<PAGE>   1
                                                                   EXHIBIT 10.10


                              SILICON VALLEY BANK
                              AMENDMENT TO LOAN AND
                               SECURITY AGREEMENT

BORROWER:            QLOGIC CORPORATION
ADDRESS:             3545 HARBOR BOULEVARD, P.O. BOX 5001
                     COSTA MESA, CALIFORNIA  92628

DATED AS OF: JULY 6, 1997

           THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT is entered into between
SILICON VALLEY BANK ("Silicon") and the borrower named above (the "Borrower").

           The parties agree to amend the Loan and Security Agreement between
them, dated March 31, 1994, as amended by that Amendment to Loan and Security
Agreement dated July 10, 1995 and as amended by that Amendment to Loan and
Security Agreement dated July 5, 1996 (as so amended and as otherwise amended
from time to time, the "Loan Agreement"), as follows, effective as of the date
hereof. (Capitalized terms used but not defined in this Amendment, shall have
the meanings set forth in the Loan Agreement.)

           1. AMENDED SCHEDULE. The Schedule to the Loan and Security Agreement
is amended effective on the date hereof, to read as set forth on the Amended
Schedule to Loan and Security Agreement attached hereto.

           2. MODIFIED SECTION 2.2A. If Borrower consummates an Additional
Equity Transaction (as defined below) on and after the date hereof, section 2.2A
of the Loan Agreement shall be deemed deleted, and all references in the Loan
Agreement to the Section 2.2A Condition shall be deemed of no force and effect.
"Additional Equity Transaction" means an equity financing transaction by the
Borrower from which it has received at least $20,000,000 in net proceeds.

           3. SECURITY INTEREST REFERENCES IN LOAN AGREEMENT; ETC. Upon the
consummation of the Additional Equity Transaction, and only upon the
consummation of the Additional Equity Transaction, Borrower and

           Silicon hereby agree that all references to the security interest or
lien of Silicon in the Collateral and related provisions are hereby deleted.
Further, it is understood that Silicon shall not be required to be named as loss
payee on the Borrower's insurance policies, nor are insurance payments relating
to the Collateral required to be forwarded to Silicon for payment of the
Obligations. Further, references in the Loan Agreement to remedies of Silicon on
and after an Event of Default that depend upon the existence of a security
interest in the Collateral in favor of Silicon at or prior to the occurrence of
an Event of Default are considered deleted, provided, however, nothing herein
affects or diminishes the rights of Silicon otherwise available as set forth in
the Loan Agreement or as available under law.

           4. FACILITY FEE. Borrower shall pay to Silicon concurrently herewith
a facility fee of $37,500, which shall be in addition to all interest and all
other fees payable to Silicon and shall be non-refundable.

           5. REPRESENTATIONS TRUE. Borrower represents and warrants to Silicon
that all representations and warranties set forth in the Loan Agreement, as
amended hereby, are true and correct.


           6. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Silicon and the Borrower, and
the other written documents and agreements between Silicon and the Borrower set
forth in full all of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with respect
to the subject hereof. Except




                                       2
<PAGE>   2

as herein expressly amended, all of the terms and provisions of the Loan
Agreement, and all other documents and agreements between Silicon and the
Borrower shall continue in full force and effect and the same are hereby
ratified and confirmed.

   BORROWER:                                  SILICON:

   QLOGIC CORPORATION                         SILICON VALLEY BANK


   BY /s/ TOM ANDERSON                        BY /s/ MICHAEL QUAIN             
     ----------------------------------          ------------------------------
           PRESIDENT OR VICE PRESIDENT        TITLE VICE PRESIDENT              

   BY /s/ MICHAEL MANNING            
      ---------------------------------
           SECRETARY OR ASS'T SECRETARY



                                       3
<PAGE>   3

                             SILICON LOAN DOCUMENTS


     SCHEDULE TO LOAN AND SECURITY AGREEMENT  -.S.

                                       -1-

<PAGE>   4


SILICON VALLEY BANK

                                   SCHEDULE TO

                           LOAN AND SECURITY AGREEMENT

BORROWER:            QLOGIC CORPORATION
ADDRESS:             3545 HARBOR BOULEVARD, P.O. BOX 5001
                     COSTA MESA, CALIFORNIA  92628

DATED AS OF:         JULY 6, 1997
CREDIT LIMIT
(Section 1.1):                  PRIOR TO THE CONSUMMATION OF THE ADDITIONAL 
                                EQUITY TRANSACTION (AS DEFINED IN PARAGRAPH 5 OF
                                SECTION 4.1 BELOW):

                                An amount not to exceed the lesser of:

                                (i) $7,500,000 at any one time outstanding; OR

                                (ii) 80% of the Net Amount of Borrower's
                                accounts, which Silicon in its discretion deems
                                eligible for borrowing;

                                Provided, however, that the minimum amount of a
                                Loan shall be $100,000;

                                "Net Amount" of an account means the gross
                                amount of the account, minus all applicable
                                sales, use, excise and other similar taxes and
                                minus all discounts, credits and allowances of
                                any nature granted or claimed.

                                Without limiting the fact that the determination
                                of which accounts are eligible for borrowing is
                                a matter of Silicon's discretion, the following
                                will not be deemed eligible for borrowing:
                                accounts outstanding for more than 90 days from
                                the invoice date, accounts subject to any
                                contingencies, accounts owing from one account
                                debtor to the extent they exceed 25% of the
                                total eligible accounts outstanding, accounts
                                owing from an affiliate of Borrower, and
                                accounts owing from an account debtor to whom
                                Borrower is or may be liable for goods purchased
                                from such account debtor or otherwise. In
                                addition, if more than 50% of the accounts owing
                                from an account debtor are outstanding more than
                                90 days from the invoice date or are otherwise
                                not eligible accounts, then all accounts owing
                                from that account debtor will be deemed
                                ineligible for borrowing.

                                ON AND AFTER THE CONSUMMATION OF THE ADDITIONAL
                                EQUITY TRANSACTION:

                                An amount not to exceed $7,500,000;

                                Provided, however, that the minimum amount of a
                                Loan shall be $100,000;

LETTER OF CREDIT SUBLIMIT       Silicon, in its reasonable discretion, will from
                                time to time during the term of this Agreement
                                issue letters of credit for the account of the
                                Borrower ("Letters of Credit"), in an aggregate
                                amount at any one time outstanding not to exceed
                                $3,000,000, upon the request of the Borrower,
                                provided that, on the date the Letters of Credit
                                are to be issued, Borrower has available to it
                                Loans in an amount equal to or greater than the
                                face amount of the Letters of Credit to be
                                issued. Prior to the issuance of any Letters of
                                Credit, Borrower shall execute and deliver to
                                Silicon Applications for Letters of Credit and
                                such other documentation as Silicon shall
                                specify (the "Letter of Credit Documentation").
                                Fees for the Letters of Credit shall be as
                                provided in the Letter of Credit Documentation.
                                
                                The Credit Limit set forth above and the Loans
                                available under this Agreement at any time shall
                                be reduced by the face amount of Letters of
                                Credit from time to time outstanding.

INTEREST RATE (Section 1.2):    A rate equal to the "Prime Rate" in effect from 
                                time to time. Interest shall be calculated on
                                the basis of a 360-day year for the actual
                                number of days elapsed. "Prime Rate" means the
                                rate announced from time to time by Silicon as
                                its "prime 



                                       -1-
<PAGE>   5

SILICON VALLEY BANK                  SCHEDULE TO LOAN AND SECURITY AGREEMENT  

                                rate;" it is a base rate upon which other rates
                                charged by Silicon are based, and it is not
                                necessarily the best rate available at Silicon.
                                The interest rate applicable to the Obligations
                                shall change on each date there is a change in
                                the Prime Rate.

LOAN ORIGINATION FEE
(Section 1.3):                  See Amendment to Loan Agreement of even date 
                                herewith.

MATURITY DATE
(Section 5.1):                  JULY 5, 1998.

PRIOR NAMES OF BORROWER
(Section 3.2):                  EMULEX MICRO DEVICES (EMD) A DIVISION OF EMULEX
                                CORPORATION

TRADE NAMES OF BORROWER
(Section 3.2):                  NONE

OTHER LOCATIONS AND ADDRESSES      
(Section 3.3):                  5589 WINFIELD BLVD., SUITE 204, SAN JOSE, 
                                CA 95123
                                150 INDUSTRIAL AVE. EAST, SUITE 39, 
                                LOWELL, MA 01852


MATERIAL ADVERSE LITIGATION
(Section 3.10):                 NONE

NEGATIVE COVENANTS-EXCEPTIONS      
(Section 4.6):                  Without Silicon's prior written consent, 
                                Borrower may do the following, provided that,
                                after giving effect thereto, no Event of Default
                                has occurred and no event has occurred which,
                                with notice or passage of time or both, would
                                constitute an Event of Default, and provided
                                that the following are done in compliance with
                                all applicable laws, rules and regulations: (i)
                                repurchase shares of Borrower's stock pursuant
                                to any employee stock purchase or benefit plan,
                                provided that the total amount paid by Borrower
                                for such stock does not exceed $1,000,000 in any
                                fiscal year and (ii) make employee loans in an
                                aggregate amount outstanding at any time not to
                                exceed $50,000.

FINANCIAL COVENANTS
(Section                        4.1): Borrower shall comply with all of the 
                                following covenants. Compliance shall be
                                determined as of the end of each quarter, except
                                as otherwise specifically provided below:

      QUICK ASSET RATIO:        Borrower shall maintain a ratio of "Quick 
                                Assets" to current liabilities of not less than 
                                1.50 to 1.

      TANGIBLE NET WORTH:       Borrower shall maintain a tangible net worth of 
                                not less than $23,000,000.

      DEBT TO TANGIBLE
      NET WORTH RATIO:          Borrower shall maintain a ratio of total 
                                liabilities to tangible net worth of not more
                                than 1.00 to 1.

      PROFITABILITY             Borrower shall not incur a loss (after taxes) 
                                for any fiscal quarter during the term hereof,
                                other than for a loss (after taxes) in a single
                                fiscal quarter which loss (after taxes) may not
                                exceed $750,000; and Borrower shall not incur a
                                loss (after taxes) for any fiscal year.

      DEFINITIONS:              "Current assets," and "current liabilities" 
                                shall have the meanings ascribed to them in
                                accordance with generally accepted accounting
                                principles. 

                                "Tangible net worth" means the excess of total
                                assets over total liabilities, determined in
                                accordance with generally accepted accounting
                                principles, excluding however all assets which
                                would be classified as intangible assets under
                                generally accepted accounting principles,
                                including without limitation goodwill, licenses,
                                patents, trademarks, trade names, copyrights,
                                capitalized software and organizational costs,
                                licenses and franchises.

                                "Quick Assets" means cash on hand or on deposit
                                in banks, readily marketable securities issued
                                by the United States, readily marketable
                                commercial paper rated "A-1" by Standard &
                                Poor's Corporation (or a similar rating by a
                                similar rating organization), certificates of
                                deposit and banker's acceptances, and accounts
                                receivable (net of allowance for doubtful
                                accounts).



                                       -2-
<PAGE>   6

SILICON VALLEY BANK                  SCHEDULE TO LOAN AND SECURITY AGREEMENT  

      DEFERRED REVENUES:        For purposes of the above quick asset ratio
                                deferred revenues shall not be counted as
                                current liabilities. For purposes of the above
                                debt to tangible net worth ratio, deferred
                                revenues shall not be counted in determining
                                total liabilities but shall be counted in
                                determining tangible net worth for purposes of
                                such ratio. For all other purposes deferred
                                revenues shall be counted as liabilities in
                                accordance with generally accepted accounting
                                principles.

      SUBORDINATED DEBT:        "Liabilities" for purposes of the foregoing 
                                covenants do not include indebtedness which is
                                subordinated to the indebtedness to Silicon
                                under a subordination agreement in form
                                specified by Silicon or by language in the
                                instrument evidencing the indebtedness which is
                                acceptable to Silicon.

OTHER COVENANTS
(Section 4.1):                  Borrower shall at all times comply with all of 
                                the following additional covenants:

                                1. BANKING RELATIONSHIP. Borrower shall at all
                                times maintain its primary banking relationship
                                with Silicon, provided that the foregoing shall
                                not restrict the Borrower's establishment of
                                investment accounts at other institutions.

                                2. MONTHLY BORROWING BASE CERTIFICATE AND
                                LISTING. At all times that any Loans are
                                outstanding, within 20 days after the end of
                                each month, Borrower shall provide Silicon with
                                a Borrowing Base Certificate in such form as
                                Silicon shall specify, and an aged listing of
                                Borrower's accounts receivable. At such times
                                that Borrower is requesting a Loan when no Loans
                                are then outstanding, Borrower shall provide to
                                Silicon a Borrowing Base Certificate in such
                                form as Silicon shall specify, and an aged
                                listing of Borrower's accounts within five (5)
                                days of Silicon's making of any such Loan.
                                Notwithstanding the foregoing, on and after the
                                consummation of the Additional Equity
                                Transaction (as defined in paragraph 5 below),
                                Borrower shall not be required to submit to
                                Silicon any of the documentation referred to in
                                this paragraph, regardless of the outstanding
                                Loan status.

                                3. INDEBTEDNESS. Without limiting any of the
                                foregoing terms or provisions of this Agreement,
                                Borrower shall not in the future incur
                                indebtedness for borrowed money, except for (i)
                                indebtedness to Silicon, (ii) indebtedness
                                incurred in the future for the purchase price of
                                or lease of equipment in an aggregate amount not
                                exceeding $3,500,000 on an annual basis, and
                                (iii) the creation of trade payable obligations
                                in the ordinary course of business.

                                4. SEC FILINGS AND COMMUNICATIONS. Without
                                limitation of the provisions of Section 3.7
                                hereof, Borrower agrees to provide to Silicon
                                all filings made with the Securities and
                                Exchange Commission (the "SEC"), and copies of
                                all notices or other communication from the SEC,
                                within 5 days of such filing or receipt of such
                                notice or other communication.

                                5. UCC-1 NOT TO BE FILED ABSENT DEFAULT. Silicon
                                shall not file the UCC-1 Financing Statements
                                provided to Silicon unless any Obligations are
                                outstanding and an Event of Default has
                                occurred, provided that upon the consummation of
                                the Additional Equity Transaction (as defined
                                below), Silicon agrees that such UCC-1 Financing
                                Statements shall be returned to the Borrower and
                                shall be deemed terminated.

                                "Additional Equity Transaction" means an equity
                                financing transaction by the Borrower from which
                                it has received at least $20,000,000 in net
                                proceeds.

                                6. COLLATERAL ASSIGNMENT REGARDING INTELLECTUAL
                                PROPERTY COLLATERAL. Borrower has executed and
                                delivered to Silicon three originals of
                                Silicon's standard form of security agreement
                                relating to Collateral consisting of
                                intellectual property items, which form is
                                entitled "Collateral Assignment, Patent Mortgage
                                and Security Agreement" (the "Copyright
                                Assignment"), provided that Silicon agrees not
                                to record the Copyright Assignment with the
                                United States Patent and Trademark office or
                                with the United States Copyright office until an
                                Event of Default has occurred and any
                                Obligations are outstanding, provided, further,
                                it is understood and agreed that the terms and
                                provisions of the Copyright Assignment shall not
                                be considered to be effective until the
                                satisfaction of the Section 2.2A Condition. In
                                connection therewith, at such time that Silicon
                                seeks to so record such agreement, Borrower
                                agrees to effect registration with the United
                                States Copyright office of Collateral consisting
                                of copyrightable subject matter in accordance
                                with the provisions set forth in the Copyright
                                Assignment, and, without limitation of the other
                                obligations of Borrower herein and therein, to
                                take all other actions in order to assist
                                Silicon in the perfection of its security
                                interest in such items of Collateral.
                                Notwithstanding the foregoing, it is understood
                                and agreed that upon the 

                                      -3-

<PAGE>   7

SILICON VALLEY BANK                  SCHEDULE TO LOAN AND SECURITY AGREEMENT  

                                consummation of an Additional Equity Transaction
                                the Copyright Assignment shall be returned to
                                the Borrower and shall be deemed terminated.

                                7. NEGATIVE PLEDGE. Except as otherwise
                                permitted hereunder (including without
                                limitation the incurrence of Permitted Liens as
                                set forth in Section 3.4 of this Agreement),
                                Borrower shall not hereafter grant a security
                                interest in any of its present or future
                                Collateral, other than for liens on capital
                                equipment relating to obligations incurred
                                pursuant to paragraph 3 above.

   BORROWER:

   QLOGIC CORPORATION



BY:   /s/ THOMAS R. ANDERSON
      ---------------------------------
      PRESIDENT OR VICE PRESIDENT




BY:   /s/ MICHAEL R. MANNING
      ---------------------------------
      SECRETARY OR ASS'T SECRETARY




   SILICON:

   SILICON VALLEY BANK


BY:   /s/ MICHAEL P. QUAIN
      ---------------------------------
      VICE PRESIDENT


                                      -4-

<PAGE>   8

                                             SILICON LOAN DOCUMENTS


   CERTIFIED RESOLUTION  -.R


                                      -1-

<PAGE>   9

SILICON VALLEY BANK

CERTIFIED RESOLUTION

BORROWER:      QLOGIC CORPORATION, A CORPORATION 
               ORGANIZED UNDER THE LAWS OF THE STATE OF
               DELAWARE

ADDRESS:       3545 HARBOR BOULEVARD, P.O. BOX 5001
               COSTA MESA, CALIFORNIA  92628

DATED AS OF:   JULY 6, 1997

           I, the undersigned, Secretary or Assistant Secretary of the
above-named borrower, a corporation organized under the laws of the state set
forth above, do hereby certify that the following is a full, true and correct
copy of resolutions duly and regularly adopted by the Board of Directors of said
corporation as required by law, and by the by-laws of said corporation, and that
said resolutions are still in full force and effect and have not been in any way
modified, repealed, rescinded, amended or revoked.

      RESOLVED, that this corporation borrow from Silicon Valley Bank
      ("Silicon"), from time to time, such sum or sums of money as, in the
      judgment of the officer or officers hereinafter authorized hereby, this
      corporation may require.

      RESOLVED FURTHER, that any officer of this corporation be, and he or she
      is hereby authorized, directed and empowered, in the name of this
      corporation, to execute and deliver to Silicon, and Silicon is requested
      to accept, the loan agreements, security agreements, notes, financing
      statements, and other documents and instruments providing for such loans
      and evidencing and/or securing such loans, with interest thereon, and said
      authorized officers are authorized from time to time to execute renewals,
      extensions and/or amendments of said loan agreements, security agreements,
      and other documents and instruments.

      RESOLVED FURTHER, that said authorized officers be and they are hereby
      authorized, directed and empowered, as security for any and all
      indebtedness of this corporation to Silicon, whether arising pursuant to
      this resolution or otherwise, to grant, transfer, pledge, mortgage,
      assign, or otherwise hypothecate to Silicon, or deed in trust for its
      benefit, any property of any and every kind, belonging to this
      corporation, including, but not limited to, any and all real property,
      accounts, inventory, equipment, general intangibles, instruments,
      documents, chattel paper, notes, money, deposit accounts, furniture,
      fixtures, goods, and other property of every kind, and to execute and
      deliver to Silicon any and all grants, transfers, trust receipts, loan or
      credit agreements, pledge agreements, mortgages, deeds of trust, financing
      statements, security agreements and other hypothecation agreements, which
      said instruments and the note or notes and other instruments referred to
      in the preceding paragraph may contain such provisions, covenants,
      recitals and agreements as Silicon may require and said authorized
      officers may approve, and the execution thereof by said authorized
      officers shall be conclusive evidence of such approval.

      RESOLVED FURTHER, that Silicon may conclusively rely upon a certified copy
      of these resolutions and a certificate of the Secretary or Ass't Secretary
      of this corporation as to the officers of this corporation and their
      offices and signatures, and continue to conclusively rely on such
      certified copy of these resolutions and said certificate for all past,
      present and future transactions until written notice of any change hereto
      or thereto is given to Silicon by this corporation by certified mail,
      return receipt requested.


<PAGE>   10

SILICON VALLEY BANK                            LOAN AND SECURITY AGREEMENT

           The undersigned further hereby certifies that the following persons
are the duly elected and acting officers of the corporation named above as
borrower and that the following are their actual signatures:

<TABLE>
<CAPTION>
NAMES                         OFFICE(S)                ACTUAL SIGNATURES
-----                         ---------                -----------------
<S>                           <C>                      <C>

________________________      ______________________   X________________________

________________________      ______________________   X________________________

________________________      ______________________   X________________________

________________________      ______________________   X________________________

</TABLE>

           IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or
Assistant Secretary on the date set forth above.

                                            --------------------------------
                                            Secretary or Assistant Secretary

                                       3

<PAGE>   11

           2.7 GRANT DATE. "Grant Date" means the first day of each Offering
Period (February 1, May 1, August 1 and November 1) under the Plan. However, for
the first Offering Period, the Grant Date shall be the Effective Date.

           2.8 OFFERING PERIOD. "Offering Period" means the three-month periods
from February 1 through April 30, May 1 through July 31, August 1 through
October 31, and November 1 through January 31 of each calendar year. The first
Offering Period shall commence on the Effective Date and end October 31, 1998.

           2.9 5% OWNER. "5% Owner" means an Employee who, immediately after the
grant of any rights under the Plan, would own Company Stock or hold outstanding
options to purchase Company Stock possessing 5% or more of the total combined
voting power of all classes of stock of the Company. For purposes of this
Section, the ownership attribution rules of Code Section 425(d) shall apply.

           2.10 PARTICIPANT. "Participant" means an Employee who has satisfied
the eligibility requirements of Section 3.1 and has become a participant in the
Plan in accordance with Section 3.2.

           2.11 PURCHASE DATE. "Purchase Date" means the last day of each
Offering Period (April 30, July 31, October 31, or January 31).

                                    ARTICLE 3

                          ELIGIBILITY AND PARTICIPATION

           3.1 ELIGIBILITY. Each Employee of the Company, or any Designated
Subsidiary, who has attained age eighteen (18) on the Entry Date and who
regularly works at least 30 hours per week for more than five months per year in
the rendition of personal services to the Company may become a Participant in
the Plan on the Entry Date coincident with or next following his satisfaction of
such requirements of employment with the Company.

           3.2 PARTICIPATION. An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Administrator of the Company of a stock purchase
agreement provided by the Company (the "Stock Purchase Agreement") authorizing
payroll deductions. Payroll deductions for a Participant shall commence on the
Entry Date coincident with or next following the filing of the Participant's
Stock Purchase Agreement and shall remain in effect until revoked by the
Participant by the filing of a notice of withdrawal from the Plan under Article
8 or by the filing of a new Stock Purchase Agreement providing for a change in
the Participant's payroll deduction rate under Section 5.2.

           3.3 SPECIAL RULES. Under no circumstances shall:

                     a. A 5% Owner be granted an option to purchase Company
Stock under the Plan;

                     b. A Participant be entitled to purchase Company Stock
under the Plan which, when aggregated with all other employee stock purchase
plans of the Company, exceed an amount equal to the Aggregate Maximum.
"Aggregate Maximum" means an amount equal to $25,000 worth of Company Stock
(determined using the fair market value of such Company Stock at each applicable
Grant Date) during each calendar year; or

                     c. The number of shares of Company Stock purchasable by a
Participant in any calendar year shall not exceed 5,000 shares, subject to
periodic adjustments under Section 10.4.


                                       5

<PAGE>   12

                                    ARTICLE 4

                                OFFERING PERIODS

           4.1 OFFERING PERIODS. The initial grant of the right to purchase
Company Stock under the Plan shall occur on the Effective Date and terminate on
October 31, 1998. Thereafter, the Plan shall provide for Offering Periods
commencing on each Grant Date and terminating on the next following Purchase
Date.

                                    ARTICLE 5

                               PAYROLL DEDUCTIONS

           5.1 PARTICIPANT ELECTION. Upon completion of the Stock Purchase
Agreement, each Participant shall designate the amount of payroll deductions to
be made from his or her paycheck to purchase Company Stock under the Plan. The
amount of payroll deductions shall be designated in whole percentages of
Compensation, not to exceed 10%, which percentage may be increased or decreased
from time to time in the discretion of the Administrator, but in no event shall
the maximum amount be increased to an amount in excess of 15% of Compensation.
The amount so designated upon the Stock Purchase Agreement shall be effective as
of the next Grant Date and shall continue until terminated or altered in
accordance with Section 5.2 below.

           5.2 CHANGES IN ELECTION. Any Participant may change any election
(increase or decrease the rate of payroll deductions) under this Section one
time during any Offering Period by completing and delivering to the
Administrator a new Stock Purchase Agreement setting forth the desired change at
least 15 days prior to the end of the Offering Period. A Participant may
terminate participation in the Plan at any time prior to the close of an
Offering Period as provided in Article 8. A Participant may also terminate
payroll deductions and have accumulated deductions for the Offering Period
applied to the purchase of Company Stock as of the next Purchase Date by
completing and delivering to the Administrator a new Stock Purchase Agreement
setting forth the desired change. Any change under this Section shall become
effective on the next payroll period (to the extent practical under the
Company's payroll practices) following the delivery of the new Stock Purchase
Agreement.

           5.3 PARTICIPANT ACCOUNTS. The Company shall establish and maintain a
separate account ("Account") for each Participant. The amount of each
Participant's payroll deductions shall be credited to his Account. Subject to
Section 11.2, no interest will be paid or allowed on amounts credited to a
Participant's Account. All payroll deductions received by the Company under the
Plan are general corporate assets of the Company and may be used by the Company
for any corporate purpose. The Company is not obligated to segregate such
payroll deductions.

                                    ARTICLE 6

                                 GRANT OF OPTION

           6.1 OPTION TO PURCHASE SHARES. On each Grant Date, each Participant
shall be granted an option to purchase at the price determined under Section 6.2
that number of shares and partial shares of Company Stock that can be purchased
or issued by the Company based upon that price with the amounts held in his
Account, subject to the limits set forth in Section 3.3. In the event that there
are amounts held in a Participant's Account that are not used to purchase
Company Stock, such amounts shall remain in the Participant's Account and shall
be eligible to purchase Company Stock in any subsequent Offering Period.

           6.2 PURCHASE PRICE. The purchase price for any Offering Period shall
be the lesser of:


                                       6
<PAGE>   13

                     a. 85% of the Fair Market Value of Company Stock on the
Grant Date; or

                     b. 85% of the Fair Market Value of Company Stock on the
Purchase Date.

           6.3 FAIR MARKET VALUE. "Fair Market Value" shall mean the value of
one share of Company Stock, determined as follows:

                     a. If the Company Stock is then listed or admitted to
trading on the Nasdaq National Market System or a stock exchange which reports
closing sale prices, the Fair Market Value shall be the closing sale price on
the date of valuation on the Nasdaq National Market System or principal stock
exchange on which the Company Stock is then listed or admitted to trading, or,
if no closing sale price is quoted or no sale takes place on such day, then the
Fair Market Value shall be the closing sale price of the Company Stock on the
Nasdaq National Market System or such exchange on the next preceding day on
which a sale occurred.

                     b. If the Company Stock is not then listed or admitted to
trading on the Nasdaq National Market System or a stock exchange which reports
closing sale prices, the Fair Market Value shall be the average of the closing
bid and asked prices of the Company Stock in the over-the-counter market on the
date of valuation.

                     c. If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator
in good faith using any reasonable method of valuation, which determination
shall be conclusive and binding on all interested parties.

                                    ARTICLE 7

                                PURCHASE OF STOCK

           7.1 EXERCISE OF OPTION.

                     a. On each Purchase Date, the Participant will be deemed to
exercise the option expiring on that Purchase Date. Notwithstanding the above, a
Participant may exercise any option granted to him or her under the Plan on any
Purchase Date during the Offering Period by executing and delivering the
appropriate form to the Administrator. In addition, a Participant may direct the
Company not to purchase Company Stock on the last Purchase Date in the Offering
Period, but to continue to hold and accumulate the amounts in the Participant's
account until the next Offering Period.

                     b. Upon exercise of an option, the Plan shall purchase on
behalf of each Participant the maximum number of full shares of Company Stock
subject to such option at the option price determined under Section 6.2 above as
can be purchased with the amounts held in each Participant's Account. Any
amounts remaining in a Participant's Account shall be held in the Participant's
Account and carried forward for the rest of the Offering Period or to the next
Offering Period.


                                       7

<PAGE>   14

           7.2 DELIVERY OF COMPANY STOCK. The time of issuance and delivery of
the shares may be postponed for such period as may be necessary to comply with
the registration requirements under the Securities Act of 1933, as amended, the
listing requirements of any securities exchange on which the Company Stock may
then be listed, or the requirements under other laws or regulations applicable
to the issuance or sale of such shares.

                                    ARTICLE 8

                                   WITHDRAWAL

           8.1 IN SERVICE WITHDRAWALS. At any time prior to the Purchase Date of
an Offering Period, any Participant may withdraw the amounts held in his Account
by executing and delivering to the Administrator a written notice of withdrawal
on the form provided by the Company. In such a case, the entire balance of the
Participant's Account shall be paid to the Participant, without interest, as
soon as is practicable. Upon such notification, the Participant shall cease to
participate in the Plan for the remainder of the Offering Period in which the
notice is given. A reduction in contributions to zero during any Offering Period
with an instruction to hold the funds in a Participant's Account to purchase
shares as of the Close of the Offering Period shall not be deemed a withdrawal.
Any Employee who has withdrawn under this Section shall be excluded from
participation in the Plan for the remainder of the Offering Period in which the
withdrawal occurred and the next succeeding Offering Period, but may then be
reinstated as a Participant thereafter by executing and delivering a new Stock
Purchase Agreement to the Administrator.

           8.2 TERMINATION OF EMPLOYMENT.

                     a. In the event that a Participant's employment with the
Company terminates for any reason, the Participant shall cease to participate in
the Plan on the date of termination. As soon as is practical following the date
of termination, the entire balance of the Participant's Account shall be paid to
the Participant or his beneficiary in cash, without interest.

                     b. A Participant may file a written designation of a
beneficiary who is to receive any shares of Company Stock purchased under the
Plan or any cash from the Participant's Account in the event of his or her death
subsequent to a Purchase Date, but prior to delivery of such shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's Account under the Plan in the event
of his death prior to a Purchase Date under paragraph (a) above.

                     c. Any beneficiary designation under paragraph (b) above
may be changed by the Participant at any time by written notice. In the event of
the death of a Participant, the Administrator may rely upon the most recent
beneficiary designation it has on file as being the appropriate beneficiary. In
the event of the death of a Participant where no valid beneficiary designation
exists or the beneficiary has predeceased the Participant, the Administrator
shall deliver any cash or shares of Company Stock to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed to the knowledge of the Administrator, the
Administrator, in its sole discretion, may deliver such shares of Company Stock
or cash to the spouse or any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the
Administrator, then to such other person as the Administrator may designate.


                                       8
<PAGE>   15

                                    ARTICLE 9

                               PLAN ADMINISTRATION

           9.1 PLAN ADMINISTRATION.

                     a. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board of Directors (the
"Board") for the Company, or a committee ("Committee") thereof. Members of the
Committee may be appointed from time to time by, and shall serve at the pleasure
of, the Board. As used herein, the term "Administrator" shall mean the Board or,
with respect to any matter as to which responsibility has been delegated to the
Committee, the term Administrator shall mean the Committee. The initial
Administrator of the Plan shall be the Compensation Committee of the Board of
Directors. The Administrator shall have all powers necessary to supervise the
administration of the Plan and control its operations.

                     b. In addition to any powers and authority conferred on the
Administrator elsewhere in the Plan or by law, the Administrator shall have the
following powers and authority:

                               (i)  To designate agents to carry out 
responsibilities relating to the Plan;

                               (ii) To administer, interpret, construe and apply
this Plan and to answer all questions which may arise or which may be raised
under this Plan by a Participant, his beneficiary or any other person
whatsoever;

                               (iii) To establish rules and procedures from time
to time for the conduct of its business and for the administration and
effectuation of its responsibilities under the Plan; and

                               (iv) To perform or cause to be performed such
further acts as it may deem to be necessary, appropriate, or convenient for the
operation of the Plan.

                     c. Any action taken in good faith by the Administrator in
the exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon a Participant and his beneficiaries. All discretionary powers
conferred upon the Administrator shall be absolute.

           9.2 LIMITATION ON LIABILITY. No Employee of the Company nor member of
the Board or Committee shall be subject to any liability with respect to his
duties under the Plan unless the person acts fraudulently or in bad faith. To
the extent permitted by law, the Company shall indemnify each member of the
Board or Committee, and any other Employee of the Company with duties under the
Plan who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed proceeding, whether civil, criminal,
administrative, or investigative, by reason of the person's conduct in the
performance of his duties under the Plan.

                                   ARTICLE 10

                                  COMPANY STOCK

           10.1 LIMITATIONS ON PURCHASE OF SHARES. The maximum number of shares
of Company Stock that shall be made available for sale under the Plan shall be
300,000 shares, subject to adjustment under Section 10.4 below. The shares of
Company Stock to be sold to Participants under the Plan will be issued by the
Company. If the total number of shares of Company Stock that would otherwise be
issuable pursuant to rights granted pursuant to Section 6.1 of the Plan at the
Purchase Date exceeds the number of shares then available under the Plan, the
Administrator shall make a pro rata allocation of the shares remaining available
in as uniform and equitable manner as is practicable. In such event, the
Administrator shall give written notice of such reduction of the 


                                       9

<PAGE>   16

number of shares to each Participant affected thereby and any unused payroll
deductions shall be returned to such Participant if necessary.

           10.2 VOTING COMPANY STOCK. The Participant will have no interest or
voting right in shares to be purchased under Section 6.1 of the Plan until such
shares have been purchased.

           10.3 REGISTRATION OF COMPANY STOCK. Shares to be delivered to a
Participant under the Plan will be registered in the name of the Participant
unless designated otherwise by the Participant.

           10.4 CHANGES IN CAPITALIZATION OF THE COMPANY. Subject to any
required action by the stockholders of the Company, the number of shares of
Company Stock covered by each right under the Plan which has not yet been
exercised and the number of shares of Company Stock which have been authorized
for issuance under the Plan but have not yet been placed under rights or which
have been returned to the Plan upon the cancellation of a right, as well as the
purchase price per share of Company Stock covered by each right under the Plan
which has not yet been exercised, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Company Stock resulting
from a stock split, stock dividend, spin-off, reorganization, recapitalization,
merger, consolidation, exchange of shares or the like. 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 issue 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 Company Stock subject
to any option granted hereunder.

           10.5 MERGER OF COMPANY. In the event that the Company at any time
proposes to merge into, consolidate with or enter into any other reorganization
pursuant to which the Company is not the surviving entity (including the sale of
substantially all of its assets or a "reverse" merger in which the Company is
the surviving entity), the Plan shall terminate, unless provision is made in
writing in connection with such transaction for the continuance of the Plan and
for the assumption of options theretofore granted, or the substitution for such
options of new options covering the shares of a successor corporation, with
appropriate adjustments as to number and kind of shares and prices, in which
event the Plan and the options theretofore granted or the new options
substituted therefor, shall continue in the manner and under the terms so
provided. If such provision is not made in such transaction for the continuance
of the Plan and the assumption of options theretofore granted or the
substitution for such options of new options covering the shares of a successor
corporation, then the Administrator shall cause written notice of the proposed
transaction to be given to the persons holding options not less than 10 days
prior to the anticipated effective date of the proposed transaction, and,
concurrent with the effective date of the proposed transaction, such options
shall be exercised automatically in accordance with Section 7.1 as if such
effective date were a Purchase Date of the applicable Offering Period unless a
Participant withdraws from the Plan as provided in Section 8.1.

                                   ARTICLE 11

                              MISCELLANEOUS MATTERS

           11.1 AMENDMENT AND TERMINATION. The Plan shall terminate on December
31, 2008. Since future conditions affecting the Company cannot be anticipated or
foreseen, the Company reserves the right to amend, modify, or terminate the Plan
at any time. Upon termination of the Plan, all benefits shall become payable
immediately. Notwithstanding the foregoing, no such amendment or termination
shall affect rights previously granted, nor may an amendment make any change in
any right previously granted which adversely affects the rights of any
Participant. In addition, no amendment may be made without prior approval of the
stockholders of the Company if such amendment would:


                                       10

<PAGE>   17

                     a. Increase the number of shares of Company Stock that may
be issued under the Plan;

                     b. Materially modify the requirements as to eligibility for
participation in the Plan; or

                     c. Materially increase the benefits which accrue to
Participants under the Plan.

           11.2 STOCKHOLDER APPROVAL. Continuance of the Plan and the
effectiveness of any right granted hereunder shall be subject to approval by the
stockholders of the Company, within six (6) months before or after the date the
Plan is adopted by the Board. In the event the stockholders of the Company do
not approve the Plan, the Company shall return to each Participant the funds
paid by such Participant to purchase options, with interest at a rate of five
percent (5%).

           11.3 BENEFITS NOT ALIENABLE. Benefits under the Plan may not be
assigned or alienated, whether voluntarily or involuntarily. Any attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Article 8.

           11.4 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Employee or to be
consideration for, or an inducement to, or a condition of, the employment of any
Employee. Nothing contained in the Plan shall be deemed to give the right to any
Employee to be retained in the employ of the Company or to interfere with the
right of the Company to discharge any Employee at any time.

           11.5 GOVERNING LAW. To the extent not preempted by Federal law, all
legal questions pertaining to the Plan shall be determined in accordance with
the laws of the State of California.

           11.6 NON-BUSINESS DAYS. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act
shall be performed on the next succeeding day which is not a Saturday, Sunday or
legal holiday. Notwithstanding the above, Fair Market Value shall be determined
in accordance with Section 6.3.

           11.7 COMPLIANCE WITH SECURITIES LAWS. Notwithstanding any provision
of the Plan, the Administrator shall administer the Plan in such a way to ensure
that the Plan at all times complies with any requirements of Federal Securities
Laws. For example, affiliates may be required to make irrevocable elections in
accordance with the rules set forth under Section 16b-3 of the Securities
Exchange Act of 1934.

                                       11