Document:

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                                                                    Exhibit 10.2

                                  NETFLIX, INC.

                        2002 EMPLOYEE STOCK PURCHASE PLAN

                            Adopted February 27, 2002

     The following constitutes the provisions of the 2002 Employee Stock
Purchase Plan of Netflix, Inc.

     1. Purpose. The purpose of the Plan is to provide Employees with an
        -------
opportunity to purchase Common Stock through accumulated payroll deductions. It
is the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Code. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit Plan participation in
a manner that is consistent with the requirements of that section of the Code.

     2. Definitions.
        -----------

        (a) "Administrator" means the Board or any committee thereof designated
             -------------
by the Board in accordance with Section 14.

        (b) "Board" means the Board of Directors of the Company.
             -----

        (c) "Change of Control" means the occurrence of any of the following
             -----------------
events:

            (i)   Any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act) becomes the "beneficial owner" (as defined in Rule 13d-3 of
the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or

            (ii)  The consummation of the sale or disposition by the Company of
all or substantially all of the Company's assets; or

            (iii) The consummation of a merger or consolidation of the Company,
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at least
fifty percent (50%) of the total voting power represented by the voting
securities of the Company, or such surviving entity or its parent outstanding
immediately after such merger or consolidation.

            (iv)  A change in the composition of the Board, as a result of which
fewer than a majority of the Directors are Incumbent Directors. "Incumbent
Directors" means Directors who either (A) are Directors as of the effective date
of the Plan (pursuant to Section 23), or (B) are elected, or nominated for
election, to the Board with the affirmative votes of at least a majority of
those Directors whose election or nomination was not in connection with any
transaction described in subsections (i), (ii) or (iii) or in connection with an
actual or threatened proxy contest relating to the election of Directors.

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            (d) "Code" means the Internal Revenue Code of 1986, as amended. Any
                 ----
reference to a section of the Code herein shall be a reference to any successor
or amended section of the Code.

            (e) "Common Stock" means the common stock of the Company.
                 ------------

            (f) "Company" means Netflix, Inc., a Delaware corporation.
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            (g) "Compensation" shall mean all salary, wages (including amounts
                 ------------
elected to be deferred by the employee, that would otherwise have been paid,
under a cash or deferred arrangement established by the Company), overtime pay,
commissions, bonuses and any other remuneration paid directly to the employee,
but excluding profit sharing, the cost of employee benefits paid for by the
Company, education or tuition reimbursements, imputed income arising under any
Company group insurance or benefit program, traveling expenses, business and
moving expense reimbursements, income recognized in connection with stock
options, contributions made by the Company under any employee benefit plan, and
similar items of compensation.

            (h) "Designated Subsidiary" means any Subsidiary that has been
                 ---------------------
designated by the Administrator from time to time in its sole discretion as
eligible to participate in the Plan.

            (i) "Director" means a member of the Board.
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            (j) "Employee" means any individual who is a common law employee of
                 --------
an Employer and is customarily employed for at least twenty (20) hours per week
and more than five (5) months in any calendar year by the Employer. For purposes
of the Plan, the employment relationship shall be treated as continuing intact
while the individual is on sick leave or other leave of absence approved by the
Employer. Where the period of leave exceeds ninety (90) days and the
individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.

            (k) "Employer" means any one or all of the Company and its
                 --------
Designated Subsidiaries.

            (l) "Enrollment Date" means the first Trading Day of each Offering
                 ---------------
Period.

            (m) "Exchange Act" means the Securities Exchange Act of 1934, as
                 ------------
amended, including the rules and regulations promulgated thereunder.

            (n) "Exercise Date" means the first Trading Day on or after May
1/st/ and November 1/st/ of each year. The first Exercise Date under the Plan
shall be November 1, 2002.

            (o) "Fair Market Value" means, as of any date, the value of Common
                 -----------------
Stock determined as follows:

                (i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for the Common Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or

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system on the date of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable, or;

              (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable, or;

              (iii) In the absence of an established market for the Common
Stock, its Fair Market Value shall be determined in good faith by the
Administrator, or;

              (iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus deemed to be included within the
registration statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Common Stock (the
"Registration Statement").

          (p) "Offering Periods" means the periods of approximately twenty-four
               ----------------
(24) months during which an option granted pursuant to the Plan may be
exercised, commencing on the first Trading Day on or after May 1st and November
1st of each year and terminating on the first Trading Day on or after the May
1st and November 1st Offering Period commencement date approximately twenty-four
(24) months later; provided, however, that the first Offering Period under the
Plan shall commence with the first Trading Day on or after the date on which the
Securities and Exchange Commission declares the Company's Registration Statement
effective and ending on the first Trading Day on or after the earlier of (i) May
1, 2004 or (ii) twenty-seven (27) months from the beginning of the first
Offering Period; and provided, further, that the second Offering Period under
the Plan shall commence on November 1, 2002. The duration and timing of Offering
Periods may be changed pursuant to Section 4 of this Plan.

          (q) "Parent" means a "parent corporation," whether now or hereafter
               ------
existing, as defined in Section 424(e) of the Code.

          (r) "Plan" means this 2002 Employee Stock Purchase Plan.
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          (s) "Purchase Period" means the approximately six (6) month period
               ---------------
commencing on one Exercise Date and ending with the next Exercise Date, except
that the first Purchase Period of any Offering Period shall commence on the
Enrollment Date and end with the next Exercise Date.

          (t) "Purchase Price" means an amount equal to eighty-five percent
               --------------
(85%) of the Fair Market Value of a share of Common Stock on the Enrollment Date
or on the Exercise Date, whichever is lower; provided however, that the Purchase
Price may be adjusted by the Administrator pursuant to Section 20.

          (u) "Subsidiary" means a "subsidiary corporation," whether now or
               ----------
hereafter existing, as defined in Section 424(f) of the Code.

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         (v) "Trading Day" means a day on which the U.S. national stock
              -----------
exchanges and the Nasdaq System are open for trading.

     3.  Eligibility.
         -----------

         (a) First Offering Period. Any individual who is an Employee
             ---------------------
immediately prior to the first Offering Period under the Plan shall be
automatically enrolled in the first Offering Period.

         (b) Subsequent Offering Periods. Any individual who is an Employee as
             ---------------------------
of the Enrollment Date of any future Offering Period shall be eligible to
participate in such Offering Period, subject to the requirements of Section 5.

         (c) Limitations. Any provisions of the Plan to the contrary
             -----------
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company or any Parent or Subsidiary of
the Company and/or hold outstanding options to purchase such stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Parent or Subsidiary of
the Company, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans (as defined in Section 423 of the Code)
of the Company or any Parent or Subsidiary of the Company accrues at a rate
which exceeds twenty-five thousand dollars ($25,000) worth of stock (determined
at the Fair Market Value of the stock at the time such option is granted) for
each calendar year in which such option is outstanding at any time.

     4.  Offering Periods. The Plan shall be implemented by consecutive,
         ----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1st and November 1st of each year, or on such other
date as the Administrator shall determine, and continuing thereafter until
terminated in accordance with Section 20; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the first Trading Day
on or after the earlier of (i) May 1, 2004 or (ii) twenty-seven (27) months from
the beginning of the first Offering Period; and provided, further, that the
second Offering Period under the Plan shall commence on November 1, 2002. The
Administrator shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings and
create new Offering Periods without stockholder approval.

     5.  Participation.
         --------------

         (a) First Offering Period. An Employee who has become a participant in
             ---------------------
the first Offering Period under the Plan pursuant to Section 3 shall be entitled
to continue his or her participation in such Offering Period only if he or she
submits to the Company's payroll office (or its designee) a properly completed
subscription agreement authorizing payroll deductions in the form provided by
the Administrator for such purpose (i) no earlier than the effective date of the
filing of the Company's Registration Statement on Form S-8 with respect to the
shares of Common Stock issuable under the Plan (the "Effective Date") and (ii)
no later than five (5) business days from the Effective Date (the "Enrollment
Window"). A participant's failure to submit the subscription

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agreement during the Enrollment Window pursuant to this Section 5(a) shall
result in the automatic termination of his or her participation in the first
Offering Period under the Plan.

          (b) Subsequent Offering Periods. An Employee who is eligible to
              ---------------------------
participate in the Plan pursuant to Section 3(b) may become a participant by (i)
submitting to the Company's payroll office (or its designee), on or before a
date prescribed by the Administrator prior to an applicable Enrollment Date, a
properly completed subscription agreement authorizing payroll deductions in the
form provided by the Administrator for such purpose, or (ii) following an
electronic or other enrollment procedure prescribed by the Administrator.

      6.  Payroll Deductions.
          ------------------

          (a) At the time a participant enrolls in the Plan pursuant to Section
5, he or she shall elect to have payroll deductions made on each payday during
the Offering Period in an amount not exceeding 15% of the Compensation which he
or she receives on each such payday.

          (b) Payroll deductions authorized by a participant shall commence on
the first payday following the Enrollment Date and shall end on the last payday
in the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10; provided, however, that
for the first Offering Period under the Plan, payroll deductions shall commence
on the first payday on or following the end of the Enrollment Window.

          (c) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.

          (d) A participant may discontinue his or her participation in the Plan
as provided in Section 10, or may change the rate of his or her payroll
deductions during the Offering Period by (i) properly completing and submitting
to the Company's payroll office (or its designee), on or before a date
prescribed by the Administrator prior to an applicable Exercise Date, a new
subscription agreement authorizing the change in payroll deduction rate in the
form provided by the Administrator for such purpose, or (ii) following an
electronic or other procedure prescribed by the Administrator; provided,
however, that a participant may only make two payroll deduction changes during
each Purchase Period. If a participant has not followed such procedures to
change the rate of payroll deductions, the rate of his or her payroll deductions
shall continue at the last properly elected rate throughout the Offering Period
and future Offering Periods (unless terminated as provided in Section 10). The
Administrator may, in its sole discretion, limit the nature and/or number of
payroll deduction rate changes that may be made by participants during any
Offering Period. Any change in payroll deduction rate made pursuant to this
Section 6(d) shall be effective as of the first full payroll period following
five (5) business days after the date on which the change is made by the
participant (unless the Company, in its sole discretion, elects to process a
given change in payroll deduction rate more quickly).

          (e)Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(c), a participant's payroll
deductions may be decreased to zero percent (0%) at any time during a Purchase
Period. Payroll deductions shall recommence at the rate originally elected by
the participant effective as of the beginning of the first Purchase Period

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which is scheduled to end in the following calendar year, unless terminated by
the participant as provided in Section 10.

          (f) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to the sale or early disposition of
Common Stock by the Employee.

     7.   Grant of Option. On the Enrollment Date of each Offering Period, each
          ---------------
Employee participating in such Offering Period shall be granted an option to
purchase on each Exercise Date during such Offering Period (at the applicable
Purchase Price) up to a number of shares of Common Stock determined by dividing
such participant's payroll deductions accumulated prior to such Exercise Date
and retained in the participant's account as of the Exercise Date by the
applicable Purchase Price; provided that in no event shall a participant be
permitted to purchase during each Purchase Period more than 12,500 shares of
Common Stock (subject to any adjustment pursuant to Section 19), and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(c) and 13. The Employee may accept the grant of such option by
submitting a properly completed subscription agreement in accordance with the
requirements of Section 5. The Administrator may, for future Offering Periods,
increase or decrease, in its absolute discretion, the maximum number of shares
of Common Stock that a participant may purchase during each Purchase Period of
such Offering Period. Exercise of the option shall occur as provided in Section
8, unless the participant has withdrawn pursuant to Section 10. The option shall
expire on the last day of the Offering Period.

     8.   Exercise of Option.
          ------------------

          (a) Unless a participant withdraws from the Plan as provided in
Section 10, his or her option for the purchase of shares of Common Stock shall
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares of Common Stock shall be purchased; any payroll
deductions accumulated in a participant's account which are not sufficient to
purchase a full share shall be retained in the participant's account for the
subsequent Purchase Period or Offering Period, subject to earlier withdrawal by
the participant as provided in Section 10. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.

          (b) Notwithstanding any contrary Plan provision, if the Administrator
determines that, on a given Exercise Date, the number of shares of Common Stock
with respect to which options are to be exercised may exceed (i) the number of
shares of Common Stock that were available for sale under the Plan on the
Enrollment Date of the applicable Offering Period, or (ii) the number of shares
of Common Stock available for sale under the Plan on such Exercise Date, the
Administrator

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may in its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares of Common Stock
available for purchase on such Enrollment Date or Exercise Date, as applicable,
in as uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and terminate any or all Offering
Periods then in effect pursuant to Section 20. The Company may make pro rata
allocation of the shares of Common Stock available on the Enrollment Date of any
applicable Offering Period pursuant to the preceding sentence, notwithstanding
any authorization of additional shares of Common Stock for issuance under the
Plan by the Company's shareholders subsequent to such Enrollment Date.

     9.  Delivery. As soon as administratively practicable after each Exercise
         --------
Date on which a purchase of shares of Common Stock occurs, the Company shall
arrange the delivery to each participant, as appropriate, the shares purchased
upon exercise of his or her option in a form determined by the Administrator (in
its sole discretion). No participant shall have any voting, dividend, or other
shareholder rights with respect to shares of Common Stock subject to any option
granted under the Plan until such shares have been purchased and delivered to
the participant as provided in this Section 9.

     10. Withdrawal.
         ----------

         (a) Under procedures established by the Administrator, a participant
may withdraw all but not less than all the payroll deductions credited to his or
her account and not yet used to exercise his or her option under the Plan at any
time by (i) submitting to the Company's payroll office (or its designee) a
written notice of withdrawal in the form prescribed by the Administrator for
such purpose, or (ii) following an electronic or other withdrawal procedure
prescribed by the Administrator. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant as promptly as
practicable after the effective date of his or her withdrawal and such
participant's option for the Offering Period shall be automatically terminated,
and no further payroll deductions for the purchase of shares shall be made for
such Offering Period. If a participant withdraws from an Offering Period,
payroll deductions shall not resume at the beginning of the succeeding Offering
Period unless the participant re-enrolls in the Plan in accordance with the
provisions of Section 5.

         (b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.

     11. Termination of Employment. Upon a participant's ceasing to be an
         -------------------------
Employee, for any reason, he or she shall be deemed to have elected to withdraw
from the Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to purchase shares of Common Stock
under the Plan shall be returned to such participant or, in the case of his or
her death, to the person or persons entitled thereto under Section 15, and such
participant's

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option shall be automatically terminated. The preceding sentence
notwithstanding, a participant who receives payment in lieu of notice of
termination of employment shall be treated as continuing to be an Employee for
the participant's customary number of hours per week of employment during the
period in which the participant is subject to such payment in lieu of notice.

     12. Interest. No interest shall accrue on the payroll deductions of a
         --------
participant in the Plan.

     13. Stock.
         -----

         (a) Subject to adjustment upon changes in capitalization of the Company
as provided in Section 19, the maximum number of shares of Common Stock which
shall be made available for sale under the Plan shall be 1,750,000 shares plus
an annual increase to be added on the first day of the Company's fiscal year
beginning in fiscal year 2003, equal to the lesser of (i) 1,000,000 shares, (ii)
two percent (2%) of the outstanding shares on such date or (iii) an amount
determined by the Board.

         (b) Shares of Common Stock to be delivered to a participant under the
Plan shall be registered in the name of the participant or in the name of the
participant and his or her spouse.

     14. Administration. The Board or a committee of members of the Board who
         --------------
shall be appointed from time to time by, and shall serve at the pleasure of, the
Board, shall administer the Plan. The Administrator shall have full and
exclusive discretionary authority to construe, interpret and apply the terms of
the Plan, to determine eligibility and to adjudicate all disputed claims filed
under the Plan. The Administrator, in its sole discretion and on such terms and
conditions as it may provide, may delegate to one or more individuals all or any
part of its authority and powers under the Plan. Every finding, decision and
determination made by the Administrator (or its designee) shall, to the full
extent permitted by law, be final and binding upon all parties.

     15. Designation of Beneficiary.
         --------------------------

         (a) A participant may designate a beneficiary who is to receive any
shares of Common Stock and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may designate a beneficiary who
is to receive any cash from the participant's account under the Plan in the
event of such participant's death prior to exercise of the option. If a
participant is married and the designated beneficiary is not the spouse, spousal
consent shall be required for such designation to be effective.

         (b) Such designation of beneficiary may be changed by the participant
at any time. In the event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such shares and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

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         (c) All beneficiary designations under this Section 15 shall be made
in such form and manner as the Administrator may prescribe from time to time.

     16. Transferability. Neither payroll deductions credited to a participant's
         ---------------
account nor any rights with regard to the exercise of an option or to receive
shares of Common Stock under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15) by the participant. Any such attempt
at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw from an
Offering Period in accordance with Section 10.

     17. Use of Funds. All payroll deductions received or held by the Company
         ------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions. Until
shares of Common Stock are issued under the Plan (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company), a participant shall only have the rights of an unsecured
creditor with respect to such shares.

     18. Reports. Individual accounts shall be maintained for each participant
         -------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares of Common Stock purchased
and the remaining cash balance, if any.

     19. Adjustments, Dissolution, Liquidation or Change of Control.
         ----------------------------------------------------------

         (a) Adjustments. In the event that any dividend or other distribution
             -----------
(whether in the form of cash, Common Stock, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or exchange
of Common Stock or other securities of the Company, or other change in the
corporate structure of the Company affecting the Common Stock such that an
adjustment is determined by the Administrator (in its sole discretion) to be
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan, then the
Administrator shall, in such manner as it may deem equitable, adjust the number
and class of Common Stock which may be delivered under the Plan, the Purchase
Price per share and the number of shares of Common Stock covered by each option
under the Plan which has not yet been exercised, and the numerical limits of
Sections 7 and 13.

         (b) Dissolution or Liquidation. In the event of the proposed
             --------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10.

                                       -9-

<PAGE>

          (c) Change of Control. In the event of a Change of Control, each
              -----------------
outstanding option shall be assumed or an equivalent option substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
option, any Purchase Periods then in progress shall be shortened by setting a
new Exercise Date (the "New Exercise Date") and any Offering Periods then in
progress shall end on the New Exercise Date. The New Exercise Date shall be
before the date of the Company's proposed Change of Control. The Administrator
shall notify each participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for the participant's option
has been changed to the New Exercise Date and that the participant's option
shall be exercised automatically on the New Exercise Date, unless prior to such
date the participant has withdrawn from the Offering Period as provided in
Section 10.

     20.  Amendment or Termination.
          ------------------------

          (a) The Administrator may at any time and for any reason terminate or
amend the Plan. Except as provided in Section 19, no such termination can affect
options previously granted under the Plan, provided that an Offering Period may
be terminated by the Administrator on any Exercise Date if the Administrator
determines that the termination of the Plan is in the best interests of the
Company and its stockholders. Except as provided in Section 19 and this Section
20, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company shall
obtain stockholder approval in such a manner and to such a degree as required.

          (b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Administrator shall be entitled to change the Offering Periods, limit the
frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Administrator determines in its sole discretion advisable which are
consistent with the Plan.

          (c) In the event the Administrator determines that the ongoing
operation of the Plan may result in unfavorable financial accounting
consequences, the Board may, in its discretion and, to the extent necessary or
desirable, modify or amend the Plan to reduce or eliminate such accounting
consequence including, but not limited to:

              (i)  altering the Purchase Price for any Offering Period including
an Offering Period underway at the time of the change in Purchase Price;

              (ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and

                                      -10-

<PAGE>

               (iii) allocating shares.

Such modifications or amendments shall not require stockholder approval or the
consent of any Plan participants.

     21. Notices. All notices or other communications by a participant to the
         -------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

     22. Conditions Upon Issuance of Shares. Shares of Common Stock shall not be
         ----------------------------------
issued with respect to an option under the Plan unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act of 1933, as amended, including the rules
and regulations promulgated thereunder, the Exchange Act and the requirements of
any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

         As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.

     23. Term of Plan. The Plan shall become effective upon the earlier to occur
         ------------
of its adoption by the Board or its approval by the stockholders of the Company.
It shall continue in effect until terminated under Section 20.

     24. Automatic Transfer to Low Price Offering Period. To the extent
         -----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period.

                                      -11-

<PAGE>

                          SAMPLE SUBSCRIPTION AGREEMENT
                          -----------------------------

                                  NETFLIX, INC.

                        2002 EMPLOYEE STOCK PURCHASE PLAN

                             SUBSCRIPTION AGREEMENT

_____ Original Application                            Offering Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)

1.  ____________________ hereby elects to participate in the Netflix, Inc. 2002
    Employee Stock Purchase Plan (the "Plan") and subscribes to purchase shares
    of the Company's Common Stock in accordance with this Subscription Agreement
    and the Plan.

2.  I hereby authorize payroll deductions from each paycheck in the amount of
    ____% of my Compensation on each payday (from 0 to 15%) during the Offering
    Period in accordance with the Plan. (Please note that no fractional
    percentages are permitted.)

3.  I understand that said payroll deductions shall be accumulated for the
    purchase of shares of Common Stock at the applicable Purchase Price
    determined in accordance with the Plan. I understand that if I do not
    withdraw from an Offering Period, any accumulated payroll deductions will be
    used to automatically exercise my option.

4.  I have received a copy of the complete Plan. I understand that my
    participation in the Plan is in all respects subject to the terms of the
    Plan. I understand that my ability to exercise the option under this
    Subscription Agreement is subject to shareholder approval of the Plan.

5.  Shares of Common Stock purchased for me under the Plan should be issued in
    the name(s) of Employee or Employee and Spouse only.

6.  I understand that if I dispose of any shares received by me pursuant to the
    Plan within 2 years after the Offering Date (the first day of the Offering
    Period during which I purchased such shares) or one year after the Exercise
    Date, I will be treated for federal income tax purposes as having received
    ordinary income at the time of such disposition in an amount equal to the
    excess of the fair market value of the shares at the time such shares were
    purchased by me over the price which I paid for the shares. I hereby agree
                                                                --------------
    to notify the Company in writing within 30 days after the date of any
    ---------------------------------------------------------------------
    disposition of my shares and I will make adequate provision for Federal,
    ------------------------------------------------------------------------
    state or other tax withholding obligations, if any, which arise upon the
    ------------------------------------------------------------------------
    disposition of the Common Stock. The Company may, but will not be obligated
    -------------------------------
    to, withhold from my compensation the amount necessary to meet any
    applicable withholding obligation including any withholding necessary to
    make available to the Company any tax deductions or

<PAGE>

     benefits attributable to sale or early disposition of Common Stock by me.
     If I dispose of such shares at any time after the expiration of the 2-year
     and 1-year holding periods, I understand that I will be treated for federal
     income tax purposes as having received income only at the time of such
     disposition, and that such income will be taxed as ordinary income only to
     the extent of an amount equal to the lesser of (1) the excess of the fair
     market value of the shares at the time of such disposition over the
     purchase price which I paid for the shares, or (2) 15% of the fair market
     value of the shares on the first day of the Offering Period. The remainder
     of the gain, if any, recognized on such disposition will be taxed as
     capital gain.

7.   I hereby agree to be bound by the terms of the Plan. The effectiveness of
     this Subscription Agreement is dependent upon my eligibility to participate
     in the Plan.

8.   In the event of my death, I hereby designate the following as my
     beneficiary(ies) to receive all payments and/or shares due me under the
     Plan:

     NAME:  (Please print)_____________________________________________________
                             (First)         (Middle)          (Last)

     _________________________               ___________________________________
     Relationship

     _________________________               ___________________________________
     Percentage Benefit                      (Address)

     NAME:  (Please print)_____________________________________________________
                             (First)         (Middle)          (Last)

     _________________________               ___________________________________
     Relationship

     _________________________               ___________________________________
     Percentage Benefit                      (Address)

                                      -2-

<PAGE>

         Employee's Social
         Security Number:                   ____________________________________

         Employee's Address:                ____________________________________

                                            ____________________________________

                                            ____________________________________

I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.

Dated:_________________________         ________________________________________
                                        Signature of Employee

                                        ________________________________________
                                        Spouse's Signature (If beneficiary other
                                        than spouse)

                                      -3-

<PAGE>

                            SAMPLE WITHDRAWAL NOTICE
                            ------------------------

                                  NETFLIX, INC.

                        2002 EMPLOYEE STOCK PURCHASE PLAN

                              NOTICE OF WITHDRAWAL

         The undersigned participant in the Offering Period of the Netflix, Inc.
2002 Employee Stock Purchase Plan which began on ____________, ______ (the
"Offering Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.

                                                Name and Address of Participant:

                                                ________________________________

                                                ________________________________

                                                ________________________________

                                                Signature:

                                                ________________________________

                                                Date:___________________________<PAGE>

                                                                    EXHIBIT 10.3

                                NETFLIX.COM, INC.

                                 1997 STOCK PLAN

                            Adopted December 17, 1997

              Amended and Restated Effective as of October 17, 2001

     1.   Purposes of the Plan. The purposes of this Stock Plan are to attract
          --------------------
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, Directors and
Consultants and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options, as determined by the Administrator at the time of grant. Stock Purchase
Rights may also be granted under the Plan.

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

          (a)  "Administrator" means the Board or any of its Committees as shall
                -------------
be administering the Plan in accordance with Section 4 hereof.

          (b)  "Applicable Laws" means the requirements relating to the
                ---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.

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

          (d)  "Code" means the Internal Revenue Code of 1986, as amended.
                ----

          (e)  "Committee" means a committee of Directors appointed by the Board
                ---------
in accordance with Section 4 hereof.

          (f)  "Common Stock" means the Common Stock of the Company.
                ------------

          (g)  "Company" means NetFlix, Inc., a Delaware corporation.
                -------

          (h)  "Consultant" means any person who is engaged by the Company or
                ----------
any Parent or Subsidiary to render consulting or advisory services to such
entity.

          (i)  "Director" means a member of the Board of Directors of the
                --------
Company.

          (j)  "Disability" means total and permanent disability as defined in
                ----------
Section 22(e)(3) of the Code.

<PAGE>

          (k)  "Employee" means any person, including Officers and Directors,
                --------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.

          (l)  "Exchange Act" means the Securities Exchange Act of 1934, as
                ------------
amended.

          (m)  "Fair Market Value" means, as of any date, the value of Common
                -----------------
Stock determined as follows:

               (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;

               (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or

               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.

          (n)  "Incentive Stock Option" means an Option intended to qualify as
                ----------------------
an incentive stock option within the meaning of Section 422 of the Code.

          (o)  "Nonstatutory Stock Option" means an Option not intended to
                -------------------------
qualify as an Incentive Stock Option.

          (p)  "Officer" means a person who is an officer of the Company within
                -------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

          (q)  "Option" means a stock option granted pursuant to the Plan.
                ------

          (r)  "Option Agreement" means a written or electronic agreement
                ----------------
between the Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.

                                      -2-

<PAGE>

          (s)  "Option Exchange Program" means a program whereby outstanding
                -----------------------
Options are exchanged for Options with a lower exercise price.

          (t)  "Optioned Stock" means the Common Stock subject to an Option or a
                --------------
Stock Purchase Right.

          (u)  "Optionee" means the holder of an outstanding Option or Stock
                --------
Purchase Right granted under the Plan.

          (v)  "Parent" means a "parent corporation," whether now or hereafter
                ------
existing, as defined in Section 424(e) of the Code.

          (w)  "Plan" means this 1997 Stock Plan.
                ----

          (x)  "Restricted Stock" means shares of Common Stock acquired pursuant
                ----------------
to a grant of a Stock Purchase Right under Section 11 below.

          (y)  "Section 16(b) " means Section 16(b) of the Securities Exchange
                -------------
Act of 1934, as amended.

          (z)  "Service Provider" means an Employee, Director or Consultant.
                ----------------

          (aa) "Share" means a share of the Common Stock, as adjusted in
                -----
accordance with Section 12 below.

          (bb) "Stock Purchase Right" means a right to purchase Common Stock
                --------------------
pursuant to Section 11 below.

          (cc) "Subsidiary" means a "subsidiary corporation," whether now or
                ----------
hereafter existing, as defined in Section 424(f) of the Code.

     3.   Stock Subject to the Plan. Subject to the provisions of Section 12 of
          -------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 14,639,935 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.

     If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan, upon
exercise of either an Option or Stock Purchase Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if Shares of Restricted Stock are repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.

     4.   Administration of the Plan.
          --------------------------

                                      -3-

<PAGE>

          (a)  Administrator. The Plan shall be administered by the Board or a
               -------------
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.

          (b)  Powers of the Administrator. Subject to the provisions of the
               ---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:

               (i)    to determine the Fair Market Value;

               (ii)   to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;

               (iii)  to determine the number of Shares to be covered by each
such award granted hereunder;

               (iv)   to approve forms of agreement for use under the Plan;

               (v)    to determine the terms and conditions, of any Option or
Stock Purchase Right granted hereunder. Such terms and conditions include, but
are not limited to, the exercise price, the time or times when Options or Stock
Purchase Rights may be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

               (vi)   to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;

               (vii)  to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;

               (viii) to initiate an Option Exchange Program;

               (ix)   to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;

               (x)    to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option or Stock Purchase Right that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by Optionees to
have Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable; and

                                      -4-

<PAGE>

               (xi)   to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.

          (c)  Effect of Administrator's Decision. All decisions, determinations
               ----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees.

     5.   Eligibility.
          -----------

          (a)  Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.

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

          (c)  Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
relationship at any time, with or without cause.

     6.   Term of Plan. The Plan shall become effective upon its adoption by the
          ------------
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.

     7.   Term of Option. The term of each Option shall be stated in the Option
          --------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.

     8.   Option Exercise Price and Consideration.
          ---------------------------------------

          (a)  The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:

               (i)    In the case of an Incentive Stock Option

                      (1)  granted to an Employee who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of

                                      -5-

<PAGE>

stock of the Company or any Parent or Subsidiary, the exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.

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

              (ii)  In the case of a Nonstatutory Stock Option

                    (1) granted to a Service Provider who, at the time of grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.

                    (2) granted to any other Service Provider, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.

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

          (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

     9.   Exercise of Option.
          ------------------

          (a) Procedure for Exercise; Rights as a Shareholder. Any Option
              -----------------------------------------------
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. Except in the case of Options granted to Officers,
Directors and Consultants, Options shall become exercisable at a rate of no less
than 20% per year over five (5) years from the date the Options are granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder shall be tolled during any unpaid leave of absence.

     An Option may not be exercised for a fraction of a Share. An Option shall
be deemed exercised when the Company receives: (i) written or electronic notice
of exercise (in accordance with the Option Agreement) from the person entitled
to exercise the Option, and (ii) full payment for the Shares with respect to
which the Option is exercised. Full payment may consist of any consideration and
method of payment authorized by the Administrator and permitted by the Option
Agreement and the Plan. Shares issued upon exercise of an Option shall

                                      -6-

<PAGE>

be issued in the name of the Optionee or, if requested by the Optionee, in the
name of the Optionee and his or her spouse. Until the Shares are issued (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such Shares promptly after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Shares are issued, except as provided in Section 12 of the Plan.

     Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.

          (b)  Termination of Relationship as a Service Provider. If an Optionee
               -------------------------------------------------
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Agreement). In the absence of a specified time in the
Option Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified by
the Administrator, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

          (c)  Disability of Optionee. If an Optionee ceases to be a Service
               ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
(of at least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Agreement). In the absence of a specified time
in the Option Agreement, the Option shall remain exercisable for twelve (12)
months following the Optionee's termination. If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.

          (d)  Death of Optionee. If an Optionee dies while a Service Provider,
               -----------------
the Option may be exercised within such period of time as is specified in the
Option Agreement (of at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Agreement) by the Optionee's
estate or by a person who acquires the right to exercise the Option by bequest
or inheritance. In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

                                       -7-

<PAGE>

          (e)  Buyout Provisions. The Administrator may at any time offer to buy
               -----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

     10.  Limited Transferability of Options and Stock Purchase Rights. Unless
          ------------------------------------------------------------
determined otherwise by the Administrator, Options and Stock Purchase Rights may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.

     11.  Stock Purchase Rights.
          ---------------------

          (a)  Rights to Purchase. Stock Purchase Rights may be issued either
               ------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that such person shall be
entitled to purchase, the price to be paid, and the time within which such
person must accept such offer. The terms of the offer shall comply in all
respects with Section 260.140.42 of Title 10 of the California Code of
Regulations. The offer shall be accepted by execution of a Restricted Stock
purchase agreement in the form determined by the Administrator.

          (b)  Repurchase Option. Unless the Administrator determines otherwise,
               -----------------
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine. Except with respect to Shares purchased by
Officers, Directors and Consultants, the repurchase option shall in no case
lapse at a rate of less than 20% per year over five (5) years from the date of
purchase.

          (c)  Other Provisions. The Restricted Stock purchase agreement shall
               ----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.

          (d)  Rights as a Shareholder. Once the Stock Purchase Right is
               -----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.

     12.  Adjustments Upon Changes in Capitalization, Merger or Asset Sale.
          ----------------------------------------------------------------

                                      -8-

<PAGE>

          (a)  Changes in Capitalization. Subject to any required action by the
               -------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company. The conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.

          (b)  Dissolution or Liquidation. In the event of the proposed
               --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Stock Purchase Right until
fifteen (15) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Option or Stock Purchase Right
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option or Stock Purchase Right shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option or Stock Purchase Right will terminate immediately prior to the
consummation of such proposed action.

          (c)  Merger or Asset Sale. In the event of a merger of the Company
               --------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company (a "Merger"), each outstanding Option and Stock Purchase Right
shall be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation (the
"Successor Corporation").

     Following such assumption or substitution in connection with a Merger, if
the Optionee's status as an Employee or employee of the Successor Corporation,
as applicable, is terminated by the Successor Corporation as a result of an
Involuntary Termination (as defined below) other than for Cause (as defined
below) within twelve months following a Merger, the Optionee shall vest in and
have the right to exercise that portion of Optionee's Option or Stock Purchase
Right, if any, that would have vested within one year after the date of
Optionee's termination. Thereafter, the Option or Stock Purchase Right shall
remain exercisable in accordance with Sections 10(b) through (d) above.

                                      -9-

<PAGE>

     For purposes of this section, any of the following events shall constitute
an "Involuntary Termination": (i) a significant reduction of the Employee's
duties, authority or responsibilities, relative to the Employee's duties,
authority or responsibilities as in effect immediately prior to the Merger, or
the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) a substantial reduction of the facilities and perquisites
(including office space and location) available to the Employee immediately
prior to the Merger; (iii) a reduction in the base salary of the Employee as in
effect immediately prior to the Merger; (iv) a material reduction in the kind or
level of employee benefits, including bonuses, to which the Employee was
entitled immediately prior to the Merger with the result that the Employee's
overall benefits package is significantly reduced; (v) the relocation of the
Employee to a facility or a location more than fifty (50) miles from the
Employee's then present location, without the Employee's express written
consent; (vi) any purported termination of the Employee by the Successor
Corporation which is not effected for Disability or for Cause, or any purported
termination for which the grounds relied upon are not valid; (vii) or any act or
set of facts or circumstances which would, under California case law or statute
constitute a constructive termination of the Employee.

     For purposes of this section, "Cause" shall mean (i) any act of personal
dishonesty taken by the Employee in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Employee, (ii) the conviction of a felony, (iii) a willful act by the Employee
which constitutes gross misconduct and which is injurious to the Successor
Corporation, and (iv) following delivery to the Employee of a written demand for
performance from the Successor Corporation which describes the basis for the
Successor Corporation's belief that the Employee has not substantially performed
his duties, continued violations by the Employee of the Employee's obligations
to the Successor which are demonstrably willful and deliberate on the Employee's
part.

     In the event that the Successor Corporation refuses to assume or substitute
for the Option or Stock Purchase Right, the Optionee shall fully vest in and
have the right to exercise the Option or Stock Purchase Right as to all of the
Optioned Stock, including Shares as to which Optionee would not otherwise be
vested or exercisable. If an Option or Stock Purchase Right becomes fully vested
and exercisable in lieu of assumption or substitution in connection with a
Merger, the Administrator shall notify the Optionee in writing that the Option
or Stock Purchase Right shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the Option or Stock Purchase
Right shall terminate upon the expiration of such period. For the purposes of
this paragraph, the Option or Stock Purchase Right shall be considered assumed
if, following the Merger, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the Merger, the consideration (whether
stock, cash, or other securities or property) received in the Merger by holders
of Common Stock for each Share held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Merger is not
solely common stock of the Successor Corporation or its Parent, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon the exercise of the Option or Stock
Purchase Right, for each Share of Optioned Stock subject to the Option or Stock
Purchase

                                      -10-

<PAGE>

Right, to be solely common stock of the Successor Corporation or its Parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the Merger.

         13.      Time of Granting Options and Stock Purchase Rights. The date
                  --------------------------------------------------
of grant of an Option or Stock Purchase Right shall, for all purposes, be the
date on which the Administrator makes the determination granting such Option or
Stock Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Service Provider to whom an
Option or Stock Purchase Right is so granted within a reasonable time after the
date of such grant.

         14.      Amendment and Termination of the Plan.
                  -------------------------------------

                  (a)      Amendment and Termination.  The Board may at any time
                           -------------------------
 amend, alter, suspend or terminate the Plan.

                  (b)      Shareholder Approval.  The Board shall obtain
                           --------------------
shareholder approval of any Plan amendment to the extent necessary and desirable
to comply with Applicable Laws.

                  (c)      Effect of Amendment or Termination. No amendment,
                           ---------------------------------
alteration, suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee and
the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.

         15.      Conditions Upon Issuance of Shares.
                  -----------------------------------

                  (a)      Legal Compliance. Shares shall not be issued pursuant
                           ----------------
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

                  (b)      Investment Representations. As a condition to the
                           --------------------------
exercise of an Option, the Administrator may require the person exercising such
Option to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required.

         16.      Inability to Obtain Authority. The inability of the Company to
                  -----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

         17.      Reservation of Shares. The Company, during the term of this
                  ---------------------
Plan, shall at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.

                                      -11-

<PAGE>

         18.      Shareholder Approval.  The Plan shall be subject to approval
                  --------------------
by the shareholders of the Company within twelve (12) months after the date the
Plan is adopted.  Such shareholder approval shall be obtained in the degree and
manner required under Applicable
Laws.
         19.      Information to Optionees and Purchasers. The Company shall
                  ---------------------------------------
provide to each Optionee and to each individual who acquires Shares pursuant to
the Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquires Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.

                                      -12-

<PAGE>

                                      -13

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