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                           ROSETTA INPHARMATICS, INC.

                                 2000 STOCK PLAN

         1.  PURPOSES OF THE PLAN.  The purposes of this 2000 Stock Plan are
to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code and the
regulations promulgated thereunder.

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

             (a)  "ADMINISTRATOR" means the Board or its Committee appointed
pursuant to Section 4 of the Plan.

             (b)  "AFFILIATE" means an entity other than a Subsidiary (as
defined below) which, together with the Company, is under common control of a
third person or entity.

             (c)  "APPLICABLE LAWS" means the legal requirements relating to
the administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options are
granted under the Plan, as such laws, rules, regulations and requirements
shall be in place from time to time.

             (d)  "BOARD" means the Board of Directors of the Company.

             (e)  "CAUSE" for termination of a Participant's Continuous
Service Status will exist if the Participant is terminated for any of the
following reasons: (i) Participant's willful failure substantially to perform
his or her duties and responsibilities to the Company or deliberate violation
of a Company policy; (ii) Participant's commission of any act of fraud,
embezzlement, dishonesty or any other willful misconduct that has caused or
is reasonably expected to result in material injury to the Company; (iii)
unauthorized use or disclosure by Participant of any proprietary information
or trade secrets of the Company or any other party to whom the Participant
owes an obligation of nondisclosure as a result of his or her relationship
with the Company; or (iv) Participant's willful breach of any of his or her
obligations under any written agreement or covenant with the Company. The
determination as to whether a Participant is being terminated for Cause shall
be made in good faith by the Company and shall be final and binding on the
Participant. The foregoing definition does not in any way limit the Company's
ability to terminate a Participant's employment or consulting relationship at
any time as provided in Section 5(d) below, and the term "Company" will be
interpreted to include any Subsidiary, Parent, Affiliate or successor
thereto, if appropriate.

             (f)  "CHANGE OF CONTROL" means a sale of all or substantially
all of the Company's assets, or any merger or consolidation of the Company
with or into another

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corporation other than a merger or consolidation in which the holders of more
than 50% of the shares of capital stock of the Company outstanding
immediately prior to such transaction continue to hold (either by the voting
securities remaining outstanding or by their being converted into voting
securities of the surviving entity) more than 50% of the total voting power
represented by the voting securities of the Company, or such surviving
entity, outstanding immediately after such transaction.

             (g)  "CODE" means the Internal Revenue Code of 1986, as amended.

             (h)  "COMMITTEE" means one or more committees or subcommittees
of the Board appointed by the Board to administer the Plan in accordance with
Section 4 below.

             (i)  "COMMON STOCK" means the Common Stock of the Company.

             (j)  "COMPANY" means Rosetta Inpharmatics, Inc., a Delaware
corporation.

             (k)  "CONSULTANT" means any person, including an advisor, who is
engaged by the Company or any Parent, Subsidiary or Affiliate to render
services and is compensated for such services, and any director of the
Company whether compensated for such services or not.

             (l)  "CONTINUOUS SERVICE STATUS" means the absence of any
interruption or termination of service as an Employee or Consultant.
Continuous Service Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the
Company or between the Company, its Parents, Subsidiaries, Affiliates or
their respective successors. A change in status from an Employee to a
Consultant or from a Consultant to an Employee will not constitute an
interruption of Continuous Service Status.

             (m)  "CORPORATE TRANSACTION" means a sale of all or
substantially all of the Company's assets, or a merger, consolidation or
other capital reorganization of the Company with or into another corporation
and includes a Change of Control.

             (n)  "DIRECTOR" means a member of the Board.

             (o)  "EMPLOYEE" means any person employed by the Company or any
Parent, Subsidiary or Affiliate, with the status of employment determined
based upon such factors as are deemed appropriate by the Administrator in its
discretion, subject to any requirements of the Code or the Applicable Laws.
The payment by the Company of a director's fee to a Director shall not be
sufficient to constitute "employment" of such Director by the Company.

             (p)  "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.

             (q)  "FAIR MARKET VALUE" means, as of any date, the fair market
value of the Common Stock, as determined by the Administrator in good faith
on such basis as it deems

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appropriate and applied consistently with respect to Participants. Whenever
possible, the determination of Fair Market Value shall be based upon the
closing price for the Shares as reported in the WALL STREET JOURNAL for the
applicable date.

             (r)  "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable Option Agreement.

             (s)  "INVOLUNTARY TERMINATION" means termination of a
Participant's Continuous Service Status under the following circumstances:
(i) termination without Cause by the Company or a Subsidiary, Parent,
Affiliate or successor thereto, as appropriate; or (ii) voluntary termination
by the Participant within 30 days following (A) a material reduction in the
Participant's job responsibilities, provided that neither a mere change in
title alone nor reassignment following a Change of Control to a position that
is substantially similar to the position held prior to the Change of Control
shall constitute a material reduction in job responsibilities; (B) relocation
by the Company or a Subsidiary, Parent, Affiliate or successor thereto, as
appropriate, of the Participant's work site to a facility or location more
than 75 miles from the Participant's principal work site for the Company at
the time of the Change of Control; or (C) a reduction in Participant's
then-current base salary by at least 25%, provided that an across-the-board
reduction in the salary level of all other employees or consultants in
positions similar to the Participant's by the same percentage amount as part
of a general salary level reduction shall not constitute such a salary
reduction.

             (t)  "LISTED SECURITY" means any security of the Company that is
listed or approved for listing on a national securities exchange or
designated or approved for designation as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc.

             (u)  "NAMED EXECUTIVE" means any individual who, on the last day
of the Company's fiscal year, is the chief executive officer of the Company
(or is acting in such capacity) or among the four most highly compensated
officers of the Company (other than the chief executive officer). Such
officer status shall be determined pursuant to the executive compensation
disclosure rules under the Exchange Act.

             (v)  "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.

             (w)  "OPTION" means a stock option granted pursuant to the Plan.

             (x)  "OPTION AGREEMENT" means a written document, the form(s) of
which shall be approved from time to time by the Administrator, reflecting
the terms of an Option granted under the Plan and includes any documents
attached to or incorporated into such Option Agreement, including, but not
limited to, a notice of stock option grant and a form of exercise notice.

             (y)  "OPTION EXCHANGE PROGRAM" means a program approved by the
Administrator whereby outstanding Options are exchanged for Options with a
lower exercise

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price or are amended to decrease the exercise price as a result of a decline
in the Fair Market Value of the Common Stock.

             (z)  "OPTIONED STOCK" means the Common Stock subject to an
Option.

             (aa)  "OPTIONEE" means an Employee or Consultant who receives an
Option.

             (bb)  "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any
successor provision.

             (cc)  "PARTICIPANT" means any holder of one or more Options, or
the Shares issuable or issued upon exercise of such Options, under the Plan.

             (dd)  "PLAN" means this 2000 Stock Plan.

             (ee)  "REPORTING PERSON" means an officer, Director, or greater
than ten percent stockholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule
16a-3 under the Exchange Act.

             (ff)  "RULE 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, as amended from time to time, or any successor provision.

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

             (hh)  "STOCK EXCHANGE" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted
at any given time.

             (ii)  "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.

             (jj)  "TEN PERCENT HOLDER" means a person who owns stock
representing more than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary.

         3.  STOCK SUBJECT TO THE PLAN.  Subject to the provisions of Section
14 of the Plan, the maximum aggregate number of Shares that may be sold under
the Plan is 5,286,913 Shares of Common Stock, plus an annual increase on the
first day of each of the Company's fiscal years beginning in 2001 and ending
in 2009 equal to the lesser of (a) 1,200,000 Shares, (b) four (4%) percent of
the Shares outstanding on the last day of the immediately preceding fiscal
year, or (c) such lesser number of Shares as the Board shall determine. The
Shares may be authorized, but unissued, or reacquired Common Stock. If an
award should expire or become unexercisable for any reason without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares that were subject thereto shall, unless the
Plan shall have been terminated, become available for future grant under the
Plan. In addition, any Shares of Common Stock which are retained by the
Company upon exercise of an award in order to satisfy any withholding taxes
due with respect to such exercise or purchase shall be treated as not issued
and shall continue to be available under the Plan. Shares issued under the
Plan and later

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repurchased by the Company pursuant to any repurchase right which the Company
may have shall not be available for future grant under the Plan.

         4.  ADMINISTRATION OF THE PLAN.

             (a)  GENERAL.  The Plan shall be administered by the Board or a
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board
may authorize one or more officers to make awards under the Plan.

             (b)  COMMITTEE COMPOSITION.  If a Committee has been appointed
pursuant to this Section 4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of any Committee and appoint additional
members thereof, remove members (with or without cause) and appoint new
members in substitution therefor, fill vacancies (however caused) and remove
all members of a Committee and thereafter directly administer the Plan, all
to the extent permitted by the Applicable Laws and, in the case of a
Committee administering the Plan in accordance with the requirements of Rule
16b-3 or Section 162(m) of the Code, to the extent permitted or required by
such provisions.

             (c)  POWERS OF THE ADMINISTRATOR.  Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:

                  (i)     to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(q) of the Plan, provided that such
determination shall be applied consistently with respect to Participants
under the Plan;

                  (ii)    to select the Employees and Consultants to whom
Options may from time to time be granted;

                  (iii)   to determine whether and to what extent Options are
granted;

                  (iv)    to determine the number of Shares of Common Stock
to be covered by each award granted;

                  (v)     to approve the form(s) of agreement(s) used under
the Plan;

                  (vi)    to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder,
which terms and conditions include but are not limited to the exercise or
purchase price, the time or times when awards may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any
Option, Optioned Stock or restricted stock issued upon exercise of an Option,
based in each case on such factors as the Administrator, in its sole
discretion, shall determine;

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                  (vii)   to determine whether and under what circumstances
an Option may be settled in cash under Section 10(c) instead of Common Stock;

                  (viii)  to implement an Option Exchange Program on such
terms and conditions as the Administrator in its discretion deems
appropriate, provided that no amendment or adjustment to an Option that would
materially and adversely affect the rights of any Optionee shall be made
without the prior written consent of the Optionee;

                  (ix)    to adjust the vesting of an Option held by an
Employee or Consultant as a result of a change in the terms or conditions
under which such person is providing services to the Company;

                  (x)     to construe and interpret the terms of the Plan and
awards granted under the Plan, which constructions, interpretations and
decisions shall be final and binding on all Participants; and

                  (xi)    in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to Participants who
are foreign nationals or employed outside of the United States in order to
recognize differences in local law, tax policies or customs.

         5.  ELIGIBILITY.

             (a)  RECIPIENTS OF GRANTS.  Nonstatutory Stock Options may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees, provided that Employees of Affiliates shall not be
eligible to receive Incentive Stock Options.

             (b)  TYPE OF OPTION.  Each Option shall be designated in the
Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option.

             (c)  ISO $100,000 LIMITATION.  Notwithstanding any designation
under Section 5(b), to the extent that the aggregate Fair Market Value of
Shares with respect to which Options designated as Incentive Stock Options
are exercisable for the first time by any Optionee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(c), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market
Value of the Shares subject to an Incentive Stock Option shall be determined
as of the date of the grant of such Option.

             (d)  NO EMPLOYMENT RIGHTS.  The Plan shall not confer upon any
Participant any right with respect to continuation of an employment or
consulting relationship with the Company, nor shall it interfere in any way
with such Participant's right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without Cause.

         6.  TERM OF PLAN.  The Plan shall become effective upon its adoption
by the Board of Directors. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 16 of the Plan.

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         7.  TERM OF OPTION.  The term of each Option shall be the term
stated in the Option Agreement; provided that the term shall be no more than
ten years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to a person who at the time of such grant is a
Ten Percent Holder, the term of the Option shall be five years from the date
of grant thereof or such shorter term as may be provided in the Option
Agreement.

         8.  LIMITATION ON GRANTS TO EMPLOYEES.  Subject to adjustment as
provided in Section 14 below, the maximum number of Shares that may be
subject to Options granted to any one Employee under this Plan for any fiscal
year of the Company shall be 2,000,000, provided that this Section 8 shall
apply only after such time, if any, as the Common Stock becomes a Listed
Security.

         9.  OPTION EXERCISE PRICE AND CONSIDERATION.

             (a)  EXERCISE PRICE.  The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be such price as
is determined by the Administrator and set forth in the Option Agreement, but
shall be subject to the following:

                  (i)     In the case of an Incentive Stock Option

                          (A)  granted to an Employee who at the time of
grant is a Ten Percent Holder, the per Share exercise price shall be no less
than 110% of the Fair Market Value per Share on the date of grant; or

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

                  (ii)    In the case of a Nonstatutory Stock Option, the per
share Exercise Price shall be such price as determined by the Administrator,
provided that if such eligible person is a Named Executive of the Company at
the time of the Option grant, the per share Exercise Price shall be no less
than 100% of the Fair Market Value on the grant date if the Option is
intended to qualify as performance-based compensation under Section 162(m) of
the Code.

                  (iii)   Notwithstanding the foregoing, Options may be
granted with a per Share exercise price other than as required above pursuant
to a merger or other corporate transaction.

             (b)  PERMISSIBLE CONSIDERATION.  The consideration to be paid
for the Shares to be issued upon exercise of an Option, including the method
of payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash; (2) check; (3) delivery of Optionee's
promissory note with such recourse, interest, security and redemption
provisions as the Administrator determines to be appropriate (subject to the
provisions of Section 153 of the Delaware General Corporation Law); (4)
cancellation of indebtedness; (5) other Shares that have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares
as to which the Option is exercised, provided that in the case of Shares
acquired, directly or

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indirectly, from the Company, such Shares must have been owned by the
Optionee for more than six months on the date of surrender (or such other
period as may be required to avoid the Company's incurring an adverse
accounting charge); (6) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and a securities
broker approved by the Company shall require to effect exercise of the Option
and prompt delivery to the Company of the sale or loan proceeds required to
pay the exercise price and any applicable withholding taxes; or (7) any
combination of the foregoing methods of payment. In making its determination
as to the type of consideration to accept, the Administrator shall consider
if acceptance of such consideration may be reasonably expected to benefit the
Company and the Administrator may, in its sole discretion, refuse to accept a
particular form of consideration at the time of any Option exercise.

         10.  EXERCISE OF OPTION.

             (a)  GENERAL.

                  (i)     EXERCISABILITY.  Any Option granted hereunder shall
be exercisable at such times and under such conditions as determined by the
Administrator, consistent with the term of the Plan and reflected in the
Option Agreement, including vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee.

                  (ii)    MINIMUM EXERCISE REQUIREMENTS.  An Option may not
be exercised for a fraction of a Share. The Administrator may require that an
Option be exercised as to a minimum number of Shares, provided that such
requirement shall not prevent an Optionee from exercising the full number of
Shares as to which the Option is then exercisable.

                  (iii)   PROCEDURES FOR AND RESULTS OF EXERCISE.  An Option
shall be deemed exercised when written notice of such exercise has been given
to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and the Company has received full payment for
the Shares with respect to which the Option is exercised. Full payment may,
as authorized by the Administrator, consist of any consideration and method
of payment allowable under Section 9(b) of the Plan, provided that the
Administrator may, in its sole discretion, refuse to accept any form of
consideration at the time of exercise. Exercise of an Option in any manner
shall result in a decrease in the number of Shares that thereafter may be
available, both for purposes of the Plan and for sale under the Option, by
the number of Shares as to which the Option is exercised.

                  (iv)    RIGHTS AS STOCKHOLDER.  Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the Shares, no right to vote or
receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the stock certificate is issued, except as provided
in Section 14 of the Plan.

             (b)  TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
Except as otherwise set forth in this Section 10(b), the Administrator shall
establish and set forth in the applicable Option Agreement the terms and
conditions upon which an Option shall remain

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exercisable, if at all, following termination of an Optionee's Continuous
Service Status, which provisions may be waived or modified by the
Administrator at any time. To the extent that the Optionee is not entitled to
exercise an Option at the date of his or her termination of Continuous
Service Status, or if the Optionee (or other person entitled to exercise the
Option) does not exercise the Option to the extent so entitled within the
time specified in the Option Agreement or below (as applicable), the Option
shall terminate and the Optioned Stock underlying the unexercised portion of
the Option shall revert to the Plan. In no event may any Option be exercised
after the expiration of the Option term as set forth in the Option Agreement
(and subject to Section 7).

             The following provisions shall apply to the extent an Option
Agreement does not specify the terms and conditions upon which an Option
shall terminate upon termination of an Optionee's Continuous Service Status:

                  (i)     TERMINATION OTHER THAN UPON DISABILITY OR DEATH OR
FOR CAUSE.  In the event of termination of an Optionee's Continuous Service
Status, such Optionee may exercise an Option for 30 days following such
termination to the extent the Optionee was entitled to exercise it at the
date of such termination. No termination shall be deemed to occur and this
Section 10(b)(i) shall not apply if (i) the Optionee is a Consultant who
becomes an Employee, or (ii) the Optionee is an Employee who becomes a
Consultant.

                  (ii)    DISABILITY OF OPTIONEE.  In the event of
termination of an Optionee's Continuous Service Status as a result of his or
her disability (including a disability within the meaning of Section 22(e)(3)
of the Code), such Optionee may exercise an Option at any time within six
months following such termination to the extent the Optionee was entitled to
exercise it at the date of such termination.

                  (iii)   DEATH OF OPTIONEE.  In the event of the death of an
Optionee during the period of Continuous Service Status since the date of
grant of the Option, or within thirty days following termination of
Optionee's Continuous Service Status, the Option may be exercised by
Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance at any time within six months following the
date of death, but only to the extent of the right to exercise that had
accrued at the date of death or, if earlier, the date the Optionee's
Continuous Service Status terminated.

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

         11.  STOCK PURCHASE RIGHTS.

             (a)  RIGHTS TO PURCHASE.  When the Administrator determines that
it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer. The purchase price of Shares subject to Stock Purchase
Rights shall be as

                                      -9-
<PAGE>

determined by the Administrator. The offer to purchase Shares subject to
Stock Purchase Rights shall be accepted by execution of a Restricted Stock
Purchase Agreement in the form determined by the Administrator.

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

             (c)  OTHER PROVISIONS.  The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent
with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock Purchase
Agreements need not be the same with respect to each purchaser.

             (d)  RIGHTS AS A STOCKHOLDER.  Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered
upon the records of the duly authorized transfer agent of the Company. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Stock Purchase Right is exercised, except as
provided in Section 14 of the Plan.

         12.  TAXES.

             (a)  As a condition of the exercise of an Option granted under
the Plan, the Participant (or in the case of the Participant's death, the
person exercising the Option) shall make such arrangements as the
Administrator may require for the satisfaction of any applicable federal,
state, local or foreign withholding tax obligations that may arise in
connection with the exercise of the Option and the issuance of Shares. The
Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied. If the Administrator allows the withholding or
surrender of Shares to satisfy a Participant's tax withholding obligations
under this Section 12 (whether pursuant to Section 12(c), (d) or (e), or
otherwise), the Administrator shall not allow Shares to be withheld or
surrendered in an amount that exceeds the minimum statutory withholding rates
for federal and state tax purposes, including payroll taxes.

             (b)  In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to
satisfy such tax obligations from the next payroll payment otherwise payable
after the date of an exercise of the Option.

             (c)  This Section 12(c) shall apply only after the date, if any,
upon which the Common Stock becomes a Listed Security. In the case of
Participant other than an Employee (or in the case of an Employee where the
next payroll payment is not sufficient to satisfy such tax obligations, with
respect to any remaining tax obligations), in the absence of any other
arrangement and to the extent permitted under the Applicable Laws, the
Participant shall be

                                      -10-
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deemed to have elected to have the Company withhold from the Shares to be
issued upon exercise of the Option that number of Shares having a Fair Market
Value determined as of the applicable Tax Date (as defined below) equal to
the amount required to be withheld. For purposes of this Section 12, the Fair
Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "TAX DATE").

             (d)  If permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise
of an Option by surrendering to the Company Shares that have a Fair Market
Value determined as of the applicable Tax Date equal to the amount required
to be withheld. In the case of shares previously acquired from the Company
that are surrendered under this Section 12(d), such Shares must have been
owned by the Participant for more than six (6) months on the date of
surrender (or such other period of time as is required for the Company to
avoid adverse accounting charges).

             (e)  Any election or deemed election by a Participant to have
Shares withheld to satisfy tax withholding obligations under Section 12(c) or
(d) above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 12(d) above must
be made on or prior to the applicable Tax Date.

             (f)  In the event an election to have Shares withheld is made by
a Participant and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the Participant
shall receive the full number of Shares with respect to which the Option is
exercised but such Participant shall be unconditionally obligated to tender
back to the Company the proper number of Shares on the Tax Date.

         13.  NON-TRANSFERABILITY OF OPTIONS.  Except as set forth in this
Section 13, Options and Stock Purchase Rights may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than
by will or by the laws of descent or distribution; provided that the
Administrator may in its discretion grant transferable Nonstatutory Stock
Options pursuant to Option Agreements specifying the manner in which such
Nonstatutory Stock Options are transferable. The designation of a beneficiary
by an Optionee will not constitute a transfer. An Option or Stock Purchase
Right may be exercised, during the lifetime of the holder of Option or Stock
Purchase Right, only by such holder or a transferee permitted by this Section
13.

         14.  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN
OTHER TRANSACTIONS.

             (a)  CHANGES IN CAPITALIZATION.  Subject to any required action
by the stockholders of the Company, the number of Shares of Common Stock
covered by each outstanding Option, the numbers of Shares set forth in
Sections 3(a) and 8 above, and the number of Shares of Common Stock that have
been authorized for issuance under the Plan but as to which no Options have
yet been granted or that have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued Shares of Common Stock
resulting from a stock split, reverse stock split, stock

                                      -11-
<PAGE>

dividend, combination, recapitalization or reclassification of the Common
Stock, or any other increase or decrease in the number of issued Shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Administrator, whose
determination in that respect shall be final, binding and conclusive. Except
as expressly provided herein, no issuance by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of Shares of Common Stock subject to an Option.

             (b)  DISSOLUTION OR LIQUIDATION.  In the event of the
dissolution or liquidation of the Company, each Option will terminate
immediately prior to the consummation of such action, unless otherwise
determined by the Administrator.

             (c)  CORPORATE TRANSACTION; CHANGE OF CONTROL.  In the event of
a Corporate Transaction, each outstanding Option or Stock Purchase Right
shall be assumed or an equivalent option or right shall be substituted by
such successor corporation or a parent or subsidiary of such successor
corporation (the "SUCCESSOR CORPORATION"), unless the Successor Corporation
does not agree to assume the award or to substitute an equivalent option or
right, in which case such Option or Stock Purchase Right shall terminate upon
the consummation of the transaction.

             Notwithstanding the above, in the event of a Change of Control
and irrespective of whether outstanding awards are being assumed, substituted
or terminated in connection with the transaction, the vesting and
exercisability of each outstanding Option and Stock Purchase Right shall
accelerate such that the Options and Stock Purchase Rights shall become
vested and exercisable to the extent of 50% of the Shares then unvested, and
any repurchase right of the Company with respect to shares issued upon
exercise of an Option or Stock Purchase Right shall lapse as to 50% of the
Shares subject to such repurchase right prior to consummation of the Change
of Control, in each case effective as of immediately prior to consummation of
the transaction; provided, however, that in the event that the Successor
Corporation does not agree to assume the award or to substitute an equivalent
option or right, the vesting and exercisability of each outstanding Option
and Stock Purchase Right shall accelerate such that the Options and Stock
Purchase Rights shall become vested and exercisable to the extent of all of
the Shares then unvested, and any repurchase right of the Company with
respect to shares issued upon exercise of an Option or Stock Purchase Right
shall lapse as to all of the Shares subject to such repurchase right prior to
consummation of the Change of Control, in each case effective as of
immediately prior to consummation of the transaction. To the extent that an
Option or Stock Purchase Right is not exercised prior to consummation of a
Corporate Transaction in which the Option or Stock Purchase Right is not
being assumed or substituted, such Option or Stock Purchase Right shall
terminate upon such consummation.

             In addition, in the event a Participant holding an Option or
Stock Purchase Right assumed or substituted by the Successor Corporation in a
Change of Control, or holding Restricted Stock issued upon exercise of an
Option or Stock Purchase Right with respect to which the Successor
Corporation has succeeded to a repurchase right as a result of the Change of
Control, is Involuntarily Terminated by the Successor Corporation without
Cause in connection

                                      -12-
<PAGE>

with, or within twelve (12) months following consummation of, the
transaction, then any assumed or substituted Option or Stock Purchase Right
held by the terminated Participant at the time of termination shall
accelerate and become exercisable as to all of Shares, and any repurchase
right applicable to any Shares shall lapse as to all of Shares. The
acceleration of vesting and lapse of repurchase rights provided for in the
previous sentence shall occur immediately prior to the effective date of the
Participant's termination.

             For purposes of this Section 14(c), an Option shall be
considered assumed, without limitation, if, at the time of issuance of the
stock or other consideration upon a Corporate Transaction or a Change of
Control, as the case may be, each holder of an Option would be entitled to
receive upon exercise of the award the same number and kind of shares of
stock or the same amount of property, cash or securities as such holder would
have been entitled to receive upon the occurrence of the transaction if the
holder had been, immediately prior to such transaction, the holder of the
number of Shares of Common Stock covered by the award at such time (after
giving effect to any adjustments in the number of Shares covered by the
Option as provided for in this Section 14); provided that if such
consideration received in the transaction is not solely common stock of the
Successor Corporation, the Administrator may, with the consent of the
Successor Corporation, provide for the consideration to be received upon
exercise of the award to be solely common stock of the Successor Corporation
equal to the Fair Market Value of the per Share consideration received by
holders of Common Stock in the transaction.

             (d)  LIMITATION ON PAYMENTS.  In the event that the vesting
acceleration or lapse of a repurchase right provided for in Section 14(c)
above (x) constitutes "parachute payments" within the meaning of Section 280G
of the Code, and (y) but for this Section 14(d) would be subject to the
excise tax imposed by Section 4999 of the Code (or any corresponding
provisions of state income tax law), then such vesting acceleration or lapse
of a repurchase right shall be either

                  (A)  delivered in full, or

                  (B)  delivered as to such lesser extent which would result
in no portion of such severance benefits being subject to excise tax under
Code Section 4999,

             whichever amount, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Code Section 4999,
results in the receipt by the Participant on an after-tax basis of the
greater amount of acceleration or lapse of repurchase rights benefits,
notwithstanding that all or some portion of such benefits may be taxable
under Code Section 4999. Any determination required under this Section 14(d)
shall be made in writing by the Company's independent accountants, whose
determination shall be conclusive and binding for all purposes on the Company
and any affected Participant. In the event that (A) above applies, then the
Participant shall be responsible for any excise taxes imposed with respect to
such benefits. In the event that (B) above applies, then each benefit
provided hereunder shall be proportionately reduced to the extent necessary
to avoid imposition of such excise taxes.

             (e)  CERTAIN DISTRIBUTIONS.  In the event of any distribution to
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without
receipt of consideration by the Company, the Administrator

                                      -13-
<PAGE>

may, in its discretion, appropriately adjust the price per Share of Common
Stock covered by each outstanding Option to reflect the effect of such
distribution.

         15.  TIME OF GRANTING OPTIONS.  The date of grant of an Option
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by
the Administrator, provided that in the case of any Incentive Stock Option,
the grant date shall be the later of the date on which the Administrator
makes the determination granting such Incentive Stock Option or the date of
commencement of the Optionee's employment relationship with the Company.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.

         16.  AMENDMENT AND TERMINATION OF THE PLAN.

             (a)  AUTHORITY TO AMEND OR TERMINATE.  The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation (other than an adjustment pursuant to Section
14 above) shall be made that would materially and adversely affect the rights
of any Optionee under any outstanding grant, without his or her consent. In
addition, to the extent necessary and desirable to comply with the Applicable
Laws, the Company shall obtain stockholder approval of any Plan amendment in
such a manner and to such a degree as required.

             (b)  EFFECT OF AMENDMENT OR TERMINATION.  No amendment or
termination of the Plan shall materially and adversely affect Options already
granted, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
or holder and the Company.

         17.  CONDITIONS UPON ISSUANCE OF SHARES.  Notwithstanding any other
provision of the Plan or any agreement entered into by the Company pursuant
to the Plan, the Company shall not be obligated, and shall have no liability
for failure, to issue or deliver any Shares under the Plan unless such
issuance or delivery would comply with the Applicable Laws, with such
compliance determined by the Company in consultation with its legal counsel.
As a condition to the exercise of an Option, the Company may require the
person exercising the award to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without
any present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by law.

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

         19.  AGREEMENTS.  Options shall be evidenced by Option Agreements in
such form(s) as the Administrator shall from time to time approve.

         20.  STOCKHOLDER APPROVAL.  If required by the Applicable Laws,
continuance of the Plan shall be subject to approval by the stockholders of
the Company within twelve (12) months

                                      -14-
<PAGE>

before or after the date the Plan is adopted. Such stockholder approval shall
be obtained in the manner and to the degree required under the Applicable
Laws.
















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