<PAGE>

                                                                    EXHIBIT 10.4

                                LINUXCARE, INC.

                             AMENDED AND RESTATED

                                1999 STOCK PLAN

  1.   Purposes of the Plan.  The purposes of this amended and restated 1999
       --------------------
Stock Plan are:

          .  to attract and retain the best available personnel for positions of
             substantial responsibility,

          .  to provide additional incentive to Employees, Directors and
             Consultants, and

          .  to promote the success of the Company's business.

          Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.  Stock Purchase Rights may also be granted under the Plan.

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

          (a)  "Administrator" means the Board or any of its Committees as
                -------------
shall be administering the Plan, in accordance with Section 4 of the Plan.

          (b)  "Applicable Laws" means the requirements relating to the
                ---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.

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

          (d)  "Change in Control" means:
                -----------------

                (i)   The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization own immediately after such merger,
consolidation or other reorganization 50% or more of the voting power of the
outstanding securities of each of (A) the continuing or surviving entity and (B)
any direct or indirect parent corporation of such continuing or surviving
entity; or

               (ii)   The sale, transfer or other disposition of all or
substantially all of the Company's assets.
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     A transaction shall not constitute a Change of Control if its sole purpose
is to change the state of the Company's incorporation or to create a holding
company that will be owned in substantially the same proportions by the persons
who held the Company's securities immediately before such transaction.

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

     (f) "Committee" means a committee of Directors appointed by the Board in
          ---------
accordance with Section 4 of the Plan.

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

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

     (i) "Consultant" means any person, including an advisor, engaged by the
          ----------
Company or a Parent or Subsidiary to render services to such entity.

     (j) "Director" means a member of the Board.
          --------

     (k) "Disability" means total and permanent disability as defined in Section
          ----------
22(e)(3) of the Code.

     (l) "Employee" means any person, including Officers and Directors, employed
          --------
by the Company or any Parent or Subsidiary of the Company.  A Service Provider
shall not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor.  For purposes
of Incentive Stock Options, no such leave may exceed ninety days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company is
not so guaranteed, on the day three (3) months and one (1) day following the
90/th/ day of such leave, any Incentive Stock Option held by the Optionee shall
cease to be treated as an Incentive Stock Option and shall be treated for tax
purposes as a Nonstatutory Stock Option.  Neither service as a Director nor
payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.

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

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

            (i)  If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system on the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;

                                      -2-
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          (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or

          (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.

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

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

     (q)  "Notice of Grant" means a written or electronic notice evidencing
           ---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant.  The Notice of Grant is part of the Option Agreement.

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

     (s)  "Option" means a stock option granted pursuant to the Plan.
           ------

     (t)  "Option Agreement" means an agreement between the Company and an
           ----------------
Optionee evidencing the terms and conditions of an individual Option grant.  The
Option Agreement is subject to the terms and conditions of the Plan.

     (u)  "Option Exchange Program" means a program whereby outstanding Options
           -----------------------
are surrendered in exchange for Options with a lower exercise price.

     (v)  "Optioned Stock" means the Common Stock subject to an Option or Stock
           --------------
Purchase Right.

     (w)  "Optionee" means the holder of an outstanding Option or Stock Purchase
           --------
Right granted under the Plan.

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

     (y)  "Plan" means this amended and restated 1999 Stock Plan.
           ----

     (z)  "Restricted Stock" means shares of Common Stock acquired pursuant to a
           ----------------
grant of Stock Purchase Rights under Section 11 of the Plan.

                                      -3-
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     (aa) "Restricted Stock Purchase Agreement" means a written agreement
           -----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right.  The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.

     (bb) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
           ----------
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.

     (cc) "Section 16(b) " means Section 16(b) of the Exchange Act.
           -------------

     (dd) "Service Provider" means an Employee, Director or Consultant.
           ----------------

     (ee) "Share" means a share of the Common Stock, as adjusted in accordance
           -----
with Section 13 of the Plan.

     (ff) "Stock Purchase Right" means the right to purchase Common Stock
           --------------------
pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.

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

  3. Stock Subject to the Plan.  Subject to the provisions of Section 13 of
     -------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 9,302,738 Shares (as adjusted for stock splits, stock
dividends, recapitalizations and the like occurring after the adoption of the
Plan ("Recapitalizations")) plus an annual increase to be added on the first day
of the Company's fiscal year beginning in 2001, equal to the lesser of (i)
4,000,000 shares (as adjusted for Recapitalizations), (ii) 5% of the outstanding
shares on such date or (iii) a lesser amount determined by the Board.  The
Shares may be authorized, but unissued, or reacquired Common Stock.

          If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
             --------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.

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

          (a)  Procedure.
               ---------

                  (i)  Multiple Administrative Bodies.  Different Committees
                       ------------------------------
with respect to different groups of Service Providers may administer the Plan.

                  (ii) Section 162(m).  To the extent that the Administrator
                       --------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the

                                      -4-
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meaning of Section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more "outside directors" within the meaning of Section
162(m) of the Code.

          (iii) Rule 16b-3.  To the extent desirable to qualify transactions
                ----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.

          (iv)  Other Administration.  Other than as provided above, the Plan
                --------------------
shall be administered by (A) the Board or (B) a Committee, which committee shall
be constituted to satisfy Applicable Laws.

     (b)  Powers of the Administrator.  Subject to the provisions of the Plan,
          ---------------------------
and in the case of a Committee, subject to the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

          (i)    to determine the Fair Market Value;

          (ii)   to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;

          (iii)  to determine the number of shares of Common Stock to be
covered by each Option and Stock Purchase Right granted hereunder;

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

          (v)    to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option or Stock Purchase Right granted hereunder.
Such terms and conditions include, but are not limited to, the exercise price,
the time or times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option
or Stock Purchase Right or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole discretion, shall
determine;

          (vi)   to reduce the exercise price of any Option or Stock Purchase
Right to the then current Fair Market Value if the Fair Market Value of the
Common Stock covered by such Option or Stock Purchase Right shall have declined
since the date the Option or Stock Purchase Right was granted;

          (vii)  to institute an Option Exchange Program;

          (viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;

          (ix)   to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of satisfying applicable foreign laws;

                                      -5-
<PAGE>

               (x)    to modify or amend each Option or Stock Purchase Right
(subject to Section 15(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;

               (xi)   to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the minimum amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;

               (xii)  to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;

               (xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.

            (c)  Effect of Administrator's Decision.  The Administrator's
                 ----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.

     5.   Eligibility.  Nonstatutory Stock Options and Stock Purchase Rights
          -----------
may be granted to Service Providers. Incentive Stock Options may be granted only
to Employees.

     6.   Limitations.
          -----------

            (a)  Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.

            (b)  Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.

            (c)  The following limitations shall apply to grants of Options:

                    (i)  No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 3,000,000 Shares (as adjusted
for Recapitalizations).

                                      -6-
<PAGE>

          (ii)  In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 3,000,000 Shares
(as adjusted for Recapitalizations), which shall not count against the limit set
forth in subsection (i) above.

          (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.

          (iv)  If an Option is cancelled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction described
in Section 13), the cancelled Option will be counted against the limits set
forth in subsections (i) and (ii) above.  For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a cancellation
of the Option and the grant of a new Option.

     7. Term of Plan.  Subject to Section 19 of the Plan, the Plan shall become
        ------------
effective upon its adoption by the Board.  It shall continue in effect for a
term of ten (10) years unless terminated earlier under Section 15 of the Plan.

     8. Term of Option.  The term of each Option shall be stated in the Option
        --------------
Agreement.  In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.  Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.

     9. Option Exercise Price and Consideration.
        ---------------------------------------

          (a)   Exercise Price.  The per share exercise price for the Shares
                --------------
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

                  (i)  In the case of an Incentive Stock Option

                       (A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.

                       (B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.

                  (ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator.  In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

                                      -7-
<PAGE>

               (iii)  Notwithstanding the foregoing, Options may be granted
with a per Share exercise price of less than 100% of the Fair Market Value per
Share on the date of grant pursuant to a merger or other corporate transaction.

          (b)  Waiting Period and Exercise Dates.  At the time an Option is
               ---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.

          (c)  Form of Consideration.  The Administrator shall determine the
               ---------------------
acceptable form of consideration for exercising an Option, including the method
of payment.  In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant.  Such
consideration may consist entirely of:

               (i)    cash;

               (ii)   check;

               (iii)  promissory note;

               (iv)   other Shares, which in the case of Shares acquired from
the Company, (A) have been owned by the Optionee for more than six months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised;

               (v)    consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;

               (vi)   a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;

               (vii)  any combination of the foregoing methods of payment; or

               (viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.

     10.  Exercise of Option.
          ------------------

               (a)  Procedure for Exercise; Rights as a Shareholder.  Any
                    -----------------------------------------------
Option granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the Administrator
and set forth in the Option Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.

                      An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is

                                      -8-
<PAGE>

exercised. Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement and the
Plan. Shares issued upon exercise of an Option shall be issued in the name of
the Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
Shares promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 13 of the Plan.

          Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is exercised.

     (b)  Termination of Relationship as a Service Provider.  If an Optionee
          -------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement).  In the absence
of a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination.  If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

     (c)  Disability of Optionee.  If an Optionee ceases to be a Service
          ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for six (6) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

     (d)  Death of Optionee.  If an Optionee dies while a Service Provider, the
          -----------------
Option may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or inheritance, but
only to the extent that the Option is vested on the date of death.  In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Optionee's termination.  If, at
the time of death, the Optionee is not vested as to his or her entire Option,
the Shares covered by the unvested portion of the Option shall immediately
revert to the

                                      -9-
<PAGE>

Plan. The Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise the Option
under the Optionee's will or the laws of descent or distribution. If the Option
is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

     11.  Stock Purchase Rights.
          ---------------------

               (a)  Rights to Purchase.  Stock Purchase Rights may be issued
                    ------------------
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.

               (b)  Repurchase Option.  Unless the Administrator determines
                    -----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.

               (c)  Other Provisions.  The Restricted Stock Purchase Agreement
                    ----------------
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion.

               (d)  Rights as a Shareholder.  Once the Stock Purchase Right is
                    -----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.

     12.  Non-Transferability of Options and Stock Purchase Rights.  Unless
          --------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.  If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.

     13.  Adjustments Upon Changes in Capitalization, Dissolution, Merger or
          ------------------------------------------------------------------
Change of Control.
-----------------

               (a)  Changes in Capitalization.  Subject to any required action
                    -------------------------
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for

                                      -10-
<PAGE>

issuance under the Plan, but as to which no Options or Stock Purchase Rights
have yet been granted or which have been returned to the Plan upon cancellation
or expiration of an Option or Stock Purchase Right, the number of shares that
may be added to the Plan annually pursuant to Section 3(i), as well as the price
per share of Common Stock covered by each such outstanding Option or Stock
Purchase Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, stock split, declaration of an
extraordinary dividend payable if the form other than Shares in an amount that
has a material effect on the Fair Market Value of the Common Stock, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.

     (b)  Dissolution or Liquidation.  In the event of the proposed dissolution
          --------------------------
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable.  In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated.  To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

     (c)  Merger or Change of Control.  In the event of a merger of the Company
          ---------------------------
with or into another corporation or a Change of Control, each outstanding Option
and Stock Purchase Right shall be assumed or an equivalent option or right
substituted by the successor corporation, or a Parent or Subsidiary of the
successor corporation, and any Company repurchase option with respect to
Restricted Stock shall be assigned to such successor corporation, or a Parent or
Subsidiary of the successor corporation.  In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable.  Any repurchase
option the Company has with respect to Restricted Stock which is not assigned to
such successor corporation shall lapse.  If an Option or Stock Purchase Right
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or Change of Control,

                                      -11-
<PAGE>

the Administrator shall notify the Optionee in writing or electronically that
the Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or Change of Control, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
Change of Control, the consideration (whether stock, cash, or other securities
or property) received in the merger or Change of Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
if such consideration received in the merger or Change of Control is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option or Stock Purchase Right, for each
Share of Optioned Stock subject to the Option or Stock Purchase Right, to be
solely common stock of the successor corporation or its Parent equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or Change of Control.

     14.  Date of Grant.  The date of grant of an Option or Stock Purchase Right
          -------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator.  Notice of the determination shall
be provided to each Optionee within a reasonable time after the date of such
grant.

     15.  Amendment and Termination of the Plan.
          -------------------------------------

              (a)   Amendment and Termination. The Board may at any time amend,
                    -------------------------
alter, suspend or terminate the Plan.

              (b)   Shareholder Approval.  The Company shall obtain shareholder
                    --------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.

              (c)   Effect of Amendment or Termination.  No amendment,
                    ----------------------------------
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.

     16.  Conditions Upon Issuance of Shares.
          ----------------------------------

              (a)   Legal Compliance.  Shares shall not be issued pursuant to
                    ----------------
the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
shall comply with Applicable Laws and shall be further subject to the approval
of counsel for the Company with respect to such compliance.

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

                                      -12-
<PAGE>

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

     18.  Reservation of Shares.  The Company, during the term of this Plan,
          ---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     19.  Shareholder Approval.  The Plan shall be subject to approval by the
          --------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted.  Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.

                                      -13-