<PAGE>

                                                                    EXHIBIT 10.2

                                    FORM OF
                                 BEATNIK, INC.
                           2000 STOCK INCENTIVE PLAN


                    (Adopted by the Board on March 10, 2000)
<PAGE>

                               TABLE OF CONTENTS
                               -----------------


<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>              <C>                                                           <C>
SECTION 1.       ESTABLISHMENT AND PURPOSE..................................    1

SECTION 2.       DEFINITIONS................................................    1
 (a)             "Affiliate"................................................    1
 (b)             "Award"....................................................    1
 (c)             "Board of Directors".......................................    1
 (d)             "Change in Control"........................................    1
 (e)             "Code".....................................................    2
 (f)             "Committee"................................................    2
 (g)             "Company"..................................................    2
 (h)             "Consultant"...............................................    2
 (i)             "Employee".................................................    2
 (j)             "Exchange Act".............................................    2
 (k)             "Exercise Price"...........................................    3
 (l)             "Fair Market Value"........................................    3
 (m)             "ISO"......................................................    3
 (n)             "Nonstatutory Option"......................................    3
 (o)             "Offeree"..................................................    3
 (p)             "Option"...................................................    3
 (q)             "Optionee".................................................    3
 (r)             "Outside Director".........................................    3
 (s)             "Parent"...................................................    4
 (t)             "Participant"..............................................    4
 (u)             "Plan".....................................................    4
 (v)             "Purchase Price"...........................................    4
 (w)             "Restricted Share".........................................    4
 (x)             "Restricted Share Agreement "..............................    4
 (y)             "SAR"......................................................    4
 (z)             "SAR Agreement"............................................    4
 (aa)            "Service"..................................................    4
 (bb)            "Share"....................................................    4
 (cc)            "Stock"....................................................    4
 (dd)            "Stock Option Agreement"...................................    4
 (ee)            "Stock Purchase Agreement".................................    4
 (ff)            "Stock Unit"...............................................    4
 (gg)            "Stock Unit Agreement".....................................    4
 (hh)            "Subsidiary"...............................................    4
 (ii)            "Total and Permanent Disability"...........................    4

SECTION 3.       ADMINISTRATION.............................................    4
 (a)             Committee Procedures.......................................    4
 (b)             Committee Responsibilities.................................    4
</TABLE>

                                      -i-
<PAGE>

<TABLE>

<C>             <S>                                                           <S>
SECTION 4.       ELIGIBILITY................................................    6
 (a)             General Rule...............................................    6
 (b)             Outside Directors..........................................    6
 (c)             Limitation On Grants.......................................    6
 (d)             Ten-Percent Stockholders...................................    6
 (e)             Attribution Rules..........................................    7
 (f)             Outstanding Stock..........................................    7

SECTION 5.       STOCK SUBJECT TO PLAN......................................    7
 (a)             Basic Limitation...........................................    7
 (b)             Annual Increase in Shares..................................    7
 (c)             Additional Shares..........................................    7
 (d)             Dividend Equivalents.......................................    7

SECTION 6.       RESTRICTED SHARES..........................................    8
 (a)             Restricted Stock Agreement.................................    8
 (b)             Payment for Awards.........................................    8
 (c)             Vesting....................................................    8
 (d)             Voting and Dividend Rights.................................    8

SECTION 7.       OTHER TERMS AND CONDITIONS OF AWARDS OR SALES..............    8
 (a)             Duration of Offers and Nontransferability of Rights........    8
 (b)             Purchase Price.............................................    9
 (c)             Withholding Taxes..........................................    9
 (d)             Restrictions on Transfer of Shares.........................    9

SECTION 8.       TERMS AND CONDITIONS OF OPTIONS............................    9
 (a)             Stock Option Agreement.....................................    9
 (b)             Number of Shares...........................................    9
 (c)             Exercise Price.............................................    9
 (d)             Withholding Taxes..........................................    9
 (e)             Exercisability and Term....................................    9
 (f)             Nontransferability.........................................   10
 (g)             Exercise of Options Upon Termination of Service............   10
 (h)             Effect of Change in Control................................   10
 (i)             Leaves of Absence..........................................   10
 (j)             No Rights as a Stockholder.................................   11
 (k)             Modification, Extension and Renewal of Options.............   11
 (l)             Restrictions on Transfer of Shares.........................   11
 (m)             Buyout Provisions..........................................   11

SECTION 9.       PAYMENT FOR SHARES.........................................   11
 (a)             General Rule...............................................   11
 (b)             Surrender of Stock.........................................   11
 (c)             Services Rendered..........................................   11
 (d)             Cashless Exercise..........................................   12
 (e)             Exercise/Pledge............................................   12

</TABLE>

                                     -ii-
<PAGE>

<TABLE>

<C>             <S>                                                           <S>
 (f)             Promissory Note............................................   12
 (g)             Other Forms of Payment.....................................   12

SECTION 10       STOCK APPRECIATION RIGHTS..................................   12
 (a)             SAR Agreement..............................................   12
 (b)             Number of Shares...........................................   12
 (c)             Exercise Price.............................................   12
 (d)             Exercisability and Term....................................   12
 (e)             Effect of Change in Control................................   13
 (f)             Exercise of SARs...........................................   13
 (g)             Modification or Assumption of SARs.........................   13

SECTION 11       STOCK UNITS................................................   13
 (a)             Stock Unit Agreement.......................................   13
 (b)             Payment for Awards.........................................   13
 (c)             Vesting Conditions.........................................   14
 (d)             Voting and Dividend Rights.................................   14
 (e)             Form and Time of Settlement of Stock Units.................   14
 (f)             Death of Recipient.........................................   14
 (g)             Creditors' Rights..........................................   15

SECTION 12.     PROTECTION AGAINST DILUTION.................................   15
 (a)             Adjustments................................................   15
 (b)             Dissolution or Liquidation.................................   15
 (c)             Reorganizations............................................   15

SECTION 13     DEFERRAL OF AWARDS...........................................   16

SECTION 14     AWARDS UNDER OTHER PLANS.....................................   16

SECTION 15     PAYMENT OF DIRECTOR'S FEES IN SECURITIES.....................   17
 (a)             Effective Date.............................................   17
 (b)             Elections to Receive NSOs, Restricted Shares or Stock Units   17
 (c)             Number and Terms of NSOs, Restricted Shares or Stock Units.   17

SECTION 16     ADJUSTMENT OF SHARES.........................................   17
 (a)             General....................................................   17
 (b)             Reorganizations............................................   17
 (c)             Reservation of Rights......................................   17

SECTION 17     LEGAL AND REGULATORY REQUIREMENTS............................   18

SECTION 18     WITHHOLDING TAXES............................................   18
 (a)             General....................................................   18
 (b)             Share Withholding..........................................   18
</TABLE>

                                     -iii-
<PAGE>

<TABLE>
<S>              <C>                                    <C>
SECTION 19   LIMITATION ON PARACHUTE PAYMENTS........   18
 (a)             Scope of Limitation.................   18
 (b)             Supersedes Other Provisions.........   18

SECTION 20   NO EMPLOYMENT RIGHTS.....................  19
SECTION 21   DURATION AND AMENDMENTS..................  19
 (a)             Term of the Plan....................   19
 (b)             Right to Amend or Terminate the Plan   19
 (c)             Effect of Amendment or Termination..   19

SECTION 22   EXECUTION................................  19
</TABLE>
                                     -iv-
<PAGE>

                                 BEATNIK, INC.
                                --------------

                           2000 STOCK INCENTIVE PLAN
                           -------------------------

                    (Adopted by the Board on March 10, 2000)

SECTION 1.  ESTABLISHMENT AND PURPOSE.
-------------------------------------

     The Plan was adopted by the Board of Directors effective March 10, 2000.
The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives, (b)
encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership.  The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.

SECTION 2.  DEFINITIONS.
------------------------

     (a)  "Affiliate" shall mean any entity other than a Subsidiary, if the
           ---------
Company and/or one of more Subsidiaries own not less than fifty percent (50%) of
such entity.

     (b)  "Award" shall mean any award of an Option, a SAR, a Restricted Share
           -----
or a Stock Unit under the Plan.

     (c)  "Board of Directors" shall mean the Board of Directors of the Company,
           ------------------
as constituted from time to time.

     (d)  "Change in Control" shall mean the occurrence of either of the
           -----------------
following events:

          (i)  A change in the composition of the Board of Directors, as a
     result of which fewer than one-half of the incumbent directors are
     directors who either:

               (A)  Had been directors of the Company twenty-four (24) months
          prior to such change; or

               (B)  Were elected, or nominated for election, to the Board of
          Directors with the affirmative votes of at least a majority of the
          directors who had been directors of the Company twenty-four (24)
          months prior to such change and who were still in office at the time
          of the election or nomination; or

          (ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
     the Exchange Act) who by the acquisition or aggregation of securities, is
     or becomes the beneficial owner, directly or indirectly, of securities of
     the Company representing twenty percent (20%) or more of the combined
     voting power of the Company's then outstanding securities ordinarily (and
     apart from rights accruing under special circumstances) having

                                      -1-
<PAGE>

     the right to vote at elections of directors (the "Base Capital Stock");
     except that any change in the relative beneficial ownership of the
     Company's securities by any person resulting solely from a reduction in the
     aggregate number of outstanding shares of Base Capital Stock, and any
     decrease thereafter in such person's ownership of securities, shall be
     disregarded until such person increases in any manner, directly or
     indirectly, such person's beneficial ownership of any securities of the
     Company. For purposes of this Subsection (ii), the term "person" shall not
     include an employee benefit plan maintained by the Company.

     (e)  "Code" shall mean the Internal Revenue Code of 1986, as amended.
           ----

     (f)  "Committee" shall mean the committee designated by the Board of
           ---------
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall have membership composition which enables the Options or
other rights granted under the Plan to qualify for exemption under Rule 16b-3
with respect to persons who are subject to Section 16 of the Exchange Act.

     (g)  "Company" shall mean Beatnik, Inc., a Delaware corporation.
           -------

     (h)  "Consultant" shall mean a consultant or advisor who provides bona fide
           ----------
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in the second sentence of
Section 4(a) and Section 4(b).

     (i)  "Employee" shall mean (i) any individual who is a common-law employee
           --------
of the Company or of a Subsidiary; (ii) a member of the Board of Directors,
including (without limitation) an Outside Director, or an affiliate of a member
the Board of Directors; (iii) a member of the board of directors of a
Subsidiary; or (iv) an independent contractor or advisor who performs services
for the Company or a Subsidiary. Service as a member of the Board of Directors,
a member of the board of directors of a Subsidiary or as an independent
contractor or advisor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a) and Section 4(b).

     (j)  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
           ------------
amended.

     (k)  "Exercise Price" shall mean, in the case of an Option, the amount for
           --------------
which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.

     (l)  "Fair Market Value" shall mean (i) the closing price of a Share on the
           -----------------
principal exchange which the Shares are trading, on the date on which the Fair
Market Value is determined (if Fair Market Value is determined on a date which
the principal exchange is closed, Fair Market Value shall be determined on the
last immediately preceding trading day), or (ii) if the Shares are not traded on
an exchange but are quoted on the Nasdaq National Market or a successor
quotation system, the closing price on the date on which the Fair Market Value
is determined, or (iii) if the Shares are not traded on an exchange or quoted on
the Nasdaq National

                                      -2-
<PAGE>

Market or a successor quotation system, the fair market
value of a Share, as determined by the Committee in good faith. Such
determination shall be conclusive and binding on all persons.

     (m)  "ISO" shall mean an employee incentive stock option described in Code
           ---
section 422.

     (n)  "Nonstatutory Option" shall mean an employee stock option that is not
           -------------------
an ISO.

     (o)  "Offeree" shall mean an individual to whom the Committee has offered
           -------
the right to acquire Shares under the Plan (other than upon exercise of an
Option).

     (p)  "Option" shall mean an ISO or Nonstatutory Option granted under the
           ------
Plan and entitling the holder to purchase Shares.

     (q)  "Optionee" shall mean an individual or estate who holds an Option or
           --------
SAR.

     (r)  "Outside Director" shall mean a member of the Board of Directors who
           ----------------
is not a common-law employee of the Company or of a Subsidiary. Service as an
Outside Director shall be considered employment for all purposes of the Plan,
except as provided in the second sentence of Section 4(a).

     (s)  "Parent" shall mean any corporation (other than the Company) in an
           ------
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be a parent commencing as
of such date.

     (t)  "Participant" shall mean an individual or estate who holds an Award.
           -----------

     (u)  "Plan" shall mean this 2000 Stock Incentive Plan of Beatnik, Inc., as
           ----
amended from time to time.

     (v)  "Purchase Price" shall mean the consideration for which one Share may
           --------------
be acquired under the Plan (other than upon exercise of an Option), as specified
by the Committee.

     (w)  "Restricted Share" shall mean a Common Share awarded under the Plan.
           ----------------

     (x)  "Restricted Share Agreement" shall mean the agreement between the
           --------------------------
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.

     (y)  "SAR" shall mean a stock appreciation right granted under the Plan.
           ---

     (z)  "SAR Agreement" shall mean the agreement between the Company and an
           -------------
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.

     (aa)  "Service" shall mean service as an Employee.
            -------

                                      -3-
<PAGE>

     (bb)  "Share" shall mean one share of Stock, as adjusted in accordance with
            -----
Section 9 (if applicable) .

     (cc)  "Stock" shall mean the Common Stock of the Company.
            -----

     (dd)  "Stock Option Agreement" shall mean the agreement between the Company
            ----------------------
and an Optionee which contains the terms, conditions and restrictions pertaining
to his Option.

     (ee)  "Stock Purchase Agreement" shall mean the agreement between the
            ------------------------
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.

     (ff)  "Stock Unit" shall mean a bookkeeping entry representing the
            ----------
equivalent of one Common Share, as awarded under the Plan.

     (gg)  "Stock Unit Agreement" shall mean the agreement between the Company
            --------------------
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.

     (hh)  "Subsidiary" shall mean any corporation, if the Company and/or one or
            ----------
more other Subsidiaries own not less than fifty percent (50%) of the total
combined voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.

     (ii) "Total and Permanent Disability" shall mean that the Optionee is
           ------------------------------
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than twelve (12) months.

SECTION 3.  ADMINISTRATION.
--------------------------

     (a)  Committee Procedures. The Plan shall be administered by the Committee.
          --------------------
The Committee shall consist exclusively of two or more directors of the Company,
who shall be appointed by the Board of Directors. The Board of Directors shall
designate one of the members of the Committee as chairman. The Committee may
hold meetings at such times and places as it shall determine. The acts of a
majority of the Committee members present at meetings at which a quorum exists,
or acts reduced to or approved in writing by all Committee members, shall be
valid acts of the Committee.

     (b)  Committee Responsibilities. Subject to the provisions of the Plan, the
          --------------------------
Committee shall have full authority and discretion to take the following
actions:

          (i)    To interpret the Plan and to apply its provisions;

          (ii)   To adopt, amend or rescind rules, procedures and forms relating
     to the Plan;

                                      -4-
<PAGE>

          (iii)   To authorize any person to execute, on behalf of the Company,
     any instrument required to carry out the purposes of the Plan;

          (iv)    To determine when Shares are to be awarded or offered for sale
     and when Options are to be granted under the Plan;

          (v)     To select the Offerees and Optionees;

          (vi)    To determine the number of Shares to be offered to each
     Offeree or to be made subject to each Option;

          (vii)   To prescribe the terms and conditions of each award or sale of
     Shares, including (without limitation) the Purchase Price, the vesting of
     the award (including accelerating the vesting of awards) and to specify the
     provisions of the Stock Purchase Agreement relating to such award or sale;

          (viii)  To prescribe the terms and conditions of each Option,
     including (without limitation) the Exercise Price, the vesting or duration
     of the Option (including accelerating the vesting of the Option), to
     determine whether such Option is to be classified as an ISO or as a
     Nonstatutory Option, and to specify the provisions of the Stock Option
     Agreement relating to such Option;

          (ix)    To amend any outstanding Stock Purchase Agreement or Stock
     Option Agreement, subject to applicable legal restrictions and to the
     consent of the Offeree or Optionee who entered into such agreement;

          (x)     To prescribe the consideration for the grant of each Option or
     other right under the Plan and to determine the sufficiency of such
     consideration;

          (xi)    To determine the disposition of each Option or other right
     under the Plan in the event of an Optionee's or Offeree's divorce or
     dissolution of marriage;

          (xii)   To determine whether Options or other rights under the Plan
     will be granted in replacement of other grants under an incentive or other
     compensation plan of an acquired business;

          (xiii)  To correct any defect, supply any omission, or reconcile any
     inconsistency in the Plan, any Stock Option Agreement or any Stock Purchase
     Agreement; and

          (xiv)   To take any other actions deemed necessary or advisable for
     the administration of the Plan.

Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act.  All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all

                                      -5-
<PAGE>

Optionees, and all persons deriving their rights from an Offeree or Optionee. No
member of the Committee shall be liable for any action that he has taken or has
failed to take in good faith with respect to the Plan, any Option, or any right
to acquire Shares under the Plan.

SECTION 4.  ELIGIBILITY.
------------------------
     (a)  General Rule. Only Employees shall be eligible for the grant of
          ------------
Restricted Shares, Stock Units, NSOs or SARs. In addition, only individuals who
are employed as common-law employees by the Company, a Parent or a Subsidiary
shall be eligible for the grant of ISOs. In addition, an Employee who owns more
than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company or any of its Parents or Subsidiaries shall not
be eligible for the grant of an ISO unless the requirements set forth in section
422(c)(6) of the Code are satisfied.

     (b)  Outside Directors. Any other provision of the Plan notwithstanding,
          -----------------
the participation of Outside Directors in the Plan shall be subject to the
following restrictions:

          (i)  Outside Directors shall only be eligible for the grant of
     Restricted Shares, Stock Units, Nonstatutory Options and SARs.

          (ii) Each Outside Director shall automatically be granted a
     Nonstatutory Option to purchase ________ Shares (subject to adjustment
     under Section 16) as a result of their appointment as an Outside Director
     on, if after, the effectiveness of the Company's initial public offering of
     the Stocks. In addition, upon the conclusion of each regular annual meeting
     of the Company's stockholders occurring after 1999 and following the
     meeting at which they were appointed, each Outside Director who will
     continue serving as a member of the Board thereafter shall receive a
     Nonstatutory Option to purchase ___________ Shares (subject to adjustment
     under Section 16). All such Nonstatutory Options shall vest and become
     exercisable at the date of grant;

          (iii)  The Exercise Price of all Nonstatutory Options granted to an
     Outside Director under this Section 4(b) shall be equal to one hundred
     percent (100%) of the Fair Market Value of a Share on the date of grant,
     payable in one of the forms described in Section 9(a), (b) and (d).

          (iv)  All Nonstatutory Options granted to an Outside Director under
     this Section 4(b) shall terminate on the earliest of (A) the tenth (10th)
     anniversary of the date of grant of such Options or (B) the date twelve
     (12) months after the termination of such Outside Director's service for
     any reason.

     (c)  Limitation On Grants. No Employee shall be granted Options to purchase
          --------------------
more than __________ (________) Shares in any fiscal year of the Company.

     (d)  Ten-Percent Stockholders. An Employee who owns more than ten percent
          ------------------------
(10%) of the total combined voting power of all classes of outstanding stock of
the Company or any of its Subsidiaries shall not be eligible for the grant of an
ISO unless such grant satisfies the requirements of Code section 422(c)(6).

                                      -6-
<PAGE>

     (e)  Attribution Rules. For purposes of Subsection (d) above, in
          -----------------
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.

     (f)  Outstanding Stock. For purposes of Subsection (d) above, "outstanding
          -----------------
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.

SECTION 5.  STOCK SUBJECT TO PLAN.
---------------------------------

     (a)  Basic Limitation. Shares offered under the Plan shall be authorized
          ----------------
but unissued Shares or treasury Shares. The maximum aggregate number of Options,
SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed
(a) ______________________ (________) Shares, plus the additional Common Shares
described in Sections (b) and (c). The limitation of this Section 5(a) shall be
subject to adjustment pursuant to Section 12.

     (b)  Annual Increase in Shares. As of January 1 of each year, commencing
          -------------------------
with the year 2001, the aggregate number of Options, SARs, Stock Units and
Restricted Shares that may be awarded under the Plan shall automatically
increase by a number equal to the lesser of (i) ___________ (__________) shares,
(ii) 5% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board. The aggregate number of Shares which may be issued
under the Plan shall at all times be subject to adjustment pursuant to Section
16. The number of Shares which are subject to Options or other rights
outstanding at any time under the Plan shall not exceed the number of Shares
which then remain available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.

     (c)  Additional Shares. If Restricted Shares or Common Shares issued upon
          -----------------
the exercise of Options are forfeited, then such Common Shares shall again
become available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Common Shares (if any)
actually issued in settlement of such Stock Units shall reduce the number
available under Section 5(a) and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Common
Shares (if any) actually issued in settlement of such SARs shall reduce the
number available in Section 5(a) and the balance shall again become available
for Awards under the Plan. The foregoing notwithstanding, the aggregate number
of Common Shares that may be issued under the Plan upon the exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are
forfeited.

     (d)  Dividend Equivalents. Any dividend equivalents paid or credited under
          --------------------
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.

                                      -7-
<PAGE>

SECTION 6.  RESTRICTED SHARES
-----------------------------

     (a)  Restricted Stock Agreement. Each grant of Restricted Shares under the
          --------------------------
Plan shall be evidenced by a Restricted Stock Agreement between the recipient
and the Company. Such Restricted Shares shall be subject to all applicable terms
of the Plan and may be subject to any other terms that are not inconsistent with
the Plan. The provisions of the various Restricted Stock Agreements entered into
under the Plan need not be identical.

     (b)  Payment for Awards. Subject to the following sentence, Restricted
          ------------------
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the extent
that an Award consists of newly issued Restricted Shares, the Award recipient
shall furnish consideration with a value not less than the par value of such
Restricted Shares in the form of cash, cash equivalents, or past services
rendered to the Company (or a Parent or Subsidiary), as the Committee may
determine.

     (c)  Vesting. Each Award of Restricted Shares may or may not be subject to
          -------
vesting. Vesting shall occur, in full or in installments, upon satisfaction of
the conditions specified in the Restricted Stock Agreement. The Committee may
include among such conditions the requirement that the performance of the
Company or a business unit of the Company for a specified period of one or more
years equal or exceed a target determined in advance by the Committee. Such
performance shall be determined by the Company's independent auditors. Such
target shall be based on one or more of the criteria set forth in Appendix A.
The Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Restricted Shares which are subject to
performance based vesting conditions exceed ____________, subject to adjustment
in accordance with Section 16. A Restricted Stock Agreement may provide for
accelerated vesting in the event of the Participant's death, disability or
retirement or other events. The Committee may determine, at the time of granting
Restricted Shares of thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to
the Company.

     (d)  Voting and Dividend Rights. The holders of Restricted Shares awarded
          --------------------------
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Restricted Stock Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be subject
to the same conditions and restrictions as the Award with respect to which the
dividends were paid.

SECTION 7.  OTHER TERMS AND CONDITIONS OF AWARDS OR SALES.
---------------------------------------------------------

     (a)  Duration of Offers and Nontransferability of Rights. Any right to
          ---------------------------------------------------
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within thirty (30) days after the grant of such
right was communicated to him by the Committee. Such right shall not be
transferable and shall be exercisable only by the Offeree to whom such right was
granted.

                                      -8-
<PAGE>

     (b)  Purchase Price. The Purchase Price shall be determined by the
          --------------
Committee at its sole discretion. The Purchase Price shall be payable in one of
the forms described in Sections 9(a), (b) or (c).

     (c)  Withholding Taxes. As a condition to the purchase of Shares, the
          -----------------
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.

     (d)  Restrictions on Transfer of Shares. Any Shares awarded or sold under
          ----------------------------------
the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.

SECTION 8.  TERMS AND CONDITIONS OF OPTIONS.
-------------------------------------------

     (a)  Stock Option Agreement. Each grant of an Option under the Plan shall
          ----------------------
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The Stock Option Agreement shall specify whether the Option is
an ISO or an NSO. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical. Options may be granted in
consideration of a reduction in the Optionee's other compensation. A Stock
Option Agreement may provide that a new Option will be granted automatically to
the Optionee when he or she exercises a prior Option and pays the Exercise Price
in a form described in Section 9.

     (b)  Number of Shares. Each Stock Option Agreement shall specify the number
          ----------------
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 16. Options granted to an Optionee in a
single fiscal year of the Company shall not cover more than _________ Shares.

     (c)  Exercise Price. Each Stock Option Agreement shall specify the Exercise
          --------------
Price. The Exercise Price of an ISO shall not be less than 100 percent (100%) of
the Fair Market Value of a Share on the date of grant, except as otherwise
provided in Section 4(d). Subject to the foregoing in this Section 8(c), the
Exercise Price under any Option shall be determined by the Committee at its sole
discretion. The Exercise Price shall be payable in one of the forms described in
Sections 9.

     (d)  Withholding Taxes. As a condition to the exercise of an Option, the
          -----------------
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.

     (e)  Exercisability and Term. Each Stock Option Agreement shall specify the
          -----------------------
date when all or any installment of the Option is to become exercisable. The
Stock Option

                                      -9-
<PAGE>

Agreement shall also specify the term of the Option; provided that the term of
an ISO shall in no event exceed ten (10) years from the date of grant (five (5)
years for Employees described in Section 4(d)). A Stock Option Agreement may
provide for accelerated exercisability in the event of the Optionee's death,
disability, or retirement or other events and may provide for expiration prior
to the end of its term in the event of the termination of the Optionee's
service. Options may be awarded in combination with SARs, and such an Award may
provide that the Options will not be exercisable unless the related SARs are
forfeited. Subject to the foregoing in this Section 8(e), the Committee at its
sole discretion shall determine when all or any installment of an Option is to
become exercisable and when an Option is to expire.

     (f)  Nontransferability. During an Optionee's lifetime, his Option(s) shall
          ------------------
be exercisable only by him and shall not be transferable. In the event of an
Optionee's death, his Option(s) shall not be transferable other than by will or
by the laws of descent and distribution.

     (g)  Exercise of Options Upon Termination of Service. Each Stock Option
          -----------------------------------------------
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service with the
Company and its Subsidiaries, and the right to exercise the Option of any
executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.

     (h)  Effect of Change in Control. The Committee may determine, at the time
          ---------------------------
of granting an Option or thereafter, that such Option shall become exercisable
as to all or part of the Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company, subject to the following
limitations:

          (i)  In the case of an ISO, the acceleration of exercisability shall
     not occur without the Optionee's written consent.

          (ii) If the Company and the other party to the transaction
     constituting a Change in Control agree that such transaction is to be
     treated as a :pooling of interests" for financial reporting purposes, and
     if such transaction in fact is so treated, then the acceleration of
     exercisability shall not occur to the extent that the Company's independent
     accountants and such other party's independent accountants separately
     determine in good faith that such acceleration would preclude the use of
     "pooling of interests" accounting.

     (i)  Leaves of Absence. An Employee's Service shall cease when such
          -----------------
Employee ceases to be actively employed by, or a consultant or adviser to, the
Company (or any subsidiary) as determined in the sole discretion of the Board of
Directors. For purposes of Options, Service does not terminate when an Employee
goes on a bona fide leave of absence, that was approved by the Company in
writing, if the terms of the leave provide for continued service crediting, or
when continued service crediting is required by applicable law. However, for
purposes of determining whether an Option is entitled to ISO status, an
Employee's Service will be treated as terminating ninety (90) days after such
Employee went on leave, unless such Employee's right to

                                      -10-
<PAGE>

return to active work is guaranteed by law or by a contract. Service terminates
in any event when the approved leave ends, unless such Employee immediately
returns to active work. The Company determines which leaves count toward
Service, and when Service terminates for all purposes under the Plan.

     (j)  No Rights as a Stockholder. An Optionee, or a transferee of an
          --------------------------
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 9.

     (k)  Modification, Extension and Renewal of Options. Within the limitations
          ----------------------------------------------
of the Plan, the Committee may modify, extend or renew outstanding options or
may accept the cancellation of outstanding options (to the extent not previously
exercised), whether or not granted hereunder, in return for the grant of new
Options for the same or a different number of Shares and at the same or a
different exercise price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair his rights or increase
his obligations under such Option.

     (l)  Restrictions on Transfer of Shares. Any Shares issued upon exercise of
          ----------------------------------
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.

     (m)  Buyout Provisions. The Committee may at any time (a) offer to buy out
          -----------------
for a payment in cash or cash equivalents an Option previously granted or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.

SECTION 9.  PAYMENT FOR SHARES.
------------------------------

     (a)  General Rule. The entire Exercise Price of Shares issued under the
          ------------
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b)
through (g) below.

     (b)  Surrender of Stock. To the extent that a Stock Option Agreement so
          ------------------
provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative for more than twelve (12) months. Such Shares shall be valued at
their Fair Market Value on the date when the new Shares are purchased under the
Plan. . The Optionee shall not surrender, or attest to the ownership of, Shares
in payment of the Exercise Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect
to the Option for financial reporting purposes.

     (c)  Services Rendered. At the discretion of the Committee, Shares may be
          -----------------
awarded under the Plan in consideration of services rendered to the Company or a
Subsidiary prior to the award. If Shares are awarded without the payment of a
Purchase Price in cash, the Committee

                                      -11-
<PAGE>

shall make a determination (at the time of the award) of the value of the
services rendered by the Offeree and the sufficiency of the consideration to
meet the requirements of Section 6(c).

     (d)  Cashless Exercise. To the extent that a Stock Option Agreement so
          -----------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.

     (e)  Exercise/Pledge. To the extent that a Stock Option Agreement so
          ---------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.

     (f)  Promissory Note. To the extent that a Stock Option Agreement so
          ---------------
provides, payment may be made all or in part by delivering (on a form prescribed
by the Company) a full-recourse promissory note. However, the par value of the
Common Shares being purchased under the Plan, if newly issued, shall be paid in
cash or cash equivalents.

     (g)  Other Forms of Payment. To the extent that a Stock Option Agreement so
          ----------------------
provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.

SECTION 10.  STOCK APPRECIATION RIGHTS.
--------------------------------------

     (a)  SAR Agreement. Each grant of a SAR under the Plan shall be evidenced
           -------------
by a SAR Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.

     (b)  Number of Shares. Each SAR Agreement shall specify the number of
          ----------------
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Section 12. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than _______ Common
Shares, except that SARs granted to a new Employee in the fiscal year of the
Company in which his or her service as an Employee first commences shall not
pertain to more than _________ Common Shares. The limitations set forth in the
preceding sentence shall be subject to adjustment in accordance with Section 12.

     (c)  Exercise Price. Each SAR Agreement shall specify the Exercise Price. A
          --------------
SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.

     (d)  Exercisability and Term. Each SAR Agreement shall specify the date
          -----------------------
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration

                                      -12-
<PAGE>

prior to the end of its term in the event of the termination of the Optionee's
service. SARs may be awarded in combination with Options, and such an Award may
provide that the SARs will not be exercisable unless the related Options are
forfeited. A SAR may be included in an ISO only at the time of grant but may be
included in an NSO at the time of grant or thereafter. A SAR granted under the
Plan may provide that it will be exercisable only in the event of a Change in
Control.

     (e)  Effect of Change in Control. The Committee may determine, at the time
          ---------------------------
of granting a SAR or thereafter, that such SAR shall become fully exercisable as
to all Common Shares subject to such SAR in the event that a Change in Control
occurs with respect to the Company, subject to the following sentence. If the
Company and the other party to the transaction constituting a Change in Control
agree that such transaction is to be treated as a "pooling of interests" for
financial reporting purposes, and if such transaction in fact is so treated,
then the acceleration of exercisability shall not occur to the extent that the
Company's independent accountants and such other party's independent accountants
separately determine in good faith that such acceleration would preclude the use
of "pooling of interests" accounting.

     (f)  Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person
          ----------------
having the right to exercise the SAR after his or her death) shall receive from
the Company (a) Common Shares, (b) cash or (c) a combination of Common Shares
and cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Common Shares received upon exercise of SARs shall, in the
aggregate, be equal to the amount by which the Fair Market Value (on the date of
surrender) of the Common Shares subject to the SARs exceeds the Exercise Price.
If, on the date when a SAR expires, the Exercise Price under such SAR is less
than the Fair Market Value on such date but any portion of such SAR has not been
exercised or surrendered, then such SAR shall automatically be deemed to be
exercised as of such date with respect to such portion.

     (g)  Modification or Assumption of SARs. Within the limitations of the
          ----------------------------------
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of a SAR shall, without the consent of the
Optionee, may alter or impair his or her rights or obligations under such SAR.

SECTION 11.  STOCK UNITS.
------------------------

     (a)  Stock Unit Agreement. Each grant of Stock Units under the Plan shall
          --------------------
be evidenced by a Stock Unit Agreement between the recipient and the Company.
Such Stock Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need
not be identical. Stock Units may be granted in consideration of a reduction in
the recipient's other compensation.

     (b)  Payment for Awards. To the extent that an Award is granted in the form
          ------------------
of Stock Units, no cash consideration shall be required of the Award recipients.

                                      -13-
<PAGE>

     (c)  Vesting Conditions. Each Award of Stock Units may or may not be
          ------------------
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company, except as provided in the next following
sentence. If the Company and the other party to the transaction constituting a
Change in Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in fact is
so treated, then the acceleration of vesting shall not occur to the extent that
the Company's independent accountants and such other party's independent
accountants separately determine in good faith that such acceleration would
preclude the use of "pooling of interests" accounting.

     (d)  Voting and Dividend Rights. The holders of Stock Units shall have no
          --------------------------
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of Common Shares, or in a combination of both. Prior to distribution, any
dividend equivalents which are not paid shall be subject to the same conditions
and restrictions as the Stock Units to which they attach.

     (e)  Form and Time of Settlement of Stock Units. Settlement of vested Stock
           -----------------------------------------
Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Section 12.

     (f)  Death of Recipient. Any Stock Units Award that becomes payable after
          ------------------
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.

                                      -14-
<PAGE>

     (g)  Creditors' Rights. A holder of Stock Units shall have no rights other
          -----------------
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.

SECTION 12.  PROTECTION AGAINST DILUTION.
----------------------------------------

     (a)  Adjustments. In the event of a subdivision of the outstanding Common
          -----------
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spin-off or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of:

          (i)    The number of Options, SARs, Restricted Shares and Stock Units
     available for future Awards under Section 5;

          (ii)   The limitations set forth in Sections 8(b) and 10(b);

          (iii)  The number of NSOs to be granted to Outside Directors under
     Section 4(b);

          (iv)   The number of Common Shares covered by each outstanding Option
     and SAR;

          (v)    The Exercise Price under each outstanding Option and SAR; or

          (vi)   The number of Stock Units included in any prior Award which has
     not yet been settled.

Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.

     (b)  Dissolution or Liquidation. To the extent not previously exercised or
          --------------------------
settled, Options, SARs and Stock Units shall terminate immediately prior to the
dissolution or liquidation of the Company.

     (c)  Reorganizations. In the event that the Company is a party to a merger
          ---------------
or other reorganization, outstanding Awards shall be subject to the agreement of
merger or reorganization. Such agreement shall provide for:

         (i)   The continuation of the outstanding Awards by the Company, if the
     Company is a surviving corporation;

         (ii)  The assumption of the outstanding Awards by the surviving
     corporation or its parent or subsidiary;

                                      -15-
<PAGE>

         (iii) The substitution by the surviving corporation or its parent or
     subsidiary of its own awards for the outstanding Awards;

         (iv)  Full exercisability or vesting and accelerated expiration of the
     outstanding Awards; or

         (v)  Settlement of the full value of the outstanding Awards in cash or
     cash equivalents followed by cancellation of such Awards.

SECTION 13.  DEFERRAL OF AWARDS.
-------------------------------
     The Committee (in its sole discretion) may permit or require a Participant
to:

     a)  Have cash that otherwise would be paid to such Participant as a result
         of the exercise of a SAR or the settlement of Stock Units credited to a
         deferred compensation account established for such Participant by the
         Committee as an entry on the Company's books;

     b)  Have Common Shares that otherwise would be delivered to such
         Participant as a result of the exercise of an Option or SAR converted
         into an equal number of Stock Units; or

     c)  Have Common Shares that otherwise would be delivered to such
         Participant as a result of the exercise of an Option or SAR or the
         settlement of Stock Units converted into amounts credited to a deferred
         compensation account established for such Participant by the Committee
         as an entry on the Company's books. Such amounts shall be determined by
         reference to the Fair Market Value of such Common Shares as of the date
         when they otherwise would have been delivered to such Participant.


A deferred compensation account established under this Section 13 may be
credited with interest or other forms of investment return, as determined by the
Committee.  A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company.  Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company.  If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 13.

SECTION 14.  AWARDS UNDER OTHER PLANS.
-------------------------------------

     The Company may grant awards under other plans or programs.  Such awards
may be settled in the form of Common Shares issued under this Plan.  Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Section 5.

                                      -16-
<PAGE>

SECTION 15.  PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
------------------------------------------------------

     (a)  Effective Date. No provision of this Section 15 shall be effective
          --------------
unless and until the Board has determined to implement such provision.

     (b)  Elections to Receive NSOs, Restricted Shares or Stock Units.
          -----------------------------------------------------------
An Outside Director may elect to receive his or her annual retainer payments
and/or meeting fees from the Company in the form of cash, NSOs, Restricted
Shares or Stock Units, or a combination thereof, as determined by the Board.
Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan.  An
election under this Section 15 shall be filed with the Company on the prescribed
form.

     (c)  Number and Terms of NSOs, Restricted Shares or Stock Units.
          ----------------------------------------------------------
The number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board.  The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.

SECTION 16.  ADJUSTMENT OF SHARES.
----------------------------------

     (a)  General. In the event of a subdivision of the outstanding Stock, a
          -------
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares available for grants under
Section 4(c), (iii) the number of Shares covered by each outstanding Option,
(iv) the Exercise Price under each outstanding Option, (v) the number of shares
covered by each outstanding award or (vi) the Purchase Price of each outstanding
award.

     (b)  Reorganizations. In the event that the Company is a party to a merger
          ---------------
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide for the assumption of
outstanding Options by the surviving corporation or its parent or for their
continuation by the Company (if the Company is a surviving corporation);
provided, however, that if assumption or continuation of the outstanding Options
is not provided by such agreement then the Committee shall have the option of
offering the payment of a cash settlement equal to the difference between the
amount to be paid for one Share under such agreement and the Exercise Price, in
all cases without the Optionees' consent.

     (c)  Reservation of Rights. Except as provided in this Section 16, an
          ---------------------
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the

                                      -17-
<PAGE>

Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.

SECTION 17.  LEGAL AND REGULATORY REQUIREMENTS.
----------------------------------------------

     Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, state securities laws and
regulations and the regulations of any stock exchange on which the Company's
securities may then be listed, and the Company has obtained the approval or
favorable ruling from any governmental agency which the Company determines is
necessary or advisable.

SECTION 18.  WITHHOLDING TAXES.
-------------------------------

     (a)  General. To the extent required by applicable federal, state, local or
          -------
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.

     (b)  Share Withholding. The Committee may permit a Participant to satisfy
          -----------------
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.

SECTION 19.  LIMITATION ON PARACHUTE PAYMENTS.
---------------------------------------------

     (a)  Scope of Limitation.  This Section 19 shall apply to an Award only if:

          (i)  The independent auditors most recently selected by the Board (the
     "Auditors") determine that the after-tax value of such Award to the
     Participant, taking into account the effect of all federal, state and local
     income taxes, employment taxes and excise taxes applicable to the
     Participant (including the excise tax under section 4999 of the Code), will
     be greater after the application of this Section 19 than it was before the
     application of this Section 19; or

          (ii) The Committee, at the time of making an Award under the Plan or
     at any time thereafter, specifies in writing that such Award shall be
     subject to this Section 19 (regardless of the after-tax value of such Award
     to the Participant).

     (b)  Supersedes Other Provisions. If this Section 19 applies to an Award,
it shall supersede any contrary provision of the Plan or of any Award granted
under the Plan.

                                      -18-
<PAGE>

SECTION 20.  NO EMPLOYMENT RIGHTS.
---------------------------------

     No provision of the Plan, nor any right or Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as, or
to remain an Employee.  The Company and its Subsidiaries reserve the right to
terminate any person's Service at any time and for any reason, with or without
notice.

SECTION 21.  DURATION AND AMENDMENTS.
------------------------------------

     (a)  Term of the Plan. The amended and restated Plan, as set forth herein,
          ----------------
shall terminate automatically on _____________, ________ and may be terminated
on any earlier date pursuant to Subsection (b) below.

     (b)  Right to Amend or Terminate the Plan. The Board of Directors may amend
          ------------------------------------
the Plan at any time and from time to time. Rights and obligations under any
Option granted before amendment of the Plan shall not be materially impaired by
such amendment, except with consent of the person to whom the Option was
granted. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules.

     (c)  Effect of Amendment or Termination. No Shares shall be issued or sold
          ----------------------------------
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Share previously issued or any Option previously
granted under the Plan.

SECTION 22.  EXECUTION.
----------------------
     To record the adoption of the amended and restated Plan by the Board of
Directors effective as of March 10, 2000, the Company has caused its authorized
officer to execute the same.

                                    BEATNIK, INC.



                                    By_______________________________
                                             Lorraine Hariton
                                         Chief Executive Officer

                                      -19-
<PAGE>


                         NOTICE OF STOCK OPTION GRANT

                 THE BEATNIK, INC.  2000 STOCK INCENTIVE PLAN


     You have been granted the following option to purchase Common Stock of
Beatnik, Inc. (the "Company") under the Beatnik, Inc. 2000 Stock Incentive Plan
(the "Plan"):

Name of Optionee:
                 -----------------

Total Number of Option Shares Granted:
                                      -----------------

Type of Option:   [ ] Incentive Stock Option  [ ] Nonstatutory Stock Option

Exercise Price Per Share:  $
                            -----------------
Grant Date:
           ---------------

Vesting Commencement Date:
                           ----------------------

Vesting Schedule: [Check only one box]

     [ ]  Full vesting:   This option is fully vested and exercisable as of the
          date of grant.

     [ ]  Two-Year Vesting:  Subject to the following terms and conditions set
          forth in this Notice of Stock Option Grant, this option shall vest as
          to 12/24ths of the shares on  the first anniversary of the Vesting
          Commencement Date and 1/24ths of the shares each full month
          thereafter.

     [ ]  Three-Year Vesting: Subject to the following terms and conditions set
          forth in this Notice of Stock Option Grant, this option shall vest as
          to 12/36ths of the shares on the first anniversary of the Vesting
          Commencement Date and 1/36th of the shares each full month thereafter.

     [ ]  Four-Year Vesting: Subject to the following terms and conditions set
          forth in this Notice of Stock Option Grant, this option shall vest as
          to 12/48ths of the shares on the first anniversary of the Vesting
          Commencement Date and 1/48th of the shares each full month thereafter.

Accelerated Vesting:  [Check only one box]

     [ ]  Your option is not subject to accelerated vesting.

          Your option will become fully vested and exercisable if:
<PAGE>

          [ ]  The Company is subject to a Change in Control (as defined in
               Section 2(b) of the Plan) prior to the date your service
               terminates.

          [ ]  The Company involuntarily terminates your employment without good
               cause.

          [ ]  You experience a Total and Permanent Disability (as defined in
               Section 2(ii) of the Plan).

Post-Termination Exercise Period:  [Check only one box]

If your service with the Company terminates for any reason other than Total and
Permanent Disability or death, then your option expires on:

     [ ]  the date of your termination.

     [ ]  the date 90 days after your termination date.

     [ ]  the date 6 months after your termination date.

     [ ]  the date 12 months after your termination date.

     [ ]  the date 24 months after your termination date.

     [ ]  the Expiration Date of your option.

Form of Payment:  [Check one or more boxes]

Payment may be made in the following form(s):

     [ ]  Your personal check, a cashier's check or a money order.

     [ ]  In shares of Company stock which have been owned by you or your
          representative for more than 12 months and which are surrendered to
          the Company in good form for transfer.

     [ ]  By delivering on a form approved by the Committee of an irrevocable
          direction to a securities broker approved by the Company to sell all
          or part of your option shares and to deliver to the Company from the
          sale proceeds in an amount sufficient to pay the option exercise price
          and any withholding taxes.  The balance of the sale proceeds, if any,
          will be delivered to you.

Expiration Date:
                --------------

                                      -2-
<PAGE>

     By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
term and conditions of the Plan and this Stock Option Agreement, both of which
are attached to and made a part of this document.

<TABLE>
<CAPTION>
OPTIONEE:                                                         BEATNIK, INC.
<S>                                                               <C>

                                                                  By:
---------------------------------------------------                  ------------------------------------------
                                                                  Title:
---------------------------------------------------                     ---------------------------------------

          Please Print Name
</TABLE>

                                      -3-
<PAGE>

                            STOCK OPTION AGREEMENT

                             FOR THE BEATNIK, INC.

                           2000 STOCK INCENTIVE PLAN



Tax Treatment        This option is intended to be an incentive stock option
                     under Section 422 of the Internal Revenue Code or a
                     nonstatutory option, as provided in the Notice of Stock
                     Option Grant.

Vesting              This option becomes exercisable in accordance with the
                     vesting schedule set forth in the Notice of Stock Option
                     Grant

Term                 This option expires on the date shown in the Notice of
                     Stock Option Grant, but in no event later than the 10th
                     anniversary of the Grant Date.

Regular              If your service as an employee, consultant or director of
Termination          the Company or a subsidiary of the Company terminates for
                     any reason excluding death or total and permanent
                     disability, then this option will expire on the date
                     specified in the Notice of Stock Option Grant under the
                     heading "Post-Termination Exercise Period."

Death or Disability  If you become Totally and Permanently Disabled (as defined
                     in Section 2(ii) of the Plan) or die as an employee,
                     consultant or director of the Company or a subsidiary of
                     the Company, then this option will expire at the close of
                     business at Company headquarters on the date 12 months
                     after the date of your termination of employment.

Leaves of Absence    For purposes of this option, your service does not
                     terminate when you go on a military leave, a sick leave or
                     another bona fide leave of absence, if the leave was
                     approved by the Company in writing and if continued
                     crediting of service is required by the terms of the leave
                     or by applicable law. But your service terminates when the
                     approved leave ends, unless you immediately return to
                     active work.

Restrictions on      The Company will not permit you to exercise this option if
Exercise             the issuance of shares at that time would violate any law
                     or regulation.

Notice of Exercise   When you wish to exercise this option you must notify the
                     Company by completing the attached "Notice of Exercise of
                     Stock Option" form and filing it with the Human Resources
                     Department of the Company. The notice will be effective
                     when it is received by the Company. If someone else wants
                     to exercise this option after your death, that person must
                     prove to the Company's satisfaction that he or she is
                     entitled to do so.

                                      -1-
<PAGE>

Form of Payment      When you submit your notice of exercise, you must include
                     payment of the option exercise price for the shares you are
                     purchasing. Payment may be made in the form specified on
                     your Notice of Stock Option Grant.

Withholding Taxes    You will not be allowed to exercise this option unless you
and Stock            make arrangements acceptable to the Company to pay any
Withholding          withholding taxes that may be due as a result of the option
                     exercise. These arrangements may include withholding shares
                     of Company stock that otherwise would be issued to you when
                     you exercise this option. The value of these shares,
                     determined as of the effective date of the option exercise,
                     will be applied to the withholding taxes.

Restrictions on      By signing this Agreement, you agree not to sell any option
Resale               shares at a time when applicable laws, Company policies or
                     an agreement between the Company and its underwriters
                     prohibit a sale (e.g., a lock-up period after the Company
                     goes public). This restriction will apply as long as you
                     are an employee, consultant or director of the Company or a
                     subsidiary of the Company.

Transfer of Option   Prior to your death, only you can exercise this option. You
                     cannot transfer or assign this option. For instance, you
                     may not sell this option or use it as security for a loan.
                     If you attempt to do any of these things, this option will
                     immediately become invalid. You may in any event dispose of
                     this option in your will.

                     Regardless of any marital property settlement agreement,
                     the Company is not obligated to honor a notice of exercise
                     from your former spouse, nor is the Company obligated to
                     recognize your former spouse's interest in your option in
                     any other way.

Retention Rights     Neither your option nor this Agreement give you the right
                     to be retained by the Company or a subsidiary of the
                     Company in any capacity. The Company and its subsidiaries
                     reserve the right to terminate your service at any time,
                     with or without cause.

Stockholder Rights   You, or your estate or heirs, have no rights as a
                     stockholder of the Company until you have exercised this
                     option by giving the required notice to the Company and
                     paying the exercise price. No adjustments are made for
                     dividends or other rights if the applicable record date
                     occurs before you exercise this option, except as described
                     in the Plan.

Adjustments          In the event of a stock split, a stock dividend or a
                     similar change in Company stock, the number of shares
                     covered by this option and the exercise price per share may
                     be adjusted pursuant to the Plan.

Applicable Law       This Agreement will be interpreted and enforced under the
                     laws of the State of California (without regard to their
                     choice-of-law provisions).

                                      -2-
<PAGE>

The Plan and         The text of the Plan is incorporated in this Agreement by
                     reference. This Agreement and the Plan constitute the
                     entire understanding between you and the Company regarding
                     this option. Any prior agreements, commitments or
                     negotiations concerning this option are superseded. This
                     Agreement may be amended only by another written agreement,
                     signed by both parties.


                 BY SIGNING THE COVER SHEET OF THIS AGREEMENT,

                 YOU AGREE TO ALL OF THE TERMS AND CONDITIONS

                       DESCRIBED ABOVE AND IN THE PLAN.


                                      -3-
<PAGE>

                               NOTICE OF EXERCISE
                              (exercise by check)


Beatnik, Inc.
______________________________
______________________________
Attn:  Chief Financial Officer

Re:  Exercise of Stock Option

Dear Sir or Madam:

Pursuant to the Stock Option Agreement dated __________, 200__ (the "Stock
Option Agreement") and the Company's 2000 Stock Incentive Plan (the "Plan"), I
hereby elect to purchase _____________ shares of the Common Stock of the Company
at aggregate exercise price of $__________.  I enclose payment and other
documents (check all that are applicable):


     [ ]    My check in the amount of $___________.

The Common Stock is to be issued and registered in the name(s) of:

                  __________________________
                  __________________________

I understand that there may be tax consequences as a result of the purchase or
disposition of the Common Stock, and I have consulted with any tax consultants I
wished to consult and I am not relying on the Company for any tax advice.  I
understand that my exercise is governed by my Stock Option Agreement and the
Plan and agree to abide by and be bound by their terms and conditions.  I
represent that the Common Stock is being acquired solely for my own account and
not as a nominee for any other party, or for investment, and that I will not
offer, sell or otherwise dispose of any such Common Stock except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.


Dated:  __________, _____.

                              ___________________________________
                                (Signature)

                              ___________________________________
                                (Please Print Name)

                              ___________________________________
                              ___________________________________
                                         (Address)
<PAGE>

            TAX CONSEQUENCES RELATED TO YOUR INCENTIVE STOCK OPTION
            -------------------------------------------------------

     This memorandum is provided to you merely as a service and is not meant to
advise you as to your personal tax situation.  You should contact your personal
legal or tax advisers with respect to the state and federal income tax treatment
of purchasing and disposing of your stock.

Internal Revenue Code Sections

     Section 421 of the Internal Revenue Code (the "Code") provides rules for
the tax treatment of "incentive stock options"("ISOs"), as that term is defined
by Section 422 of the Code.

ISO Tax Treatment - Usually No Tax Until You Sell Your Stock

     Your option is intended to be an ISO.  If you hold the stock you are
purchasing under your option for more than two (2) years from the date of grant
and more than one (1) year from the date of exercise, upon any subsequent sale
---
or other disposition of such shares you will have capital gains or loss. Capital
gains are taxed at reduced rates if you held the shares for more than 1 year
(20% federal rate).

     If you sell or dispose of the stock within two (2) years from the date of
grant or within 1 year from the date of exercise (a "disqualifying
      --
disposition"), the special capital gains tax treatment of Code Section 421 will
not apply.  Generally, in that event, you will recognize taxable ordinary income
in an amount equal to the lesser of:  (i) the excess of the fair market value of
the shares at the time of exercise over the exercise price of the option, or
(ii) your actual gain on the purchase and sale.  The gain (if any) in excess of
the amount of ordinary income recognized, or the loss (if any) will be a capital
gain or loss.  An exception to this general rule applies if your stock is
subject to the company's repurchase right (see "Early Exercise" below).

Alternative Minimum Tax - Potential Tax at Exercise

     The alternative minimum tax is a separately computed tax that is imposed
only if and to the extent it exceeds your regular tax for the taxable year.
Basically, the alternative minimum tax is an amount equal to twenty-six percent
(26%) of your "alternative minimum taxable income" for the year of up to
$175,000 and twenty-eight percent (28%) of any excess ($87,500 in the case of a
married individual filing a separate return).  "Alternative minimum taxable
income" generally is determined by (i) reducing adjusted gross income by an
exemption amount ($45,000 for joint declarations and $33,750 for single
taxpayers, less $0.25 for each dollar of alternative minimum taxable income in
excess of $150,000 or $112,500, respectively) and certain specifically defined
deductions, and (ii) by adding to the amount so calculated certain tax
preference items and other adjustments.

     As a general rule, when you exercise an ISO, the excess of the (1) fair
market value of the stock acquired on the date of exercise over (2) the exercise
price (the "spread") is added to your alternative minimum taxable income.

                                      -1-
<PAGE>


                                 BEATNIK, INC.
                           2000 STOCK INCENTIVE PLAN
                        NOTICE OF RESTRICTED STOCK AWARD

     You have been granted restricted shares of Common Stock of Beatnik, Inc.
(the "Company") on the following terms:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Name of Recipient:                       _________________________
--------------------------------------------------------------------------------
<S>                                      <C>
Total Number of Shares Granted:          _________________________
--------------------------------------------------------------------------------
Fair Market Value per Share:             $_________________________
--------------------------------------------------------------------------------
Total Fair Market Value of Award:        $_________________________
--------------------------------------------------------------------------------
Date of Grant:                           _______ __, ____
--------------------------------------------------------------------------------
Vesting Commencement Date:               _______ __, ____
--------------------------------------------------------------------------------
Vesting Schedule:                        The first __% of the total number of
                                         shares granted vest when you complete
                                         __ months of continuous service from
                                         the Vesting Commencement Date.  An
                                         additional __% of the shares vest when
                                         you complete each month of continuous
                                         service thereafter.
--------------------------------------------------------------------------------
</TABLE>

By your signature and the signature of the Company's representative below, you
and the Company agree that these shares are granted under and governed by the
terms and conditions of the 2000 Stock Incentive Plan (the "Plan") and the
Restricted Stock Agreement, both of which are attached to and made a part of
this document.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Recipient:                                     Beatnik, Inc.
--------------------------------------------------------------------------------
<S>                                            <C>
_________________________                      By:_______________________
--------------------------------------------------------------------------------
_________________________                      Title:______________________
Print Name
--------------------------------------------------------------------------------
</TABLE>

                                       1
<PAGE>


                                 BEATNIK, INC.
                           2000 STOCK INCENTIVE PLAN

                      RESTRICTED STOCK PURCHASE AGREEMENT
                      -----------------------------------

     This Restricted Stock Purchase Agreement (the "Agreement") is made as of
                                                    ---------
_____________, 2000 by and between Beatnik, Inc., a Delaware corporation (the

"Company"), and ________________ ("Purchaser") pursuant to the Company's 2000
--------                           ---------
Stock Incentive Plan.  To the extent any capitalized terms used in this
Agreement are not defined, they shall have the meaning ascribed to them in the
2000 Stock Incentive Plan.

     1.  Sale of Stock.  Subject to the terms and conditions of this Agreement,
         -------------
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, _______ shares of
the Company's Common Stock (the "Shares") at a purchase price of $____ per Share
                                 ------
for a total purchase price of $______.  The per share purchase price of the
Shares shall be not less than 100% of the Fair Market Value of the Shares as of
the date of the offer of such Shares to the Purchaser, or, in the case of any
person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any affiliated
company), the per share purchase price shall be not less than 110% of the Fair
Market Value of the Shares as of such date.  The term "Shares" refers to the
                                                       ------
purchased Shares and all securities received in replacement of or in connection
with the Shares pursuant to stock dividends or splits, all securities received
in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.

     2.  Time and Place of Exercise.  The purchase and sale of the Shares under
         --------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement by the parties, or on such other date as
the Company and Purchaser shall agree (the "Purchase Date").  On the Purchase
                                            -------------
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the purchase price therefor by Purchaser by (a) check made
payable to the Company, (b) cancellation of indebtedness of the Company to
Purchaser, or (c) by a combination of the foregoing.

     3.  Restrictions on Resale.  By signing this Agreement, you agree not to
         -----------------------
sell any Shares acquired pursuant to the Plan, the Restricted Stock Agreement
and this Agreement at a time when applicable laws, regulations or Company or
underwriter trading policies prohibit exercise or sale.  This restriction will
apply as long as you are an Employee, director or Consultant of the Company or a
Subsidiary of the Company.
<PAGE>

     4.  Restrictive Legends and Stop-Transfer Orders.
         --------------------------------------------

          (a) Legends.  The certificate or certificates representing the Shares
              -------
shall bear the following legend (as well as any legends required by applicable
state and federal corporate and securities laws):

               (i) THE SHARES REPRESENTED BY THIS CERTIFICATE
                   MAY BE TRANSFERRED ONLY IN ACCORDANCE
                   WITH THE TERMS OF AN AGREEMENT BETWEEN
                   THE COMPANY AND THE STOCKHOLDER, A COPY
                   OF WHICH IS ON FILE WITH THE SECRETARY OF
                   THE COMPANY.

          (b) Stop-Transfer Notices.  Purchaser agrees that, in order to ensure
              ---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.

          (c) Refusal to Transfer.  The Company shall not be required (i) to
              -------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.

     5.  No Employment Rights.  Nothing in this Agreement shall affect in any
         --------------------
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.

     6.  Market Standoff Agreement.  Upon request of the Company or the
         -------------------------
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.

     7.  Miscellaneous.
         -------------

          (a) Governing Law.  This Agreement and all acts and transactions
              -------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.

          (b) The Plan and Other Agreements; Enforcement of Rights. The text of
              ----------------------------------------------------
the Plan and the Restricted Stock Agreement are incorporated into this Agreement
by reference.
<PAGE>

This Agreement, the Plan and the Restricted Stock Agreement constitute the
entire agreement and understanding of the parties relating to the subject matter
herein and merges all prior discussions between them. Any prior agreements,
commitments or negotiations concerning the purchase of the Restricted Shares
hereunder are superseded. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, shall be effective unless in
writing signed by the parties to this Agreement. The failure by either party to
enforce any rights under this Agreement shall not be construed as a waiver of
any rights of such party.

          (c) Severability.  If one or more provisions of this Agreement are
              ------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith.  In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.

          (d) Construction.  This Agreement is the result of negotiations
              ------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.

          (e) Notices.  Any notice to be given under the terms of the Plan shall
              -------
be addressed to the Company in care or its principal office, and any notice to
be given to the Purchaser shall be addressed to such Purchaser at the address
maintained by the Company for such person or at such other address as the
Purchaser may specify in writing to the Company.

          (f) Counterparts.  This Agreement may be executed in two or more
              ------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

          (g) Successors and Assigns.  The rights and benefits of this Agreement
              ----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns.  The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.

                            [Signature Page Follows]
<PAGE>

     The parties have executed this Agreement as of the date first set forth
above.

                              BEATNIK, INC.

                              By:
                                 ----------------------------------

                              Title:
                                    -------------------------------

                              Address:
                                      -----------------------------
                                      -----------------------------

                              PURCHASER:



                              -------------------------------------
                              (Signature)

                              Address:
                                      -----------------------------
                                      -----------------------------



I, ________________________________, spouse of ___________, have read and hereby
approve the foregoing Agreement.  In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall be similarly bound by the
Agreement.  I hereby appoint my spouse as my attorney-in-fact with respect to
any amendment or exercise of any rights under the Agreement.



                              -------------------------------------
                              Spouse of
                                       ----------------------------
<PAGE>

                                    RECEIPT
                                    -------

Beatnik, Inc. hereby acknowledges receipt of (check as applicable):

     _____  A check in the amount of $__________

     _____  The cancellation of indebtedness in the amount of $__________

given by ________________ as consideration for Certificate No. CS-____ for
_______ shares of Common Stock of Beatnik, Inc.


Dated:  ________________

                              Beatnik, Inc.

                              By:
                                 ----------------------------------

                              Title:
                                    -------------------------------


<PAGE>

                              RECEIPT AND CONSENT
                              -------------------

     The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. CS-____ for _________ shares of Common Stock of Beatnik, Inc. (the

"Company").
 -------

     The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company.  As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.

Dated:  _________________________


                                   ----------------------------
                                           Name