<PAGE>
 
                                                                    Exhibit 99.3
                                                                    ------------
                            CYBERIAN OUTPOST, INC.

                             AMENDED AND RESTATED
               1998 EMPLOYEE, DIRECTOR AND CONSULTANT STOCK PLAN


1.  DEFINITIONS.
    ----------- 

    Unless otherwise specified or unless the context otherwise requires, the
    following terms, as used in this Cyberian Outpost 1998 Employee, Director
    and Consultant Stock Plan, have the following meanings:
    
        Administrator means the Board of Directors, unless it has delegated 
        -------------                                    
        power to act on its behalf to the Committee, in which case the 
        Administrator means the Committee.
        
        Affiliate means a corporation which, for purposes of Section 424 of the
        ---------                                                              
        Code, is a parent or subsidiary of the Company, direct or indirect.
        
        Board of Directors means the Board of Directors of the Company.
        ------------------                                             
        
        Code means the United States Internal Revenue Code of 1986, as amended.
        ----                                                                   
        
        Committee means the committee of the Board of Directors to which the 
        ---------  
        Board of Directors has delegated power to act under or pursuant to the
        provisions of the Plan.
        
        Common Stock means shares of the Company's common stock, no par value 
        ------------     
        per share.
        
        Company means Cyberian Outpost Inc., a Delaware corporation.
        -------                                                     
        
        Disability or Disabled means permanent and total disability as defined
        ----------    --------  
        in Section 22(e)(3) of the Code.
        
        Fair Market Value of a Share of Common Stock means:
        -----------------                                  
      
        (1)  If the Common Stock is listed on a national securities exchange or
             traded in the over-the-counter market and sales prices are
             regularly reported for the Common Stock, the closing or last price
             of the Common Stock on the Composite Tape or other comparable
             reporting system for the trading day immediately preceding the
             applicable date;

        (2)  If the Common Stock is not traded on a national securities exchange
             but is traded on the over-the-counter market, if sales prices are
             not regularly reported for
<PAGE>
 
          the Common Stock for the trading day referred to in clause (1), and if
          bid and asked prices for the Common Stock are regularly reported, the
          mean between the bid and the asked price for the Common Stock at the
          close of trading in the over-the-counter market for the trading day on
          which Common Stock was traded immediately preceding the applicable
          date; and

     (3)  If the Common Stock is neither listed on a national securities
          exchange nor traded in the over-the-counter market, such value as the
          Administrator, in good faith, shall determine.

     ISO means an option meant to qualify as an incentive stock option under
     ---                                                                    
     Section 422 of the Code.

     Key Employee means an employee of the Company or of an Affiliate
     ------------                                                    
     (including, without limitation, an employee who is also serving as an
     officer or director of the Company or of an Affiliate), designated by
     the Administrator to be eligible to be granted one or more Stock
     Rights under the Plan.

     Non-Qualified Option means an option which is not intended to qualify as an
     --------------------                                                       
     ISO.

     Option means an ISO or Non-Qualified Option granted under the Plan.
     ------                                                             

     Option Agreement means an agreement between the Company and a Participant
     ----------------                                                         
     delivered pursuant to the Plan, in such form as the Administrator
     shall approve.

     Participant means a Key Employee, director or consultant to whom one or
     -----------                                                            
     more Stock Rights are granted under the Plan.  As used herein,
     "Participant" shall include "Participant's Survivors" where the
     context requires.

     Plan means this Amended and Restated Cyberian Outpost 1998 Employee,
     ----                                                                
     Director and Consultant Stock Plan.

     Shares means shares of the Common Stock as to which Stock Rights have been
     ------                                                                    
     or may be granted under the Plan or any shares of capital stock into
     which the Shares are changed or for which they are exchanged within
     the provisions of Paragraph 3 of the Plan.  The Shares issued under
     the Plan may be authorized and unissued shares or shares held by the
     Company in its treasury, or both.

     Stock Grant  means a grant by the Company of Shares under the Plan.
     -----------                                                        

     Stock Grant Agreement means an agreement between the Company and a
     ---------------------                                             
     Participant delivered pursuant to the Plan, in such form as the
     Administrator shall approve.

                                       2
<PAGE>
 
     Stock Right means a right to Shares of the Company granted pursuant to the
     -----------                                                               
     Plan -- an ISO, a Non-Qualified Option or a Stock Grant.

     Survivors means a deceased Participant's legal representatives and/or any
     ---------                                                                
     person or persons who acquired the Participant's rights to a Stock
     Right by will or by the laws of descent and distribution.


2.  PURPOSES OF THE PLAN.
    -------------------- 

  The Plan is intended to encourage ownership of Shares by Key Employees and
directors of and certain consultants to the Company in order to attract such
people, to induce them to work for the benefit of the Company or of an Affiliate
and to provide additional incentive for them to promote the success of the
Company or of an Affiliate.  The Plan provides for the granting of ISOs, Non-
Qualified Options and Stock Grants.


3.   SHARES SUBJECT TO THE PLAN.
     -------------------------- 

  The number of Shares which may be issued from time to time pursuant to this
Plan shall be 3,186,000 shares of Common Stock or the equivalent of such number
of Shares after the Administrator, in its sole discretion, has interpreted the
effect of any stock split, stock dividend, combination, recapitalization or
similar transaction in accordance with Paragraph 23 of the Plan.

  If an Option ceases to be "outstanding", in whole or in part, or if the
Company shall reacquire any Shares issued pursuant to a Stock Grant, the Shares
which were subject to such Option and any Shares so reacquired by the Company
shall be available for the granting of other Stock Rights under the Plan.  Any
Option shall be treated as "outstanding" until such Option is exercised in full,
or terminates or expires under the provisions of the Plan, or by agreement of
the parties to the pertinent Option Agreement.


4.   ADMINISTRATION OF THE PLAN.
     -------------------------- 

  The Administrator of the Plan will be the Board of Directors, except to the
extent the Board of Directors delegates its authority to the Committee, in which
case the Committee shall be the Administrator.  Subject to the provisions of the
Plan, the Administrator is authorized to:

     a.   Interpret the provisions of the Plan or of any Option or Stock Grant
          and to make all rules and determinations which it deems necessary or
          advisable for the administration of the Plan;

     b.   Determine which employees of the Company or of an Affiliate shall be
          designated as Key Employees and which of the Key Employees, directors
          and consultants shall be granted Stock Rights;

                                       3
<PAGE>
 
     c.   Determine the number of Shares for which a Stock Right or Stock Rights
          shall be granted, provided, however, that in no event shall Stock
          Rights with respect to more than 3,000,000 shares be granted to any
          Participant in any fiscal year; and

     d.   Specify the terms and conditions upon which a Stock Right or Stock
          Rights may be granted;

provided, however, that all such interpretations, rules, determinations, terms
and conditions shall be made and prescribed in the context of preserving the tax
status under Section 422 of the Code of those Options which are designated as
ISOs.  Subject to the foregoing, the interpretation and construction by the
Administrator of any provisions of the Plan or of any Stock Right granted under
it shall be final, unless otherwise determined by the Board of Directors, if the
Administrator is the Committee.


5.  ELIGIBILITY FOR PARTICIPATION.
    ----------------------------- 

  The Administrator will, in its sole discretion, name the Participants in the
Plan, provided, however, that each Participant must be a Key Employee, director
or consultant of the Company or of an Affiliate at the time a Stock Right is
granted.  Notwithstanding the foregoing, the Administrator may authorize the
grant of a Stock Right to a person not then an employee, director or consultant
of the Company or of an Affiliate; provided, however, that the actual grant of
such Stock Right shall be conditioned upon such person becoming eligible to
become a Participant at or prior to the time of the delivery of the Agreement
evidencing such Stock Right.  ISOs may be granted only to Key Employees.  Non-
Qualified Options and Stock Grants may be granted to any Key Employee, director
or consultant of the Company or an Affiliate.  The granting of any Stock Right
to any individual shall neither entitle that individual to, nor disqualify him
or her from, participation in any other grant of Stock Rights.


6.  TERMS AND CONDITIONS OF OPTIONS.
    ------------------------------- 

  Each Option shall be set forth in writing in an Option Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant.  The Administrator may provide that Options be
granted subject to such terms and conditions, consistent with the terms and
conditions specifically required under this Plan, as the Administrator may deem
appropriate including, without limitation, subsequent approval by the
shareholders of the Company of this Plan or any amendments thereto.

     A.   Non-Qualified Options:  Each Option intended to be a Non-Qualified
          ---------------------                                             
          Option shall be subject to the terms and conditions which the
          Administrator determines to be appropriate and in the best interest of
          the Company, subject to the following minimum standards for any such
          Non-Qualified Option:

                                       4
<PAGE>
 
          a.   Option Price: Each Option Agreement shall state the option price
               (per share) of the Shares covered by each Option, which option
               price shall be determined by the Administrator but shall not be
               less than the par value per share of Common Stock.

          b.   Each Option Agreement shall state the number of Shares to which
               it pertains;

          c.   Each Option Agreement shall state the date or dates on which it
               first is exercisable and the date after which it may no longer be
               exercised, and may provide that the Option rights accrue or
               become exercisable in installments over a period of months or
               years, or upon the occurrence of certain conditions or the
               attainment of stated goals or events; and

          d.   Exercise of any Option may be conditioned upon the Participant's
               execution of a Share purchase agreement in form satisfactory to
               the Administrator providing for certain protections for the
               Company and its other shareholders, including requirements that:

               i.   The Participant's or the Participant's Survivors' right to
                    sell or transfer the Shares may be restricted; and

               ii.  The Participant or the Participant's Survivors may be
                    required to execute letters of investment intent and must
                    also acknowledge that the Shares will bear legends noting
                    any applicable restrictions.

     B.   ISOs:  Each Option intended to be an ISO shall be issued only to a Key
          ----                                                                  
          Employee and be subject to at least the following terms and
          conditions, with such additional restrictions or changes as the
          Administrator determines are appropriate but not in conflict with
          Section 422 of the Code and relevant regulations and rulings of the
          Internal Revenue Service:

          a.   Minimum standards:  The ISO shall meet the minimum standards
               required of Non-Qualified Options, as described in Paragraph 6(A)
               above, except clause (a) thereunder.

          b.   Option Price:  Immediately before the Option is granted, if the
               Participant owns, directly or by reason of the applicable
               attribution rules in Section 424(d) of the Code:

               i.   Ten percent (10%) or less of the total combined voting power
                                      -------                                   
                    of all classes of stock of the Company or an Affiliate, the
                    Option price per share of the Shares covered by each Option
                    shall not be less than one hundred percent (100%) of the
                    Fair Market Value per share of the Shares on the date of the
                    grant of the Option.

                                       5
<PAGE>
 
               ii.  More than ten percent (10%) of the total combined voting
                    power of all classes of stock of the Company or an
                    Affiliate, the Option price per share of the Shares covered
                    by each Option shall not be less than one hundred ten
                    percent (110%) of the said Fair Market Value on the date of
                    grant.

          c.   Term of Option:  For Participants who own

               i.   Ten percent (10%) or less of the total combined voting power
                                      -------                                   
                    of all classes of stock of the Company or an Affiliate, each
                    Option shall terminate not more than ten (10) years from the
                    date of the grant or at such earlier time as the Option
                    Agreement may provide.

               ii.  More than ten percent (10%) of the total combined voting
                    power of all classes of stock of the Company or an
                    Affiliate, each Option shall terminate not more than five
                    (5) years from the date of the grant or at such earlier time
                    as the Option Agreement may provide.

          d.   Limitation on Yearly Exercise:  The Option Agreements shall
               restrict the amount of Options which may be exercisable in any
               calendar year (under this or any other ISO plan of the Company or
               an Affiliate) so that the aggregate Fair Market Value (determined
               at the time each ISO is granted) of the stock with respect to
               which ISOs are exercisable for the first time by the Participant
               in any calendar year does not exceed one hundred thousand dollars
               ($100,000), provided that this subparagraph (d) shall have no
               force or effect if its inclusion in the Plan is not necessary for
               Options issued as ISOs to qualify as ISOs pursuant to Section
               422(d) of the Code.


7.   TERMS AND CONDITIONS OF STOCK GRANTS.
     ------------------------------------ 

  Each offer of a Stock Grant to a Participant shall state the date prior to
which the Stock Grant must be accepted by the Participant, and the principal
terms of each Stock Grant shall be set forth in a Stock Grant Agreement, duly
executed by the Company and, to the extent required by law or requested by the
Company, by the Participant.  The Stock Grant Agreement shall be in a form
approved by the Administrator and shall contain terms and conditions which the
Administrator determines to be appropriate and in the best interest of the
Company, subject to the following minimum standards:

     (a)  Each Stock Grant Agreement shall state the purchase price (per share),
          if any, of the Shares covered by each Stock Grant, which purchase
          price shall be determined by the Administrator but shall not be less
          than the minimum consideration required by the Delaware Law on the
          date of the grant of the Stock Grant;

                                       6
<PAGE>
 
     (b)  Each Stock Grant Agreement shall state the number of Shares to which
          the Stock Grant pertains; and

     (c)  Each Stock Grant Agreement shall include the terms of any right of the
          Company to reacquire the Shares subject to the Stock Grant, including
          the time and events upon which such rights shall accrue and the
          purchase price therefor, if any.


8.  EXERCISE OF OPTIONS AND ISSUE OF SHARES.
    --------------------------------------- 

  An Option (or any part or installment thereof) shall be exercised by giving
written notice to the Company at its principal executive office address,
together with provision for payment of the full purchase price in accordance
with this Paragraph for the Shares as to which the Option is being exercised,
and upon compliance with any other condition(s) set forth in the Option
Agreement.  Such written notice shall be signed by the person exercising the
Option, shall state the number of Shares with respect to which the Option is
being exercised and shall contain any representation required by the Plan or the
Option Agreement.  Payment of the purchase price for the Shares as to which such
Option is being exercised shall be made (a) in United States dollars in cash or
by check, or (b) at the discretion of the Administrator, through delivery of
shares of Common Stock having a Fair Market Value equal as of the date of the
exercise to the cash exercise price of the Option, or (c) at the discretion of
the Administrator, by having the Company retain from the shares otherwise
issuable upon exercise of the Option, a number of shares having a Fair Market
Value equal as of the date of exercise to the exercise price of the Option, or
(d) at the discretion of the Administrator, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the applicable Federal rate, as defined in Section 1274(d) of
the Code, or (e) at the discretion of the Administrator, in accordance with a
cashless exercise program established with a securities brokerage firm, and
approved by the Administrator, or (f) at the discretion of the Administrator, by
any combination of (a), (b), (c), (d) and (e) above. Notwithstanding the
foregoing, the Administrator shall accept only such payment on exercise of an
ISO as is permitted by Section 422 of the Code.

  The Company shall then reasonably promptly deliver the Shares as to which such
Option was exercised to the Participant (or to the Participant's Survivors, as
the case may be).  In determining what constitutes "reasonably promptly," it is
expressly understood that the issuance and delivery of the Shares may be delayed
by the Company in order to comply with any law or regulation (including, without
limitation, state securities or "blue sky" laws) which requires the Company to
take any action with respect to the Shares prior to their issuance.  The Shares
shall, upon delivery, be evidenced by an appropriate certificate or certificates
for fully paid, non-assessable Shares.

  The Administrator shall have the right to accelerate the date of exercise of
any installment of any Option; provided that the Administrator shall not
accelerate the exercise date of any installment of any Option granted to any Key
Employee as an ISO (and not previously converted into a  Non-Qualified Option
pursuant to Paragraph 26) if such acceleration would violate the 

                                       7
<PAGE>
 
annual vesting limitation contained in Section 422(d) of the Code, as
described in Paragraph 6.B.d.

  The Administrator may, in its discretion, amend any term or condition of an
outstanding Option provided (i) such term or condition as amended is permitted
by the Plan, (ii) any such amendment shall be made only with the consent of the
Participant to whom the Option was granted, or in the event of the death of the
Participant, the Participant's Survivors, if the amendment is adverse to the
Participant, and (iii) any such amendment of any ISO shall be made only after
the Administrator, after consulting the counsel for the Company, determines
whether such amendment would constitute a "modification" of any Option which is
an ISO (as that term is defined in Section 424(h) of the Code) or would cause
any adverse tax consequences for the holder of such ISO.


9.   ACCEPTANCE OF STOCK GRANT AND ISSUE OF SHARES.
     --------------------------------------------- 

  A Stock Grant (or any part or installment thereof) shall be accepted by
executing the Stock Grant Agreement and delivering it to the Company at its
principal office address, together with provision for payment of the full
purchase price, if any, in accordance with this Paragraph for the Shares as to
which such Stock Grant is being accepted, and upon compliance with any other
conditions set forth in the Stock Grant Agreement.  Payment of the purchase
price for the Shares as to which such Stock Grant is being accepted shall be
made (a) in United States dollars in cash or by check, or (b) at the discretion
of the Administrator, through delivery of shares of Common Stock having a fair
market value equal as of the date of acceptance of the Stock Grant to the
purchase price of the Stock Grant determined in good faith by the Administrator,
or (c) at the discretion of the Administrator, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the applicable Federal rate, as defined in Section 1274(d) of
the Code, or (d) at the discretion of the Administrator, by any combination of
(a), (b) and (c) above.

  The Company shall then reasonably promptly deliver the Shares as to which such
Stock Grant was accepted to the Participant (or to the Participant's Survivors,
as the case may be), subject to any escrow provision set forth in the Stock
Grant Agreement.  In determining what constitutes "reasonably promptly," it is
expressly understood that the issuance and delivery of the Shares may be delayed
by the Company in order to comply with any law or regulation (including, without
limitation, state securities or "blue sky" laws) which requires the Company to
take any action with respect to the Shares prior to their issuance.

  The Administrator may, in its discretion, amend any term or condition of an
outstanding Stock Grant or Stock Grant Agreement provided (i) such term or
condition as amended is permitted by the Plan, and (ii) any such amendment shall
be made only with the consent of the Participant to whom the Stock Grant was
made, if the amendment is adverse to the Participant.

                                       8
<PAGE>
 
10.  RIGHTS AS A SHAREHOLDER.
     ----------------------- 

  No Participant to whom a Stock Right has been granted shall have rights as a
shareholder with respect to any Shares covered by such Stock Right, except after
due exercise of the Option or acceptance of the Stock Grant and tender of the
full purchase price, if any, for the Shares being purchased pursuant to such
exercise or acceptance and registration of the Shares in the Company's share
register in the name of the Participant.


11.  ASSIGNABILITY AND TRANSFERABILITY OF STOCK RIGHTS.
     ------------------------------------------------- 

  By its terms, a Stock Right granted to a Participant shall not be transferable
by the Participant other than (i) by will or by the laws of descent and
distribution, or (ii) as otherwise determined by the Administrator and set forth
in the applicable Option Agreement or Stock Grant Agreement.  The designation of
a beneficiary of a Stock Right by a Participant shall not be deemed a transfer
prohibited by this Paragraph.  Except as provided above, a Stock Right shall
only be exercisable or may only be accepted, during the Participant's lifetime,
by such Participant (or by his or her legal representative) and shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar process.
Any attempted transfer, assignment, pledge, hypothecation or other disposition
of any Stock Right or of any rights granted thereunder contrary to the
provisions of this Plan, or the levy of any attachment or similar process upon a
Stock Right, shall be null and void.


12.  EFFECT ON OPTIONS OF TERMINATION OF SERVICE OTHER THAN FOR "CAUSE" OR DEATH
     ---------------------------------------------------------------------------
     OR DISABILITY.
     ------------- 

  Except as otherwise provided in the pertinent Option Agreement in the event of
a termination of service (whether as an employee, director or consultant) with
the Company or an Affiliate before the Participant has exercised an Option, the
following rules apply:

     a.   A Participant who ceases to be an employee, director or consultant of
          the Company or of an Affiliate (for any reason other than termination
          for "cause", Disability, or death for which events there are special
          rules in Paragraphs 13, 14, and 15, respectively), may exercise any
          Option granted to him or her to the extent that the Option is
          exercisable on the date of such termination of service, but only
          within such term as the Administrator has designated in the pertinent
          Option Agreement.

     b.   Except as provided in Subparagraph (c) below, or Paragraph 14 or 15,
          in no event may an Option Agreement provide, if an Option is intended
          to be an ISO, that the time for exercise be later than three (3)
          months after the Participant's termination of employment.

                                       9
<PAGE>
 
     c.   The provisions of this Paragraph, and not the provisions of Paragraph
          14 or 15, shall apply to a Participant who subsequently becomes
          Disabled or dies after the termination of employment, director status
          or consultancy, provided, however, in the case of a Participant's
          Disability or death within three (3) months after the termination of
          employment, director status or consultancy, the Participant or the
          Participant's Survivors may exercise the Option within one (1) year
          after the date of the Participant's termination of employment, but in
          no event after the date of expiration of the term of the Option.

     d.   Notwithstanding anything herein to the contrary, if subsequent to a
          Participant's termination of employment, termination of director
          status or termination of consultancy, but prior to the exercise of an
          Option, the Board of Directors determines that, either prior or
          subsequent to the Participant's termination, the Participant engaged
          in conduct which would constitute "cause", then such Participant shall
          forthwith cease to have any right to exercise any Option.

     e.   A Participant to whom an Option has been granted under the Plan who is
          absent from work with the Company or with an Affiliate because of
          temporary disability (any disability other than a permanent and total
          Disability as defined in Paragraph 1 hereof), or who is on leave of
          absence for any purpose, shall not, during the period of any such
          absence, be deemed, by virtue of such absence alone, to have
          terminated such Participant's employment, director status or
          consultancy with the Company or with an Affiliate, except as the
          Administrator may otherwise expressly provide.

     f.   Except as required by law or as set forth in the pertinent Option
          Agreement, Options granted under the Plan shall not be affected by any
          change of a Participant's status within or among the Company and any
          Affiliates, so long as the Participant continues to be an employee,
          director or consultant of the Company or any Affiliate.


13.  EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR "CAUSE".
     ------------------------------------------------------- 

  Except as otherwise provided in the pertinent Option Agreement, the following
rules apply if the Participant's service (whether as an employee, director or
consultant) with the Company or an Affiliate is terminated for "cause" prior to
the time that all his or her outstanding Options have been exercised:

     a.   All outstanding and unexercised Options as of the time the Participant
          is notified his or her service is terminated for "cause" will
          immediately be forfeited.

     b.   For purposes of this Plan, "cause" shall include (and is not limited
          to) dishonesty with respect to the Company or any Affiliate,
          insubordination, substantial malfeasance or non-feasance of duty,
          unauthorized disclosure of confidential 

                                       10
<PAGE>
 
          information, and conduct substantially prejudicial to the business of
          the Company or any Affiliate. The determination of the Administrator
          as to the existence of "cause" will be conclusive on the Participant
          and the Company.

     c.   "Cause" is not limited to events which have occurred prior to a
          Participant's termination of service, nor is it necessary that the
          Administrator's finding of "cause" occur prior to termination.  If the
          Administrator determines, subsequent to a Participant's termination of
          service but prior to the exercise of an Option, that either prior or
          subsequent to the Participant's termination the Participant engaged in
          conduct which would constitute "cause", then the right to exercise any
          Option is forfeited.

     d.   Any definition in an agreement between the Participant and the Company
          or an Affiliate, which contains a conflicting definition of "cause"
          for termination and which is in effect at the time of such
          termination, shall supersede the definition in this Plan with respect
          to such Participant.


14.  EFFECT ON OPTIONS OF TERMINATION OF SERVICE FOR DISABILITY.
     ---------------------------------------------------------- 

  Except as otherwise provided in the pertinent Option Agreement, a Participant
who ceases to be an employee, director or consultant of the Company or of an
Affiliate by reason of Disability may exercise any Option granted to such
Participant:

     a.   To the extent exercisable but not exercised on the date of Disability;
          and

     b.   In the event rights to exercise the Option accrue periodically, to the
          extent of a pro rata portion of any additional rights as would have
          accrued had the Participant not become Disabled prior to the end of
          the accrual period which next ends following the date of Disability.
          The proration shall be based upon the number of days of such accrual
          period prior to the date of Disability.

  A Disabled Participant may exercise such rights only within a period of not
more than one (1) year after the date of the Participant's termination of
employment, directorship or consultancy, as the case may be, notwithstanding
that the Participant might have been able to exercise the Option as to some or
all of the Shares on a later date if the Participant had not become disabled and
had continued to be an employee, director or consultant or, if earlier, within
the originally prescribed term of the Option.

  The Administrator shall make the determination both of whether Disability has
occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for
by the Company.

                                       11
<PAGE>
 
15.  EFFECT ON OPTIONS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
     -------------------------------------------------------------------- 

  Except as otherwise provided in the pertinent Option Agreement, in the event
of the death of a Participant while the Participant is an employee, director or
consultant of the Company or of an Affiliate, such Option may be exercised by
the Participant's Survivors:

     a.   To the extent exercisable but not exercised on the date of death; and

     b.   In the event rights to exercise the Option accrue periodically, to the
          extent of a pro rata portion of any additional rights which would have
          accrued had the Participant not died prior to the end of the accrual
          period which next ends following the date of death.  The proration
          shall be based upon the number of days of such accrual period prior to
          the Participant's death.

  If the Participant's Survivors wish to exercise the Option, they must take all
necessary steps to exercise the Option within one (1) year after the date of
death of such Participant, notwithstanding that the decedent might have been
able to exercise the Option as to some or all of the Shares on a later date if
he or she had not died and had continued to be an employee, director or
consultant or, if earlier, within the originally prescribed term of the Option.


16.  EFFECT OF TERMINATION OF SERVICE ON STOCK GRANTS.
     ------------------------------------------------ 

  In the event of a termination of service (whether as an employee, director or
consultant) with the Company or an Affiliate for any reason before the
Participant has accepted a Stock Grant, such offer shall terminate.

  For purposes of this Paragraph 16 and Paragraph 17 below, a Participant to
whom a Stock Grant has been offered under the Plan who is absent from work with
the Company or with an Affiliate because of temporary disability (any disability
other than a permanent and total Disability as defined in Paragraph 1 hereof),
or who is on leave of absence for any purpose, shall not, during the period of
any such absence, be deemed, by virtue of such absence alone, to have terminated
such Participant's employment, director status or consultancy with the Company
or with an Affiliate, except as the Administrator may otherwise expressly
provide.

  In addition, for purposes of this Paragraph 16 and Paragraph 17 below, any
change of employment or other service within or among the Company and any
Affiliates shall not be treated as a termination of employment, director status
or consultancy so long as the Participant continues to be an employee, director
or consultant of the Company or any Affiliate.

                                       12
<PAGE>
 
17.  EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE OTHER THAN FOR "CAUSE" OR
     --------------------------------------------------------------------------
     DEATH OR DISABILITY.
     ------------------- 

  Except as otherwise provided in the pertinent Stock Grant Agreement, in the
event of a termination of service (whether as an employee, director or
consultant), other than termination for "cause," Disability, or death for which
events there are special rules in Paragraphs 18, 19, and 20, respectively,
before all Company rights of repurchase shall have lapsed, then the Company
shall have the right to repurchase that number of Shares subject to a Stock
Grant as to which the Company's repurchase rights have not lapsed.


18.  EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE FOR "CAUSE".
     ------------------------------------------------------------ 

  Except as otherwise provided in the pertinent Stock Grant Agreement, the
following rules apply if the Participant's service (whether as an employee,
director or consultant) with the Company or an Affiliate is terminated for
"cause":

     a.   All Shares subject to any Stock Grant shall be immediately subject to
          repurchase by the Company at the purchase price, if any, thereof.

     b.   For purposes of this Plan, "cause" shall include (and is not limited
          to) dishonesty with respect to the employer, insubordination,
          substantial malfeasance or non-feasance of duty, unauthorized
          disclosure of confidential information, and conduct substantially
          prejudicial to the business of the Company or any Affiliate.  The
          determination of the Administrator as to the existence of "cause" will
          be conclusive on the Participant and the Company.

     c.   "Cause" is not limited to events which have occurred prior to a
          Participant's termination of service, nor is it necessary that the
          Administrator's finding of "cause" occur prior to termination.  If the
          Administrator determines, subsequent to a Participant's termination of
          service, that either prior or subsequent to the Participant's
          termination the Participant engaged in conduct which would constitute
          "cause," then the Company's right to repurchase all of such
          Participant's Shares shall apply.

     d.   Any definition in an agreement between the Participant and the Company
          or an Affiliate, which contains a conflicting definition of "cause"
          for termination and which is in effect at the time of such
          termination, shall supersede the definition in this Plan with respect
          to such Participant.

                                       13
<PAGE>
 
19.  EFFECT ON STOCK GRANTS OF TERMINATION OF SERVICE FOR DISABILITY.
     --------------------------------------------------------------- 

  Except as otherwise provided in the pertinent Stock Grant Agreement, the
following rules apply if a Participant ceases to be an employee, director or
consultant of the Company or of an Affiliate by reason of Disability:  to the
extent the Company's rights of repurchase have not lapsed on the date of
Disability, they shall be exercisable; provided, however, that in the event such
rights of repurchase lapse periodically, such rights shall lapse to the extent
of a pro rata portion of the Shares subject to such Stock Grant as would have
lapsed had the Participant not become Disabled prior to the end of the vesting
period which next ends following the date of Disability.  The proration shall be
based upon the number of days of such vesting period prior to the date of
Disability.

  The Administrator shall make the determination both of whether Disability has
occurred and the date of its occurrence (unless a procedure for such
determination is set forth in another agreement between the Company and such
Participant, in which case such procedure shall be used for such determination).
If requested, the Participant shall be examined by a physician selected or
approved by the Administrator, the cost of which examination shall be paid for
by the Company.


20.  EFFECT ON STOCK GRANTS OF DEATH WHILE AN EMPLOYEE, DIRECTOR OR CONSULTANT.
     ------------------------------------------------------------------------- 

  Except as otherwise provided in the pertinent Stock Grant Agreement, the
following rules apply in the event of the death of a Participant while the
Participant is an employee, director or consultant of the Company or of an
Affiliate:  to the extent the Company's rights of repurchase have not lapsed on
the date of death, they shall be exercisable; provided, however, that in the
event such rights of repurchase lapse periodically, such rights shall lapse to
the extent of a pro rata portion of the Shares subject to such Stock Grant as
would have lapsed had the Participant not died prior to the end of the vesting
period which next ends following the date of death.  The proration shall be
based upon the number of days of such vesting period prior to the Participant's
death.


21.  PURCHASE FOR INVESTMENT.
     ----------------------- 

  Unless the offering and sale of the Shares to be issued upon the particular
exercise or acceptance of a Stock Right shall have been effectively registered
under the Securities Act of 1933, as now in force or hereafter amended (the
"1933 Act"), the Company shall be under no obligation to issue the Shares
covered by such exercise unless and until the following conditions have been
fulfilled:

     a.   The person(s) who exercise(s) or accept(s) such Stock Right shall
          warrant to the Company, prior to the receipt of such Shares, that such
          person(s) are acquiring 

                                       14
<PAGE>
 
          such Shares for their own respective accounts, for investment, and not
          with a view to, or for sale in connection with, the distribution of
          any such Shares, in which event the person(s) acquiring such Shares
          shall be bound by the provisions of the following legend which shall
          be endorsed upon the certificate(s) evidencing their Shares issued
          pursuant to such exercise or such grant:

               "The shares represented by this certificate have been taken for
               investment and they may not be sold or otherwise transferred by
               any person, including a pledgee, unless (1) either (a) a
               Registration Statement with respect to such shares shall be
               effective under the Securities Act of 1933, as amended, or (b)
               the Company shall have received an opinion of counsel
               satisfactory to it that an exemption from registration under such
               Act is then available, and (2) there shall have been compliance
               with all applicable state securities laws."

     b.   At the discretion of the Administrator, the Company shall have
          received an opinion of its counsel that the Shares may be issued upon
          such particular exercise or acceptance in compliance with the 1933 Act
          without registration thereunder.


22.  DISSOLUTION OR LIQUIDATION OF THE COMPANY.
     ----------------------------------------- 

  Upon the dissolution or liquidation of the Company, all Options granted under
this Plan which as of such date shall not have been exercised and all Stock
Grants which have not been accepted will terminate and become null and void;
provided, however, that if the rights of a Participant or a Participant's
Survivors have not otherwise terminated and expired, the Participant or the
Participant's Survivors will have the right immediately prior to such
dissolution or liquidation to exercise or accept any Stock Right to the extent
that the Stock Right is exercisable or subject to acceptance as of the date
immediately prior to such dissolution or liquidation.


23.  ADJUSTMENTS.
     ----------- 

  Upon the occurrence of any of the following events, a Participant's rights
with respect to any Stock Right granted to him or her hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
pertinent Option Agreement or Stock Grant Agreement:

  A.  Stock Dividends and Stock Splits.  If (i) the shares of Common Stock shall
      --------------------------------                                          
be subdivided or combined into a greater or smaller number of shares or if the
Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, or (ii) additional shares or new or different shares
or other securities of the Company or other non-cash assets are distributed with
respect to such shares of Common Stock, the number of shares of Common Stock
deliverable upon the exercise or acceptance of such Stock Right may be
appropriately increased or decreased proportionately, and appropriate
adjustments may be made in the purchase price per share to reflect such events.
The number of Shares subject to the 

                                       15
<PAGE>
 
limitation in Paragraph 4(c) shall also be proportionately adjusted upon the
occurrence of such events.

  B.  Consolidations or Mergers.  If the Company is to be consolidated with or
      -------------------------                                               
acquired by another entity in a merger, sale of all or substantially all of the
Company's assets or otherwise (an "Acquisition"), the Administrator or the board
of directors of any entity assuming the obligations of the Company hereunder
(the "Successor Board"), shall, as to outstanding Options, either (i) make
appropriate provision for the continuation of such Options by substituting on an
equitable basis for the Shares then subject to such Options either the
consideration payable with respect to the outstanding shares of Common Stock in
connection with the Acquisition or securities of any successor or acquiring
entity; or (ii) upon written notice to the Participants, provide that all
Options must be exercised (either to the extent then exercisable or, at the
discretion of the Administrator, all Options being made fully exercisable for
purposes of this Subparagraph) at the end of which period the Options shall
terminate; or (iii) terminate all Options in exchange for a cash payment equal
to the excess of the Fair Market Value of the Shares subject to such Options
(either to the extent then exercisable or, at the discretion of the
Administrator, all Options being made fully exercisable for purposes of this
Subparagraph) over the exercise price thereof.

  With respect to outstanding Stock Grants, the Administrator or the Successor
Board, shall either (i) make appropriate provisions for the continuation of such
Stock Grants by substituting on an equitable basis for the Shares then subject
to such Stock Grants either the consideration payable with respect to the
outstanding Shares of Common Stock in connection with the Acquisition or
securities of any successor or acquiring entity; or (ii) upon written notice to
the Participants, provide that all Stock Grants must be accepted (to the extent
then subject to acceptance) within a specified number of days of the date of
such notice, at the end of which period the offer of the Stock Grants shall
terminate; or (iii) terminate all Stock Grants in exchange for a cash payment
equal to the excess of the Fair Market Value of the Shares subject to such Stock
Grants over the purchase price thereof, if any.  In addition, in the event of an
Acquisition, the Administrator may waive any or all Company repurchase rights
with respect to outstanding Stock Grants.

  C.  Recapitalization or Reorganization.  In the event of a recapitalization or
      ----------------------------------                                        
reorganization of the Company (other than a transaction described in
Subparagraph B above) pursuant to which securities of the Company or of another
corporation are issued with respect to the outstanding shares of Common Stock, a
Participant upon exercising or accepting a Stock Right shall be entitled to
receive for the purchase price, if any, paid upon such exercise or acceptance
the securities which would have been received if such Stock Right had been
exercised or accepted prior to such recapitalization or reorganization.

  D.  Modification of ISOs.  Notwithstanding the foregoing, any adjustments made
      --------------------                                                      
pursuant to Subparagraph A, B or C with respect to ISOs shall be made only after
the Administrator, after consulting with counsel for the Company, determines
whether such adjustments would constitute a "modification" of such ISOs (as that
term is defined in Section 424(h) of the Code) or would cause any adverse tax
consequences for the holders of such 

                                       16
<PAGE>
 
ISOs. If the Administrator determines that such adjustments made with respect to
ISOs would constitute a modification of such ISOs, it may refrain from making
such adjustments, unless the holder of an ISO specifically requests in writing
that such adjustment be made and such writing indicates that the holder has full
knowledge of the consequences of such "modification" on his or her income tax
treatment with respect to the ISO.


24.  ISSUANCES OF SECURITIES.
     ----------------------- 

  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 subject to Stock Rights.  Except as expressly
provided herein, no adjustments shall be made for dividends paid in cash or in
property (including without limitation, securities) of the Company prior to any
issuance of Shares pursuant to a Stock Right.


25.  FRACTIONAL SHARES.
     ----------------- 

  No fractional shares shall be issued under the Plan and the person exercising
a Stock Right shall receive from the Company cash in lieu of such fractional
shares equal to the Fair Market Value thereof.


26.  CONVERSION OF ISOs INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOs.
     ------------------------------------------------------------------ 

  The Administrator, at the written request of any Participant, may in its
discretion take such actions as may be necessary to convert such Participant's
ISOs (or any portions thereof) that have not been exercised on the date of
conversion into Non-Qualified Options at any time prior to the expiration of
such ISOs, regardless of whether the Participant is an employee of the Company
or an Affiliate at the time of such conversion.  Such actions may include, but
not be limited to, extending the exercise period or reducing the exercise price
of the appropriate installments of such Options.  At the time of such
conversion, the Administrator (with the consent of the Participant) may impose
such conditions on the exercise of the resulting Non-Qualified Options as the
Administrator in its discretion may determine, provided that such conditions
shall not be inconsistent with this Plan.  Nothing in the Plan shall be deemed
to give any Participant the right to have such Participant's ISOs converted into
Non-Qualified Options, and no such conversion shall occur until and unless the
Administrator takes appropriate action.  The Administrator, with the consent of
the Participant, may also terminate any portion of any ISO that has not been
exercised at the time of such conversion.

                                       17
<PAGE>
 
27.  WITHHOLDING.
     ----------- 

  In the event that any federal, state, or local income taxes, employment taxes,
Federal Insurance Contributions Act ("F.I.C.A.") withholdings or other amounts
are required by applicable law or governmental regulation to be withheld from
the Participant's salary, wages or other remuneration in connection with the
exercise or acceptance of a Stock Right or in connection with a Disqualifying
Disposition (as defined in Paragraph 28) or upon the lapsing of any right of
repurchase, the Company may withhold from the Participant's compensation, if
any, or may require that the Participant advance in cash to the Company, or to
any Affiliate of the Company which employs or employed the Participant, the
amount of such withholdings unless a different withholding arrangement,
including the use of shares of Common Stock or a promissory note, is authorized
by the Administrator (and permitted by law).  For purposes hereof, the fair
market value of the shares withheld for purposes of payroll withholding shall be
determined in the manner provided in Paragraph 1 above, as of the most recent
practicable date prior to the date of exercise.  If the fair market value of the
shares withheld is less than the amount of payroll withholdings required, the
Participant may be required to advance the difference in cash to the Company or
the Affiliate employer.  The Administrator in its discretion may condition the
exercise of an Option for less than the then Fair Market Value on the
Participant's payment of such additional withholding.


28.  NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.
     ---------------------------------------------- 

  Each Key Employee who receives an ISO must agree to notify the Company in
writing immediately after the Key Employee makes a Disqualifying Disposition of
any shares acquired pursuant to the exercise of an ISO.  A Disqualifying
Disposition is any disposition (including any sale) of such shares before the
later of (a) two years after the date the Key Employee was granted the ISO, or
(b) one year after the date the Key Employee acquired Shares by exercising the
ISO.  If the Key Employee has died before such stock is sold, these holding
period requirements do not apply and no Disqualifying Disposition can occur
thereafter.


29.  TERMINATION OF THE PLAN.
     ----------------------- 

  The Plan will terminate on 10 years after adoption, the date which is ten (10)
years from the earlier of the date of its adoption and the date of its approval
               -------                                                         
by the shareholders of the Company.  The Plan may be terminated at an earlier
date by vote of the shareholders of the Company; provided, however, that any
such earlier termination shall not affect any Option Agreements or Stock Grant
Agreements executed prior to the effective date of such termination.


30.  AMENDMENT OF THE PLAN AND AGREEMENTS.
     ------------------------------------ 

  The Plan may be amended by the shareholders of the Company.  The Plan may also
be amended by the Administrator, including, without limitation, to the extent
necessary to qualify 

                                       18
<PAGE>
 
any or all outstanding Stock Rights granted under the Plan or Stock Rights to be
granted under the Plan for favorable federal income tax treatment (including
deferral of taxation upon exercise) as may be afforded incentive stock options
under Section 422 of the Code, and to the extent necessary to qualify the shares
issuable upon exercise or acceptance of any outstanding Stock Rights granted, or
Stock Rights to be granted, under the Plan for listing on any national
securities exchange or quotation in any national automated quotation system of
securities dealers. Any amendment approved by the Administrator which the
Administrator determines is of a scope that requires shareholder approval shall
be subject to obtaining such shareholder approval. Any modification or amendment
of the Plan shall not, without the consent of a Participant, adversely affect
his or her rights under a Stock Right previously granted to him or her. With the
consent of the Participant affected, the Administrator may amend outstanding
Option Agreements and Stock Grant Agreements in a manner which may be adverse to
the Participant but which is not inconsistent with the Plan. In the discretion
of the Administrator, outstanding Option Agreements and Stock Grant Agreements
may be amended by the Administrator in a manner which is not adverse to the
Participant.


31.  EMPLOYMENT OR OTHER RELATIONSHIP.
     -------------------------------- 

  Nothing in this Plan or any Option Agreement or Stock Grant Agreement shall be
deemed to prevent the Company or an Affiliate from terminating the employment,
consultancy or director status of a Participant, nor to prevent a Participant
from terminating his or her own employment, consultancy or director status or to
give any Participant a right to be retained in employment or other service by
the Company or any Affiliate for any period of time.


32.  GOVERNING LAW.
     ------------- 

  This Plan shall be construed and enforced in accordance with the law of the
State of Delaware.

                                       19