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                                                                    EXHIBIT 10.4

                               EXELIXIS, INC.

                         2000 EQUITY INCENTIVE PLAN

                          Adopted January 27, 2000
                   Approved By Stockholders March 15, 2000
                     Termination Date: January 26, 2010



1.   PURPOSES.

     (a) Eligible Stock Award Recipients.  The persons eligible to receive Stock
Awards are the  Employees,  Directors  and  Consultants  of the  Company and its
Affiliates.

     (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) Incentive Stock Options,  (ii)  Nonstatutory  Stock
Options, (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) "Board" means the Board of Directors of the Company.

     (c)  "Calculation  Date"  means  the  last day of each  fiscal  year of the
Company.

     (d) "Cause"  means,  with  respect to the  involuntary  termination  of the
Continuous Service of a Participant,  misconduct,  including:  (i) conviction of
any  felony  or  any  crime  involving  moral  turpitude  or  dishonesty;   (ii)
participation  in a  fraud  or act  of  dishonesty  against  the  Company  or an
Affiliate;  (iii) conduct that,  based upon a good faith and reasonable  factual
investigation and determination by the Company,  demonstrates gross unfitness to
serve;  or (iv)  intentional,  material  violation  of any  agreement  with  the
Company,  or of any statutory duty to the Company,  that is not corrected within
thirty (30) days after written  notice  thereof.  Physical or mental  disability
shall not constitute  "Cause." For purposes of this definition,  "Company" shall
include an Affiliate of the Company and a successor to the Company.

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

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     (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.

     (h) "Company" means Exelixis, Inc., a Delaware corporation.

     (i) "Consultant" means any person, including an advisor, (i) engaged by the
Company or an Affiliate  to render  consulting  or advisory  services and who is
compensated  for such services or (ii) who is a member of the Board of Directors
of an  Affiliate.  However,  the term  "Consultant"  shall  not  include  either
Directors who are not compensated by the Company for their services as Directors
or  Directors  who are merely  paid a  director's  fee by the  Company for their
services as Directors.

     (j)  "Continuous  Service"  means that the  Participant's  service with the
Company or an Affiliate,  whether as an Employee, Director 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,
Consultant  or  Director  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 or a Director  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) "Covered  Employee" means the chief executive  officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to  stockholders  under the Exchange  Act, as determined
for purposes of Section 162(m) of the Code.

     (l) "Diluted Shares  Outstanding" means the number of outstanding shares of
Common Stock on the Calculation  Date, plus the number of shares of Common Stock
issuable on the  Calculation  Date assuming the  conversion  of all  outstanding
preferred stock and  convertible  notes,  and the additional  number of dilutive
Common  Stock  equivalent  shares  outstanding  as the result of any  options or
warrants outstanding during the fiscal year, calculated using the treasury stock
method.

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

     (n)  "Disability"  means (i) before the Listing  Date,  the  inability of a
person, in the opinion of a qualified  physician  acceptable to the Company,  to
perform  the major  duties of that  person's  position  with the  Company  or an
Affiliate  of the  Company  because of the  sickness or injury of the person and
(ii) after the Listing  Date,  the  permanent  and total  disability of a person
within the meaning of Section 22(e)(3) of the Code.

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     (o)  "Employee"  means any person  employed by the Company or an Affiliate.
Mere service as a Director or payment of a  director's  fee by the Company or an
Affiliate  shall not be sufficient to constitute  "employment" by the Company or
an Affiliate.

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

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

          (i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq  National Market or the Nasdaq  SmallCap  Market,  the Fair
Market  Value of a share of Common  Stock shall be the  closing  sales price for
such stock (or the  closing  bid, if no sales were  reported)  as quoted on such
exchange  or market  (or the  exchange  or market  with the  greatest  volume of
trading in the Common Stock) on the last market  trading day prior to the day of
determination,  as reported in The Wall Street  Journal or such other  source as
the Board deems reliable.

          (ii) In the  absence of such  markets for the Common  Stock,  the Fair
Market Value shall be determined in good faith by the Board.

          (iii) Prior to the Listing  Date,  the value of the Common Stock shall
be determined in a manner consistent with Section  260.140.50 of Title 10 of the
California Code of Regulations.

     (r) "Good Reason" means,  with respect to the voluntary  termination of the
Continuous Service of a Participant in connection with a Change in Control,  (i)
reduction of such person's rate of compensation as in effect  immediately  prior
to the Change in Control by greater than ten percent (10%), except to the extent
the compensation of other similarly  situated  persons are accordingly  reduced,
(ii)  failure to provide a package of welfare  benefit  plans  that,  taken as a
whole, provide  substantially  similar benefits to those in which such person is
entitled to participate  immediately prior to the Change in Control (except that
such person's  contributions  may be raised to the extent of any cost  increases
imposed by third  parties)  or any action by the  Company  that would  adversely
affect such person's participation or reduce such person's benefits under any of
such plans, (iii) a change in such person's responsibilities,  authority, titles
or offices  resulting in diminution  of position,  excluding for this purpose an
isolated,  insubstantial  and inadvertent  action not taken in bad faith that is
remedied by the Company  promptly  after notice thereof is given by such person,
(iv) a request that such person  relocate to a worksite  that is more than fifty
(50) miles from such person's  prior  worksite,  unless such person accepts such
relocation  opportunity,  (v) a material reduction in duties,  (vi) a failure or
refusal of any successor  company to assume the obligations of the Company under
an agreement  with such person or (vii) a material  breach by the Company of any
of the material  provisions  of an agreement  with such person.  For purposes of
this  definition,  "Company"  shall  include an  Affiliate  of the Company and a
successor to the Company.

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     (s)  "Incentive  Stock  Option"  means an Option  intended to qualify as an
incentive  stock  option  within the  meaning of Section 422 of the Code and the
regulations promulgated thereunder.

     (t)  "Listing  Date"  means the first date upon which any  security  of the
Company is listed (or  approved  for  listing)  upon  notice of  issuance on any
securities  exchange or designated (or approved for designation)  upon notice of
issuance as a national  market  security on an interdealer  quotation  system if
such securities  exchange or interdealer  quotation system has been certified in
accordance with the provisions of Section  25100(o) of the California  Corporate
Securities Law of 1968.

     (u)  "Non-Employee  Director"  means a  Director  who  either  (i) is not a
current  Employee or Officer of the Company or its parent or a subsidiary,  does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary  for services  rendered as a consultant or in any capacity other
than as a Director  (except  for an amount as to which  disclosure  would not be
required  under  Item  404(a) of  Regulation  S-K  promulgated  pursuant  to the
Securities Act  ("Regulation  S-K")),  does not possess an interest in any other
transaction  as to which  disclosure  would be  required  under  Item  404(a) of
Regulation  S-K  and is not  engaged  in a  business  relationship  as to  which
disclosure  would be required  under Item 404(b) of  Regulation  S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

     (v) "Nonstatutory  Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.

     (w) "Officer"  means (i) before the Listing Date, any person  designated by
the Company as an officer and (ii) on and after the Listing  Date,  a person who
is an officer of the Company  within the  meaning of Section 16 of the  Exchange
Act and the rules and regulations promulgated thereunder.

     (x) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.

     (y) "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.

     (z) "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.

     (aa)  "Outside  Director"  means a Director who either (i) is not a current
employee of the Company or an  "affiliated  corporation"  (within the meaning of
Treasury  Regulations  promulgated  under Section 162(m) of the Code),  is not a
former  employee  of  the  Company  or  an  "affiliated  corporation"  receiving
compensation  for prior  services  (other than  benefits  under a tax  qualified
pension plan), was not an officer of the Company or an "affiliated  corporation"
at any time and is not currently receiving direct or indirect  remuneration from
the Company or an

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"affiliated  corporation"  for services in any capacity other than as a Director
or (ii) is otherwise  considered  an "outside  director" for purposes of Section
162(m) of the Code.

     (bb) "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.

     (cc) "Plan" means this Exelixis, Inc. 2000 Equity Incentive Plan.

     (dd) "Rule  16b-3" means Rule 16b-3  promulgated  under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

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

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

     (gg) "Stock Award Agreement" means a written  agreement between the Company
and a  holder  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.

     (hh) "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).

     (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.

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          (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) Committee  Composition when Common Stock is Publicly  Traded.  At
such time as the Common  Stock is  publicly  traded,  in the  discretion  of the
Board,  a Committee  may consist  solely of two or more  Outside  Directors,  in
accordance  with  Section  162(m)  of the  Code,  and/or  solely  of two or more
Non-Employee  Directors, in accordance with Rule 16b-3. Within the scope of such
authority,  the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside  Directors  the authority to grant
Stock Awards to eligible  persons who are either (a) not then Covered  Employees
and are not  expected  to be Covered  Employees  at the time of  recognition  of
income  resulting  from such Stock Award or (b) not persons with respect to whom
the  Company  wishes to comply  with  Section  162(m)  of the Code  and/or)  (2)
delegate  to a  committee  of one or  more  members  of the  Board  who  are not
Non-Employee  Directors the authority to grant Stock Awards to eligible  persons
who are not then subject to Section 16 of the Exchange Act.

     (d) Effect of Board's Decision.  All  determinations,  interpretations  and
constructions  made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

4.   SHARES SUBJECT TO THE PLAN.

     (a) Share Reserve. Subject to the provisions of subsection 4(b) relating to
automatic  increases to the share  reserve,  the  provisions of subsection  4(c)
relating to  reversion  of shares of Common  Stock to the share  reserve and the
provisions of Section 11 relating to adjustments upon changes in the Common
Stock, the Common Stock that may be issued pursuant to Stock Awards shall not
exceed in the aggregate three million (3,000,000) shares of Common Stock.

     (b) Automatic  Increase.  For a period of ten (10) years, the share reserve
specified in subsection 4(a) automatically shall be increased on the Calculation
Date by the  greater  of that  number of shares  of Common  Stock  equal to five
percent  (5%) of the  Diluted  Shares

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Outstanding or that number of shares of Common Stock that have been made subject
to Stock Awards granted under the Plan during the prior 12-month period;
provided, however, that the Board may provide for a lesser number at any time
prior to the Calculation Date and provided further that such automatic share
reserve increases in the aggregate that are available for Incentive Stock
Options shall not exceed thirty million (30,000,000)shares of Common Stock.

     (c) 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, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan. If
the Company  repurchases  any unvested shares of Common Stock acquired under the
Plan,  the  repurchased  shares of Common Stock shall revert to and again become
available for issuance  under the Plan for all Stock Awards other than Incentive
Stock Options.

     (d) 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.

     (e) Share Reserve  Limitation.  Prior to the Listing Date and to the extent
then  required  by  Section  260.140.45  of Title 10 of the  California  Code of
Regulations,  the total number of shares of Common Stock  issuable upon exercise
of all  outstanding  Options  and the total  number  of  shares of Common  Stock
provided  for under any stock  bonus or similar  plan of the  Company  shall not
exceed the applicable percentage as calculated in accordance with the conditions
and  exclusions  of Section  260.140.45  of Title 10 of the  California  Code of
Regulations,  based  on the  shares  of  Common  Stock of the  Company  that are
outstanding at the time the calculation is made.1

5.   ELIGIBILITY.

     (a) Eligibility  for Specific Stock Awards.  Incentive Stock Options may be
granted only to Employees.  Stock Awards other than Incentive  Stock Options may
be granted to Employees, Directors and Consultants.

     (b) Ten Percent Stockholders.

          (i) A Ten Percent  Stockholder shall not be granted an Incentive Stock
Option  unless the  exercise  price of such  Option is at least one  hundred ten
percent (110%) of the Fair Market Value of the Common Stock at the date of grant
and the Option is not  exercisable  after the  expiration of five (5) years from
the date of grant.

--------
1 Section 260.140.45 generally provides that the total number of shares issuable
upon exercise of all outstanding  options  (exclusive of certain rights) and the
total  number of shares  called for under any stock bonus or similar  plan shall
not  exceed a number  of  shares  which is equal to 30% of the then  outstanding
shares of the issuer (convertible  preferred or convertible senior common shares
counted on an as if converted basis), exclusive of shares subject to promotional
waivers under Section 260.141,  unless a percentage  higher than 30% is approved
by at least two-thirds of the outstanding shares entitled to vote.

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          (ii) Prior to the Listing Date, a Ten Percent Stockholder shall not be
granted a Nonstatutory  Stock Option unless the exercise price of such Option is
at least (i) one  hundred ten  percent  (110%) of the Fair  Market  Value of the
Common  Stock at the date of grant or (ii)  such  lower  percentage  of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California  Code of Regulations at the time of the
grant of the Option.

          (iii) Prior to the Listing Date, a Ten Percent  Stockholder  shall not
be granted a restricted  stock award unless the purchase price of the restricted
stock is at least (i) one hundred percent (100%) of the Fair Market Value of the
Common  Stock at the date of grant or (ii)  such  lower  percentage  of the Fair
Market Value of the Common Stock at the date of grant as is permitted by Section
260.140.41 of Title 10 of the California  Code of Regulations at the time of the
grant of the Option.

     (c) Section  162(m)  Limitation.  Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than one million
(1,000,000) Shares of Common Stock during any calendar year. This subsection
5(c) shall not apply prior to the Listing Date and, following the Listing Date,
this subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of
shares of Common Stock reserved for issuance under the Plan in accordance with
Section 4); (2) the issuance of all of the shares of Common Stock reserved for
issuance under the Plan; (3) the expiration of the Plan; or (4) the first
meeting of stockholders at which Directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.

(d)  Consultants.

          (i) Prior to the Listing Date, a Consultant  shall not be eligible for
the grant of a Stock  Award if,  at the time of grant,  either  the offer or the
sale of the Company's securities to such Consultant is not exempt under Rule 701
of the  Securities  Act ("Rule 701")  because of the nature of the services that
the  Consultant is providing to the Company,  or because the Consultant is not a
natural  person,  or as  otherwise  provided  by Rule 701,  unless  the  Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy  another  exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions.

          (ii)  From and after  the  Listing  Date,  a  Consultant  shall not be
eligible  for the grant of a Stock  Award  if, at the time of grant,  a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register  either  the  offer or the  sale of the  Company's  securities  to such
Consultant  because  of the  nature  of the  services  that  the  Consultant  is
providing to the Company,  or because the Consultant is not a natural person, or
as otherwise  provided by the rules  governing  the use of Form S-8,  unless the
Company  determines  both (1) that such grant (a) shall be registered in another
manner under the Securities Act (e.g., on a Form

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S-3  Registration  Statement)  or (b) does not  require  registration  under the
Securities Act in order to comply with the  requirements  of the Securities Act,
if applicable,  and (2) that such grant complies with the securities laws of all
other relevant jurisdictions.

          (iii) Rule 701 and Form S-8 generally are available to consultants and
advisors  only if (1) they are  natural  persons;  (2) they  provide  bona  fide
services  to  the  issuer,  its  parents,  its  majority-owned  subsidiaries  or
majority-owned subsidiaries of the issuer's parent; and (3) the 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 issuer's securities.

6.   OPTION PROVISIONS.

     Each  Option  shall be in such  form  and  shall  contain  such  terms  and
conditions as the Board shall deem appropriate.  All Options shall be separately
designated  Incentive Stock Options or Nonstatutory Stock Options at the time of
grant,  and, if certificates are issued, a separate  certificate or certificates
will be issued for shares of Common Stock  purchased on exercise of each type of
Option.  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.  Subject to the  provisions  of  subsection  5(b)  regarding  Ten
Percent  Stockholders,  no Option  granted  prior to the  Listing  Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no  Incentive  Stock  Option  granted on or after the Listing  Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.

     (b) Exercise Price of an Incentive Stock Option.  Subject to the provisions
of subsection  5(b)  regarding Ten Percent  Stockholders,  the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the Common Stock  subject to the Option on the date the
Option is granted.  Notwithstanding the foregoing, an Incentive Stock Option may
be granted  with an exercise  price  lower than that set forth in the  preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another  option in a manner  satisfying  the provisions of Section 424(a) of the
Code.

     (c)  Exercise  Price  of  a  Nonstatutory  Stock  Option.  Subject  to  the
provisions of subsection 5(b) regarding Ten Percent  Stockholders,  the exercise
price of each Nonstatutory  Stock Option granted prior to the Listing Date shall
be not less  than  eighty-five  percent  (85%) of the Fair  Market  Value of the
Common Stock subject to the Option on the date the Option is granted.  The Board
shall determine the exercise price of each Nonstatutory  Stock Option granted on
or after the Listing Date.  Notwithstanding the foregoing,  a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth herein if
such Option is granted  pursuant to an  assumption or  substitution  for another
option in a manner satisfying the provisions of Section 424(a) of the Code.

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     (d) Consideration.  The purchase price of Common Stock acquired pursuant to
an Option  shall be paid,  to the extent  permitted by  applicable  statutes and
regulations,  either (i) in cash at the time the Option is  exercised or (ii) at
the  discretion  of the  Board  at the  time  of the  grant  of the  Option  (or
subsequently in the case of a Nonstatutory  Stock Option) (1) by delivery to the
Company of other Common  Stock,  (2)  according  to a deferred  payment or other
similar  arrangement  with the  Optionholder  or (3) in any other  form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option,  the purchase price of Common Stock acquired pursuant to
an  Option  that is paid by  delivery  to the  Company  of  other  Common  Stock
acquired,  directly or indirectly from the Company, shall be paid only by shares
of the  Common  Stock of the  Company  that have been held for more than six (6)
months (or such longer or shorter  period of time  required to avoid a charge to
earnings for  financial  accounting  purposes).  At any time that 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.

     In  the  case  of any  deferred  payment  arrangement,  interest  shall  be
compounded  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.

     (e) Transferability of an Incentive Stock Option. An Incentive Stock 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.

     (f)  Transferability  of a Nonstatutory  Stock Option. A Nonstatutory Stock
Option  granted  prior to the Listing Date shall not be  transferable  except by
will or by the laws of descent and  distribution  and, to the extent provided in
the  Option   Agreement,   to  such  further  extent  as  permitted  by  Section
260.140.41(d)  of Title 10 of the California  Code of Regulations at the time of
the grant of the Option,  and shall be  exercisable  during the  lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the  Listing  Date shall be  transferable  to the extent  provided  in the
Option  Agreement.  If the  Nonstatutory  Stock  Option  does  not  provide  for
transferability,  then the  Nonstatutory  Stock 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.

     (g) 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

                                       10
<PAGE>

criteria)  as  the  Board  may  deem  appropriate.  The  vesting  provisions  of
individual  Options may vary. The provisions of this subsection 6(g) are subject
to any Option provisions  governing the minimum number of shares of Common Stock
as to which an Option may be exercised.

     (h)  Minimum  Vesting  Prior  to  the  Listing  Date.  Notwithstanding  the
foregoing  subsection  6(g),  to the extent that the following  restrictions  on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:

          (i) Options  granted  prior to the Listing  Date to an Employee who is
not an Officer,  Director or  Consultant  shall provide for vesting of the total
number of shares of Common Stock at a rate of at least twenty  percent (20%) per
year  over five (5) years  from the date the  Option  was  granted,  subject  to
reasonable conditions such as continued employment; and

          (ii) Options granted prior to the Listing Date to Officers,  Directors
or Consultants may be made fully exercisable,  subject to reasonable  conditions
such as continued  employment,  at any time or during any period  established by
the Company.

     (i)  Termination  of  Continuous  Service.  In the event an  Optionholder's
Continuous  Service  terminates  (other  than upon the  Optionholder's  death or
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  three (3)  months  following  the  termination  of the  Optionholder's
Continuous  Service (or such longer or shorter  period  specified  in the Option
Agreement,  which  period  shall not be less than  thirty  (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the  expiration of the term of the Option as set forth in the Option  Agreement.
If,  after  termination,  the  Optionholder  does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.

     (j) 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 or
Disability)  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 three  (3)  months  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.

     (k)  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 specified in
the Option  Agreement,  which  period  shall not be less than six (6) months for
Options granted prior

                                       11
<PAGE>

to the  Listing  Date) or (ii) the  expiration  of the term of the Option as set
forth in the Option Agreement. If, after termination,  the Optionholder does not
exercise his or her Option within the time  specified  herein,  the Option shall
terminate.

     (l) 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(e) or 6(f), but
only  within the period  ending on the  earlier  of (1) the date  eighteen  (18)
months  following the date of death (or such longer or shorter period  specified
in the Option Agreement,  which period shall not be less than six (6) months for
Options  granted prior to the Listing Date) 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.

     (m) 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.  Subject to the  "Repurchase  Limitation" in subsection  10(h),  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. Provided that the "Repurchase Limitation" in subsection 10(h)
is not violated,  the Company will not exercise its  repurchase  option until at
least six (6) months (or such longer or shorter period of time required to avoid
a charge to earnings for financial  accounting  purposes) have elapsed following
exercise of the Option unless the Board otherwise  specifically  provides in the
Option.

     (n)  Right  of  Repurchase.  Subject  to  the  "Repurchase  Limitation"  in
subsection  10(h), the Option may, but need not, include a provision whereby the
Company may elect,  prior to the Listing Date, to repurchase  all or any part of
the vested shares of Common Stock acquired by the  Optionholder  pursuant to the
exercise of the Option.  Provided that the "Repurchase Limitation" in subsection
10(h) is not violated, the Company will not exercise its repurchase option until
at least six (6) months (or such  longer or shorter  period of time  required to
avoid a charge to earnings  for  financial  accounting  purposes)  have  elapsed
following  exercise  of the  Option  unless  the  Board  otherwise  specifically
provides in the Option.

     (o)  Right of First  Refusal.  The  Option  may,  but need  not,  include a
provision whereby the Company may elect,  prior to the Listing Date, to exercise
a right of first refusal  following  receipt of notice from the  Optionholder of
the intent to transfer  all or any part of the shares of Common  Stock  received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o),  such right of first refusal shall  otherwise  comply with any  applicable
provisions of the Bylaws of the Company.

                                       12
<PAGE>

     (p) Re-Load Options.

          (i) Without in any way limiting the  authority of the Board to make or
not to make grants of Options hereunder, the Board shall have the authority (but
not an  obligation)  to  include  as part of any Option  Agreement  a  provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the  Optionholder  exercises the Option  evidenced by the Option  Agreement,  in
whole or in part,  by  surrendering  other shares of Common Stock in  accordance
with this Plan and the terms and  conditions  of the  Option  Agreement.  Unless
otherwise  specifically  provided  in the  Option,  the  Optionholder  shall not
surrender  shares of Common  Stock  acquired,  directly or  indirectly  from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter  period of time  required  to avoid a charge to  earnings  for
financial accounting purposes).

          (ii) Any such Re-Load  Option shall (1) provide for a number of shares
of Common  Stock equal to the number of shares of Common  Stock  surrendered  as
part or all of the exercise  price of such Option;  (2) have an expiration  date
which is the same as the  expiration  date of the Option the  exercise  of which
gave rise to such Re-Load Option;  and (3) have an exercise price which is equal
to one  hundred  percent  (100%) of the Fair  Market  Value of the Common  Stock
subject to the Re-Load  Option on the date of exercise of the  original  Option.
Notwithstanding  the  foregoing,  a Re-Load  Option shall be subject to the same
exercise price and term  provisions  heretofore  described for Options under the
Plan.

          (iii) Any such Re-Load  Option may be an  Incentive  Stock Option or a
Nonstatutory  Stock Option,  as the Board may designate at the time of the grant
of the original Option;  provided,  however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar  ($100,000)  annual  limitation on the  exercisability of Incentive Stock
Options  described in subsection  10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load  Option.  Any such Re-Load Option shall
be  subject to the  availability  of  sufficient  shares of Common  Stock  under
subsection  4(a) and the "Section  162(m)  Limitation"  on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent  with the express  provisions
of the Plan regarding the terms of Options.

7.   PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.

     (a) Stock Bonus Awards.  Each stock bonus  agreement  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
past services actually rendered to the Company or an Affiliate for its benefit.

                                       13
<PAGE>

          (ii) Vesting.  Subject to the  "Repurchase  Limitation"  in subsection
10(h),  shares of Common Stock awarded under the stock bonus  agreement may, but
need not,  be subject to a share  repurchase  option in favor of the  Company in
accordance with a vesting schedule to be determined by the Board.

          (iii) Termination of Participant's  Continuous Service. Subject to the
"Repurchase  Limitation"  in  subsection  10(h),  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.  For a stock bonus award made before the Listing
Date,  rights to acquire shares of Common Stock under the stock bonus  agreement
shall  not be  transferable  except  by  will  or by the  laws  of  descent  and
distribution  and shall be  exercisable  during the lifetime of the  Participant
only by the  Participant.  For a stock  bonus award made on or after the Listing
Date,  rights to acquire shares of Common Stock 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 restricted stock purchase agreement 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.  Subject to the  provisions  of  subsection  5(b)
regarding Ten Percent  Stockholders,  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.  For restricted  stock
awards made prior to the Listing Date, the purchase price shall not be less than
eighty-five  percent  (85%) of the Common  Stock's Fair Market Value on the date
such award is made or at the time the purchase is  consummated.  For  restricted
stock awards made on or after the Listing  Date,  the Board shall  determine the
purchase price.

          (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;  or (iii)
in any other form of legal  consideration that may be acceptable to the Board in
its  discretion;  provided,  however,  that at any  time  that  the  Company  is
incorporated  in Delaware,  then  payment of the Common  Stock's "par value," as
defined in the Delaware  General  Corporation Law, shall not be made by deferred
payment.

                                       14
<PAGE>

          (iii) Vesting.  Subject to the  "Repurchase  Limitation" in subsection
10(h),  shares of Common Stock  acquired  under the  restricted  stock  purchase
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.

          (iv) Termination of Participant's  Continuous Service.  Subject to the
"Repurchase  Limitation"  in  subsection  10(h),  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.  For a  restricted  stock  award made before the
Listing  Date,  rights to acquire  shares of Common  Stock under the  restricted
stock purchase agreement shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable  during the lifetime of the
Participant  only by the  Participant.  For a restricted  stock award made on or
after the  Listing  Date,  rights to acquire  shares of Common  Stock  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.

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. 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.

                                       15
<PAGE>

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, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate,  and any applicable  provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

     (d)  Incentive  Stock Option  $100,000  Limitation.  To the extent that the
aggregate  Fair Market Value  (determined  at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000),  the Options or
portions  thereof which exceed such limit  (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

     (e)  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 (1) 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 (2) 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

                                       16
<PAGE>

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.

     (f) 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 or 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
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.

     (g)  Information  Obligation.  Prior to the  Listing  Date,  to the  extent
required  by  Section   260.140.46  of  Title  10  of  the  California  Code  of
Regulations,  the Company shall deliver financial  statements to Participants at
least  annually.  This  subsection  10(g) shall not apply to key Employees whose
duties  in  connection  with  the  Company  assure  them  access  to  equivalent
information.

     (h)  Repurchase  Limitation.  The terms of any  repurchase  option shall be
specified  in the Stock Award and may be either at Fair Market Value at the time
of repurchase  or at not less than the original  purchase  price.  To the extent
required  by  Section  260.140.41  and  Section  260.140.42  of  Title 10 of the
California Code of Regulations at the time a Stock Award is made, any repurchase
option  contained in a Stock Award granted prior to the Listing Date to a person
who is not an Officer,  Director or Consultant shall be upon the terms described
below:

          (i) Fair Market Value. If the repurchase  option gives the Company the
right to repurchase the shares of Common Stock upon termination of employment at
not  less  than the  Fair  Market  Value of the  shares  of  Common  Stock to be
purchased on the date of termination of Continuous  Service,  then (i) the right
to repurchase  shall be exercised  for cash or  cancellation  of purchase  money
indebtedness  for  the  shares  of  Common  Stock  within  ninety  (90)  days of
termination  of  Continuous  Service  (or in the case of shares of Common  Stock
issued upon  exercise of Stock  Awards  after such date of  termination,  within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company  and the  Participant  (for  example,  for  purposes of
satisfying  the  requirements  of  Section  1202(c)(3)  of  the  Code  regarding
"qualified  small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.

          (ii)  Original  Purchase  Price.  If the  repurchase  option gives the
Company the right to repurchase  the shares of Common Stock upon  termination of
Continuous  Service  at the  original  purchase  price,  then  (i) the  right to
repurchase  at the original  purchase  price shall lapse at the rate of at least
twenty  percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted  (without respect to the date the Stock
Award was  exercised  or became  exercisable)  and (ii) the right to  repurchase
shall be exercised for cash or

                                       17
<PAGE>

cancellation  of  purchase  money  indebtedness  for the shares of Common  Stock
within ninety (90) days of termination of Continuous  Service (or in the case of
shares of Common  Stock  issued  upon  exercise  of  Options  after such date of
termination,  within  ninety (90) days after the date of the  exercise)  or such
longer  period as may be  agreed  to by the  Company  and the  Participant  (for
example,  for purposes of satisfying the  requirements of Section  1202(c)(3) of
the Code regarding "qualified small business 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 maximum  number of  securities  subject to
award to any person  pursuant to  subsection  5(c),  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)  Change  in  Control--Dissolution  or  Liquidation.  In the  event of a
dissolution  or liquidation of the Company,  then all  outstanding  Stock Awards
shall terminate immediately prior to such event.

     (c) Change in Control--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  shall assume any Stock Awards
outstanding  under the Plan or shall substitute  similar stock awards (including
an award to  acquire  the same  consideration  paid to the  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 refuses
to assume such Stock  Awards or to  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 any shares of Common  Stock  acquired  under 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.

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<PAGE>

     (d)  Change  in  Control--Securities   Acquisition.  In  the  event  of  an
acquisition  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  at least fifty  percent  (50%) of the
combined voting power entitled to vote in the election of Directors and provided
that such  acquisition is not a result of, and does not constitute a transaction
described in, subsection 11(c) hereof, then with respect to Stock Awards held by
Participants  whose Continuous  Service has not terminated,  the vesting of such
Stock  Awards and any shares of Common  Stock  acquired  under such Stock Awards
(and, if  applicable,  the time during which such Stock Awards may be exercised)
shall be accelerated in full.

     (e) Change in Control--Termination of Continuous Service.

          (i) In the event of a change in control  as  specified  in  subsection
11(c) or 11(d) (collectively,  a "Change in Control") and the Continuous Service
of a  Participant  is  either  involuntarily  terminated  without  Cause  or  is
voluntarily  terminated  for Good Reason within one (1) month before or thirteen
(13) months after the Change in Control,  then the vesting of such Participant's
Stock Award and any shares of Common Stock acquired under such Stock Award (and,
if applicable, the time during which such Stock Award may be exercised) shall be
accelerated by one (1) year.

          (ii) The Company or an  Affiliate  may not  terminate  the  Continuous
Service  of a  Participant  for Cause  unless  and until  there  shall have been
delivered to such person a copy of a resolution  duly adopted by the affirmative
vote of at least a majority  of the Board at a meeting  of the Board  called and
held for the purpose (after  reasonable notice to such person and an opportunity
for such person,  together  with such person's  counsel,  to be heard before the
Board),  finding  that in the good faith  opinion of the Board,  such person was
guilty of the  conduct  constituting  "Cause"  and  specifying  the  particulars
thereof in detail.

          (iii) Any purported voluntarily  termination of the Continuous Service
of  a  Participant  for  Good  Reason  shall  be  communicated  by a  notice  of
termination to the Company and shall state the specific  termination  provisions
relied  upon and set forth in  reasonable  detail  the  facts and  circumstances
claimed to provide a basis for such termination.

          (iv) If any benefit received or to be received by such person pursuant
to the  acceleration  of the  vesting  and/or  exercisability  of an Award would
constitute  an "excess  parachute  payment"  subject to excise tax under Section
4999 of the Code (the  "Excise  Tax"),  the amount or benefit to be  received by
such  person  shall be  reduced  if such  reduction,  taking  into  account  all
applicable  federal,  state and local income and employment taxes and the Excise
Tax, results in a greater after-tax  benefit for such person.  The determination
by the Company's  independent auditors of any required reduction pursuant hereto
shall be conclusive and binding upon such person.

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<PAGE>

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.  However,  except  as  provided  in  Section  11  relating  to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent  stockholder  approval
is necessary to satisfy the  requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

     (b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to,  amendments  to the Plan  intended  to satisfy the  requirements  of Section
162(m) of the Code and the  regulations  thereunder  regarding  the exclusion of
performance-based  compensation  from the limit on  corporate  deductibility  of
compensation paid to certain executive officers.

     (c) Contemplated  Amendments.  It is expressly  contemplated that the Board
may amend the Plan in any respect  the Board deems  necessary  or  advisable  to
provide eligible  Employees with the maximum benefits provided or to be provided
under the  provisions  of the Code and the  regulations  promulgated  thereunder
relating to Incentive  Stock Options  and/or to bring the Plan and/or  Incentive
Stock Options granted under it into compliance therewith.

     (d) 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.

     (e)  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 on the day before the tenth
(10th)  anniversary  of the date the Plan is adopted by the Board or approved by
the  stockholders of the Company,  whichever is earlier.  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  upon adoption by the Board,  but no Stock
Award shall be exercised  (or, in the case of a stock  bonus,  shall be granted)
unless and until the Plan has been

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<PAGE>

approved by the  stockholders  of the Company,  which  approval  shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.

15.  CHOICE OF LAW.

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

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