Document:

<PAGE>   1
                                                                   EXHIBIT 10.11

                                 WEBSENSE, INC.

                         NOTICE OF GRANT OF STOCK OPTION

     Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Websense, Inc. (the "Corporation"):

     Optionee:
               -----------------------------------------------------------------

     Grant Date:
                 ---------------------------------------------------------------

     Vesting Commencement Date:
                                ------------------------------------------------

     Exercise Price: $                                                 per share
                    -------------------------------------------------

     Number of Option Shares:                                             shares
                              -------------------------------------------

     Expiration Date:
                      ----------------------------------------------------------

     Type of Option:               Incentive Stock Option
                     -------------

                                   Non-Statutory Stock Option
                     -------------

     Exercise Schedule: The Option shall become exercisable for twenty-five
     percent (25%) of the Option Shares upon Optionee's completion of one (1)
     year of Service measured from the Vesting Commencement Date and shall
     become exercisable for the balance of the Option Shares in a series of
     thirty-six (36) successive equal monthly installments upon Optionee's
     completion of each additional month of Service over the thirty-six (36)
     month period measured from the first anniversary of the Vesting
     Commencement Date. In no event shall the Option become exercisable for any
     additional Option Shares after Optionee's cessation of Service.

     Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Websense, Inc. 2000 Stock Incentive Plan
(the "Plan"). Optionee further agrees to be bound by the terms of the Plan and
the terms of the Option as set forth in the Stock Option Agreement attached
hereto as Exhibit A. Optionee hereby acknowledges the receipt of a copy of the
official prospectus for the Plan in the form attached hereto as Exhibit B. A
copy of the Plan is available upon request made to the Corporate Secretary at
the Corporation's principal offices.

<PAGE>   2

     Employment at Will. Nothing in this Notice or in the attached Stock Option
Agreement or in the Plan shall confer upon Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.

     Definitions. All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.

DATED:
       -----------------------

                                        WEBSENSE, INC.

                                        By:
                                            ------------------------------------

                                        Title:
                                               ---------------------------------

                                        ----------------------------------------
                                                       OPTIONEE

                                        Address:
                                                 -------------------------------

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

ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS

                                       2
<PAGE>   3

                                    EXHIBIT A

                             STOCK OPTION AGREEMENT

Filed as Exhibit 10.11 to this Registration Statement

<PAGE>   4
                                    EXHIBIT B

                           PLAN SUMMARY AND PROSPECTUS

                                       4
<PAGE>   5

                                                             SECTION 16 INSIDERS

                                 WEBSENSE, INC.

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

                            2000 STOCK INCENTIVE PLAN

                           PLAN SUMMARY AND PROSPECTUS

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

                                The date of this Prospectus is ___________, 2000

<PAGE>   6

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>            <C>                                                                        <C>
INFORMATION ON THE 2000 STOCK INCENTIVE PLAN................................................1
QUESTIONS AND ANSWERS ABOUT THE PLAN........................................................1

        GENERAL PLAN PROVISIONS.............................................................1

               1.     What is the basic structure of the Plan?..............................1
               2.     When did the Plan become effective?...................................1
               3.     Who administers the Plan?.............................................2
               4.     Who is eligible to participate in the Plan?...........................2
               5.     How many shares of Common Stock may be issued under the Plan?.........2
               6.     What happens if there is a change in the Corporation's capital
                      structure?............................................................3
               7.     Can the Plan be amended or terminated?................................4

DISCRETIONARY OPTION GRANT PROGRAM..........................................................4

        GRANT OF OPTIONS....................................................................4

               8.     How are options granted under the Discretionary Option Grant
                      Program?..............................................................4
               9.     What type of options may be granted under the Discretionary
                      Option Grant Program?.................................................4
               10.    How is the exercise price determined?.................................4
               11.    How is the fair market value of the Common Stock determined?..........4
               12.    Can the Corporation cancel my option and grant me a new option?.......4
               13.    Can I assign or transfer my option?...................................5
               14.    When do I acquire the rights of a stockholder?........................5

        EXERCISE OF OPTIONS.................................................................5

               15.    When may I exercise my option?........................................5
               16.    When will my option terminate?........................................5
               17.    How do I exercise my option?..........................................5
               18.    How do I pay the exercise price?......................................6
               19.    Does the Corporation have the right to repurchase the shares
                      acquired upon exercise of my option?..................................6
               20.    Can I transfer shares subject to the Corporation's repurchase
                      rights?...............................................................6
               21.    When will the Corporation's repurchase right lapse?...................6
               22.    Does the Plan include any special programs?...........................7
               23.    What is the Stock Appreciation Rights Program?........................7
               24.    What is the Tax Withholding Program?..................................8

        INCENTIVE OPTIONS...................................................................8

               25.    Who is eligible to receive an Incentive Option?.......................8
               26.    Is there a limitation on the number of shares for which an
                      Incentive Option may become exercisable in any one calendar
                      year?.................................................................8
               27.    Can an Incentive Option lose its qualified status?....................9
               28.    What limitations apply to Incentive Options granted to a 10%
                      stockholder?..........................................................9

        EARLY TERMINATION OF OPTIONS........................................................9

               29.    What happens to my options if my service terminates?..................9
               30.    What happens to my options if I am discharged from service for
                      Misconduct?...........................................................9
               31.    What happens to my options if I die or become disabled?..............10
               32.    What happens to my options if the Corporation is acquired or
                      merged?..............................................................10
</TABLE>

                                        i
<PAGE>   7

<TABLE>
<S>            <C>                                                                        <C>
               33.    What happens to my options that are assumed upon a Corporate
                      Transaction?.........................................................11
               34.    What happens to my options if there is a change in control of
                      the Corporation?.....................................................11

        SALARY INVESTMENT OPTION GRANT PROGRAM.............................................12

               35.    What is the Salary Investment Option Grant Program?..................12
               36.    Are there any limitations on the amount of salary reduction a
                      participant may elect?...............................................12
               37.    What are the terms of the options granted under the Salary
                      Investment Option Grant Program?.....................................12

        STOCK ISSUANCE PROGRAM.............................................................14

               38.    How are shares of Common Stock issued under the Stock Issuance
                      Program?.............................................................14
               39.    How is the purchase price determined?................................14
               40.    What form of payment is required for shares issued under the
                      Stock Issuance Program?..............................................14
               41.    When do shares of Common Stock acquired under the Stock
                      Issuance Program vest?...............................................14
               42.    Does the Corporation have the right to repurchase the shares
                      acquired under the Stock Issuance Program?...........................14
               43.    Can I transfer shares subject to the Corporation's repurchase
                      rights?..............................................................15
               44.    What happens to unvested shares if the Corporation is acquired
                      or merged?...........................................................15
               45.    What happens to repurchase rights that are assigned upon a
                      Corporate Transaction?...............................................15
               46.    What happens to unvested shares if there is a change in control
                      of the Corporation?..................................................15
               47.    Do I have any stockholder rights with respect to shares issued
                      under the Stock Issuance Program?....................................15
               48.    Is the Tax Withholding Program available under the Stock
                      Issuance Program?....................................................16

        DISPOSITION OF SHARES..............................................................16

               49.    When can I sell my shares acquired under the Discretionary
                      Option Grant and Stock Issuance Programs?............................16

        MISCELLANEOUS......................................................................16

               50.    Is financing available under the Plan?...............................16
               51.    Do I have the right to remain employed until my options under
                      the Discretionary Option Grant or the Salary Investment Option
                      Grant Program, or my shares under the Stock Issuance Program,
                      vest?................................................................16
               52.    Are there any circumstances which would cause me to lose my
                      rights with respect to an option grant or a stock issuance?..........17
               53.    Does the Plan restrict the authority of the Corporation to
                      grant or assume options outside of the Plan?.........................17
               54.    Does the grant of an option or the issuance of shares under the
                      Plan affect my eligibility to participate in other plans of the
                      Corporation?.........................................................17
               55.    What is a parent corporation?........................................17
               56.    What is a subsidiary corporation?....................................17
               57.    Is the Plan subject to ERISA?........................................17

        RESTRICTIONS ON RESALE.............................................................17

               58.    What restrictions apply because I am a Section 16 Insider?...........17
               59.    What restrictions apply if I am an affiliate?........................19
</TABLE>

                                       ii
<PAGE>   8

<TABLE>
<S>            <C>                                                                        <C>
QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES..........................................19

        INCENTIVE OPTIONS..................................................................19

               T1.    Will the grant of an Incentive Option result in Federal income
                      tax liability to me?.................................................19
               T2.    Will the exercise of an Incentive Option result in Federal
                      income tax liability to me?..........................................19
               T3.    When will I be subject to Federal income tax on shares acquired
                      under an Incentive Option?...........................................20
               T4.    What constitutes a disposition of Incentive Option shares?...........20
               T5.    How is my Federal income tax liability determined when I
                      dispose of my shares?................................................20
               T6.    What if I make a qualifying disposition?.............................20
               T7.    What are the normal tax rules for a disqualifying disposition?.......20
               T8.    What if the shares purchased under an Incentive Option are
                      subject to a substantial risk of forfeiture, such as the
                      Corporation's repurchase right?......................................21
               T9.    What are the Federal tax consequences to the Corporation?............22
               T10.   What are the consequences of paying the exercise price of an
                      Incentive Option in the form of shares of Common Stock
                      acquired upon the exercise of an earlier-granted Incentive
                      Option if the delivery of the shares results in a
                      disqualifying disposition?...........................................22
               T11.   What are the consequences of paying the exercise price of an
                      Incentive Option in the form of shares of Common Stock (i)
                      acquired under an Incentive Option and held for the requisite
                      holding periods, (ii) acquired under a Non-Statutory Option or
                      (iii) acquired through open-market purchases?........................22
               T12.   What are the consequences of a subsequent disposition of shares
                      purchased under an Incentive Option with shares of Common Stock?.....22

        NON-STATUTORY OPTIONS..............................................................23

               T13.   Will the grant of a Non-Statutory Option result in Federal
                      income tax liability to me?..........................................23
               T14.   Will the exercise of a Non-Statutory Option result in Federal
                      income tax liability to me?..........................................23
               T15.   What if the shares purchased under a Non-Statutory Option are
                      subject to a substantial risk of forfeiture, such as the
                      Corporation's repurchase right?......................................23
               T16.   What is the effect of making a Section 83(b) election?...............23
               T17.   Will I recognize additional income when I sell shares acquired
                      under a Non-Statutory Option?........................................24
               T18.   What are the consequences of paying the exercise price of a
                      Non-Statutory Option in the form of shares of Common Stock
                      previously acquired upon the exercise of employee options or
                      through open-market purchases?.......................................24
               T19.   What are the Federal tax consequences to the Corporation?............24

        STOCK APPRECIATION RIGHTS..........................................................24

               T20.   Will the exercise of a stock appreciation right result in
                      Federal income tax liability to me?..................................24
               T21.   What are the Federal tax consequences to the Corporation?............25

        STOCK ISSUANCES....................................................................25

               T22.   Will the issuance of vested shares result in Federal income tax
                      liability to me?.....................................................25
               T23.   Will the issuance of unvested shares result in Federal income
                      tax liability to me?.................................................25
               T24.   What is the effect of making a Section 83(b) election?...............25
</TABLE>

                                       iii
<PAGE>   9

<TABLE>
<S>            <C>                                                                        <C>
               T25.   Will I recognize additional income when I sell shares acquired
                      under the Stock Issuance Program?....................................25
               T26.   What are the Federal tax consequences to the Corporation?............26

        FEDERAL TAX RATES..................................................................26

               T27.   What are the applicable Federal tax rates?...........................26

        ALTERNATIVE MINIMUM TAX............................................................27

               T28.   What is the alternative minimum tax?.................................27
               T29.   What is the allowable exemption amount?..............................27
               T30.   How is the alternative minimum taxable income calculated?............27
               T31.   When is the spread on shares acquired under an Incentive Option
                      that are subject to a substantial risk of forfeiture includible
                      in alternative minimum taxable income?...............................27
               T32.   How will the payment of alternative minimum taxes in one year
                      affect the calculation of my tax liability in a later year?..........28

CORPORATION INFORMATION AND ANNUAL PLAN INFORMATION........................................28
</TABLE>

                                       iv

<PAGE>   10

THIS DOCUMENT CONSTITUTES PART OF THE OFFICIAL PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

                                INFORMATION ON THE
                            2000 STOCK INCENTIVE PLAN

     Websense, Inc., a Delaware corporation (the "Corporation"), is offering
shares of its common stock (the "Common Stock") to eligible individuals in the
Corporation's service pursuant to option grants and direct stock issuances made
under the Corporation's 2000 Stock Incentive Plan (the "Plan"). The purpose of
the Plan is to offer the Corporation's employees, the non-employee members of
the Board of Directors (the "Board"), and consultants and other independent
advisors who provide services to the Corporation the opportunity to acquire an
ownership interest in the Corporation as an incentive for such persons to
continue in the Corporation's service. Unless the context indicates otherwise,
all references to the Corporation in this Plan Summary and Prospectus include
Websense, Inc. and its parent and subsidiary corporations, whether now existing
or subsequently established.

                      QUESTIONS AND ANSWERS ABOUT THE PLAN

     This Plan Summary and Prospectus sets forth in question and answer format
the principal terms of the option grants and direct stock issuances which may be
made from time to time under the Plan to individuals who are executive officers
of the Corporation or Board members subject to the short-swing profit
restrictions of Section 16(b) of the Securities Exchange Act of 1934 (the "1934
Act"). Such individuals will be referred to in this document as "Section 16
Insiders."

                            GENERAL PLAN PROVISIONS

     1.   WHAT IS THE BASIC STRUCTURE OF THE PLAN?

          The Plan is divided into five (5) separate equity programs: (i) the
Discretionary Option Grant Program under which options may be granted to
eligible persons which will provide them with the right to purchase shares of
Common Stock at a fixed price per share equal to the fair market value of the
Common Stock on the grant date; (ii) the Salary Investment Option Grant Program
under which the Corporation's officers and other highly-compensated executives
may elect to invest a portion of their base salary each year in special option
grants with a below-market exercise price; (iii) the Stock Issuance Program
under which eligible persons may be issued shares of Common Stock directly,
either through the purchase of those shares at fair market value or as a bonus
for services rendered to the Corporation; (iv) the Automatic Option Grant
Program under which non-employee Board members will receive automatic option
grants at periodic intervals with exercise prices equal to the fair market value
of the Common Stock on the grant date and (v) the Director Fee Option Grant
Program under which non-employee Board members may elect to have their annual
cash retainer fee applied in whole or in part to the acquisition of special
option grants with a below-market exercise price.

     2.   WHEN DID THE PLAN BECOME EFFECTIVE?

          The Plan became effective on June 24, 2000 in connection with the
initial public offering of the Common Stock and serves as the successor to the
Corporation's 1998 Stock Plan (the "Predecessor Plan").

          All options outstanding under the Predecessor Plan have been
incorporated into the new Plan, and no further option grants or stock issuances
will be made under the Predecessor Plan. Each option so incorporated will
continue to be governed by the terms of the agreement evidencing that option,
and no provision of the new Plan will adversely affect or otherwise modify the
rights of the holders of such incorporated options with respect to their
acquisition of shares of Common Stock thereunder.

<PAGE>   11

     3.   WHO ADMINISTERS THE PLAN?

          The Discretionary Option Grant and Stock Issuance Programs under the
Plan will, with respect to all executive officers and Board members subject to
the short-swing profit restrictions of the federal securities laws, be
administered by the Compensation Committee. This committee is comprised of two
(2) or more non-employee Board members appointed by the Board, and each member
will serve for so long as the Board deems appropriate and may be removed by the
Board at any time. The Compensation Committee will also administer the
Discretionary Option Grant and Stock Issuance Programs with respect to all other
persons eligible to participate in those programs. However, a secondary
committee of one or more Board members may be delegated separate but concurrent
jurisdiction with the Compensation Committee to administer those programs with
respect to such persons. The Compensation Committee and any secondary Board
committee will each, within the scope of their administrative jurisdiction under
the Plan, have full power and authority to determine, with respect to the option
grants or share issuances made under the Discretionary Option Grant and Stock
Issuance Programs, the persons who are to be granted options or issued shares,
the time or times when such option grants or share issuances are to be made, the
number of shares to be subject to each such grant or issuance, the time or times
when each option is to become exercisable, the vesting schedule applicable to
the option shares or the share issuance and the maximum period for which the
option is to remain outstanding. However, any discretionary option grants or
stock issuances to members of the Compensation Committee will require the
approval of a disinterested majority of the Board. The Compensation Committee
will also have the sole and exclusive authority to select the eligible
individuals who are to participate in the Salary Investment Option Grant
Program. However, the number of shares subject to each option grant made under
the Salary Investment Option Grant Program and the exercise price payable per
share will be determined in accordance with the express provisions in effect for
that program.

          Neither the Compensation Committee nor any secondary committee will
perform any discretionary functions under the Automatic Option Grant or Director
Fee Option Programs. The terms and conditions of the option grants made under
the Automatic Option Grant and Director Fee Option Programs (including the
timing and pricing of each such option grant) will be determined solely in
accordance with the express provisions of those programs.

          The Compensation Committee and any secondary Board committee with
administrative jurisdiction under the Plan will each be referred to in this
document as the "Plan Administrator."

     4.   WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?

          Employees, non-employee Board members, consultants and other
independent advisors in the Corporation's service will be eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs. Only
employees who are executive officers and other highly-compensated individuals in
the Corporation's employ will be eligible to participate in the Salary
Investment Option Grant Program. However, the actual persons to whom option
grants or stock issuances are to be made under the foregoing programs will be
determined by the Plan Administrator in its sole discretion. Non-employee Board
members will also be eligible to participate in the Automatic Option Grant and
Director Fee Option Grant Programs.

     5.   HOW MANY SHARES OF COMMON STOCK MAY BE ISSUED UNDER THE PLAN?

          The maximum number of shares of Common Stock issuable over the term of
the Plan will initially be limited to 4,500,000 shares (subject to adjustment
for certain changes in the Corporation's capital structure). Such share reserve
consists of (i) the number of shares which remained available for issuance under
the Predecessor Plan at the time of the initial public offering of the Common
Stock, including the shares subject to outstanding options under the Predecessor
Plan incorporated into the new Plan, plus (ii) an additional increase of
approximately 1,000,000 shares of Common Stock.

                                       2
<PAGE>   12

          The number of shares of Common Stock available for issuance under the
Plan will automatically increase on the first trading day in January each
calendar year, beginning with calendar year 2001, by an amount equal to four
percent (4%) of the total number of shares of Common Stock outstanding on the
last trading day in December in the immediately preceding calendar year, but in
no event will any such annual increase exceed 1,500,000 shares.

          No individual participating in the Plan may receive stock options,
separately exercisable stock appreciation rights and direct share issuances for
more than 750,000 shares of Common Stock under the Plan per calendar year.
Except for such restriction and certain other restrictions in connection with
incentive stock option grants (see the "Incentive Options" section below), there
are no limitations on the number of shares of Common Stock for which an eligible
individual may be granted options under the Discretionary Option Grant or Salary
Investment Option Grant Programs or issued stock under the Stock Issuance
Program.

          Should one or more outstanding options under the Plan expire or
terminate for any reason prior to exercise in full, the shares of Common Stock
subject to the portion of each such option not so exercised will be available
for subsequent issuance under the Plan. Unvested shares issued under the Plan
and subsequently repurchased by the Corporation, at the original exercise price
or issue price paid per share, pursuant to the Corporation's repurchase rights
under the Plan will be added back to the number of shares of Common Stock
available for issuance under the Plan and may accordingly be reissued through
one or more subsequent option grants or direct stock issuances under the Plan.
Should the exercise price of an option under the Plan be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan will be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance. Shares subject to options which are surrendered pursuant to any stock
appreciation rights exercised under the Plan will not be available for
subsequent issuance.

          The Common Stock will be made available either from authorized but
unissued shares of Common Stock or from shares of Common Stock reacquired by the
Corporation, including shares repurchased on the open market.

     6.   WHAT HAPPENS IF THERE IS A CHANGE IN THE CORPORATION'S CAPITAL
          STRUCTURE?

          In the event of a Recapitalization, appropriate adjustments will
automatically be made to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities by
which the share reserve is to increase automatically each calendar year pursuant
to the automatic share increase provisions of the Plan, (iii) the maximum number
and/or class of securities for which any one person may be granted stock
options, separately exercisable stock appreciation rights and direct stock
issuances per calendar year, (iv) the number and/or class of securities for
which grants are subsequently to be made under the Automatic Option Grant
Program to new and continuing non-employee Board members and (v) the number
and/or class of securities and the exercise price per share in effect under each
outstanding option (including options incorporated from the Predecessor Plan).
The adjustments to such outstanding options will preclude the dilution or
enlargement of the rights and benefits available under those options.

          For purposes of the Plan, a Recapitalization will include any stock
dividend, stock split, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration.

                                       3
<PAGE>   13

     7.   CAN THE PLAN BE AMENDED OR TERMINATED?

          Yes. The Board has exclusive authority to amend or modify the Plan in
any and all respects. However, no amendment or modification may, without the
holder's consent, adversely affect such individual's rights and obligations
under his or her outstanding stock options, stock appreciation rights or direct
stock issuances under the Plan. In addition, certain amendments to the Plan may
require the approval of the Corporation's stockholders.

        The Plan will terminate upon the earliest to occur of (i) January 31,
2010, (ii) the date on which all shares available for issuance under the Plan
are issued as fully vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction (see the "Early Termination
of Options" section below). Should the Plan terminate on January 31, 2010, then
any option grants and unvested stock issuances outstanding at that time under
the Plan will continue to have force and effect in accordance with the
provisions of the agreements evidencing those grants or issuances.

                       DISCRETIONARY OPTION GRANT PROGRAM

                                GRANT OF OPTIONS

     8.   HOW ARE OPTIONS GRANTED UNDER THE DISCRETIONARY OPTION GRANT PROGRAM?

          The Plan Administrator will have complete discretion (subject to the
limitations of the Plan) to determine when and to whom options will be granted
under the Discretionary Option Grant Program and the terms of each such grant.
Each option grant will be evidenced by one or more option documents
(collectively, the "Option Agreement") executed by the Corporation and the
optionee.

     9.  WHAT TYPE OF OPTIONS MAY BE GRANTED UNDER THE DISCRETIONARY OPTION
         GRANT PROGRAM?

          The Plan Administrator may grant incentive stock options ("Incentive
Options") designed to meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options which do not satisfy
such requirements ("Non-Statutory Options"). For a discussion of the difference
in tax treatment under the Code between Incentive Options and Non-Statutory
Options, see the "Questions and Answers on Federal Tax Consequences" section
below.

     10.  HOW IS THE EXERCISE PRICE DETERMINED?

          The exercise price of an option will be determined by the Plan
Administrator. However, the exercise price of an option cannot be less than one
hundred percent (100%) of the fair market value of the Common Stock on the grant
date.

     11.  HOW IS THE FAIR MARKET VALUE OF THE COMMON STOCK DETERMINED?

          The fair market value per share of Common Stock on any relevant date
under the Plan will be the closing selling price per share on that date, as
reported on the Nasdaq National Market and published in The Wall Street Journal.
If the Common Stock is not traded on that day, the fair market value will be the
closing selling price per share on the last preceding date for which such
quotation exists.

     12.   CAN THE CORPORATION CANCEL MY OPTION AND GRANT ME A NEW OPTION?

          Yes. The Plan Administrator has the authority to cancel outstanding
options and to issue new options in replacement, but your consent will be
required in connection with your participation in any such cancellation/regrant
program. The new options can cover the same or a different number of shares of
Common

                                       4
<PAGE>   14

Stock and will have an exercise price per share not less than the fair market
value of the Common Stock on the new grant date. In addition, it is likely that
the new options will have a vesting schedule based on the new grant date,
without any credit provided for the period the cancelled options were
outstanding.

     13.  CAN I ASSIGN OR TRANSFER MY OPTION?

          No. Your options generally cannot be assigned or transferred, except
by the provisions of your will or the laws of inheritance following your death
or pursuant to any beneficiary designation you have in effect for your options
at the time of your death. However, one or more Non-statutory Options may be
structured so that those options will be assignable in whole or in part during
your lifetime to one or more members of your immediate family or to a trust
established exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. No such assignment will be
permitted, however, unless in connection with your estate plan.

     14.  WHEN DO I ACQUIRE THE RIGHTS OF A STOCKHOLDER?

          You will not have any stockholder rights with respect to the option
shares. You will not acquire stockholder rights until you exercise the option,
pay the exercise price and become a holder of record of the purchased shares.

                              EXERCISE OF OPTIONS

     15.  WHEN MAY I EXERCISE MY OPTION?

          Your option may be immediately exercisable for all of the option
shares or may become exercisable for those shares in a series of installments
over the period that you remain in the Corporation's service. The exercise
schedule applicable to your option will be determined by the Plan Administrator
at the time of grant and will be set forth in the Option Agreement. You may
exercise your option at any time for the shares for which your option is
exercisable, provided you do so before the option terminates. However, any
purchased shares in which you are not vested at the time of your termination of
service will be subject to repurchase by the Corporation as discussed below.

     16.  WHEN WILL MY OPTION TERMINATE?

          No option granted under the Discretionary Option Grant Program may
have a term in excess of ten (10) years. The actual expiration date of your
option will be set forth in the Option Agreement. Your option may, however,
terminate prior to its designated expiration date in the event of your
termination of service or upon the occurrence of certain other events. See the
"Early Termination of Options" section below.

     17.  HOW DO I EXERCISE MY OPTION?

          To exercise your option, you must provide the Corporation with written
notice of the exercise in which you indicate the number of shares to be
purchased under your option. The notice must be accompanied by payment of the
exercise price for the purchased shares, together with appropriate proof that
the person exercising the option (if other than yourself) has the right to
effect such exercise. You will be required to satisfy all applicable income and
employment tax withholding requirements at that time. For information about such
tax withholding, see the "Questions and Answers on Federal Tax Consequences"
section below.

                                       5
<PAGE>   15

     18.  HOW DO I PAY THE EXERCISE PRICE?

          The exercise price may be paid in cash or check payable to the
Corporation or in shares of Common Stock. Any shares delivered in payment of the
exercise price will be valued at fair market value on the exercise date and must
have been held for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes (generally a six
(6)-month period).

          Cashless exercises are also permitted to the extent your option is
exercised for vested shares of Common Stock. To use this procedure, you must
provide irrevocable instructions to a Corporation-designated brokerage firm to
effect the immediate sale of the vested shares of Common Stock purchased under
your option and to pay over to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable withholding
taxes. Concurrently with such instructions, you must also direct the Corporation
to deliver the certificates for the purchased shares to the brokerage firm in
order to complete the sale.

     19.  DOES THE CORPORATION HAVE THE RIGHT TO REPURCHASE THE SHARES ACQUIRED
          UPON EXERCISE OF MY OPTION?

          The answer will depend upon the exercise and vesting schedules in
effect for your option. If you are granted an option which becomes exercisable
in a series of installments over your period of service, then the shares of
Common Stock purchased under that option will be fully-vested when acquired and
will not be subject to the Corporation's repurchase rights. However, if you are
granted an option which is exercisable immediately, then the shares of Common
Stock purchased under that option will normally be subject to a vesting schedule
pursuant to which the Corporation may repurchase, at the original exercise
price, any unvested shares you hold at the time of your termination of service.
If you wait to exercise your option so that you purchase only vested shares,
then the Corporation will not have any right to repurchase those shares.

          The Corporation's repurchase rights will also cover any new,
substituted or additional securities or other property subsequently distributed
with respect to your unvested shares of Common Stock by reason of any
Recapitalization. Appropriate adjustments to reflect the distribution will be
made to the number and/or class of securities subject to the Corporation's
repurchase rights and the price per share payable upon the exercise of those
rights.

          The Plan Administrator will have full discretion to establish the
remaining terms upon which the Corporation's repurchase rights are to become
exercisable (including the procedure for effecting such repurchase), and such
terms will be included in the agreement evidencing the repurchase rights.

     20.  CAN I TRANSFER SHARES SUBJECT TO THE CORPORATION'S REPURCHASE RIGHTS?

          You may not transfer, assign or encumber any unvested shares of Common
Stock which are subject to the Corporation's repurchase rights, except for
certain gifts approved by the Plan Administrator or transfers by will or
inheritance following your death. The certificates representing such unvested
shares may, in the Plan Administrator's discretion, bear a legend indicating the
existence of such transfer restrictions, or the unvested shares (and any
securities or other property distributed with respect to the shares) may be held
in escrow by the Corporation (or any successor entity) until you vest in those
shares.

     21.  WHEN WILL THE CORPORATION'S REPURCHASE RIGHT LAPSE?

          The Corporation's repurchase right will lapse, and you will vest in
your option shares, in one or more installments according to the vesting
schedule established by the Plan Administrator and set forth in the agreement
evidencing the repurchase right. In addition, the Corporation's repurchase right
may under certain

                                       6
<PAGE>   16

circumstances lapse, and the shares subject to the terminated right will
thereupon vest, in connection with a Corporate Transaction or Change in Control.
(For further information, see the discussion below under the "Early Termination
of Options" section.)

     22. DOES THE PLAN INCLUDE ANY SPECIAL PROGRAMS?

          The Plan includes two special programs: the Stock Appreciation Rights
Program and the Tax Withholding Program which are explained more fully below.
The Plan Administrator will have the discretion to extend the benefits of either
of those programs to one or more eligible individuals under the Plan. You will
be notified in writing should you be selected for participation in either
program.

     23.  WHAT IS THE STOCK APPRECIATION RIGHTS PROGRAM?

          The Plan Administrator has the discretion to grant to selected
optionees tandem stock appreciation rights ("SARs") which provide the optionee
with the right to elect between the normal exercise of the option for shares of
Common Stock and the surrender of all or part of that option for a distribution
from the Corporation equal to the excess of (i) the fair market value of the
vested shares of Common Stock subject to the surrendered option over (ii) the
exercise price payable for those shares. The distribution may, in the Plan
Administrator's discretion, be made in cash or in shares of Common Stock. There
are a number of limitations governing the exercise of an SAR:

          -    The exercise of the SAR must be approved by the Plan
               Administrator.

          -    If the Plan Administrator disapproves the exercise of the SAR,
               the optionee will retain whatever rights existed under the
               surrendered option (or surrendered portion) and may exercise
               those rights at any time before the later of (i) five (5)
               business days following notification of such disapproval or (ii)
               the last day on which the option is otherwise exercisable in
               accordance with its terms.

          -    No SAR may be transferred or assigned.

          The Plan Administrator may also grant limited SARs to one or more
Section 16 Insiders. Each outstanding option with such a limited SAR may be
surrendered to the Corporation within thirty (30) days following the occurrence
of a Hostile Take-Over. In return, the Section 16 Insider will receive a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to each
surrendered option (whether or not the option is otherwise vested and
exercisable for those shares) over (ii) the aggregate exercise price payable for
those shares. The exercise of the limited SAR in accordance with the foregoing
terms and conditions will be pre-approved by the Plan Administrator at the time
the SAR is granted, and no additional approval of the Plan Administrator or the
Board will be required at the time of the actual option surrender and cash
distribution. Accordingly, the cash distribution to which the Section 16 Insider
becomes entitled upon the exercise of the limited SAR will be made within five
(5) days following the option surrender date.

          A HOSTILE TAKE-OVER will be deemed to occur in the event any person or
related group of persons directly or indirectly acquires securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's stockholders which the Board does not recommend
such stockholders to accept.

          The TAKE-OVER PRICE per share will be deemed to be equal to the
greater of (i) the fair market value per share of Common Stock on the option
surrender date or (ii) the highest reported price per share paid by the tender
offeror in effecting the Hostile Take-Over. However, if the surrendered option
is an Incentive Option, the Take-Over Price will not exceed the clause (i) price
per share.

          The shares of Common Stock subject to options surrendered in
connection with the exercise of SARs will not be available for subsequent
issuance under the Plan.

                                       7
<PAGE>   17

          NOTE: NONE OF THE OPTIONS INCORPORATED FROM THE PREDECESSOR PLAN
          CONTAIN ANY SARS.

     25.  WHAT IS THE TAX WITHHOLDING PROGRAM?

          The Plan Administrator may select one or more holders of Non-Statutory
Options for participation in the Tax Withholding Program. Each selected
individual may elect to have the Corporation withhold, from the shares of Common
Stock purchased under his or her Non-Statutory Option, a portion of those shares
with a fair market value equal to a designated percentage (not to exceed one
hundred percent (100%)) of the Federal, state and local income and employment
withholding taxes to which such individual may become subject in connection with
the exercise of that option. In lieu of such direct withholding, the Plan
Administrator may allow such individual to deliver previously acquired shares of
Common Stock in satisfaction of the withholding tax liability. However, no
shares of Common Stock will actually be withheld or accepted in satisfaction of
such withholding tax liability except to the extent approved by the Plan
Administrator, and any such withheld or delivered shares will be valued at fair
market value on the date of the option exercise.

                                INCENTIVE OPTIONS

          This section applies only to Incentive Options. Non-Statutory Options
are not subject to these provisions.

     25.  WHO IS ELIGIBLE TO RECEIVE AN INCENTIVE OPTION?

          Incentive Options may only be granted to individuals who are employees
of the Corporation.

     26.  IS THERE A LIMITATION ON THE NUMBER OF SHARES FOR WHICH AN INCENTIVE
          OPTION MAY BECOME EXERCISABLE IN ANY ONE CALENDAR YEAR?

          Yes. The aggregate fair market value of the shares of Common Stock
(determined at the date of grant) for which an option may for the first time
become exercisable in any calendar year as an Incentive Option under the Federal
tax laws may not exceed $100,000. To the extent you hold two (2) or more
Incentive Options which become exercisable for the first time in the same
calendar year, the $100,000 limitation will be applied on the basis of the order
in which those options were granted. Options which do not qualify for Incentive
Option treatment under the Federal tax laws by reason of this dollar limitation
may nevertheless be exercised as Non-Statutory Options in the calendar year in
which they become exercisable for the excess number of shares.

                    EXAMPLE: On March 1, 2000, Sam Smith is granted an Incentive
          Option to purchase 20,000 shares of Common Stock at an exercise price
          of $15.00 per share, the fair market value of the Common Stock on that
          date. The option will become exercisable for the option shares in a
          series of four successive equal annual installments, beginning March
          1, 2001. When the option becomes exercisable for the second annual
          installment on March 1, 2002, the fair market value of the Common
          Stock is assumed to be $25.00 per share. On April 25, 2001, Sam is
          granted a second Incentive Option to purchase 10,000 shares of Common
          Stock at an exercise price of $20.00 per share, the fair market value
          of the Common Stock on that date. This option will also become
          exercisable for the option shares in a series of four successive equal
          annual installments beginning on April 25, 2002. When the option
          becomes exercisable for the first annual installment on that date, the
          fair market value of the Common Stock is assumed to be $25.00 per
          share.

                    The aggregate fair market value of the 5,000 shares of
          Common Stock (measured as of the grant date) which become exercisable
          under the first option in calendar year 2002 is $75,000. The aggregate
          fair market value of the 2,500 shares of Common Stock (measured as of
          the grant date) which become exercisable under the second option in
          calendar year 2002 is $50,000. Accordingly, 1,250 of the shares which
          first become purchasable in calendar

                                       8
<PAGE>   18
          year 2002 under the calendar year 2001 option will not qualify for
          favorable tax treatment as Incentive Options because the aggregate
          value (as measured as of the grant date) of the shares of Common Stock
          for which the two options first become exercisable in calendar year
          2002 exceeds $100,000 ($75,000 + $50,000 = $125,000). The 1,250 shares
          which do not qualify for Incentive Option treatment under the calendar
          year 2001 option may be exercised as Non-Statutory Options.

     27.  CAN AN INCENTIVE OPTION LOSE ITS QUALIFIED STATUS?

          Yes. An option granted as an Incentive Option will be taxed as a
Non-Statutory Option if exercised more than three (3) months after you terminate
employee status. Certain amendments or modifications to an outstanding option
may also cause the loss of Incentive Option status, but no such amendment or
modification may be made without your consent.

     28.  WHAT LIMITATIONS APPLY TO INCENTIVE OPTIONS GRANTED TO A 10%
          STOCKHOLDER?

          If an Incentive Option is granted to an individual who is at the time
the owner of stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation or any parent or
subsidiary corporation, then the exercise price per share cannot be less than
one hundred ten percent (110%) of the fair market value of the Common Stock on
the grant date, and the option term may not exceed five (5) years from the grant
date.

                          EARLY TERMINATION OF OPTIONS

     29.  WHAT HAPPENS TO MY OPTIONS IF MY SERVICE TERMINATES?

          After your termination of service for any reason other than death,
disability or Misconduct (as defined below in Question 30), you will have a
limited period of time in which to exercise your outstanding options for any
shares of Common Stock in which you are vested on the date your service
terminates. The length of this period will be set forth in your Option Agreement
and will generally not be in excess of three (3) months. However, your option
will in all events terminate on the specified expiration date of the option
term. To the extent your options are not exercisable for one or more vested
shares at the time of your termination of service, your options will immediately
terminate and cease to be outstanding with respect to those unvested shares.

          Unless your Option Agreement specifically provides otherwise, you will
be deemed to continue in service for so long as you render services to the
Corporation, whether as (i) an employee, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance, (ii) a non-employee Board member or (iii) a consultant or
other independent advisor.

          The Plan Administrator has the discretion to extend the period during
which you may exercise one or more of your options following your termination of
service and/or to permit such options to be exercised not only with respect to
the number of shares of Common Stock in which you are at the time vested but
also with respect to one or more additional installments in which you would have
vested had you continued in service. You will be notified in writing in the
event the Plan Administrator decides to provide you with any of those additional
benefits.

     30.  WHAT HAPPENS TO MY OPTIONS IF I AM DISCHARGED FROM SERVICE FOR
          MISCONDUCT?

          Should you be discharged from service for Misconduct or otherwise
engage in Misconduct while your options are outstanding, then all of your
outstanding options will immediately terminate. For purposes of the Plan,
MISCONDUCT includes (i) any act of fraud, embezzlement or dishonesty, (ii) any
unauthorized use or disclosure of confidential information or trade secrets of
the Corporation, or (iii) any other intentional misconduct adversely affecting
the business or affairs of the Corporation in a material manner. However, the
foregoing list is not inclusive of all the acts or omissions which may be
considered as grounds for dismissal or discharge of any individual in the
Corporation's service.

                                       9
<PAGE>   19

     31.  WHAT HAPPENS TO MY OPTIONS IF I DIE OR BECOME DISABLED?

          If you die while any of your options are outstanding, the personal
representative of your estate or the person or persons to whom the options are
transferred by the provisions of your will or the laws of inheritance or
pursuant to the beneficiary designation you have in effect for those options may
exercise each of those options for any or all vested shares of Common Stock for
which the option was exercisable on the date your service with the Corporation
terminated, less any shares you may have subsequently purchased prior to your
death. The right to exercise each such option will lapse upon the earlier of (i)
the expiration of the option term or (ii) the first anniversary of the date of
your death.

          If you terminate your service with the Corporation because you become
permanently disabled, you will normally have a period of twelve (12) months from
such termination date during which to exercise your options for any or all of
the vested shares for which those options were exercisable at the time of such
termination. In no event, however, may you exercise any option after the
specified expiration of the option term. For purposes of the Plan, you will be
deemed to be PERMANENTLY DISABLED if you are unable to perform any substantial
gainful activity by reason of any medically-determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) consecutive months or more.

          NOTE: FOR OPTIONS INCORPORATED FROM THE PREDECESSOR PLAN, YOU WILL
     HAVE UNTIL THE EARLIER OF (i) THE EXPIRATION DATE OF THE OPTION TERM OR
     (ii) THE LIMITED PERIOD PROVIDED IN THE OPTION AGREEMENT FOR THE EXERCISE
     OF THAT OPTION FOLLOWING YOUR TERMINATION OF SERVICE.

     32.  WHAT HAPPENS TO MY OPTIONS IF THE CORPORATION IS ACQUIRED OR MERGED?

          In the event of a Corporate Transaction, all options outstanding under
the Discretionary Option Grant Program will automatically vest on an accelerated
basis so that each such option will, immediately prior to the effective date of
the Corporate Transaction, become exercisable for all the shares of Common Stock
at the time subject to that option and may be exercised for any or all of those
shares as fully-vested shares. However, an outstanding option will NOT vest and
become exercisable on such an accelerated basis, if and to the extent: (i) the
option is assumed by the successor corporation, (ii) such option is replaced
with a cash incentive program which preserves the option spread existing on the
unvested shares subject to the option at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to those option shares or (iii) the acceleration of the option is
subject to other limitations imposed by the Plan Administrator in the Option
Agreement. In addition, all of the Corporation's outstanding repurchase rights
under the Discretionary Option Grant Program will automatically terminate in the
event of a Corporate Transaction except to the extent: (i) the repurchase right
is assigned to the successor corporation or (ii) termination of the repurchase
right is subject to other limitations imposed by the Plan Administrator in the
agreement evidencing the right.

          All outstanding options under the Discretionary Option Grant Program
will, to the extent not assumed by the successor corporation, terminate and
cease to be outstanding immediately following the completion of the Corporate
Transaction.

          Any Incentive Options accelerated upon the Corporate Transaction will
remain exercisable as Incentive Options under the Federal tax laws only to the
extent the applicable $100,000 limitation is not exceeded. If such limitation is
exceeded, the option may be exercised for the excess number of shares as a
Non-Statutory Option.

          A CORPORATE TRANSACTION will be deemed to occur upon (i) a merger or
consolidation in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities are
transferred to a person or persons different from the persons holding those
securities immediately prior to such transaction or (ii) a sale, transfer or
other disposition of all or substantially all the assets of the Corporation in
liquidation or dissolution of the Corporation.

                                       10
<PAGE>   20

          NOTE: THE OPTIONS INCORPORATED FROM THE PREDECESSOR PLAN WILL VEST
     UPON AN ACQUISITION OF THE CORPORATION BY MERGER OR ASSET SALE AND BECOME
     IMMEDIATELY EXERCISABLE FOR ALL THE OPTION SHARES, UNLESS THE REPURCHASE
     RIGHTS APPLICABLE TO THE OPTION SHARES ARE TRANSFERRED TO THE ACQUIRING
     COMPANY. THE OPTIONS WILL TERMINATE IMMEDIATELY AFTER THE ACQUISITION,
     UNLESS ASSUMED BY THE SUCCESSOR ENTITY.

     33.  WHAT HAPPENS TO MY OPTIONS THAT ARE ASSUMED UPON A CORPORATE
          TRANSACTION?

          Each option under the Discretionary Option Grant Program which is
assumed by the successor corporation will, immediately after the Corporate
Transaction, be appropriately adjusted to apply to the number and class of
securities which would have been issued to the optionee in consummation of the
Corporate Transaction had the option been exercised immediately prior to the
Corporate Transaction. Appropriate adjustments will also be made to the exercise
price payable per share under each assumed option, provided the aggregate
exercise price for the option shares will remain the same. To the extent the
actual holders of the Corporation's outstanding Common Stock receive cash
consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
the option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.

          The Plan Administrator may structure one or more options granted under
the Discretionary Option Grant Program so that those options will immediately
vest and become exercisable for all the option shares as fully vested shares
upon an Involuntary Termination of the optionee's service within a designated
period (not to exceed eighteen (18) months) following the effective date of a
Corporate Transaction in which the options are assumed and do not otherwise vest
at that time. Any option so accelerated will remain exercisable for the vested
shares until the expiration or sooner termination of the option term. In
addition, the Plan Administrator may structure one or more of the Corporation's
outstanding repurchase rights so that those rights will automatically terminate,
and the shares subject those terminated rights will immediately vest, upon such
an Involuntary Termination. You should review your Option Agreement to determine
whether the options you hold will in fact accelerate upon such an Involuntary
Termination.

          An INVOLUNTARY TERMINATION will be deemed to occur upon (i) the
optionee's involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct or (ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of management to
which he or she reports, (B) a reduction in his or her level of compensation
(including base salary, fringe benefits and target bonus under any corporate
performance-based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of such individual's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation without the optionee's consent.

          NOTE: A NUMBER OF OUTSTANDING OPTIONS INCORPORATED FROM THE
     PREDECESSOR PLAN INCLUDE A SPECIAL VESTING ACCELERATION PROVISION PURSUANT
     TO WHICH THOSE OPTIONS WILL VEST AND BECOME IMMEDIATELY EXERCISABLE FOR ALL
     THE OPTION SHARES AS FULLY-VESTED SHARES UPON AN INVOLUNTARY TERMINATION OF
     THE OPTIONEE'S SERVICE WITHIN EIGHTEEN (18) MONTHS FOLLOWING AN ACQUISITION
     OF THE CORPORATION BY A MERGER OR ASSET SALE.

     34.  WHAT HAPPENS TO MY OPTIONS IF THERE IS A CHANGE IN CONTROL OF THE
          CORPORATION?

          The Plan Administrator may structure one or more options granted under
the Discretionary Option Grant Program so that those options will immediately
vest and become exercisable for all the option shares as fully vested shares
either upon the occurrence of a Change in Control or upon an Involuntary
Termination of the optionee's service within a designated period (not to exceed
eighteen (18) months) following the effective date of that Change in Control. In
addition, the Plan Administrator may structure one or more of the Corporation's

                                       11
<PAGE>   21

outstanding repurchase rights so that those rights will automatically terminate,
and the shares subject those terminated rights will immediately vest, upon such
a Change in Control or subsequent Involuntary Termination. You should review
your Option Agreement to determine whether the options you hold will in fact
accelerate upon a Change in Control or your subsequent Involuntary Termination.

          Any option accelerated in connection with a Change in Control or
subsequent Involuntary Termination will remain exercisable for fully-vested
shares until the expiration or sooner termination of the option term. However,
any Incentive Option so accelerated will remain exercisable as an Incentive
Option under the Federal tax laws only to the extent the applicable $100,000
limitation is not exceeded. If such limitation is exceeded, the option may be
exercised for the excess number of shares as a Non-Statutory Option.

          A CHANGE IN CONTROL will be deemed to occur in the event (i) any
person directly or indirectly acquires securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's stockholders or (ii) there is a change in the composition of
the Board over a period of thirty-six (36) consecutive months or less such that
a majority of the Board ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time such election or nomination was approved by the Board.

          NOTE: NONE OF THE OPTIONS INCORPORATED FROM THE PREDECESSOR PLAN
CONTAIN ANY CHANGE IN CONTROL ACCELERATION PROVISIONS.

                     SALARY INVESTMENT OPTION GRANT PROGRAM

     35.  WHAT IS THE SALARY INVESTMENT OPTION GRANT PROGRAM?

          The Salary Investment Option Grant Program may become effective for
one or more calendar years designated by the Compensation Committee. Once the
Salary Investment Program is implemented, the Compensation Committee will have
the discretionary authority to select the executive officers and other highly
compensated employees who may participate each year, and the selected
individuals may elect to invest a portion of their base salary for the upcoming
calendar year in a special below-market option grant. The elected investment
will be effected through a reduction in the participant's salary for that
calendar year by a designated dollar amount. In return, the participant will
receive an option to purchase shares of Common Stock at an aggregate discount
from the fair market value of the option shares on the grant date equal to the
amount by which his or her salary is to be reduced. The election must be filed
with the Compensation Committee prior to the start of the calendar year for
which the salary reduction is to be in effect, and the election, once filed,
will be irrevocable.

     36.  ARE THERE ANY LIMITATIONS ON THE AMOUNT OF SALARY REDUCTION A
          PARTICIPANT MAY ELECT?

          The salary investment amount subject to the participant's election may
not be less than Ten Thousand Dollars ($10,000) nor more than Fifty Thousand
Dollars ($50,000).

     37.  WHAT ARE THE TERMS OF THE OPTIONS GRANTED UNDER THE SALARY INVESTMENT
          OPTION GRANT PROGRAM?

          The participant will be granted a stock option under the program on
the first trading day in January of the calendar year for which the salary
reduction is to be in effect. Such option will be subject to substantially the
same terms and conditions applicable to option grants under the Discretionary
Option Grant Program, except for the following differences:

                                       12
<PAGE>   22

          - Each option will be a Non-Statutory Option and will have a maximum
term of ten (10) years measured from the option grant date.

          - The exercise price per share will be equal to one-third of the fair
market value per share of Common Stock on the option grant date.

          - The number of shares subject to the option will be determined by
dividing the total dollar amount of the reduction in the participant's base
salary by two-thirds of the fair market value per share of Common Stock on the
option grant date (and rounding down to the nearest whole share).

          - The option will become exercisable for the option shares in a series
of twelve (12) successive equal monthly installments upon the optionee's
completion of each calendar month of service in the calendar year for which the
salary reduction is in effect.

          - The optionee will have until the earlier of (i) the expiration date
of the option term or (ii) the expiration of the three (3)-year period measured
from the date of his or her cessation of service in which to exercise the option
for any option shares for which the option is exercisable on the date of such
cessation of service. However, upon the optionee's cessation of service, the
option will immediately terminate and cease to be outstanding with respect to
any option shares for which the option is not otherwise at that time
exercisable.

          - Should a Corporate Transaction occur during the optionee's period of
service, then his or her salary investment option will automatically accelerate
so that the option will, immediately prior to the effective date of the
Corporate Transaction, become exercisable for all the shares of Common Stock at
the time subject to that option, and the accelerated option may be exercised for
any or all of those shares as fully-vested shares. The accelerated option will
terminate immediately after the Corporate Transaction, except to the extent
assumed by the successor corporation (or its parent corporation). Any option so
assumed will remain exercisable for the fully-vested shares until the earlier of
(i) the expiration of the option term or (ii) the expiration of the three
(3)-year period measured from the date of the optionee's cessation of service.

          - Should a Change in Control occur during the optionee's period of
service, then his or her salary investment option will automatically accelerate
so that the option will, immediately prior to the effective date of such Change
in Control, become exercisable for all the shares of Common Stock at the time
subject to that option and may be exercised for any or all of those shares as
fully-vested shares. The accelerated option will remain exercisable until the
earliest to occur of (i) the expiration of the option term, (ii) the expiration
of the three (3)-year period measured form the date of the optionee's cessation
of service, (iii) the termination of the option in connection with a Corporate
Transaction or (iv) the surrender of the option in connection with a Hostile
Take-Over.

          - Each salary investment option grant will include a limited SAR.
Accordingly, upon a Hostile Take-Over, that option may be surrendered to the
Corporation for a cash distribution in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the option is otherwise exercisable for those
shares) over (ii) the aggregate exercise price payable for those shares.

                                       13
<PAGE>   23

                             STOCK ISSUANCE PROGRAM

     38.  HOW ARE SHARES OF COMMON STOCK ISSUED UNDER THE STOCK ISSUANCE
          PROGRAM?

          The Plan Administrator will have complete discretion to determine when
and to whom share issuances are to be made under the Stock Issuance Program and
the terms of each such issuance. Each share issuance will be evidenced by a
stock issuance agreement (the "Issuance Agreement") executed by the Corporation
and the participant.

          Alternatively, the Plan Administrator may issue the shares pursuant to
share right awards which entitle the recipients to receive those shares upon the
attainment of designated performance goals or the completion of a specified
period of service.

     39.  HOW IS THE PURCHASE PRICE DETERMINED?

          The purchase price per share will be determined by the Plan
Administrator but will not be less than one hundred percent (100%) of the fair
market value of the Common Stock on the issuance date.

     40.  WHAT FORM OF PAYMENT IS REQUIRED FOR SHARES ISSUED UNDER THE STOCK
          ISSUANCE PROGRAM?

          The purchase price will be due immediately upon the issuance of the
Common Stock and may be paid in cash or check payable to the Corporation. Shares
of Common Stock may also be issued as a bonus for past services rendered to the
Corporation without any cash payment required of the participant.

     41.  WHEN DO SHARES OF COMMON STOCK ACQUIRED UNDER THE STOCK ISSUANCE
          PROGRAM VEST?

          Shares of Common Stock issued under the Stock Issuance Program may, in
the discretion of the Plan Administrator, be fully-vested upon issuance or may
vest over the participant's period of service or upon attainment of specified
performance objectives. The Plan Administrator will determine the vesting
schedule applicable to any unvested shares of Common Stock issued under the
program, and that schedule will be incorporated into the Issuance Agreement for
those shares.

     42.  DOES THE CORPORATION HAVE THE RIGHT TO REPURCHASE THE SHARES ACQUIRED
          UNDER THE STOCK ISSUANCE PROGRAM?

          The answer will depend on the vesting schedule in effect for your
shares. If you are issued shares of Common Stock which are fully vested, then
those shares will not be subject to the Corporation's repurchase rights.
However, if you are issued shares which are not fully vested at the time of
issuance, then the Corporation may repurchase those shares should you fail to
complete the applicable service requirement or should the Corporation not attain
the specified performance objectives. If you paid for the unvested shares in
cash, then the Corporation will refund the purchase price at the time those
shares are repurchased. If you delivered a promissory note in payment for such
shares, the Corporation will, in effecting the repurchase, cancel the principal
balance of the note attributable to the repurchased shares.

          The Corporation's repurchase rights will also cover any new,
substituted or additional securities or other property subsequently distributed
with respect to your unvested shares by reason of any Recapitalization.
Appropriate adjustments to reflect the distribution will be made to the number
and/or class of securities subject to the Corporation's repurchase rights and
the price per share (if any) payable upon the exercise of those rights.

          The Plan Administrator may waive one or more of the Corporation's
outstanding repurchase rights with respect to any unvested shares of Common
Stock you hold at the time of your cessation of service and thereby trigger the
immediate vesting of those shares.

                                       14
<PAGE>   24

          The Plan Administrator will have full discretion to establish the
remaining terms upon which the Corporation's repurchase rights are to become
exercisable (including the procedure for effecting such repurchase). All the
terms of the repurchase right will be included in the Issuance Agreement.

     43.  CAN I TRANSFER SHARES SUBJECT TO THE CORPORATION'S REPURCHASE RIGHTS?

          You may not transfer, assign or encumber any unvested shares of Common
Stock which are subject to the Corporation's repurchase rights, except for
permissible gifts approved by the Plan Administrator, transfers by will or
inheritance following your death or transfers to the Corporation in pledge as
security for any promissory note delivered in payment for the shares. The
certificates representing such unvested shares may, in the Plan Administrator's
discretion, bear a legend indicating the existence of such transfer
restrictions, or the unvested shares (and any securities or other property
distributed with respect to such shares) may be held in escrow by the
Corporation (or any successor entity) until you vest in those shares.

     44.  WHAT HAPPENS TO UNVESTED SHARES IF THE CORPORATION IS ACQUIRED OR
          MERGED?

          In the event of a Corporate Transaction, all unvested shares of Common
Stock acquired under the Stock Issuance Program will immediately vest in full,
except to the extent the Corporation's repurchase rights with respect to those
shares are assigned to the successor corporation or such accelerated vesting is
subject to other limitations imposed by the Plan Administrator in the Issuance
Agreement.

     45.  WHAT HAPPENS TO REPURCHASE RIGHTS THAT ARE ASSIGNED UPON A CORPORATE
          TRANSACTION?

          The Plan Administrator may structure one or more repurchase rights so
that those rights will automatically terminate, and the shares subject to those
terminated rights will immediately vest, upon an Involuntary Termination of the
participant's service within a designated period (not to exceed eighteen (18)
months) following the effective date of a Corporate Transaction in which those
repurchase rights are assigned to the successor corporation and do not otherwise
terminate. You should review your Issuance Agreement to determine whether your
unvested shares will in fact accelerate upon such an Involuntary Termination.

     46.  WHAT HAPPENS TO UNVESTED SHARES IF THERE IS A CHANGE IN CONTROL OF THE
          CORPORATION?

          The Plan Administrator may structure one or more repurchase rights so
that those rights will automatically terminate, and the shares subject to those
terminated rights will immediately vest, either upon the occurrence of a Change
in Control or upon an Involuntary Termination of the participant's service
within a designated period (not to exceed eighteen (18) months) following the
effective date of that Change in Control. You should review your Issuance
Agreement to determine whether your unvested shares will in fact accelerate upon
such a Change in Control or subsequent Involuntary Termination.

     47.  DO I HAVE ANY STOCKHOLDER RIGHTS WITH RESPECT TO SHARES ISSUED UNDER
          THE STOCK ISSUANCE PROGRAM?

          You will have full stockholder rights with respect to the shares of
Common Stock issued to you under the Stock Issuance Program, including the right
to vote such shares and receive all regular cash dividends paid on such shares,
whether or not such shares are vested. However, unvested shares will be subject
to the transfer restrictions specified above.

          Share right awards under the program will not entitle you to any
stockholder rights until the shares of Common Stock subject to those awards are
actually issued upon the attainment of the performance goals or the completion
of the required service period.

                                       15
<PAGE>   25

     48.  IS THE TAX WITHHOLDING PROGRAM AVAILABLE UNDER THE STOCK ISSUANCE
          PROGRAM?

          Yes. The Plan Administrator will have the discretion to extend the Tax
Withholding Program to holders of unvested shares of Common Stock under the
Stock Issuance Program who elect to be taxed on those shares at the time of
vesting rather than at the time of issuance. Each selected participant may
accordingly elect to have the Corporation withhold, from the shares which
otherwise vest at the time, a portion of those shares with a fair market value
equal to a designated percentage (not to exceed one hundred percent (100%)) of
the Federal, state and local income and employment withholding taxes to which
the participant may become subject in connection with the vesting of those
shares. In lieu of such direct withholding, the selected participants may also
be allowed to deliver existing shares of Common Stock to the Corporation in
satisfaction of such withholding tax liability. However, no shares will actually
be withheld or accepted in satisfaction of such withholding tax liability except
to the extent approved by the Plan Administrator, and any such withheld or
delivered shares will be valued at fair market value on the vesting date.

          You will be notified in writing should you be selected for
participation in the Tax Withholding Program.

                              DISPOSITION OF SHARES

     49.  WHEN CAN I SELL MY SHARES ACQUIRED UNDER THE DISCRETIONARY OPTION
          GRANT AND STOCK ISSUANCE PROGRAMS?

          As a Section 16 Insider, you will be subject to certain restrictions
in connection with your transactions under the Discretionary Option Grant and
Stock Issuance Programs. These restrictions are described in detail in the
"Restrictions on Resale" section below.

                                  MISCELLANEOUS

     50.  IS FINANCING AVAILABLE UNDER THE PLAN?

          The Plan Administrator may assist you in the acquisition of shares of
Common Stock under the Discretionary Option Grant Program or Stock Issuance
Program by permitting you to pay the purchase price for the shares through a
promissory note payable in one or more installments. The terms of any such
promissory note, including the interest rate and terms of repayment, will be
established in the sole discretion of the Plan Administrator. Promissory notes
will be made on a full-recourse basis, and the maximum credit available to you
may not exceed the purchase price payable for the acquired shares plus any
withholding tax liability incurred by you in connection with such acquisition.
In addition, the Corporation will comply with all applicable requirements of
Regulation U of the Board of Governors of the Federal Reserve System in
connection with any financing extended under the Plan.

     51.  DO I HAVE THE RIGHT TO REMAIN EMPLOYED UNTIL MY OPTIONS UNDER THE
          DISCRETIONARY OPTION GRANT OR THE SALARY INVESTMENT OPTION GRANT
          PROGRAM, OR MY SHARES UNDER THE STOCK ISSUANCE PROGRAM, VEST?

          No. Nothing in the Plan or in any option grant or stock issuance under
the Plan is intended to provide any person with the right to remain in the
Corporation's service for any specific period, and both you and the Corporation
will each have the right to terminate your service at any time and for any
reason, with or without cause.

                                       16
<PAGE>   26

     52.  ARE THERE ANY CIRCUMSTANCES WHICH WOULD CAUSE ME TO LOSE MY RIGHTS
          WITH RESPECT TO AN OPTION GRANT OR A STOCK ISSUANCE?

          Yes. The grant of options and the issuance of Common Stock under such
options or pursuant to the Stock Issuance Program are subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan and the securities issuable
thereunder. It is possible that the Corporation could be prevented from granting
options or from issuing shares of Common Stock under the Plan in the event one
or more required approvals or permits were not obtained.

     53.  DOES THE PLAN RESTRICT THE AUTHORITY OF THE CORPORATION TO GRANT OR
          ASSUME OPTIONS OUTSIDE OF THE PLAN?

          No. The Plan does not limit the authority of the Corporation to grant
options outside of the Plan or to grant options to, or assume the options of,
any person in connection with the acquisition of the business and assets of any
firm, corporation or other business entity.

     54.  DOES THE GRANT OF AN OPTION OR THE ISSUANCE OF SHARES UNDER THE PLAN
          AFFECT MY ELIGIBILITY TO PARTICIPATE IN OTHER PLANS OF THE
          CORPORATION?

          No. Option grants and stock issuances made under the Plan do not in
any way affect, limit or restrict your eligibility to participate in any other
stock plan or other compensation or benefit plan or program maintained by the
Corporation.

     55.  WHAT IS A PARENT CORPORATION?

          A corporation is a parent corporation if such corporation owns,
directly or indirectly, stock possessing fifty percent (50%) or more of the
total combined voting power of the Corporation's outstanding securities.

     56.  WHAT IS A SUBSIDIARY CORPORATION?

          A corporation is a subsidiary corporation if the Corporation owns,
directly or indirectly, stock possessing fifty percent (50%) or more of the
total combined voting power of the outstanding securities of that corporation.

     57.  IS THE PLAN SUBJECT TO ERISA?

          The Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA) or Section 401(a) of the Code.

                             RESTRICTIONS ON RESALE

     58.  WHAT RESTRICTIONS APPLY BECAUSE I AM A SECTION 16 INSIDER?

          Section 16(b) of the 1934 Act requires the Corporation to recover any
profit realized by any officer, director or beneficial owner of more than ten
percent (10%) of the outstanding Common Stock (a "Section 16 Insider") from any
purchase and sale, or sale and purchase, of such Common Stock made within a
period of less than six (6) months.

          The Securities and Exchange Commission (the "SEC") has issued a series
of revised rules under Section 16(b) of the 1934 Act which govern the
short-swing liability treatment of certain transactions effected by a Section 16
Insider under equity incentive plans such as the Plan. The application of those
rules to Plan transactions may be summarized as follows.

                                       17
<PAGE>   27

          Option Grant. The receipt of an option grant will not be treated as a
"purchase" of the underlying option shares for short-swing liability purposes.

          Option Exercise. The exercise of an option under the Plan will be an
exempt transaction and will not be treated as a "purchase" of the acquired
shares for short-swing liability purposes.

          Delivery of Shares. The delivery of shares of Common Stock in payment
of the exercise price will be an exempt transaction for short-swing liability
purposes.

          Stock Withholding. The withholding of a portion of the shares of
Common Stock otherwise issuable to the Section 16 Insider by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of his or her outstanding options or the vesting of his or her stock issuances
will be an exempt transaction for short-swing liability purposes if such
withholding is approved by the Plan Administrator, either at the time of the
option exercise or vesting of the shares or at any earlier time. The delivery of
shares of Common Stock out of the Section 16 Insider's existing investment
portfolio in satisfaction of the applicable tax withholding liability will be an
exempt transaction for short-swing liability purposes if approved by the Plan
Administrator.

          Direct Stock Issuances. The direct issuance of shares of Common Stock
under the Stock Issuance Program, whether effected as a purchase or bonus, will
be an exempt transaction and will not be treated as a "purchase" of the issued
shares for short-swing liability purposes.

          Vesting of Issued Shares. The vesting of shares issued under the Plan
will not be taken into account for short-swing liability purposes.

          SAR Transactions. The grant of an SAR will not be treated as a
purchase of the underlying shares of Common Stock subject to that grant. If the
SAR is subsequently exercised for shares of Common Stock, the exercise of such
right will not be treated as a "purchase" of the acquired shares for short-swing
liability purposes. If the SAR is exercised for cash, including the cash-out of
an option in connection with a Hostile Take-Over, then the transaction will be
exempt from short-swing liability if approved by the Plan Administrator either
at the time of exercise or at any earlier time.

          Repurchase of Unvested Shares. The surrender of unvested shares to the
Corporation for cancellation without any cash payment or other consideration to
the participant will not be deemed a "sale" of those shares for short-swing
liability purposes. The repurchase of unvested shares by the Corporation for
consideration equal to the original purchase price paid for those shares will
normally not result in a "sale" transaction for short-swing liability purposes.

          Sale of Shares. The sale of any shares acquired under the Plan will be
treated as a "sale" for short-swing liability purposes and will be matched with
any non-exempt purchases of Common Stock (e.g. open-market purchases) made
within six (6) months before or after the date of such sale.

          REPORTING REQUIREMENTS

          Each of the following transactions involving the Section 16 Insider
must be reported on the annual Form 5 required to be filed by such individual
within forty-five (45) days after the close of the Corporation's fiscal year in
which such transaction occurs or may be reported on any earlier-filed Form 4:

          * Receipt of option grant or SAR

          * Acquisition of shares under the Stock Issuance Program

          * Surrender of unvested shares for repurchase

          However, the receipt of an option grant or SAR must in all events be
reported on or before the due date for the Form 4 in which the exercise of that
option or SAR must be reported.

                                       18
<PAGE>   28

          The exercise of an option or SAR must be reported on a Form 4 filed
within ten (10) days after the close of the calendar month in which such
exercise occurs. If the exercise price is paid with shares of Common Stock, then
the disposition of those shares should also be reported on the same Form 4 for
the option exercise.

          The sale of Common Stock must be reported on a Form 4 filed within ten
(10) days after the close of the calendar month in which the sale is effected.

          When shares of Common Stock are withheld in satisfaction of applicable
withholding taxes, the Section 16 Insider should report the gross number of
shares acquired upon the exercise of the option (including the withheld shares)
on the Form 4 filed for the month in which the option is exercised and should
also report the disposition of the withheld shares on that same Form 4.

     59.  WHAT RESTRICTIONS APPLY IF I AM AN AFFILIATE?

               In general, persons with power to manage and direct the policies
of the Corporation, their relatives and trusts, estates, corporations or other
entities controlled by any of those persons may be deemed to be affiliates of
the Corporation. Affiliates of the Corporation are obligated to resell their
shares of Common Stock in compliance with SEC Rule 144. This rule requires such
sales to be effected in "brokers' transactions," as defined in the rule, and a
written notice of each sale must be filed with the SEC at the time of such sale.
The rule also limits the number of shares which may be sold in any three
(3)-month period to the greater of (i) one percent (1%) of the outstanding
shares of Common Stock or (ii) the average weekly reported volume of trading in
such shares on all securities exchanges during the four (4) calendar weeks
preceding the filing of the required notice of proposed sale. However, there
will be no Rule 144 holding period requirements applicable to the shares of
Common Stock acquired under the Plan.

               AS AN OFFICER OR DIRECTOR OF THE CORPORATION, OR A NON-EMPLOYEE
BOARD MEMBER, YOU SHOULD CONSULT WITH COUNSEL BEFORE OFFERING FOR SALE ANY
SHARES OF COMMON STOCK ACQUIRED UNDER THE PLAN IN ORDER TO ASSURE YOUR
COMPLIANCE WITH RULE 144, SECTION 16 AND ALL OTHER APPLICABLE PROVISIONS OF
FEDERAL AND STATE SECURITIES LAWS.

               QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES

               The following is a general description of the Federal income tax
consequences of option grants and stock issuances under the Plan. State and
local tax treatment, which is not discussed below, may vary from such Federal
income tax treatment. You should consult with your own tax advisor as to the tax
consequences of your particular transactions under the Plan.

               The tax consequences of Incentive Options and Non-Statutory
Options differ as described below.

                               INCENTIVE OPTIONS

     T1.  WILL THE GRANT OF AN INCENTIVE OPTION RESULT IN FEDERAL INCOME TAX
          LIABILITY TO ME?

          No.

     T2.  WILL THE EXERCISE OF AN INCENTIVE OPTION RESULT IN FEDERAL INCOME TAX
          LIABILITY TO ME?

          No. You will not recognize taxable income at the time the Incentive
Option is exercised. However, the amount by which the fair market value (at the
time of exercise) of the purchased shares exceeds the exercise price paid for
those shares will constitute an adjustment to your income for purposes of the
alternative minimum tax (see the "Alternative Minimum Tax" section below). On or
before January 31 of the calendar year

                                       19
<PAGE>   29

following the calendar year in which you exercise your Incentive Option, you
will receive an information statement from the Corporation indicating, among
other items, the number of shares of Common Stock you purchased in connection
with such exercise, the market price of the Common Stock on the exercise date
and the price you paid for the purchased shares.

     T3.  WHEN WILL I BE SUBJECT TO FEDERAL INCOME TAX ON SHARES ACQUIRED UNDER
          AN INCENTIVE OPTION?

          Generally, you will recognize income in the year in which you make a
disposition of the shares purchased under your Incentive Option.

     T4.  WHAT CONSTITUTES A DISPOSITION OF INCENTIVE OPTION SHARES?

          A disposition of shares purchased under an Incentive Option will occur
in the event you transfer legal title to those shares, whether by sale, exchange
or gift, or you deliver such shares in payment of the exercise price of any
other Incentive Option you hold. However, a disposition will not occur if you
engage in any of the following transactions: a transfer of the shares to your
spouse, a transfer into joint ownership with right of survivorship provided you
remain one of the joint owners, a pledge of the shares as collateral for a loan,
a transfer by bequest or inheritance upon your death or certain tax-free
exchanges of the shares permitted under the Code.

     T5.  HOW IS MY FEDERAL INCOME TAX LIABILITY DETERMINED WHEN I DISPOSE OF MY
          SHARES?

          Your Federal income tax liability will depend upon whether you make a
qualifying or disqualifying disposition of the shares purchased under your
Incentive Option. A qualifying disposition will occur if the sale or other
disposition of the shares takes place more than two (2) years after the date the
Incentive Option was granted and more than one (1) year after the date that
option was exercised for the particular shares involved in the disposition. A
disqualifying disposition is any sale or other disposition made before both of
these minimum holding periods are satisfied.

     T6.  WHAT IF I MAKE A QUALIFYING DISPOSITION?

          You will recognize a long-term capital gain equal to the excess of (i)
the amount realized upon the sale or other disposition over (ii) the exercise
price paid for the shares. You will recognize a long-term capital loss if the
amount realized is lower than the exercise price paid for the shares. (For the
tax rates applicable to capital gain, please see Question T27.)

                    EXAMPLE: On March 1, 2000, you are granted an Incentive
          Option for 1,000 shares with an exercise price of $15.00 per share. On
          March 1, 2002, you exercise the option for 500 vested shares when the
          market price is $25.00 per share. The purchased shares are held until
          July 1, 2003, when you sell them for $30.00 per share.

                    Because the disposition of the shares is made more than two
          (2) years after the grant date of the Incentive Option and more than
          one (1) year after the option was exercised for the shares sold on
          July 1, 2003, the sale represents a qualifying disposition of such
          shares, and for Federal income tax purposes, there will be a long-term
          capital gain of $15.00 per share.

     T7.  WHAT ARE THE NORMAL TAX RULES FOR A DISQUALIFYING DISPOSITION?

          Normally, when you make a disqualifying disposition of shares
purchased under an Incentive Option, you will recognize ordinary income at the
time of the disposition in an amount equal to the excess of (i) the fair market
value of the shares on the option exercise date over (ii) the exercise price
paid for those shares. If the disqualifying disposition is effected by means of
an arm's length sale or exchange with an unrelated party, the ordinary income
will be limited to the amount by which (i) the amount realized upon the
disposition of the shares or

                                       20
<PAGE>   30

(ii) their fair market value on the exercise date, whichever is less, exceeds
the exercise price paid for the shares. The amount of your disqualifying
disposition income will be reported by the Corporation on your W-2 wage
statement for the year of disposition, and any applicable withholding taxes
which arise in connection with the disqualifying disposition will be deducted
from your wages or otherwise collected from you.

          Any additional gain recognized upon the disqualifying disposition will
be capital gain, which will be long-term if the shares have been held for more
than one (1) year following the exercise date of the option. (See Question T27
below for the tax rates applicable to capital gain.)

                    EXAMPLE: On March 1, 2000, you are granted an Incentive
          Option for 1,000 shares with an exercise price of $15.00 per share. On
          March 1, 2002, you exercise this option for 500 vested shares when the
          market price is $25.00 per share. The purchased shares are held until
          December 15, 2002, when you sell them for $30.00 per share.

                    Because the disposition of the shares is made less than one
          (1) year after the Incentive Option was exercised for the shares sold
          on December 15, 2002, the sale represents a disqualifying disposition
          of the shares, and for Federal income tax purposes, the gain upon the
          sale will be divided into two (2) components:

                    Ordinary Income: You will recognize ordinary income in the
          amount of $10.00 per share, the excess of the $25.00 per share market
          price of the shares on the date the option was exercised over the
          $15.00 per share exercise price.

                    Capital Gain: You will also recognize a short-term capital
          gain of $5.00 per share with respect to each share sold.

          In the event the shares purchased under an Incentive Option are sold
in a disqualifying disposition for less than the exercise price paid for those
shares, you will not recognize any income but will recognize a capital loss
equal to the excess of (i) the exercise price paid for the shares over (ii) the
amount realized upon the disposition of those shares. For example, if the shares
in the above Example are sold for $12.00 per share in the disqualifying
disposition, you would simply recognize a short-term capital loss of $3.00 per
share.

     T8.  WHAT IF THE SHARES PURCHASED UNDER AN INCENTIVE OPTION ARE SUBJECT TO
          A SUBSTANTIAL RISK OF FORFEITURE, SUCH AS THE CORPORATION'S REPURCHASE
          RIGHT?

          If the shares purchased under your Incentive Option are subject to a
substantial risk of forfeiture, such as the Corporation's right to repurchase
those shares at the original exercise price in the event your service terminates
prior to vesting in such shares, then the amount of ordinary income you would
recognize upon a disqualifying disposition of those shares will be based upon
their fair market value on the date the forfeiture period lapses (i.e., the
vesting date for the shares), rather than the date the Incentive Option is
exercised, and the holding period for determining whether any additional gain is
long-term or short-term capital gain will not commence until such lapse date. In
the absence of final Treasury Regulations relating to Incentive Options, it is
not certain whether such a result can be avoided, and the normal disqualifying
disposition rules discussed above reinstated, by making a conditional election
pursuant to Code Section 83(b) to have the ordinary income measured at the time
the Incentive Option is exercised. (See the discussion below concerning Code
Section 83(b) elections for additional information.) Because of the uncertainty
as to the precise tax consequences of such a conditional election, you should
consult with your own tax advisor before filing any such election.

                                       21
<PAGE>   31

     T9.  WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

          If you make a qualifying disposition of shares acquired upon the
exercise of an Incentive Option, then no income tax deduction may be taken by
the Corporation with respect to such shares. Should you make a disqualifying
disposition of such shares, then the Corporation will be entitled to an income
tax deduction equal to the amount of ordinary income you recognize in connection
with the disposition. The deduction will, in general, be allowed to the
Corporation in the taxable year in which the disposition occurs.

     T10. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN INCENTIVE
          OPTION IN THE FORM OF SHARES OF COMMON STOCK ACQUIRED UPON THE
          EXERCISE OF AN EARLIER-GRANTED INCENTIVE OPTION IF THE DELIVERY OF THE
          SHARES RESULTS IN A DISQUALIFYING DISPOSITION?

          If the delivery of the shares acquired under an earlier granted
Incentive Option results in a disqualifying disposition, then you will be
subject to ordinary income taxation on the excess of (i) the fair market value
of the delivered shares at the time of their original purchase (or at the time
any forfeiture restriction applicable to those shares lapsed) over (ii) the
exercise price paid for the delivered shares.

          The tax basis and capital gain holding periods for the shares of
Common Stock purchased upon exercise of the Incentive Option will be determined
as follows:

                    (i) To the extent the purchased shares equal in number the
          delivered shares as to which there is a disqualifying disposition, the
          basis for the new shares will be equal to the fair market value of the
          delivered shares at the time they were originally purchased (or at the
          time any forfeiture restriction applicable to those shares lapsed),
          and the capital gain holding period for those shares will include the
          period for which the delivered shares were held (measured from their
          original purchase date or (if later) from the lapse date of any
          forfeiture restriction applicable to those shares).

                    (ii) To the extent the number of purchased shares exceeds
          the number of delivered shares, the additional shares will have a zero
          basis and a capital gain holding period measured (in general) from the
          exercise date.

     T11. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN INCENTIVE
          OPTION IN THE FORM OF SHARES OF COMMON STOCK (i) ACQUIRED UNDER AN
          INCENTIVE OPTION AND HELD FOR THE REQUISITE HOLDING PERIODS, (ii)
          ACQUIRED UNDER A NON-STATUTORY OPTION OR (iii) ACQUIRED THROUGH
          OPEN-MARKET PURCHASES?

          If the exercise price for the Incentive Option is paid with shares of
Common Stock (i) acquired under an Incentive Option and held for the requisite
minimum holding periods for a qualifying disposition, (ii) acquired under a
Non-Statutory Option or (iii) acquired through open-market purchases, you will
not recognize any taxable income (other than as described in the "Alternative
Minimum Tax" section below) with respect to the shares of Common Stock purchased
upon exercise of the Incentive Option. To the extent the purchased shares equal
in number the shares of Common Stock delivered in payment of the exercise price,
the new shares will have the same basis and holding period for capital gain
purposes as the delivered shares. To the extent the number of purchased shares
exceeds the number of delivered shares, the additional shares will have a zero
basis and a capital gain holding period measured (in general) from the exercise
date.

     T12. WHAT ARE THE CONSEQUENCES OF A SUBSEQUENT DISPOSITION OF SHARES
          PURCHASED UNDER AN INCENTIVE OPTION WITH SHARES OF COMMON STOCK?

          If the Incentive Option is exercised with shares of Common Stock, then
those shares purchased under the Incentive Option which have a zero basis will
be treated as the first shares sold or otherwise transferred in a disqualifying
disposition. Accordingly, upon such a disqualifying disposition, you will
recognize ordinary income

                                       22
<PAGE>   32

with respect to the zero basis shares in an amount equal to their fair market
value on the date the option was exercised for those shares or, if such shares
were subject to any forfeiture restriction, on the date that restriction lapsed.
Any additional gain upon such disqualifying disposition will in most instances
be taxed as short-term capital gain.

                              NON-STATUTORY OPTIONS

     T13. WILL THE GRANT OF A NON-STATUTORY OPTION RESULT IN FEDERAL INCOME TAX
          LIABILITY TO ME?

          No.

     T14. WILL THE EXERCISE OF A NON-STATUTORY OPTION RESULT IN FEDERAL INCOME
          TAX LIABILITY TO ME?

          Normally, you will recognize ordinary income in the year in which the
Non-Statutory Option is exercised in an amount equal to the excess of (i) the
fair market value of the purchased shares on the exercise date over (ii) the
exercise price paid for those shares. This income will be reported by the
Corporation on your W-2 wage statement for the year of exercise (or on a Form
1099 if you are not an employee), and you will be required to satisfy the tax
withholding requirements applicable to this income.

     T15. WHAT IF THE SHARES PURCHASED UNDER A NON-STATUTORY OPTION ARE SUBJECT
          TO A SUBSTANTIAL RISK OF FORFEITURE, SUCH AS THE CORPORATION'S
          REPURCHASE RIGHT?

          If the shares you purchase under a Non-Statutory Option are unvested
and subject to a substantial risk of forfeiture, such as the Corporation's right
to repurchase those shares at the original exercise price upon your termination
of service prior to vesting in such shares, then you will not recognize any
taxable income at the time of exercise but will have to report as ordinary
income, as and when the Corporation's repurchase right lapses, an amount equal
to the excess of (i) the fair market value of the shares on the date such shares
vest over (ii) the exercise price paid for those shares.

          If you purchase unvested shares subject to the Corporation's
repurchase right, you may elect under Code Section 83(b) to recognize income at
the time of exercise (see the question below concerning the effect of making a
Section 83(b) election). If such election is made, you will not recognize any
additional income with respect to your shares until such shares are sold or
otherwise transferred in a taxable transaction.

     T16. WHAT IS THE EFFECT OF MAKING A SECTION 83(b) ELECTION?

          If you purchase shares subject to the Corporation's repurchase right,
you may elect under Code Section 83(b) to include as ordinary income in the year
of exercise an amount equal to the excess of (i) the fair market value of the
purchased shares on the exercise date over (ii) the exercise price paid for the
shares. The fair market value of the purchased shares will be determined as if
the shares were not subject to the Corporation's repurchase right. If you make
the Section 83(b) election, you will not recognize any additional income when
the Corporation's repurchase right subsequently lapses.

          The Section 83(b) election must be filed with the Internal Revenue
Service within thirty (30) days following the date the option is exercised, and
any ordinary income resulting from such election will be subject to applicable
tax withholding requirements.

                                       23
<PAGE>   33

     T17. WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED UNDER A
          NON-STATUTORY OPTION?

          Yes. You will recognize a capital gain to the extent the amount
realized upon the sale of such shares exceeds their fair market value at the
time you recognized the ordinary income with respect to their acquisition. A
capital loss will result to the extent the amount realized upon the sale is less
than such fair market value. The gain or loss will be long-term if the shares
are held for more than one (1) year prior to the disposition. (Please see
Question T27 below for the tax rates applicable to capital gain.)

          The holding period normally starts at the time the Non-Statutory
Option is exercised. If you purchase shares subject to the Corporation's
repurchase right, the capital gain holding period will start either (i) at the
time the shares may first be sold free of such repurchase right, if no Section
83(b) election is made at the time of the option exercise, or (ii) at the time
the option is exercised if you file the Section 83(b) election within thirty
(30) days after the exercise date.

     T18. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF A
          NON-STATUTORY OPTION IN THE FORM OF SHARES OF COMMON STOCK PREVIOUSLY
          ACQUIRED UPON THE EXERCISE OF EMPLOYEE OPTIONS OR THROUGH OPEN-MARKET
          PURCHASES?

          You will not recognize any taxable income to the extent the shares of
Common Stock received upon the exercise of the Non-Statutory Option equal in
number the shares of Common Stock delivered in payment of the exercise price.
For Federal income tax purposes, these newly-acquired shares will have the same
basis and capital gain holding period as the delivered shares. To the extent the
delivered shares were acquired under an Incentive Option, the new shares
received upon the exercise of the Non-Statutory Option will continue to be
subject to taxation as Incentive Option shares in accordance with the Incentive
Option principles discussed above.

          The additional shares of Common Stock received upon the exercise of
the Non-Statutory Option will, in general, have to be reported as ordinary
income for the year of exercise in an amount equal to their fair market value on
the exercise date. These additional shares will have a tax basis equal to such
fair market value and a capital gain holding period measured (in general) from
the exercise date. However, if the shares purchased under the Non-Statutory
Option are subject to the Corporation's repurchase right, then the recognition
and measurement of ordinary income and the commencement of the capital gain
holding period will be deferred until the time the repurchase right lapses,
unless you make a Section 83(b) election to be taxed at the time of exercise.

     T19. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

          The Corporation will be entitled to an income tax deduction equal to
the amount of ordinary income you recognize in connection with the exercise of
the Non-Statutory Option. The deduction will, in general, be allowed for the
taxable year of the Corporation in which you recognize such ordinary income.
However, if the deduction is attributable to a Non-Statutory Option exercised
for unvested shares subject to the Corporation's repurchase right, then in the
absence of your Section 83(b) election, the deduction will not be allowed until
the taxable year of the Corporation which includes the last day of the calendar
year in which you recognize the ordinary income with respect to the unvested
shares acquired under your Non-Statutory Option.

                            STOCK APPRECIATION RIGHTS

     T20. WILL THE EXERCISE OF A STOCK APPRECIATION RIGHT RESULT IN FEDERAL
          INCOME TAX LIABILITY TO ME?

          Yes. Upon the exercise of a stock appreciation right for a
distribution from the Corporation, you will, in general, recognize ordinary
income in an amount equal to that distribution.

                                       24
<PAGE>   34

     T21. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

          The Corporation will be entitled to an income tax deduction equal to
the amount of ordinary income you recognize in connection with the appreciation
distribution. The deduction will, in general, be allowed for the taxable year of
the Corporation in which you recognize such ordinary income.

                                 STOCK ISSUANCES

     T22. WILL THE ISSUANCE OF VESTED SHARES RESULT IN FEDERAL INCOME TAX
          LIABILITY TO ME?

          Yes. Upon the issuance of vested shares, you will recognize ordinary
income in an amount equal to the excess of (i) the then fair market value of the
issued shares over (ii) the purchase price (if any) paid for such shares.

     T23. WILL THE ISSUANCE OF UNVESTED SHARES RESULT IN FEDERAL INCOME TAX
          LIABILITY TO ME?

          If you are issued unvested shares of Common Stock subject to the
Corporation's right to repurchase those shares at the issue price per share upon
your cessation of service and you do not make a Section 83(b) election at the
time of such issuance, then you will not recognize any taxable income with
respect to those unvested shares at the time of acquisition. However, you will
subsequently recognize ordinary income, as and when the Corporation's repurchase
right lapses with respect to the shares, in an amount equal to the excess of (i)
the fair market value of the shares on the date those shares vest over (ii) the
purchase price (if any) paid for the shares.

          You may elect under Code Section 83(b) to recognize income at the time
the unvested shares are issued to you (see discussion of Section 83(b) election
below). If such election is made, you will not recognize any additional income
with respect to your unvested shares until such shares are sold or otherwise
transferred in a taxable transaction.

     T24. WHAT IS THE EFFECT OF MAKING A SECTION 83(b) ELECTION?

          If you are issued shares subject to the Corporation's repurchase
right, you may elect under Code Section 83(b) to include as ordinary income in
the year of issuance an amount equal to the excess of (i) the fair market value
of the issued shares on the issue date over (ii) the purchase price (if any)
paid for the shares. The fair market value of the issued shares will be
determined as if the shares were not subject to the Corporation's repurchase
right. If you make the Section 83(b) election, you will not recognize any
additional income when the Corporation's repurchase right subsequently lapses
with respect to the shares.

          The Section 83(b) election must be filed with the Internal Revenue
Service within thirty (30) days following the date the shares are issued, and
any ordinary income resulting from such election will be subject to applicable
tax withholding requirements.

     T25. WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED UNDER
          THE STOCK ISSUANCE PROGRAM?

          Yes. You will recognize a capital gain to the extent the amount
realized upon the sale of such shares exceeds their fair market value at the
time you recognized the ordinary income with respect to their issuance. A
capital loss will result to the extent the amount realized upon such sale is
less than such fair market value. (Please see Question T27 for the tax rates
applicable to capital gain.)

                                       25
<PAGE>   35

          The gain or loss will be long-term if the shares are held for more
than one (1) year prior to the sale. The capital gain holding period for
unvested shares issued under the Stock Issuance Program will start either (i) at
the time the Corporation's repurchase right with respect to the shares lapses,
if no Section 83(b) election is filed at the time of issuance, or (ii) at the
time of issuance if you file the Section 83(b) election within thirty (30) days
after the issue date.

     T26. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

          The Corporation will be entitled to an income tax deduction equal to
the amount of ordinary income you recognize in connection with the acquisition
of Common Stock under the Stock Issuance Program. The deduction will normally be
allowed for the taxable year in which such issuance occurs. However, in the
absence of your Section 83(b) election, the deduction for share issuances
subject to the Corporation's repurchase right will not be allowed until the
taxable year of the Corporation which includes the last day of the calendar year
in which you recognize ordinary income with respect to the issued shares.

                                FEDERAL TAX RATES

     T27. WHAT ARE THE APPLICABLE FEDERAL TAX RATES?

          REGULAR TAX RATES. Effective for the 2000 calendar year, ordinary
income in excess of $288,350 ($144,175 for a married taxpayer filing a separate
return) will be subject to the maximum federal income tax rate of 39.6%. The
applicable $288,350 or $144,175 threshold is subject to cost-of-living
adjustments in taxable years beginning after December 31, 2000. Certain
limitations are imposed upon a taxpayer's itemized deductions, and the personal
exemptions claimed by the taxpayer are subject to phase-out. These limitations
may result in the taxation of ordinary income at an effective top marginal rate
in excess of 39.6%.

          CAPITAL GAIN TAX RATES. Short-term capital gains are subject to the
same tax rates as ordinary income. Long-term capital gain is subject to a
maximum federal income tax rate of 20%, provided the capital asset is held for
more than one (1) year prior to sale or other taxable disposition.

          Beginning in 2001, capital gain recognized on the sale or disposition
of capital assets held for more than five (5) years by individuals not subject
to the 28% tax rate on their ordinary income will be subject to tax at a rate of
8%.

          Beginning in 2006, capital gain recognized on the sale or disposition
of capital assets held for more than five (5) years by individuals subject to
the 28% tax rate on their ordinary income will be taxed at a rate of 18%,
provided the holding period for such property begins after December 31, 2000.
However, any capital gain recognized on the sale or disposition of shares of the
Corporation's common stock acquired pursuant to options granted under the
Discretionary Option Grant or Salary Investment Option Grant Program will not be
eligible for the 18% tax rate unless those options are granted after December
31, 2000.

          ITEMIZED DEDUCTIONS. For the tax year ending December 31, 2000,
itemized deductions are reduced by 3% of the amount by which the taxpayer's
adjusted gross income for the year exceeds $128,950 ($64,475 for a married
taxpayer filing a separate return). However, the reduction may not exceed 80% of
the total itemized deductions (excluding medical expenses, casualty and theft
losses, and certain investment interest expense) claimed by the taxpayer. The
applicable $128,950 or $64,475 threshold is subject to cost-of-living
adjustments in taxable years beginning after December 31, 2000.

          PERSONAL EXEMPTIONS. In addition, the deduction for personal
exemptions claimed by the taxpayer is reduced by 2% for each $2,500 ($1,250 for
a married taxpayer filing a separate return) or fraction thereof by which the
taxpayer's adjusted gross income for the year exceeds a specified threshold
amount. The applicable thresholds for 2000 are $193,400 for married taxpayers
filing joint returns (and in certain instances, surviving

                                       26
<PAGE>   36

spouses), $161,150 for heads of households, $128,950 for single taxpayers and
$96,700 for married taxpayers filing separate returns. Accordingly, the
deduction is completely eliminated for any taxpayer whose adjusted gross income
for the year exceeds the applicable threshold amount by more than $122,500. The
threshold amounts will be subject to cost-of-living adjustments in taxable years
beginning after December 31, 2000.

                             ALTERNATIVE MINIMUM TAX

     T28. WHAT IS THE ALTERNATIVE MINIMUM TAX?

          The alternative minimum tax is an alternative method of calculating
the income tax you must pay each year in order to assure that a minimum amount
of tax is paid for the year. The first $175,000 ($87,500 for a married taxpayer
filing a separate return) of your alternative minimum taxable income for the
year over the allowable exemption amount is subject to alternative minimum
taxation at the rate of 26%. The balance of your alternative minimum taxable
income is subject to alternative minimum taxation at the rate of 28%. However,
the portion of your alternative minimum taxable income attributable to capital
gain recognized upon the sale or disposition of capital assets held for more
than one (1) year will be subject to a reduced alternative minimum tax rate of
20% (10% for individuals not subject to the regular 28% tax rate on their
ordinary income). Beginning in 2001, the alternative minimum tax rate applicable
to capital gain recognized upon the sale or disposition of capital assets held
for more than five (5) years will be equal to the capital gain tax rate in
effect for such gain for regular tax purposes (see Question T27 above). The
alternative minimum tax will, however, be payable only to the extent that it
exceeds your regular federal income tax for the year (computed without regard to
certain credits and special taxes).

     T29. WHAT IS THE ALLOWABLE EXEMPTION AMOUNT?

          The allowable exemption amount is $45,000 for a married taxpayer
filing a joint return, $33,750 for an unmarried taxpayer and $22,500 for a
married taxpayer filing a separate return. The allowable exemption amount is,
however, to be reduced by $0.25 for each $1.00 by which the individual's
alternative minimum taxable income for the year exceeds $150,000 for a married
taxpayer filing a joint return, $112,500 for an unmarried taxpayer, and $75,000
for a married taxpayer filing a separate return.

     T30. HOW IS THE ALTERNATIVE MINIMUM TAXABLE INCOME CALCULATED?

          Your alternative minimum taxable income is based upon your regular
taxable income for the year, adjusted to (i) include certain additional items of
income and tax preference and (ii) disallow or limit certain deductions
otherwise allowable for regular tax purposes. The spread on the shares purchased
under an Incentive Option (the excess of the fair market value of the purchased
shares at the time of exercise over the aggregate exercise price paid for those
shares) will be included in your alternative minimum taxable income at the time
of exercise, whether or not the shares are subsequently made the subject of a
disqualifying disposition.

     T31. WHEN IS THE SPREAD ON SHARES ACQUIRED UNDER AN INCENTIVE OPTION THAT
          ARE SUBJECT TO A SUBSTANTIAL RISK OF FORFEITURE INCLUDIBLE IN
          ALTERNATIVE MINIMUM TAXABLE INCOME?

          Should the shares purchased under an Incentive Option be subject to a
substantial risk of forfeiture (such as the Corporation's repurchase rights
applicable to unvested shares), then the optionee's alternative minimum taxable
income attributable to the exercised Incentive Option will be measured at the
time the risk of forfeiture lapses and will be equal to the excess of the fair
market value of the shares at that time over the aggregate exercise price paid
for the shares. Alternatively, the optionee may file a Section 83(b) election
within thirty (30) days after the exercise of the Incentive Option in order to
limit the amount of such alternative minimum taxable income to the spread
between the fair market value of the purchased shares at the time of exercise
and the aggregate exercise price paid for those shares.

                                       27
<PAGE>   37

     T32. HOW WILL THE PAYMENT OF ALTERNATIVE MINIMUM TAXES IN ONE YEAR AFFECT
          THE CALCULATION OF MY TAX LIABILITY IN A LATER YEAR?

          If alternative minimum taxes are paid for one or more taxable years, a
portion of those taxes (subject to certain adjustments and reductions) will be
applied as a partial credit against your regular tax liability (but not
alternative minimum tax liability) for subsequent taxable years. In addition,
the sale or other disposition of the purchased shares, whether in the year of
exercise or in any subsequent taxable year, your basis for computing the gain
for purposes of alternative minimum taxable income (but not regular taxable
income) will include the amount of the Incentive Option spread previously
included in your alternative minimum taxable income.

               CORPORATION INFORMATION AND ANNUAL PLAN INFORMATION

          Websense, Inc. is a Delaware corporation which maintains its principal
executive offices at 3420 Ocean Park Boulevard, Suite 1040, Santa Monica,
California 94045. The telephone number at the executive offices is (310)
581-7200. You may contact the Corporation at this address or telephone number
for further information concerning the Plan and its administration.

          A copy of the Corporation's Annual Report to Stockholders for each
fiscal year will be furnished to each participant in the Plan, and additional
copies will be furnished without charge to each participant upon written or oral
request to the Corporate Secretary of the Corporation at its principal executive
office or upon telephoning the Corporation at its principal executive office. In
addition, any person receiving a copy of this Prospectus may obtain without
charge, upon written or oral request to the Corporate Secretary, a copy of any
of the documents listed below, which are hereby incorporated by reference into
this Prospectus, other than certain exhibits to such documents.

     (a)  The Corporation's Registration Statement No. 333-77025 on Form S-1
          filed with the SEC on April 26, 1999, together with the amendments
          filed thereto on Form S-1/A on May 13, 1999, June 7, 1999, June 14,
          1999, June 22, 1999 and June 24, 1999, respectively.

     (b)  The Corporation's Prospectus filed with the SEC on June 25, 1999
          pursuant to Rule 424(b) of the Securities Act of 1933, as amended, in
          connection with the Corporation's Registration Statement No.
          333-77025, in which there is set forth the audited financial
          statements for the Corporation's fiscal year ended December 31, 1998.

     (c)  The Corporation's Registration Statement on Form 8-A12G filed with the
          SEC on June 17, 1999, in which are described the terms, rights and
          provisions applicable to the Corporation's outstanding Common Stock.

          The Corporation will also deliver to each participant in the Plan who
does not otherwise receive such materials a copy of all reports, proxy
statements and other communications distributed to the Corporation's
stockholders.

                                       28<PAGE>   1
                                                                   EXHIBIT 10.12

                                 WEBSENSE, INC.

                             STOCK OPTION AGREEMENT

RECITALS

     A. The Board has adopted the Plan for the purpose of retaining the services
of selected Employees, non-employee members of the Board (or the board of
directors of any Parent or Subsidiary) and consultants and other independent
advisors who provide services to the Corporation (or any Parent or Subsidiary).

     B. Optionee is to render valuable services to the Corporation (or a Parent
or Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of an option to Optionee.

     C. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.

          NOW, THEREFORE, it is hereby agreed as follows:

          1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as of
the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.

          2. OPTION TERM. This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.

          3.   LIMITED TRANSFERABILITY.

               (a) This option shall be neither transferable nor assignable by
Optionee other than by will or the laws of inheritance following Optionee's
death and may be exercised, during Optionee's lifetime, only by Optionee.
However, Optionee may designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding this option. Such beneficiary or
beneficiaries shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation) the limited time
period during which this option may, pursuant to Paragraph 5, be exercised
following Optionee's death.

<PAGE>   2

               (b) If this option is designated a Non-Statutory Option in the
Grant Notice, then this option may be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's family or to a trust
established for the exclusive benefit of one or more such family members or to
Optionee's former spouse, to the extent such assignment is in connection with
the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment.

          4. DATES OF EXERCISE. This option shall become exercisable for the
Option Shares in one or more installments as specified in the Grant Notice. As
the option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.

          5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:

               (a) Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while holding this
option, then Optionee shall have a period of three (3) months (commencing with
the date of such cessation of Service) during which to exercise this option, but
in no event shall this option be exercisable at any time after the Expiration
Date.

               (b) Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or persons to whom
the option is transferred pursuant to Optionee's will or the laws of inheritance
shall have the right to exercise this option. However, if Optionee has
designated one or more beneficiaries of this option, then those persons shall
have the exclusive right to exercise this option following Optionee's death. Any
such right to exercise this option shall lapse, and this option shall cease to
be outstanding, upon the earlier of (i) the expiration of the twelve (12)-month
period measured from the date of Optionee's death or (ii) the Expiration Date.

               (c) Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.

               (d) During the limited period of post-Service exercisability,
this option may not be exercised in the aggregate for more than the number of
Option Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such limited exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and

                                       2
<PAGE>   3

cease to be outstanding for any exercisable Option Shares for which the option
has not been exercised. However, this option shall, immediately upon Optionee's
cessation of Service for any reason, terminate and cease to be outstanding with
respect to any Option Shares for which this option is not otherwise at that time
exercisable.

               (e) Should Optionee's Service be terminated for Misconduct or
should Optionee otherwise engage in any Misconduct while this option is
outstanding, then this option shall terminate immediately and cease to remain
outstanding.

          6.   SPECIAL ACCELERATION OF OPTION.

               (a) This option, to the extent outstanding at the time of a
Corporate Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for all of the Option Shares at
the time subject to this option and may be exercised for any or all of those
Option Shares as fully vested shares of Common Stock. However, this option shall
NOT become exercisable on such an accelerated basis, if and to the extent: (i)
this option is, in connection with the Corporate Transaction, to be assumed by
the successor corporation (or parent thereof) or (ii) this option is to be
replaced with a cash incentive program of the successor corporation which
preserves the spread existing at the time of the Corporate Transaction on any
Option Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of those Option Shares over the aggregate
Exercise Price payable for such shares) and provides for subsequent payout in
accordance with the same option exercise/vesting schedule for those Option
Shares set forth in the Grant Notice.

               (b) Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.

               (c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
this option, substitute one or more shares of its own common stock with a fair
market value equivalent to the cash consideration paid per share of Common Stock
in such Corporate Transaction.

               (d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.

                                       3
<PAGE>   4

          7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.

          8. STOCKHOLDER RIGHTS. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.

          9. MANNER OF EXERCISING OPTION.

               (a) In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take the
following actions:

                    (i) Execute and deliver to the Corporation a Notice of
               Exercise for the Option Shares for which the option is exercised.

                    (ii) Pay the aggregate Exercise Price for the purchased
               shares in one or more of the following forms:

                         (A) cash or check made payable to the Corporation;

                         (B) a promissory note payable to the Corporation, but
                    only to the extent authorized by the Plan Administrator in
                    accordance with Paragraph 13;

                         (C) shares of Common Stock held by Optionee (or any
                    other person or persons exercising the option) for the
                    requisite period necessary to avoid a charge to the
                    Corporation's earnings for financial reporting purposes and
                    valued at Fair Market Value on the Exercise Date; or

                         (D) through a special sale and remittance procedure
                    pursuant to which Optionee (or any other person or persons
                    exercising the option) shall concurrently provide
                    irrevocable instructions (i) to a Corporation-designated
                    brokerage firm to effect the immediate sale of the purchased
                    shares and remit to the Corporation, out of the sale
                    proceeds available on the settlement date, sufficient funds
                    to cover the aggregate Exercise Price payable for the
                    purchased shares plus all

                                       4
<PAGE>   5

                    applicable Federal, state and local income and employment
                    taxes required to be withheld by the Corporation by reason
                    of such exercise and (ii) to the Corporation to deliver the
                    certificates for the purchased shares directly to such
                    brokerage firm in order to complete the sale.

                         Except to the extent the sale and remittance procedure
                    is utilized in connection with the option exercise, payment
                    of the Exercise Price must accompany the Notice of Exercise
                    delivered to the Corporation in connection with the option
                    exercise.

                    (iii) Furnish to the Corporation appropriate documentation
               that the person or persons exercising the option (if other than
               Optionee) have the right to exercise this option.

                    (iv) Make appropriate arrangements with the Corporation (or
               Parent or Subsidiary employing or retaining Optionee) for the
               satisfaction of all Federal, state and local income and
               employment tax withholding requirements applicable to the option
               exercise.

          (b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with the
appropriate legends affixed thereto.

          (c) In no event may this option be exercised for any fractional
shares.

     10.  COMPLIANCE WITH LAWS AND REGULATIONS.

          (a) The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock may be listed for trading at the time of
such exercise and issuance.

          (b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the non-issuance or
sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such
approvals.

     11.  SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this option designated by
Optionee.

                                       5
<PAGE>   6

          12. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.

          13. FINANCING. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, permit Optionee to pay the Exercise Price
for the purchased Option Shares (to the extent such Exercise Price is in excess
of the par value of those shares) by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note (including the
interest rate, the requirements for collateral and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion.

          14. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.

          15. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.

          16. EXCESS SHARES. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without stockholder approval be issued under the Plan, then this option shall be
void with respect to those excess shares, unless stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of the Plan.

          17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the event
this option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:

               (a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (A) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (B) more than twelve (12) months after the date Optionee ceases to
be an Employee by reason of Permanent Disability.

               (b) No installment under this option shall qualify for favorable
tax treatment as an Incentive Option if (and to the extent) the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for which such
installment first becomes exercisable hereunder would, when added to the
aggregate value (determined as of the respective date or dates of grant) of the
Common Stock or other securities for which this option or any other

                                       6
<PAGE>   7

Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. Should such One Hundred Thousand
Dollar ($100,000) limitation be exceeded in any calendar year, this option shall
nevertheless become exercisable for the excess shares in such calendar year as a
Non-Statutory Option.

               (c) Should the exercisability of this option be accelerated upon
a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
first becomes exercisable in the calendar year in which the Corporate
Transaction occurs does not, when added to the aggregate value (determined as of
the respective date or dates of grant) of the Common Stock or other securities
for which this option or one or more other Incentive Options granted to Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable during the
same calendar year, exceed One Hundred Thousand Dollars ($100,000) in the
aggregate. Should the applicable One Hundred Thousand Dollar ($100,000)
limitation be exceeded in the calendar year of such Corporate Transaction, the
option may nevertheless be exercised for the excess shares in such calendar year
as a Non-Statutory Option.

               (d) Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing limitations on
the exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.

                                       7
<PAGE>   8

                                    EXHIBIT I

                               NOTICE OF EXERCISE

          I hereby notify Websense, Inc. (the "Corporation") that I elect to
purchase ______________ shares of the Corporation's Common Stock (the "Purchased
Shares") at the option exercise price of $ per share (the "Exercise Price")
pursuant to that certain option (the "Option") granted to me under the
Corporation's 2000 Stock Incentive Plan on , _______.

          Concurrently with the delivery of this Exercise Notice to the
Corporation, I shall hereby pay to the Corporation the Exercise Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition
for exercise. Alternatively, I may utilize the special broker-dealer sale and
remittance procedure specified in my agreement to effect payment of the Exercise
Price.

--------------------, -------
Date

                                        ----------------------------------------
                                        Optionee

                                        ----------------------------------------
                                        Address:

                                        ----------------------------------------
Print name in exact manner it is to
appear on the stock certificate:
                                        ----------------------------------------

Address to which certificate is to
be sent, if different from address
above:
                                        ----------------------------------------

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

Social Security Number:
                                        ----------------------------------------
<PAGE>   9
                                    APPENDIX

          The following definitions shall be in effect under the Agreement:

     A.   AGREEMENT shall mean this Stock Option Agreement.

     B.   BOARD shall mean the Corporation's Board of Directors.

     C.   COMMON STOCK shall mean shares of the Corporation's common stock.

     D.   CODE shall mean the Internal Revenue Code of 1986, as amended.

     E.   CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

          (i) a merger or consolidation in which securities possessing more than
     fifty percent (50%) of the total combined voting power of the Corporation's
     outstanding securities are transferred to a person or persons different
     from the persons holding those securities immediately prior to such
     transaction, or

          (ii) the sale, transfer or other disposition of all or substantially
     all of the Corporation's assets in complete liquidation or dissolution of
     the Corporation.

     F.   CORPORATION shall mean Websense, Inc., a Delaware corporation, and any
successor corporation to all or substantially all of the assets or voting stock
of Websense, Inc. which shall by appropriate action adopt the Plan.

     G.   EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

     H.   EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.

     I.   EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.

     J.   EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.

                                      A-1
<PAGE>   10

     K.   FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

          (i) If the Common Stock is at the time traded on the Nasdaq National
     Market, then the Fair Market Value shall be deemed equal to the closing
     selling price per share of Common Stock on the date in question, as the
     price is reported by the National Association of Securities Dealers on the
     Nasdaq National Market and published in The Wall Street Journal. If there
     is no closing selling price for the Common Stock on the date in question,
     then the Fair Market Value shall be the closing selling price on the last
     preceding date for which such quotation exists, or

          (ii) If the Common Stock is at the time listed on any Stock Exchange,
     then the Fair Market Value shall be deemed equal to the closing selling
     price per share of Common Stock on the date in question on the Stock
     Exchange determined by the Plan Administrator to be the primary market for
     the Common Stock, as such price is officially quoted in the composite tape
     of transactions on such exchange and published in The Wall Street Journal.
     If there is no closing selling price for the Common Stock on the date in
     question, then the Fair Market Value shall be the closing selling price on
     the last preceding date for which such quotation exists.

     L.   GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.

     M.   GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.

     N.   INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.

     O.   MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent or
Subsidiary), or any other intentional misconduct by Optionee adversely affecting
the business or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or any other
individual in the Service of the Corporation (or any Parent or Subsidiary).

     P.   NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

     Q.   NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.

                                      A-2
<PAGE>   11

     R.   OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.

     S.   OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.

     T.   PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

     U.   PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.

     V.   PLAN shall mean the Corporation's 2000 Stock Incentive Plan.

     W.   PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.

     X.   SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.

     Y.   STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.

     Z.   SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

                                      A-3

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