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                                                                    EXHIBIT 10.1
                             SIXTH AMENDMENT TO THE

                           FIRST AMENDED AND RESTATED

                       AGREEMENT OF LIMITED PARTNERSHIP OF

                              ESSEX PORTFOLIO, L.P.

                            Dated as of June 28, 2001

     This Sixth Amendment to the First Amended and Restated Agreement of Limited
Partnership of Essex Portfolio, L.P., as amended (as amended, the "Partnership
Agreement"), dated as of the date shown above (the "Amendment"), is executed by
Essex Property Trust, Inc., a Maryland corporation (the "General Partner"), as
the General Partner and on behalf of the existing Limited Partners of Essex
Portfolio, L.P. (the "Partnership"), and the individuals whose names are set
forth on Exhibit Q as holders of Series Z Incentive Units issued pursuant to
this Amendment (the "Series Z Partners").

                                    RECITALS

     WHEREAS, the Partnership was formed pursuant to the Partnership Agreement;

     WHEREAS, the Partnership desires to issue as of the date hereof an
aggregate amount of 200,000 Series Z Incentive Units (the "Series Z Incentive
Units") of limited partnership interests in the Partnership with rights, terms
and conditions as set forth herein, in exchange for a capital commitment (the
"Capital Commitment") in the amount of $1.00 per unit;

     WHEREAS, as of the date hereof, each of the Series Z Partners has made a
capital commitment to the Partnership in the amount set forth on Exhibit Q, in
exchange for which such Partner is entitled to receive the number Series Z
Incentive Units set forth on Exhibit Q;

     WHEREAS, pursuant to the authority granted to the General Partner under the
Partnership Agreement, the General Partner desires to amend the Partnership
Agreement to reflect (i) the issuance of the Series Z Incentive Units, (ii) the
admission of the Series Z Partners as Additional Limited Partners and holders of
a certain number of Series Z Incentive Units and (iii) certain other matters
described herein; and

     WHEREAS, the Series Z Partners desire to become parties to the Partnership
Agreement as Limited Partners and to be bound by all terms, conditions and other
provisions of this Amendment and the Partnership Agreement.

     NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the General Partner hereby amends the Partnership Agreement as
follows:

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     1. Definitions. Capitalized terms used herein, unless otherwise defined
herein, shall have the same meanings as set forth in the Partnership Agreement.

     2. Amended Definitions. Section 1.1 of the Partnership Agreement is hereby
amended to delete the definition of "Percentage Interest" in its entirety and
substituting the following definition of "Percentage Interest," in its place:

          "Percentage Interest" shall mean (i) with respect to any Partner other
     than holders of Series B Preferred Units, Series C Preferred Units, Series
     D Preferred Units, Series E Preferred Units or Series Z Incentive Units,
     the undivided percentage ownership interest of such Partner in the
     Partnership, as determined by dividing (A) the number of Partnership Units
     owned by such Partner by (B) the sum of (x) the total number of Partnership
     Units then outstanding (excluding the Series A Preferred Interest, the
     Series B Preferred Interest, the Series B Partnership Units, the Series C
     Preferred Interest, the Series C Preferred Units, the Series D Preferred
     Interest, the Series D Preferred Units, the Series E Preferred Interest,
     the Series E Preferred Units and the Series Z Incentive Units) and (y) the
     total number of outstanding Series Z Incentive Units multiplied by the
     Distribution Ratchet Percentage with respect to each such Series Z
     Incentive Unit, calculated on a unit-by-unit basis, and (ii) with respect
     to any holder of Series Z Incentive Units, the undivided percentage
     ownership interest of such Partner in the Partnership as determined by
     dividing (A) the product resulting from multiplying the total number of
     outstanding Series Z Incentive Units owned by such Partner by the
     Distribution Ratchet Percentage attributable to such holder's Series Z
     Incentive Units, by (B) the sum of (x) the total number of Partnership
     Units then outstanding (excluding the Series A Preferred Interest, the
     Series B Preferred Interest, the Series B Partnership Units, the Series C
     Preferred Interest, the Series C Preferred Units, the Series D Preferred
     Interest, the Series D Preferred Units, the Series E Preferred Interest,
     the Series E Preferred Units and the Series Z Incentive Units) and (y) the
     total number of outstanding Series Z Incentive Units multiplied by the
     Distribution Ratchet Percentage with respect to each such Series Z
     Incentive Unit, calculated on a unit-by-unit basis. If any Partner holds
     both Common Units and Series Z Incentive Units, then such Partner's
     Percentage Interest shall equal the sum of the amounts calculated under
     clauses (i) and (ii) of this definition of "Percentage Interest",
     determined by assuming for purposes of clause (i) that such Partner holds
     only Common Units and for purposes of clause (ii) that such Partner holds
     only Series Z Incentive Units.

     3. Definitions. Section 1.1 of the Partnership Agreement is hereby amended
to include the following definitions, to be inserted in alphabetical order in
such Section 1.1:

          "Actual FFO" shall mean with respect to any fiscal period "funds from
     operations" of the General Partner as determined with respect to such
     fiscal period by the Board of Directors of the General Partner using a
     consistently applied methodology that conforms with the standards for
     computation of "funds from operations" established by the National
     Association of Real Estate Investment Trusts, Inc. (or successor
     organizations) from time to time; it being understood that, to the extent
     that the General Partner discloses "funds from operations" for any fiscal
     period in any of its periodic reports publicly filed with the Securities
     and Exchange Commission, Actual FFO for

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     such fiscal period for the purposes of this Agreement will conform to such
     publicly disclosed "funds from operations."

          "Actual FFO Per Share" shall mean with respect to any fiscal period
     the Actual FFO for such period divided by the number of Common Equivalent
     Shares.

          "Change in Control" shall mean the earliest to occur of any of the
     following events:

          (i) any "person," as such term is used in Sections 13(d) and 14(d) of
     the Securities Exchange Act of 1934, as amended (the "Exchange Act") other
     than any trustee, fiduciary or other person or entity holding securities
     under any employee benefit plan or trust of any of the General Partner or
     any of its subsidiaries or affiliates), together with all "affiliates" and
     "associates" (as such terms are defined in Rule 12b-2 under the Exchange
     Act) of such person, shall become the "beneficial owner" (as such term is
     defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
     securities of the General Partner representing thirty percent (30%) or more
     of the combined voting power of the General Partner's then outstanding
     securities having the right to vote in an election of the General Partner's
     Board of Directors ("Voting Securities") (other than as a result of an
     acquisition of securities directly from the General Partner).
     Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
     have occurred for purposes of this clause (i) solely as the result of an
     acquisition of securities by the General Partner which, by reducing the
     number of shares of Voting Securities outstanding, increases the
     proportionate number of shares of Voting Securities beneficially owned by
     any person (as defined in the foregoing clause) to thirty percent (30%) or
     more of the combined voting power of all then outstanding Voting
     Securities; provided, however, that if such person shall thereafter become
     the beneficial owner of any additional shares of Voting Securities (other
     than pursuant to a stock split, stock dividend, or similar transaction or
     as a result of an acquisition of securities directly from the General
     Partner) and immediately thereafter beneficially owns thirty percent (30%)
     or more of the combined voting power of all then outstanding Voting
     Securities, then a "Change in Control" shall be deemed to have occurred for
     purposes of this clause (i).

          (ii) the moment immediately prior to the consummation of a merger,
     reorganization or consolidation of the General Partner or the occurrence of
     any other event (including without limitation a tender or exchange offer),
     the result of which is that the "beneficial owners" (as such term is
     defined in Rule 13d-3 of the Exchange Act) of the Voting Securities of the
     General Partner before the merger, reorganization, consolidation or other
     transaction are not the "beneficial owners", directly or indirectly, of a
     majority of the voting power of the surviving or resulting entity upon
     completion of such merger, reorganization, consolidation or other
     transaction;

          (iii) the moment immediately prior to the consummation of a merger,
     reorganization or consolidation of the Partnership, unless the General
     Partner immediately prior to such merger, reorganization or consolidation
     remains the sole general partner of the Partnership after such merger;

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          (iv) the moment immediately prior to the consummation of a change
     (whether by removal, withdrawal, transfer or otherwise) in the general
     partner of the Partnership;

          (v) persons who, as of June 1, 2001, constitute the General Partner's
     Board of Directors (the "Incumbent Directors") cease for any reason,
     including, without limitation, as a result of a tender or exchange offer,
     proxy contest, merger or similar transaction, to constitute at least a
     majority of the Board of Directors of the General Partner (rounded up to
     the next whole number), provided that any person becoming a director of the
     General Partner subsequent to such date shall be considered an Incumbent
     Director if such person's election was approved by or such person was
     nominated for election by a vote of a majority of the Incumbent Directors;
     provided, however, that any person whose initial assumption of office is in
     connection with an actual or threatened election contest relating to the
     election of members of the Board of Directors or other actual or threatened
     solicitation of proxies or consents by or on behalf of a "person" other
     than the Board of Directors, including by reason of agreement intended to
     avoid or settle any such actual or threatened contest or solicitation,
     shall not be considered an Incumbent Director; or

          (vi) the moment immediately prior to the consummation of a sale of all
     or substantially all of the assets of the General Partner and/or the
     Partnership.

          "Clawback Amount" shall mean at any time with respect to each Series Z
     Incentive Unit, an amount equal to the positive difference, if any, between
     (i) the then unpaid Capital Commitment with respect to such Series Z
     Incentive Unit, and (ii) the sum of any distributions deemed to offset the
     Clawback Amount in accordance with Section 6 below. The unpaid Capital
     Commitment of a Series Z Partner with respect to a Series Z Incentive Unit
     shall never be greater than the Clawback Amount with respect to such Series
     Z Incentive Unit, as adjusted from time to time.

          "Common Equivalent Shares" shall mean the total number of shares of
     Common Stock outstanding on a fully diluted basis, calculated in a manner
     consistent with the manner used by the General Partner for reporting
     diluted earnings or loss per share under generally accepted accounting
     principles, it being understood that, to the extent that the General
     Partner discloses diluted earnings or loss per share in any of its periodic
     reports publicly filed with the Securities and Exchange Commission, Common
     Equivalent Shares for such period for the purposes of this Agreement shall
     be calculated in a manner consistent with such public disclosure.

          "Common Unit" shall mean a Partnership Unit representing an interest
     in the Partnership, other than a Series A Preferred Interest, Series B
     Preferred Unit, Series B Preferred Interest, Series C Preferred Unit,
     Series C Preferred Interest, Series D Preferred Unit, Series D Preferred
     Interest, Series E Preferred Unit, Series E Preferred Interest, Series Z
     Incentive Unit or any other Preferred Interest or Preferred Partnership
     Units.

          "Compensation Committee" shall mean the Compensation Committee of the
     Board of Directors of the General Partner or, if no such committee exists,
     the full Board of Directors of the General Partner.

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          "Conversion Ratchet Percentage" with respect to any Series Z Incentive
     Unit (i) shall equal 0% on the date hereof, (ii) shall increase by twenty
     percentage points on January 1 of the first calendar year after the date
     hereof on which (x) the holder of such Series Z Incentive Unit is an
     employee of the General Partner and/or the Partnership and/or any
     subsidiary or affiliate thereof as of such January 1, (y) the Actual FFO
     Per Share of the General Partner for the calendar year preceding such
     January 1 is greater than or equal to the Target FFO for such year, and (z)
     the Conversion Ratchet Percentage prior to such increase is less than 100%,
     and (iii) shall increase ten percentage points on January 1 of every
     calendar year thereafter on which the conditions in clauses (x), (y) and
     (z) of the immediately preceding clause (ii) are met; provided, however,
     that if the Compensation Committee determines that Actual FFO Per Share is
     no longer an appropriate corporate performance parameter for establishing
     management objectives or that the applicable target levels are no longer
     feasible in light of factors or circumstances outside of the Partnership's
     or the General Partner's control (such as general economic conditions,
     legal/regulatory changes, war or similar events), it may, in its reasonable
     good faith discretion without any consent or other action on the part of
     the Series Z Partners or any other Partners of the Partnership, revise and
     amend the requirement in (y) above (and any definitions involved therein)
     to reflect one or more different or additional parameters, objectives or
     performance measures, so long as the Compensation Committee, in its
     reasonable good faith discretion, determines that the revised or amended
     clause (y) is, considered as a whole, comparable or more effective as a
     means for analyzing the performance of the Partnership and incentivizing
     the Series Z Partners (it being understood that such amended or restated
     clause (y) shall not be more difficult to achieve than the present
     requirements of clause (y)).

          "Distribution Ratchet Percentage" with respect to any Series Z
     Incentive Unit (i) shall equal 10% on the date hereof, (ii) shall increase
     on January 1, 2002, to (a) twenty-five percent (25%) if the Conversion
     Ratchet Percentage with respect to such Series Z Incentive Units also
     increases to 20%, or (b) fifteen percent (15%) if the Conversion Ratchet
     Percentage with respect to such Series Z Incentive Units remains at 0%,
     (iii) shall increase, to the extent it has not already done so, to
     twenty-five percent (25%) at such time as such Conversion Ratchet
     Percentage is equal to 20%, and (iv) after such time as the Conversion
     Ratchet Percentage with respect to such Series Z Incentive Units is equal
     to or greater than 30%, the Distribution Ratchet Percentage shall be equal
     to the Conversion Ratchet Percentage with respect to such Series Z
     Incentive Units.

          "Forfeited Capital Account" shall mean that portion of the Capital
     Account attributable to a Series Z Incentive Unit equal to the product of
     (a) the excess of (i) the Adjusted Capital Account Balance (as defined in
     Section 10.9(a)) allocable to such Series Z Incentive Unit over (ii) the
     sum of (A) the capital contribution made with respect to such Series Z
     Incentive Unit and (B) the excess of the sum of the net allocations of
     operating income made with respect to such Series Z Incentive Unit for all
     fiscal years (taking into account allocations of Net Operating Loss made
     with respect to such Series Z Incentive Unit for all fiscal years) over the
     distributions of operating cash flow made to such Series Z Unit (except to
     the extent such allocations have reduced the Clawback Amount) multiplied by
     (b) 100% minus the Conversion Ratchet Percentage applicable to such Series
     Z Incentive Unit.

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          "Net Operating Income" shall mean, for any fiscal year or portion
     thereof, the excess of the items of income and gain over the items of
     deduction and loss, excluding, in each case, items of gain or loss realized
     in connection with the sale or disposition of real property and other
     capital assets.

          "Net Operating Loss" shall mean, for any fiscal year or portion
     thereof, the excess the items of deduction and loss over the items of
     income and gain, excluding, in each case, items of gain or loss realized
     in connection with the sale or disposition of real property and other
     capital assets.

          "Net Property Gain" shall mean, for any fiscal year or portion
     thereof, the excess of gains realized from the sale or disposition of real
     property and other capital assets over the losses realized in connection
     with the sale or disposition of real property and other capital assets.

          "Net Property Loss" shall mean, for any fiscal year or portion
     thereof, the excess of losses realized from the sale or disposition of real
     property and other capital assets over the gains realized in connection
     with the sale or disposition of real property and other capital assets.

          "Series Z Incentive Unit" shall mean a Series Z Incentive Unit of
     limited partnership interest in the Partnership with the rights set forth
     in this Agreement.

          "Target FFO" shall mean Actual FFO Per Share equal to $4.29 with
     respect to fiscal year 2001 and, with respect to each fiscal year
     thereafter, shall mean Actual FFO Per Share equal to the lesser of (x) the
     product of $4.29 times 1.1N, where "N" is equal to 1 with respect to fiscal
     year 2002 plus an additional 1 for each fiscal year thereafter, and (y)
     110% of the Actual FFO Per Share applicable to the immediately preceding
     fiscal year; provided, however, that if the Compensation Committee
     determines that Actual FFO Per Share is no longer an appropriate corporate
     performance parameter for establishing management objectives or that the
     applicable target levels are no longer feasible in light of factors or
     circumstances outside of the Partnership's or the General Partner's control
     (such as general economic conditions, legal/regulatory changes, war or
     similar events), it may, in its reasonable good faith discretion without
     any consent or other action on the part of the Series Z Partners or any
     other Partners of the Partnership, revise and amend this definition of
     Target FFO (and any definitions involved herein) to reflect one or more
     different or additional parameters, objectives or performance measures, so
     long as the Compensation Committee, in its reasonable good faith
     discretion, determines that the revised or amended definition is,
     considered as a whole, comparable as a means for analyzing the performance
     of the Partnership and incentivizing the Series Z Partners (it being
     understood that such amended or restated definition shall not be more
     difficult to achieve than the present requirements of this definition).

          "Trigger Event" shall mean the earliest to occur of any of the
     following events:

          (i) such time as a plan of dissolution or liquidation (but not
     including a deemed liquidation for tax purposes in connection with one or
     more transfers of interest

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     in the Partnership) of the General Partner and/or the Partnership is duly
     adopted by appropriate corporate or partnership action;

          (ii) the date on which the Conversion Ratchet Percentage applicable to
     all Series Z Incentive Units held by then current employees of the General
     Partner and/or the Partnership (i.e., other than holders of Series Z
     Incentive Units whose employment with the General Partner and/or the
     Partnership has terminated) reaches 100%;

          (iii) the earliest date on which the employment of all holders of
     Series Z Incentive Units has been terminated; and

          (iv) January 1, 2016.

          "Weighted Number of Series Z Incentive Units" as determined from time
     to time shall mean the total number of outstanding Series Z Incentive
     Units, multiplied by the Conversion Ratchet Percentage with respect to each
     such Series Z Incentive Unit, calculated on a unit-by-unit basis.

     4. Restatement of Exhibit A, Exhibit E and Exhibit M. Exhibit A to the
Partnership Agreement is amended and restated by replacing such Exhibit A with
Exhibit A attached to this Amendment. Exhibit E to the Partnership Agreement is
amended and restated by replacing such Exhibit E with Exhibit E attached to this
Amendment. Exhibit M to the Partnership Agreement is amended and restated by
replacing such Exhibit M with Exhibit M attached to this Amendment.

     5. Admission of Series Z Partners. Effective immediately prior to the
effectiveness of the next succeeding sentence, the capital accounts of the
Partnership shall be adjusted to reflect each Partner's share of the net fair
market value of the Partnership's assets (a "book-up") by adjusting the Gross
Asset Values of all Partnership assets to their respective gross fair market
values and allocating the amount of such adjustment as Net Property Gain or Net
Property Loss pursuant to Section 2(b) or 2(c) of Exhibit E hereof. Each of the
Series Z Partners is hereby admitted as an Additional Limited Partner in
accordance with Section 4.6 of the Partnership Agreement holding that number of
Series Z Incentive Units as is set forth next to his or her name on Exhibit Q.
Each of the Series Z Partners hereby agrees to become a party to the Partnership
Agreement as a Limited Partner and to be bound by all the terms, conditions and
other provisions of the Partnership Agreement, as amended by this Amendment.
Pursuant to Section 4.6(b) of the Partnership Agreement, the General Partner
hereby consents to the admission of each of the Series Z Partners as an
Additional Limited Partner of the Partnership. The admission of the Series Z
Partners shall become effective as of the date of this Amendment, which shall
also be the date on which the name of each Series Z Partner is recorded on the
books and records of the Partnership.

     6. Distributions to Series Z Partners. The Partnership Agreement is hereby
amended by adding the following language after Section 6.2(c) thereof:

               "(d) Notwithstanding the foregoing, at any time that the Clawback
Amount with respect to a Series Z Incentive Unit is greater than zero, then, to
the extent of such Clawback Amount, the distributions otherwise provided for by
this Section with respect to such

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Series Z Incentive Unit shall not be paid in cash and shall instead be deemed to
offset the applicable Series Z Partners' unpaid Capital Commitment and thereby
reduce the then existing Clawback Amount with respect to such Series Z Incentive
Unit in an amount equal to the distributions that would have otherwise been paid
with respect to such Series Z Incentive Unit."

     7. Transfer Restrictions. Section 9.2A of the Partnership Agreement shall
be amended by inserting the following as the last sentence thereof:

          "In addition, the Partners hereby acknowledge and agree that the
     Series Z Incentive Units shall not be Transferred, other than (a) by
     operation of law to the estate of a Series Z Partner or (b) to the
     Partnership or the General Partner."

     8. Conversion Rights of Series Z Partners.

          (a) Section 10.8 of the Partnership Agreement is hereby amended by
deleting the first sentence thereof and replacing it with the following:

          "So long as Code Section 1014 or a successor provision remains in
     effect and provides for the "step-up" in basis of an asset upon death, as
     determined by the Partnership's counsel, upon the death of a Limited
     Partner, all of such Limited Partner's Partnership Units shall, without the
     taking of any action by the General Partner or any heir, representative,
     administrator or executor of or for such Limited Partner, automatically
     convert as of the date of such death into shares of Common Stock in the
     amount of the Common Stock Amount; provided that the General Partner, in
     its sole and absolute discretion, shall have the option, instead of issuing
     the Common Stock Amount to the estate of the decedent Limited Partner, of
     paying to such estate the Cash Amount or any combination of cash and Common
     Stock equal to the Cash Amount; provided, however, that, notwithstanding
     the foregoing, the provisions of this Section shall not apply to any Series
     Z Incentive Units held by such Limited Partner."

          (b) The Partnership Agreement is hereby amended by adding the
following language after Section 10.8 thereof:

          "10.9 Conversion and Redemption of Series Z Incentive Units.

               (a) Upon the occurrence of any Trigger Event with respect to the
     Series Z Incentive Units, the Forfeited Capital Account with respect to
     such Series Z Incentive Units shall be forfeited and each such Series Z
     Incentive Unit shall, without the taking of any action by the General
     Partner or any Series Z Partners, automatically convert into that number of
     Common Units calculated by dividing (i) the remainder resulting from (x)
     the portion of the adjusted Capital Account balance properly allocable to
     each such Series Z Incentive Unit at the time of conversion, as determined
     by the General Partner, taking into account all allocations made pursuant
     to Exhibit E hereof (including Section 2(d) thereof) through and including
     the date of the conversion (as so adjusted, the "Adjusted Capital Account
     Balance"), minus (y) the Forfeited Capital Account as of the time of
     conversion minus (z) the Clawback Amount, if any, with respect to such
     Series Z Incentive Unit, by (ii) the adjusted Capital Account balance
     properly allocable to one Common Unit determined immediately prior to such

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     conversion, after taking into account any adjustments made pursuant to
     Exhibit E hereof (including Section 2(d) thereof) through and including the
     date of conversion.

               (b) In the event of a Change in Control, (1) the Partnership
     shall give each Series Z Partner notice as required by Section 10.9(d) and
     otherwise comply with the procedures set forth in such section and (2) upon
     or at any time (except as expressly provided in clause (ii) below)
     following the occurrence of such Change in Control, each Series Z Partner
     shall have the right to elect, in accordance with the procedures set forth
     in Section 10.9(d), to forfeit the Forfeited Capital Account with respect
     to all of the Series Z Incentive Units held by such Series Z Partner and
     convert each such Series Z Incentive Unit into either:

               (i) that number of Common Units calculated by dividing (I) the
     remainder resulting from (x) the Adjusted Capital Account balance properly
     allocable to each such Series Z Incentive Unit at the time of an election
     pursuant to this Section 10.9(b), as determined by the General Partner
     after taking into account all allocations required to be made pursuant to
     Exhibit E hereof, including Section 2(d) thereof) minus (y) the Forfeited
     Capital Account as of the time of conversion, minus (z) the Clawback
     Amount, if any, with respect to such Series Z Incentive Unit, by (II) the
     adjusted Capital Account balance properly allocable to one Common Unit
     determined immediately prior to such conversion, after taking into account
     any adjustments made pursuant to Exhibit E hereof (including Section 2(d)
     thereof) through and including the date of conversion; provided, however,
     that, if applicable, references to "Common Units" in this clause shall be
     deemed to refer to the class or series of equity interests in the
     Substitute Umbrella Partnership (as defined in Section 10.9(c)) most
     comparable to the Common Units, after taking into account all relevant
     rights, benefits, terms and conditions and economic factors and all
     references to capital account balances and numbers of Common Units shall be
     equitably adjusted, as nearly as may be practicable, to give effect to the
     rights and obligations of the Series Z Incentive Units or, if applicable,
     the Substitute Incentive Units; or

               (ii) that amount and type of cash, securities or other property
     as such holder would have received in connection with such Change in
     Control if he, she or it had elected to convert such Series Z Incentive
     Units into Common Units in accordance with the immediately preceding clause
     (i) prior to the consummation of the Change in Control and received (or had
     the right to elect to receive) such consideration in connection with the
     Change in Control as the Holder of the number of Common Units into which
     such Series Z Incentive Units would have converted as of the date of
     occurrence of such Change of Control without any increase in the Conversion
     Ratchet Percentage that may have occurred after such date; provided,
     however, that any election pursuant to this clause (ii) must be made within
     the twelve (12) month period immediately following the occurrence of such
     Change in Control. For the avoidance of doubt, it is the intent of the
     parties hereto that a holder's right to make the election provided in this
     clause (ii) shall continue notwithstanding that, within such twelve (12)
     month period, another Change in Control occurs, such holder's employment is
     terminated as referred to in clause (e) below, or such holder dies as
     referred to in clause (f) below; provided, further, that if a Trigger Event
     occurs, such holder's right to make the election

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     provided in this clause (ii) shall continue only until the moment
     immediately prior to the occurrence of such Trigger Event.

               For the avoidance of doubt, the Series Z Incentive Units of any
     Series Z Partner who has not made the election contemplated by this Section
     10.9(b) shall remain outstanding until such election is made or another
     clause of this Section 10.9 becomes applicable, and thereafter shall
     continue to be entitled to all the rights and benefits of the Series Z
     Incentive Units, including without limitation the right to make an election
     pursuant to this Section 10.9(b) with respect to any subsequent Change in
     Control and the potential for continued increase in the Conversion Ratchet
     Percentage.

               (c) Notwithstanding anything in this Agreement to the contrary,
     in connection with any Change in Control following which the Partnership
     will not continue to exist as a separate legal entity or following which
     the Partnership, despite continuing in legal existence, will no longer
     conduct its business in a fashion substantially similar to the fashion in
     which it conducted its business immediately prior to such Change of Control
     (e.g., owning similar properties and operating in a comparable fashion),
     the General Partner shall use commercially reasonable efforts (after taking
     into account the fiduciary duties owed by the General Partner to the other
     Partners in the Partnership in connection with negotiating the Change in
     Controltransaction as a whole) to cause the resulting or surviving entity
     and/or the entity primarily succeeding to the business of the Partnership,
     as the case may be, to be a partnership, limited liability company or other
     pass-through entity organized under the laws of any state of the United
     States or the District of Columbia (a "Substitute Umbrella Partnership"),
     and, in the event the Change in Control does result in a Substitute
     Umbrella Partnership, shall use commercially reasonable efforts to (1)
     cause the Substitute Umbrella Partnership to issue in connection with such
     Change in Control in substitution for any Series Z Incentive Units
     remaining outstanding as of the effective time thereof other interests in
     the Substitute Umbrella Partnership having substantially the same terms and
     rights as the Series Z Incentive Units, including with respect to
     distributions, conversions, ratcheting, voting rights and rights upon
     liquidation, dissolution or winding-up (the "Substitute Incentive Units"),
     (2) make equitable and appropriate provisions for adjustments to the terms
     of the Substitute Incentive Units such that the rights and obligations of
     the Series Z Partners after such Change in Control as holders of Substitute
     Incentive Units of the Substitute Umbrella Partnership shall be equivalent,
     as nearly as may be practicable, to their rights and obligations as holders
     of Series Z Incentive Units of the Partnership, and (3) secure a commitment
     of the general partner or other controlling person of the Substitute
     Umbrella Partnership to undertake to perform the obligations and covenants
     of the General Partner with respect to the Series Z Partners.

               (d) As promptly as possible prior to the consummation of a Change
     of Control (but in any event not later than ten (10) days following
     consummation of such Change in Control), the Partnership shall deliver a
     written notice of such Change of Control to each Series Z Partner at their
     addresses as shown on the records of the Partnership, containing all
     instructions and materials necessary to enable such Series Z Partners to
     make an election pursuant to Section 10.9(b) hereof and describing the
     circumstances and relevant facts regarding such Change of Control,
     including without

                                       10

<PAGE>

     limitation the expected date of consummation. Failure to give or receive
     such notice or any defect therein shall not affect the legality or validity
     of any proceedings in connection with such Change of Control or otherwise
     as contemplated by this Agreement. Each Series Z Partner may exercise his
     or her right to convert in accordance with Section 10.9(b) by delivering
     written notice of such intent (and specifying whether he or she is electing
     to convert pursuant to Section 10.9(b)(i) or Section 10.9(b)(ii)) to the
     Partnership, Attn: Chief Financial Officer, with a copy to Goodwin Procter
     LLP, Attn: Ettore A. Santucci, P.C. (such notice, an "Election Notice") On
     or before the later of (i) the effective date of such Change in Control and
     (ii) the tenth (10th) business day following the date of such Election
     Notice, the Partnership shall issue the consideration required by Section
     10.9(b) to the Series Z Partner making the election in exchange for his or
     her Series Z Incentive Units (or, if applicable, Substitute Incentive
     Units).

               (e) Effective as of such time as (other than by reason of death,
     as provided in Section 10.9(f)) a holder of Series Z Incentive Units is no
     longer an employee of the Partnership, the General Partner or any of their
     subsidiaries or affiliates, the Forfeited Capital Account with respect to
     such holder's Series Z Incentive Units shall be forfeited and the
     Partnership shall have the right, for 90 days following the date of
     termination of such holder's employment, to redeem each Series Z Incentive
     Unit held by such holder in exchange for, at the Partnership's option,
     either (1) a number of shares of Common Stock then owned by the Partnership
     calculated by dividing (i) the remainder resulting from (x) the Adjusted
     Capital Account Balance properly allocable to each such Series Z Incentive
     Unit as determined by the General Partner after taking into account all
     allocations required to be made pursuant to Exhibit E hereto (including
     Section 2(d) thereof) and, in the event the provisions of Section 2(f)
     thereof are inapplicable, in a manner consistent with the provisions of
     Treasury Regulation Section 1.704-1(b)(2)(iv)(f) minus (y) the Forfeited
     Capital Account as of the time of redemption minus (z) the Clawback Amount,
     if any, with respect to such Series Z Incentive Unit, by (ii) the Closing
     Price of Common Stock determined as of such date; or (2) a number of Common
     Units calculated by dividing (i) the remainder resulting from (x) the
     Adjusted Capital Account Balance which would be allocable to each such
     Series Z Incentive Unit as determined by the General Partner after taking
     into account all allocations required to be made pursuant to Exhibit E
     hereof (including Section 2(d) thereof) and assuming that the Capital
     Accounts of the Partners were adjusted at such time as provided in Section
     2(f) of Exhibit E hereto minus (y) the Forfeited Capital Account minus (z)
     the Clawback Amount, if any, with respect to such Series Z Incentive Unit,
     by (ii) the adjusted Capital Account balance properly allocable to one
     Common Unit determined immediately prior to such redemption, after taking
     into account any adjustments made pursuant to Exhibit E hereof (including
     Section 2(d) thereof) and assuming that the Capital Accounts of the
     Partners were adjusted at such time as provided in Section 2(f) of Exhibit
     E hereto through and including the date of redemption. The Partnership may
     exercise its rights under this Section 10.9(e) by providing written notice
     to the terminated Series Z Partner within 90 days of such termination and
     consummating the redemption promptly thereafter.

               (f) Upon the death of a holder of Series Z Incentive Units, the
     Forfeited Capital Account with respect to such Series Z Incentive Units
     shall be forfeited

                                       11

<PAGE>

     and each such Series Z Incentive Unit held by such holder shall be redeemed
     by the Partnership for, at its option, either (1) a number of shares of
     Common Stock then owned by the Partnership calculated by dividing (i) the
     remainder resulting from (x) the Adjusted Capital Account Balance properly
     allocable to each such Series Z Incentive Unit as determined by the General
     Partner after taking into account all allocations required to be made by
     Exhibit E hereto (including Section 2(d) thereof) and in the event that the
     provisions of Section 2(f) are inapplicable, in a manner consistent with
     the provisions of Treasury Regulation Section 1.704-1(b)(2)(iv)(f) minus
     (y) the Forfeited Capital Account as of the time of redemption minus (z)
     the Clawback Amount, if any, with respect to such Series Z Incentive Unit,
     by (ii) the Closing Price of Common Stock determined immediately prior to
     such redemption; or (2) a number of Common Units calculated by dividing (i)
     the remainder resulting from (x) the Adjusted Capital Account Balance which
     would be allocable to each such Series Z Incentive Unit as determined by
     the General Partner after taking into account all allocations required to
     be made by Exhibit E hereto (including Section 2(d) thereof) and in the
     event that the provisions of Section 2(f) are inapplicable, in a manner
     consistent with the provisions of Treasury Regulation Section
     1.704-1(b)(2)(iv)(f) minus (y) the Forfeited Capital Account as of the time
     of redemption minus (z) the Clawback Amount, if any, with respect to such
     Series Z Incentive Unit, by (ii) the average adjusted Capital Account
     balance properly allocable to one Common Unit determined immediately prior
     to such redemption, as determined by the General Partner after taking into
     account all allocations required to be made by Exhibit E hereto (including
     Section 2(d) thereof) and in the event that the provisions of Section 2(f)
     are inapplicable in a manner consistent with the provisions of Treasury
     Regulation Section 1.704-1(b)(2)(iv)(f). The Partnership shall effect the
     redemption required by this Section 10.9(f) within 60 days follow its
     receipt of written notification of the death of a Series Z Partner.

               (g) In lieu of delivering a fractional share of Common Stock
     pursuant to this Section 10.9, the Partnership may deliver cash equal to
     the Closing Price attributable to such fractional share. In lieu of issuing
     a fractional Common Unit pursuant to this Section 10.9, the Partnership may
     deliver cash equal to the product of (i) the Closing Price multiplied by
     the Conversion Factor, and (ii) such fractional Common Unit. For the
     avoidance of doubt, as to any fractional Common Unit or fraction of a share
     of Common Stock which would otherwise be delivered, the Partnership shall
     pay a cash adjustment in respect of such final fraction (which for each
     holder of Series Z Incentive Units shall be deemed to be a fraction of the
     last fractional Common Unit or fraction of a share of Common Stock after
     taking into account all Series Z Incentive Units held by such holder, not
     on a unit-by-unit basis) in the amount provided for in this clause (g).

               (h) The holder of any Common Units received upon a conversion or
     redemption of Series Z Incentive Units pursuant to this Section 10.9 shall
     have an aggregate Capital Account balance with respect to such Common Units
     equal to the remainder resulting from (x) the Adjusted Capital Account
     Balance of such holder's Series Z Incentive Units (determined pursuant to
     the applicable sub-section of this Section 10.9) immediately prior to
     conversion or redemption minus (y) the Forfeited Capital Account minus (z)
     the Clawback Amount, if any, with respect to such Series Z

                                       12

<PAGE>

     Incentive Unit, and such holder of Common Units shall have all of the
     rights of holders of Common Units as set forth in this Agreement.
     Immediately upon conversion or redemption of any Series Z Incentive Units
     pursuant to this Section 10, the aggregate Forfeited Capital Accounts with
     respect to all Series Z Incentive Units being converted or redeemed shall
     be reallocated among the Capital Accounts of the holders of Common Units
     immediately subsequent to such conversion or redemption on a pro rata
     basis, in proportion to the Capital Account balances of all such units
     immediately subsequent to such conversion or redemption. Any Common Units
     received upon the conversion or redemption of Series Z Incentive Units
     pursuant to this Section 10.9 may thereafter be converted into Common Stock
     pursuant to Section 10.8 and the holder of such Common Units shall have the
     Rights provided in Article XI; provided, however, that, notwithstanding
     anything to the contrary contained in Section 10.8, Article XI or Exhibit
     I, (i) the General Partner may, in its sole discretion, choose to assign
     its obligation pursuant to Section 10.8, Article XI or Exhibit I, as the
     case may be, to the Partnership, in which case the Partnership will deliver
     shares of Common Stock that it holds on such date in exchange for the
     Common Units to be converted or redeemed, in lieu of the General Partner
     issuing new shares of Common Stock to the holder of such Common Units and
     (ii) neither the General Partner nor the Partnership shall pay cash (in
     whole or in part) with respect to the conversion of Common Units received
     upon conversion or redemption of Series Z Incentive Units."

     9. Restatement of Exhibit E. Exhibit E to the Partnership Agreement is
hereby amended and restated in its entirety by replacing such Exhibit E with
Exhibit E attached to this Amendment.

     10. Voting Rights.

          (a) Holders of the Series Z Incentive Units will not have any voting
rights or rights to consent to any matters, except as set forth in Section 10(b)
below.

          (b) So long as any Series Z Incentive Units remains outstanding, the
Partnership shall not, without the affirmative vote of the holders of at least
two-thirds (2/3) of the Weighted Number of Series Z Incentive Units (i) amend,
alter or repeal any provisions of the Partnership Agreement, including without
limitation as a result of or in connection with a merger, consolidation or
otherwise, in a manner that would materially and adversely affect the powers,
special rights, preferences, privileges or voting power of the Series Z
Incentive Units or the holders thereof; provided, however, that the following
shall be deemed not to materially and adversely affect such powers, special
rights, preferences, privileges or voting power of the Series Z Incentive Units:
(a) any revision or amendment of the definition of "Conversion Ratchet
Percentage" or "Target FFO" in accordance with the proviso contained in each
such definition; (b) any increase in the amount of Partnership Interests or the
creation or issuance of any other class or series of Partnership Interests or
obligation or security convertible into or evidencing the right to purchase any
such Partnership Interests ranking senior to, junior to or on a parity with the
Series Z Incentive Units with respect to payment of distributions or the
distribution of assets upon liquidation, dissolution or winding up; or (c) any
amendment, alteration or repeal of any provision(s) of the Partnership Agreement
that also materially and adversely affects the Common Units or the holders
thereof in a comparable and proportionate fashion; provided, further, that

                                       13

<PAGE>

with respect to the occurrence of a merger, consolidation or comparable
transaction, so long as (l) the Partnership is the surviving entity and the
Series Z Incentive Units remain outstanding with the terms thereof unchanged, or
(2) the resulting, surviving or transferee entity is a partnership, limited
liability company or other pass-through entity organized under the laws of any
state and substitutes the Series Z Incentive Units for other interests in such
entity having substantially the same terms and rights as the Series Z Incentive
Units, including with respect to distributions, conversions, voting rights and
rights upon liquidation, dissolution or winding-up, then the occurrence of any
such event shall not be deemed to materially and adversely affect such rights,
privileges or voting powers of the holders of the Series Z Incentive Units.
Notwithstanding anything in this Section 10 to the contrary, the holders of
Series Z Incentive Units shall have no right to vote or consent with respect to
any transaction that constitutes a Trigger Event or that constitutes a Change in
Control so long as the provisions of Section 10.9(b) remain in effect.

     11. Exhibit Q. The Partnership Agreement is hereby amended by adding
Exhibit Q, a copy of which is attached hereto. Exhibit Q is hereby inserted into
the Partnership Agreement following Exhibit P.

     12. Ranking. The Series Z Incentive Units shall rank (i) junior to any and
all presently outstanding or subsequently issued Preferred Interests and
preferred Partnership Units of the Partnership, unless the terms of such
Preferred Interests and/or preferred Partnership Units expressly provide that
they shall rank junior to or pari passu with the Series Z Incentive Units or
Common Units, and (ii) pari passu with the Common Units and with any other class
or series of presently existing or subsequently issued Partnership Units of the
Partnership, the terms of which do not expressly provide that such Partnership
Units shall rank senior to the Series Z Incentive Units or the Common Units with
respect to the receipt of distributions and of amounts distributable upon
liquidation, dissolution or winding up.

     13. Continuing Effect of Partnership Agreement. Except as modified herein,
the Partnership Agreement is hereby ratified and confirmed in its entirety and
shall remain and continue in full force and effect, provided, however, that to
the extent there shall be a conflict between the provisions of the Partnership
Agreement and this Amendment, the provisions in this Amendment will prevail. All
references in any document to the Partnership Agreement shall mean the
Partnership Agreement, as amended hereby.

     14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement. Facsimile signatures shall be
deemed effective execution of this Agreement and may be relied upon as such by
the other party. In the event facsimile signatures are delivered, originals of
such signatures shall be delivered to the other party within three business days
after execution.

                                       14

<PAGE>

          IN WITNESS WHEREOF, the General Partner and the Series Z Partners have
executed this Amendment as of the date indicated above.

                                 GENERAL PARTNER

                                 ESSEX PROPERTY TRUST, INC.,
                                 a Maryland corporation as General Partner

                                 of Essex Portfolio, L.P. and on behalf of the
                                 existing Limited Partners

                                 By: /s/ Keith R. Guericke
                                     ----------------------------------------
                                     Keith R. Guericke
                                     Chief Executive Officer & President

                                       S-1

<PAGE>

                                        SERIES Z PARTNERS:

                                        By: /s/ Keith R. Guericke
                                            ------------------------------------
                                                Keith R. Guericke

                                        By: /s/ Michael J. Schall
                                            ------------------------------------
                                                Michael J. Schall

                                        By: /s/ John D. Eudy
                                            ------------------------------------
                                                John D. Eudy

                                        By: /s/ Craig K. Zimmerman
                                            ------------------------------------
                                                Craig K. Zimmerman

                                        By: /s/ Robert C. Talbott
                                            ------------------------------------
                                                Robert C. Talbott

                                        By: /s/ Jordan E. Ritter
                                            ------------------------------------
                                                Jordan E. Ritter

                                        By: /s/ Gerald E. Kelly
                                            ------------------------------------
                                                Gerald E. Kelly

                                        By: /s/ Mark J. Mikl
                                            ------------------------------------
                                                Mark J. Mikl

                                        By: /s/ John F. Burkart
                                            ------------------------------------
                                                John F. Burkart

                                       S-2

<PAGE>

                                        By: /s/ Bryan W. Meyer
                                            ------------------------------------
                                                Bryan W. Meyer

                                        By: /s/ Bruce Knoblock
                                            ------------------------------------
                                                Bruce Knoblo

                                       S-3

<PAGE>

                                    EXHIBIT E

                                   ALLOCATIONS

1. Allocation of Net Operating Income and Net Operating Loss.

     (a) Net Operating Income. Except as otherwise provided herein, Net
Operating Income for any fiscal year or other applicable period shall be
allocated in the following order and priority:

          (1) First, to the Partners, until the cumulative Net Operating Income
allocated pursuant to this subparagraph 1(a)(1) for the current and all prior
periods equals the cumulative Net Operating Loss allocated pursuant to
subparagraph 1(b)(2) hereof for all prior periods, among the Partners in the
same ratio and reverse order that such Net Operating Loss was allocated to the
Partners pursuant to subparagraph 1(b)(2) hereof (and, in the event of a shift
of a Partner's interest in the Partnership, to the Partners in a manner that
most equitably reflects the successors in interest to the Partners).

          (2) Thereafter, the balance of the Net Operating Income, if any, shall
be allocated to the Partners in accordance with their respective Percentage
Interests.

     (b) Net Operating Loss. Except as otherwise provided herein, Net Operating
Loss of the Partnership for each fiscal year or other applicable period shall be
allocated as follows:

          (1) To the Partners in accordance with their respective Percentage
Interests.

          (2) Notwithstanding subparagraph 1(b)(1) hereof, to the extent any Net
Operating Loss allocated to a Partner under subparagraph 1(b)(1) hereof or this
subparagraph 1(b)(2) would cause such Partner (hereinafter, a "Restricted
Partner") to have an Adjusted Capital Account Deficit as of the end of the
fiscal year to which such Net Operating Loss relates, such Net Operating Loss
shall not be allocated to such Restricted Partner and instead shall be allocated
to the other Partner(s) (hereinafter, the "Permitted Partners") pro rata in
accordance with their relative Percentage Interests.

     (c) Notwithstanding Sections 1(a) and (b) above, on any date on which any
Series A Preferred Stock, any Series B Preferred Stock, any Series C Preferred
Stock, any Series D Preferred Stock, any Series E Preferred Stock, or any Series
B Preferred Unit, any Series C Preferred Unit, any Series D Preferred Unit or
any Series E Preferred Unit (or other Preferred Stock or other Preferred Units)
is outstanding, Net Operating Income and Net Operating Loss shall be allocated
as follows:

          (1) Net Operating Income for any fiscal year or other applicable
period shall be allocated in the following order and priority:

               (i) First, to the Partners, until the cumulative Net Operating
Income allocated pursuant to this subparagraph 1(c)(l)(i) for the current and
all prior periods equals the cumulative Net Operating Loss allocated pursuant to
subparagraphs 1(c)(2)(iii) and

                                       E-1

<PAGE>

(iv) hereof for all prior periods, among the Partners in the same ratio and
reverse order that such Net Operating Loss was allocated (and, in the event of a
shift of a Partner's interest in the Partnership, to the Partners in a manner
that most equitably reflects the successors in interest to such Partners);

               (ii) Second, to the General Partner, until the cumulative Net
Operating Income allocated pursuant to this subparagraph 1(c)(1)(ii) for the
current and all prior periods equals the cumulative Net Operating Loss allocated
pursuant to subparagraph 1(c)(2)(ii) hereof for all prior periods;

               (iii) Third, on a pari passu basis, to (A) the General Partner
until the cumulative amount of Net Operating Income allocated pursuant to this
subparagraph 1(c)(1)(iii) equals the total amount of dividends paid on the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock and the Series E Preferred Stock (and other
Preferred Stock) as of or prior to the date of such allocation plus the total
amount of accrued but unpaid dividends on the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock and the Series E Preferred Stock (and other Preferred Stock) as of such
date; (B) to the holders of Series B Preferred Units until the cumulative amount
of Net Operating Income allocated pursuant to this subparagraph 1(c)(i)(iii)
equals the total amount of Priority Return paid on the Series B Preferred Units
as of or prior to the date of such allocation plus the total amount of accrued
but unpaid Priority Return on the Series B Preferred Units; (C) to the holders
of Series C Preferred Units until the cumulative amount of Net Operating Income
allocated pursuant to this subparagraph 1(c)(i)(iii) equals the total amount of
Priority Return paid on the Series C Preferred Units as of or prior to the date
of such allocation plus the total amount of accrued but unpaid Priority Return
on the Series C Preferred Units; (D) to the holders of Series D Preferred Units
until the cumulative amount of Net Operating Income allocated pursuant to this
subparagraph 1(c)(i)(iii) equals the total amount of Priority Return paid on the
Series D Preferred Units as of or prior to the date of such allocation plus the
total amount of accrued but unpaid Priority Return on the Series D Preferred
Units; and (E) to the holders of Series E Preferred Units until the cumulative
amount of Net Operating Income allocated pursuant to this subparagraph
1(c)(i)(iii) equals the total amount of Priority Return paid on the Series E
Preferred Units as of or prior to the date of such allocation plus the total
amount of accrued but unpaid Priority Return on the Series E Preferred Units.

               (iv) Thereafter, the balance of the Net Operating Income, if any,
shall be allocated to the Partners in accordance with their respective
Percentage Interests.

          (2) Net Operating Loss of the Partnership for each fiscal year or
other applicable period shall be allocated as follows:

               (i) First, to the Partners in accordance with their respective
Percentage Interests until the Capital Account balances of the Limited Partners
(not including the holders of the Series B Preferred Units, the Series C
Preferred Units, the Series D Preferred Units and the Series E Preferred Units)
are reduced to zero (for purposes of this calculation, each Partner's Capital
Account balance shall be credited with the amount such Partner is obligated to
restore pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of the
Regulations, or is deemed to be obligated to restore with respect to any deficit
balance pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations);

                                       E-2

<PAGE>

               (ii) Second, on a pari passu basis, to (A) the General Partner
until its Capital Account balance has been reduced to zero; (B) to the holders
of Series B Preferred Units until their Capital Account balances have been
reduced to zero (for purposes of this calculation, such Partners' share of
Partnership Minimum Gain shall be added back to their Capital Accounts); (C) to
the holders of Series C Preferred Units until their Capital Account balances
have been reduced to zero; (D) to the holders of Series D Preferred Units until
their Capital Account balances have been reduced to zero; and (E) to the holders
of Series E Preferred Units until their Capital Account balances have been
reduced to zero (for purposes of each such calculation, each Partner's Capital
Account balance shall be credited with the amount such Partner is obligated to
restore pursuant to the provisions of Section 1.704-1(b)(2)(ii)(c) of the
Regulations, or is deemed to be obligated to restore with respect to any deficit
balance pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations);

               (iii) Thereafter, to the Partners in accordance with their then
Percentage Interests;

               (iv) Notwithstanding subparagraph 2(c)(2)(iii) hereof, to the
extent any Net Operating Loss allocated to a Partner under subparagraph 2(c)(2)
would cause such Partner (hereinafter, a "Restricted Partner") to have an
Adjusted Capital Account Deficit as of the end of the fiscal year to which such
Net Operating Loss relates, such Net Operating Loss shall not be allocated to
such Restricted Partner and instead shall be allocated to the other Partner(s)
(hereinafter, the "Permitted Partners") pro rata in accordance with their
relative Percentage Interests.

     (d) Adjustment of Percentage Interests Upon Conversion of Convertible
Preferred Stock to Common Stock. Upon the conversion of any Series A Preferred
Stock to Common Stock of the General Partner, the Percentage Interests of the
Partners shall be adjusted in accordance with the provisions of Article 4 of the
Partnership Agreement as if, on the date of such conversion, the General Partner
had made an additional Capital Contribution to the Partnership in an amount
equal to the number of shares of Common Stock issued as a result of such
conversion multiplied by the fair market value of such shares on the date of
conversion, and provided that in calculating such adjustments, the General
Partner shall be deemed not to have incurred any expenses in connection with
raising the funds used to make such additional Capital Contribution.

2. Allocation of Net Property Gain and Net Property Loss.

     After the allocation of Net Operating Income or Net Operating Loss has been
made pursuant to Section 1 above, Net Property Gain and Net Property Loss shall
be allocated as follows:

     (a) Net Property Gain. Except as otherwise provided herein, Net Property
Gain for any fiscal year or other applicable period shall be allocated in the
following order and priority:

          (1) First, to the Partners, until the cumulative Net Property Gain
allocated pursuant to this subparagraph 2(a)(1) for the current and all prior
periods equals the cumulative Net Property Loss allocated pursuant to
subparagraph 2(b)(2) hereof for all prior periods, among the Partners in the
same ratio and reverse order that such Net Property Loss was allocated to the

                                       E-3

<PAGE>

Partners pursuant to subparagraph 2(b)(2) hereof (and, in the event of a shift
of a Partner's interest in the Partnership, to the Partners in a manner that
most equitably reflects the successors in interest to the Partners).

          (2) Thereafter, the balance of the Net Property Gain, if any, shall be
allocated to the Partners in accordance with their respective Percentage
Interests.

     (b) Net Property Loss. Except as otherwise provided herein, Net Property
Loss of the Partnership for each fiscal year or other applicable period shall be
allocated as follows:

          (1) To the Partners in accordance with their respective Percentage
Interests.

          (2) Notwithstanding subparagraph 2(b)(1) hereof, to the extent any Net
Property Loss allocated to a Partner under subparagraph 2(b)(1) hereof or this
subparagraph 2(b)(2) would cause such Partner (hereinafter, a "Restricted
Partner") to have an Adjusted Capital Account Deficit as of the end of the
fiscal year to which such Net Property Loss relates, such Net Property Loss
shall not be allocated to such Restricted Partner and instead shall be allocated
to the other Partner(s) (hereinafter, the "Permitted Partners") pro rata in
accordance with their relative Percentage Interests.

     (c) Notwithstanding Sections 2(a) and (b) above, on any date on which any
Series A Preferred Stock, any Series B Preferred Stock, any Series C Preferred
Stock, any Series D Preferred Stock, any Series E Preferred Stock or any Series
B Preferred Unit, any Series C Preferred Unit, any Series D Preferred Unit or
any Series E Preferred Unit (or other Preferred Stock or other Preferred Units)
is outstanding, Net Property Gain and Net Property Loss shall be allocated as
follows:

          (1) Net Property Gain for any fiscal year or other applicable period
shall be allocated in the following order and priority:

               (i) First, to the Partners, until the cumulative Net Property
Gain allocated pursuant to this subparagraph 2(c)(l)(i) for the current and all
prior periods equals the cumulative Net Property Loss allocated pursuant to
subparagraphs 2(c)(2)(iii) and (iv) hereof for all prior periods, among the
Partners in the same ratio and reverse order that such Net Property Loss was
allocated (and, in the event of a shift of a Partner's interest in the
Partnership, to the Partners in a manner that most equitably reflects the
successors in interest to such Partners);

               (ii) Second, to the General Partner, until the cumulative Net
Property Gain allocated pursuant to this subparagraph 2(c)(1)(ii) for the
current and all prior periods equals the cumulative Net Property Loss allocated
pursuant to subparagraph 2(c)(2)(ii) hereof for all prior periods;

               (iii) Third, on a pari passu basis, to (A) the General Partner
until the sum of (x) the total cumulative amount of Net Operating Income
allocated to the General Partner under Section 1(c)(1)(iii) for the current and
all prior periods plus (y) the total cumulative amount of Net Property Gain
allocated pursuant to this subparagraph 2(c)(1)(iii) equals the total amount of
dividends paid on the Series A Preferred Stock, the Series B Preferred Stock,
the Series C Preferred Stock, the Series D Preferred Stock and the Series E
Preferred Stock (and

                                       E-4

<PAGE>

other Preferred Stock) as of or prior to the date of such allocation plus the
total amount of accrued but unpaid dividends on the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock, the Series D
Preferred Stock and the Series E Preferred Stock (and other Preferred Stock) as
of such date; (B) to the holders of Series B Preferred Units until the sum of
(x) the total cumulative amount of Net Operating Income allocated to the holders
of the Series B Preferred Units under Section 1(c)(1)(iii) for the current and
all prior periods plus (y) the total cumulative amount of Net Property Gain
allocated pursuant to this subparagraph 2(c)(i)(iii) to the holders of the
Series B Preferred Units equals the total amount of Priority Return paid on the
Series B Preferred Units as of or prior to the date of such allocation plus the
total amount of accrued but unpaid Priority Return on the Series B Preferred
Units; (C) to the holders of Series C Preferred Units until the sum of (x) the
total cumulative amount of Net Operating Income allocated to the holders of the
Series C Preferred Units under Section 1(c)(1)(iii) for the current and all
prior periods plus (y) the total cumulative amount of Net Property Gain
allocated pursuant to this subparagraph 2(c)(i)(iii) to the holders of the
Series C Preferred Units equals the total amount of Priority Return paid on the
Series C Preferred Units as of or prior to the date of such allocation plus the
total amount of accrued but unpaid Priority Return on the Series C Preferred
Units; (D) to the holders of Series D Preferred Units until the sum of (x) the
total cumulative amount of Net Operating Income allocated under Section
1(c)(1)(iii) for the current and all prior periods plus (y) the cumulative
amount of Net Property Gain allocated pursuant to this subparagraph 2(c)(i)(iii)
to the holders of the Series D Preferred Units equals the total amount of
Priority Return paid on the Series D Preferred Units as of or prior to the date
of such allocation plus the total amount of accrued but unpaid Priority Return
on the Series D Preferred Units; (E) to the holders of Series E Preferred Units
until the sum of (x) the total cumulative amount of Net Operating Income
allocated under Section 1(c)(1)(iii) for the current and all prior periods plus
(y) the cumulative amount of Net Property Gain allocated pursuant to this
subparagraph 2(c)(i)(iii) to the holders of the Series E Preferred Units equals
the total amount of Priority Return paid on the Series E Preferred Units as of
or prior to the date of such allocation plus the total amount of accrued but
unpaid Priority Return on the Series E Preferred Units.

               (iv) Thereafter, the balance of the Net Property Gain, if any,
shall be allocated to the Partners in accordance with their respective
Percentage Interests.

          (2) Net Property Loss of the Partnership for each fiscal year or other
applicable period shall be allocated as follows:

               (i) First, to the Partners in accordance with their respective
Percentage Interests until the Capital Account balances of the Limited Partners
(not including the holders of the Series B Preferred Units, the Series C
Preferred Units, the Series D Preferred Units and the Series E Preferred Units)
are reduced to zero (for purposes of this calculation, such Partners' share of
Partnership Minimum Gain shall be added back to their Capital Accounts);

               (ii) Second, on a pari passu basis, to (A) the General Partner
until its Capital Account balance has been reduced to zero (for purposes of this
calculation, such Partner's share of Partnership Minimum Gain shall be added
back to its Capital Account); (B) to the holders of Series B Preferred Units
until their Capital Account balances have been reduced to zero (for purposes of
this calculation, such Partners' share of Partnership Minimum Gain shall be
added back to their Capital Accounts); (C) to the holders of Series C Preferred
Units until their

                                       E-5

<PAGE>

Capital Account balances have been reduced to zero (for purposes of this
calculation, such Partners' share of Partnership Minimum Gain shall be added
back to their Capital Accounts); (D) to the holders of Series D Preferred Units
until their Capital Account balances have been reduced to zero (for purposes of
this calculation, such Partners' share of Partnership Minimum Gain shall be
added back to their Capital Accounts); and (E) to the holders of Series E
Preferred Units until their Capital Account balances have been reduced to zero
(for purposes of this calculation, such Partners' share of Partnership Minimum
Gain shall be added back to their Capital Accounts);

               (iii) Thereafter, to the Partners in accordance with their then
Percentage Interests;

               (iv) Notwithstanding subparagraph 2(c)(2)(iii) hereof, to the
     extent any Net Property Loss allocated to a Partner under subparagraph
     2(c)(2) would cause such Partner (hereinafter, a "Restricted Partner") to
     have an Adjusted Capital Account Deficit as of the end of the fiscal year
     to which such Net Property Loss relates, such Net Property Loss shall not
     be allocated to such Restricted Partner and instead shall be allocated to
     the other Partner(s) (hereinafter, the "Permitted Partners") pro rata in
     accordance with their relative Percentage Interests.

     (d) Special Allocation to Holders of Series Z Incentive Units.

          (1) Subject only to the provisions of Section 2(c)(iii) but
notwithstanding any other provision of this Section 2, in the year in which the
Partnership sells or otherwise disposes of all or substantially all of its
assets in a single transaction or a series of related transactions, Net Property
Gain shall first be allocated to the holders of the Series Z Incentive Units pro
rata in proportion to the number of such Series Z Incentive Units outstanding,
until the Capital Account balance attributable to each such Series Z Incentive
Unit is equal to (A) the aggregate Capital Account balance attributable to the
Common Units outstanding (including any other Partnership Units convertible into
Common Units) divided by (B) the number of such Common Units outstanding. If Net
Property Gain is insufficient to make the full allocation provided in the
preceding sentence, then, in lieu of such special allocation of Net Property
Gain provided in the preceding sentence, items of gross capital gain shall be
allocated to the holders of Series Z Incentive Units, and, if such gross items
are insufficient to make the full required allocation, items of gross capital
loss shall be allocated pro rata with respect to such Common Units. The
allocations pursuant to this paragraph (d) shall be made after the allocation of
Net Operating Income or Net Operating Loss for the applicable period in which
such sale or other disposition occurs. For purposes of this clause (i) of this
Section 2(d) "all or substantially all" means assets representing not less than
95% of the aggregate fair market value of the Partnership's assets.

          (2) Notwithstanding anything herein to the contrary, for the 12-month
period following the occurrence of a Change of Control (A) Net Operating Loss
and Net Property Loss, if any, shall be allocated pursuant to Section 1(b) or
1(c)(2), as applicable, or Section 2(b) or 2(c)(2), as applicable, as if the
Percentage Interest of each Series Z Partner were zero, and (B) with respect to
each Series Z Partner at the earlier of (x) the date such Partner makes the
election to convert his Series Z Incentive Units pursuant to Section 10.9(b)(i)
or (y) the expiration of a period of twelve (12) months after such Change in
Control, items of income, gain, deduction and loss shall be allocated so as to
cause the Capital Account balance of each

                                       E-6

<PAGE>

such Series Z Partner, and, as soon as possible after the end of such twelve
month period, the Capital Account balances of all Partners, to be in the same
ratio and amounts as if the allocations required by clause (A) of this Section
2(d)(2) had not been made.

     (e) Definition of Percentage Interest. Solely for purposes of allocating
Net Property Gain and Net Property Loss under this Section 2, the Percentage
Interest of a Series Z Incentive Unit holder attributable to such Units shall be
deemed to be the undivided percentage ownership interest of such holder in the
Partnership as determined by dividing (A) the total number of outstanding Series
Z Incentive Units owned by such holder by (B) the total number of Partnership
Units then outstanding (excluding the Series A Preferred Interest, the Series B
Preferred Interest, the Series B Preferred Units, the Series C Preferred
Interest, the Series C Preferred Units, the Series D Preferred Interest, the
Series D Preferred Units, the Series E Preferred Interest, and the Series E
Preferred Units).

     (f) Book-Up and Capital Account Adjustments. On any day on which (i) Series
A Preferred Stock (or other Preferred Stock), any series of Preferred Units or
Incentive Units are redeemed or converted into Common Stock or Common Units,
(ii) Percentage Interests are adjusted in the manner required in subparagraph
1(d), or (iii) in connection with the issuance of the Series Z Incentive Units
the Partnership shall adjust the Gross Asset Values of all Partnership assets to
equal their respective gross fair market values and shall allocate the amount of
such adjustment as Net Property Gain or Net Property Loss pursuant to Section
2(c) hereof, provided, however, that if no Series A Preferred Stock (or other
Preferred Stock) is outstanding after such redemption or conversion, such Net
Property Gain or Net Property Loss shall be allocated in such a manner that
after such allocation the Capital Accounts of the Partners are in proportion to
their Percentage Interests.

3. Special Allocations.

     Notwithstanding any provision of sections 1 and 2 of this Exhibit E, the
following special allocations shall be made in the following order:

     (a) Minimum Gain Chargeback (Nonrecourse Liabilities). If there is a net
decrease in Partnership Minimum Gain for any Partnership fiscal year (except as
a result of conversion or refinancing of Partnership indebtedness, certain
capital contributions or revaluation of the Partnership property as further
outlined in Regulation Sections 1.704-2(d)(4), (f)(2) or (f)(3)), each Partner
shall be specially allocated items of Partnership income and gain for such year
(and, if necessary, subsequent years) in an amount equal to that Partner's share
of the net decrease in Partnership Minimum Gain. The items to be so allocated
shall be determined in accordance with Regulation Section 1.704-2(f). This
paragraph 3(a) is intended to comply with the minimum gain chargeback
requirement in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this paragraph 3(a) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.

     (b) Minimum Gain Attributable to Partner Nonrecourse Debt. If there is a
net decrease in Minimum Gain Attributable to Partner Nonrecourse Debt during any
fiscal year (other than due to the conversion, refinancing or other change in
the debt instrument causing it to become partially or wholly nonrecourse,
certain capital contributions, or certain revaluations of Partnership property
as further outlined in Regulations Sections 1.704-2(i)(4), each Partner shall

                                       E-7

<PAGE>

be specially allocated Partnership income and gain for such year (and, if
necessary, subsequent years) in an amount equal to that Partner's share of the
net decrease in the Minimum Gain Attributable to Partner Nonrecourse Debt. The
items to be so allocated shall be determined in accordance with Regulation
Section 1.704-2(i)(4) and (j)(2). This paragraph 3(b) is intended to comply with
the minimum gain chargeback requirement with respect to Partner Nonrecourse Debt
contained in said section of the Regulations and shall be interpreted
consistently therewith. Allocations pursuant to this paragraph 3(b) shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant hereto.

     (c) Qualified Income Offset. In the event a Limited Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5),or (6), and such Limited Partner has an
Adjusted Capital Account Deficit, items of Partnership income and gain shall be
specially allocated to such Partner in an amount and manner sufficient to
eliminate the Adjusted Capital Account Deficit as quickly as possible. This
paragraph 3(c) is intended to constitute a "qualified income offset" under
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.

     (d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
other applicable period shall be allocated to the Partners in accordance with
their respective Percentage Interests.

     (e) Partner Nonrecourse Deductions. Partner Nonrecourse Deductions for any
fiscal year or other applicable period shall be specially allocated to the
Partner that bears the economic risk of loss for the debt (i.e., the Partner
Nonrecourse Debt) in respect of which such Partner Nonrecourse Deductions are
attributable (as determined under Regulation Section 1.704-2(b)(4) and (i)(1)).

     (f) Curative Allocations. The allocations set forth in paragraphs (a)-(e)
and Section 1(b)(2), Section 1(c)(2)(iv), Section 2(b)(2) and Section
2(c)(2)(iv), (the "Regulatory Allocations") are intended to comply with the
requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding any other provisions of Sections 1 and 2, the Regulatory
Allocations shall be taken into account in allocating other items of income,
gain, deduction and loss among the Partners so that, to the extent possible, the
net amount of such allocations of other items and the Regulatory Allocations to
each Partner shall be equal to the net amount that would have been allocated to
each such Partner if the Regulatory Allocations had not occurred. This paragraph
(f) shall be interpreted and applied in such a manner and to such extent as is
reasonably necessary to eliminate, as quickly as possible, permanent economic
distortions that would otherwise occur as a consequence of the Regulatory
Allocations in the absence of this paragraph (f).

4. Tax Allocations.

     (a) Generally. Subject to paragraphs 4(b) and (c) hereof, items of income,
gain, loss, deduction and credit to be allocated for income tax purposes
(collectively, "Tax Items") shall be allocated among the Partners on the same
basis as their respective book items.

     (b) Sections 1245/1250 Recapture. If any portion of gain form the sale of
property is treated as gain which is ordinary income by virtue of the
application of Code Section 1245 or

                                       E-8

<PAGE>

1250 ("Affected Gain"), then (A) such Affected Gain shall be allocated among the
Partners in the same proportion that the depreciation and amortization
deductions giving rise to the Affected Gain were allocated and (B) other Tax
Items of gain of the same character that would have been recognized, but for the
application of Code Sections 1245 and/or 1250, shall be allocated away from
those Partners who are allocated Affected Gain pursuant to Clause (A) so that,
to the extent possible, the other Partners are allocated the same amount, and
type, of capital gain that would have been allocated to them had Code Sections
1245 and/or 1250 not applied; provided, however, that the net amount of Tax
Items allocated to each Partner shall be the same as if this paragraph 4(b) did
not exist. For purposes hereof, in order to determine the proportionate
allocations of depreciation and amortization deductions for each fiscal year or
other applicable period, such deductions shall be deemed allocated on the same
basis as Net Property Gain and Net Property Loss for such respective period.

     (c) Allocations Respecting Section 704(c) and Revaluations. If any
Partnership property is subject to Code Section 704(c) or is reflected in the
Capital Accounts of the Partners and on the books of the Partnership at a book
value that differs from the adjusted tax basis of such property, then the tax
items with respect to such property shall, in accordance with the requirements
of Regulations Section 1.704-1(b)(4)(i), be shared among the Partners in a
manner that takes account of the variation between the adjusted tax basis of the
applicable property and its book value in the same manner as variations between
the adjusted tax basis and fair market value of property contributed to the
Partnership are taken into account in determining the Partners' share of tax
items under Code Section 704(c). The General Partner is authorized to choose any
reasonable method permitted by the Regulations pursuant to Code Section 704(c),
including the "remedial allocation" method, the "curative allocation" method and
the traditional method; provided that the General Partner agrees to use
reasonable efforts to minimize the amount of taxable income in excess of book
income allocated to the holders of the Series B Preferred Units, the Series C
Preferred Units, the Series D Preferred Units and the Series E Preferred Units.

     (d) Code Section 752 Specification. Pursuant to Regulations Section
1.752-3, the Partners' interest in Partnership profits for purposes of
determining the Partners' shares of excess nonrecourse liabilities shall be
their Percentage Interests.

                                       E-9<PAGE>

                                                                    EXHIBIT 4.01

           REGISTRANT'S 2000 CLASS A EQUITY INCENTIVE PLAN AS AMENDED

                              ELECTRONIC ARTS INC.

                  2000 CLASS A EQUITY INCENTIVE PLAN AS AMENDED

            As adopted by the Board of Directors on January 27, 2000
                As approved by the Stockholders on March 22, 2000
                As amended by the Stockholders on August 1, 2001

     1. PURPOSE. The purpose of this Plan is to provide incentives to attract,
        -------
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries by
offering them an opportunity to participate in the Company's future performance
through awards of Options and Restricted Stock. Capitalized terms not defined in
the text are defined in Section 22.

     2. SHARES SUBJECT TO THE PLAN.
        --------------------------

          2.1 Number of Shares Available. Subject to Sections 2.2 and 17, the
              --------------------------
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 12,200,000 Shares plus Shares that are subject to: (a)
issuance upon exercise of an Option but cease to be subject to such Option for
any reason other than exercise of such Option; (b) an Award granted hereunder
but are forfeited or are repurchased by the Company at the original issue price;
and (c) an Award that otherwise terminates without Shares being issued. At all
times the Company shall reserve and keep available a sufficient number of Shares
as shall be required to satisfy the requirements of all outstanding Options
granted under this Plan and all other outstanding but unvested Awards granted
under this Plan.

          2.2 Adjustment of Shares. In the event that the number of outstanding
              --------------------
shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the number of Shares that may
be granted pursuant to Sections 3 and 8 below, (c) the Exercise Prices of and
number of Shares subject to outstanding Options, and (d) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Committee.

     3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only to
        -----------
employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees and directors of the Company or any Parent or Subsidiary of
the Company. No person will be eligible to receive more than 350,000 Shares in
any calendar year under this Plan pursuant to the grant of Awards hereunder,
other than new employees of the Company or of a Parent or Subsidiary of the
Company (including new employees who are also officers and directors of the
Company or any Parent or Subsidiary of the Company), who are eligible to receive
up to a maximum of 700,000 Shares in the calendar year in which they commence
their employment. A person may be granted more than one Award under this Plan.

     4. ADMINISTRATION.
        --------------

          4.1 Committee Authority. This Plan will be administered by the
              -------------------
Committee or by the Board acting as the Committee. Except for automatic grants
to Outside Directors pursuant to Section 8 hereof, and subject to the general
purposes, terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Except
for automatic grants to Outside Directors pursuant to Section 8 hereof, the
Committee will have the authority to:

          (a)  construe and interpret this Plan, any Award Agreement and any
               other agreement or document executed pursuant to this Plan;

<PAGE>

          (b)  prescribe, amend and rescind rules and regulations relating to
               this Plan or any Award;

          (c)  select persons to receive Awards;

          (d)  determine the form and terms of Awards;

          (e)  determine the number of Shares or other consideration subject to
               Awards;

          (f)  determine whether Awards will be granted singly, in combination
               with, in tandem with, in replacement of, or as alternatives to,
               other Awards under this Plan or any other incentive or
               compensation plan of the Company or any Parent or Subsidiary of
               the Company;

          (g)  grant waivers of Plan or Award conditions;

          (h)  determine the vesting, exercisability and payment of Awards;

          (i)  correct any defect, supply any omission or reconcile any
               inconsistency in this Plan, any Award or any Award Agreement;

          (j)  determine whether an Award has been earned; and

          (k)  make all other determinations necessary or advisable for the
               administration of this Plan.

          4.2 Committee Discretion. Except for automatic grants to Outside
              --------------------
Directors pursuant to Section 8 hereof, any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, at any later time, and such determination will be final and binding on
the Company and on all persons having an interest in any Award under this Plan.
The Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to Participants who are not Insiders of the
Company.

     5. OPTIONS. The Committee may grant Options to eligible persons and will
        -------
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISO") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:

          5.1 Form of Option Grant. Each Option granted under this Plan will be
              --------------------
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO ("Stock Option Agreement"), and, except as otherwise required by
the terms of Section 8 hereof, will be in such form and contain such provisions
(which need not be the same for each Participant) as the Committee may from time
to time approve, and which will comply with and be subject to the terms and
conditions of this Plan.

          5.2 Date of Grant. The date of grant of an Option will be the date on
              -------------
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.

          5.3 Exercise Period. Options may be exercisable within the times or
              ---------------
upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary of the
Company ("Ten Percent Stockholder") will be exercisable after the expiration of
five (5) years from the date the ISO is granted. The Committee also may provide
for Options to become exercisable at one time or from time to time, periodically
or otherwise, in such number of Shares or percentage of Shares as the Committee
determines.

          5.4 Exercise Price. The Exercise Price of an Option will be determined
              --------------
by the Committee when the Option is granted and may be not less than 85% of the
Fair Market Value of the Shares on the date of grant; provided that: (i) the
Exercise Price of an ISO will be not less than 100% of the Fair Market Value of
the Shares on the date of grant; and (ii) the Exercise Price of any ISO granted
to a Ten Percent Stockholder will not be less than 110% of the Fair Market Value
of the Shares on the date of grant. Payment for the Shares purchased may be made
in accordance with Section 7 of this Plan.

<PAGE>

          5.5 Method of Exercise. Options may be exercised only by delivery to
              ------------------
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price for the number of Shares being
purchased.

          5.6 Termination. Notwithstanding the exercise periods set forth in the
              -----------
Stock Option Agreement, exercise of an Option will always be subject to the
following:

          (a)  If the Participant is Terminated for any reason except death or
               Disability, then the Participant may exercise such Participant's
               Options only to the extent that such Options would have been
               exercisable upon the Termination Date no later than three (3)
               months after the Termination Date (or such shorter or longer time
               period not exceeding five (5) years as may be determined by the
               Committee, with any exercise beyond three (3) months after the
               Termination Date deemed to be an NQSO), but in any event, no
               later than the expiration date of the Options.

          (b)  If the Participant is Terminated because of Participant's death
               or Disability (or the Participant dies within three (3) months
               after a Termination other than for Cause or because of
               Participant's Disability), then Participant's Options may be
               exercised only to the extent that such Options would have been
               exercisable by Participant on the Termination Date and must be
               exercised by Participant (or Participant's legal representative
               or authorized assignee) no later than twelve (12) months after
               the Termination Date (or such shorter or longer time period not
               exceeding five (5) years as may be determined by the Committee,
               with any such exercise beyond (a) three (3) months after the
               Termination Date when the Termination is for any reason other
               than the Participant's death or Disability, or (b) twelve (12)
               months after the Termination Date when the Termination is for
               Participant's death or Disability, deemed to be an NQSO), but in
               any event no later than the expiration date of the Options.

          (c)  Notwithstanding the provisions in paragraph 5.6(a) above, if a
               Participant is terminated for Cause, neither the Participant, the
               Participant's estate nor such other person who may then hold the
               Option shall be entitled to exercise any Option with respect to
               any Shares whatsoever, after termination of service, whether or
               not after termination of service the Participant may receive
               payment from the Company or Subsidiary for vacation pay, for
               services rendered prior to termination, for services rendered for
               the day on which termination occurs, for salary in lieu of
               notice, or for any other benefits. In making such determination,
               the Board shall give the Participant an opportunity to present to
               the Board evidence on his behalf. For the purpose of this
               paragraph, termination of service shall be deemed to occur on the
               date when the Company dispatches notice or advice to the
               Participant that his service is terminated.

          5.7 Limitations on Exercise. The Committee may specify a reasonable
              -----------------------
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.

          5.8 Limitations on ISO. The aggregate Fair Market Value (determined as
              ------------------
of the date of grant) of Shares with respect to which ISO are exercisable for
the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company, Parent or Subsidiary
of the Company) will not exceed $100,000. If the Fair Market Value of Shares on
the date of grant with respect to which ISO are exercisable for the first time
by a Participant during any calendar year exceeds $100,000, then the Options for
the first $100,000 worth of Shares to become exercisable in such calendar year
will be ISO and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISO, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.

          5.9 Modification, Extension or Renewal. The Committee may modify,
              ----------------------------------
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected

<PAGE>

by a written notice to them; provided, however, that the Exercise Price may not
be reduced below the minimum Exercise Price that would be permitted under
Section 5.4 of this Plan for Options granted on the date the action is taken to
reduce the Exercise Price.

          5.10 No Disqualification. Notwithstanding any other provision in this
               -------------------
Plan, no term of this Plan relating to ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

     6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to
        ----------------
sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the price to be paid (the "Purchase Price"), the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:

          6.1 Form of Restricted Stock Award. All purchases under a Restricted
              ------------------------------
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer will terminate, unless otherwise determined by the Committee.

          6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
              --------------
Restricted Stock Award will be determined by the Committee on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 7 of
this Plan.

          6.3 Terms of Restricted Stock Awards. Restricted Stock Awards shall be
              --------------------------------
subject to such restrictions as the Committee May impose. These restrictions May
be based upon completion of a specified number of years of service with the
Company or upon completion of the performance goals as set out in advance in the
Participant's individual Restricted Stock Purchase Agreement. Restricted Stock
Awards may vary from Participant to Participant and between groups of
Participants. Prior to the grant of a Restricted Stock Award, the Committee
shall: (a) determine the nature, length and starting date of any Performance
Period for the Restricted Stock Award; (b) select from among the Performance
Factors to be used to measure performance goals, if any; and (c) determine the
number of Shares that may be awarded to the Participant. Prior to the payment of
any Restricted Stock Award, the Committee shall determine the extent to which
such Restricted Stock Award has been earned. Performance Periods may overlap and
Participants may participate simultaneously with respect to Restricted Stock
Awards that are subject to different Performance Periods and having different
performance goals and other criteria.

          6.4 Termination During Performance Period. If a Participant is
              -------------------------------------
terminated during a Performance Period for any reason, then such Participant
will be entitled to payment (whether in Shares, cash or otherwise) with respect
to the Restricted Stock Award only to the extent earned as of the date of
Termination in accordance with the Restricted Stock Purchase Agreement, unless
the Committee will determine otherwise.

     7. PAYMENT FOR SHARE PURCHASES.
        ---------------------------

          7.1 Payment. Payment for Shares purchased pursuant to this Plan may be
              -------
made in cash (by check) or, where expressly approved for the Participant by the
Committee and where permitted by law:

          (a)  by cancellation of indebtedness of the Company to the
               Participant;s

          (b)  by surrender of shares that either: (1) have been owned by
               Participant for more than six (6) months and have been paid for
               within the meaning of SEC Rule 144 (and, if such shares were
               purchased from the Company by use of a promissory note, such note
               has been fully paid with respect to such shares); or (2) were
               obtained by Participant in the public market;

          (c)  by tender of a full recourse promissory note having such terms as
               may be approved by the Committee and bearing interest at a rate
               sufficient to avoid imputation of income under Sections 483 and
               1274 of the Code;

<PAGE>

          (d)  by waiver of compensation due or accrued to the Participant for
               services rendered;

          (e)  with respect only to purchases upon exercise of an Option, and
               provided that a public market for the Company's stock exists:

               (1)  through a "same day sale" commitment from the Participant
                    and a broker-dealer that is a member of the National
                    Association of Securities Dealers (an "NASD Dealer") whereby
                    the Participant irrevocably elects to exercise the Option
                    and to sell a portion of the Shares so purchased to pay for
                    the Exercise Price, and whereby the NASD Dealer irrevocably
                    commits upon receipt of such Shares to forward the Exercise
                    Price directly to the Company; or

               (2)  through a "margin" commitment from the Participant and a
                    NASD Dealer whereby the Participant irrevocably elects to
                    exercise the Option and to pledge the Shares so purchased to
                    the NASD Dealer in a margin account as security for a loan
                    from the NASD Dealer in the amount of the Exercise Price,
                    and whereby the NASD Dealer irrevocably commits upon receipt
                    of such Shares to forward the Exercise Price directly to the
                    Company; or

          (f)  by any combination of the foregoing.

          7.2 Loan Guarantees. The Committee may help the Participant pay for
              ---------------
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.

     8. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
        -------------------------------------

          8.1 Types of Options and Shares. Options granted under this Plan and
              ---------------------------
subject to this Section 8 shall be NQSOs.

          8.2 Eligibility. Options subject to this Section 8 shall be granted
              -----------
only to Outside Directors. Outside Directors shall also be eligible to receive
option grants pursuant to Section 5 hereof at such times and on such conditions
as determined by the Committee.

          8.3 Initial Grant. Each Outside Director who first becomes a member of
              -------------
the Board on or after the Effective Date will automatically be granted an Option
for 25,000 Shares (an "Initial Grant") on the date such Outside Director first
becomes a member of the Board.

          8.4 Succeeding Grants. Upon re-election to the Board at each Annual
              -----------------
Meeting of Stockholders, each Outside Director will automatically be granted an
Option for 8,000 Shares (a "Succeeding Grant"); provided, however, that any such
Outside Director who received an Initial Grant since the last Annual Meeting of
Stockholders will receive a prorated Succeeding Grant to purchase a number of
shares equal to 8,000 multiplied by a fraction whose numerator is the number of
calendar months or portions thereof that the Outside Director has served since
the date of the Initial Grant and whose denominator is twelve.

          8.5 Vesting. The date an Outside Director receives an Initial Grant or
              -------
a Succeeding Grant is referred to in this Plan as the "Start Date" for such
Option.

          (a)  Initial Grants. Each Initial Grant will vest as to 2% of the
               --------------
               Shares on the Start Date for such Initial Grant, and as to an
               additional 2% of the Shares on the first day of each calendar
               month after the Start Date, so long as the Outside Director
               continuously remains a director of the Company.

          (b)  Succeeding Grants. Each Succeeding Grant will vest as to 2% of
               -----------------
               the Shares on the Start Date for such Succeeding Grant, and as to
               an additional 2% of the Shares on the first day of each calendar
               month after the Start Date, so long as the Outside Director
               continuously remains a director of the Company.

Notwithstanding any provision to the contrary, in the event of a corporate
transaction described in Section 17.1, the vesting of all options granted to
Outside Directors pursuant to this Section 8 will accelerate and such options
will become exercisable in full prior to the consummation of such event at such
times and on such conditions as the Committee determines, and must

<PAGE>

be exercised, if at all, within three months of the consummation of said event.
Any options not exercised within such three-month period shall expire.

          8.6 Exercise Price. The exercise price of an Option pursuant to an
              --------------
Initial Grant or Succeeding Grant shall be the Fair Market Value of the Shares
at the time that the Option is granted.

          8.7 Deferral of Cash Compensation. Each Outside Director may elect to
              -----------------------------
reduce all or part of the cash compensation otherwise payable for services to be
rendered by him as a director (including the annual retainer and any fees
payable for serving on the Board or a Committee of the Board) and to receive in
lieu thereof Shares. Any such election shall be in writing and must be made
before the services are rendered giving rise to such compensation, and may not
be revoked or changed thereafter during the Outside Director's term. On such
election, the cash compensation otherwise payable will be increased by 10% for
purposes of determining the number of Shares to be credited to such Outside
Director.

     If an Outside Director so elects to defer, there shall be credited to such
Outside Director a number of Shares equal to the amount of the deferral
(increased by 10% as described in the preceding sentence) divided by the fair
market value as determined by the closing price on the Nasdaq National Market on
the day in which the compensation would have been paid in the absence of a
deferral election.

     9. WITHHOLDING TAXES.
        -----------------

          9.1 Withholding Generally. Whenever Shares are to be issued in
              ---------------------
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

          9.2 Stock Withholding. When, under applicable tax laws, a Participant
              -----------------
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.

     10. TRANSFERABILITY.
         ---------------

          10.1 Except as otherwise provided in this Section 10, Awards granted
under this Plan, and any interest therein, will not be transferable or
assignable by Participant, and may not be made subject to execution, attachment
or similar process, otherwise than by will or by the laws of descent and
distribution or as determined by the Committee and set forth in the Award
Agreement with respect to Awards that are not ISOs.

          10.2 All Awards other than NQSO's. All Awards other than NQSO's shall
               ----------------------------
be exercisable: (i) during the Participant's lifetime, only by (A) the
Participant, or (B) the Participant's guardian or legal representative; and (ii)
after Participant's death, by the legal representative of the Participant's
heirs or legatees.

          10.3 NQSOs. Unless otherwise restricted by the Committee, an NQSO
               -----
shall be exercisable: (i) during the Participant's lifetime only by (A) the
Participant, (B) the Participant's guardian or legal representative, (C) a
Family Member of the Participant who has acquired the NQSO by "permitted
transfer;" and (ii) after Participant's death, by the legal representative of
the Participant's heirs or legatees. "Permitted transfer" means, as authorized
by this Plan and the Committee in a Stock Option Agreement, any transfer
effected by the Participant during the Participant's lifetime of an interest in
such NQSO but only such transfers which are by gift or domestic relations order.
A permitted transfer does not include any transfer for value and neither of the
following are transfers for value: (a) a transfer under a domestic relations
order in settlement of marital property rights or (b) a transfer to an entity in
which more than fifty percent of the voting interests are owned by Family
Members or the Participant in exchange for an interest in that entity.

     11. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
         -----------------------------------------------------

          11.1 Voting and Dividends. No Participant will have any of the rights
               --------------------
of a stockholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a

<PAGE>

stockholder and have all the rights of a stockholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock; provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Shares that
are repurchased at the Participant's Purchase Price or Exercise Price pursuant
to Section 11.3.

          11.2 Financial Statements. The Company will provide financial
               --------------------
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.

          11.3 Restrictions on Shares. At the discretion of the Committee, the
               ----------------------
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase a portion of or all Unvested Shares held by a Participant
following such Participant's Termination at any time within ninety (90) days
after the later of Participant's Termination Date and the date Participant
purchases Shares under this Plan, for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price or Purchase Price, as the case
may be.

     12. CERTIFICATES. All certificates for Shares or other securities delivered
         ------------
under this Plan will be subject to such stock transfer orders, legends and other
restrictions as the Committee may deem necessary or advisable, including
restrictions under any applicable federal, state or foreign securities law, or
any rules, regulations and other requirements of the SEC or any stock exchange
or automated quotation system upon which the Shares may be listed or quoted.

     13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
         ------------------------
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.

     14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
         -----------------------------
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Committee and the Participant may agree.

     15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
         ----------------------------------------------
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.

     16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
         -----------------------
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.

<PAGE>

     17. CORPORATE TRANSACTIONS.
         ----------------------

          17.1 Assumption or Replacement of Awards by Successor. Except for
               ------------------------------------------------
automatic grants to Outside Directors pursuant to Section 8 hereof, in the event
of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the stockholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption will be binding on all
Participants), (c) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (d) the sale of substantially
all of the assets of the Company, or (e) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction, any or all outstanding Awards may be assumed, converted or
replaced by the successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to stockholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Shares of the Company held
by the Participants, substantially similar shares or other property subject to
repurchase restrictions no less favorable to the Participant. In the event such
successor corporation (if any) refuses to assume or substitute Awards, as
provided above, pursuant to a transaction described in this Subsection 17.1,
such Awards will accelerate and all Options will become exercisable in full
prior to the consummation of such transaction at such time and on such
conditions as the Committee will determine, and if such Options are not
exercised prior to the consummation of the corporate transaction, they shall
terminate at such time as determined by the Committee.

          17.2 Other Treatment of Awards. Subject to any greater rights granted
               -------------------------
to Participants under the foregoing provisions of this Section 17, in the event
of the occurrence of any transaction described in Section 17.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation, or sale of assets.

          17.3 Assumption of Awards by the Company. The Company, from time to
               -----------------------------------
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of Shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

     18. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective on
         ---------------------------------
the date that it is adopted by the Board (the "Effective Date"). This Plan shall
be approved by the stockholders of the Company (excluding Shares issued pursuant
to this Plan), consistent with applicable laws, within twelve (12) months before
or after the date this Plan is adopted by the Board. Upon the Effective Date,
the Committee may grant Awards pursuant to this Plan; provided, however, that:
(a) no Option may be exercised prior to initial stockholder approval of this
Plan; (b) no Option granted pursuant to an increase in the number of Shares
subject to this Plan approved by the Board will be exercised prior to the time
such increase has been approved by the stockholders of the Company; (c) in the
event that initial stockholder approval is not obtained within the time period
provided herein, all Awards granted hereunder shall be cancelled, any Shares
issued pursuant to any Awards shall be cancelled and any purchase of Shares
issued hereunder shall be rescinded; and (d) in the event that stockholder
approval of such increase is not obtained within the time period provided
herein, all Awards granted pursuant to such increase will be cancelled, any
Shares issued pursuant to any Award granted pursuant to such increase will be
cancelled, and any purchase of Shares pursuant to such increase will be
rescinded.

     19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
         --------------------------
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.

     20. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate
         --------------------------------
or amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed

<PAGE>

pursuant to this Plan; provided, however, that the Board will not, without the
approval of the stockholders of the Company, amend this Plan in any manner that
requires such stockholder approval.

     21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the
         --------------------------
Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.

     22. DEFINITIONS. As used in this Plan, the following terms will have the
         -----------
following meanings:

          "Award" means any award under this Plan, including any Option or
Restricted Stock.

          "Award Agreement" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.

          "Board" means the Board of Directors of the Company.

          "Cause" means the commission of an act of theft, embezzlement, fraud,
dishonesty or a breach of fiduciary duty to the Company or a Parent or
Subsidiary of the Company.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Committee" means the Compensation Committee of the Board.

          "Company" means Electronic Arts Inc. or any successor corporation.

          "Disability" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended.

          "Exercise Price" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

          "Fair Market Value" means, as of any date, the value of a share of the
Company's Class A Common Stock determined as follows:

          (a)  if such Class A Common Stock is then quoted on the Nasdaq
               National Market, its closing price on the Nasdaq National Market
               on the date of determination as reported in The Wall Street
               Journal;

          (b)  if such Class A Common Stock is publicly traded and is then
               listed on a national securities exchange, its closing price on
               the date of determination on the principal national securities
               exchange on which the Class A Common Stock is listed or admitted
               to trading as reported in The Wall Street Journal;

          (c)  if such Class A Common Stock is publicly traded but is not quoted
               on the Nasdaq National Market nor listed or admitted to trading
               on a national securities exchange, the average of the closing bid
               and asked prices on the date of determination as reported in The
               Wall Street Journal; or

          (d)  if none of the foregoing is applicable, by the Committee in good
               faith.

          "Family Member" includes any of the following:

          (a)  child, stepchild, grandchild, parent, stepparent, grandparent,
               spouse, former spouse, sibling, niece, nephew, mother-in-law,
               father-in-law, son-in-law, daughter-in-law, brother-in-law, or
               sister-in-law of the Participant, including any such person with
               such relationship to the Participant by adoption;

          (b)  any person (other than a tenant or employee) sharing the
               Participant's household;

<PAGE>

          (c)  a trust in which the persons in (a) and (b) have more than fifty
               percent of the beneficial interest;

          (d)  a foundation in which the persons in (a) and (b) or the
               Participant control the management of assets; or

          (e)  any other entity in which the persons in (a) and (b) or the
               Participant own more than fifty percent of the voting interest.

          "Insider" means an officer or director of the Company or any other
person whose transactions in the Company's Class A Common Stock are subject to
Section 16 of the Exchange Act.

          "Option" means an award of an option to purchase Shares pursuant to
Section 5.

          "Outside Director" means a member of the Board who is not an employee
of the Company or any Parent or Subsidiary of the Company.

          "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

          "Participant" means a person who receives an Award under this Plan.

          "Performance Factors" means the factors selected by the Committee from
among the following measures to determine whether the performance goals
established by the Committee and applicable to Awards have been satisfied:

          (a)  Net revenue and/or net revenue growth;

          (b)  Earnings before income taxes and amortization and/or earnings
               before income taxes and amortization growth;

          (c)  Operating income and/or operating income growth;

          (d)  Net income and/or net income growth;

          (e)  Earnings per share and/or earnings per share growth;

          (f)  Total stockholder return and/or total stockholder return growth;

          (g)  Return on equity;

          (h)  Operating cash flow return on income;

          (i)  Adjusted operating cash flow return on income;

          (j)  Economic value added; and

          (k)  Individual confidential business objectives.

          "Performance Period" means the period of service determined by the
Committee, not to exceed five years, during which years of service or
performance is to be measured for Restricted Stock Awards.

          "Plan" means this EA.com 2000 Equity Incentive Plan, as amended from
time to time.

          "Restricted Stock Award" means an award of Shares pursuant to Section
6.

          "SEC" means the Securities and Exchange Commission.

          "Securities Act" means the Securities Act of 1933 Act, as amended.

<PAGE>

          "Shares" means shares of the Company's Class A Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 17, and any
successor security.

          "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

          "Termination" or "Terminated" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Parent or Subsidiary of the Company.
An employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Committee will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").

          "Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.

          "Vested Shares" means "Vested Shares" as defined in the Award
Agreement.

<PAGE>

                        [LETTER HEAD OF ELECTRONIC ARTS]

================================================================================

                  2000 CLASS A EQUITY INCENTIVE PLAN AS AMENDED

================================================================================

--------------------------------------------------------------------------------
            AS ADOPTED BY THE BOARD OF DIRECTORS ON JANUARY 27, 2000
                AS APPROVED BY THE STOCKHOLDERS ON MARCH 22, 2000
                AS AMENDED BY THE STOCKHOLDERS ON AUGUST 1, 2001
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                                   12,200,000
                              Class A Common Stock
                                 $.01 par value
--------------------------------------------------------------------------------

     Electronic Arts Inc., a Delaware corporation (the "Company"), is offering
an aggregate of 12,200,000 shares of its authorized but unissued Class A Common
Stock to the Company's employees, officers and directors or any Parent or
Subsidiary of the Company pursuant to the terms and conditions of the Company's
2000 Class A Equity Incentive Plan as amended, (the "Class A Plan") as described
herein.

          THIS  DOCUMENT  CONSTITUTES  PART OF A  PROSPECTUS  COVERING
          SECURITIES  THAT HAVE BEEN  REGISTERED  UNDER THE SECURITIES
          ACT OF 1933, AS AMENDED (THE "1933 ACT").

          THESE  SECURITIES  HAVE NOT BEEN APPROVED OR  DISAPPROVED BY
          ANY STATE SECURITIES COMMISSION NOR HAS ANY STATE SECURITIES
          COMMISSION  PASSED  UPON THE  ACCURACY  OR  ADEQUACY OF THIS
          DOCUMENT.  ANY  REPRESENTATION TO THE CONTRARY IS A CRIMINAL
          OFFENSE.

                                  INTRODUCTION

     This document relates to unexercised options to purchase shares of Class A
common stock of the Company granted or to be granted to the employees, officers
and directors of the Company under the Class A Plan. A registration statement
with respect to such shares of Class A common stock (the "Registration
Statement") has been filed with the Securities and Exchange Commission (the
"SEC").

     Additional information about the Class A Plan and the administrators can be
obtained by contacting The Stock Administration Department (650.628.1500). The
address of the Company is 209 Redwood Shores Parkway, Redwood City, CA 94065.

          ------------------------------------------------------------
                     QUESTION AND ANSWERS ABOUT THE OPTIONS
          ------------------------------------------------------------

1.   What is the history of the Class A Plan?

     The Class A Plan was adopted by the Company's Board of Directors on January
27, 2000, was approved by the Company's stockholders on March 22, 2000 and
amended on August 2, 2001. Options may be granted pursuant to the Class A Plan
until January, 2010.

<PAGE>

2.   What is the purpose of the Class A Plan?

     The purpose of the Class A Plan is to provide incentives to attract, retain
and motivate eligible persons whose present and potential contributions are
important to the success of the Company, its Parent and Subsidiaries by offering
such persons, like yourself, an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock.

3.   Who is eligible to participate?

     Employees, officers and directors of the Company, its parent, if any, and
its subsidiaries may receive options under the Class A Plan. The Company's
Board, in its discretion, determines which eligible individuals will receive
options under the Class A Plan.

4.   What kind of options are there?

     The Company can grant two kinds of options:

     (a)  "Nonqualified Stock Options" or "NQSOs," where you will have to pay
          tax at the time of exercise on the difference between the exercise
          price and the fair market value, and where such difference is taxed at
          ordinary income rates; and

     (b)  "Incentive Stock Options" or "ISOs," where you may defer paying tax on
          the difference between the exercise price and the fair market value
          from the time of exercise until the stock is sold (assuming certain
          holding period requirements are met), and where the gain from the sale
          is taxed as capital gain.

     Because ISOs have tax advantages, they are generally subject to more legal
restrictions than NQSOs. The primary restrictions on ISOs and the differences
between ISOs and NQSOs are discussed in a number of the answers in this
Prospectus and in "Tax Information and ERISA," below.

5.   What kind of options can I get?

     If you are an employee of the Company, its parent or its subsidiaries,
you may get ISOs, NQSOs or both. If you are a non-employee director of the
Company, its parent or its subsidiaries or affiliated corporations, you may only
receive NQSOs.

6.   Can I hold more than one option?

     Yes.

7.   Is there a limit to the number or size of options I can get?

     No person will be eligible to receive more than 350,000 Shares in any
calendar year under a Class A Plan option Award unless they are a new employee.
New employees, who may also be an officer or director of the Company, are
eligible to receive up to a maximum of 700,000 Shares in the calendar year in
which they commence their employment With respect to ISOs, the Class A Plan
limits the aggregate fair market value (determined as of the time the option is
granted) of the shares that may first become exercisable in any calendar year to
not more than $100,000.

8.   When can I exercise options?

     The Board determines the exercisability of each option at the date of
grant. Only vested options may be exercised. The exercisability of your options
is set forth on the first page of your option grant or option agreement as well
as your vesting schedule. It is customary for first time options granted under
the Class A Plan to vest at the rate of 2% per month beginning the month of
employment for 50 months and to be exercisable after 1 year of continuous
employment. However the Board determines all vesting schedules at the date of
grant.

9.   How long do I have to exercise?

     Most options must be exercised within ten years after the option grant date
for the Class A Plan. If you own ten percent or more of the Company's
outstanding stock, your ISO under the Class A Plan will be granted for a term
not to

<PAGE>

exceed five years. Again, the Board determines the term of each option at
the date of grant (up to a maximum of ten years). The term of your option is set
forth on the first page of your option grant agreement.

10.  What determines my exercise price?

     The Board determines the exercise price of each option. This price is
stated in your option grant or agreement and the Class A Plan states the price
may not be less that 85% of the Fair Market Value on the date of grant. All ISO
grants may not be less than 100% of the Fair Market Value on the date of grant.
If you own ten percent or more of the Company's outstanding stock, your option
will be granted at an exercise price equal to at least 110% of the fair market
value of the shares at the time your option is granted. Fair market value is
currently determined by the closing bid price of the Company's Class A common
stock on the NASDAQ National Market System on the date of grant.

11.  How do I exercise my options?

     To exercise an option, you must deliver to the Stock Administration
department of the Company (a) a copy of the Stock Option Exercise Notice and
Agreement under the Class A Plan signed by you, and (b) full cash payment (U. S.
dollars) for the shares being purchased or, when authorized by the Board at the
time of the grant of the option under the Class A Plan, shares of fully paid
Class A common stock of the Company or certain other forms of payment. The
Company will then issue a certificate representing the shares purchased.

12.  Are there any restrictions on the resale of  shares I purchase?

     Generally, the Class A Plan does not impose any restrictions on the resale
of shares of Class A common stock purchased. The Registration Statement filed by
the Company also satisfies most federal securities laws requirements with
respect to the resale of such shares. However, the shares purchased under the
Class A Plan may be subject to certain restrictions on transfer in the event
that the Company completes a registered public offering of its securities and
all shares are subject to resale restrictions imposed by securities laws in the
state(s) where you and your purchaser live. (There are presently no restrictions
imposed by California law.) In addition, if you are an affiliate of the Company,
you may not resell under the Registration Statement any shares purchased on
exercise of options. Such resales must be registered in a separate registration
statement or be effected in accordance with Rule 144 or another available
exemption under the 1933 Act. In addition, there may be tax consequences
associated with the sale or other disposition of shares. See "Tax Information
and ERISA--Tax Treatment of the Optionee," below.

13.  Can I transfer my options?

     Generally, no. Any Award granted under this Plan, other than NQSOs, cannot
be transferred or assigned by you, and may not be made subject to execution,
attachment or similar process, otherwise than by will or by the laws of descent
and distribution or as determined by the Committee.

     NQSOs. Unless otherwise restricted by the Committee, an NQSO shall be
     -----
exercisable: (i) during your lifetime only by (A) you, (B) your guardian or
legal representative, (C) a member of your family who has acquired the NQSO by
"permitted transfer;" and (ii) after your death, by your legal representative.

     "Permitted transfer" means, as authorized by this Plan and the Committee in
a Stock Option Agreement, any transfer by gift or domestic relations order. A
permitted transfer does not include any transfer for value and neither of the
following are transfers for value: (a) a transfer under a domestic relations
order in settlement of marital property rights or (b) a transfer to an entity in
which more than fifty percent of the voting interests are owned by Family
Members or the Participant in exchange for an interest in that entity.

14.  What happens if I leave the Company?

     In the event that your relationship with the Company is terminated for any
reason other than your death or disability, you will have the right to exercise
your options, to the extent (and only to the extent) that they would have been
exercisable upon the date of termination, within three (3) months after the date
of termination (or such shorter time period as may be specified in the Grant).

     In the event that your relationship with the Company is terminated because
of death or disability, you or your legal representative will have the right to
exercise your options, to the extent (and only to the extent) that they would
have been exercisable upon the date of termination, within twelve (12) months
after the date of termination (or such shorter time period as may be specified
in the Grant) but in any event no later than the expiration date of the Options.

<PAGE>

     However, if your relationship with the Company is terminated for Cause,
you, your legal representative or such other person who may then hold your
Option, shall not be entitled to exercise your option. In making this
determination, the Board will give you an opportunity to present to the Board
evidence on your behalf. For the purposes of this paragraph, termination of
service shall be deemed to occur on the date when the Company gives you notice
that your service is terminated.

     The Committee will have the sole discretion to determine whether you have
ceased to provide services and the effective date on which you ceased to provide
services.

15.  Is the option an employment contract?

     No. The option grant or agreement does not impose any obligation whatsoever
upon you or the Company to continue your relationship with the Company. Such
relationship is terminable at will by you or the Company.

16.  Do my options get adjusted for future events?

     If the Company issues additional securities to raise more capital, no
adjustments will be made. However, if there is a stock split, stock dividend or
similar change in the Company's capital structure without receipt of
consideration by the Company, the number of shares subject to and the exercise
price of your options will be adjusted accordingly. The number of shares
reserved under the Class A Plan will also be proportionately adjusted.

17.  What happens in a merger or consolidation?

     For any options granted under the Class A Plan, (other than "Automatic
Grants to Outside Directors"), if there is a merger or consolidation in which
the Company is not the surviving entity, or if the Company dissolves or sells
substantially all of its assets or completes a "corporate transaction" under
Section 425(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
then your options may be assumed by the successor corporation. If the successor
corporation, if any, refuses to assume the options or substitute equivalent
options, the options may accelerate and become immediately exercisable at times
and on terms that the Board determines.

18.  What happens to unexercised, expired options?

     If your option granted under the Class A Plan is terminated for any reason
without being exercised in whole or in part or if it expires according to its
terms, the shares thereby released from your option will become available again
under the Class A Plan.

19.  How are the Options administered?

     The Class A Plan is administered by the Compensation Committee of the Board
of Directors of the Company (referred to, along with the Board of Directors, as
the "Board" or the "Committee" as the context requires), whose address is the
same as that of the Company's principal executive offices. The Board designates
the optionees, exercise prices, vesting schedule, exercise periods and dates of
grants. The members of the Compensation Committee receive a yearly fee; no
additional compensation is paid for administering the Class A Plan. The Company
bears all expenses in connection with administration of the Class A Plan.

20.  Are there other Awards under the Class A Plan?

     Automatic Grants to Outside Directors. Under the Class A Plan, non-employee
     -------------------------------------
Directors receive a NQSO to purchase 8,000 shares upon re-election. New
Directors would receive a grant of 25,000 shares, under the Class A Plan.
Non-employee Directors may elect to receive all or part of their cash
compensation in the Company's Class A common stock.

     Restricted Stock. The Committee from time to time may offer to an eligible
     ----------------
person Shares that are subject to restrictions. The Committee will determine to
whom an offer will be made, the number of Shares the person may purchase, the
price to be paid (which must be 100% of the Fair Market Value to a Ten Percent
Stockholder), the restrictions to which the Shares will be subject and all other
terms and conditions of the Award as determined in the Class A Plan.

21.  Who is on the Compensation Committee?

<PAGE>

     The Compensation Committee currently consists of Mr. Richard Asher, Mr.
William J. Byron and Mr. Daniel H. Case III, each of whom is an outside director
of the Company and is an affiliate of the Company. Other than as disclosed
herein (including disclosures in material incorporated by reference herein),
members of the Compensation Committee that administer the Class A Plan have no
material relationships with the Company, its employees or its affiliates.

22.  Who elects the Board and the Compensation Committee?

     The members of the full Board are elected each year at the Company's annual
meeting of stockholders and serve until the next annual meeting or until their
successors are elected and qualified. The stockholders may remove members of the
full Board from office by following certain voting procedures set forth in the
Company's By-laws and applicable corporate law. The members of the Compensation
Committee are chosen by the full Board and serve at its discretion.

23.  What if there is a dispute concerning the Class A Plan?

     Subject to the provisions of the Class A Plan, the Compensation Committee
has the authority to construe and interpret any of the provisions of the Class A
Plan or any options granted thereunder. Such interpretations are binding on the
Company and on you. Members of the Board can be contacted by writing to them at
the Company's principal executive offices to the attention of the Stock
Administration department.

24.  How can the Class A Plan change?

     Subject to the terms and conditions of the Class A Plan and applicable law,
the Board may modify, extend or renew outstanding options. The Board may
terminate or amend the Class A Plan in any respect provided it does not, without
stockholder approval, amend the Class A Plan in any manner that requires such
stockholder approval pursuant to the Code or the Securities Exchange Act of
1934, as amended (the "1934 Act") (including Rule 16b-3 promulgated thereunder).
Currently, this means that the Board must have stockholder approval among other
things, to increase the number of shares available under the Class A Plan, to
change the class of persons eligible to receive options or to make a change that
materially increases the benefits accruing to Class A Plan participants.

25.  Can I get additional information about the Class A Plan and my options?

     The full text of the Class A Plan is available electronically at the
Company's internal web site or by contacting Stock Administration. These
questions and answers are simply a guide to the principal provisions of the
Class A Plan and are qualified in their entirety by the wording of those
documents.

     You may also contact the Company's Stock Administration department with any
specific questions you may have regarding the Class A Plan or your individual
options or to request a report summarizing the amount and status of your
options.

26.  Can I receive information provided to stockholders?

     Yes. If you are an optionee under the Class A Plan, material sent by the
Company to its stockholders is available to you by contacting the Stock
Administration department at the Company's headquarters.

<PAGE>

                            TAX INFORMATION AND ERISA

Introduction

     THE FOLLOWING DESCRIPTION OF UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
ASSOCIATED WITH PARTICIPATION IN THE Class A Plan IS BASED UPON EXISTING
STATUTES, REGULATIONS AND INTERPRETATIONS AS OF THE DATE OF THIS DOCUMENT.
BECAUSE THE CURRENTLY APPLICABLE RULES ARE COMPLEX AND THE TAX LAWS JUNE CHANGE
AND BECAUSE INCOME TAX CONSEQUENCES JUNE VARY DEPENDING UPON THE PARTICULAR
CIRCUMSTANCES OF EACH PARTICIPANT, EACH PARTICIPANT SHOULD CONSULT A TAX ADVISOR
CONCERNING FEDERAL (AND ANY STATE AND LOCAL) INCOME TAX CONSEQUENCES OF
PARTICIPATION IN THE Class A Plan. THE FOLLOWING DISCUSSION DOES NOT PURPORT TO
DESCRIBE STATE OR LOCAL INCOME TAX CONSEQUENCES OR TAX CONSEQUENCES FOR
PARTICIPANTS IN COUNTRIES OTHER THAN THE UNITED STATES.

     SPECIAL TAX RULES APPLY TO OFFICERS AND DIRECTORS OF THE COMPANY. SEE
"SPECIAL CONSIDERATIONS FOR OFFICERS AND DIRECTORS," BELOW.

         Options so designated under the Class A Plan are intended to qualify as
ISOs. All options that are not designated as ISOs are intended to be NQSOs. The
Class A Plan is not qualified under Section 401(a) of the Code.

Tax Treatment of the Optionee

     Incentive Stock Options. The optionee will recognize no income upon grant
of an ISO and incur no tax on its exercise (unless the optionee is subject to
the alternative minimum tax described below). If the optionee holds the stock
acquired upon exercise of an ISO (the "ISO Shares") for more than one year after
the date the option was exercised and for more than two years after the date the
option was granted, the optionee generally will realize long-term capital gain
or loss (rather than ordinary income or loss) upon disposition of the ISO
Shares. This gain or loss will be equal to the difference between the amount
realized upon such disposition and the amount paid for the ISO Shares.

     If the optionee disposes of ISO Shares prior to the expiration of either
required holding period (a "disqualifying disposition"), the gain realized upon
such disposition up to the difference between the value of the ISO Shares on the
date of exercise (or, if less, the amount realized on a sale of such ISO Shares)
and the option exercise price, will be treated as ordinary income. Any
additional gain will be long-term or short-term capital gain, depending upon the
amount of time the ISO Shares were held by the optionee.

     Alternative Minimum Tax. The difference between the fair market value of
ISO Shares (measured as of the date of exercise) and the amount paid for the ISO
Shares is an adjustment to income for purposes of the alternative minimum tax.
The alternative minimum tax (imposed to the extent it exceeds the taxpayer's
regular tax) is 26% on an individual taxpayer's alternative minimum taxable
income up to $175,000, and 28% above that dollar amount. Alternative minimum
taxable income is determined by adjusting regular taxable income for certain
items, increasing that income by certain preference items and reducing this
amount by the applicable exemption amount ($45,000 in the case of a joint
return, subject to reduction under certain circumstances). If a disqualifying
disposition of the ISO Shares occurs in the same calendar year as exercise of
the ISO, there is no alternative minimum tax adjustment with respect to those
ISO Shares. Also, upon a sale of ISO Shares that is not a disqualifying
disposition, alternative minimum taxable income is reduced in the year of sale
by the excess of the fair market value of the ISO Shares at exercise over the
amount paid for the ISO Shares. Special rules apply where all or a portion of
the exercise price is paid by tendering shares of Class A common stock.

     Nonqualifying Stock Options. An optionee will not recognize any taxable
income at the time an NQSO is granted. However, upon exercise of an NQSO the
optionee will include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
and the optionee's purchase price. The included amount will be treated as
ordinary income by the optionee and may be subject to income tax withholding by
the Company (either by payment in cash or withholding out of the optionee's
salary). Upon resale of the shares by the optionee, any subsequent appreciation
or depreciation in the value of the shares will be treated as capital gain or
loss. Special rules apply where all or a portion of the exercise price is paid
by tendering shares of Class A common stock.

     Revenue Reconciliation Act of 1993. The Revenue Reconciliation Act of 1993
increased the alternative minimum tax from 24% to 26% on an individual
taxpayer's alternative minimum taxable income up to $175,000, and to 28% above
that dollar amount. 1933 Act also raised the exemption amount from $40,000 to
$45,000 in the case of a joint return. These changes were effective for taxable
years ending after December 31, 1992.

<PAGE>

     Special Consideration for Officers and Directors. Following is a discussion
of certain tax rules applicable to officers and directors of the Company.
Officers and directors should consult their tax advisors regarding these issues.

     ISOs. If an optionee is an officer or director of the Company who is
potentially subject to short-swing profits liability under Section 16(b) of the
1934 Act, ISO Shares that are purchased on exercise of an ISO less than six
months after the date of grant will be subject to special tax rules. Thus, in
the case of a disqualifying disposition the optionee will recognize ordinary
income equal to the difference between the fair market value of the ISO Shares
on the date six months after the date of grant (or, if less, the amount realized
on the sale of the ISO Shares) and the option exercise price unless the optionee
makes an election under Section 83(b) of the Code (an "83(b) election"). If the
optionee makes an 83(b) election the ordinary income is equal to the difference
between the fair market value on the date of exercise (or, if less, the amount
realized on the sale if the ISO Shares) and the option exercise price. Moreover,
for alternative minimum tax calculation purposes, unless the optionee makes an
83(b) election, the adjustment to income will be based on the difference between
fair market value of the ISO Shares on the date six months after the date of
grant and the option exercise price.

     NQSOs. In the event of the exercise of an NQSO less than six months after
the date of grant, the optionee will include in income as compensation an amount
equal to the difference between the fair market value of the shares on the date
six months after the date of grant and the option exercise price unless the
optionee makes an 83(b) election. If the optionee makes an 83(b) election, the
optionee will include in income as compensation an amount equal to the
difference between the fair market value on the date of exercise and the option
exercise price.

     Exercises Within Six Months of a Section 16(b) Purchase. If an optionee
exercises an option more than six months from the date of grant but within six
months from the date of a prior purchase that does not constitute an exempt
purchase under Section 16(b) of the 1934 Act, it may be possible to take the
position that such prior purchase permits the optionee to defer the ordinary
income (or, with respect to ISOs, any adjustment to income for alternative
minimum tax purposes) until six months from the date of the prior purchase.
However, it is not clear at this time whether the Internal Revenue Service would
agree with this position.

     Officers and directors should consult their tax advisors regarding these
issues and the advisability of filing an 83(b) election.

Tax Treatment of the Company

     The Company will be entitled to a deduction in connection with the exercise
of an NQSO by a domestic employee or director to the extent that the optionee
recognizes ordinary income. The Company will be entitled to a deduction in
connection with the disposition of ISO Shares only to the extent that the
optionee recognizes ordinary income on a disqualifying disposition of the ISO
Shares.

ERISA

     The Company believes that the Plans are not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974.

                     AVAILABILITY OF ADDITIONAL INFORMATION

     The Company filed the Registration Statement with the SEC with respect to
the shares issuable pursuant to the exercise of options granted under the Class
A Plan. The Registration Statement incorporates by reference the following
documents:

     (a)  The Registrant's latest annual report filed pursuant to Section 13 or
          15(d) of the Exchange Act or the latest prospectus filed pursuant to
          Rule 424(b) under the Securities Exchange Act of 1934, as amended (the
          "Exchange Act"), or the latest prospectus filed pursuant to Rule
          424(b) under the 1933 Act (the "1933 Act"), that contains audited
          financial statements for the Registrant's latest fiscal year for which
          such statements have been filed.

     (b)  All other reports filed pursuant to Section 13(a) or 15(d) of the
          Exchange Act since the end of the fiscal year covered by the annual
          report or the prospectus referred to in (a) above.

<PAGE>

     (c)  The description of the Registrant's Class A common stock contained in
          the Registrant's Registration Statement filed with the Commission
          under Section 12 of the Exchange Act, including any amendment or
          report filed for the purpose of updating such description.

     All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing of such documents.

     The Company will provide to you, upon written or oral request and without
charge: (1) a copy of any document incorporated by reference in the Registration
Statement (not including exhibits to such document unless such exhibits are
specifically incorporated by reference into such document); (2) a copy of the
Company's most recent Annual Report to Shareholders (or such alternative
document as Rule 428(b)(2) under the 1933 Act permits); (3) a copy of all
reports, proxy statements and other communications distributed by the Company to
its stockholders generally; and (4) a copy of all documents that constitute a
part of the prospectus required to be delivered to each Plan participant. Please
direct all requests to the Stock Administration department at the Company's
headquarters.

<PAGE>

                                                          Emp#:_______; Class: A
                                                          Grant#: _______
                                                          Location:______

                              ELECTRONIC ARTS INC.
                         NONQUALIFIED STOCK OPTION GRANT

     Electronic Arts Inc., a Delaware corporation, (the "Company") hereby grants
to the optionee named below (the "Optionee"), a non-qualified stock option (the
"Option") under the Company's 2000 Class A Equity Incentive Plan as amended (the
"Plan"), to purchase the total number of shares set forth below of Class A
common stock of the Company (the "Option Shares") at the exercise price per
share set forth below (the "Exercise Price"). The option is subject to all the
terms and conditions of the Nonqualified Stock Option Grant including the terms
and conditions contained in the attached Appendix A (the "Grant") and the Plan,
the provisions of which are incorporated herein by reference. The principal
features of the option are as follows:

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

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

Number of Option Shares:                      Exercise Price per Share:
                           ---------                                    --------

Date of Grant:                                Expiration Date:
                           ---------                                    --------

Vest Start Date:
                           ---------

     Subject to the terms and conditions of the Plan and the Grant, the Option
shall vest 2% per month for 50 months on the 1st day of each calendar month
until the earlier of (1) the date the option becomes fully vested or (2) the
date the optionee ceases to be employed. Optionee may first exercise the Option
with respect to the vested Option Shares on the first day of the 12th month from
Vest Start Date. Optionee may then exercise the Option with respect to vested
Option Shares at any time until expiration or termination.

     An optionee shall be deemed to have worked a calendar month if optionee has
worked any portion of that month. Only vested options may be exercised. Vesting
will be suspended during any unpaid leave of absence.

     PLEASE READ ALL OF APPENDIX A WHICH CONTAINS THE SPECIFIC TERMS AND
CONDITIONS OF THE OPTION.

ELECTRONIC ARTS INC.

/s/ E. Stanton McKee, Jr.
---------------------------------------------
E. Stanton McKee, Jr.
EVP, Chief Financial and Administrative Officer

ACCEPTANCE

Optionee hereby acknowledges that a copy of the Plan and a copy of the
Prospectus as amended are available upon request from the Stock Administration
department and can also be accessed electronically. Optionee represents that
Optionee has read and understands the terms and conditions thereof, and accepts
the Option subject to all the terms and conditions of the Plan and the Grant.
Optionee acknowledges that there may be adverse tax consequences upon exercise
of the Option and that Optionee should consult a tax adviser prior to such
exercise.

_________________________________
Optionee

<PAGE>

                                                                      Appendix A
                                                                      ----------

                              ELECTRONIC ARTS INC.
          Nonqualified Stock Option (the "Option") Terms and Conditions
            Under the 2000 Class A Equity Incentive Plan, as amended

1. Form of Option Grant. Each Option granted under the Plan shall be evidenced
   --------------------
by a written Stock Option Grant (the "Grant") in such form (which need not be
the same for each Optionee) as the Committee shall from time to time approve,
which Grant shall comply with and be subject to the terms and conditions of the
Plan.

2. Date of Grant. The date of grant of the Option shall be the date on which the
   -------------
Committee makes the determination to grant such Option unless otherwise
specified by the committee. The Grant representing the Option will be delivered
to Optionee within a reasonable time after the granting of the Option. Copies of
the Plan and Prospectus are available electronically at http://www.ea.com/legal
and can also be obtained by contacting the Stock Administration Department.

3. Exercise Price. The exercise price of the Option shall be determined by the
   --------------
Committee on the date the Option is granted; provided that the exercise price of
the Option shall be not less than 100% of the Fair Market Value of the Shares on
the date the Option is granted.

4. Exercise Period. Options shall be exercisable within the times or upon the
   ---------------
events determined by the Committee as set forth in the Grant; provided, however,
that no Option shall be exercisable after the expiration of ten (10) years from
the date the Option is granted.

5. Restrictions on Exercise. Exercise of the Option is subject to the following
   ------------------------
limitations:

     (a) The Option may not be exercised until the Plan has been approved by the
stockholders of the Company as set forth in the Plan.

     (b) The Option may not be exercised unless such exercise is in compliance
with the 1933 Act, as amended, the Exchange Act of 1934, as amended, all
applicable state securities laws, and the requirements of any stock exchange or
national market system on which the Company's Common Stock may be listed, as
they are in effect on the date of exercise.

     (c) The Option may be exercised even if there is outstanding, within the
meaning of Section 422A(c)(7) of the Internal Revenue Code of 1954, as amended
(the "Code"), any incentive stock option to purchase stock of the Company or its
Parent or Subsidiary (as defined in the plan) that was granted to the Optionee
before the grant of the Option.

6. Termination of Option.
   ---------------------

     (a) Except as provided in this section, the Option shall terminate in whole
if Optionee ceases to be an employee of the Company and may not be exercised to
the extent terminated. If the Optionee ceases to be an employee of the Company
for any reason except by death or disability, the Option, to the extent it is
exercisable on the date on which the Optionee ceases to be an employee (the
"Termination Date"), may be exercised by the Optionee within three (3) months
after the Termination Date, but in no event later than the Expiration Date.

          (i) An Optionee shall be deemed to be a "full time" employee if
Optionee works not less than 40 hours per week, unless prevailed upon by local
law.

          (ii) Except as to the number of Option Shares for which the Option
terminates in accordance with subsection (a)(iii) below, the Option shall
continue to vest with respect to Option Shares in equal monthly amounts from the
termination date to the time the Optionee has been continuously employed 50
calendar months from the vest start date set forth in the Grant.

          (iii) The number of Option Shares for which the Option shall terminate
in accordance with this Paragraph will be determined by multiplying the total
number of Option Shares by the following fraction:

              40 minus [number of hours regularly worked per week]
              ----------------------------------------------------
                                       40

     (b) If the Optionee's employment with the Company is terminated because of
the death of the Optionee or disability of the Optionee within the meaning of
Section 22(e)(3) of the Code, the Option, to the extent that it is exercisable
on the Termination Date, may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve months after
the Termination Date, but in any event no later than the Expiration Date.

<PAGE>

     (c) Notwithstanding the provisions in Paragraph 6(a) above, if the
Optionee's employment with the Company is terminated for Cause, the Option with
respect to any Shares whatsoever, after termination of service, may not be
exercised.

     (d) Nothing in the Plan or the Grant shall confer on Optionee any right to
continue in the employ of, or other relationship with, the Company or any
Parent, Subsidiary or Affiliate of the Company or limit in any way the right of
the Company or any Parent, Subsidiary or Affiliate of the Company to terminate
Optionee's employment or other relationship at any time, with or without cause.

7. Manner of Exercise.
   -------------------

     (a) The Option shall be exercisable by delivery to the Company of written
notice in the form attached hereto as Exhibit A, or in such other form as may be
                                      ---------
approved by the Board of Directors of the Company, which shall set forth the
Optionee's election to exercise the Option, the number of Option Shares being
purchased, and such other representations and agreements as to the Optionee's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws.

     (b) Such notice shall be accompanied by full payment of the Exercise Price
(i) in cash; (ii) by tender of shares of Common Stock of the Company having a
fair market value equal to the Exercise Price; or (iii) a combination of the
foregoing, provided that a portion of the exercise price equal to the par value
of the Shares, if any, must be paid in cash or other legal consideration.

     (c) Prior to the issuance of the Option Shares upon exercise of the Option,
the Optionee must pay or make adequate provision for any applicable federal,
state, or provincial withholding obligations of the Company.

     (d) Provided that such notice and payment are in form and substance
satisfactory to counsel for the Company, the Company shall issue the Option
Shares registered in the name of the Optionee or the Optionee's legal
representative.

8. Compliance with Laws and Regulations. The issuance and transfer of Option
   ------------------------------------
Shares shall be subject to compliance by the Company and the Optionee with all
applicable requirements of federal and state laws and with all applicable
requirements of any stock exchange or national market system on which the
Company's Common Stock may be listed at the time of such issuance or transfer.

9. Nontransferability of Option. The Option may not be transferred in any manner
   ----------------------------
other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of the Optionee only by the Optionee. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of the Optionee.

10. Tax Consequences. Set forth below is a brief summary as of the date the form
    ----------------
of grant was adopted of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. Additional information is
included in the Prospectus for the Plan, as amended. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR DISPOSING OF THE
SHARES.

     (a) Exercise. Upon exercise, Optionee will recognize compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price. The
Company may be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.

     (b) Disposition of the Shares. For federal tax purposes, if the Shares are
held for less than twelve (12) months after the date of transfer of the Shares
pursuant to the exercise of a nonqualified stock option, any gain realized on
the disposition of the Shares will be treated as a short-term capital gain. If
the Shares are held for more than twelve (12) months any such gain will be
treated as long-term capital gain.

11. Interpretation. Any dispute regarding the interpretation of this agreement
    --------------
shall be submitted by Optionee or the Company forthwith to the Company's Board
of Directors or the committee thereof that administers the Plan, which shall
review such dispute at its next regular meeting. The resolution of such a
dispute by the Board or committee shall be final and binding on the Company and
on Optionee.

12. Entire Agreement. The Exercise Notice and Agreement attached as Exhibit A
    ----------------
and the Plan available upon request from the Stock Administration department and
also accessible electronically is incorporated herein by reference. The Grant,
the Plan and the Exercise Notice and Agreement constitute the entire agreement
of the parties and supersede all prior undertakings and agreements with respect
to the subject matter hereof.

<PAGE>

                                    EXHIBIT A
                   STOCK OPTION EXERCISE NOTICE AND AGREEMENT

Electronic Arts Inc.
209 Redwood Shores Parkway
Redwood City, Ca 94065

Attention:  Stock Administrator

     1. Exercise of Option. The undersigned ("Optionee") hereby elects to
        ------------------
exercise Optionee's option to purchase shares of the Common Stock (the "Option
Shares") of Electronic Arts Inc. (the "Company") under and pursuant to the
Company's 2000 Class A Equity Incentive Plan as amended, (the "Plan") and the
stock option grant dated (the "Grant"). The terms and conditions of the Plan and
the Grant are hereby incorporated into and made a part of this Agreement by this
reference.

     2. Representations of Optionee. Optionee hereby acknowledges, represents
        ---------------------------
and warrants that Optionee has received, read and understood the Plan and the
Grant and will abide by and be bound by their terms and conditions.

     3. Compliance with Securities Laws. Optionee understands and acknowledges
        -------------------------------
that the exercise of any rights to purchase any Option Shares is expressly
conditioned upon compliance with the 1933 Act, the Exchange Act of 1934, the
requirements of any stock exchange or national market system on which the
Company's stock may be listed, and all applicable state securities laws.
Optionee agrees to cooperate with the Company to ensure compliance with such
laws.

     4. Stop Transfer Notices. Optionee understands and agrees that the Company
        ---------------------
may issue appropriate "stop transfer" instructions to its transfer agent to
ensure compliance with the restrictions on transfer.

     5. Tax Consequences. Optionee understands that Optionee may suffer adverse
        ----------------
tax consequences as a result of Optionee's purchase or disposition of the Option
Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Option Shares and that Optionee is not relying on the Company
for any tax advice.

     6. Delivery of Payment. Optionee (or Optionee's broker acting as agent)
        -------------------
herewith delivers to the Company the aggregate purchase price of the Option
Shares that Optionee has elected to purchase, in cash (by check payable to
Electronic Arts Inc.) in the amount of $________________, receipt of which is
acknowledged by the Company.

Submitted by:                                   Accepted by:

OPTIONEE:                                       ELECTRONIC ARTS INC.
          ----------------------------------
                  (Print Name)

                                                By:
--------------------------------------------        ----------------------------
                  (Signature)

                                                Its: Senior Vice President,
                                                     ----------------------
                                                     General Counsel
                                                     ---------------

Dated:                                      Dated:
        ----------                                   ------------------

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