Document:

<PAGE>

                                                              EXHIBIT 10.79

                                    GUARANTY

         THIS GUARANTY, dated as of April 12, 2000 (as amended, restated, and
otherwise modified from time to time, this "Guaranty"), is made by
___________________________ ("Guarantor"), of the obligations of STAR
Telecommunications, Inc. ("Debtor"), under the WorldCom Documents, as defined
below, by and between Debtor and MCI WORLDCOM NETWORK SERVICES, INC., a Delaware
corporation ("WorldCom"), as agent for itself and MCI WORLDCOM, INC., its
affiliates and subsidiaries (collectively, the "WorldCom Entities").

                              W I T N E S S E T H:

         WHEREAS, WorldCom provides telecommunications services to Debtor,
Guarantor and certain of their respective Subsidiaries pursuant to the Service
Agreements; and

         WHEREAS, Debtor is in default to WorldCom for, INTER ALIA, failure to
pay its obligations to WorldCom in a timely manner (the "Past Due
Indebtedness"); and

         WHEREAS, Debtor and WorldCom have agreed to restructure certain of the
Past Due Indebtedness due to WorldCom as of February 3, 2000, in the form of a
Promissory Note in the principal amount of $56,017,698.87, of even date herewith
(the "Note"), which has been executed and delivered by Debtor to WorldCom; and

         WHEREAS, Guarantor has determined that the execution, delivery, and
performance of this Guaranty is necessary and convenient to the conduct,
promotion, and attainment of Guarantor's business; and

         WHEREAS, Guarantor desires to induce WorldCom to accept delivery of the
Note, extend the term of the obligations evidenced by the Note, and otherwise
restructure the credit relationship between Debtor and WorldCom to facilitate
the potential merger between Debtor and World Access, Inc., all of which are
reasonably expected to benefit, directly or indirectly, Guarantor.

          NOW, THEREFORE, in consideration of the foregoing premises and in
order to, INTER ALIA, induce WorldCom to agree to the financial restructuring
with the Debtor, Guarantor hereby agrees as follows:

          1.       DEFINITIONS. Unless otherwise defined in this Agreement,
terms used herein shall have the meanings set forth in the Workout Agreement,
or Credit Agreement, in that order. Unless the context indicates otherwise or
the terms are otherwise defined herein, definitions in the Uniform Commercial
Code as enacted in the State of Oklahoma (the "UCC") apply to words and
phrases in this Agreement. "Debtor" includes, without limitation, such
Person, such Person's heirs, successors and assigns, such Person as a
debtor-in-possession, and any receiver, trustee, liquidator, conservator,
custodian, or similar party appointed for such Person or all or substantially
all of its assets under any law.

<PAGE>

          2.       GUARANTY.

                   (a)   Guarantor  hereby  unconditionally  guarantees to
WorldCom the punctual payment and performance of, and promises to pay and
perform when due, whether at stated maturity, by acceleration, or otherwise,
all of the Obligations, and agrees to pay any and all reasonable expenses
(including reasonable attorneys' fees and expenses) incurred in enforcement
or collection of all or any part thereof, whether such obligations,
indebtedness, and liabilities are direct, indirect, fixed, contingent, joint,
several, or joint and several, and in enforcement of any rights under this
Guaranty.

                   (b)   Anything  contained  in this  Guaranty  to the
contrary  notwithstanding,  the obligations of Guarantor hereunder shall be
limited to a maximum aggregate amount equal to the largest amount that would
not render its obligations hereunder subject to avoidance as a fraudulent
transfer or conveyance under Section 548 of Title 11 of the United States
Code or any applicable provisions of comparable state law (collectively, the
"Fraudulent Transfer Laws"), in each case after giving effect to all other
liabilities of Guarantor, contingent or otherwise, that are relevant under
the Fraudulent Transfer Laws (specifically excluding, however, any
liabilities of Guarantor in respect of intercompany indebtedness to Debtor or
other affiliates of Debtor to the extent that such indebtedness would be
discharged in an amount equal to the amount paid by Guarantor hereunder) and
after giving effect as assets, subject to Paragraph 5(a) hereof, to the value
(as determined under the applicable provisions of the Fraudulent Transfer
Laws) of any rights to subrogation or contribution of Guarantor pursuant to
(i) applicable law or (ii) any agreement providing for an equitable
allocation among Guarantor and other affiliates of Debtor of obligations
arising under guaranties by such parties.

          3.       GUARANTY  ABSOLUTE.   This  is  a  guaranty  of  payment
and  performance  and  not  of collection. The liability of Guarantor
hereunder shall be joint and several with any other guarantors of the
Obligations guaranteed hereby. Guarantor guarantees that the Obligations will
be paid strictly in accordance with the terms of the WorldCom Documents,
regardless of any applicable law, regulation, or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of
WorldCom with respect thereto. The obligations and liabilities of Guarantor
hereunder are independent of the obligations of Debtor under the WorldCom
Documents and any applicable law, to the extent that Guarantor's obligations
to make such payments are not in violation of any applicable law. The
liability of Guarantor under this Guaranty shall be absolute and
unconditional irrespective of:

                   (a)  the taking or  accepting  of any other  security or
guaranty  for any or all of the Obligations;

                   (b)  any  increase,  reduction,  or payment in full at any
time or from time to time of any part of the Obligations;

                   (c)  any lack of validity or enforceability of the any of
the WorldCom  Documents or any other agreement or instrument relating
thereto, including but not limited to the

                                    2

<PAGE>

unenforceability of all or any part of the Obligations by reason of the fact
that (i) the act of creating the Obligations, or any part thereof, is ULTRA
VIRES, (ii) the officers creating same acted in excess of their authority, or
(iii) for any other reason;

                   (d)  any lack of  corporate  power of Debtor or any other
Person at any time liable for the payment of any or all of the Obligations;

                   (e)  any Debtor Relief Laws  affecting the rights of
creditors  generally  involving Debtor, Guarantor, or any other Person
obligated on any of the Obligations;

                   (f)  any renewal, compromise, extension,  acceleration, or
other change in the time, manner, or place of payment of, or in any other
term of, all or any of the Obligations; any adjustment, indulgence,
forbearance, or compromise that may be granted or given by WorldCom to
Debtor, Guarantor, or any Person at any time liable for the payment of any or
all of the Obligations; or any other modification, amendment, or waiver of or
any consent to departure from any of the WorldCom Documents or any other
agreement or instrument relating thereto without notification of Guarantor
(the right to such notification being herein specifically waived by
Guarantor);

                   (g)  any exchange, release, sale,  subordination, or
non-perfection of any Collateral or Lien thereon or any lack of validity or
enforceability or change in priority, destruction, reduction, or loss or
impairment of value of any Collateral or Lien thereon;

                   (h)  any release or amendment or waiver of or consent to
departure from any other guaranty for all or any of the Obligations;

                   (i)  the failure by WorldCom to make any demand upon or to
bring any legal, equitable, or other action against Debtor or any other
Person (including, without limitation, Guarantor), or the failure or delay by
WorldCom to, or the manner in which WorldCom shall, proceed to exhaust rights
against any direct or indirect security for the Obligations;

                   (j)  the existence of any claim, defense, set-off, or
other rights which Debtor or Guarantor may have at any time against Debtor,
WorldCom, or Guarantor, or any other Person, whether in connection with this
Guaranty, the other WorldCom Documents, the transactions contemplated
thereby, or any other transaction;

                   (k)  any failure of WorldCom to notify Guarantor of any
renewal, extension, or assignment of the Obligations or any part thereof, or
the release of any security, or of any other action taken or refrained from
being taken by WorldCom, it being understood that WorldCom shall not be
required to give Guarantor any notice of any kind under any circumstances
whatsoever with respect to or in connection with the Obligations;

                   (l)  any payment by Debtor to WorldCom is held to
constitute a preference  under any Debtor Relief Law or if for any other
reason WorldCom is required to refund such payment or pay the amount thereof
to another Person; or

                                     3

<PAGE>

                   (m)  any other circumstance which might otherwise
constitute a defense  available to, or a discharge of, Debtor, Guarantor, any
other guarantor or other Person liable on the Obligations, including, without
limitation, any defense by reason of any disability or other defense of
Debtor, or the cessation from any cause whatsoever of the liability of
Debtor, or any claim that Guarantor's obligations hereunder exceed or are
more burdensome than those of Debtor.

         This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by WorldCom or any other Person as a result of the
insolvency, bankruptcy, or reorganization of Debtor or Guarantor or otherwise,
all as though such payment had not been made.

         4.   WAIVER. Guarantor hereby waives: (a) any incapacity, lack of
authority, death, or disability of Guarantor or any other Person or entity;
(b) any failure of WorldCom to commence an action against Debtor or any other
Person or entity (including, without limitation, other guarantors, if any),
or to file or enforce a claim against the estate (either in administration,
bankruptcy, or any other proceeding) of Debtor or any other Person or entity,
whether or not demand is made upon WorldCom to file or enforce such claim;
(c) any failure of WorldCom to give notice of the existence, creation, or
incurring of any new or additional indebtedness or other obligation or of any
action or nonaction on the part of any other Person or entity in connection
with any of the WorldCom Documents or any obligation hereby guaranteed; (d)
any failure on the part of WorldCom to ascertain the extent or nature of the
Collateral or any insurance or other rights with respect thereto, or the
liability of any party liable for the WorldCom Documents or the obligations
evidenced or secured thereby, or any failure on the part of WorldCom to
disclose to Guarantor any facts it may now or hereafter know regarding
Debtor, the Collateral, or such other parties; (e) any lack of acceptance or
notice of acceptance of this Guaranty by WorldCom; (f) any lack of
presentment, demand, protest, or notice of demand, protest, dishonor or
nonpayment with respect to any indebtedness or obligations under any of the
WorldCom Documents; (g) any lack of notice of disposition or of manner of
disposition of any Collateral; (h) any lack of other notices to which
Guarantor might otherwise be entitled; (i) failure to properly record any
document or any other lack of due diligence by WorldCom in creating or
perfecting a security interest in or collection, protection, or realization
upon any Collateral or in obtaining reimbursement or performance from any
Person or entity now or hereafter liable for the WorldCom Documents or any
obligation secured thereby; (j) any invalidity, irregularity, or
unenforceability, in whole or in part, of any one or more of the WorldCom
Documents; (k) the inaccuracy of any representation or other provision
contained in any WorldCom Document; (l) any sale or assignment of the
WorldCom Documents, in whole or in part; (m) any sale or assignment by Debtor
of the Collateral, or any portion thereof, whether or not consented to by
WorldCom; (n) any lack of commercial reasonableness in dealing with
Collateral; (o) any deficiencies in the Collateral or any deficiency in the
ability of WorldCom to collect or obtain performance from any Persons or
entities now or hereafter liable for the payment or performance of any
obligation hereby guaranteed; (p) an assertion or claim that the automatic
stay provided by 11 U.S.C. ss. 362 (arising upon the voluntary or involuntarY
bankruptcy proceeding of Debtor), or any other stay provided under any other
Debtor Relief Law (whether statutory, common law, case law, or otherwise) of
any jurisdiction whatsoever, now or hereafter in effect, which may be or
become applicable, shall operate or be interpreted to stay, interdict,
condition, reduce or inhibit the ability

                                     4

<PAGE>

of WorldCom to enforce any of its rights, whether now or hereafter acquired,
which WorldCom may have against Guarantor or the Collateral; (q) any
modifications of the WorldCom Documents or any of the Obligations by
operation of law or by action of any court, whether pursuant to the
Bankruptcy Reform Act of 1978, as amended, or any other Debtor Relief Law
(whether statutory, common law, case law, or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, or otherwise; (r) notices of any of
the events described in Paragraph 3 hereof and of any other occurrence or
matter with respect to any of the Obligations, this Guaranty, or any of the
other of the WorldCom Documents (s) any right to assert against WorldCom as a
counterclaim, set-off or cross-claim, any counterclaim, set-off, or claim
which it may now or hereafter have against Debtor or other Person liable on
the Obligations; (t) any right to participate in any collateral or any right
benefitting WorldCom in respect of the Obligations; and (u) any right by
which Guarantor might be entitled to require suit on an accrued right of
action in respect of any of the Obligations or require suit against Debtor or
any other Person, whether arising pursuant to any provision of statutory or
case law or otherwise.

         5.   SUBROGATION AND SUBORDINATION.

              (a)  Notwithstanding any reference to subrogation  contained
herein to the contrary, Guarantor hereby irrevocably waives any claim or
other rights which it may have or hereafter acquire against Debtor that arise
from the existence, payment, performance, or enforcement of Guarantor's
obligations under this Guaranty, including, without limitation, any right of
subrogation, reimbursement, exoneration, contribution, indemnification, any
right to participate in any claim or remedy of WorldCom against Debtor, or
any other Person at any time liable for the payment of any or all of the
Obligations, or any Collateral, which WorldCom now has or hereafter acquires,
whether or not such claim, remedy or right arises in equity, or under
contract, statutes or common law, including, without limitation, the right to
take or receive from Debtor, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account
of such claim or other rights. If any amount shall be paid to Guarantor in
violation of the immediately preceding sentence, such amount shall be deemed
to have been paid to Guarantor for the benefit of, and held in trust for the
benefit of, WorldCom, and shall forthwith be paid to WorldCom to be credited
and applied against the Obligations, whether matured or unmatured, in
accordance with the terms of the Note or the other WorldCom Documents.
Guarantor acknowledges that it will receive direct and indirect benefits from
the financing arrangements contemplated by the Note and the restructuring of
the Debtor's obligations to WorldCom and that the waiver set forth in this
Paragraph 5(a) is knowingly made in contemplation of such benefits.

              (b)  If Guarantor becomes the holder of any indebtedness
payable by Debtor, Guarantor hereby subordinates all indebtedness owing to it
from Debtor to all indebtedness of Debtor to WorldCom and agrees that upon
the occurrence and continuance of a Default or an Event of Default, it shall
not accept any payment on the same until payment in full of the Obligations
of Debtor under the Note, and all other WorldCom Documents and shall in no
circumstance whatsoever attempt to set-off or reduce any obligations
hereunder because of such indebtedness. If any amount shall nevertheless be
paid to Guarantor by Debtor or on behalf of Debtor prior to payment in full
of

                                     5

<PAGE>

the Obligations, such amount shall be held in trust for the benefit of
WorldCom and shall forthwith be paid to WorldCom to be credited and applied
to the Obligations, whether matured or unmatured.

         6.   INTENTIONALLY OMITTED.

         7.   COVENANTS. Guarantor covenants and agrees (a) punctually and
properly to perform all of Guarantor's covenants and duties under any other
of the WorldCom Documents; (b) from time to time promptly to furnish WorldCom
with any information or writings which WorldCom may request concerning this
Guaranty; and (c) promptly to notify WorldCom of any claim, action, or
proceeding affecting this Guaranty.

         8.   AMENDMENTS, ETC. No amendment or waiver of any  provision of
this  Guaranty nor consent to any departure by Guarantor therefrom shall in
any event be effective unless the same shall be in writing and signed by
Guarantor and WorldCom, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

         9.  NOTICES. All notices, communications, and materials to be given
or delivered pursuant to this Agreement shall be given or delivered in the
manner provided in, and shall be deemed to be effective in accordance with,
the provisions of the Workout Agreement. For purposes of notices,
communications, and materials to be given or delivered pursuant to this
Agreement, addresses and facsimile numbers and the individuals or departments
to whose attention the same shall be directed are, for WorldCom, as set forth
in the Security Agreement and are, for Guarantor, as follows:

              If to Guarantor:
                               --------------------------

                               --------------------------

                               --------------------------
                               Facsimile No.:
                                             ------------
                               Attention:
                                         ----------------

              with a copy to:  Riordan & McKinzie
                               Twenty-Ninth Floor
                               300 South Grand Avenue
                               Los Angeles, California 90071
                               Attention:  Ronn S. Davids
                               Facsimile No.:  (213) 229-8550

or at such other addresses or facsimile numbers or to the attention of such
other individuals or departments as Guarantor may hereafter specify in a notice
to the other party specifically captioned "Notice of Change of Address."

         10.  NO WAIVER;  REMEDIES.  No failure on the part of WorldCom to
exercise,  and no delay in exercising, any right hereunder or under any of
the WorldCom Documents shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder or under any of the

                                  6

<PAGE>

WorldCom Documents preclude any other or further exercise thereof or the
exercise of any other right. WorldCom shall not be required to (a) prosecute
collection or seek to enforce or resort to any remedies against Debtor or any
other Person liable on any of the Obligations, (b) join Debtor or any other
Person liable on any of the Obligations in any action in which WorldCom
prosecutes collection or seeks to enforce or resort to any remedies against
Debtor or other Person liable on any of the Obligations, or (c) seek to
enforce or resort to any remedies with respect to any Liens granted to (or
benefitting, directly or indirectly) WorldCom by Debtor or any other Person
liable on any of the Obligations. WorldCom shall not have any obligation to
protect, secure, or insure any of the Collateral or any of the Liens or the
properties or interests in properties subject thereto. The remedies herein
provided are cumulative and not exclusive of any remedies provided by
applicable law.

         11.  RIGHT OF SET OFF. Upon the occurrence and during the
continuance of any Event of Default, WorldCom is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time
owing by WorldCom to or for the credit or the account of Guarantor against
any and all of the obligations of Guarantor now or hereafter existing under
this Guaranty, irrespective of whether or not WorldCom shall have made any
demand under this Guaranty. The rights of WorldCom under this Paragraph 11
are in addition to other rights and remedies (including, without limitation,
other rights of set off) which WorldCom or any other WorldCom Entity may have.

         12.  LIENS. Guarantor agrees that WorldCom, in its discretion,
without notice or demand to or upon Guarantor and without affecting either
the liability of Guarantor, Debtor or any other Person liable on any of the
Obligations under, or the Liens and security interests created by, the Note,
or the other WorldCom Documents, or this Guaranty, or any security interest
or other Lien, may foreclose any deed of trust or mortgage or similar Lien
covering interests in real or personal property, and the interests in real or
personal property secured thereby, by nonjudicial sale; and Guarantor hereby
waives any defense to the recovery by WorldCom hereunder against Debtor,
Guarantor, or any collateral of any deficiency after a nonjudicial sale, and
Guarantor expressly waives any defense or benefits that may be derived from
any statute or case law in effect in any jurisdiction. Without limiting the
foregoing, Guarantor waives any defense arising out of any such nonjudicial
sale even though such sale operates to impair or extinguish any right of
reimbursement or subrogation or any other right or remedy of Guarantor
against Debtor or any other Person or any Collateral or any other collateral.
Guarantor hereby agrees that Guarantor shall be liable, subject to the
limitations of Paragraph 2(b) hereof, for any part of the Obligations
remaining unpaid after any foreclosure.

         13.  CONTINUING GUARANTY; TRANSFER OF NOTE. This Guaranty is an
irrevocable continuing guaranty of payment and shall (a) remain in full force
and effect until payment in full of all of the Obligations and all other
amounts payable under this Guaranty, (b) be binding upon Guarantor, its
successors and assigns, and (c) inure to the benefit of and be enforceable by
WorldCom and its successors, transferees, and assigns. Without limiting the
generality of the foregoing clause, (c) WorldCom may assign or otherwise
transfer its rights under the any of the WorldCom Documents or any interest
therein to any other Person, and such other Person shall thereupon become
vested with

                                     7
<PAGE>

all the rights or any interest therein, as appropriate, in respect thereof
granted to WorldCom herein or otherwise.

         14.  INFORMATION. Guarantor acknowledges and agrees that it shall
have the sole responsibility for obtaining from Debtor such information
concerning Debtor's financial condition or business operations as Guarantor
may require and that WorldCom has no duty at any time to disclose to
Guarantor any information relating to the business operations or financial
conditions of Debtor.

         15.  GOVERNING LAW; SERVICE OF PROCESS.

              (a)  THIS  GUARANTY SHALL BE DEEMED A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF OKLAHOMA AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA, EXCEPT TO
THE EXTENT THAT FEDERAL LAWS MAY GOVERN THE VALIDITY, CONSTRUCTION,
ENFORCEMENT, AND INTERPRETATION OF ALL OR ANY PART OF THIS GUARANTY.
GUARANTOR AGREES THAT THE FEDERAL AND STATE COURTS LOCATED IN TULSA COUNTY,
OKLAHOMA, WILL HAVE JURISDICTION OVER ALL PROCEEDINGS IN CONNECTION HEREWITH.

              (b)  GUARANTOR HEREBY WAIVES PERSONAL SERVICE OF ANY LEGAL
PROCESS UPON IT. IN ADDITION, GUARANTOR AGREES THAT SERVICE OF PROCESS MAY BE
MADE UPON IT BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO
GUARANTOR AT ITS ADDRESS DESIGNATED FOR NOTICE UNDER THIS GUARANTY AND THAT
SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON RECEIPT BY GUARANTOR.
NOTHING IN THIS PARAGRAPH 15 SHALL AFFECT THE RIGHT OF LENDER TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

         16.  WAIVER OF JURY TRIAL. TO THE MAXIMUM EXTENT PERMITTED BY LAW,
GUARANTOR AND WORLDCOM HEREBY WAIVE ANY RIGHT THAT EITHER MAY HAVE TO A TRIAL
BY JURY OF ANY DISPUTE (WHETHER A CLAIM IN TORT, CONTRACT, EQUITY, OR
OTHERWISE) ARISING UNDER OR RELATING TO THIS GUARANTY, THE OTHER WORLDCOM
DOCUMENTS, OR ANY RELATED MATTERS AND AGREE THAT ANY SUCH DISPUTE SHALL BE
TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

         17.  WAIVER OF RIGHTS. Guarantor hereby waives and renounces, to the
fullest extent permitted by law, all rights to the benefits of any statute of
limitations and any moratorium, reinstatement, marshaling, forbearance,
valuation, stay, extension, redemption, appraisement, exemption and homestead
law or principle of law now or hereafter provided by the Constitution and
laws of the United States of America and of each state thereof, both as to
itself and in and to all of

                                    8
<PAGE>

its property, real and personal, against the enforcement and collection of
the Obligations evidenced by this Guaranty.

         18.  LIMIT OF VALIDITY. If from any circumstances whatsoever
fulfillment of any provisions of this Guaranty, at the time performance of
such provision shall be due, shall involve transcending the limit of validity
presently prescribed by any applicable usury statute or any other applicable
law, with regard to obligations of like character and amount, then IPSO FACTO
the obligation to be fulfilled shall be reduced to the limit of such
validity, so that in no event shall any exaction be possible under this
Guaranty that is in excess of the current limit of such validity, but such
obligation shall be fulfilled to the limit of such validity. The provisions
of this section shall control every other provision of this Guaranty.

         19.  GUARANTOR INSOLVENCY. Should Guarantor become insolvent, fail
to pay its debts generally as they become due, voluntarily seek, consent to,
or acquiesce in the benefits of any Debtor Relief Laws, or become a party to
or be made the subject of any proceeding provided for by any Debtor Relief
Laws (other than as a creditor or claimant) that could suspend or otherwise
adversely affect the rights of WorldCom granted hereunder, then the
obligations of Guarantor under this Guaranty shall be, as between Guarantor
and WorldCom, fully matured, due, and payable obligations of Guarantor to
WorldCom (without regard to whether Debtor is then in default under any of
the WorldCom Documents or whether any of the Obligations may then be due and
owing by Debtor to WorldCom), payable in full by Guarantor to WorldCom upon
demand, which shall be the estimated amount owing in respect of the
contingent claim created hereunder.

         20.  ENTIRE AGREEMENT. THIS GUARANTY REPRESENTS THE FINAL AGREEMENT
BETWEEN GUARANTOR AND WORLDCOM REGARDING THE GUARANTYING OF THE OBLIGATIONS
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL  AGREEMENTS WITH RESPECT  THERETO. GUARANTOR ACKNOWLEDGES
THAT THERE ARE NO CONTEMPORANEOUS ORAL AGREEMENTS WITH RESPECT TO THE SUBJECT
MATTER HEREOF.

         21.  MISCELLANEOUS. Time is of the essence with respect to all
obligations of Guarantor hereunder. This Guaranty shall in no event be
impaired by any change which may arise by reason of the dissolution of Debtor
or Guarantor. Guarantor expressly waives notice of transfer or assignment of
this Guaranty and acknowledges that the failure by WorldCom to give any such
notice shall not affect the liabilities of Guarantor hereunder.
Notwithstanding the foregoing, Guarantor shall not assign any of its rights
or obligations under this Guaranty. All personal pronouns used herein,
whether used in the masculine, feminine, or neuter gender, shall include all
other genders; and the singular shall include the plural and vice versa.
Titles of articles and sections are for convenience only and in no way
define, limit, amplify, or describe the scope or intent of any provisions
hereof. If Guarantor is a partnership, all of the provisions hereof referring
to Guarantor shall be construed to apply to each of the general partners of
Guarantor and of any and all further tiers of general partners in the
structure of Guarantor.

                                     9.

<PAGE>

              IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be
duly executed and delivered by its respective officers thereunto duly authorized
as of the date first above written.

                                       GUARANTOR:

                                       BY:
                                          ---------------------------

                                           By:
                                              -----------------------
                                           Its:
                                               ----------------------

                                       Attest:
                                               -----------------------

                                               Name:
                                                    ------------------
                                               Title:
                                                     -----------------

                                       (CORPORATE SEAL)

                                     10<PAGE>

                                                                    EXHIBIT 10.1

                                   LINEO, INC.
                             1999 STOCK OPTION PLAN

<PAGE>

<TABLE>
<S>                                                                                                              <C>
1.    DEFINITIONS.................................................................................................1

2.    PURPOSES....................................................................................................4

3.    ADMINISTRATION..............................................................................................4

   (A)   COMMITTEE................................................................................................4
   (B)   APPOINTMENT OF COMMITTEE.................................................................................4
   (C)   POWERS; REGULATIONS......................................................................................4
   (D)   DELEGATION TO EXECUTIVE OFFICER..........................................................................5

4.    ELIGIBILITY.................................................................................................5

5.    STOCK.......................................................................................................5

6.    TERMS AND CONDITIONS OF OPTIONS.............................................................................5

   (A)   NUMBER OF SHARES AND TYPE OF OPTION......................................................................5
   (B)   DATE OF GRANT............................................................................................6
   (C)   OPTION PRICE.............................................................................................6
   (D)   DURATION OF OPTIONS......................................................................................6
   (E)   VESTING SCHEDULE OF OPTIONS..............................................................................7
   (F)   ACCELERATION OF VESTING..................................................................................7
   (G)   TERM OF OPTION...........................................................................................7
   (H)   EXERCISE OF OPTIONS......................................................................................8
   (I)   PAYMENT UPON EXERCISE OF OPTION..........................................................................9
   (J)   RIGHTS AS A SHAREHOLDER..................................................................................9
   (K)   TRANSFER OF OPTION......................................................................................10
   (L)   SECURITIES REGULATION AND TAX WITHHOLDING...............................................................11
   (M)   STOCK SPLIT, REORGANIZATION OR LIQUIDATION..............................................................12
   (N)   APPROVED TRANSACTIONS; CONTROL PURCHASE.................................................................12
   (O)   FURTHER ADJUSTMENTS OF AWARDS...........................................................................13

7.    EFFECTIVE DATE; TERM.......................................................................................13

8.    MARKET STANDOFF............................................................................................14

9.    NO OBLIGATIONS TO EXERCISE OPTION..........................................................................14

10.   NO RIGHT TO OPTIONS OR TO EMPLOYMENT.......................................................................14

11.   APPLICATION OF FUNDS.......................................................................................14

12.   INDEMNIFICATION OF COMMITTEE...............................................................................15

13.   SHAREHOLDERS AGREEMENT.....................................................................................15

14.   SEPARABILITY...............................................................................................15

15.   NON-EXCLUSIVITY OF THE PLAN................................................................................15

16.   EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION......................................................15

17.   AMENDMENT OF PLAN..........................................................................................16
</TABLE>

<PAGE>

                                   LINEO, INC.
                             1999 STOCK OPTION PLAN

1.       DEFINITIONS.

         Capitalized terms not defined elsewhere in the Plan shall have the
following meanings (whether used in the singular or plural).

         (a)      "AGREEMENT" means a written agreement approved by the
                  Committee evidencing Options granted under the Plan.

         (b)      "APPROVED TRANSACTION" means

                  (i)      the acquisition of the Company by another entity by
                           means of merger, consolidation or other transaction
                           or series of related transactions resulting in the
                           exchange of the outstanding shares of the Company for
                           securities of, or consideration issued, or caused to
                           be issued by, the acquiring entity or any of its
                           affiliates, provided, that after such event the
                           shareholders of the Company immediately prior to the
                           event own less than a majority of the outstanding
                           voting equity securities of the surviving entity
                           immediately following the event;

                  (ii)     any liquidation or dissolution of the Company; and

                  (iii)    any sale, lease, exchange or other transfer not in
                           the ordinary course of business (in one transaction
                           or a series of related transactions) of all, or
                           substantially all, of the assets of the Company.

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

         (d)      "CODE" means the Internal Revenue Code of 1986, as amended
                  from time to time, or any successor statute or statutes
                  thereto. Reference to any specific section of the Code shall
                  include any successor section.

         (e)      "COMMITTEE" shall mean the Board, or the committee appointed
                  by the Board pursuant to Section 3(b) of the Plan, if it is
                  administering the Plan.

         (f)      "COMMON STOCK" means the Common Stock, no par value, of the
                  Company.

         (g)      "COMPANY" means Lineo, Inc., a Utah corporation.

         (h)      "CONTROL PURCHASE" means any transaction (or series of related
                  transactions) in which any person, corporation or other entity
                  (including any "person" as defined in Sections 13(d)(3) and
                  14(d)(2) of the Exchange Act, but excluding the Company and
                  any employee benefit plan sponsored by the Company):

                  (i)      purchases any Common Stock (or securities convertible
                           into Common Stock) for cash, securities or any other
                           consideration pursuant to a tender offer or exchange
                           offer unless by the terms of such offer the offeror,
                           upon consummation thereof, would be the "beneficial
                           owner" (as that term is defined in Rule 13d-3 under
                           the

                                       1
<PAGE>

                           Exchange Act) of less than 30% of the shares of
                           Common Stock then outstanding; or

                  (ii)     becomes the "beneficial owner", directly or
                           indirectly, of securities of the Company representing
                           fifty percent (50%) or more of the combined voting
                           power of the then outstanding securities of the
                           Company ordinarily (and apart from rights accruing
                           under special circumstances) having the right to vote
                           in the election of directors (calculated as provided
                           in Rule 13d-3(d) under the Exchange Act in the case
                           of rights to acquire the Company's securities);

                  PROVIDED, HOWEVER, that the foregoing shall not constitute a
                  Control Purchase if the transactions or related transactions
                  received the prior approval of a majority of all of the
                  directors of the Company, excluding for such purpose the votes
                  of directors who are directors or officers of, or have a
                  material financial interest in any Person (other than the
                  Company) who is a party to the event specified in either
                  clauses (i) or (ii).

         (i)      "COVERED EMPLOYEE" has the meaning given to it by Section
                  162(m)(3) of the Code.

         (j)      "DATE OF GRANT" means that date the Committee has deemed to be
                  the effective date of the Option for purposes of the Plan.

         (k)      "DISABILITY" means any medically determinable physical or
                  mental impairment which can be expected to result in death or
                  which has lasted or can be expected to last for a continuous
                  period of not less than twelve (12) months that renders the
                  Optionee unable to engage in any substantial gainful activity.

         (l)      "EFFECTIVE DATE" means at the time specified in the
                  resolutions of the Board adopting the Plan.

         (m)      "EMPLOYEES" means individuals employed by the Company or a
                  Related Corporation.

         (n)      "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
                  amended from time to time, or any successor statute or
                  statutes thereto. Reference to any specific section of the
                  Exchange Act shall include any successor section.

         (o)      "EXECUTIVE OFFICER" shall be defined in Section 3(d).

         (p)      "FAIR MARKET VALUE" means, if the Common Stock is publicly
                  traded, the last sales price (or, if no last sales price is
                  reported, the average of the high bid and low asked prices)
                  for a share of Common Stock on that day (or, if that day is
                  not a trading day, on the next preceding trading day), as
                  reported by the principal exchange on which the Common Stock
                  is listed, or, if the Common Stock is publicly traded but not
                  listed on an exchange, as reported by The Nasdaq Stock Market,
                  or if such prices or quotations are not reported by The Nasdaq
                  Stock Market, as reported by any other available source of
                  prices or quotations selected by the Committee. If the Common
                  Stock is not publicly traded or if the Fair Market Value is
                  not determinable by any of the foregoing means, the Fair
                  Market Value on any day shall be determined in good faith by
                  the Committee on the basis of such considerations as the
                  Committee deems important.

                                       2
<PAGE>

         (q)      "IMMEDIATE FAMILY MEMBER" means a spouse, children or
                  grandchildren of the Optionee.

         (r)      "INCENTIVE STOCK OPTION" means an Option that is an incentive
                  stock option within the meaning of Section 422 of the Code.

         (s)      "NON-EMPLOYEE DIRECTOR" has the meaning given to it by Rule
                  16b-3 promulgated under the Exchange Act of 1934.

         (t)      "NON-INSIDERS" has the meaning given to it by Section
                  162(m)(3) of the Code.

         (u)      "NON-QUALIFIED STOCK OPTION" means an Option that is not an
                  Incentive Stock Option.

         (v)      "OPTION" means an option with respect to shares of Common
                  Stock awarded pursuant to Section 6.

         (w)      "OPTIONEE" means any person to whom an Option is granted under
                  the Plan (as well as any permitted transferee of an Option).

         (x)      "OUTSIDE DIRECTOR" has the meaning given to by the regulations
                  promulgated under Section 162(m) of the Code.

         (y)      "PLAN" means the Lineo, Inc. 1999 Stock Option Plan.

         (z)      "QUALIFIED PERFORMANCE-BASED COMPENSATION" has the meaning
                  given to it by the regulations promulgated under Section
                  162(m) of the Code.

         (aa)     "RELATED CORPORATION" means any corporation (other than the
                  Company) that is a "parent corporation" of the Company or
                  "subsidiary corporation" of the Company, as defined in
                  Sections 424(e) and 424(f) respectively, of the Code.

         (bb)     "SECTION 16 INSIDERS" means individuals who are subject to
                  Section 16(b) of the Exchange Act with respect to the Common
                  Stock.

         (cc)     "SECURITIES ACT" means the Securities Act of 1933, as amended
                  from time to time, or any successor statute or statutes
                  thereto. References to any specific section of the Securities
                  Act shall include any successor section.

         (dd)     "TEN PERCENT SHAREHOLDER" means a person who owns more than
                  ten percent of the total combined voting power of the Company
                  or any related corporation as determined with reference to
                  Section 424(d) of the Code.

                                       3
<PAGE>

2.   PURPOSES.

         The purposes of the Plan are to retain the services of directors,
valued key employees and consultants of the Company and such other persons as
the Committee shall select in accordance with Section 4, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in hiring new employees and
to provide an equity incentive to directors, consultants and other persons
selected by the Committee.

3.   ADMINISTRATION.

         (a)      COMMITTEE.

         The Plan shall be administered by the Board unless the Board appoints a
separate committee of the board to administer the Plan pursuant to Section 3(b)
below. A majority of the members of the Committee shall constitute a quorum, and
all actions of the Committee shall be taken by a majority of the members
present. Any action may be taken by a written instrument signed by all of the
members of the Committee and any action so taken shall be fully effective as if
it had been taken at a meeting.

         (b)      APPOINTMENT OF COMMITTEE.

         The Board may appoint a committee consisting of two or more of its
members to administer the Plan. The Board shall consider whether a director is
(i) an Outside Director and (ii) a Non-Employee Director when appointing any
such Committee and shall appoint solely two or more individuals who qualify as
Outside Directors if the Board intends for compensation attributable to Options
to be Qualified Performance-Based Compensation. The Committee shall have the
powers and authority vested in the Board hereunder (including the power and
authority to interpret any provision of the Plan or of any Option). The members
of any such Committee shall serve at the pleasure of the Board.

         (c)      POWERS; REGULATIONS.

         Subject to the provisions of the Plan, and with a view to effecting its
purpose, the Committee shall have sole authority, in its absolute discretion,
to:

                  (i)      construe and interpret the Plan;
                  (ii)     define the terms used in the Plan;
                  (iii)    prescribe, amend and rescind rules and regulations
                           relating to the Plan;
                  (iv)     correct any defect, supply any omission or reconcile
                           any inconsistency in the Plan;
                  (v)      grant Options under the Plan;
                  (vi)     determine the individuals to whom Options shall be
                           granted under the Plan and whether the Option is an
                           Incentive Stock Option or a Non-Qualified Stock
                           Option;
                  (vii)    determine the time or times at which Options shall be
                           granted under the Plan;
                  (viii)   determine the number of shares of Common Stock
                           subject to each Option, the exercise price of each
                           Option, the duration of each Option and the times at
                           which each Option shall become exercisable;
                  (ix)     determine all other terms and conditions of Options;
                           and
                  (x)      make all other determinations necessary or advisable
                           for the administration of the Plan.

                                       4
<PAGE>

         All decisions, determinations and interpretations made by the Committee
shall be binding and conclusive on all participants in the Plan and on their
legal representatives, heirs and beneficiaries.

         (d)      DELEGATION TO EXECUTIVE OFFICER.

         The Committee may by resolution delegate to one or more executive
officers (the "Executive Officer") of the Company the authority to grant Options
under the Plan to employees of the Company who, at the time of grant, are not
Section 16 Insiders nor Covered Employees; PROVIDED, HOWEVER, that the authority
delegated to the Executive Officer under this Section 3 shall not exceed that of
the Committee under the provisions of the Plan and shall be subject to such
limitations, in addition to those specified in this Section 3, as may be
specified by the Committee at the time of delegation.

4.   ELIGIBILITY.

         Incentive Stock Options may be granted to any individual who, at the
time such Options are granted, is an Employee, including Employees who are also
directors of the Company. Non-Qualified Stock Options may be granted to
Employees and to such other persons as the Committee shall select. Options may
be granted in substitution for outstanding options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization between such other corporation and the Company or any
subsidiary of the Company. At such point as the Company first becomes subject to
the periodic reporting requirements of Section 12 of the Exchange Act, no person
shall be eligible to receive in any fiscal year Options to purchase more than
100,000 shares of Common Stock (subject to adjustment as set forth in Section
6(m) hereof).

5.   STOCK.

         The Company is authorized to grant Options to acquire up to a total of
2,000,000 shares of the Company's authorized but unissued, or reacquired, Common
Stock. The number of shares with respect to which Options may be granted
hereunder is subject to adjustment as set forth in Section 6(m). In the event
that any outstanding Option expires or is terminated for any reason, the shares
of Common Stock allocable to the unexercised portion of such Option may again be
subject to an Option granted to the same Optionee or to a different person
eligible under Section 4; PROVIDED, HOWEVER, that any canceled Options will be
counted against the maximum number of shares with respect to which Options may
be granted to any particular person as set forth in Section 4.

6.   TERMS AND CONDITIONS OF OPTIONS.

         Each Option granted under the Plan shall be evidenced by an Agreement.
Agreements may contain such provisions, not inconsistent with the Plan, as the
Committee or Executive Officer, in its discretion, may deem advisable. All
Options also shall comply with the following requirements:

         (a)      NUMBER OF SHARES AND TYPE OF OPTION.

         Each Agreement shall state the number of shares of Common Stock to
which it pertains and whether the Option is intended to be an Incentive Stock
Option or a Non-Qualified Stock Option. In the absence of action to the contrary
by the Committee or Executive Officer in connection with the grant of an Option,
all Options shall be Non-Qualified Stock Options. The aggregate Fair Market
Value (determined at the Date of Grant) of the Common Stock with respect to
which the Incentive Stock Options granted to the Optionee and any incentive
stock options granted to the Optionee under any other stock option plan of the
Company, any

                                       5
<PAGE>

Related Corporation or any predecessor corporation are exercisable for the first
time by the Optionee during any calendar year shall not exceed $100,000, or such
other limit as may be prescribed by the Code. If

                  (i)      an Optionee holds one or more Incentive Stock Options
                           under the Plan (and/or any incentive stock options
                           under any other stock option plan of the Company, any
                           Related Corporation or any predecessor corporation),
                           and
                  (ii)     the aggregate Fair Market Value of the shares of
                           Common Stock with respect to which, during any
                           calendar year, such Options become exercisable for
                           the first time exceeds $100,000 (said value to be
                           determined as provided above),

then such Option or Options are intended to qualify under Section 422 of the
Code with respect to the maximum number of such shares as can, in light of the
foregoing limitation, be so qualified, with the shares so qualified to be the
shares subject to the Option or Options earliest granted to the Optionee. If an
Option that would otherwise qualify as an Incentive Stock Option becomes
exercisable for the first time in any calendar year for shares of Common Stock
that would cause such aggregate Fair Market Value to exceed $100,000, then the
portion of the Option in respect of such shares shall be deemed to be a
Non-Qualified Stock Option.

         (b)      DATE OF GRANT.

         Each Agreement shall state the Date of Grant.

         (c)      OPTION PRICE.

         Each Agreement shall state the price per share of Common Stock at which
it is exercisable. The exercise price shall be fixed by the Committee or
Executive Officer at whatever price the Committee or Executive Officer may
determine in the exercise of its sole discretion; PROVIDED, HOWEVER, that the
per share exercise price for an Incentive Stock Option shall not be less than
the Fair Market Value at the Date of Grant; PROVIDED FURTHER, that with respect
to Incentive Stock Options granted to Ten Percent Shareholders of the Company,
the per share exercise price shall not be less than 110 percent (110%) of the
Fair Market Value at the Date of Grant; and, PROVIDED FURTHER, that Options
granted in substitution for outstanding options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization involving such other corporation and the Company or any
subsidiary of the Company may be granted with an exercise price equal to the
exercise price for the substituted option of the other corporation, subject to
any adjustment consistent with the terms of the transaction pursuant to which
the substitution is to occur.

         (d)      DURATION OF OPTIONS.

         On the Date of Grant, the Committee or Executive Officer shall
designate, subject to Section 6(g), the expiration date of the Option, which
date shall not be later than ten (10) years from the Date of Grant in the case
of Incentive Stock Options; PROVIDED, HOWEVER, that the expiration date of any
Incentive Stock Option granted to a Ten Percent Shareholder shall not be later
than five (5) years from the Date of Grant. In the absence of action to the
contrary by the Committee in connection with the grant of an Option, and except
in the case of Incentive Stock Options granted to Ten Percent Shareholders, all
Options granted under this Section 6 shall expire ten (10) years from the Date
of Grant.

                                       6
<PAGE>

         (e)      VESTING SCHEDULE OF OPTIONS

         No Option shall be exercisable until it has vested. The vesting
schedule for each Option shall be specified by the Committee or Executive
Officer at the time of grant of the Option; PROVIDED, HOWEVER, that if no
vesting schedule is specified at the time of grant, the Option shall be vested
according to the following schedule:

<TABLE>
<CAPTION>
                  Number of Years of
                 Continuous Employment                         Portion of Total
              With the Company Following                   Option Which Will Become
                Vesting Commencement Date                             Vested
---------------------------------------------------        -------------------------

<S>                                                        <C>
                           1                                        1/4th
                  Monthly thereafter                                1/48th
</TABLE>

         The Committee or Executive Officer may specify a vesting schedule for
all or any portion of an Option based on the achievement of performance
objectives established in advance of the commencement by the Optionee of
services related to the achievement of the performance objectives. Performance
objectives shall be expressed in terms of one or more of the following: return
on equity, return on assets, share price, market share, sales, earnings per
share, costs, net earnings, net worth, inventories, cash and cash equivalents,
gross margin or the Company's performance relative to its internal business
plan. Performance objectives may be in respect of the performance of the Company
as a whole (whether on a consolidated or unconsolidated basis), a Related
Corporation, or a subdivision, operating unit, product or product line of the
foregoing. Performance objectives may be absolute or relative and may be
expressed in terms of a progression or a range. An Option which is exercisable
(in whole or in part) upon the achievement of one or more performance objectives
may be exercised only upon completion of the following process: (a) the Optionee
must deliver written notice to the Company that the performance objective has
been achieved and demonstrating, if necessary, how the objective has been
satisfied, (b) within 45 days after receipt of such notice, the Committee will
make a good faith determination whether such performance objective has been
achieved and deliver written notice to the Optionee detailing the results of
such determination; if the Company fails to respond with such 45-day period,
then the performance objective shall be presumed to have been achieved and (c)
upon receipt of written notice from the Company that the performance objective
has been achieved (or upon expiration of such 45-day period without a
determination by the Company), the Optionee may exercise the Option; upon
receipt of written notice from the Company that the performance objective has
not been achieved, the Optionee shall have 15 days to appeal the Company's
determination and the Company shall have 15 days after the receipt of such
appeal to consider the issues presented by the Optionee and make a determination
on the appeal, which determination shall be conclusive and binding on the
Optionee.

         (f)      ACCELERATION OF VESTING.

         The vesting of one or more outstanding Options may be accelerated by
the Board at such times and in such amounts as it shall determine in its sole
discretion.

         (g)      TERM OF OPTION.

         Any vested Option granted to an Optionee shall terminate, to the extent
not previously exercised, upon the occurrence of the first of the following
events:

                                       7
<PAGE>

                  (i)      as designated by the Committee or the Executive
                           Officer in accordance with Section 6(d) hereof;

                  (ii)     the date of the Optionee's termination of employment
                           or contractual relationship with the Company or any
                           Related Corporation for cause (as determined in the
                           sole discretion of the Committee);

                  (iii)    the expiration of ninety (90) days from the date of
                           the Optionee's termination of employment or
                           contractual relationship with the Company or any
                           Related Corporation for any reason whatsoever other
                           than cause, death or Disability unless the exercise
                           period is extended by the Committee until a date not
                           later than the expiration date of the Option;

                  (iv)     the expiration of one year from (A) the date of death
                           of the Optionee or (B) cessation of the Optionee's
                           employment or contractual relationship by reason of
                           Disability unless the exercise period is extended by
                           the Committee until a date not later than the
                           expiration date of the Option; or

                  (v)      any other event specified by the Committee at the
                           time of grant of the Option.

         If an Optionee's employment or contractual relationship is terminated
by death, any Option granted to the Optionee shall be exercisable only by the
person or persons to whom such Optionee's rights under such Option shall pass by
the Optionee's will or by the laws of descent and distribution of the state or
county of the Optionee's domicile at the time of death. The Committee shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence reasonably acceptable to the Committee. Upon making a determination of
Disability, the Committee shall, for purposes of the Plan, determine the date of
an Optionee's termination of employment or contractual relationship.

         Unless accelerated in accordance with Section 6(f), any unvested Option
granted to an Optionee shall terminate immediately upon termination of
employment of the Optionee by the Company for any reason whatsoever, including
death or Disability. For purposes of the Plan, transfer of employment between or
among the Company and/or any Related Corporation shall not be deemed to
constitute a termination of employment with the Company or any Related
Corporation. For purposes of this subsection with respect to Incentive Stock
Options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Committee). The foregoing notwithstanding, employment shall not be deemed to
continue beyond the first ninety (90) days of such leave, unless the Optionee's
re-employment rights are guaranteed by statute or by contract.

         (h)      EXERCISE OF OPTIONS.

         An Option shall be exercisable, either all or in part, at any time
after vesting and prior to the expiration date with respect to, or the
termination of, the Option. If less than all of the shares included in an
exercisable Option are purchased, the remainder may be purchased at any
subsequent time prior to the expiration date with respect to, or the termination
of, the Option. No portion of any vested Option may be exercised for less than
one hundred (100) shares (as adjusted pursuant to Section 6(m)); PROVIDED,
HOWEVER, that if the vested Option is less than one hundred (100) shares, it may
be exercised with respect to all shares for which it is vested. Only whole
shares may be issued upon exercise of an vested Option, and to the extent that a
vested Option covers less than one (1) share, it is unexercisable.

                                       8
<PAGE>

         A vested Option or any portion thereof may be exercised by giving
written notice to the Company upon such terms and conditions as the Agreement
evidencing the vested Option may provide and in accordance with such other
procedures for the exercise of a vested Option as the Committee may establish
from time to time. Such notice shall be accompanied by payment in the amount of
the aggregate exercise price for such shares, which payment shall be in the form
specified in Section 6(i). The Company shall not be obligated to issue, transfer
or deliver a certificate of Common Stock to the holder of any vested Option
until provision has been made by the holder, to the satisfaction of the Company,
for the payment of the aggregate exercise price for all shares for which the
vested Option shall have been exercised and for satisfaction of any tax
withholding obligations associated with such exercise. Options granted to an
Optionee are, during the Optionee's lifetime, exercisable only by the Optionee
or a transferee who takes title to the Option in the manner permitted by Section
6(k).

         (i)      PAYMENT UPON EXERCISE OF OPTION.

         The exercise price for shares purchased under an Option shall be paid
in full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Committee in its sole discretion
determines otherwise, either at the time the Option is granted or at any time
before it is exercised, a combination of cash and/or check (if any) and one or
both of the following alternative forms: (a) tendering (either actually or, if
and so long as the Common Stock is registered under Section 12(b) or 12(g) of
the Exchange Act, by attestation) Common Stock already owned by the Optionee for
at least six months (or any shorter period necessary to avoid a charge to the
Company's earnings for financial reporting purposes) having a Fair Market Value
on the day prior to the exercise date equal to the aggregate Option exercise
price; or (b) if and so long as the Common Stock is registered under Section
12(b) or 12(g) of the Exchange Act, delivery of a properly executed exercise
notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board. In addition, to the extent permitted by the Committee in its sole
discretion, the price for shares purchased under an Option may be paid, either
singly or in combination with one or more of the alternative forms of payment
authorized by this Section 6(i), by (y) a full-recourse promissory note; or (z)
such other consideration as the Committee may permit.

         (j)      RIGHTS AS A SHAREHOLDER.

         An Optionee shall have no rights as a shareholder with respect to any
shares of Common Stock issuable upon exercise of the Option until such holder
becomes a record holder of such shares. Subject to the provisions of Sections
6(m), no rights shall accrue to an Optionee and no adjustments shall be made on
account of dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights declared on, or created in, the
Common Stock for which the record date is prior to the date such Optionee
becomes a record holder of the shares of Common Stock issuable upon exercise of
such Option.

                                       9
<PAGE>

         (k)      TRANSFER OF OPTION.

         Options granted under the Plan and the rights and privileges conferred
by the Plan may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will, by
applicable laws of descent and distribution or pursuant to a domestic relations
order (as defined in the Code or Title I of the Employment Retirement Income
Security Act of 1974 or the rules or regulations thereunder), and shall not be
subject to execution, attachment or similar process; PROVIDED, HOWEVER, that
solely with respect to Non-Qualified Stock Options, the Committee may, in its
discretion, authorize all or a portion of the Options to be granted to an
Optionee to be on terms which permit transfer by such Optionee to:

                  (i)      Immediate Family Members,

                  (ii)     a trust or trusts for the exclusive benefit of such
                           Immediate Family Members, or

                  (iii)    a partnership in which such Immediate Family Members
                           are the only partners, provided that :

                           (x)      there may be no consideration for any such
                                    transfer,

                           (y)      the Agreement evidencing such Options must
                                    be approved by Committee, and must expressly
                                    provide for transferability in a manner
                                    consistent with this Section, and

                           (z)      subsequent transfers of transferred Options
                                    shall be prohibited other than by will, by
                                    applicable laws of descent and distribution
                                    or pursuant to a domestic relations order
                                    (as defined in the Code or Title I of the
                                    Employment Retirement Income Security Act of
                                    1974 or the rules or regulations
                                    thereunder).

Following transfer, any such Options shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer, provided
that for purposes of Section 6(l)(2), the term "Optionee" shall be deemed to
refer to the initial transferor. The events of termination of employment of
Section 6(g) shall continue to be applied with respect to the original Optionee,
following which the options shall be exercisable by the transferee only to the
extent, and for the periods specified at Section 6(g). Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by the Plan contrary to the provisions hereof,
or upon the sale, levy or any attachment or similar process upon the rights and
privileges conferred by the Plan, such Option shall thereupon terminate and
become null and void.

                                       10
<PAGE>

         (l)      SECURITIES REGULATION AND TAX WITHHOLDING.

                  (1) No shares of Common Stock shall be issued upon exercise of
an Option unless the exercise of such Option and the issuance and delivery of
such shares shall comply with all relevant provisions of law, including, without
limitation, any applicable state securities laws, the Securities Act, the
Exchange Act, the rules and regulations thereunder and the requirements of any
stock exchange upon which such shares may then be listed, and such issuance
shall be further subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption from registration
for the issuance and sale of such shares. The inability of the Company to obtain
from any regulatory body the authority deemed by the Company to be necessary for
the lawful issuance and sale of any shares under the Plan, or the unavailability
of an exemption from registration for the issuance and sale of any shares under
the Plan, shall relieve the Company of any liability with respect to the
non-issuance or sale of such shares.

         As long as the Common Stock is not registered under the Exchange Act,
the Company intends that all offers and sales of Options and shares of Common
Stock issuable upon exercise of Options shall be exempt from registration under
the provisions of Section 5 of the Securities Act, and the Plan shall be
administered in a manner so as to preserve such exemption. The Company also
intends that the Plan shall constitute a written compensatory benefit plan,
within the meaning of Rule 701(b) promulgated under the Securities Act, and that
each Option granted pursuant to the Plan at a time when the Common Stock is not
registered under the Exchange Act shall, unless otherwise specified by the
Committee at the time the Option is granted or at any time thereafter, be
granted in reliance on the exemption from the registration requirements of
Section 5 of the Securities Act provided by Rule 701.

         As a condition to the exercise of an Option, the Committee may require
the Optionee to represent and warrant in writing at the time of such exercise
that the shares of Common Stock issuable upon exercise of the Option are being
purchased only for investment and without any then-present intention to sell or
distribute such shares. At the option of the Committee, a stop-transfer order
against such shares may be placed on the stock books and records of the Company,
and a legend indicating that such shares may not be pledged, sold or otherwise
transferred unless an opinion of counsel is provided stating that such transfer
is not in violation of any applicable law or regulation, may be stamped on the
certificates representing such shares in order to assure an exemption from
registration. The Committee also may require such other documentation as it
shall, in its discretion, deem necessary from time to time to comply with
federal and state securities laws. THE COMPANY HAS NO OBLIGATION TO UNDERTAKE
REGISTRATION OF ANY OPTION OR ANY SHARES OF COMMON STOCK ISSUABLE UPON THE
EXERCISE OF ANY OPTION.

                  (2) The Company may require the Optionee to pay to the Company
the amount of any withholding taxes that the Company is required to withhold
with respect to the grant, vesting or exercise of any Option. Subject to the
Plan and applicable law, the Committee may, in its sole discretion, permit the
Optionee to satisfy withholding obligations, in whole or in part, by paying
cash, by electing to have the Company withhold shares of Common Stock or by
transferring shares of Common Stock to the Company, in such amounts as are
equivalent to the Fair Market Value of the withholding obligation. The Company
shall have the right to withhold from any shares of Common Stock issuable
pursuant to an Option or from any cash amounts otherwise due or to become due
from the Company to the Optionee an amount equal to such taxes. The Company may
also deduct from any Option any other amounts due from the Optionee to the
Company or a Related Corporation.

                                       11
<PAGE>

                  (3) The issuance, transfer or delivery of certificates of
Common Stock pursuant to the exercise of an Option may be delayed, at the
discretion of the Committee, until the Committee is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met.

         (m)      STOCK SPLIT, REORGANIZATION OR LIQUIDATION.

                  (1) In the event that, at any time or from time to time, a
stock dividend, stock split, spin-off, combination or exchange of shares,
recapitalization, merger, consolidation, distribution to shareholders other than
a normal cash dividend, or other change in the Company's corporate or capital
structure results in (a) the outstanding shares, or any securities exchanged
therefor or received in their place, being exchanged for a different number or
class of securities of the Company or of any other corporation or (b) new,
different or additional securities of the Company or of any other corporation
being received by the holders of shares of Common Stock of the Company, then the
Board shall make proportional adjustments in (i) the maximum number and kind of
securities subject to the Plan as set forth in Section 5 and (ii) the number and
kind of securities that are subject to any outstanding Option and the per share
price of such securities, without any change in the aggregate price to be paid
therefor. The determination by the Board as to the terms of any of the foregoing
adjustments shall be conclusive and binding. Notwithstanding the foregoing, an
Approved Transaction or Control Purchase shall not be governed by this Section
6(m) but shall be governed by Section 6(n).

                  (2) The foregoing adjustments shall be made by the Committee
or by the applicable terms of any assumption or substitution document.

                  (3) With respect to the foregoing adjustments, the number of
shares subject to an Option shall always be a whole number. The Committee may,
if deemed appropriate, provide for a cash payment to any Optionee in connection
with any adjustment made pursuant to this Section 6(m).

                  (4) The grant of an Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure, to merge,
consolidate or dissolve, to liquidate or to sell or transfer all or any part of
its business or assets.

         (k)      APPROVED TRANSACTIONS; CONTROL PURCHASE.

                  (1) Except as otherwise provided in this instrument that
evidences an Option, in the event of any Approved Transaction or Control
Purchase, each Option that is at the time outstanding shall automatically
accelerate so that each such Option shall, immediately prior to the specified
effective date for the Approved Transaction or Control Purchase, become 100%
vested and exercisable.

                  (2) Such Option shall not so accelerate, however, if and to
the extend that such Option is, in connection with the Approved Transaction or
Control Purchase, either to be assumed by the successor corporation or parent
thereof (the "Successor Corporation") or to be replaced with a comparable option
for the purchase of shares of capital stock of the Successor Corporation. The
determination of option comparability shall be made by the Board, and its
determination shall be conclusive and binding.

                  (3) All such Options shall terminate and cease to remain
outstanding immediately following the consummation of the Approved Transaction
or Control Purchase, except to the extent assumed by the Successor Corporation.

                                       12
<PAGE>

                  (4) The acceleration will not occur if, in the opinion of the
Company's outside accountants, it would render unavailable "pooling of interest"
accounting for an Approved Transaction or Control Purchase that would otherwise
qualify for such accounting treatment.

         (o)      FURTHER ADJUSTMENTS OF AWARDS.

         Subject to the other provisions of Section 6, the Board shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Board, to take such further action as it determines to be necessary or
advisable, and fair and equitable to the Optionees, with respect to Options.
Such authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Options so as to provide for earlier, later, extended or additional time for
exercise, lifting restrictions and other modifications, and the Board may take
such actions with respect to all Optionees, to certain categories of Optionees
or only to individual Optionees. The Board may take such action before or after
granting Options to which the action relates and before or after any public
announcement with respect to such sale, merger, consolidation, reorganization,
liquidation or change in control that is the reason for such action.

7.   EFFECTIVE DATE; TERM.

         The Plan shall be effective at the time specified in the resolutions of
the Board adopting the Plan (the "Effective Date"). Options may be granted by
the Committee or Executive Officer from time to time thereafter until the tenth
anniversary of the Effective Date. Termination of the Plan shall not terminate
any Option granted prior to such termination. Issuance of Non-Qualified Stock
Options under the Plan shall be subject to the requirement of RCW 21.20.310(10)
that the Administrator of Securities of the Department of Financial Institutions
of the State of Washington be provided with notification of the adoption of the
Plan. No Non-Qualified Stock Option shall be granted hereunder until this
notification requirement has been satisfied. Issuance of Incentive Stock Options
under the Plan within twelve (12) months after the Effective Date shall be
subject to the approval of the Plan by the shareholders of the Company at a duly
held meeting of shareholders at which a majority of all outstanding voting stock
of the Company is represented in person or by proxy. The approval required shall
be a majority of the votes cast on the proposal to approve the Plan. Such
approval may also be provided pursuant to a written consent in lieu of such
meeting. No Incentive Stock Option granted hereunder shall be exercisable until
this approval requirement has been satisfied. If this requirement is not
satisfied within twelve (12) months after the Effective Date, then,
notwithstanding any contrary provision in the Plan (a) no Incentive Stock
Options may thereafter be granted under the Plan, and (b) each Incentive Stock
Option granted under the Plan prior thereto shall automatically be deemed to be
a Non-Qualified Stock Option (except to the extent the Agreement evidencing the
Option expressly provides otherwise).

                                       13
<PAGE>

8.   MARKET STANDOFF.

         In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed
under the Securities Act, including the Company's initial public offering, a
person shall not sell, make any short sale of, loan, hypothecate, pledge, grant
any option for the purchase of, or otherwise dispose or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to,
any shares issued pursuant to an Option granted under the Plan without the prior
written consent of the Company or its underwriters. Such limitations shall be in
effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period exceed
180 days. The limitations of this paragraph shall in all events terminate two
years after the effective date of the Company's initial public offering. Holders
of shares issued pursuant to an Option granted under the Plan shall be subject
to the market standoff provisions of this paragraph only if the officers and
directors of the Company are also subject to similar arrangements.

         In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then an new, substituted or additional securities
distributed with respect to the purchased shares shall immediately subject to
the provisions of this Section 8, to the same extent the purchased shares are at
such time covered by such provisions.

         In order to enforce the limitations of this Section 8, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.

9.   NO OBLIGATIONS TO EXERCISE OPTION.

         The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.

10. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.

         Whether or not any Options are to be granted under the Plan shall be
exclusively within the discretion of the Committee, and nothing contained in the
Plan shall be construed as giving any person any right to participate under the
Plan. The grant of an Option to any Optionee shall in no way constitute any form
of agreement or understanding binding on the Company or any Related Corporation,
express or implied, that the Company or such Related Corporation will employ or
contract with such Optionee for any length of time, nor shall it interfere in
any way with the Company's or, where applicable, a Related Corporation's right
to terminate such Optionee's employment at any time, which right is hereby
reserved.

11.  APPLICATION OF FUNDS.

         The proceeds received by the Company from the sale of Common Stock
issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.

                                       14
<PAGE>

12.  INDEMNIFICATION OF COMMITTEE.

         In addition to all other rights of indemnification they may have by
virtue of being a member of the Board or an executive officer of the Company,
members of the Committee and the Executive Officer shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, the Plan or any Option granted under the Plan, and against all
amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Committee member or Executive Officer is liable for willful misconduct;
PROVIDED, HOWEVER, that within fifteen (15) days after the institution of any
such action, suit or proceeding, the Committee member or Executive Officer
involved therein shall, in writing, notify the Company of such action, suit or
proceeding, so that the Company may have the opportunity to make appropriate
arrangements to prosecute or defend the same.

13.  SHAREHOLDERS AGREEMENT.

         Unless the Agreement evidencing an Option expressly provides otherwise,
each Optionee may be required, as a condition to the issuance of any shares of
Common Stock that such Optionee acquires upon the exercise of the Option, to
execute and deliver to the Company a shareholders agreement in such form as may
be required by the Company at the time of such exercise, or a counterpart
thereof, together with, unless the Optionee is unmarried, a spousal consent in
the form required thereby, unless the Optionee has previously executed and
delivered such documents and they are in effect at the time of exercise and
apply by their terms to the shares to be issued.

14.  SEPARABILITY.

         With respect to Incentive Stock Options, if the Plan does not contain
any provision required to be included herein under Section 422 of the Code, such
provision shall be deemed to be incorporated herein with the same force and
effect as if such provision had been set out in full herein; PROVIDED, HOWEVER,
that to the extent any Option that is intended to qualify as an Incentive Stock
Option cannot so qualify, the Option, to that extent, shall be deemed to be a
Non-Qualified Stock Option for all purposes of the Plan.

15.  NON-EXCLUSIVITY OF THE PLAN.

         Neither the adoption of the Plan by the Board nor the submission of the
Plan to the shareholders of the Company for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and the awarding of stock and cash otherwise than
pursuant to the Plan, and such arrangements may be either generally applicable
or applicable only in specific cases.

16. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION.

         By acceptance of an Option, unless otherwise provided in the Agreement
evidencing the Option, the Optionee with respect to such Option shall be deemed
to have agreed that the Option is special incentive compensation that will not
be taken into account, in any manner, as salary, compensation or bonus in
determining the amount of any payment or other benefit under any pension,
retirement or other employee benefit plan, program or policy of the Company or
any of its affiliates.

                                       15
<PAGE>

17.  AMENDMENT OF PLAN.

         The Board may, at any time, modify, amend or terminate the Plan or
modify or amend any Option granted pursuant to the Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; PROVIDED, HOWEVER,
that no amendment with respect to an outstanding Option which has the effect of
reducing the benefits afforded to the Optionee shall be made over the objection
of such Optionee; FURTHER PROVIDED, that the events triggering acceleration of
vesting of an outstanding Option may be modified, expanded or eliminated without
the consent of the Optionee. The Board may condition the effectiveness of any
such amendment on the receipt of shareholder approval at such time and in such
manner as the Committee may consider necessary for the Company to comply with or
to avail the Company, the Optionees or both of the benefits of any securities,
tax, market listing or other administrative or regulatory requirement which the
Board determines to be desirable. Without limiting the generality of the
foregoing, the Board may modify grants to persons who are eligible to receive
Options under the Plan who are foreign nationals or employed outside the United
States to recognize differences in local law, tax policy or custom.

Date Approved by the Board of Directors of Company:  June 28, 1999

Date Approved by the Shareholders of Company: ____________________, 1999

                                       16

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00010-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00010-of-00352.parquet"}]]