Exhibit
10.1








INTERNAP
NETWORK SERVICES CORPORATION


1998
STOCK OPTION/STOCK ISSUANCE PLAN





AMENDED
AND RESTATED SEPTEMBER 20, 2000








ARTICLE
I





GENERAL
PROVISIONS





SECTION
1.PURPOSE





This 1998
Stock Option/Stock Issuance Plan is intended to promote the interests of
InterNAP Network Services Corp. (the "Corporation")
by providing eligible individuals who are responsible for the management, growth
and financial success of the Corporation or who otherwise render valuable
services to the Corporation with the opportunity to acquire a proprietary
interest, or increase their proprietary interest, in the Corporation and thereby
encourage them to remain in the service of the Corporation.





Capitalized
terms used herein shall have the meanings ascribed to such terms in Section 6 of
this Article I.





SECTION
2.STRUCTURE
OF THE PLAN





The Plan
shall be divided into two separate components: the Option Grant Program
specified in Article II and the Stock Issuance Program specified in Article III.
The provisions of Articles I, IV and V of the Plan shall apply to both the
Option Grant Program and the Stock Issuance Program and shall accordingly govern
the interests of all individuals in the Plan.





SECTION
3.ADMINISTRATION OF THE
PLAN





(a) The Plan
shall be administered by the Board. The Board at any time may appoint a
Committee and delegate to such Committee some or all of the administrative
powers allocated to the Board pursuant to the provisions of the Plan. Members of
the Committee shall serve for such period of time as the Board may determine and
shall be subject to removal by the Board at any time. The Board at any time may
terminate the functions of the Committee and reassume all powers and authority
previously delegated to the Committee.





(b) The Plan
Administrator (either the Board or the Committee, to the extent the Committee is
at the time responsible for the administration of the Plan) shall have full
power and authority (subject to the provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper plan
administration and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or share
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or share issuance.











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





SECTION
4.OPTION
GRANTS AND SHARE ISSUANCES





(a) The persons
eligible to receive option grants pursuant to the Option Grant Program (each an
"Optionee") and/or share issuances under the Stock Issuance Program (each a
"Participant") are limited to the following:





(1) key employees
(including officers and directors) of the Corporation (or its Parent or
Subsidiary corporations, if any) who render services that contribute to the
success and growth of the Corporation (or its Parent or Subsidiary
corporations), or that reasonably may be anticipated to contribute to the future
success and growth of the Corporation (or its Parent or Subsidiary
corporations);





(2) the
non-employee members of the Board or the non-employee members of the board of
directors of any Parent or Subsidiary corporations; and





(3) those
consultants or independent contractors who provide valuable services to the
Corporation (or its Parent or Subsidiary corporations, if any).





(b) The Plan
Administrator shall have full authority to determine: (i) with respect to the
option grants made under the Plan, which eligible individuals are to receive
option grants, the number of shares to be covered by each such grant, the status
of the granted option as either an Incentive Option or a Non-Statutory Option,
the time or times at which each granted option is to become exercisable and the
maximum term for which the option may remain outstanding, and (ii) with respect
to share issuances under the Stock Issuance Program, the number of shares to be
issued to each Participant, the vesting schedule (if any) to be applicable to
the issued shares, and the consideration to be paid by the individual for such
shares.





(c) The Plan
Administrator shall have the absolute discretion either to grant options in
accordance with Article II of the Plan or to effect share issuances in
accordance with Article III of the Plan.





SECTION
5.STOCK
SUBJECT TO THE PLAN





(a) The stock
issuable under the Plan shall be shares of the Corporation's
authorized but unissued or reacquired Common Stock (the "Common Stock"). The
maximum number of shares that may be issued over the term of the Plan shall not
exceed four million thirty-five thousand (4,035,000) shares of Common Stock. The
total number of shares issuable under the Plan shall be subject to adjustment
from time to time in accordance with the provisions of Section
5(c).




2




(b) Shares
subject to (i) the portion of one or more outstanding options that are not
exercised or surrendered prior to expiration or termination and (ii) outstanding
options canceled in accordance with the cancellation-regrant provisions of
Section 5 of Article II will be available for subsequent option grants or stock
issuances under the Plan. Shares issued under either the Option Grant Program or
the Stock Issuance Program (whether as vested or unvested shares) that are
repurchased by the Corporation shall not be available for subsequent option
grants or stock issuances under the Plan.





(c) If any change
is made in the Common Stock subject to the Plan, or subject to any Stock Award,
without the receipt of consideration by the Corporation (through merger,
consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Corporation), the Plan will be appropriately adjusted in the class(es) and
maximum number of securities subject to the Plan pursuant to Article I, Section
5(a) and the maximum number of securities subject to award to any person
pursuant to subsection 5(e), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of Common Stock subject to such outstanding Stock Awards. The Board shall
make such adjustments, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Corporation
shall not be treated as a transaction "without receipt of consideration" by the
Corporation.)





(d) Common Stock
issuable under the Plan, whether under the Option Grant Program or the Stock
Issuance Program, may be subject to such restrictions on transfer, repurchase
rights or other restrictions as may be determined by the Plan
Administrator.





(e) Subject to
the provisions of Article I, Section 5(c) relating to adjustments upon changes
in the shares of Common Stock, no Employee shall be eligible to be granted
options covering more than two million (2,000,000) shares of Common Stock during
any calendar year.





SECTION
6.DEFINITIONS





The
following definitions shall apply to the respective capitalized
terms used herein:





BOARD
means the Board of Directors of InterNAP Network Services Corp.




3




CAUSE
shall have such meaning as is defined in the Participant's employment or
consulting agreement with a Paticipating Company. If the Participant does not
have an employment or consulting agreement with a Paticipating Company, or if
such agreement does not define the term "Cause," then the term "Cause" shall
mean: (i) misconduct or dishonesty that materially adversely affects a
Paticipating Company, including without limitation (A) an act materially
in conflict with the financial interests of a Paticipating Company,
(B) an act that could damage the reputation or customer relations of a
Paticipating Company, (C) an act that could subject a Paticipating Company to
liability, (D) an act constituting sexual harassment or other violation of the
civil rights of coworkers, (E) failure to obey any lawful instruction of the
Board or any officer of a Paticipating Company and (F) failure to comply with,
or perform any duty required under, the terms of any confidentiality, inventions
or non-competition agreement the Participant may have with a Paticipating
Company, or (ii) acts constituting the unauthorized disclosure of any of the
trade secrets or confidential information of a Paticipating Company, unfair
competition with a Paticipating Company or the inducement of any customer of a
Paticipating Company to breach any contract with a Paticipating Company. The
right to exercise any Option shall be suspended automatically during the
pendency of any investigation by the Board or its designee, and/or any
negotiations by the Board or its designee and the Participant, regarding any
actual or alleged act or omission by the Participant of the type described in
this section.





CHANGE IN
CONTROL means the transaction described in Article V, Section (b), which is
referred to as a Change in Control or Corporate transaction.





CODE
means the Internal Revenue Code of 1986, as amended.





COMMITTEE
means either the Compensation Committee of the Board or another committee
comprised of two or more members thereof and appointed pursuant to the Plan to
function as the Plan Administrator.





CORPORATION
means InterNAP Network Services Corp., a Washington corporation.





CORPORATE
TRANSACTION means the transaction described in Article V, Section (b), which is
referred to as a Change in Control or Corporate Transaction.





COVERED
EMPLOYEE means the chief executive officer and the four (4) other highest
compensated officers of the Corporation for whom total compensation is required
to be reported to shareholders under the Exchange Act, as determined for
purposes of Section 162(m) of the Code.





EMPLOYEE
means an individual who is in the employ of the Corporation or one or more
Parent or Subsidiary corporations. An optionee shall be considered to be an
Employee for so long as such individual remains in the employ of the Corporation
or one or more Parent or Subsidiary corporations, subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.





EXCHANGE
ACT means the Securities Exchange Act of 1934, as amended.





EXERCISE
DATE shall be the date on which written notice of the exercise of an outstanding
option under the Plan is delivered to the Corporation. Such exercise shall be
effected pursuant to a stock purchase agreement incorporating any repurchase
rights or first refusal rights retained by the Corporation with respect to the
Common Stock purchased under the option.





4




FAIR
MARKET VALUE of a share of Common Stock on any relevant date shall be determined
in accordance with the following provisions:





(a) If the Common
Stock is at the time listed or admitted to trading on any stock exchange, then
the Fair Market Value shall be the closing selling price per share of Common
Stock on the date in question on the stock exchange determined by the Plan
Administrator to be the primary market for the Common Stock. If there is no
reported sale of Common Stock on such exchange on the date in question, then the
Fair Market Value shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.





(b) If the Common
Stock is not at the time listed or admitted to trading on any stock exchange but
is traded in the over-the-counter market, the Fair Market Value shall be the
mean between the highest bid and the lowest asked prices (or if such information
is available the closing selling price) per share of Common Stock on the date in
question in the over-the-counter market, as such prices are reported by the
National Association of Securities Dealers through its NASDAQ National Market
System or any successor system. If there are no reported bid and asked prices
(or closing selling price) for the Common Stock on the date in question, then
the mean between the highest bid and lowest asked prices (or closing selling
price) on the last preceding date for which such quotations exist shall be
determinative of Fair Market Value.





(c) If the Common
Stock is at the time neither listed nor admitted to trading on any stock
exchange nor traded in the over-the-counter market, or if the Plan Administrator
determines that the valuation provisions of subsections (a) and (b) above will
not result in a true and accurate valuation of the Common Stock, then the Fair
Market Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate under the
circumstances.





INCENTIVE  OPTION
means an incentive stock option that satisfies the  requirements of
Section 422 of the Code.





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





NON-STATUTORY
OPTION means an option not intended to meet the statutory requirements
prescribed for an Incentive Option.




OFFICER
means a person who is an officer of the Corporation within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.




5





OUTSIDE
DIRECTOR means a Director who either (i) is not a current employee of the
Corporation or an "affiliated corporation" (within the meaning of Treasury
Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Corporation or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Corporation or an "affiliated
corporation" at any time and is not currently receiving direct or indirect
remuneration from the Corporation or an "affiliated corporation" for services in
any capacity other than as a Director or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.





PARENT
corporation means any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation,
provided each such corporation in the unbroken chain (other than the
Corporation) owns, at the time of the determination, stock possessing fifty
percent (50%) or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.





PARTICIPATING
COMPANY means the Corporation, a Parent, or a Subsidiary.





PERMANENT
DISABILITY means the inability of an individual to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment which can be expect to result in death or which has lasted or can be
expected to last for a continuous period of not less than 12
months.





PLAN
means this 1998 Stock Option/Stock Issuance Plan.





PLAN
ADMINISTRATOR means the Board or the Committee, to the extent the Committee is
responsible for plan administration in accordance with Article I, Section
3.





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





SECURITIES
ACT means the Securities Act of 1933, as amended.





SERVICE
means the performance of services for the Corporation or one or more Parent or
Subsidiary corporations by an individual in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant or
advisor, unless a different meaning is specified in the option agreement
evidencing the option grant, the purchase agreement evidencing the purchased
option shares or the issuance agreement evidencing any direct stock issuance. An
optionee shall be deemed to remain in Service for so long as such individual
renders services to the Corporation or any Parent or Subsidiary corporation on a
periodic basis in the capacity of an Employee, a non-employee member of the
board of directors or an independent consultant or advisor.




STOCK
AWARD means any right granted under the Plan including an Incentive Stock
Option, Non-Statutory Option or stock issuance.




STOCK
AWARD AGREEMENT means any written agreement between the Corporation and the
holder of a Stock Award evidencing the terms and conditions of the Stock Award.
Each Stock Award Agreement shall be subject to the terms and conditions of the
Plan.


6


SUBSIDIARY
corporation means each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.





TEN
PERCENT SHAREHOLDER means the owner of stock (as determined under Section 424(d)
of the Code) possessing ten percent (10%) or more of the total combined voting
power of all classes of stock of the Corporation or any Parent or Subsidiary
corporation.





ARTICLE
II





OPTION
GRANT PROGRAM





SECTION
1.TERMS AND
CONDITIONS OF OPTIONS





Options
granted pursuant to the Plan shall be authorized by action of the Plan
Administrator and, at the discretion of the Plan Administrator, may be either
Incentive Options or Non-Statutory Options. Each granted option shall be
evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, that each such instrument shall comply with and
incorporate the terms and conditions specified below. In addition, each
instrument evidencing an Incentive Option shall be subject to the applicable
provisions of Section 2 of this Article II.





(a) OPTION
PRICE.





(1) The option
price per share shall be fixed by the Plan Administrator.





(2) The option
price shall become immediately due upon exercise of the option, and subject to
the provisions of Article IV, Section 2, shall be payable in cash or check drawn
to the Corporation's order. Should the Corporation's outstanding Common Stock be
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "1934 Act") at the time the option is exercised, then the option
price may also be paid as follows:





(A) in shares of
Common Stock held by the optionee for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date; or





(B) through a
special sale and remittance procedure pursuant to which the Optionee is to (i)
provide irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds, an amount sufficient to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation by reason
of such purchase and (ii) concurrently provide written directives to the
Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to effect the sale
transaction.





(b) TERM AND
EXERCISE OF OPTIONS. Each option granted under the Plan shall be exercisable at
such time or times, during such period, and for such number of shares as shall
be determined by the Plan Administrator and set forth in the notice of grant and
stock option agreement evidencing such option. No option granted under the Plan,
however, shall have a term in excess of ten (10) years from the grant date.
During the lifetime of the Optionee, the option shall be exercisable only by the
Optionee and shall not be assignable or transferable by the Optionee otherwise
than by will or by the laws of descent and distribution following the Optionee's
death.





(c) TERMINATION
OF SERVICE.





(1) Should the
Optionee cease to remain in Service for any reason (including death or Permanent
Disability) while holding one or more outstanding options under the Plan, then
except to the extent otherwise provided pursuant to Section 6 of this Article
II, each such option shall remain exercisable for the limited period of time
(not to exceed twelve (12) months after the date of such cessation of Service)
specified by the Plan Administrator in the option agreement. In no event,
however, shall any such option be exercisable after the specified expiration
date of the option term.  During such limited period of
exercisability, the option may not be exercised for more than that number of
shares (if any) for which such option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of such period or (if
earlier) upon the expiration of the option term, the option shall terminate and
cease to be exercisable.





(2) Any option
granted to an Optionee under the Plan and exercisable in whole or in part on the
date of the Optionee's death may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution. The maximum number of shares for which such
option may be exercised shall be limited to the number of shares (if any) for
which the option is exercisable on the date of the Optionee's cessation of
Service. Any such exercise of the option must be effected prior to the EARLIER
of the first anniversary of the date of the Optionee's death or the specified
expiration date of the option term. Upon the occurrence of either such event,
the option shall terminate and cease to be exercisable.





(3) Notwithstanding
subsections (1) and (2) above, the Plan Administrator shall have discretion,
exercisable either at the time the option is granted or at the time the Optionee
ceases Service, to allow one or more outstanding options held by the Optionee to
be exercised, during the limited period of exercisability following the
Optionee's cessation of Service, not only with respect to the number of shares
for which the option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more subsequent installments of
purchasable shares for which the option otherwise would have become exercisable
had such cessation of Service not occurred.





7





(4) Notwithstanding any
provision of this Article II or any other provision of this Plan to the
contrary, any options granted under this Plan shall terminate as of the date the
Optionee ceases to be in the Service of the Corporation if the Optionee was
terminated for "cause" or could have been terminated for "cause." If the
Optionee has an employment or consulting agreement with the Corporation, the
term "cause" shall have the meaning given that term in such employment or
consulting agreement. If the Optionee does not have an employment or consulting
agreement with the Corporation, or if such agreement does not define the term
"cause," the term "cause" shall mean: (A) misconduct or dishonesty that
materially adversely affects the Corporation, including without limitation (i)
an act materially in conflict with the financial interests of the Corporation,
(ii) an act that could damage the reputation or customer relations of the
Corporation, (iii) an act that could subject the Corporation to liability, (iv)
an act constituting sexual harassment or other violation of the civil rights of
coworkers, (v) failure to obey any lawful instruction of the Board or any
officer of the Corporation and (vi) failure to comply with, or perform any duty
required under, the terms of any confidentiality, inventions or non-competition
agreement the Optionee may have with the Corporation, or (B) acts constituting
the unauthorized disclosure of any of the trade secrets or confidential
information of the Corporation, unfair competition with the Corporation or the
inducement of any customer of the Corporation to breach any contract with the
Corporation. The right to exercise any option shall be suspended automatically
during the pendency of any investigation by the Board or its designee, and/or
any negotiations by the Board or its designee and the Optionee, regarding any
actual or alleged act or omission by the Optionee of the type described in this
section.





(d) SHAREHOLDER
RIGHTS. An Optionee shall have none of the rights of a shareholder with respect
to any shares covered by the option until such Optionee shall have exercised the
option and paid the option price.





(e) REPURCHASE
RIGHTS. The shares of Common Stock issued under the Plan shall be subject to
certain repurchase rights of the Corporation in accordance with the following
provisions:





(1) (A)The Plan
Administrator shall have the discretion to authorize the issuance of unvested
shares of Common Stock under the Plan.  Should the optionee cease
Service or should the Corporation consummate a Corporate Transaction while the
optionee is holding such unvested shares, the Corporation shall have the right
to repurchase, at the option price paid per share, all or (at the discretion of
the Corporation and with the consent of the Optionee) any portion of those such
shares. The terms and conditions upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in an instrument evidencing such right.





(B) The  repurchase  right  shall
be  assignable  to any person  or entity selected
by the Corporation, including one or more of the Corporation's shareholders. If
the selected assignee is other than a Parent or Subsidiary corporation, however,
then the assignee must make a cash payment to the Corporation, upon the
assignment of the repurchase right, in an amount equal to the amount by which
the Fair Market Value of the unvested shares at the time subject
to the assigned right exceeds the aggregate repurchase price payable for such
unvested shares.




8




(C) Upon the
occurrence of a Corporate Transaction, the Plan Administrator may, at its sole
discretion, (i) terminate all or any outstanding repurchase rights under the
Plan and thereby cause the shares subject to such rights to vest immediately in
full, (ii) arrange for all or any of the repurchase rights to be assigned to the
successor corporation (or parent thereof) in connection with the Corporate
Transaction or (iii) exercise the Corporation's right to repurchase any unvested
shares contemporaneously with the consummation of the Corporate Transaction if
such right is provided in the instrument pursuant to which such unvested shares
were issued.





(2) Until such
time as the Corporation's outstanding shares of Common Stock are first
registered under Section 12(g) of the 1934 Act, the Corporation shall have the
right of first refusal with respect to any proposed sale or other disposition by
the Optionee (or any successor in interest by reason of purchase, gift or other
mode of transfer) of any shares of Common Stock issued under the Plan. Such
right of first refusal shall be exercisable by the Corporation (or its
assignees) in accordance with the terms and conditions established by the Plan
Administrator and set forth in the instrument evidencing such
right.





SECTION
2.INCENTIVE
OPTIONS





The terms
and conditions  specified  below shall be applicable to all
Incentive  Options granted under the Plan. Incentive Options may be
granted only to individuals who are Employees. Options that are specifically
designated as Non-Statutory Options when issued under the Plan shall not be
subject to the following terms and conditions.





(a) OPTION PRICE.
The option price per share of the Common Stock subject to an Incentive Option
shall in no event be less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock on the grant date; PROVIDED, if the individual
to whom the option is granted is at the time a Ten Percent Shareholder, then the
option price per share shall not be less than one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the grant date.





(b) DOLLAR
LIMITATION. The aggregate Fair Market Value (determined as of the respective
date or dates of grant) of the Common Stock for which one or more options
granted to any Employee under this Plan (or any other option plan of the
Corporation or any Parent or Subsidiary corporation) may for the first time
become exercisable as incentive stock options under the Federal tax laws during
any one calendar year shall not exceed the sum of one hundred thousand dollars
($100,000). To the extent the Employee holds two or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability thereof as Incentive Options under the Federal
tax laws shall be applied on the basis of the order in which such options are
granted.





(c) OPTION TERM
FOR TEN PERCENT SHAREHOLDER. No option granted to a Ten Percent Shareholder
shall have a term in excess of five (5) years from the grant date.





9




Except as
modified by the  preceding  provisions  of this
Section 2, all the  provisions of the Plan shall be applicable to the
Incentive Options granted hereunder.





SECTION
3.CORPORATE
TRANSACTION





(a) The
exercisability as incentive stock options under the Federal tax laws of any
options accelerated in connection with the Corporate Transaction shall remain
subject to the applicable dollar limitation of subsection 2(b) of this Article
II.





(b) The grant of
options under this Plan shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.





SECTION
4.CANCELLATION AND NEW GRANT
OF OPTIONS





The
Plan  Administrator  shall have the  authority to
effect,  at any time and from time to time, with the consent of the
affected Optionees, the cancellation of any or all outstanding options under the
Plan and to grant in substitution therefor new options under the Plan covering
the same or different numbers of shares of Common Stock but having, in the case
of an Incentive Option, an option price per share not less than one hundred
percent (100%) of such Fair Market Value per share of Common Stock on the new
grant date, or, in the case of a Ten Percent Shareholder, not less than one
hundred and ten percent (110%) of such Fair Market Value.





SECTION
5.EXTENSION
OF EXERCISE PERIOD





The Plan
Administrator shall have full power and authority to extend (either at the time
the option is granted or at any time that the option remains outstanding) the
period of time for which the option is to remain exercisable following the
Optionee's cessation of Service, from the limited period set forth in the option
agreement, to such greater period of time as the Plan Administrator may deem
appropriate under the circumstances.  In no event, however, shall such
option be exercisable after the specified expiration date of the option
term.




ARTICLE
III





STOCK
ISSUANCE PROGRAM





SECTION
1.TERMS AND
CONDITIONS OF STOCK ISSUANCES





Shares of
Common  Stock  shall be  issuable  under
the Stock Issuance  Program  through direct and immediate
issuances without any intervening stock option grants. Each such stock issuance
shall be evidenced by a Stock Issuance Agreement ("Issuance Agreement") that
complies with the terms and conditions of this Article III.





(a) ISSUE
PRICE.





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(1) Shares may,
in the absolute discretion of the Plan Administrator, be issued for
consideration with a value less than one-hundred percent (100%) of the Fair
Market Value of the issued shares.





(2) Shares shall
be issued under the Plan for such consideration as the Plan Administrator shall
from time to time determine, provided that in no event shall shares be issued
for consideration other than:





(A)cash or check
payable to the Corporation,





(B) a promissory
note in favor of the Corporation, which may be subject to cancellation by the
Corporation in whole or in part upon such terms and conditions as the Plan
Administrator shall specify, or





(C) services
rendered.





(b)VESTING
SCHEDULE.





(1) In the
discretion of the Plan Administrator, the interest of a Participant in the
shares of Common Stock issued to such Participant under the Plan may be fully
and immediately vested upon issuance or may vest in one or more installments in
accordance with the vesting provisions of subsection (b)(4) below. Except as
otherwise provided in subsection (b)(2), the Participant may not transfer any
issued shares in which such Participant does not have a vested interest.
Accordingly, all unvested shares issued under the Plan shall bear the
restrictive legend specified in Article IV, Section 1, until such legend is
removed in accordance with such section. Regardless of whether or not a
Participant's interest in such shares is vested, such Participant shall be
entitled to exercise all the rights of a shareholder with respect to the shares
of Common Stock issued to Participant hereunder, including the right to vote
such shares and to receive any cash dividends or other distributions paid or
made with respect to such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) that the holder of unvested Common Stock may have the right to receive
with respect to such unvested shares by reason of a stock dividend, stock split,
reclassification or other change affecting the outstanding Common Stock as a
class without the Corporation's receipt of consideration therefor shall be
issued subject to (i) the same vesting requirements under subsection (b)(4)
applicable to the unvested Common Stock and (ii) such escrow arrangements as the
Plan Administrator shall deem appropriate.





(2) As used in
this Article III, the term "transfer" shall include (without limitation) any
sale, pledge, encumbrance, gift or other disposition of such shares. A
Participant shall have the right to make a gift of unvested shares acquired
under the Stock Issuance Program to Participant's spouse, parents or issue or to
a trust established for such spouse, parents or issue, provided the donee of
such shares delivers to the Corporation, at the time of such donee's acquisition
of the gifted shares, a written agreement to be bound by all the provisions of
the Plan and the Issuance Agreement executed by the Participant.





(3) Should the
Participant cease Service for any reason while Participant's interest in the
Common Stock remains unvested, then the Corporation shall have the right to
repurchase, at the original purchase price paid by the Participant, all or (at
the discretion of the Corporation and with the consent of the Participant) any
portion of the shares in which the Participant is not at the time vested, and
the Participant shall thereafter cease to have any further shareholder rights
with respect to the repurchased shares.




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(4) Any shares of
Common Stock issued under the Stock Issuance Program that are not vested at the
time of such issuance shall vest in one or more installments thereafter. The
elements of the vesting schedule, specifically, the performance or service
objectives to be completed or achieved, the number of installments in which the
shares are to vest, the interval or intervals (if any) that are to lapse between
installments and the effect that death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule, shall
be determined by the Plan Administrator and specified in the Issuance
Agreement.





(5) In its
discretion, the Plan Administrator may elect not to exercise, in whole or in
part, its repurchase rights with respect to any unvested Common Stock or other
assets that would otherwise at the time be subject to repurchase pursuant to the
provisions of subsection (b)(3) above.  Such an election shall result
in the immediate vesting of the Participant's interest in the shares of Common
Stock as to which the election applies.





(6) No shares of
Common Stock or other assets shall be issued or delivered under this Plan unless
and until, in the opinion of counsel for the Corporation (or its successor in
the event of any Corporate Transaction), there shall have been compliance with
all applicable requirements of the securities exchange on which stock of the
same class is then listed and all other requirements of Federal and state law or
of any regulatory bodies having jurisdiction over such issuance and
delivery.





(c) RIGHT OF
FIRST REFUSAL. The Plan Administrator may also in its discretion establish as a
term and condition of the issuance of one or more shares of Common Stock under
the Stock Issuance Program that the Corporation shall have a right of first
refusal with respect to any proposed disposition by the Participant (or any
successor in interest by reason of purchase, gift or other mode of transfer) of
one or more shares of such Common Stock. Such right of first refusal shall be
exercisable by the Corporation (or its assignees) in accordance with the terms
and conditions specified in the instrument evidencing such right.





ARTICLE
IV





MISCELLANEOUS





SECTION
1.STOCK
LEGEND.  Each certificate representing shares of Common Stock (or
other securities) issued pursuant to the Plan may bear a restrictive legend
substantially as follows:





(1) "This
certificate and the shares represented hereby may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in conformity with
the terms of written agreements between the Corporation and the registered
holder of the
shares (or the predecessor in interest to the shares).  Upon written
request, the Corporation will furnish without charge a copy of such agreements
to the holder hereof."




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SECTION
2.LOANS





(a) The Plan
Administrator, in its discretion, may assist any Optionee or Participant
(including an Optionee or Participant who is an officer or director of the
Corporation) in the exercise of one or more options granted to such Optionee
under the Article II Option Grant Program or the purchase of one or more shares
issued to such Participant under the Article III Stock Issuance Program,
including the satisfaction of any Federal and State income and employment tax
obligations arising therefrom, by





(1) authorizing
the extension of a loan from the Corporation to such Optionee or Participant,
or





(2) permitting
the Optionee or Participant to pay the option price or purchase price for the
purchased Common Stock in installments over a period of years.





(b) The terms of
any loan or installment method of payment (including the interest rate and terms
of repayment applicable thereto) shall be established by the Plan Administrator.
Loans or installment payments may be granted with or without security or
collateral; provided, that any loan made to a consultant or other non-employee
advisor must be secured by property other than the purchased shares of Common
Stock. In all events the maximum credit available to each Optionee or
Participant may not exceed the sum of (i) the aggregate option price or purchase
price payable for the purchased shares (less the par value of such shares
rounded up to the nearest whole cent) plus (ii) any Federal and State income and
employment tax liability incurred by the Optionee or Participant in connection
with such exercise or purchase.





(c) The Plan
Administrator, in its discretion, may determine that one or more loans extended
under the financial assistance program shall be subject to forgiveness by the
Corporation in whole or in part upon such terms and conditions as the Board
deems appropriate.





SECTION
3.AMENDMENT
OF THE PLAN AND AWARDS





(a) The Board
shall have complete and exclusive power and authority to amend or modify the
Plan in any or all respects whatsoever; PROVIDED, that no such amendment or
modification shall adversely affect the rights and obligations of an Optionee
with respect to options at the time outstanding under the Plan, nor adversely
affect the rights of any Participant with respect to Common Stock issued under
the Plan prior to such action, unless the Optionee or Participant consents to
such amendment. In addition, the Board shall not, without the approval of the
Corporation's shareholders, amend the Plan to (i) materially increase the
maximum number of shares issuable under the Plan (except for permissible
adjustments under Article I, Section 5(c)), (ii) materially increase the
benefits accruing to individuals who participate in the Plan, or (iii)
materially modify the eligibility requirements for participation in the
Plan.





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(b) Options to
purchase shares of Common Stock may be granted under the Option Grant Program
and shares of Common Stock may be issued under the Stock Issuance Program, which
in both instances are in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under the
Option Grant Program or the Stock Issuance Program are held in escrow until the
Corporation's shareholders approve an amendment that sufficiently increases the
number of shares of Common Stock available for issuance under the Plan. If such
shareholder approval is not obtained within twelve (12) months after the date
the initial excess stock option grants or direct stock issuances are made, then
any unexercised options representing such excess shall terminate and cease to be
exercisable and the Corporation shall promptly refund to the Optionees and
Participants the option or purchase price paid for any excess shares issued
under the Plan and held in escrow, together with interest (at the applicable
Short Term Federal Rate) thereon for the period the shares were held in
escrow.





SECTION
4.EFFECTIVE
DATE AND TERM OF PLAN





(a) The Plan
shall become effective when adopted by the Board, but no option granted under
the Plan shall become exercisable, and no shares shall be issuable under the
Stock Issuance Program, unless and until the Plan shall have been approved by
the Corporation's shareholders. If such shareholder approval is not obtained
within twelve (12) months after the date of the Board's adoption of the Plan,
then all options previously granted under the Plan shall terminate, and no
further options shall be granted and no shares shall be issued under the Stock
Issuance Program. Subject to such limitation, the Plan Administrator may grant
options under the Plan at any time after the effective date and before the date
fixed herein for termination of the Plan.





(b) The Plan
shall terminate upon the earlier of (i) ten years after the adoption of the Plan
or (ii) the date on which all shares available for issuance under the Plan have
been issued or canceled pursuant to the exercise of options granted under
Article II or the issuance of shares under Article III. If the date of
termination is determined under clause (i) above, then no options outstanding on
such date under Article II and no shares issued and outstanding on such date
under Article III shall be affected by the termination of the Plan, and such
securities shall thereafter continue to have force and effect in accordance with
the provisions of the stock option agreements evidencing such Article II options
and the stock purchase agreements evidencing the issuance of such Article III
shares.





SECTION
5.USE OF
PROCEEDS





Any cash
proceeds received by the  Corporation  from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.





SECTION
6.WITHHOLDING





The
Corporation's obligation to deliver shares upon the exercise of any options
granted under Article II or upon the purchase of any shares issued under Article
III shall be subject to the satisfaction of all applicable Federal, state and
local income and employment tax withholding requirements.





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SECTION
7.REGULATORY
APPROVALS





The
implementation of the Plan, the granting of any options under the
Option  Grant Program, the issuance of any shares under the Stock
Issuance Program, and the issuance of Common Stock upon the exercise of the
option grants made hereunder shall be subject to the Corporation's procurement
of all approvals and permits required by regulatory authorities having
jurisdiction over the Plan, the options granted under it, and the Common Stock
issued pursuant to it.





SECTION
8.ACCELERATION OF
EXERCISABILITY AND VESTING





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




ARTICLE
V





CHANGE IN
CONTROL OR CORPORATE TRANSACTIONS





(a) DISSOLUTION
OR LIQUIDATION. In the event of a dissolution or liquidation of the Corporation,
then all outstanding Options shall terminate immediately prior to such
event.





(b) CERTAIN
CHANGES IN CONTROL. In the event of (i) a sale, lease or other disposition of
all or substantially all of the assets of the Corporation, (ii) a merger or
consolidation in which the Corporation is not the surviving corporation or (iii)
a reverse merger in which the Corporation is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise (collectively, a "Change in Control" or "Corporate
Transaction"), then any surviving corporation or acquiring corporation may
assume or continue any Stock Awards outstanding under the Plan or may substitute
similar stock awards (including an award to acquire the same consideration paid
to the shareholders in the transaction described in this paragraph) for those
outstanding under the Plan. In the event any surviving corporation or acquiring
corporation refuses to assume or continue such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, then with respect to
Stock Awards held by Participants whose Service has not terminated, the vesting
of such Stock Awards (and, if applicable, the time during which such Stock
Awards may be exercised) shall be accelerated in full, and the Stock Awards
shall terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such
event.





(c) TERMINATION
OF SERVICE FOLLOWING A CHANGE IN CONTROL. Unless otherwise specified in the
applicable Stock Award Agreement, in the event of the occurrence of a Change in
Control and provided that a participant's Stock Award remains in effect
following such Change in Control or is assumed, continued or substituted for any
similar stock award in connection with the Change in Control, then, if such
participant's Service is terminated by the Corporation
without Cause within thirteen (13) months following the effective date of the
Change in Control, all Stock Awards held by such participant (or any substituted
stock awards) shall, as of the date of such termination of Service, vest in full
and become fully exercisable (if applicable) to the extent not previously vested
or exercisable. Such Stock Awards shall remain exercisable until they expire in
accordance with their terms. For the purposes of this section, Cause shall have
the same meaning as is defined in Article II, Section 1(c)(4).




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(d) SECURITIES
ACQUISITION. In the event of an acquisition by any person, entity or group
within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Corporation or an Affiliate) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Corporation
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of Corporation's Board of Directors, then with respect
to Stock Awards held by Participants whose Service has not terminated, the
vesting of such Stock Awards (and, if applicable, the time during which such
Stock Awards may be exercised) shall be accelerated in full. Such Stock Awards
shall remain exercisable until they expire in accordance with their
terms.





(e) PARACHUTE
PAYMENTS. If any payment or benefit a Participant would receive in connection
with a Change in Control from the Corporation or otherwise ("Payment") would (i)
constitute a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
"Excise Tax"), then such Payment shall be reduced to the Reduced Amount. The
"Reduced Amount" shall be either (x) the largest portion of the Payment that
would result in no portion of the Payment being subject to the Excise Tax or (y)
the largest portion, up to and including the total, of the Payment, whichever
amount, after taking into account all applicable federal, state and local
employment taxes, income taxes, and the Excise Tax (all computed at the highest
applicable marginal rate), results in Participant's receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits constituting "parachute payments" is necessary so that the
Payment equals the Reduced Amount, reduction shall occur in the following order
unless the Participant elects in writing a different order (PROVIDED, HOWEVER,
that such election shall be subject to Corporation approval if made on or after
the effective date of the Change of Control): reduction of cash payments;
cancellation of accelerated vesting of stock awards; reduction of employee
benefits. In the event that acceleration of vesting of stock award compensation
is to be reduced, such acceleration of vesting shall be cancelled in the reverse
order of the date of grant of the Participant's stock awards unless the
Participant elects in writing a different order for cancellation.





The
accounting firm engaged by the Corporation for general audit purposes
as of the day prior to the effective date of the Change in Control shall perform
the foregoing calculations. If the accounting firm so engaged by the Corporation
is serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Corporation shall appoint a nationally
recognized accounting firm to make the determinations required hereunder. The
Corporation shall bear all expenses with respect to the determinations by such
accounting firm required to be made hereunder.




The
accounting firm engaged to make the determinations hereunder shall provide its
calculations, together with detailed supporting documentation, to the
Corporation and Participant within fifteen (15) calendar days after the date on
which Participant's right to a Payment arises (if requested at that time by the
Corporation or Participant) or at such other time as requested by the
Corporation or Participant. If the accounting firm determines that no Excise Tax
is payable with respect to a Payment, either before or after the application of
the Reduced Amount, it shall furnish the Corporation and Participant with an
opinion reasonably acceptable to Participant that no Excise Tax will be imposed
with respect to such Payment. Any good faith determination of the accounting
firm made hereunder shall be final, binding and conclusive upon the Corporation
and Participant.






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