<PAGE>

                                                                    EXHIBIT 10.1


                               VIRTGAME.COM CORP.
                        2002 STOCK OPTION AND GRANT PLAN


SECTION 1.    GENERAL PURPOSE OF THE PLAN; DEFINITIONS

         The name of the plan is the Virtgame.Com Corp. 2002 Stock Option and
Grant Plan (the "Plan"). The purpose of the Plan is to encourage and enable the
officers, employees, directors, consultants, advisors, and other key persons of
Virtgame.Com Corp. (the "Company") and its Subsidiaries (as defined below) upon
whose judgment, initiative and efforts the Company largely depends for the
successful conduct of its business to acquire a proprietary interest in the
Company. It is anticipated that providing such persons with a direct stake in
the Company's welfare will assure a closer identification of their interests
with those of the Company, thereby stimulating their efforts on the Company's
behalf and strengthening their desire to remain with the Company.

         The following terms shall be defined as set forth below:

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

         "AWARD" or "AWARDS, "except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock Awards and Unrestricted Stock Awards.

         "BOARD" means the Board of Directors of the Company.

         "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

         "COMMITTEE" has the meaning specified in Section 2.

         "EFFECTIVE DATE" means the date on which the Plan is approved by
stockholders as set forth in Section 13.

         "FAIR MARKET VALUE" of the Stock on any given date (or, if no shares
were traded or quoted on such date, as of the next preceding date on which there
was such a trade or quote) means (i) the average of the reported high and low
sale prices of the Stock as of 4:00 p.m. New York time if the Stock is listed,
admitted to unlisted trading privileges or reported on any foreign or national
securities exchange or on the Nasdaq National Market or an equivalent foreign
market on which sale prices are reported; or (ii) if the Stock is not so listed,
admitted to unlisted trading privileges or reported, the closing bid price as of
4:00 p.m. New York time as reported by the Nasdaq SmallCap Market, OTC Bulletin
Board or the National Quotation Bureau, Inc. or other comparable service; or
(iii) if the Stock is not so listed or reported, or if there are no transactions
or quotations within the last ten trading days or trading has been halted for
extraordinary reasons, such price as the Committee determines in good faith in
the exercise of its reasonable discretion with reference to the rules and
principles of valuation set forth in Section 20.2031-2 of the Treasury
Regulations.

<PAGE>

         "INCENTIVE STOCK OPTION" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.

         "INDEPENDENT DIRECTOR" means a member of the Board who is not an
employee or officer of the Company or any Subsidiary.

         "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.

         "OPTION" or "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.

         "RESTRICTED STOCK AWARD" means any Award granted pursuant to Section 6.

         "STOCK" means the Common Stock, par value $.00001 per share, of the
Company, subject to adjustments pursuant to Section 3.

         "SUBSIDIARY" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning with
the Company, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

         "UNRESTRICTED STOCK AWARD" means any Award granted pursuant to Section
7.

SECTION 2.    ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
              AND DETERMINE AWARDS

         (a) COMMITTEE. The Plan shall be administered by the Board of Directors
of the Company, or at the discretion of the Board, by a committee of the Board
of not less than two Independent Directors. Each member of the Committee shall
be a "non-employee director" within the meaning of Rule 16b-3(a)(3) and, if the
Board so determines in its sole discretion, shall be an "outside director"
within the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. All references herein to the "Committee" shall be deemed to refer to
the entity then responsible for administration of this Plan at the relevant time
(i.e., either the Board of Directors or a committee of the Board, as
applicable).

         (b) POWERS OF COMMITTEE. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

                  (i) to select the officers, employees, Independent Directors,
         consultants, advisors and key persons of the Company and its
         Subsidiaries to whom Awards may from time to time be granted;

                  (ii) to determine the time or times of grant, and the extent,
         if any, of Incentive Stock Options, Non-Qualified Stock Options,
         Restricted Stock Awards and Unrestricted Stock Awards or any
         combination of the foregoing, granted to any one or more participants;

                                       2
<PAGE>

                  (iii) to determine the number of shares of Stock to be covered
         by any Award;

                  (iv) to determine and modify from time to time the terms and
         conditions, including restrictions, not inconsistent with the terms of
         the Plan, of any Award, which terms and conditions may differ among
         individual Awards and participants, and to approve the form of written
         instruments evidencing the Awards;

                  (v) to accelerate at any time the exercisability or vesting of
         all or any portion of any Award and/or to include provisions in Awards
         providing for such acceleration;

                  (vi) to impose any limitations on Awards granted under the
         Plan, including limitations on transfers, repurchase provisions and the
         like and to exercise repurchase rights or obligations;

                  (vii) subject to the provisions of Section 5(a)(iii), to
         extend at any time the period in which Stock Options may be exercised;

                  (viii) to determine at any time whether, to what extent, and
         under what circumstances Stock and other amounts payable with respect
         to an Award shall be deferred either automatically or at the election
         of the participant and whether and to what extent the Company shall pay
         or credit amounts constituting interest (at rates determined by the
         Committee) or dividends or deemed dividends on such deferrals; and

                  (ix) at any time to adopt, alter and repeal such rules,
         guidelines and practices for administration of the Plan and for its own
         acts and proceedings as it shall deem advisable; to interpret the terms
         and provisions of the Plan and any Award (including related written
         instruments); to make all determinations it deems advisable for the
         administration of the Plan; to decide all disputes arising in
         connection with the Plan; and to otherwise supervise the administration
         of the Plan.

         All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

         (c) DELEGATION OF AUTHORITY TO GRANT AWARDS. The Committee, in its
discretion, may delegate to the Chief Executive Officer of the Company all or
part of the Committee's authority and duties with respect to Awards, including
the granting thereof, to individuals who are not subject to the reporting and
other provisions of Section 16 of the Act or "covered employees" within the
meaning of Section 162(m) of the Code. The Committee may revoke or amend the
terms of a delegation at any time but such action shall not invalidate any prior
actions of the Committee's delegate or delegates that were consistent with the
terms of the Plan.

SECTION 3.    STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

         (a) STOCK ISSUABLE. The maximum number of shares of Stock reserved and
available for issuance under the Plan at any time is equal to 10,000,000 shares
of Stock of the Company, subject to adjustment as provided in Section 3(b)

                                       3
<PAGE>

below. For purposes of the foregoing limitations, the shares of Stock underlying
any Awards which are forfeited, canceled, reacquired by the Company, satisfied
without the issuance of Stock or otherwise terminated (other than by exercise)
shall be added back to the shares of Stock available for issuance under the
Plan. Subject to such overall limitation, shares of Stock may be issued up to
such maximum number pursuant to any type or types of Award. The shares available
for issuance under the Plan may be authorized but unissued shares of Stock or
shares of Stock reacquired by the Company.

         (b) RECAPITALIZATION. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company or any successor company, or
additional shares or new or different shares or other securities of the Company
or any successor Company or other non-cash assets are distributed with respect
to such shares of Stock or other securities, the Committee shall make an
appropriate or proportionate adjustment in (i) the maximum number of shares
reserved for issuance under the Plan, (ii) the number of Stock Options that can
be granted to any one individual participant, (iii) the number and kind of
shares or other securities subject to any then outstanding Awards under the
Plan, and (iv) the price for each share subject to any then outstanding Stock
Options or other Awards under the Plan, without changing the aggregate exercise
price (i.e., the exercise price multiplied by the number of shares) as to which
such Stock Options or other Awards remain exercisable. The adjustment by the
Committee shall be final, binding and conclusive. No fractional shares of Stock
shall be issued under the Plan resulting from any such adjustment, but the
Committee in its discretion may make a cash payment in lieu of fractional
shares.

         The Committee may also adjust the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to
take into consideration material changes in accounting practices or principles,
extraordinary dividends, acquisitions or dispositions of stock or property or
any other event if it is determined by the Committee that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided that no
such adjustment shall be made in the case of an Incentive Stock Option, without
the consent of the participant, if it would constitute a modification, extension
or renewal of the Option within the meaning of Section 424(h) of the Code.

         (c) MERGERS AND OTHER TRANSACTIONS. In the case of (i) a merger or
consolidation of the Company with or into another corporation (with respect to
which less than a majority of the outstanding voting power of the surviving or
consolidated corporation is held by shareholders of the Company immediately
prior to such event), (ii) the sale or transfer of all or substantially all of
the properties and assets of the Company and its subsidiaries (iii) any purchase
by any party (or group of affiliated parties) of shares of capital stock of the
Company (either through a negotiated stock purchase or a tender for such
shares), the effect of which is that such party (or group of affiliated parties)
that did not beneficially own a majority of the voting power of the outstanding
shares of capital stock of the Company immediately prior to such purchase
beneficially owns at least a majority of such voting power immediately after
such purchase, or (iv) a change in the composition of the Board such that the
Continuity Directors (defined below) cease for any reason to constitute at least
a majority of the Board (in each case, a "Transaction"), all unvested Options

                                       4
<PAGE>

and other Awards which are not vested as of the effective date of such
Transaction shall become vested as of such effective date, except as the
Committee may otherwise specify with respect to particular Awards. Upon the
effectiveness of the Transaction, the Plan and all outstanding Options and other
Awards granted hereunder shall terminate, unless provision is made in connection
with the Transaction for the assumption of Awards heretofore granted, or the
substitution of such Awards of new Awards of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and, if
appropriate, the per share exercise prices, as provided in Section 3(b) above.
In the event of such termination, each optionee shall be permitted to exercise
for a period of at least 15 days prior to the date of such termination all
outstanding Options and other Awards held by such optionee which are then
exercisable or become exercisable upon the effectiveness of the Transaction. For
purposes of this Section 3, "Continuity Directors" of the Company will mean any
individuals who are members of the Board on the effective date of the Plan and
any individual who subsequently becomes a member of the Board whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the Continuity Directors (either by specific vote or by
approval of the Company's proxy statement in which such individual is named as a
nominee for director without objection to such nomination).

         (d) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.

         (e) LIMITATION ON CHANGE IN CONTROL PAYMENTS. Notwithstanding anything
in this Section 3 to the contrary, if, with respect to a participant, the
acceleration of the exercisability of an Option as provided in this Section 3,
together with any other "payments" that such participant has the right to
receive from the Company or any corporation that is a member of an "affiliated
group" (as defined in Section 1504(a) of the Code without regard to Section
1504(b) of the Code) of which the Company is a member, would constitute a
"parachute payment" (as defined in Section 280G(b)(2) of the Code), then the
"payments" to such participant pursuant to this Section 3 will be reduced to the
largest amount as will result in no portion of such "payments" being subject to
the excise tax imposed by Section 4999 of the Code but if and only if so
reducing such payments or benefits results in the participant receiving a
greater net benefit than the participant would have received had a reduction not
occurred and an excise tax had been paid by the participant under Section 4999
of the Code; provided, however, that if a participant is subject to a separate
agreement with the Company or a Subsidiary that expressly addresses the
potential application of Sections 280G or 4999 of the Code (including, without
limitation, that "payments" under such agreement or otherwise will be reduced,
that the participant will have the discretion to determine which "payments" will
be reduced, that such "payments" will not be reduced or that such "payments"
will be "grossed up" for tax purposes), then this Section 3(e) will not apply,
and any "payments" to a participant pursuant to Section 3(c) will be treated as
"payments" arising under such separate agreement. The determination as to
whether any such decrease in the payments or benefits to be made or provided in
connection with this Section 3 is necessary must be made in good faith by legal
counsel or a certified public accountant selected by the Company and reasonably
acceptable to the participant, and such determination will be conclusive and
binding upon the participant and the Company.

                                       5
<PAGE>

SECTION 4.    ELIGIBILITY

         Participants in the Plan will be such officers and other employees,
Independent Directors, consultants, advisors and other key persons of the
Company and its Subsidiaries who are responsible for or contribute to the
management, growth or profitability of the Company and its Subsidiaries as are
selected from time to time by the Committee, in its sole discretion.

SECTION 5.    STOCK OPTIONS

         Any Stock Option granted under the Plan shall be pursuant to a stock
option agreement which shall be in such form as the Committee may from time to
time approve. Option agreements need not be identical.

         Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(t) of the Code. Non-Qualified
Stock Options may be granted to officers, employees, Independent Directors,
advisors, consultants and other key persons of the Company and its Subsidiaries.
To the extent that any Option does not qualify as an Incentive Stock Option, it
shall be deemed a Non-Qualified Stock Option. No Incentive Stock Option shall be
granted under the Plan after January 24, 2012.

         (a) TERMS OF STOCK OPTIONS. Stock Options granted under the Plan shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable:

                  (i) EXERCISE PRICE. The exercise price per share for the Stock
         covered by a Stock Option shall be determined by the Committee at the
         time of grant but in the case of Incentive Stock Options shall not be
         less than 100% of the Fair Market Value on the date of grant. If an
         employee owns or is deemed to own (by reason of the attribution rules
         applicable under Section 424(d) of the Code) more than 10% of the
         combined voting power of all classes of stock of the Company or any
         parent or subsidiary corporation and an Incentive Stock Option is
         granted to such employee, the option price of such Incentive Stock
         Option shall be not less than 110% of the Fair Market Value on the
         grant date.

                  (ii) GRANT OF DISCOUNT OPTIONS IN LIEU OF CASH COMPENSATION.
         The Committee is authorized to establish, from time to time, a plan
         permitting participants to elect to receive a Non-Qualified Stock
         Option in lieu of any cash bonus or other compensation to which such
         participant may become entitled. The exercise price per share shall be
         determined by the Committee. The number of shares of Stock subject to
         the Stock Option shall be determined by dividing the amount of the
         waived cash compensation by the difference between the Fair Market
         Value of the Stock on the date the Stock Option is granted and the
         exercise price per share of the Stock Option. The Stock Option shall be
         granted for a whole number of shares so determined; the value of any
         fractional share shall be paid in cash.

                                       6
<PAGE>

                  (iii) OPTION TERM. The term of each Stock Option shall be
         fixed by the Committee, but no Incentive Stock Option shall be
         exercisable more than ten years after the date the option is granted.
         If an employee owns or is deemed to own (by reason of the attribution
         rules of Section 424(d) of the Code) more than 10% of the combined
         voting power of all classes of stock of the Company or any parent or
         subsidiary corporation and an Incentive Stock Option is granted to such
         employee, the term of such option shall be no more than five years from
         the date of grant.

                  (iv) EXERCISABILITY RIGHTS OF A STOCKHOLDER. Stock Options
         shall become vested and exercisable at such time or times, whether or
         not in installments, as shall be determined by the Committee at or
         after the grant date; PROVIDED, HOWEVER, that Stock Options granted in
         lieu of cash compensation shall be exercisable in full as of the grant
         date. The Committee may at any time accelerate the exercisability of
         all or any portion of any Stock Option. An optionee shall have the
         rights of a stockholder only as to shares acquired upon the exercise of
         a Stock Option and not as to unexercised Stock Options.

                  (v) METHOD OF EXERCISE. Stock Options may be exercised in
         whole or in part, by giving written notice of exercise to the Company,
         specifying the number of shares to be purchased. Payment of the
         purchase price may be made by one or more of the following methods;
         provided, however, that the methods set forth in subsections (B) and
         (C) below shall become available only after the closing of the Initial
         Public Offering:

                           (A) In cash, by certified or bank check or other
                  instrument acceptable to the Committee;

                           (B) In the form of shares of Stock that are not then
                  subject to restrictions under any Company plan and that have
                  been held by the optionee free of such restrictions for at
                  least six months, if permitted by the Committee in its
                  discretion. Such surrendered shares shall be valued at Fair
                  Market Value on the exercise date;

                           (C) By the optionee delivering to the Company a
                  properly executed exercise notice together with irrevocable
                  instructions to a broker to promptly deliver to the Company
                  cash or a check payable and acceptable to the Company to pay
                  the purchase price; provided that in the event the optionee
                  chooses to pay the purchase price as so provided, the optionee
                  and the broker shall comply with such procedures and enter
                  into such agreements of indemnity and other agreements as the
                  Committee shall prescribe as a condition of such payment
                  procedure; or

                           (D) By the optionee delivering to the Company a
                  secured promissory note if the Board has authorized the loan
                  of funds to the optionee for the purpose of enabling or
                  assisting the optionee to effect the exercise of the
                  optionee's Stock Option.

         Payment instruments will be received subject to collection. The
         delivery of certificates representing the shares of Stock to be
         purchased pursuant to the exercise of a Stock Option will be contingent
         upon receipt from the optionee (or a purchaser acting in his stead in

                                       7
<PAGE>

         accordance with the provisions of the Stock Option) by the Company of
         the full purchase price for such shares and the fulfillment of any
         other requirements contained in the Stock Option or applicable
         provisions of laws.

                  (vi) TERMINATION. Unless otherwise provided in the option
         agreement or determined by the Committee, upon the optionee's
         termination of employment (or other business relationship) with the
         Company and its Subsidiaries, the optionee's rights in the optionee's
         Stock Options shall automatically terminate.

                  (vii) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent
         required for "incentive stock option" treatment under Section 422 of
         the Code, the aggregate Fair Market Value (determined as of the time of
         grant) of the shares of Stock with respect to which Incentive Stock
         Options granted under this Plan and any other plan of the Company or
         its parent and subsidiary corporations become exercisable for the first
         time by an optionee during any calendar year shall not exceed $100,000.
         To the extent that any Stock Option exceeds this limit, it shall
         constitute a Non-Qualified Stock Option.

         (b) RELOAD OPTIONS. At the discretion of the Committee, Options granted
under the Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.

         (c) NON-TRANSFERABILITY OF OPTIONS. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the
Committee may provide in an option agreement that the optionee may transfer,
without consideration for the transfer, Non-Qualified Stock Options to members
of the optionee's immediate family, to trusts for the benefit of such family
members, to partnerships in which such family members are the only partners; or
to charitable organizations; PROVIDED, HOWEVER, that the transferee agrees in
writing to be bound by the terms and conditions of this Plan and the applicable
Option Agreement.

SECTION 6.    RESTRICTED STOCK AWARDS

         (a) NATURE OF RESTRICTED STOCK AWARDS. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other purchase
price determined by the Committee, shares of Stock subject to such restrictions
and conditions as the Committee may determine at the time of grant ("Restricted
Stock"). Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives. The grant of a Restricted Stock Award is contingent on the recipient
executing the Restricted Stock Award agreement. The terms and conditions of each
such agreement shall be determined by the Committee, and such terms and
conditions may differ among individual Awards and participants.

                                       8
<PAGE>

         (b) RIGHTS AS A STOCKHOLDER. Upon execution of a written instrument
setting forth the Restricted Stock Award and paying any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(d) below and the participant shall be required, as a
condition of the grant, to deliver to the Company a stock power endorsed in
blank.

         (c) RESTRICTIONS. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the
Restricted Stock Award. If a participant's employment (or other business
relationship) with the Company and its Subsidiaries terminates for any reason,
or upon such other events as may be stated in the instrument evidencing the
Restricted Stock Award, the Company or its assigns shall have the right or shall
agree, as may be specified in the relevant restricted stock agreement, to
repurchase same or all of the shares of Stock subject to the Award at such
purchase price as shall be set forth in such instrument.

         (d) VESTING OF RESTRICTED STOCK. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which Restricted Stock
shall become vested, subject to such further rights of the Company or its
assigns as may be specified in the instrument evidencing the Restricted Stock
Award.

         (e) WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The written
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.

SECTION 7.    UNRESTRICTED STOCK AWARDS

         (a) GRANT OR SALE OF UNRESTRICTED STOCK. The Committee may, in its sole
discretion, grant (or sell at a purchase price determined by the Committee) an
Unrestricted Stock Award to any participant, pursuant to which such participant
may receive shares of Stock free of any vesting restrictions ("Unrestricted
Stock") under the Plan. Unrestricted Stock Awards may be granted or sold as
described in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation due to such individual.

         (b) ELECTIONS TO RECEIVE UNRESTRICTED STOCK IN LIEU OF COMPENSATION.
Upon the request of a participant and with the consent of the Committee, each
such participant may, pursuant to an advance written election delivered to the
Company no later than the date specified by the Committee, receive a portion of
the cash compensation otherwise due to such participant in the form of shares of
Unrestricted Stock either currently or on a deferred basis.

         (c) RESTRICTIONS ON TRANSFERS. The right to receive shares of
Unrestricted Stock on a deferred basis may not be sold, assigned, transferred,
pledged or otherwise encumbered, other than by will or the laws of descent and
distribution.

                                       9
<PAGE>

SECTION 8.    TAX WITHHOLDING

         (a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

         (b) PAYMENT IN STOCK. Subject to approval by the Committee, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.

SECTION 9.    TRASFER, LEAVE OF ABSENCE, ETC.

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

         (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

SECTION 10.   AMENDMENTS AND TERMINATION

         The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award (or provide
substitute Awards at the same or reduced exercise or purchase price or with no
exercise or purchase price in a manner not inconsistent with the terms of the
Plan, but such price, if any, must satisfy the requirements which would apply to
the substitute or amended Award if it were then initially granted under this
Plan for the purpose of satisfying changes in law or for any other lawful
purpose), but no such action shall adversely affect rights under any outstanding
Award without the holder's consent. No amendments to the Plan will be effective
without approval of the stockholders of the Company if stockholder approval is
then required to ensure that Incentive Stock Options granted under the Plan are
qualified under Section 422 of the Code or to satisfy the rules of any stock
exchange, Nasdaq or similar regulatory body.

                                       10
<PAGE>

SECTION 11.   STATUS OF PLAN

         With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.

SECTION 12.   GENERAL PROVISIONS

         (a) NO DISTRIBUTION COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

         No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.

         (b) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.

SECTION 13.   EFFECTIVE DATE OF PLAN

         This Plan shall become effective upon approval by the Board, provided
that the exercise of any Incentive Stock Option granted under the Plan shall be
subject to the approval of the Plan by the holders of a majority of the shares
of Stock of the Company no later than January 24, 2003.

SECTION 14.   GOVERNING LAW

         This Plan shall be governed by California law except to the extent such
law is preempted by federal law.





Adopted and Effective: January 24, 2002


                                       11