PROVIDIAN FINANCIAL CORPORATION

                     1999 NON-OFFICER EQUITY INCENTIVE PLAN

                              Adopted May 11, 1999


1.       PURPOSES.

     (a) Eligible Stock Award Recipients.  The persons eligible to receive Stock
Awards are the Employees and  Consultants  of the Company and its Affiliates who
are not Officers, Directors or Affiliate Directors.

     (b) Available  Stock Awards.  The purpose of the Plan is to provide a means
by which  eligible  recipients  of Stock Awards may be given an  opportunity  to
benefit from  increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Nonstatutory Stock Options,  (ii) stock appreciation
rights, (iii) stock bonuses and (iv) rights to acquire restricted stock.

     (c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to secure and
retain the services of new members of this group and to provide  incentives  for
such  persons to exert  maximum  efforts  for the success of the Company and its
Affiliates.

2.       DEFINITIONS.

     (a) "Affiliate" means any parent  corporation or subsidiary  corporation of
the Company,  whether now or hereafter  existing,  as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

     (b) "Affiliate  Director" means any member of the Board of Directors of any
Affiliate.

     (c) "Board" means the Board of Directors of the Company.

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

     (e) "Cause"  means (i)  conviction  of, a guilty plea with respect to, or a
plea of nolo  contendere to a charge that the Participant has committed a felony
under the laws of the United States or of any state or a crime  involving  moral
turpitude,  including,  but not limited to, fraud,  theft,  embezzlement  or any
crime that  results in or is intended to result in  personal  enrichment  at the
expense of the Company or an Affiliate;  (ii)  material  breach of any agreement
entered  into  between  the  Participant  and the Company or an  Affiliate  that
impairs  the  Company's  or the  Affiliate's  interest  therein;  (iii)  willful
misconduct,  significant failure by Participant to perform his or her duties, or
gross neglect by  Participant  of his or her duties;  or (iv)  engagement in any
activity that  constitutes  a material  conflict of interest with the Company or
any Affiliate.

     (f)  "Committee"  means a  committee  of one or more  members  of the Board
appointed by the Board in accordance with subsection 3(c).

     (g) "Common Stock" means the common stock of the Company, $0.01 par value.

     (h)  "Company"   means   Providian   Financial   Corporation,   a  Delaware
corporation.

     (i)  "Consultant"  shall mean any natural  person,  including an advisor or
other form of independent contractor,  engaged by the Company or an Affiliate to
render  consulting  services and who is compensated for such services  (provided
that such services are not in connection with the offer or sale of securities in
a  capital-raising  transaction,  and do not directly or  indirectly  promote or
maintain  a  market  for  the  Company's  securities),   except  that  the  term
"Consultant"  shall  not  include  Employees,   Officers,  Directors,  Affiliate
Directors or stockholders  beneficially  owning ten percent (10%) or more of the
Company's Common Stock.

     (j)  "Continuous  Service"  means that the  Participant's  service with the
Company  or  an  Affiliate,  whether  as  an  Employee  or  Consultant,  is  not
interrupted or terminated.  The  Participant's  Continuous  Service shall not be
deemed to have  terminated  merely  because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee or
Consultant  or a change in the entity  for which the  Participant  renders  such
service,   provided  that  there  is  no  interruption  or  termination  of  the
Participant's  Continuous  Service.  For  example,  a change in  status  from an
Employee of the Company to a Consultant of an Affiliate  will not  constitute an
interruption of Continuous Service.  The Board or the chief executive officer of
the Company,  in that party's sole discretion,  may determine whether Continuous
Service  shall be  considered  interrupted  in the case of any leave of  absence
approved  by that  party,  including  sick  leave,  military  leave or any other
personal leave.

     (k) "Director" means a member of the Board of Directors of the Company.

     (l)  "Disability"  means  when  a  Participant  is  considered  permanently
disabled  under a  disability  insurance  policy  carried  by the  Company or an
Affiliate and under which the  Participant is covered or, if the  Participant is
not  covered  under  such a policy,  the  permanent  and total  disability  of a
Participant within the meaning of Section 22(e)(3) of the Code.

     (m)  "Employee"  means any person  employed  full-time  or part-time by the
Company or an  Affiliate,  provided that the term  "Employee"  shall not include
Directors, Affiliate Directors or Officers.

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

     (o) "Fair Market Value" means, as of any applicable  date, the mean between
the highest and lowest sale price of the Common  Stock as  reflected  on the New
York Stock  Exchange  Composite  Tape on such date or during such other relevant
period of trading days as determined  by the Board or Committee,  or, if no such
reported  sale of the Common  Stock  shall have  occurred on such date or during
such period, on the next preceding date on which there was such a reported sale.
If there shall be any  material  alteration  in the present  system of reporting
sale prices of the Common  Stock,  or if the Common  Stock is not then listed on
the New York Stock  Exchange,  the fair market value of the Common Stock as of a
particular date shall be determined by such method as shall be determined by the
Board or Committee.

     (p)  "Nonstatutory  Stock Option" means an option to purchase  Common Stock
that is not intended to qualify as an incentive  stock option within the meaning
of Section 422 of the Code and the regulations promulgated thereunder.

     (q)  "Officer"  shall  mean a  person  who  is an  officer  of the  Company
including any corporate  officer with the title of vice  president and above and
any other Employee of the Company whom the Board or the Committee  classifies as
"Officer".

     (r) "Option"  means a  Nonstatutory  Stock Option  granted  pursuant to the
Plan.

     (s) "Option Agreement" means a written agreement between the Company and an
Optionholder  evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (t) "Optionholder"  means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

     (u) "Participant"  means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable,  such other person who holds an outstanding Stock
Award.

     (v) "Plan" means this  Providian  Financial  Corporation  1999  Non-Officer
Equity Incentive Plan.

     (w) "Securities Act" means the Securities Act of 1933, as amended.

     (x) "Stock  Award"  means any right  granted  under the Plan,  including an
Option,  a stock  appreciation  right,  a stock  bonus  and a right  to  acquire
restricted stock.

     (y) "Stock Award Agreement" means a written  agreement  between the Company
and a  recipient  of a Stock Award  evidencing  the terms and  conditions  of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

     (z) "Ten Percent  Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock  possessing  more than ten percent
(10%) of the total combined  voting power of all classes of stock of the Company
or of any of its Affiliates.

3.       ADMINISTRATION.

     (a) Administration by Board. The Board shall administer the Plan unless and
until  the  Board  delegates  administration  to a  Committee,  as  provided  in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.

     (b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:

          (i) To determine from time to time which of the persons eligible under
     the Plan shall be granted Stock Awards; when and how each Stock Award shall
     be  granted;  what type or  combination  of types of Stock  Award  shall be
     granted;  the  provisions  of each Stock Award  granted  (which need not be
     identical), including the time or times when a person shall be permitted to
     receive Common Stock pursuant to a Stock Award; and the number of shares of
     Common  Stock with  respect to which a Stock Award shall be granted to each
     such person.

          (ii) To construe and interpret the Plan and Stock Awards granted under
     it,  and to  establish,  amend and  revoke  rules and  regulations  for its
     administration.  The Board, in the exercise of this power,  may correct any
     defect,  omission  or  inconsistency  in the  Plan  or in any  Stock  Award
     Agreement,  in a manner  and to the  extent  it  shall  deem  necessary  or
     expedient to make the Plan fully effective.

          (iii) To amend the Plan or a Stock Award as provided in Section 12.

          (iv)  Generally,  to exercise  such powers and to perform such acts as
     the Board deems necessary or expedient to promote the best interests of the
     Company which are not in conflict with the provisions of the Plan.

     (c) Delegation to Committee.

          (i) General.  The Board may delegate  administration  of the Plan to a
     Committee or  Committees  of one (1) or more members of the Board,  and the
     term  "Committee"  shall  apply  to any  person  or  persons  to whom  such
     authority  has  been  delegated.   If  administration  is  delegated  to  a
     Committee,  the Committee shall have, in connection with the administration
     of the Plan, the powers theretofore  possessed by the Board,  including the
     power to delegate to a subcommittee  any of the  administrative  powers the
     Committee is  authorized  to exercise  (and  references in this Plan to the
     Board shall  thereafter  be to the  Committee  or  subcommittee),  subject,
     however,  to such resolutions,  not inconsistent with the provisions of the
     Plan,  as may be  adopted  from  time to time by the  Board.  The Board may
     abolish   the   Committee   at  any  time  and  revest  in  the  Board  the
     administration of the Plan.

          (ii) Initial  Delegation.  By approval of this Plan as of the adoption
     date set forth above, the Board delegates to the Human Resources  Committee
     of the Board the full power and  authority of the Board to  administer  the
     Plan and to otherwise  act on behalf of the Board with respect to the Plan,
     including (without limitation) the powers set forth in Sections 12 and 13.

4.       SHARES SUBJECT TO THE PLAN.

     (a) Share  Reserve.  Subject to the  provisions  of Section 11  relating to
adjustments  upon changes in Common  Stock,  the Common Stock that may be issued
pursuant to Stock  Awards  shall not exceed in the  aggregate  two million  five
hundred thousand (2,500,000) shares of Common Stock.

     (b) Reversion of Shares to the Share Reserve.  If any Stock Award shall for
any reason expire or otherwise  terminate,  in whole or in part,  without having
been exercised in full (or vested in the case of restricted  stock),  the shares
of Common  Stock not  acquired  under such Stock Award shall revert to and again
become  available for issuance under the Plan. In addition,  any unvested shares
repurchased  by the  Company  pursuant  to a  repurchase  right  in favor of the
Company or otherwise forfeited by a Participant prior to vesting shall revert to
and again become available for issuance under the Plan.  Shares subject to stock
appreciation rights exercised in accordance with the Plan shall not be available
for subsequent issuance under the Plan.

     (c) Source of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.

5.       ELIGIBILITY.

     (a) Stock Awards may be granted only to  Employees or  Consultants  who are
not, at the time of such grants, either (i) Directors,  (ii) Affiliate Directors
or (iii) Officers.

6.       OPTION PROVISIONS.

         Each  Option  shall be in such form and shall  contain  such  terms and
conditions  as the Board  shall deem  appropriate.  The  provisions  of separate
Options  need  not  be  identical,   but  each  Option  shall  include  (through
incorporation of provisions  hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

     (a) Term. No Option shall be  exercisable  after the expiration of ten (10)
years  from the date it was  granted or such  shorter  or longer  term as may be
provided in the Option Agreement.

     (b) Exercise  Price.  The exercise price of each Option shall be determined
by the Board and shall be set forth in the Option Agreement.

     (c) Consideration.  The purchase price of Common Stock acquired pursuant to
an Option shall be paid in cash at the time the Option is  exercised  or, to the
extent set forth in the Option  Agreement or otherwise  specified by the Company
and if permitted by applicable statutes and regulations,  either (i) pursuant to
a "cashless  exercise" program operated in compliance with Regulation T or other
regulations or rules promulgated by the Federal Reserve Board that, prior to the
issuance  of Common  Stock,  results in either the receipt of cash (or check) by
the  Company or the receipt of  irrevocable  instructions  to pay the  aggregate
exercise price to the Company from the proceeds of sale of shares of such Common
Stock, provided that at the time of exercise the Common Stock is publicly traded
and quoted regularly in The Wall Street Journal; (ii) in any other form of legal
consideration  that may be  acceptable  to the  Board  in its  sole  discretion,
provided,  however,  that,  at any time  when the  Company  is  incorporated  in
Delaware,  payment of the Common Stock's "par value" (as defined in the Delaware
General  Corporation  Law) shall be made in cash; or (iii) in any combination of
the foregoing forms of  consideration  permitted at the discretion of the Board.
In the case of any deferred  payment  arrangement,  interest shall be payable at
least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred  payment
arrangement.

     (d) Transferability. An Option shall be transferable to the extent provided
in the Option  Agreement.  If the Option does not  provide for  transferability,
then the  Option  shall  not be  transferable  except  by will or by the laws of
descent and  distribution  and shall be  exercisable  during the lifetime of the
Optionholder  only  by the  Optionholder.  Notwithstanding  the  foregoing,  the
Optionholder  may,  by  delivering  written  notice  to the  Company,  in a form
satisfactory  to the  Company,  designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.

     (e) Vesting  Generally.  The total number of shares of Common Stock subject
to an Option  may,  but need  not,  vest and  therefore  become  exercisable  in
periodic  installments  that may,  but need not,  be equal.  The  Option  may be
subject to such other terms and  conditions  on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem  appropriate.  The vesting  provisions of individual  Options may vary. The
provisions  of  this  subsection  6(e)  are  subject  to any  Option  provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.

     (f)  Termination  of  Continuous  Service.  In the event an  Optionholder's
Continuous  Service  terminates  (other  than  upon  the  Optionholder's  death,
Disability or for Cause),  the  Optionholder  may exercise his or her Option (to
the extent that the  Optionholder was entitled to exercise such Option as of the
date of  termination)  but only within such period of time ending on the earlier
of (i) the date ninety (90) days following the termination of the Optionholder's
Continuous  Service (or such  longer or shorter  period if so  specified  in the
Option Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option  Agreement.  If, after  termination  of  Continuous  Service,  the
Optionholder  does not  exercise  his or her Option  within  the time  specified
herein,  the Option shall terminate.  In the event an Optionholder's  Continuous
Service terminates for Cause, then his or her Option shall terminate immediately
upon such event.

     (g) Extension of Termination Date. An  Optionholder's  Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's  Continuous  Service (other than upon the  Optionholder's  death,
Disability  or for Cause)  would be  prohibited  at any time solely  because the
issuance of shares of Common Stock would violate the  registration  requirements
under the Securities  Act, then the Option shall terminate on the earlier of (i)
the  expiration of the term of the Option set forth in  subsection  6(a) or (ii)
the  expiration  of a period of ninety  (90) days after the  termination  of the
Optionholder's  Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

     (h)  Disability  of  Optionholder.  In the  event  that  an  Optionholder's
Continuous Service terminates as a result of the Optionholder's  Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise  such Option as of the date of  termination),  but only
within such period of time  ending on the earlier of (i) the date  -twelve  (12)
months  following  such  termination  (or such  longer or  shorter  period if so
specified in the Option  Agreement)  or (ii) the  expiration  of the term of the
Option as set forth in the Option Agreement. If, after termination of Continuous
Service,  the  Optionholder  does not exercise his or her Option within the time
specified herein, the Option shall terminate.

     (i) Death of Optionholder.  In the event (i) an  Optionholder's  Continuous
Service  terminates  as a  result  of  the  Optionholder's  death  or  (ii)  the
Optionholder  dies within the period (if any) specified in the Option  Agreement
after the  termination  of the  Optionholder's  Continuous  Service for a reason
other  than  death,  then  the  Option  may be  exercised  (to  the  extent  the
Optionholder  was  entitled to exercise  such Option as of the date of death) by
the  Optionholder's  estate,  by a person who acquired the right to exercise the
Option by bequest or  inheritance  or by a person  designated  to  exercise  the
option upon the  Optionholder's  death  pursuant to  subsection  6(d),  but only
within  the period  ending on the  earlier of (1) the date  twelve  (12)  months
following the date of death (or such longer or shorter period if so specified in
the Option  Agreement)  or (2) the  expiration of the term of such Option as set
forth in the Option  Agreement.  If,  after death,  the Option is not  exercised
within the time specified herein, the Option shall terminate.

     (j) Early  Exercise.  The Option  may,  but need not,  include a  provision
whereby  the  Optionholder  may  elect at any  time  before  the  Optionholder's
Continuous  Service  terminates  to exercise the Option as to any part or all of
the shares of Common  Stock  subject to the Option  prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase  option in favor of the Company or to any other restriction the Board
determines to be appropriate.

7.       PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

     (a) Stock Bonus  Awards.  Each stock bonus  award shall be  evidenced  by a
stock bonus agreement,  which shall be in such form and shall contain such terms
and conditions as the Board shall deem appropriate.  The terms and conditions of
stock  bonus  agreements  may  change  from  time to  time,  and the  terms  and
conditions of separate stock bonus  agreements  need not be identical,  but each
stock bonus agreement shall include (through  incorporation of provisions hereof
by  reference  in the  agreement  or  otherwise)  the  substance  of each of the
following provisions:

          (i)  Consideration.  A stock bonus may be awarded in consideration for
     any form of legal  consideration  provided by the  Participant  that may be
     acceptable  to the Board,  including  (without  limitation)  past  services
     actually rendered to the Company or an Affiliate for its benefit.

          (ii)  Vesting.  Shares of Common Stock  awarded  under the stock bonus
     agreement  may,  but need  not,  be  subject  to  forfeiture  or to a share
     repurchase  option in favor of the  Company  in  accordance  with a vesting
     schedule or such other conditions as may be determined by the Board.

          (iii) Termination of Participant's  Continuous Service. In the event a
     Participant's Continuous Service terminates,  the Company may reacquire any
     or all of the shares of Common Stock held by the Participant which have not
     vested as of the date of  termination  under  the terms of the stock  bonus
     agreement.

          (iv)  Transferability.  Rights to acquire shares under the stock bonus
     agreement shall be transferable by the Participant only upon such terms and
     conditions  as are set forth in the  stock  bonus  agreement,  as the Board
     shall  determine in its  discretion,  so long as Common Stock awarded under
     the stock bonus  agreement  remains subject to the terms of the stock bonus
     agreement.

     (b)  Restricted  Stock Awards.  Each award of rights to acquire  restricted
stock shall be evidenced by a restricted stock purchase  agreement,  which shall
be in such form and shall  contain such terms and  conditions as the Board shall
deem  appropriate.  The terms and  conditions of the  restricted  stock purchase
agreements  may  change  from  time to time,  and the terms  and  conditions  of
separate  restricted stock purchase  agreements need not be identical,  but each
restricted  stock purchase  agreement shall include  (through  incorporation  of
provisions  hereof by reference in the agreement or otherwise)  the substance of
each of the following provisions:

          (i) Purchase  Price.  The purchase price under each  restricted  stock
     purchase  agreement  shall be such amount as the Board shall  determine and
     designate in such restricted stock purchase agreement.

          (ii)  Consideration.  The  purchase  price of  Common  Stock  acquired
     pursuant to the restricted  stock purchase  agreement shall be paid either:
     (i) in cash at the time of purchase;  (ii) at the  discretion of the Board,
     according  to a deferred  payment  or other  similar  arrangement  with the
     Participant;  (iii) in any other  form of legal  consideration  that may be
     acceptable to the Board in its discretion,  including (without  limitation)
     past services actually rendered to the Company or an Affiliate;  or (iv) in
     any  combination of the foregoing forms of  consideration  permitted by the
     Board;  provided  that,  in the case of any deferred  payment  arrangement,
     interest  shall be  payable at least  annually  and shall be charged at the
     minimum  rate of interest  necessary  to avoid the  treatment  as interest,
     under any  applicable  provisions  of the Code,  of any amounts  other than
     amounts stated to be interest under the deferred payment arrangement;  and,
     provided  further  that,  at any time when the Company is  incorporated  in
     Delaware,  payment of the Common  Stock's  "par  value" (as  defined in the
     Delaware General Corporation Law) shall not be made by deferred payment.

          (iii)  Vesting.  Shares of Common Stock  acquired under the restricted
     stock purchase  agreement may, but need not, be subject to forfeiture or to
     a share  repurchase  option in favor of the  Company in  accordance  with a
     vesting  schedule  or such other  conditions  as may be  determined  by the
     Board.

          (iv) Termination of Participant's  Continuous  Service. In the event a
     Participant's Continuous Service terminates,  the Company may repurchase or
     otherwise  reacquire  any or all of the shares of Common  Stock held by the
     Participant  which have not vested as of the date of termination  under the
     terms of the restricted stock purchase agreement.

          (v)  Transferability.  Rights to acquire  shares under the  restricted
     stock purchase agreement shall be transferable by the Participant only upon
     such terms and conditions as are set forth in the restricted stock purchase
     agreement,  as the Board  shall  determine  in its  discretion,  so long as
     Common Stock awarded under the restricted stock purchase  agreement remains
     subject to the terms of the restricted stock purchase agreement.

     (c) Stock  Appreciation  Rights.  Each stock  appreciation  right  shall be
evidenced by a Stock Award  Agreement,  which shall contain terms and conditions
that are consistent with the applicable  provisions set forth below with respect
to the  types  of  stock  appreciation  rights  authorized  under  the  Plan and
otherwise shall be in such form as the Board shall deem  appropriate.  The terms
and  conditions of stock  appreciation  rights may change from time to time, and
the terms and  conditions  of  separate  stock  appreciation  rights need not be
identical,  but each Stock Award Agreement evidencing a stock appreciation right
shall include (through  incorporation  of provisions  hereof by reference in the
Stock Award Agreement or otherwise) the substance of the following provisions as
are applicable:

          (i) Authorized Rights. The following three types of stock appreciation
     rights shall be authorized for issuance under the Plan:

               (1) Tandem Rights.  A "Tandem  Right" means a stock  appreciation
          right  granted  appurtenant  to an Option  that is subject to the same
          terms and  conditions  applicable  to the  particular  Option grant to
          which it pertains,  with the  following  exceptions:  The Tandem Right
          shall  require  the  holder  to  elect  between  the  exercise  of the
          underlying  Option for shares of Common  Stock and the  surrender,  in
          whole or in part, of such Option for an appreciation distribution. The
          appreciation  distribution payable on the exercised Tandem Right shall
          be in cash (or, if so provided  in the Stock  Award  Agreement,  in an
          equivalent number of shares of Common Stock based on Fair Market Value
          on the date of the Option  surrender) in an amount up to the excess of
          (A) the Fair Market Value, on the date of the Option surrender, of the
          number of  shares  of Common  Stock  covered  by that  portion  of the
          surrendered  Option in which the  Optionholder  is vested over (B) the
          aggregate exercise price payable for such vested shares.

               (2)  Concurrent  Rights.  A  "Concurrent  Right"  means  a  stock
          appreciation  right granted  appurtenant  to an Option that applies to
          all  or a  portion  of the  shares  of  Common  Stock  subject  to the
          underlying  Option  and  which  is  subject  to  the  same  terms  and
          conditions  applicable  to the  particular  Option  grant  to which it
          pertains,  with the following exceptions:  A Concurrent Right shall be
          exercised  automatically  at the same  time the  underlying  Option is
          exercised  with  respect to the  particular  shares of Common Stock to
          which the Concurrent  Right pertains.  The  appreciation  distribution
          payable on an exercised  Concurrent  Right shall be in cash (or, if so
          provided  in the Stock Award  Agreement,  in an  equivalent  number of
          shares of Common  Stock based on Fair Market  Value on the date of the
          exercise of the  Concurrent  Right) in an amount equal to such portion
          as  determined  by the Board at the time of the grant of the excess of
          (A) the aggregate  Fair Market  Value,  on the date of the exercise of
          the Concurrent  Right,  of the vested shares of Common Stock purchased
          under the underlying Option which have Concurrent  Rights  appurtenant
          to them over (B) the aggregate exercise price paid for such shares.

               (3)  Independent  Rights.  An  "Independent  Right" means a stock
          appreciation  right granted  independently  of any Option but which is
          subject to the same terms and conditions applicable to an Option, with
          the following exceptions: An Independent Right shall be denominated in
          share  equivalents.  The  appreciation  distribution  payable  on  the
          exercised  Independent Right shall be not greater than an amount equal
          to the excess of (a) the aggregate  Fair Market Value,  on the date of
          the  exercise  of the  Independent  Right,  of a number  of  shares of
          Company  stock equal to the number of share  equivalents  in which the
          holder is vested  under such  Independent  Right,  and with respect to
          which the holder is  exercising  the  Independent  Right on such date,
          over (b) the aggregate Fair Market Value,  on the date of the grant of
          the Independent  Right, of such number of shares of Company stock. The
          appreciation  distribution payable on the exercised  Independent Right
          shall be in cash or, if so provided in the Stock Award  Agreement,  in
          an  equivalent  number of shares of Common  Stock based on Fair Market
          Value on the date of the exercise of the Independent Right.

          (ii) Exercise.  To exercise any outstanding stock appreciation  right,
     the holder  shall  provide  written  notice of  exercise  to the Company in
     compliance with the provisions of the Stock Award Agreement evidencing such
     right. No limitation  shall exist on the aggregate  amount of cash payments
     that the Company may make under the Plan in connection with the exercise of
     a stock appreciation right.

8.       COVENANTS OF THE COMPANY.

     (a)  Availability  of  Shares.  During the terms of the Stock  Awards,  the
Company  shall keep  available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

     (b) Securities Law  Compliance.  The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock  Awards and to issue and sell shares of Common
Stock  upon  exercise  of  the  Stock  Awards;  provided,   however,  that  this
undertaking  shall not require the Company to register  under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such  Stock  Award,  other  than on Form S-8  under the  Securities  Act (if the
Company is eligible for the use of such form). If, after reasonable efforts, the
Company is unable to obtain from any such  regulatory  commission  or agency the
authority  which counsel for the Company deems necessary for the lawful issuance
and sale of Common Stock under the Plan,  the Company shall be relieved from any
liability for failure to issue and sell Common Stock upon exercise of such Stock
Awards unless and until such authority is obtained.

9.       USE OF PROCEEDS FROM STOCK.

         Proceeds  from the sale of Common Stock  pursuant to Stock Awards shall
constitute general funds of the Company.

10.      MISCELLANEOUS.

     (a) Acceleration of  Exercisability  and Vesting.  The Board shall have the
power to  accelerate  the time at which a Stock Award may first be  exercised or
the time during which a Stock Award or any part thereof will vest in  accordance
with the Plan,  notwithstanding  the  provisions  in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.

     (b) Stockholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder  with  respect to, any shares of Common
Stock  subject  to such  Stock  Award  unless  and until  such  Participant  has
satisfied  all  requirements  for  exercise of the Stock  Award  pursuant to its
terms.

     (c) No  Employment  or other  Service  Rights.  Nothing  in the Plan or any
instrument  executed or Stock Award granted  pursuant  thereto shall confer upon
any  Participant  any right to continue to serve the Company or an  Affiliate in
the  capacity in effect at the time the Stock Award was granted or shall  affect
the right of the Company or an Affiliate to terminate  (i) the  employment of an
Employee with or without notice and with or without  cause,  or (ii) the service
of a Consultant  pursuant to the terms of such  Consultant's  agreement with the
Company or an Affiliate.

     (d)  Investment  Assurances.  The Company may require a  Participant,  as a
condition of exercising or acquiring  Common Stock under any Stock Award, (i) to
give  written  assurances  satisfactory  to the Company as to the  Participant's
knowledge and  experience in financial and business  matters  and/or to employ a
purchaser   representative   reasonably  satisfactory  to  the  Company  who  is
knowledgeable  and experienced in financial and business  matters and that he or
she  is  capable  of   evaluating,   alone  or  together   with  the   purchaser
representative,  the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the  Participant's  own
account and not with any present intention of selling or otherwise  distributing
the Common Stock. The foregoing requirements,  and any assurances given pursuant
to such  requirements,  shall be  inoperative  if the  issuance of the shares of
Common  Stock upon the exercise or  acquisition  of Common Stock under the Stock
Award  has  been  registered  under  a  then  currently  effective  registration
statement  under the  Securities  Act or, as to any  particular  requirement,  a
determination  is made by counsel for the Company that such requirement need not
be met in the  circumstances  under the then  applicable  securities  laws.  The
Company  may,  upon  advice of counsel to the  Company,  place  legends on stock
certificates   issued  under  the  Plan  as  such  counsel  deems  necessary  or
appropriate in order to comply with applicable securities laws,  including,  but
not limited to, legends restricting the transfer of the Common Stock.

     (e) Withholding Obligations. To the extent provided by the terms of a Stock
Award  Agreement,  the Participant  may satisfy any federal,  state or local tax
withholding  obligation  relating  to the  exercise of or other  acquisition  of
Common Stock under a Stock Award by any of the  following  means (in addition to
the Company's right to withhold from any compensation paid to the Participant by
the Company) or by a  combination  of such means:  (i) tendering a cash payment;
(ii)  authorizing the Company to withhold shares of Common Stock from the shares
of  Common  Stock  otherwise  issuable  to the  Participant  as a result  of the
exercise of or other acquisition of Common Stock under the Stock Award; or (iii)
delivering to the Company owned and unencumbered shares of the Common Stock.

11.      ADJUSTMENTS UPON CHANGES IN STOCK.

     (a) Capitalization  Adjustments.  If any change is made in the Common Stock
subject to the Plan,  or  subject to any Stock  Award,  without  the  receipt of
consideration  by the Company (through  merger,  consolidation,  reorganization,
recapitalization,  reincorporation,  stock dividend,  dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares,  change in corporate  structure or other  transaction  not involving the
receipt  of  consideration  by the  Company),  the  Plan  will be  appropriately
adjusted in the class(es) and maximum  number of securities  subject to the Plan
pursuant  to  subsection  4(a),  and  the  outstanding   Stock  Awards  will  be
appropriately  adjusted in the class(es) and number of securities  and price per
share of Common Stock subject to such outstanding Stock Awards.  The Board shall
make  such  adjustments,  and its  determination  shall be  final,  binding  and
conclusive.  (The conversion of any convertible  securities of the Company shall
not be treated  as a  transaction  "without  receipt  of  consideration"  by the
Company.)

     (b)  Dissolution or Liquidation.  Upon approval by the  stockholders of the
Company of a complete dissolution or liquidation of the Company, all outstanding
Stock Awards shall become  fully  vested and  immediately  exercisable,  and the
Stock Awards shall terminate if not exercised (if applicable) at or prior to the
consummation of such event.

     (c) Asset Sale,  Merger,  Consolidation or Reverse Merger.  In the event of
(i) a sale, lease or other disposition of all or substantially all of the assets
of the Company,  (ii) a merger or  consolidation in which the Company is not the
surviving  corporation  or (iii) a reverse  merger in which the  Company  is the
surviving  corporation  but the shares of Common Stock  outstanding  immediately
preceding the merger are converted by virtue of the merger into other  property,
whether  in the  form of  securities,  cash or  otherwise,  then  any  surviving
corporation  or acquiring  corporation  may assume any Stock Awards  outstanding
under the Plan or may  substitute  similar  stock awards  (including an award to
acquire  the  same  consideration  paid  to the  Company's  stockholders  in the
transaction  described in this subsection 11(c)) for those outstanding under the
Plan. In the event any surviving  corporation or acquiring  corporation does not
assume  such  Stock  Awards  or  substitute   similar  stock  awards  for  those
outstanding  under  the  Plan,  then  with  respect  to  Stock  Awards  held  by
Participants  whose Continuous  Service has not terminated,  the vesting of such
Stock Awards (and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full, and the Stock Awards shall terminate if
not exercised  (if  applicable)  at or prior to such event.  With respect to any
other Stock Awards outstanding under the Plan, such Stock Awards shall terminate
if not exercised (if applicable) prior to such event.

     (d) Securities Acquisition. In the event of an acquisition (other than in a
transaction  described in subsection 11(c) above) by any person, entity or group
within  the  meaning  of  Section  13(d) or 14(d) of the  Exchange  Act,  or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or an Affiliate) of the beneficial
ownership  (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable  successor rule) of securities of the Company representing greater
than fifty  percent (50%) of the combined  voting power  entitled to vote in the
election  of  directors,  then any such  acquiring  person,  entity or group may
assume any Stock Awards  outstanding  under the Plan or may  substitute  similar
stock awards (including an award to acquire the same  consideration  paid to the
Company's  stockholders in the transaction  described in this subsection  11(d))
for those  outstanding  under the Plan. In the event any such acquiring  person,
entity or group does not assume such Stock Awards or does not substitute similar
stock awards for those  outstanding under the Plan, then such Stock Awards shall
continue in full force and effect.

     (e) Certain Change in Control  Transactions.  Unless otherwise specified in
the  applicable  Stock  Award  Agreement,  in the event of the  occurrence  of a
transaction described in subsections 11(c) or 11(d) above (hereafter,  a "Change
in Control")  and provided  that a  Participant's  Stock Award remains in effect
following  such Change in Control or is assumed or  substituted  for any similar
stock  award  in  connection   with  the  Change  in  Control,   then,  if  such
Participant's  Continuous  Service is terminated by the Company without Cause or
the Participant  voluntarily  terminates his or her Continuous  Service due to a
Constructive  Termination  (as defined  below) within one (1) month prior to the
effective  date of the Change in Control or within six (6) months  following the
effective  date  of the  Change  in  Control,  all  Stock  Awards  held  by such
Participant  (or any  substituted  stock awards)  shall,  as of the date of such
termination of Continuous Service, vest in full and become fully exercisable (if
applicable) to the extent not previously vested or exercisable (if applicable).

         For purposes of this subsection 11(e), "Constructive Termination" means
that a Participant voluntarily terminates his or her Continuous Service with the
Company  after any of the  following are  undertaken  without the  Participant's
express written consent:  (i) the assignment to the Participant of any duties or
responsibilities which result in a substantial diminution or significant adverse
change in the Participant's  position,  status or circumstances of employment as
in effect at the  beginning of the one (1) month period  immediately  prior to a
Change  in  Control,   except  in  connection   with  the   termination  of  the
Participant's service on account of death, disability, retirement, for Cause, or
any voluntary  termination of service by the Participant other than Constructive
Termination;  (ii) a reduction in the Participant's  annual base compensation by
more than ten  percent  (10%);  (iii) a  relocation  of the  Participant  or the
Company's  offices at which the  Participant is employed to a location more than
forty-five (45) miles from the location at which the  Participant  performed his
or her duties  prior to a Change in  Control,  (iv) any  material  breach by the
Company  of  any  provision  of  an  agreement   between  the  Company  and  the
Participant,  whether  pursuant to this Plan or  otherwise,  other than a breach
which is cured by the Company within  fifteen (15) days following  notice by the
Company  of such  breach;  or (v) any  failure  by the  Company  to  obtain  the
assumption of this Plan by any successor or assign of the Company.

12.      AMENDMENT OF THE PLAN AND STOCK AWARDS.

     (a) Amendment of Plan.  The Board at any time,  and from time to time,  may
amend the Plan.

     (b) No  Impairment of Rights.  Rights under any Stock Award granted  before
amendment of the Plan shall not be impaired by any  amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

     (c)  Amendment  of Stock  Awards.  The Board at any time,  and from time to
time,  may amend the terms of any one or more Stock Awards;  provided,  however,
that the  rights  under  any  Stock  Award  shall  not be  impaired  by any such
amendment  unless (i) the Company  requests the consent of the  Participant  and
(ii) the Participant consents in writing.

13.      TERMINATION OR SUSPENSION OF THE PLAN.

     (a) Plan Term.  The Board may  suspend or  terminate  the Plan at any time.
Unless sooner  terminated,  the Plan shall  terminate  when all shares of Common
Stock  reserved for issuance under the Plan have been issued and all such issued
shares are no longer subject to a repurchase or reacquisition option in favor of
the Company or other form of  forfeiture or vesting  condition.  No Stock Awards
may be  granted  under  the  Plan  while  the Plan is  suspended  or after it is
terminated.

     (b) No Impairment of Rights.  Suspension or  termination  of the Plan shall
not impair rights and  obligations  under any Stock Award granted while the Plan
is in effect, except with the written consent of the Participant.

14.      EFFECTIVE DATE OF PLAN.

         The Plan shall become effective as of May 11, 1999.

15.      CHOICE OF LAW.

         The  law  of  the  State  of  California  shall  govern  all  questions
concerning the construction,  validity and  interpretation of this Plan, without
regard to such state's conflict of laws rules.