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                            PAC-WEST TELECOMM, INC.

                1998 GRIFFIN NON-QUALIFIED STOCK INCENTIVE PLAN

     1.   Purposes of the Plan.  The purposes of this Non-Qualified Stock
          --------------------
Incentive Plan are to attract and retain the best available personnel, to
provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business.

     2.   Definitions.  As used herein, the following definitions shall apply:
          -----------

          (a)  "Administrator" means the Board or any of the Committees
                -------------
appointed to administer the Plan.

          (b)  "Applicable Laws" means the legal requirements relating to the
                ---------------
administration of stock incentive plans, if any, under applicable provisions of
federal and state securities laws, the corporate laws of California and, to the
extent other than California, the corporate law of the state of the Company's
incorporation, the Code, the rules of any applicable stock exchange or national
market system, and the rules of any foreign jurisdiction applicable to Awards
granted to residents therein.

          (c)  "Award" means the grant of an Option under the Plan.
                -----

          (d)  "Award Agreement" means the written agreement evidencing the
                ---------------
grant of an Award executed by the Company and the Grantee, including any
amendments thereto.

          (e)  "Board" means the Board of Directors of the Company.
                -----

          (f)  "Cause" means, with respect to the termination by the Company or
                -----
a Related Entity of the Grantee's Continuous Service, that such termination is
for "Cause" as such term is expressly defined in a then-effective written
agreement between the Grantee and the Company or such Related Entity, or in the
absence of such then-effective written agreement and definition, is based on, in
the determination of the Administrator, the Grantee's: (i) refusal or failure to
act in accordance with any specific, lawful direction or order of the Company or
a Related Entity; (ii) unfitness or unavailability for service or unsatisfactory
performance (other than as a result of Disability); (iii) performance of any act
or failure to perform any act in bad faith and to the detriment of the Company
or a Related Entity; (iv) dishonesty, intentional misconduct or material breach
of any agreement with the Company or a Related Entity; or (v) commission of a
crime involving dishonesty, breach of trust, or physical or emotional harm to
any person. At least 30 days prior to the termination of the Grantee's
Continuous Service pursuant to (i) or (ii) above, the Company shall provide the
Grantee with notice of the Company's or such Related Entity's intent to
terminate, the reason therefor, and an opportunity for the Grantee to cure such
defects in his or her service to the Company's or such Related Entity's
satisfaction. During this 30 day (or longer) period, no Award issued to the
Grantee under the Plan may be exercised or purchased.

          (g)  "Code" means the Internal Revenue Code of 1986, as amended.
                ----

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          (h)  "Committee" means any committee appointed by the Board to
                ---------
administer the Plan.

          (i)  "Common Stock" means the common stock of the Company.
                ------------

          (j)  "Company" means Pac-West Telecomm, Inc., a California
                -------
corporation.

          (k)  "Consultant" means any person (other than an Employee or, solely
                ----------
with respect to rendering services in such person's capacity as a Director) who
is engaged by the Company or any Related Entity to render consulting or advisory
services to the Company or such Related Entity.

          (l)  "Continuous Service" means that the provision of services to the
                ------------------
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not interrupted or terminated.  Continuous Service shall not be considered
interrupted in the case of (i) any approved leave of absence, (ii) transfers
between locations of the Company or among the Company, any Related Entity, or
any successor, in any capacity of Employee, Director or Consultant, or (iii) any
change in status as long as the individual remains in the service of the Company
or a Related Entity in any capacity of Employee, Director or Consultant (except
as otherwise provided in the Award Agreement).  An approved leave of absence
shall include sick leave, military leave, or any other authorized personal
leave.

          (m)  "Corporate Transaction" means any of the following shareholder-
                ---------------------
approved transactions to which the Company is a party:

               (i)   a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;

               (ii)  the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company;

               (iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger; or

               (iv)  an acquisition by any person or related group of persons
(other than the Company or by a Company-sponsored employee benefit plan) of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities, but excluding any such
transaction that the Administrator determines shall not be a Corporate
Transaction.

          (n)  "Director" means a member of the Board or the board of directors
                --------
of any Related Entity.

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          (o)  "Disability" means that a Grantee is permanently unable to carry
                ----------
out the responsibilities and functions of the position held by the Grantee by
reason of any medically determinable physical or mental impairment. A Grantee
will not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.

          (p)  "Dividend Equivalent Right" means a right entitling the Grantee
                -------------------------
to compensation measured by dividends paid with respect to Common Stock.

          (q)  "Employee" means any person, including an Officer or Director,
                --------
who is an employee of the Company or any Related Entity. The payment of a
director's fee by the Company or a Related Entity shall not be sufficient to
constitute "employment" by the Company.

          (r)  "Exchange Act" means the Securities Exchange Act of 1934, as
                ------------
amended.

          (s)  "Fair Market Value" means, as of any date, the value of Common
                -----------------
Stock determined as follows:

               (i)  Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing price for a Share for the last market
trading day prior to the time of the determination (or, if no closing price was
reported on that date, on the last trading date on which a closing price was
reported) on the stock exchange determined by the Administrator to be the
primary market for the Common Stock or the NASDAQ National Market, whichever is
applicable or (B) if the Common Stock is not traded on any such exchange or
national market system, the average of the closing bid and asked prices of a
Share on the NASDAQ Small Cap Market for the day prior to the time of the
determination (or, if no such prices were reported on that date, on the last
date on which such prices were reported), in each case, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or

               (ii) In the absence of an established market for the Common Stock
of the type described in (i), above, the Fair Market Value thereof shall be
determined by the Administrator in good faith and in a manner consistent with
Section 260.140.50 of Title 10 of the California Code of Regulations.

          (t)  "Grantee" means an Employee, Director or Consultant who receives
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an Award under the Plan.

          (u)  "Non-Qualified Stock Option" means an Option not intended to
                --------------------------
qualify as an Incentive Stock Option under Section 422 of the Code.

          (v)  "Officer" means a person who is an officer of the Company or a
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Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.

          (w)  "Option" means an option to purchase Shares pursuant to an Award
                ------
Agreement granted under the Plan.

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          (x)  "Parent" means a "parent corporation," whether now or hereafter
                ------
existing, as defined in Section 424(e) of the Code.

          (y)  "Performance Shares" means Shares or an Award denominated in
                ------------------
Shares which may be earned in whole or in part upon attainment of performance
criteria established by the Administrator.

          (z)  "Performance Units" means an Award which may be earned in whole
                -----------------
or in part upon attainment of performance criteria established by the
Administrator and which may be settled for cash, Shares or other securities or a
combination of cash, Shares or other securities as established by the
Administrator.

          (aa) "Plan" means this 1998 Griffin Non-Qualified Stock Incentive
                ----
Plan.

          (bb) "Post-Termination Exercise Period" means the period specified
                --------------------------------
in the Award Agreement of not less than three (3) months commencing on the date
of termination (other than termination by the Company or any Related Entity for
Cause) of the Grantee's Continuous Service, or such longer period as may be
applicable upon death or Disability.

          (cc) "Registration Date" means the first to occur of (i) the closing
                -----------------
of the first sale to the general public of (A) the Common Stock or (B) the same
class of securities of a successor corporation (or its Parent) issued pursuant
to a Corporate Transaction in exchange for or in substitution of the Common
Stock, pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended; and (ii) in the event of a Corporate Transaction, the date of the
consummation of the Corporate Transaction if the same class of securities of the
successor corporation (or its Parent) issuable in such Corporate Transaction
shall have been sold to the general public pursuant to a registration statement
filed with and declared effective by, on or prior to the date of consummation of
such Corporate Transaction, the Securities and Exchange Commission under the
Securities Act of 1933, as amended.

          (dd) "Related Entity" means any Parent, Subsidiary and any business,
                --------------
corporation, partnership, limited liability company or other entity in which the
Company, a Parent or a Subsidiary holds a substantial ownership interest,
directly or indirectly.

          (ee) "Restricted Stock" means Shares issued under the Plan to the
                ----------------
Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.

          (ff) "SAR" means a stock appreciation right entitling the Grantee to
                ---
Shares or cash compensation, as established by the Administrator, measured by
appreciation in the value of Common Stock.

          (gg) "Share" means a share of the Common Stock.
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          (hh) "Subsidiary" means a "subsidiary corporation," whether now or
                ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.   Stock Subject to the Plan.
          -------------------------

          (a)  Subject to the provisions of Section 11(a) below, the maximum
aggregate number of Shares which may be issued pursuant to all Awards is 25,000
Shares. The Shares may be authorized, but unissued, or reacquired Common Stock.

          (b)  Any Shares covered by an Award (or portion of an Award) which is
forfeited or canceled, expires or is settled in cash, shall be deemed not to
have been issued for purposes of determining the maximum aggregate number of
Shares which may be issued under the Plan.  If any unissued Shares are retained
by the Company upon exercise of an Award in order to satisfy the exercise price
for such Award or any withholding taxes due with respect to such Award, such
retained Shares subject to such Award shall become available for future issuance
under the Plan (unless the Plan has terminated).  Shares that actually have been
issued under the Plan pursuant to an Award shall not be returned to the Plan and
shall not become available for future issuance under the Plan, except that if
unvested Shares are forfeited, or repurchased by the Company at their original
purchase price, such Shares shall become available for future grant under the
Plan.

     4.   Administration of the Plan.
          --------------------------

          (a)  Plan Administrator.  With respect to grants of Awards to
               -------------------
Employees, Directors, or Consultants, the Plan shall be administered by (A) the
Board or (B) a Committee (or a subcommittee of the Committee) designated by the
Board, which Committee shall be constituted in such a manner as to satisfy
Applicable Laws. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.

          (b)  Multiple Administrative Bodies.  The Plan may be administered by
               ------------------------------
different bodies with respect to Directors, Officers, Consultants, and Employees
who are neither Directors nor Officers.

          (c)  Powers of the Administrator.  Subject to Applicable Laws and the
               ---------------------------
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:

               (i)   to select the Employees, Directors and Consultants to whom
Awards may be granted from time to time hereunder;

               (ii)  to determine whether and to what extent Awards are granted
hereunder;

               (iii) to determine the number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;

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               (iv)   to approve forms of Award Agreements for use under the
Plan;

               (v)    to determine the terms and conditions of any Award granted
hereunder;

               (vi)   to establish additional terms, conditions, rules or
procedures to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable treatment under such rules or laws; provided,
however, that no Award shall be granted under any such additional terms,
conditions, rules or procedures with terms or conditions which are inconsistent
with the provisions of the Plan;

               (vii)  to amend the terms of any outstanding Award granted under
the Plan, provided that any amendment that would adversely affect the Grantee's
rights under an outstanding Award shall not be made without the Grantee's
written consent;

               (viii) to construe and interpret the terms of the Plan and
Awards, including without limitation, any notice of award or Award Agreement,
granted pursuant to the Plan; and

               (ix)   to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.

          (d)  Effect of Administrator's Decision.  All decisions,
               ----------------------------------
determinations and interpretations of the Administrator shall be conclusive and
binding on all persons.

     5.   Eligibility.  Awards may be granted to Employees, Directors and
          -----------
Consultants.  An Employee, Director or Consultant who has been granted an Award
may, if otherwise eligible, be granted additional Awards.  Awards may be granted
to such Employees, Directors or Consultants who are residing in foreign
jurisdictions as the Administrator may determine from time to time.

     6.   Terms and Conditions of Awards.
          ------------------------------

          (a)  Type of Awards.  The Administrator is authorized under the Plan
               --------------
to award any type of arrangement to an Employee, Director or Consultant that is
not inconsistent with the provisions of the Plan and that by its terms involves
or might involve the issuance of (i) Shares, (ii) an Option, a SAR or similar
right with a fixed or variable price related to the Fair Market Value of the
Shares and with an exercise or conversion privilege related to the passage of
time, the occurrence of one or more events, or the satisfaction of performance
criteria or other conditions, or (iii) any other security with the value derived
from the value of the Shares. Such awards include, without limitation, Options,
sales or bonuses of Restricted Stock, SARs, Dividend Equivalent Rights,
Performance Units or Performance Shares, and an Award may consist of one such
security or benefit, or two (2) or more of them in any combination or
alternative.

          (b)  Designation of Award.  Each Award shall be designated in the
               --------------------
Award Agreement. In the case of an Option, the Option shall be designated as a
Non-Qualified Stock Option.

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          (c)  Conditions of Award.  Subject to the terms of the Plan, the
               -------------------
Administrator shall determine the provisions, terms, and conditions of each
Award including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares, or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria.  The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total shareholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.

          (d)  Acquisitions and Other Transactions.  The Administrator may issue
               -----------------------------------
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity acquiring another entity, an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.

          (e)  Deferral of Award Payment.  The Administrator may establish one
               -------------------------
or more programs under the Plan to permit selected Grantees the opportunity to
elect to defer receipt of consideration upon exercise of an Award, satisfaction
of performance criteria, or other event that absent the election would entitle
the Grantee to payment or receipt of Shares or other consideration under an
Award. The Administrator may establish the election procedures, the timing of
such elections, the mechanisms for payments of, and accrual of interest or other
earnings, if any, on amounts, Shares or other consideration so deferred, and
such other terms, conditions, rules and procedures that the Administrator deems
advisable for the administration of any such deferral program.

          (f)  Award Exchange Programs.  The Administrator may establish one or
               -----------------------
more programs under the Plan to permit selected Grantees to exchange an Award
under the Plan for one or more other types of Awards under the Plan on such
terms and conditions as determined by the Administrator from time to time.

          (g)  Separate Programs.  The Administrator may establish one or more
               -----------------
separate programs under the Plan for the purpose of issuing particular forms of
Awards to one or more classes of Grantees on such terms and conditions as
determined by the Administrator from time to time.

          (h)  Early Exercise.  The Award Agreement may, but need not, include a
               --------------
provision whereby the Grantee may elect at any time while an Employee, Director
or Consultant to exercise any part or all of the Award prior to full vesting of
the Award.  Any unvested Shares received pursuant to such exercise may be
subject to a repurchase right in favor of the Company or a Related Entity or to
any other restriction the Administrator determines to be appropriate.

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          (i)  Term of Award.  The term of each Award shall be the term
               -------------
stated in the Award Agreement, provided, however, that the term shall be no more
than ten (10) years from the date of grant thereof.

          (j)  Non-Transferability of Awards.  Awards may not be sold, pledged,
               -----------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Grantee, only by the Grantee.

          (k)  Time of Granting Awards.  The date of grant of an Award shall
               -----------------------
for all purposes be the date on which the Administrator makes the determination
to grant such Award, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Award is so granted within a reasonable time after the
date of such grant.

     7.   Award Exercise or Purchase Price, Consideration, Taxes and Reload
          -----------------------------------------------------------------
Options.
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          (a)  Exercise or Purchase Price.  The exercise or purchase price, if
               --------------------------
any, for an Award shall be as follows:

               (i)   In the case of a Non-Qualified Stock Option:

                     (A)  granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be not less than one hundred ten percent (110%)
of the Fair Market Value per Share on the date of grant; or

                     (B)  granted to any person other than a person described in
the preceding paragraph, the per Share exercise price shall be not less than
eighty-five percent (85%) of the Fair Market Value per Share on the date of
grant.

               (ii)  In the case of the sale of Shares:

                     (A)  granted to a person who, at the time of the grant of
such Award, or at the time the purchase is consummated, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share purchase price shall be not
less than one hundred percent (100%) of the Fair Market Value per Share on the
date of grant; or

                     (B)  granted to any person other than a person described in
the preceding paragraph, the per Share purchase price shall be not less than
eighty-five percent (85%) of the Fair Market Value per Share on the date of
grant.

               (iii) In the case of other Awards, such price as is determined by
the Administrator.

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               (iv)  Notwithstanding the foregoing provisions of this Section
7(a), in the case of an Award issued pursuant to Section 6(d), above, the
exercise or purchase price for the Award shall be determined in accordance with
the principles of Section 424(a) of the Code.

          (b)  Consideration.  Subject to Applicable Laws, the consideration to
               -------------
be paid for the Shares to be issued upon exercise or purchase of an Award
including the method of payment, shall be determined by the Administrator. In
addition to any other types of consideration the Administrator may determine,
the Administrator is authorized to accept as consideration for Shares issued
under the Plan the following:

               (i)   cash;

               (ii)  check;

               (iii) delivery of Grantee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;

               (iv)  if the exercise or purchase occurs on or after the
Registration Date, surrender of Shares or delivery of a properly executed form
of attestation of ownership of Shares as the Administrator may require
(including withholding of Shares otherwise deliverable upon exercise of the
Award) which have a Fair Market Value on the date of surrender or attestation
equal to the aggregate exercise price of the Shares as to which said Award shall
be exercised (but only to the extent that such exercise of the Award would not
result in an accounting compensation charge with respect to the Shares used to
pay the exercise price unless otherwise determined by the Administrator);

               (v)   with respect to Options, if the exercise occurs on or after
the Registration Date, payment through a broker-dealer sale and remittance
procedure pursuant to which the Grantee (A) shall provide written instructions
to a Company designated brokerage firm to effect the immediate sale of some or
all of the purchased Shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased Shares and (B) shall provide written
directives to the Company to deliver the certificates for the purchased Shares
directly to such brokerage firm in order to complete the sale transaction; or

               (vi)  any combination of the foregoing methods of payment.

          (c)  Taxes.  No Shares shall be delivered under the Plan to any
               -----
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation or obligations incident to the receipt of Shares. Upon
exercise of an Award the Company shall withhold or collect from Grantee an
amount sufficient to satisfy such tax obligations.

          (d)  Reload Options.  In the event the exercise price or tax
               --------------
withholding of an Option is satisfied by the Company or the Grantee's employer
withholding Shares otherwise deliverable to the Grantee, the Administrator may
issue the Grantee an additional Option, with

                                       9
<PAGE>

terms identical to the Award Agreement under which the Option was exercised, but
at an exercise price as determined by the Administrator in accordance with the
Plan.

     8.   Exercise of Award.
          -----------------

          (a)  Procedure for Exercise; Rights as a Shareholder.
               -----------------------------------------------

               (i)   Any Award granted hereunder shall be exercisable at such
times and under such conditions as determined by the Administrator under the
terms of the Plan and specified in the Award Agreement but in the case of an
Option, in no case at a rate of less than twenty percent (20%) per year over
five (5) years from the date the Option is granted, subject to reasonable
conditions such as continued employment. Notwithstanding the foregoing, in the
case of an Option granted to an Officer, Director or Consultant, the Award
Agreement may provide that the Option may become exercisable, subject to
reasonable conditions such as such Officer's, Director's or Consultant's
Continuous Service, at any time or during any period established in the Award
Agreement.

               (ii)  An Award shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised, including, to the
extent selected, use of the broker-dealer sale and remittance procedure to pay
the purchase price as provided in Section 7(b)(v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in the Award Agreement
or Section 11(a), below.

          (b)  Exercise of Award Following Termination of Continuous Service.
               -------------------------------------------------------------
In the event of termination of a Grantee's Continuous Service for any reason
other than Disability or death (but not in the event of a Grantee's change of
status from Employee to Consultant or from Consultant to Employee), such Grantee
may, but only during the Post-Termination Exercise Period (but in no event later
than the expiration date of the term of such Award as set forth in the Award
Agreement), exercise the Award to the extent that the Grantee was entitled to
exercise it at the date of such termination or to such other extent as may be
determined by the Administrator. The Grantee's Award Agreement may provide that
upon the termination of the Grantee's Continuous Service for Cause, the
Grantee's right to exercise the Award shall terminate concurrently with the
termination of Grantee's Continuous Service. To the extent that the Grantee is
not entitled to exercise the Award at the date of termination, or if the Grantee
does not exercise such Award to the extent so entitled within the Post-
Termination Exercise Period, the Award shall terminate.

          (c)  Disability of Grantee.  In the event of termination of a
               ---------------------
Grantee's Continuous Service as a result of his or her Disability, Grantee may,
but only within at least twelve (12) months from the date of such termination
(and in no event later than the expiration

                                       10
<PAGE>

date of the term of such Award as set forth in the Award Agreement), exercise
the Award to the extent that the Grantee was otherwise entitled to exercise it
at the date of such termination; provided, however, that if such Disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code. To
the extent that the Grantee is not entitled to exercise the Award at the date of
termination, or if Grantee does not exercise such Award to the extent so
entitled within the time specified herein, the Award shall terminate.

          (d)  Death of Grantee.  In the event of a termination of the Grantee's
               ----------------
Continuous Service as a result of his or her death, or in the event of the death
of the Grantee during the Post-Termination Exercise Period, the Grantee's estate
or a person who acquired the right to exercise the Award by bequest or
inheritance may exercise the Award, but only to the extent that the Grantee was
entitled to exercise the Award as of the date of termination, within at least
twelve (12) months from the date of such termination (but in no event later than
the expiration of the term of such Award as set forth in the Award Agreement).
To the extent that, at the time of death, the Grantee was not entitled to
exercise the Award, or if the Grantee's estate or a person who acquired the
right to exercise the Award by bequest or inheritance does not exercise such
Award to the extent so entitled within the time specified herein, the Award
shall terminate.

          (e)  Buyout Provisions.  The Administrator may at any time offer to
               -----------------
buy out for a payment in cash or Shares, an Award previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Grantee at the time that such offer is made.

     9.   Conditions Upon Issuance of Shares.
          ----------------------------------

          (a)  Shares shall not be issued pursuant to the exercise of an Award
unless the exercise of such Award and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

          (b)  As a condition to the exercise of an Award, the Company may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.

     10.  Repurchase Rights.  If the provisions of an Award Agreement grant to
          -----------------
the Company the right to repurchase Shares upon termination of the Grantee's
Continuous Service, the Award Agreement shall (or may, with respect to Awards
granted or issued to Officers, Directors or Consultants) provide that:

          (a)  the right to repurchase must be exercised, if at all, within
ninety (90) days of the termination of the Grantee's Continuous Service (or in
the case of Shares issued upon exercise of Awards after the date of termination
of the Grantee's Continuous Service, within ninety (90) days after the date of
the Award exercise);

                                       11
<PAGE>

          (b)  the consideration payable for the Shares upon exercise of such
repurchase right shall be made in cash or by cancellation of purchase money
indebtedness within the ninety (90) day periods specified in Section 10(a);

          (c)  the amount of such consideration shall (i) be equal to the
original purchase price paid by Grantee for each such Share; provided, that the
right to repurchase such Shares at the original purchase price shall lapse at
the rate of at least twenty percent (20%) of the Shares subject to the Award per
year over five (5) years from the date the Award is granted (without respect to
the date the Award was exercised or became exercisable), and (ii) with respect
to Shares, other than Shares subject to repurchase at the original purchase
price pursuant to clause (i) above, not less than the Fair Market Value of the
Shares to be repurchased on the date of termination of Grantee's Continuous
Service; and

          (d)  the right to repurchase Shares, other than the right to
repurchase Shares at the original purchase price pursuant to clause (i) of
Section 10(c), shall terminate on the Registration Date.

     11.  Adjustments Upon Changes in Capitalization or Corporate Transaction.
          -------------------------------------------------------------------

          (a)  Adjustments upon Changes in Capitalization.  Subject to any
               ------------------------------------------
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Award, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Awards have yet been granted or
which have been returned to the Plan, the exercise or purchase price of each
such outstanding Award, as well as any other terms that the Administrator
determines require adjustment shall be proportionately adjusted for (i) any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Shares, (ii) any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company, or (iii) as the
Administrator may determine in its discretion, any other transaction with
respect to Common Stock to which Section 424(a) of the Code applies; provided,
however that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator and its determination shall be
final, binding and conclusive. Except as the Administrator determines, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason hereof shall be made with respect to, the number or price of Shares
subject to an Award.

          (b)  Corporate Transaction.  In the event of a Corporate Transaction
               ---------------------
each Award held by the Company's Chief Executive Officer which is at the time
outstanding under the Plan shall automatically become fully vested and
exercisable and be released from any restrictions on transfer (other than
transfer restrictions applicable to Options) repurchase or forfeiture rights,
immediately prior to the specified effective date of such Corporate Transaction,
for all of the Shares at the time represented by such Awards. Effective upon the
consummation of the Corporate Transaction, all such Awards under the Plan shall
terminate immediately prior to the specified effective date of the Corporate
Transaction unless the Award is assumed by the successor corporation or Parent
thereof in connection with the Corporate Transaction. Except as

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<PAGE>

provided otherwise in an individual Award Agreement, in the event of a Corporate
Transaction, all other Awards under the Plan will terminate immediately prior to
the specified effective date of the Corporate Transaction, unless the Award is
assumed by the successor corporation or Parent thereof in connection with the
Corporate Transaction.

     12.  Effective Date and Term of Plan.  The Plan shall become effective upon
          -------------------------------
the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company.  It shall continue in effect for a term of ten (10)
years unless sooner terminated.  Subject to Section 16, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

     13.  Amendment, Suspension or Termination of the Plan.
          ------------------------------------------------

          (a)  The Board may at any time amend, suspend or terminate the Plan.
To the extent necessary to comply with Applicable Laws, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required.

          (b)  No Award may be granted during any suspension of the Plan or
after termination of the Plan.

          (c)  Any amendment, suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted, and such Awards shall remain in full force and effect as if the Plan
had not been amended, suspended or terminated, unless mutually agreed otherwise
between the Grantee and the Administrator, which agreement must be in writing
and signed by the Grantee and the Company.

     14.  Reservation of Shares.
          ---------------------

          (a)  The Company, during the term of the Plan, will at all times
reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.

          (b)  The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.

     15.  No Effect on Terms of Employment/Consulting Relationship.  The Plan
          --------------------------------------------------------
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's Continuous Service at any time,
with or without cause.

     16.  No Effect on Retirement and Other Benefit Plans.  Except as
          -----------------------------------------------
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit

                                       13
<PAGE>

plan of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement-Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.

     17.  Board Approval.  The Plan was adopted by the Board during September of
          --------------
1998.

     18.  Information to Grantees.  The Company shall provide to each Grantee,
          -----------------------
during the period for which such Grantee has one or more Awards outstanding,
copies of financial statements at least annually.



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