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                                                                    EXHIBIT 10.2



                                 TELOCITY, INC.

                           2000 EQUITY INCENTIVE PLAN

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                                TABLE OF CONTENTS

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1.      Establishment, Purpose and Term of Plan...............................1
        1.1    Establishment..................................................1
        1.2    Purpose........................................................1
        1.3    Term of Plan...................................................1

2.      Definitions and Construction..........................................1
        2.1    Definitions....................................................1
        2.2    Construction...................................................5

3.      Administration........................................................5
        3.1    Administration by the Committee................................5
        3.2    Authority of Officers..........................................5
        3.3    Powers of the Committee........................................5
        3.4    Administration with Respect to Insiders........................7
        3.5    Committee Complying with Section 162(m)........................7
        3.6    Indemnification................................................7

4.      Shares Subject to Plan................................................7
        4.1    Maximum Number of Shares Issuable..............................7
        4.2    Adjustments for Changes in Capital Structure...................8

5.      Eligibility and Award Limitations.....................................8
        5.1    Persons Eligible for Incentive Stock Options...................8
        5.2    Persons Eligible for Other Awards..............................9
        5.3    Fair Market Value Limitation on Incentive Stock Options........9
        5.4    Section 162(m) Award Limits....................................9

6.      Terms and Conditions of Options.......................................9
        6.1    Exercise Price................................................10
        6.2    Exercisability and Term of Options............................10
        6.3    Payment of Exercise Price.....................................10
        6.4    Effect of Termination of Service..............................12
        6.5    Transferability of Options....................................14

7.      Terms and Conditions of Restricted Stock Awards......................14
        7.1    Purchase Price................................................14
        7.2    Purchase Period...............................................15
        7.3    Payment of Purchase Price.....................................15
        7.4    Vesting and Restrictions on Transfer..........................15
        7.5    Voting Rights; Dividends......................................15
        7.6    Effect of Termination of Service..............................16
        7.7    Nontransferability of Restricted Stock Award Rights...........16
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                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
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8.      Terms and Conditions of Performance Awards...........................16
        8.1    Initial Value of Performance Shares and Performance Units.....17
        8.2    Establishment of Performance Goals and Performance Period.....17
        8.3    Measurement of Performance Goals..............................17
        8.4    Determination of Final Value of Performance Awards............18
        8.5    Dividend Equivalents..........................................18
        8.6    Payment in Settlement of Performance Awards...................19
        8.7    Restrictions Applicable to Payment in Shares..................19
        8.8    Effect of Termination of Service..............................19
        8.9    Nontransferability of Performance Awards......................20

9.      Standard Forms of Award Agreement....................................20
        9.1    Award Agreements..............................................20
        9.2    Authority to Vary Terms.......................................20

10.     Change in Control....................................................20
        10.1   Definitions...................................................20
        10.2   Effect of Change in Control on Options........................21
        10.3   Effect of Change in Control on Restricted Stock Awards........21
        10.4   Effect of Change in Control on Performance Awards.............22

11.     Compliance with Securities Law.......................................22

12.     Tax Withholding......................................................23
        12.1   Tax Withholding in General....................................23
        12.2   Withholding in Shares.........................................23

13.     Termination or Amendment of Plan.....................................23

14.     Miscellaneous Provisions.............................................23
        14.1   Provision of Information......................................23
        14.2   Rights as Employee, Consultant or Director....................24
        14.3   Rights as a Stockholder.......................................24
        14.4   Beneficiary Designation.......................................24
        14.5   Unfunded Obligation...........................................24

15.     Continuation of Initial Plan as to Outstanding Options...............25
</TABLE>



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                                 TELOCITY, INC.
                           2000 EQUITY INCENTIVE PLAN


        1.     ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

               1.1 ESTABLISHMENT. The Telocity, Inc. 1998 Stock Option Plan (the
"INITIAL PLAN") was initially established effective January 31, 1998. The
Initial Plan is hereby amended and restated in its entirety as the Telocity,
Inc. 2000 Equity Incentive Plan (the "PLAN") effective as of January 4, 2000
(the "EFFECTIVE DATE").

               1.2 PURPOSE. The purpose of the Plan is to advance the interests
of the Participating Company Group and its stockholders by providing an
incentive to attract, retain and reward persons performing services for the
Participating Company Group and by motivating such persons to contribute to the
growth and profitability of the Participating Company Group. The Plan seeks to
achieve this purpose by providing for Awards in the form of Options, Restricted
Stock Purchase Rights, Restricted Stock Bonuses, Performance Shares and
Performance Units.

               1.3 TERM OF PLAN. The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Awards granted under the Plan have lapsed. However, all Awards shall
be granted, if at all, within ten (10) years from the Effective Date.

        2.     DEFINITIONS AND CONSTRUCTION.

               2.1 DEFINITIONS. Whenever used herein, the following terms shall
have their respective meanings set forth below:

                      (a) "AWARD" means any Option, Restricted Stock Purchase
Right, Restricted Stock Bonus, Performance Share or Performance Unit granted
under the Plan.

                      (b) "AWARD AGREEMENT" means a written agreement between
the Company and a Participant setting forth the terms, conditions and
restrictions of the Award granted to the Participant. An Award Agreement may be
an "Option Agreement," a "Restricted Stock Purchase Agreement," a "Restricted
Stock Bonus Agreement," a "Performance Share Agreement," or a "Performance Unit
Agreement."

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

                      (d) "CODE" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.

                      (e) "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be



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specified by the Board. If no committee of the Board has been appointed to
administer the Plan, the Board shall exercise all of the powers of the Committee
granted herein, and, in any event, the Board may in its discretion exercise any
or all of such powers.

                      (f) "COMPANY" means Telocity, Inc., a Delaware
corporation, or any successor corporation thereto.

                      (g) "CONSULTANT" means a person engaged to provide
consulting or advisory services (other than as an Employee or a Director) to a
Participating Company, provided that the identity of such person, the nature of
such services or the entity to which such services are provided would not
preclude the Company from offering or selling securities to such person pursuant
to the Plan in reliance on registration on a Form S-8 Registration Statement
under the Securities Act.

                      (h) "DIRECTOR" means a member of the Board or of the board
of directors of any other Participating Company.

                      (i) "DISABILITY" means the inability of the Participant,
in the opinion of a qualified physician acceptable to the Company, to perform
the major duties of the Participant's position with the Participating Company
Group because of the sickness or injury of the Participant.

                      (j) "DIVIDEND EQUIVALENT" means a credit, made at the
discretion of the Committee or as otherwise provided by the Plan, to the account
of a Participant in an amount equal to the cash dividends paid on one share of
Stock for each share of Stock represented by an Award of Performance Shares held
by such Participant.

                      (k) "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company and, with respect to any Incentive Stock
Option granted to such person, who is an employee for purposes of Section 422 of
the Code; provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan.

                      (l) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.

                      (m) "FAIR MARKET VALUE" means, as of any date, the value
of a share of Stock or other property as determined by the Committee, in its
discretion, or by the Company, in its discretion, if such determination is
expressly allocated to the Company herein, subject to the following:

                             (i) If, on such date, the Stock is listed on a
national or regional securities exchange or market system, the Fair Market Value
of a share of Stock shall be the closing price of a share of Stock (or the mean
of the closing bid and asked prices of a share of Stock if the Stock is so
quoted instead) as quoted on the Nasdaq National Market, The Nasdaq



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SmallCap Market or such other national or regional securities exchange or market
system constituting the primary market for the Stock, as reported in The Wall
Street Journal or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Committee, in its discretion.

                             (ii) If, on such date, the Stock is not listed on a
national or regional securities exchange or market system, the Fair Market Value
of a share of Stock shall be as determined by the Committee in good faith
without regard to any restriction other than a restriction which, by its terms,
will never lapse.

                      (n) "INCENTIVE STOCK OPTION" means an Option intended to
be (as set forth in the Option Agreement) and which qualifies as an incentive
stock option within the meaning of Section 422(b) of the Code.

                      (o) "INSIDER" means an officer or a Director of the
Company or any other person whose transactions in Stock are subject to Section
16 of the Exchange Act.

                      (p) "NONSTATUTORY STOCK OPTION" means an Option not
intended to be (as set forth in the Option Agreement) or which does not qualify
as an Incentive Stock Option.

                      (q) "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.

                      (r) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.

                      (s) "PARTICIPANT" means any eligible person who has been
granted one or more Awards.

                      (t) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.

                      (u) "PARTICIPATING COMPANY GROUP" means, at any point in
time, all corporations collectively which are then Participating Companies.

                      (v) "PERFORMANCE AWARD" means an Award of Performance
Shares or Performance Units.

                      (w) "PERFORMANCE GOAL" means a performance goal
established by the Committee pursuant to Section 8.2.



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                      (x) "PERFORMANCE PERIOD" means a period established by the
Committee pursuant to Section 8.2 at the end of which one or more Performance
Goals are to be measured.

                      (y) "PERFORMANCE SHARE" means a bookkeeping entry
representing a right granted to a Participant pursuant to the terms and
conditions of Section 8 to receive a payment equal to the value of a Performance
Share, as determined by the Committee, based on performance.

                      (z) "PERFORMANCE UNIT" means a bookkeeping entry
representing a right granted to a Participant pursuant to the terms and
conditions of Section 8 to receive a payment equal to the value of a Performance
Unit, as determined by the Committee, based upon performance.

                      (aa) "RESTRICTED STOCK AWARD" means an Award of a
Restricted Stock Bonus or a Restricted Stock Purchase Right.

                      (bb) "RESTRICTED STOCK BONUS" means Stock granted to a
Participant pursuant to the terms and conditions of Section 7.

                      (cc) "RESTRICTED STOCK PURCHASE RIGHT" means a right to
purchase Stock granted to a Participant pursuant to the terms and conditions of
Section 7.

                      (dd) "RESTRICTION PERIOD" means the period established in
accordance with Section 7.4 during which shares subject to a Restricted Stock
Award are subject to Vesting Conditions.

                      (ee) "RULE 16b-3" means Rule 16b-3 under the Exchange Act,
as amended from time to time, or any successor rule or regulation.

                      (ff) "SECTION 162(m)" means Section 162(m) of the Code.

                      (gg) "SECURITIES ACT" means the Securities Act of 1933, as
amended.

                      (hh) "SERVICE" means a Participant's employment or service
with the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. A Participant's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Participant
renders Service to the Participating Company Group or a change in the
Participating Company for which the Participant renders such Service, provided
that there is no interruption or termination of the Participant's Service.
Furthermore, a Participant's Service with the Participating Company Group shall
not be deemed to have terminated if the Participant takes any military leave,
sick leave, or other bona fide leave of absence approved by the Company;
provided, however, that if any such leave exceeds ninety (90) days, on the one
hundred eighty-first (181st) day of such leave any Incentive Stock Option held
by such Participant shall cease to be treated as an Incentive Stock Option and
instead shall be treated thereafter as a Nonstatutory Stock Option unless the
Participant's right to



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return to Service with the Participating Company Group is guaranteed by statute
or contract. Notwithstanding the foregoing, unless otherwise designated by the
Company or required by law, a leave of absence shall not be treated as Service
for purposes of determining vesting under the Participant's Award Agreement. A
Participant's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Participant
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Participant's Service has terminated and the effective date of such termination.

                      (ii) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.

                      (jj) "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

                      (kk) "TEN PERCENT OWNER" means a Participant who, at the
time an Option is granted to the Participant, owns stock possessing more than
ten percent (10%) of the total combined voting power of all classes of stock of
a Participating Company within the meaning of Section 422(b)(6) of the Code.

                      (ll) "VESTING CONDITIONS" mean those conditions
established in accordance with Section 7.4 prior to the satisfaction of which
shares subject to a Restricted Stock Award remain subject to forfeiture or a
repurchase option in favor of the Company.

               2.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

        3.     ADMINISTRATION.

               3.1 ADMINISTRATION BY THE COMMITTEE. The Plan shall be
administered by the Committee. All questions of interpretation of the Plan or of
any Award shall be determined by the Committee, and such determinations shall be
final and binding upon all persons having an interest in the Plan or such Award.

               3.2 AUTHORITY OF OFFICERS. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.

               3.3 POWERS OF THE COMMITTEE. In addition to any other powers set
forth in the Plan and subject to the provisions of the Plan, the Committee shall
have the full and final power and authority, in its discretion:



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                      (a) to determine the persons to whom, and the time or
times at which, Awards shall be granted and the number of shares of Stock or
units to be subject to each Award;

                      (b) to determine the type of Award granted and to
designate Options as Incentive Stock Options or Nonstatutory Stock Options;

                      (c) to determine the Fair Market Value of shares of Stock
or other property;

                      (d) to determine the terms, conditions and restrictions
applicable to each Award (which need not be identical) and any shares acquired
pursuant thereto, including, without limitation, (i) the purchase price of any
Stock, (ii) the method of payment for shares purchased pursuant to any Award,
(iii) the method for satisfaction of any tax withholding obligation arising in
connection with Award, including by the withholding or delivery of shares of
Stock, (iv) the timing, terms and conditions of the exercisability or vesting of
any Award or any shares acquired pursuant thereto, (v) the Performance Goals
applicable to any Award and the extent to which such Performance Goals have been
attained, (vi) the time of the expiration of any Award, (vii) the effect of the
Participant's termination of Service on any of the foregoing, and (viii) all
other terms, conditions and restrictions applicable to any Award or shares
acquired pursuant thereto not inconsistent with the terms of the Plan;

                      (e) to determine whether an Award of Performance Shares or
Performance Units will be settled in shares of Stock, cash, or in any
combination thereof;

                      (f) to approve one or more forms of Award Agreement;

                      (g) to amend, modify, extend, cancel or renew any Award or
to waive any restrictions or conditions applicable to any Award or any shares
acquired pursuant thereto;

                      (h) to accelerate, continue, extend or defer the
exercisability or vesting of any Award or any shares acquired pursuant thereto,
including with respect to the period following a Participant's termination of
Service;

                      (i) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Committee deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted Awards;
and



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                      (j) to correct any defect, supply any omission or
reconcile any inconsistency in the Plan or any Award Agreement and to make all
other determinations and take such other actions with respect to the Plan or any
Award as the Committee may deem advisable to the extent not inconsistent with
the provisions of the Plan or applicable law.

               3.4 ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.

               3.5 COMMITTEE COMPLYING WITH SECTION 162(m). If the Company is a
"publicly held corporation" within the meaning of Section 162(m), the Board may
establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Award which might reasonably be anticipated
to result in the payment of employee remuneration that would otherwise exceed
the limit on employee remuneration deductible for income tax purposes pursuant
to Section 162(m).

               3.6 INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board or the Committee or as
officers or employees of the Participating Company Group, members of the Board
or the Committee and any officers or employees of the Participating Company
Group to whom authority to act for the Board, the Committee or the Company is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan, or any right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.

        4.     SHARES SUBJECT TO PLAN.

               4.1 MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be twenty-three million (23,000,000),
cumulatively increased on January 1, 2001 and each January 1 thereafter until
and including January 1, 2010 by a number of shares of Stock (the "ANNUAL
INCREASE") equal to the lesser of (a) five percent (5%) of the number of shares
of Stock issued and outstanding on the immediately preceding December 31 or (b)
an amount determined by the Committee, and shall consist of authorized but
unissued or reacquired shares of Stock or any combination thereof.
Notwithstanding the foregoing, except as adjusted pursuant to Section 4.2, the
portion of each Annual Increase that shall be available for issuance pursuant to
the exercise of Incentive Stock Options shall not exceed five million
(5,000,000) shares (the "ISO SHARE LIMIT"). If an outstanding Award for any
reason expires or is terminated or canceled without having been exercised or
settled in full, or if shares of Stock acquired pursuant to an Award subject to
forfeiture or repurchase are forfeited or repurchased by the Company at the
Participant's purchase price, the shares of Stock allocable to the terminated



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portion of such Award or such forfeited or repurchased shares of Stock shall
again be available for issuance under the Plan.(1)

               4.2 ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan and to any outstanding Awards, in the ISO Share Limit set
forth in Section 4.1, and in the exercise price per share of any outstanding
Options and Restricted Stock Purchase Rights. If a majority of the shares which
are of the same class as the shares that are subject to outstanding Awards are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change Event, as defined in Section 10.1) shares of another
corporation (the "NEW SHARES"), the Committee may unilaterally amend the
outstanding Awards to provide that such Awards shall be for New Shares. In the
event of any such amendment, the number of shares subject to outstanding Awards
and the exercise price per share of outstanding Options and Restricted Stock
Purchase Rights shall be adjusted in a fair and equitable manner as determined
by the Committee, in its discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 4.2 shall
be rounded down to the nearest whole number, and in no event may the exercise
price of any Option or Restricted Stock Purchase Right be decreased to an amount
less than the par value, if any, of the stock subject to such Award. The
adjustments determined by the Committee pursuant to this Section 4.2 shall be
final, binding and conclusive.

        5.     ELIGIBILITY AND AWARD LIMITATIONS.

               5.1 PERSONS ELIGIBLE FOR INCENTIVE STOCK OPTIONS. Incentive Stock
Options may be granted only to Employees. For purposes of the foregoing
sentence, the term "Employees" shall include prospective Employees to whom
Incentive Stock Options are granted in connection with written offers of
employment with the Participating Company Group, provided that any such
Incentive Stock Option shall be deemed granted effective on the date such person
commences Service as an Employee, with an exercise price determined as of such
date in accordance with Section 6.1. Eligible persons may be granted more than
one (1) Incentive Stock Option.


----------

(1) Until immediately prior to the effective time of the Company's registration
of Stock under Section 12 of the Exchange Act, Section 4.1 shall include the
following:

        Notwithstanding the foregoing, at any such time as the offer and sale of
        securities pursuant to the Plan is subject to compliance with Section
        260.140.45 of Title 10 of the California Code of Regulations ("SECTION
        260.140.45"), the total number of shares of Stock issuable pursuant to
        the Plan and the total number of shares provided for under any other
        stock bonus or similar plan of the Company shall not exceed thirty
        percent (30%) (or such other higher percentage limitation as may be
        approved by the stockholders of the Company pursuant to Section
        260.140.45) of the then outstanding shares of the Company as calculated
        in accordance with the conditions and exclusions of Section 260.140.45.



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               5.2 PERSONS ELIGIBLE FOR OTHER AWARDS. Awards other than
Incentive Stock Options may be granted only to Employees, Consultants and
Directors. For purposes of the foregoing sentence, "Employees," "Consultants"
and "Directors" shall include prospective Employees, prospective Consultants and
prospective Directors to whom Awards are granted in connection with written
offers of an employment or other service relationship with the Participating
Company Group; provided, however, that no Stock subject to any such Award shall
vest, become exercisable or be issued prior to the date on which such person
commences Service. Eligible persons may be granted more than one (1) Award.

               5.3 FAIR MARKET VALUE LIMITATION ON INCENTIVE STOCK OPTIONS. To
the extent that options designated as Incentive Stock Options (granted under all
stock option plans of the Participating Company Group, including the Plan)
become exercisable by a Participant for the first time during any calendar year
for stock having a Fair Market Value greater than One Hundred Thousand Dollars
($100,000), the portions of such options which exceed such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of stock shall be
determined as of the time the option with respect to such stock is granted. If
the Code is amended to provide for a different limitation from that set forth in
this Section 5.3, such different limitation shall be deemed incorporated herein
effective as of the date and with respect to such Options as required or
permitted by such amendment to the Code. If an Option is treated as an Incentive
Stock Option in part and as a Nonstatutory Stock Option in part by reason of the
limitation set forth in this Section 5.3, the Participant may designate which
portion of such Option the Participant is exercising. In the absence of such
designation, the Participant shall be deemed to have exercised the Incentive
Stock Option portion of the Option first. Separate certificates representing
each such portion shall be issued upon the exercise of the Option.

               5.4 SECTION 162(m) AWARD LIMITS. If the Company is a "publicly
held corporation" within the meaning of Section 162(m), then, no later than the
first meeting of the stockholders of the Company at which directors are to be
elected that occurs after the close of the third calendar year following the
calendar year in which the Company's initial public offering occurs, the
Committee shall adopt amendments to the Plan setting forth the maximum amount of
performance-based compensation (within the meaning of Section 162(m)) that may
be paid under any Award to any Employee during a specified period and, in the
case of Options, the maximum amount of shares for which Options may be granted
to any Employee during a specified period. The Company shall seek stockholder
approve of such Award limits and any other materials terms of Awards necessary
to qualify the compensation paid with respect to such Awards as
performance-based compensation within the meaning of Section 162(m). This
Section 5.4 shall not apply if, in connection with a prior material modification
to the Plan within the meaning of Section 162(m), the Committee has adopted such
amendments and sought such stockholder approval.

        6.     TERMS AND CONDITIONS OF OPTIONS.

               Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby, in such form as the Committee shall
from time to time establish.



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No Option or purported Option shall be a valid and binding obligation of the
Company unless evidenced by a fully executed Option Agreement. Option Agreements
may incorporate all or any of the terms of the Plan by reference and shall
comply with and be subject to the following terms and conditions:

               6.1 EXERCISE PRICE. The exercise price for each Option shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Incentive
Stock Option(2) granted to a Ten Percent Owner shall have an exercise price per
share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.

               6.2 EXERCISABILITY AND TERM OF OPTIONS. Options shall be
exercisable at such time or times, or upon such event or events, and subject to
such terms, conditions, performance criteria and restrictions as shall be
determined by the Committee and set forth in the Option Agreement evidencing
such Option; provided, however, that (a) no Option shall be exercisable after
the expiration of ten (10) years after the effective date of grant of such
Option, (b) no Incentive Stock Option granted to a Ten Percent Owner shall be
exercisable after the expiration of five (5) years after the effective date of
grant of such Option, (c) no Option granted to a prospective Employee,
prospective Consultant or prospective Director may become exercisable prior to
the date on which such person commences Service. Subject to the foregoing,
unless otherwise specified by the Committee in the grant of an Option, any
Option granted hereunder shall terminate ten (10) years after the effective date
of grant of the Option, unless earlier terminated in accordance with its
provisions.(3)

               6.3    PAYMENT OF EXERCISE PRICE.

                      (a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased


----------

(2) Until immediately prior to the effective time of the Company's registration
of Stock under Section 12 of the Exchange Act, the limitation in Section 6.1(c)
shall apply to all Options.

(3) Until immediately prior to the effective time of the Company's registration
of Stock under Section 12 of the Exchange Act, Section 6.2 shall include the
following:

        With the exception of an Option granted to an officer, Director or
        Consultant, no Option shall become exercisable at a rate less than
        twenty percent (20%) per year over a period of five (5) years from the
        effective date of grant of such Option, subject to the Participant's
        continued Service.



                                       10
<PAGE>   14

pursuant to any Option shall be made (i) in cash, by check or cash equivalent,
(ii) by tender to the Company, or attestation to the ownership, of shares of
Stock owned by the Participant having a Fair Market Value (as determined by the
Company without regard to any restrictions on transferability applicable to such
stock by reason of federal or state securities laws or agreements with an
underwriter for the Company) not less than the exercise price, (iii) by delivery
of a properly executed notice together with irrevocable instructions to a broker
providing for the assignment to the Company of the proceeds of a sale or loan
with respect to some or all of the shares being acquired upon the exercise of
the Option (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), (iv) provided
that the Participant is an Employee (unless otherwise not prohibited by law,
including, without limitation, any regulation promulgated by the Board of
Governors of the Federal Reserve System) and in the Company's sole discretion at
the time the Option is exercised, by delivery of the Participant's promissory
note in a form approved by the Company for the aggregate exercise price,
provided that, if the Company is incorporated in the State of Delaware, the
Participant shall pay in cash that portion of the aggregate exercise price not
less than the par value of the shares being acquired, (v) by such other
consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law, or (vi) by any combination thereof. The
Committee may at any time or from time to time grant Options which do not permit
all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of consideration.

                      (b)    LIMITATIONS ON FORMS OF CONSIDERATION.

                             (i) TENDER OF STOCK. Notwithstanding the foregoing,
an Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Committee, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Participant for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

                             (ii) CASHLESS EXERCISE. The Company reserves, at
any and all times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures for the
exercise of Options by means of a Cashless Exercise.

                             (iii) PAYMENT BY PROMISSORY NOTE. No promissory
note shall be permitted if the exercise of an Option using a promissory note
would be a violation of any law. Any permitted promissory note shall be on such
terms as the Committee shall determine at the time the Option is granted. The
Committee shall have the authority to permit or require the Participant to
secure any promissory note used to exercise an Option with the shares of Stock
acquired upon the exercise of the Option or with other collateral acceptable to
the Company. Unless otherwise provided by the Committee, if the Company at any
time is subject to the regulations promulgated by the Board of Governors of the
Federal Reserve System or any other



                                       11
<PAGE>   15

governmental entity affecting the extension of credit in connection with the
Company's securities, any promissory note shall comply with such applicable
regulations, and the Participant shall pay the unpaid principal and accrued
interest, if any, to the extent necessary to comply with such applicable
regulations.

               6.4    EFFECT OF TERMINATION OF SERVICE.

                      (a) OPTION EXERCISABILITY. Subject to earlier termination
of the Option as otherwise provided herein and unless otherwise provided by the
Committee in the grant of the Option and set forth in the Option Agreement, an
Option granted to a Participant shall be exercisable after the Participant's
termination of Service only during the applicable time period determined in
accordance with this Section 6.4 and thereafter shall terminate:

                             (i) DISABILITY. If the Participant's Service with
the Participating Company Group terminates because of the Disability of the
Participant, the Option, to the extent unexercised and exercisable on the date
on which the Participant's Service terminated, may be exercised by the
Participant (or the Participant's guardian or legal representative) at any time
prior to the expiration of six (6) months (or such longer period of time as
determined by the Committee, in its discretion) after the date on which the
Participant's Service terminated, but in any event no later than the date of
expiration of the Option's term as set forth in the Option Agreement evidencing
such Option (the "OPTION EXPIRATION DATE").

                             (ii) DEATH. If the Participant's Service with the
Participating Company Group terminates because of the death of the Participant,
the Option, to the extent unexercised and exercisable on the date on which the
Participant's Service terminated, may be exercised by the Participant's legal
representative or other person who acquired the right to exercise the Option by
reason of the Participant's death at any time prior to the expiration of six (6)
months (or such longer period of time as determined by the Committee, in its
discretion) after the date on which the Participant's Service terminated, but in
any event no later than the Option Expiration Date. The Participant's Service
shall be deemed to have terminated on account of death if the Participant dies
within one (1) month (or such longer period of time as determined by the
Committee, in its discretion) after the Participant's termination of Service.

                             (iii) TERMINATION AFTER CHANGE IN CONTROL. The
Committee may, in its discretion, provide in any Option Agreement that if the
Participant's Service with the Participating Company Group ceases as a result of
"Termination After Change in Control" (as defined in such Option Agreement),
then (1) the Option, to the extent unexercised and exercisable on the date on
which the Participant's Service terminated, may be exercised by the Participant
(or the Participant's guardian or legal representative) at any time prior to the
expiration of six (6) months (or such longer period of time as determined by the
Committee, in its discretion) after the date on which the Participant's Service
terminated, but in any event no later than the Option Expiration Date, and (2)
the exercisability and vesting of the Option and any shares acquired upon the
exercise thereof shall be accelerated effective as of the date on which the
Participant's Service terminated to such extent, if any, as shall have been
determined by the Committee, in its discretion, and set forth in the Option
Agreement. Notwithstanding the foregoing, if it is determined that the
provisions or operation of this Section 6.4(a)(iii) would



                                       12
<PAGE>   16

preclude treatment of a Change in Control as a "pooling-of-interests" for
accounting purposes and provided further that in the absence of the preceding
sentence such Change in Control would be treated as a "pooling-of-interests" for
accounting purposes, then this Section 6.4(a)(iii) shall be void ab initio, and
the vesting and exercisability of the Option shall be determined under any other
applicable provision of the Plan or the Option Agreement evidencing such Option.

                             (iv) TERMINATION FOR CAUSE. Notwithstanding any
other provision of the Plan to the contrary, if the Participant's Service with
the Participating Company Group is terminated for Cause, as defined by the
Participant's Option Agreement or contract of employment or service (or, if not
defined in any of the foregoing, as defined below), the Option shall terminate
and cease to be exercisable immediately upon such termination of Service. Unless
otherwise defined by the Participant's Option Agreement or contract of
employment or service, for purposes of this Section 6.4(a)(iv) "CAUSE" shall
mean any of the following: (1) the Participant's theft, dishonesty, or
falsification of any Participating Company documents or records; (2) the
Participant's improper use or disclosure of a Participating Company's
confidential or proprietary information; (3) any action by the Participant which
has a detrimental effect on a Participating Company's reputation or business;
(4) the Participant's failure or inability to perform any reasonable assigned
duties after written notice from a Participating Company of, and a reasonable
opportunity to cure, such failure or inability; (5) any material breach by the
Participant of any employment or service agreement between the Participant and a
Participating Company, which breach is not cured pursuant to the terms of such
agreement; or (6) the Participant's conviction (including any plea of guilty or
nolo contendere) of any criminal act which impairs the Participant's ability to
perform his or her duties with a Participating Company.

                             (v) OTHER TERMINATION OF SERVICE. If the
Participant's Service with the Participating Company Group terminates for any
reason, except Disability, death, Termination After Change in Control or Cause,
the Option, to the extent unexercised and exercisable by the Participant on the
date on which the Participant's Service terminated, may be exercised by the
Participant at any time prior to the expiration of one (1) month (or such longer
period of time as determined by the Committee, in its discretion) after the date
on which the Participant's Service terminated, but in any event no later than
the Option Expiration Date.

                      (b) EXTENSION IF EXERCISE PREVENTED BY LAW.
Notwithstanding the foregoing other than termination of a Participant's Service
for Cause, if the exercise of an Option within the applicable time periods set
forth in Section 6.4(a) is prevented by the provisions of Section 11 below, the
Option shall remain exercisable until one (1) month (or such longer period of
time as determined by the Committee, in its discretion) after the date the
Participant is notified by the Company that the Option is exercisable, but in
any event no later than the Option Expiration Date.

                      (c)    EXTENSION IF PARTICIPANT SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing other than termination of a Participant's Service
for Cause, if a sale within the applicable time periods set forth in Section
6.4(a) of shares acquired upon the exercise of the Option would subject the
Participant to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day



                                       13
<PAGE>   17

following the date on which a sale of such shares by the Participant would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Participant's termination of Service, or (iii) the Option Expiration
Date.

               6.5 TRANSFERABILITY OF OPTIONS. During the lifetime of the
Participant, an Option shall be exercisable only by the Participant or the
Participant's guardian or legal representative. No Option shall be assignable or
transferable by the Participant, except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, to the extent permitted by the
Committee, in its discretion, and set forth in the Option Agreement evidencing
such Option, a Nonstatutory Stock Option shall be assignable or transferable
subject to the applicable limitations, if any, described in the General
Instructions to Form S-8 Registration Statement under the Securities Act.(4)

        7.     TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.(5)

               The Committee may from time to time grant Restricted Stock Awards
upon such conditions as the Committee shall determine, including, without
limitation, upon the attainment of one or more Performance Goals described in
Section 8.3. If either the grant of a Restricted Stock Award or the lapsing of
the Restriction Period is to be contingent upon the attainment of one or more
Performance Goals, the Committee shall follow procedures substantially
equivalent to those set forth in Sections 8.2 through 8.4. Restricted Stock
Awards may be in the form of either a Restricted Stock Bonus, which shall be
evidenced by Restricted Stock Bonus Agreement, or a Restricted Stock Purchase
Right, which shall be evidenced by Restricted Stock Purchase Agreement. Each
such Award Agreement shall specify the number of shares of Stock subject to and
the other terms, conditions and restrictions of the Award, and shall be in such
form as the Committee shall establish from time to time. No Restricted Stock
Award or purported Restricted Stock Award shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Award Agreement.
Restricted Stock Award Agreements may incorporate all or any of the terms of the
Plan by reference and shall comply with and be subject to the following terms
and conditions:

               7.1 PURCHASE PRICE. The purchase price under each Restricted
Stock Purchase Right shall be established by the Committee. No monetary payment
(other than applicable tax withholding) shall be required as a condition of
receiving a Restricted Stock Bonus, the consideration for which shall be
services actually rendered to a Participating Company or for its benefit.


----------

(4) Until immediately prior to the effective time of the Company's registration
of Stock under Section 12 of the Exchange Act, Section 6.5 shall also refer to
the limitations, if any, under Section 260.140.41 of Title 10 of the California
Code of Regulations and Rule 701 under the Securities Act.

(5) No Restricted Stock Award may be granted pursuant to this Section 7 until
immediately prior to the effective time of the Company's registration of Stock
under Section 12 of the Exchange Act.



                                       14
<PAGE>   18

               7.2 PURCHASE PERIOD. A Restricted Stock Purchase Right shall be
exercisable within a period established by the Committee, which shall in no
event exceed thirty (30) days from the effective date of the grant of the
Restricted Stock Purchase Right; provided, however, that no Restricted Stock
Purchase Right granted to a prospective Employee, prospective Director or
prospective Consultant may become exercisable prior to the date on which such
person commences Service.

               7.3 PAYMENT OF PURCHASE PRICE. Except as otherwise provided
below, payment of the purchase price for the number of shares of Stock being
purchased pursuant to any Restricted Stock Purchase Right shall be made (i) in
cash, by check, or cash equivalent, (ii) provided that the Participant is an
Employee (unless otherwise not prohibited by law, including, without limitation,
any regulation promulgated by the Board of Governors of the Federal Reserve
System) and in the Company's sole discretion at the time the Restricted Stock
Purchase Right is exercised, by delivery of the Participant's promissory note in
a form approved by the Company for the aggregate purchase price, provided that,
if the Company is incorporated in the State of Delaware, the Participant shall
pay in cash that portion of the aggregate purchase price not less than the par
value of the shares being acquired, (iii) by such other consideration as may be
approved by the Committee from time to time to the extent permitted by
applicable law, or (iv) by any combination thereof. Payment by means of the
Participant's promissory note shall be subject to the conditions described in
Section 6.3(b)(iii). The Committee may at any time or from time to time grant
Restricted Stock Purchase Rights which do not permit all of the foregoing forms
of consideration to be used in payment of the purchase price or which otherwise
restrict one or more forms of consideration. Restricted Stock Bonuses shall be
issued in consideration for services actually rendered to a Participating
Company or for its benefit.

               7.4 VESTING AND RESTRICTIONS ON TRANSFER. Shares issued pursuant
to any Restricted Stock Award may be made subject to vesting conditioned upon
the satisfaction of such Service requirements, conditions, restrictions or
performance criteria, including, without limitation, Performance Goals as
described in Section 8.3 (the "VESTING Conditions"), as shall be established by
the Committee and set forth in the Award Agreement evidencing such Award. During
any period (the "RESTRICTION PERIOD") in which shares acquired pursuant to a
Restricted Stock Award remain subject to Vesting Conditions, such shares may not
be sold, exchanged, transferred, pledged, assigned or otherwise disposed of
other than pursuant to an Ownership Change Event, as defined in Section 10.1, or
as provided in Section 7.7. Upon request by the Company, each Participant shall
execute any agreement evidencing such transfer restrictions prior to the receipt
of shares of Stock hereunder and shall promptly present to the Company any and
all certificates representing shares of Stock acquired hereunder for the
placement on such certificates of appropriate legends evidencing any such
transfer restrictions.

               7.5 VOTING RIGHTS; DIVIDENDS. Except as provided in this Section
and Section 7.4, during the Restriction Period applicable to shares subject to a
Restricted Stock Award held by a Participant, the Participant shall have all of
the rights of a stockholder of the Company holding shares of Stock, including
the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares; provided, however, that if any
such dividends or distributions are paid in shares of Stock, such shares shall
be subject to the



                                       15
<PAGE>   19

same Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which the dividends or distributions were paid.

               7.6 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided
in the grant of a Restricted Stock Award and set forth in the Award Agreement,
the effect of the Participant's termination of Service shall be as follows:

                      (a) TERMINATION AFTER CHANGE IN CONTROL. The Committee
may, in its discretion, provide in any Restricted Stock Award Agreement that if
the Participant's Service with the Participating Company Group ceases as a
result of "Termination After Change in Control" (as defined in such Award
Agreement), then the Vesting Conditions applicable to the shares subject to the
Restricted Stock Award shall terminate effective as of the date on which the
Participant's Service terminated to the extent specified in such Award
Agreement. Notwithstanding the foregoing, if it is determined that the
provisions or operation of this Section 7.6(a) would preclude treatment of a
Change in Control as a "pooling-of-interests" for accounting purposes and
provided further that in the absence of the preceding sentence such Change in
Control would be treated as a "pooling-of-interests" for accounting purposes,
then this Section 7.6(a) shall be void ab initio, and the effect of the
Participant's termination of Service shall be determined under any other
applicable provision of the Plan or the Award Agreement evidencing such
Restricted Stock Award.

                      (b) OTHER TERMINATION OF SERVICE. If a Participant's
Service with the Participating Company Group terminates for any reason, except
Termination After Change in Control, whether voluntary or involuntary (including
the Participant's death or disability), then (i) the Company shall have the
option to repurchase for the purchase price paid by the Participant any shares
acquired by the Participant pursuant to a Restricted Stock Purchase Right which
remain subject to Vesting Conditions as of the date of the Participant's
termination of Service and (ii) the Participant shall forfeit to the Company any
shares acquired by the Participant pursuant to a Restricted Stock Bonus which
remain subject to Vesting Conditions as of the date of the Participant's
termination of Service. The Company shall have the right to assign at any time
any repurchase right it may have, whether or not such right is then exercisable,
to one or more persons as may be selected by the Company.

               7.7 NONTRANSFERABILITY OF RESTRICTED STOCK AWARD RIGHTS. Rights
to acquire shares of Stock pursuant to a Restricted Stock Award may not be
assigned or transferred in any manner except by will or the laws of descent and
distribution, and, during the lifetime of the Participant, shall be exercisable
only by the Participant.

        8.     TERMS AND CONDITIONS OF PERFORMANCE AWARDS.(6)

               The Committee may from time to time grant Performance Awards upon
such conditions as the Committee shall determine. Performance Awards may be in
the form of either Performance Shares, which shall be evidenced by a Performance
Share Agreement, or


----------

(6) No Performance Award may be granted pursuant to this Section 8 until
immediately prior to the effective time of the Company's registration of Stock
under Section 12 of the Exchange Act.



                                       16
<PAGE>   20

Performance Units, which shall be evidenced by a Performance Unit Agreement.
Each such Award Agreement shall specify the number of Performance Shares or
Performance Units subject thereto, the method of computing the value of each
Performance Share or Performance Unit, the Performance Goals and Performance
Period applicable to the Award, and the other terms, conditions and restrictions
of the Award, and shall be in such form as the Committee shall establish from
time to time. No Performance Award or purported Performance Award shall be a
valid and binding obligation of the Company unless evidenced by a fully executed
Award Agreement. Performance Share and Performance Unit Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

               8.1 INITIAL VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS.
Unless otherwise provided by the Committee in granting a Performance Award, each
Performance Share shall have an initial value equal to the Fair Market Value of
a share of Stock on the effective date of grant of the Performance Share, and
each Performance Unit shall have an initial value of one hundred dollars ($100).
The final value payable to the Participant in settlement of a Performance Award
will depend on the extent to which Performance Goals established by the
Committee are attained within the applicable Performance Period established by
the Committee.

               8.2 ESTABLISHMENT OF PERFORMANCE GOALS AND PERFORMANCE PERIOD.
The Committee shall establish in writing the Performance Period applicable to
each Performance Award and one or more Performance Goals which, when measured at
the end of the Performance Period, shall determine the final value of the
Performance Award to be paid to the Participant. Unless otherwise permitted in
compliance with the requirements under Section 162(m) with respect to
"performance-based compensation," the Committee shall establish the Performance
Goals applicable to each Performance Award no later than the earlier of (a) the
date ninety (90) days after the commencement of the applicable Performance
Period or (b) the date on which 25% of the Performance Period has elapsed, and,
in any event, at a time when the outcome of the Performance Goals remains
substantially uncertain. Once established, the Performance Goals shall not be
changed during the Performance Period.

               8.3 MEASUREMENT OF PERFORMANCE GOALS. Performance Goals shall be
established by the Committee on the basis of targets to be attained
("PERFORMANCE TARGETS") with respect one or more measures of business or
financial performance (each, a "PERFORMANCE MEASURE"). Performance Measures
shall have the same meanings as used in the Company's financial statements, or
if such terms are not used in the Company's financial statements, they shall
have the meaning applied pursuant to generally accepted accounting principles,
or as used generally in the Company's industry. Performance Targets may include
a minimum, maximum, target level and intermediate levels of performance, with
the final value of a Performance Award determined by the level attained during
the applicable Performance Period. A Performance Target may be stated as an
absolute value or as a value determined relative to a standard selected by the
Committee. Performance Measures shall be calculated with respect to the Company
and each Subsidiary Corporation consolidated therewith for financial reporting
purposes or such division or other business unit as may be selected by the
Committee. For purposes of the Plan, the Performance Measures applicable to a
Performance Award shall be calculated before the effect of changes in accounting
standards, restructuring charges and similar extraordinary items,



                                       17
<PAGE>   21

determined according to criteria established by the Committee, occurring after
the establishment of the Performance Goals applicable to a Performance Award.
Performance Measures may be one or more of the following, as determined by the
Committee:

                      (a)    revenue

                      (b)    gross margin

                      (c)    operating margin

                      (d)    operating income

                      (e)    pre-tax profit

                      (f)    earnings before interest, taxes and depreciation

                      (g)    net income

                      (h)    cash flow

                      (i)    expenses

                      (j)    stock price

                      (k)    earnings per share

                      (l)    return on stockholder equity

                      (m)    return on capital

                      (n)    return on net assets

                      (o)    economic value added

                      (p)    number of customers

                      (q)    market share

               8.4 DETERMINATION OF FINAL VALUE OF PERFORMANCE AWARDS. As soon
as practicable following the completion of the Performance Period applicable to
a Performance Award, the Committee shall certify in writing the extent to which
the applicable Performance Goals have been attained and the resulting final
value of the Award earned by the Participant and to be paid upon its settlement
in accordance with the terms of the Award Agreement. The Committee shall have no
discretion to increase the value of an Award payable upon its settlement in
excess of the amount called for by the terms of the Award Agreement on the basis
of the degree of attainment of the Performance Goals as certified by the
Committee. However, notwithstanding the attainment of any Performance Goal, if
permitted under a Participant's Award Agreement, the Committee shall have the
discretion, on the basis of such criteria as may be established by the
Committee, to reduce some or all of the value of a Performance Award that would
otherwise be paid upon its settlement. No such reduction may result in an
increase in the amount payable upon settlement of another Participant's
Performance Award. As soon as practicable following the Committee's
certification, the Company shall notify the Participant of the determination of
the Committee.

               8.5 DIVIDEND EQUIVALENTS. In its discretion, the Committee may
provide in the Award Agreement evidencing any Performance Share Award that the
Participant shall be entitled to receive Dividend Equivalents with respect to
the payment of cash dividends on Stock having a record date prior to the date on
which the Performance Shares are settled or forfeited. Dividend Equivalents may
be paid currently or may be accumulated and paid to the extent that Performance
Shares become nonforfeitable, as determined by the Committee. Settlement of
Dividend Equivalents may be made in cash, shares of Stock, or a combination
thereof as determined by the Committee, and may be paid on the same basis as
settlement of the related



                                       18
<PAGE>   22

Performance Share as provided in Section 8.6. Dividend Equivalents shall not be
paid with respect to Performance Units.

               8.6 PAYMENT IN SETTLEMENT OF PERFORMANCE AWARDS. Payment of the
final value of a Performance Award earned by a Participant as determined
following the completion of the applicable Performance Period pursuant to
Sections 8.4 and 8.5 may be made in cash, shares of Stock, or a combination
thereof as determined by the Committee. If payment is made in shares of Stock,
the number of such shares shall be determined by dividing the final value of the
Performance Award by the Fair Market Value of a share of Stock on the settlement
date. Payment may be made in a lump sum or installments as prescribed by the
Committee. If any payment is to be made on a deferred basis, the Committee may,
but shall not be obligated to, provide for the payment during the deferral
period of Dividend Equivalents or a reasonable rate of interest within the
meaning of Section 162(m).

               8.7 RESTRICTIONS APPLICABLE TO PAYMENT IN SHARES. Shares of Stock
issued in payment of any Performance Award may be fully vested and freely
transferable shares or may be shares of Stock subject to Vesting Conditions as
provided in Section 7.4. Any shares subject to Vesting Conditions shall be
evidenced by an appropriate Restricted Stock Bonus Agreement and shall be
subject to the provisions of Sections 7.4 through 7.7 above.

               8.8 EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided
by the Committee in the grant of a Performance Award and set forth in the Award
Agreement, the effect of the Participant's termination of Service shall be as
follows:

                      (a) DEATH OR DISABILITY. If the Participant's Service with
the Participating Company Group terminates because of the death or Disability of
the Participant prior to the completion of the Performance Period applicable to
a Performance Award held by the Participant, the final value of the Performance
Award shall be determined by the extent to which the applicable Performance
Goals are attained with respect to the entire Performance Period but shall be
prorated on the basis of the number of days of the Participant's Service during
the Performance Period. Payment shall be made following the end of the
Performance Period in any manner permitted by Section 8.6.

                      (b) TERMINATION AFTER CHANGE IN CONTROL. The Committee
may, in its discretion, provide in any Performance Award Agreement that if the
Participant's Service with the Participating Company Group ceases as a result of
"Termination After Change in Control" (as defined in such Award Agreement), then
the Performance Award shall become payable, effective as of the date on which
the Participant's Service terminated, in the amount of a final value determined
in accordance with the method specified by the Committee, in its discretion, and
set forth in the Award Agreement. Notwithstanding the foregoing, if it is
determined that the provisions or operation of this Section 8.8(b) would
preclude treatment of a Change in Control as a "pooling-of-interests" for
accounting purposes and provided further that in the absence of the preceding
sentence such Change in Control would be treated as a "pooling-of-interests" for
accounting purposes, then this Section 8.8(b) shall be void ab initio, and the
effect of the Participant's termination of Service shall be determined under any
other applicable provision of the Plan or the Award Agreement evidencing such
Performance Award.



                                       19
<PAGE>   23

                      (c) OTHER TERMINATION OF SERVICE. If the Participant's
Service with the Participating Company Group terminates for any reason, except
death, Disability or Termination After Change in Control, prior to the
completion of the Performance Period applicable to a Performance Award held by
the Participant, the Performance Award shall be forfeited in its entirety.

               8.9 NONTRANSFERABILITY OF PERFORMANCE AWARDS. Performance Shares
and Performance Units may not be sold, exchanged, transferred, pledged,
assigned, or otherwise disposed of other than by will or by the laws of descent
and distribution until the completion of the applicable Performance Period. All
rights with respect to Performance Shares and Performance Units granted to a
Participant hereunder shall be exercisable during his or her lifetime only by
such Participant.

        9.     STANDARD FORMS OF AWARD AGREEMENT.

               9.1 AWARD AGREEMENTS. Each Award shall comply with and be subject
to the terms and conditions set forth in the appropriate form of Award Agreement
approved by the Committee concurrently with its adoption of the Plan and as
amended from time to time. Any Award Agreement may consist of an appropriate
form of Notice of Grant and a form of Agreement incorporated therein by
reference, or such other form or forms as the Committee may approve from time to
time.

               9.2 AUTHORITY TO VARY TERMS. The Committee shall have the
authority from time to time to vary the terms of any standard form of Award
Agreement either in connection with the grant or amendment of an individual
Award or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form or forms of Award Agreement are not inconsistent with the
terms of the Plan.

        10.    CHANGE IN CONTROL.

               10.1   DEFINITIONS.

                      (a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company: (i) the
direct or indirect sale or exchange in a single or series of related
transactions by the stockholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the
Company is a party; (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or (iv) a liquidation or
dissolution of the Company.

                      (b) A "CHANGE IN CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, a
"TRANSACTION") wherein the stockholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial



                                       20
<PAGE>   24

ownership of more than fifty percent (50%) of the total combined voting power of
the outstanding voting stock of the Company or the corporation or corporations
to which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Committee shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

               10.2 EFFECT OF CHANGE IN CONTROL ON OPTIONS. In the event of a
Change in Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "ACQUIRING
CORPORATION"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. In the event that the
Acquiring Corporation elects not to assume or substitute for outstanding Options
in connection with a Change in Control, the exercisability and vesting of each
such outstanding Option and any shares acquired upon the exercise thereof held
by a Participant whose Service has not terminated prior to such date shall be
accelerated, effective as of the date ten (10) days prior to the date of the
Change in Control, to such extent, if any, as shall have been determined by the
Committee, in its discretion, and set forth in the Option Agreement evidencing
such Option. The exercise or vesting of any Option and any shares acquired upon
the exercise thereof that was permissible solely by reason of this Section 10.2
and the provisions of such Option Agreement shall be conditioned upon the
consummation of the Change in Control. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control shall terminate
and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Change in Control and any consideration received pursuant to the Change
in Control with respect to such shares shall continue to be subject to all
applicable provisions of the Option Agreement evidencing such Option except as
otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the outstanding
Options immediately prior to an Ownership Change Event described in Section
8.1(a)(i) constituting a Change in Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall not
terminate unless the Committee otherwise provides in its discretion.

               10.3 EFFECT OF CHANGE IN CONTROL ON RESTRICTED STOCK AWARDS. The
Committee may, in its discretion, provide in any Restricted Stock Award
Agreement that, in the event of a Change in Control, the lapsing of the Vesting
Conditions applicable to the shares subject to the Restricted Stock Award held
by a Participant whose Service has not terminated prior to such date shall be
accelerated effective as of the date of the Change in Control to such



                                       21
<PAGE>   25

extent as specified in such Award Agreement. Any acceleration of the lapsing of
Vesting Conditions that was permissible solely by reason of this Section 10.3
and the provisions of such Award Agreement shall be conditioned upon the
consummation of the Change in Control. Notwithstanding the foregoing, if it is
determined that the provisions or operation of this Section 10.3 would preclude
treatment of a Change in Control as a "pooling-of-interests" for accounting
purposes and provided further that in the absence of the preceding sentences
such Change in Control would be treated as a "pooling-of-interests" for
accounting purposes, then this Section 10.3 shall be void ab initio.

               10.4 EFFECT OF CHANGE IN CONTROL ON PERFORMANCE AWARDS. The
Committee may, in its discretion, provide in any Performance Award Agreement
that, in the event of a Change in Control, the Performance Award held by a
Participant whose Service has not terminated prior to such date (unless the
Participant's Service terminated by reason of the Participant's death or
Disability) shall become payable effective as of the date of the Change in
Control. For this purpose, the final value of the Performance Award shall be
determined by the greater of (a) the extent to which the applicable Performance
Goals have been attained during the Performance Period prior to the date of the
Change in Control or (b) the pre-established 100% level with respect to each
Performance Target comprising the applicable Performance Goals. Notwithstanding
the foregoing, if it is determined that the provisions or operation of this
Section 10.4 would preclude treatment of a Change in Control as a
"pooling-of-interests" for accounting purposes and provided further that in the
absence of the preceding sentences such Change in Control would be treated as a
"pooling-of-interests" for accounting purposes, then this Section 10.4 shall be
void ab initio.

        11.    COMPLIANCE WITH SECURITIES LAW.

               The grant of Awards and the issuance of shares of Stock pursuant
to any Award shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities and the
requirements of any stock exchange or market system upon which the Stock may
then be listed. In addition, no Award may be exercised or shares issued pursuant
to an Award unless (a) a registration statement under the Securities Act shall
at the time of such exercise or issuance be in effect with respect to the shares
issuable pursuant to the Award or (b) in the opinion of legal counsel to the
Company, the shares issuable pursuant to the Award may be issued in accordance
with the terms of an applicable exemption from the registration requirements of
the Securities Act. The inability of the Company to obtain from any regulatory
body having jurisdiction the authority, if any, deemed by the Company's legal
counsel to be necessary to the lawful issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been
obtained. As a condition to issuance of any Stock, the Company may require the
Participant to satisfy any qualifications that may be necessary or appropriate,
to evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.



                                       22
<PAGE>   26

        12.    TAX WITHHOLDING.

               12.1 TAX WITHHOLDING IN GENERAL. The Company shall have the right
to require the Participant, through payroll withholding, cash payment or
otherwise, including by means of a Cashless Exercise of an Option, to make
adequate provision for the federal, state, local and foreign taxes, if any,
required by law to be withheld by the Participating Company Group with respect
to an Award or the shares acquired pursuant thereto. The Company shall have no
obligation to deliver shares of Stock, to release shares of Stock from an escrow
established pursuant to an Award Agreement, or to make any payment in cash under
the Plan until the Participating Company Group's tax withholding obligations
have been satisfied by the Participant.

               12.2 WITHHOLDING IN SHARES. The Company shall have the right, but
not the obligation, to deduct from the shares of Stock issuable to a Participant
upon the exercise or settlement of an Award, or to accept from the Participant
the tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

        13.    TERMINATION OR AMENDMENT OF PLAN.

               The Committee may terminate or amend the Plan at any time.
However, subject to changes in applicable law, regulations or rules that would
permit otherwise, without the approval of the Company's stockholders, there
shall be (a) no increase in the maximum aggregate number of shares of Stock that
may be issued under the Plan (except by operation of the provisions of Section
4.2), (b) no change in the class of persons eligible to receive Incentive Stock
Options, and (c) no other amendment of the Plan that would require approval of
the Company's stockholders under any applicable law, regulation or rule. No
termination or amendment of the Plan shall affect any then outstanding Award
unless expressly provided by the Committee. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Award without
the consent of the Participant, unless such termination or amendment is required
to enable an Option designated as an Incentive Stock Option to qualify as an
Incentive Stock Option or is necessary to comply with any applicable law,
regulation or rule.

        14.    MISCELLANEOUS PROVISIONS.

               14.1 PROVISION OF INFORMATION. Each Participant shall be given
access to information concerning the Company equivalent to that information
generally made available to the Company's common stockholders.(7)



----------

(7) Until immediately prior to the effective time of the Company's registration
of Stock under Section 12 of the Exchange Act, Section 14.1 will read as
follows:

        At least annually, copies of the Company's balance sheet and income
        statement for the just completed fiscal year shall be made available to
        each Participant and purchaser of



                                       23
<PAGE>   27

               14.2 RIGHTS AS EMPLOYEE, CONSULTANT OR DIRECTOR. No person, even
though eligible pursuant to Section 5, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee, Consultant or Director, or interfere
with or limit in any way the right of a Participating Company to terminate the
Participant's Service at any time.

               14.3 RIGHTS AS A STOCKHOLDER. A Participant shall have no rights
as a stockholder with respect to any shares covered by an Award until the date
of the issuance of a certificate for such shares (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company). No adjustment shall be made for dividends, distributions
or other rights for which the record date is prior to the date such certificate
is issued, except as provided in Section 4.2 or another provision of the Plan.

               14.4 BENEFICIARY DESIGNATION. Each Participant may file with the
Company a written designation of a beneficiary who is to receive any benefit
under the Plan to which the Participant is entitled in the event of such
Participant's death before he or she receives any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Company during the Participant's lifetime.
If a married Participant designates a beneficiary other than the Participant's
spouse, the effectiveness of such designation shall be subject to the consent of
the Participant's spouse. If a Participant dies without an effective designation
of a beneficiary who is living at the time of the Participant's death, the
Company will pay any remaining unpaid benefits to the Participant's legal
representative.

               14.5 UNFUNDED OBLIGATION. Any amounts payable to Participants
pursuant to the Plan shall be unfunded obligations for all purposes, including,
without limitation, Title I of the Employee Retirement Income Security Act of
1974. No Participating Company shall be required to segregate any monies from
its general funds, or to create any trusts, or establish any special accounts
with respect to such obligations. The Company shall retain at all times
beneficial ownership of any investments, including trust investments, which the
Company may make to fulfill its payment obligations hereunder. Any investments
or the creation or maintenance of any trust or any Participant account shall not
create or constitute a trust or fiduciary relationship between the Committee or
any Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant's creditors in any
assets of any Participating Company. The Participants shall have no claim
against any Participating Company for any changes in the value of any assets
which may be invested or reinvested by the Company with respect to the Plan.



----------

        shares of Stock upon the exercise of an Option. The Company shall not be
        required to provide such information to key employees whose duties in
        connection with the Company assure them access to equivalent
        information.



                                       24
<PAGE>   28

        15.    CONTINUATION OF INITIAL PLAN AS TO OUTSTANDING OPTIONS.(8)

               Any other provision of the Plan to the contrary notwithstanding,
the terms of the Initial Plan (other than the maximum aggregate number of shares
of Stock issuable thereunder) shall remain in effect and apply to all Options
granted pursuant to the Initial Plan.

        IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Telocity, Inc. 2000 Equity Incentive Plan as
duly adopted by the Board on January 4, 2000.


                                             /s/  SCOTT MARTIN
                                             -----------------------------------
                                             Secretary


----------

(8) Until immediately prior to the effective time of the Company's registration
of Stock under Section 12 of the Exchange Act, the Plan shall include a Section
16 reading as follows:

        The Plan or any increase in the maximum aggregate number of shares of
        Stock issuable thereunder as provided in Section 4.1 (the "AUTHORIZED
        SHARES") shall be approved by the stockholders of the Company within
        twelve (12) months of the date of adoption thereof by the Board. Options
        granted prior to stockholder approval of the Plan or in excess of the
        Authorized Shares previously approved by the stockholders shall become
        exercisable no earlier than the date of stockholder approval of the Plan
        or such increase in the Authorized Shares, as the case may be.



                                       25