<PAGE>

                                                                     EXHIBIT 4.2
                                                                     -----------


                             SONIC INNOVATIONS, INC.

                                 2000 STOCK PLAN

                  (Amended and restated as of January 1, 2002)

     1.   Purposes of the Plan. The purposes of this 2000 Stock Plan are:
          --------------------

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

          .    to provide additional incentive to Service Providers, 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
granted under the Plan.

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

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

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

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

          (g)  "Company" means Sonic Innovations, Inc., a Delaware corporation.
                -------

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

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

<PAGE>

          (j)  "Employee" means any person 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, if
reemployment upon expiration of a leave of absence approved by the Company is
not guaranteed, on the 91st day of such leave any Incentive Stock Option shall
cease to be treated as an Incentive Stock Option and shall be treated as a
Nonstatutory Stock Option.

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

          (l)  "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, 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 for the last market trading day
prior to the time of determination;

               (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 last market trading day prior to the day of
determination; 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.

          (m)  "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.

          (n)  "Inside Director" means a Director who is an Employee.
                ---------------

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

          (p)  "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.

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

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

          (s)  "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.

<PAGE>

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

          (u)  "Outside Director" means a Director who is not an Employee.
                ----------------

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

          (w)  "Plan" means this 2000 Stock Plan.
                ----

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

          (y)  "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.

          (z)  "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.

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

          (bb) "Service Provider" means an Employee, Director or any provider of
                ----------------
 service to the Company.

          (cc) "Share" means a share of the Common Stock, as adjusted in
                -----
accordance with Section 14 of the Plan.

          (dd) "Stock Purchase Right" means the right to purchase Common Stock
                --------------------
pursuant to Section 11 of the Plan.

          (ee) "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 14 of
          -------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan shall be 3,015,962 plus an annual increase to be added on each
January 1st equal to the lesser of (i) 789,474 Shares, (ii) 5% of the
outstanding shares on that date, or (iii) a lesser amount of Shares as
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 Stock Purchase Right, shall not
be returned to the Plan and shall not become available for future distribution
under the Plan, except that

<PAGE>

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 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

<PAGE>

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 whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price;

               (viii) to construe and interpret the terms of the Plan and
Options and Stock Purchase Rights 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 qualifying for preferred tax treatment under
foreign tax laws;

               (x)    to modify or amend each Option or Stock Purchase Right
(subject to Section 16(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 amount required to be withheld;

               (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
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.

<PAGE>

          (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 500,000 Shares.

               (ii)  In connection with his or her initial service, an Employee
may be granted Options to purchase up to an additional 500,000 Shares, 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 14.

               (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 14), 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 20 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 16 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.

<PAGE>

                    (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.

               (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 (A) in the case of Shares acquired upon
exercise of an option, 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.

<PAGE>

     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 will be suspended during any unpaid leave of absence.

               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 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 14 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. No
option may be exercised after the expiration of the term as set forth in the
Option Agreement. Unvested Shares at the date of termination, Disability, or
death shall revert to the Plan. If, after termination, Disability, or death, the
Optionee's Options are not exercised within the timeframe specified herein, the
unexercised Shares shall revert to the Plan.

          (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. 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.

          (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. In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for twelve (12) months following the Optionee's Disability.

          (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 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

<PAGE>

specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's death. 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.


          (e)  Buyout Provisions.  The Administrator may at any time offer to
               -----------------
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

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

          (a)  Rights to Purchase. After the Administrator determines that it
               ------------------
will offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, 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 14
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.  Formula Option Grants to Outside Directors.  All grants of Options to
          ------------------------------------------
Outside Directors pursuant to this Section shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following
provisions:

<PAGE>

          (a)  All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the Plan.

          (b)  No person shall have any discretion to select which Outside
Directors shall be granted Options under this Section or to determine the number
of Shares to be covered by such Options.

          (c)  Each person who first becomes an Outside Director following
October 18, 2001 shall be automatically granted an Option to purchase 15,000
Shares (the "First Option") on the date on which such person first becomes an
Outside Director, whether through election by the stockholders of the Company or
appointment by the Board to fill a vacancy; provided, however, that an Inside
Director who ceases to be an Inside Director but who remains a Director shall
not receive a First Option.

          (d)  Each Outside Director shall be automatically granted an Option to
purchase 6,000 Shares (a "Subsequent Option") on the date of each annual meeting
of the stockholders of the Company occuring after the end of the Company's
fiscal year 2001, if as of such date, he or she shall have served on the Board
for at least the preceding six (6) months.

          (e)  The terms of each Option granted pursuant to this Section shall
be as follows:

               (i)    the term of the Option shall be ten (10) years.

               (ii)   the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Option.

               (iii)  subject to Section 14 hereof, the First Option shall vest
and become exercisable as to 1/3 of the Shares subject to the Option on the
first anniversary of its date of grant, as to 1/3 of the Shares subject to the
Option on the second anniversary of its date of grant and as to the remaining
1/3 of the Shares subject to the Option on the third anniversary of its grant,
provided that the Optionee continues to serve as a Director on such dates.

               (iv)   subject to Section 14 hereof, the Subsequent Option shall
vest and become exercisable as to 100% of the Shares subject to the Option on
the anniversary of its date of grant, provided that the Optionee continues to
serve as a Director on such date.

     14.  Adjustments Upon Changes in Capitalization, Dissolution, Merger or
          ------------------------------------------------------------------
Asset Sale.
----------

          (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, the number of shares of Common
Stock that have been authorized for issuance under the Plan but as to which no
Options or Stock Purchase Rights have yet been granted or that 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 annually to the Plan
pursuant to Section 3(c), the number of Shares that may be granted pursuant to
the automatic grant provisions of Section 13 and the number of shares of Common
Stock as well as the price per share of Common Stock covered by

<PAGE>

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,
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 Shares 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 Asset Sale. In the event of a merger of the Company with
              --------------------
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option and Stock Purchase Right shall be assumed
or an equivalent option or right substituted by the successor corporation or its
Parent. With respect to Options granted to an Outside Director pursuant to
Section 13 that are assumed or substituted for, if following such assumption or
substitution the Optionee's status as a Director or a director of the successor
corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee, then the Optionee shall fully vest in and have the
right to exercise such Options as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. 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 Shares, including
Shares which would not otherwise be vested or exercisable. 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 sale of assets, 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 sale of assets, the option or right confers the right to
purchase or receive the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of assets by holders of Common Stock
on the effective date of the transaction provided, however, that if such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of

<PAGE>


the successor corporation, provide for the consideration to be received upon the
exercise of 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 sale of
assets.

     15. 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.

     16. 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.

     17. 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.

     18. 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.

<PAGE>


     19. 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.

     20. 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.