Document:

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                                                                    EXHIBIT 10.8

[WESTLAKE GROUP LOGO]                                       Westlake Center
                                                            2801 Post Oak Blvd.
                                                            Houston, Texas 77056

                                                            Tel: 713/960-9111
                                                            Fax: 713/960-8738

July 23, 2004

Ms. Ruth Dreessen
4103 Ruskin
Houston, TX 77005

Dear Ruth:

This letter is written to confirm the current terms of your employment with
Westlake Management Services Corporation as summarized below, subject to the
closing of Initial Public Offering (IPO) in 2004.

SECTION
-------

POSITION:             Sr. Vice President & Chief Financial Officer (CFO)

LOCATION:             Houston, Corporate Office

STATUS:               Regular, full-time employee

REPORTING:            You will report to Albert Chao, President.

BASE PAY:             Your base pay will be $270,000 per year effective July 1,
                      2004. However, if at the end of calendar year 2004 your
                      total compensation is less than $300,000 per year, after
                      including the management bonus, quarterly incentive,
                      long-term incentive and profit sharing as discussed below,
                      you will be paid the difference between your actual
                      compensation and $300,000.

MANAGEMENT BONUS:     You will be eligible for participation in the annual EVA
                      Incentive Bonus program. Your target bonus will be 40% of
                      base pay. The actual payment will be conditioned on the
                      performance of the company and your individual
                      contributions and may be higher or lower than the target.

QUARTERLY INCENTIVE:  You will be eligible for participation in the Quarterly
                      Incentive Plan. This plan currently has a maximum payment
                      of 2% of annual base pay per quarter.

TERMINATION:          In the event of the discontinuance of your services at the
                      Company's or shareholder's request and not for cause:

                      A.  You will become vested in all compensation and
                          benefit plans for which there is a vesting schedule
                          and given a cash payment were applicable based upon
                          your eligibility as of the date of termination solely
                          in accordance with the terms and conditions of each
                          plan.

                      B.  In the event your termination is solely as a result
                          of a change in control you will be paid an amount
                          equal to one times your annual compensation, to
                          include your then current base pay, cash bonuses,
                          based upon the prior calendar year actual payment, and
                          an amount equivalent to the cash value of the
                          long-term incentive provisions provided below at the
                          40% level. A termination in the event of a change of
                          control in this respect will mean (i) your involuntary
                          termination by the Company, a Subsidiary or their
                          successor for any reason other than cause, (ii) your
                          voluntary termination because your position and duties
                          are diminished in a material way from your position or
                          duties prior to a change of control (iii) your
                          voluntary

                                       1

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                      termination because you are required on an ongoing basis
                      to perform your regular duties at a materially different
                      location from your location prior to the change of
                      control. In all other events you will receive, in addition
                      to A. above, the greater of a lump sum payment depending
                      on the year during which the termination occurred or the
                      Company's standard severance package:

                          a.  During 1st year of employment -      $200,000
                          b.  During 2nd year of employment -      $150,000
                          c.  During 3rd year of employment -      $100,000
                          d.  During 4th year of employment -      $ 50,000
                          e.  After the 4th year of employment -   $      0

LONG TERM INCENTIVE:  You will be eligible for awards under the provisions of
                      the Performance Unit Plan (PUP) or any other long term
                      incentive plan generally provided to company executives
                      with a target grant equal to 40% of base pay.

OTHER BONUSES:        At the sole discretion of the Company additional bonuses
                      may be granted subject to the performance of the Company
                      and your individual performance.

PROFIT SHARING:       You will be eligible for any profit sharing payments made
                      to employees at the discretion of the company.

VACATION:             Beginning in 2004 you will become eligible for a maximum
                      of 5 weeks vacation per year. No carryover provision will
                      apply.

BENEFITS:             You will be eligible for all benefits provided to regular,
                      full-time employees of Westlake Management Services
                      pursuant to the terms and conditions of the plan documents
                      and to the extent you have not previously waived your
                      rights to these benefits.

CLUB:                 You will be eligible for membership in the University Club
                      under our Corporate Membership Plan.

EXECUTIVE PHYSICAL:   You will be provided with annual executive physical
                      examination at company expense.

As a senior member of management your future executive compensation package will
be reviewed by the Compensation Committee of the Board of Westlake Chemical
Corporation.

Once you have completed your review of the summary above please acknowledge your
agreement by signing below and returning a copy to my attention.

Best regards,

/s/ ALBERT CHAO
-------------------
Albert Chao
President

AGREED:

/s/ RUTH DREESSEN
-------------------
Ruth Dreessen

Cc:  D. R. Hansen

                                       2<PAGE>

                                                                  EXHIBIT 10.3.1

                                  AMENDMENT TO

               PEOPLESUPPORT, INC. 2002 MANAGEMENT INCENTIVE PLAN

         On July 21, 2004, the Board of Directors of PeopleSupport, Inc., with
the approval of the Chief Executive Officer, approved the following amendment to
the PeopleSupport, Inc. 2002 Management Incentive Plan (the "MIP"). Section 3.2
of the MIP shall be deleted in its entirety and replaced with the following:

         "3.2     ALLOCATION OF REMAINING INTEREST IN MANAGEMENT BONUS POOL.

                  The Board, at its sole discretion, shall have authority to
allocate the remaining twenty-five percent (25%) of the Management Bonus Pool
either on a pro rata basis among Participants listed on Exhibit A or on such
different basis, and to make grants to employees or other service providers not
listed on Exhibit A in consideration of substantial contributions of service to
the Company. All or any portion of such twenty-five percent (25%) may, in the
sole discretion of the Board, be paid upon the closing of a Company Sale in a
lump sum, or may be paid in increments over time following the closing of a
Company Sale with such incremental payments conditioned on the recipient's
continued service to the Company or other performance objectives. The Board may
give the Chief Executive Officer the authority to determine the allocation of
such twenty-five percent (25%) and the terms upon which payments may be made
incrementally over time."<PAGE>
                                                                   EXHIBIT 10.9

                              PEOPLESUPPORT, INC.

                            2004 STOCK INCENTIVE PLAN

              (Adopted by the Board of Directors on July 21, 2004)

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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                          Page
<S>       <C>                                                                             <C>
SECTION 1. ESTABLISHMENT AND PURPOSE.........................................................1

SECTION 2. DEFINITIONS.......................................................................1
    (a)   "Affiliate"........................................................................1
    (b)   "Award"............................................................................1
    (c)   "Board of Directors"...............................................................1
    (d)   "Change in Control"................................................................1
    (e)   "Code".............................................................................2
    (f)   "Committee"........................................................................2
    (g)   "Company"..........................................................................2
    (h)   "Consultant".......................................................................3
    (i)   "Employee".........................................................................3
    (j)   "Exchange Act".....................................................................3
    (k)   "Exercise Price"...................................................................3
    (l)   "Fair Market Value"................................................................3
    (m)   "ISO"..............................................................................3
    (n)   "Nonstatutory Option" or "NSO".....................................................3
    (o)   "Offeree"..........................................................................4
    (p)   "Option"...........................................................................4
    (q)   "Optionee".........................................................................4
    (r)   "Outside Director".................................................................4
    (s)   "Parent"...........................................................................4
    (t)   "Participant"......................................................................4
    (u)   "Plan".............................................................................4
    (v)   "Purchase Price"...................................................................4
    (w)   "Restricted Share".................................................................4
    (x)   "Restricted Share Agreement".......................................................4
    (y)   "SAR"..............................................................................4
    (z)   "SAR Agreement"....................................................................4
    (aa)  "Service"..........................................................................4
    (bb)  "Share"............................................................................4
    (cc)  "Stock"............................................................................4
    (dd)  "Stock Option Agreement"...........................................................4
    (ee)  "Stock Unit".......................................................................5
    (ff)  "Stock Unit Agreement".............................................................5
    (gg)  "Subsidiary".......................................................................5
    (hh)  "Total and Permanent Disability"...................................................5

SECTION 3. ADMINISTRATION....................................................................5
    (a)   Committee Composition..............................................................5
    (b)   Committee for Non-Officer Grants...................................................5
    (c)   Committee Procedures...............................................................5
</TABLE>

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<TABLE>
<CAPTION>

                                                                                          Page
<S>       <C>                                                                             <C>
    (d)   Committee Responsibilities.........................................................6

SECTION 4. ELIGIBILITY.......................................................................7
    (a)   General Rule.......................................................................7
    (b)   Automatic Grants to Outside Directors..............................................7
    (c)   Ten-Percent Stockholders...........................................................8
    (d)   Attribution Rules..................................................................8
    (e)   Outstanding Stock..................................................................8

SECTION 5. STOCK SUBJECT TO PLAN.............................................................8
    (a)   Basic Limitation...................................................................8
    (b)   Award Limitation...................................................................9
    (c)   Additional Shares..................................................................9

SECTION 6. RESTRICTED SHARES.................................................................9
    (a)   Restricted Stock Agreement.........................................................9
    (b)   Payment for Awards.................................................................9
    (c)   Vesting............................................................................9
    (d)   Voting and Dividend Rights........................................................10
    (e)   Restrictions on Transfer of Shares................................................10

SECTION 7. TERMS AND CONDITIONS OF OPTIONS..................................................10
    (a)   Stock Option Agreement............................................................10
    (b)   Number of Shares..................................................................10
    (c)   Exercise Price....................................................................10
    (d)   Withholding Taxes.................................................................10
    (e)   Exercisability and Term...........................................................10
    (f)   Exercise of Options...............................................................11
    (g)   Effect of Change in Control.......................................................11
    (h)   Leaves of Absence.................................................................11
    (i)   No Rights as a Stockholder........................................................11
    (j)   Modification, Extension and Renewal of Options....................................11
    (k)   Restrictions on Transfer of Shares................................................12
    (l)   Buyout Provisions.................................................................12

SECTION 8. PAYMENT FOR SHARES...............................................................12
    (a)   General Rule......................................................................12
    (b)   Surrender of Stock................................................................12
    (c)   Services Rendered.................................................................12
    (d)   Cashless Exercise.................................................................12
    (e)   Exercise/Pledge...................................................................12
    (f)   Promissory Note...................................................................13
    (g)   Other Forms of Payment............................................................13
    (h)   Limitations under Applicable Law..................................................13
</TABLE>

                                      -ii-

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<TABLE>
<CAPTION>

                                                                                          Page
<S>       <C>                                                                             <C>
SECTION 9. STOCK APPRECIATION RIGHTS........................................................13
    (a)   SAR Agreement.....................................................................13
    (b)   Number of Shares..................................................................13
    (c)   Exercise Price....................................................................13
    (d)   Exercisability and Term...........................................................13
    (e)   Effect of Change in Control.......................................................13
    (f)   Exercise of SARs..................................................................14
    (g)   Modification or Assumption of SARs................................................14

SECTION 10. STOCK UNITS.....................................................................14
    (a)   Stock Unit Agreement..............................................................14
    (b)   Payment for Awards................................................................14
    (c)   Vesting Conditions................................................................14
    (d)   Voting and Dividend Rights........................................................14
    (e)   Form and Time of Settlement of Stock Units........................................15
    (f)   Death of Recipient................................................................15
    (g)   Creditors' Rights.................................................................15

SECTION 11. ADJUSTMENT OF SHARES............................................................15
    (a)   Adjustments.......................................................................15
    (b)   Dissolution or Liquidation........................................................16
    (c)   Reorganizations...................................................................16
    (d)   Reservation of Rights.............................................................16

SECTION 12. DEFERRAL OF AWARDS..............................................................17

SECTION 13. AWARDS UNDER OTHER PLANS........................................................17

SECTION 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES........................................17
    (a)   Effective Date....................................................................17
    (b)   Elections to Receive NSOs, Restricted Shares or Stock Units.......................17
    (c)   Number and Terms of NSOs, Restricted Shares or Stock Units........................18

SECTION 15. LEGAL AND REGULATORY REQUIREMENTS...............................................18

SECTION 16. WITHHOLDING TAXES...............................................................18
    (a)   General...........................................................................18
    (b)   Share Withholding.................................................................18

SECTION 17. OTHER PROVISIONS APPLICABLE TO AWARDS...........................................18
    (a)   Transferability...................................................................18
    (b)   [Qualifying Performance Criteria..................................................19

SECTION 18. NO EMPLOYMENT RIGHTS............................................................19

SECTION 19. DURATION AND AMENDMENTS.........................................................19
    (a)   Term of the Plan..................................................................19
</TABLE>

                                     -iii-

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<TABLE>
<CAPTION>

                                                                                          Page
<S>       <C>                                                                             <C>
    (b)   Right to Amend or Terminate the Plan..............................................20
    (c)   Effect of Termination.............................................................20

SECTION 20. EXECUTION.......................................................................21
</TABLE>

                                      -iv-

<PAGE>

                               PEOPLESUPPORT, INC.

                            2004 STOCK INCENTIVE PLAN

SECTION 1. ESTABLISHMENT AND PURPOSE.

        The Plan (as hereinafter defined) was adopted by the Board of Directors
on July 21, 2004, effective as of the date of the initial offering of Stock (as
hereinafter defined) to the public pursuant to a registration statement filed by
the Company (as hereinafter defined) with the Securities and Exchange Commission
(the "Effective Date"). The purpose of the Plan is to promote the long-term
success of the Company and the creation of stockholder value by (a) encouraging
Employees (as hereinafter defined), Outside Directors (as hereinafter defined)
and Consultants (as hereinafter defined) to focus on critical long-range
objectives, (b) encouraging the attraction and retention of Employees, Outside
Directors and Consultants with exceptional qualifications and (c) linking
Employees, Outside Directors and Consultants directly to stockholder interests
through increased stock ownership. The Plan seeks to achieve this purpose by
providing for Awards (as hereinafter defined) in the form of restricted shares,
stock units, options (which may constitute incentive stock options or
nonstatutory stock options) or stock appreciation rights.

SECTION 2. DEFINITIONS.

        (a) "Affiliate" shall mean any entity other than a Subsidiary, if the
Company and/or one of more Subsidiaries own not less than 50% of such entity.

        (b) "Award" shall mean any award of an Option, a SAR, a Restricted Share
or a Stock Unit under the Plan.

        (c) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.

        (d) "Change in Control" shall mean the occurrence of any of the
following events:

               (i) A change in the composition of the Board of Directors occurs,
as a result of which fewer than one-half of the incumbent directors are
directors who either:

                      (A) Had been directors of the Company on the "look-back
date" (as defined below) (the "original directors"); or

                      (B) Were elected, or nominated for election, to the Board
of Directors with the affirmative votes of at least a majority of the aggregate
of the original directors who were still in office at the time of the election
or nomination and the directors whose election or nomination was previously so
approved (the "continuing directors"); or

                                      -1-

<PAGE>

               (ii) Any "person" (as defined below) who by the acquisition or
aggregation of securities, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the Company's
then outstanding securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); except that any change in the relative beneficial
ownership of the Company's securities by any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base Capital Stock,
and any decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or indirectly,
such person's beneficial ownership of any securities of the Company; or

               (iii) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
persons who were not stockholders of the Company immediately prior to such
merger, consolidation or other reorganization own immediately after such merger,
consolidation or other reorganization 50% or more of the voting power of the
outstanding securities of each of (A) the continuing or surviving entity and (B)
any direct or indirect parent corporation of such continuing or surviving
entity; or

               (iv) The sale, transfer or other disposition of all or
substantially all of the Company's assets.

        For purposes of subsection (d)(i) above, the term "look-back" date shall
mean the later of (1) the Effective Date or (2) the date 24 months prior to the
date of the event that may constitute a Change in Control.

        For purposes of subsection (d)(ii)) above, the term "person" shall have
the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Act
but shall exclude (1) a trustee or other fiduciary holding securities under an
employee benefit plan maintained by the Company or a Parent or Subsidiary and
(2) a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the Stock.

        Any other provision of this Section 2(d) notwithstanding, a transaction
shall not constitute a Change in Control if its sole purpose is to change the
state of the Company's incorporation or to create a holding company that will be
owned in substantially the same proportions by the persons who held the
Company's securities immediately before such transaction, and a Change in
Control shall not be deemed to occur if the Company files a registration
statement with the Securities and Exchange Commission for the initial offering
of Stock to the public.

        (e) "Code" shall mean the Internal Revenue Code of 1986, as amended.

        (f) "Committee" shall mean the Compensation Committee as designated by
the Board of Directors, which is authorized to administer the Plan, as described
in Section 3 hereof.

        (g) "Company" shall mean PeopleSupport, Inc.

                                       -2-

<PAGE>

        (h) "Consultant" shall mean a consultant or advisor who provides bona
fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor or a member of the board of directors of a Parent or a
Subsidiary who is not an Employee.

        (i) "Employee" shall mean any individual who is a common-law employee of
the Company, a Parent or a Subsidiary.

        (j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

        (k) "Exercise Price" shall mean, in the case of an Option, the amount
for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.

        (l) "Fair Market Value" with respect to a Share, shall mean the market
price of one Share of Stock, determined by the Committee as follows:

               (i) If the Stock was traded over-the-counter on the date in
question but was not traded on The Nasdaq Stock Market, then the Fair Market
Value shall be equal to the last transaction price quoted for such date by the
OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the
last reported representative bid and asked prices quoted for such date by the
principal automated inter-dealer quotation system on which the Stock is quoted
or, if the Stock is not quoted on any such system, by the "Pink Sheets"
published by the National Quotation Bureau, Inc.;

               (ii) If the Stock was traded on The Nasdaq Stock Market, then the
Fair Market Value shall be equal to the last reported sale price quoted for such
date by The Nasdaq Stock Market;

               (iii) If the Stock was traded on a United States stock exchange
on the date in question, then the Fair Market Value shall be equal to the
closing price reported for such date by the applicable composite-transactions
report; and

               (iv) If none of the foregoing provisions is applicable, then the
Fair Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.

In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.

        (m) "ISO" shall mean an employee incentive stock option described in
Section 422 of the Code.

        (n) "Nonstatutory Option" or "NSO" shall mean an employee stock option
that is not an ISO.

                                      -3-

<PAGE>

        (o) "Offeree" shall mean an individual to whom the Committee has offered
the right to acquire Shares under the Plan (other than upon exercise of an
Option).

        (p) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.

        (q) "Optionee" shall mean an individual or estate who holds an Option or
SAR.

        (r) "Outside Director" shall mean a member of the Board of Directors who
is not a common-law employee of, or paid consultant to, the Company, a Parent or
a Subsidiary.

        (s) "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
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. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be a Parent commencing as of such
date.

        (t) "Participant" shall mean an individual or estate who holds an Award.

        (u) "Plan" shall mean this 2004 Stock Incentive Plan of PeopleSupport,
Inc., as amended from time to time.

        (v) "Purchase Price" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.

        (w) "Restricted Share" shall mean a Share awarded under the Plan.

        (x) "Restricted Share Agreement" shall mean the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.

        (y) "SAR" shall mean a stock appreciation right granted under the Plan.

        (z) "SAR Agreement" shall mean the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.

        (aa) "Service" shall mean service as an Employee, Consultant or Outside
Director.

        (bb) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 8 (if applicable).

        (cc) "Stock" shall mean the Common Stock of the Company.

        (dd) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee that contains the terms, conditions and restrictions
pertaining to his Option.

                                      -4-

<PAGE>

        (ee) "Stock Unit" shall mean a bookkeeping entry representing the
equivalent of one Share, as awarded under the Plan.

        (ff) "Stock Unit Agreement" shall mean the agreement between the Company
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.

        (gg) "Subsidiary" shall mean any corporation, if the Company and/or one
or more other Subsidiaries own not less than 50% of the total combined voting
power of all classes of outstanding stock of such corporation. A corporation
that attains the status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.

        (hh) "Total and Permanent Disability" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted, or can be expected to last, for a continuous period of
not less than 12 months.

SECTION 3. ADMINISTRATION.

        (a) Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist of two or more directors of the Company,
who shall be appointed by the Board of Directors. In addition, the composition
of the Committee shall satisfy (i) such requirements as the Securities and
Exchange Commission may establish for administrators acting under plans intended
to qualify for exemption under Rule 16b-3 (or its successor) under the Exchange
Act; and (ii) such requirements as the Internal Revenue Service may establish
for outside directors acting under plans intended to qualify for exemption under
Section 162(m)(4)(C) of the Code.

        (b) Committee for Non-Officer Grants. The Board of Directors may also
appoint one or more separate committees of the Board of Directors, each composed
of one or more directors of the Company who need not satisfy the requirements of
Section 3(a), who may administer the Plan with respect to Employees who are not
considered officers or directors of the Company under Section 16 of the Exchange
Act, may grant Awards under the Plan to such Employees and may determine all
terms of such grants. Within the limitations of the preceding sentence, any
reference in the Plan to the Committee shall include such committee or
committees appointed pursuant to the preceding sentence. The Board of Directors
may also authorize one or more officers of the Company to designate Employees,
other than officers under Section 16 of the Exchange Act, to receive Awards
and/or to determine the number of such Awards to be received by such persons;
provided, however, that the Board of Directors shall specify the total number of
Awards that such officers may so award.

        (c) Committee Procedures. The Board of Directors shall designate one of
the members of the Committee as chairman. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at

                                      -5-

<PAGE>

meetings at which a quorum exists, or acts reduced to or approved in writing by
all Committee members, shall be valid acts of the Committee.

        (d) Committee Responsibilities. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take the following
actions:

               (i) To interpret the Plan and to apply its provisions;

               (ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;

               (iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;

               (iv) To determine when Awards are to be granted under the Plan;

               (v) To select the Offerees and Optionees;

               (vi) To determine the number of Shares to be made subject to each
Award;

               (vii) To prescribe the terms and conditions of each Award,
including (without limitation) the Exercise Price and Purchase Price, and the
vesting or duration of the Award (including accelerating the vesting of Awards,
either at the time of the Award or thereafter, without the consent of the
Participant), to determine whether an Option is to be classified as an ISO or as
a Nonstatutory Option, and to specify the provisions of the agreement relating
to such Award;

               (viii) To amend any outstanding Award agreement, subject to
applicable legal restrictions and to the consent of the Participant if the
Participant's rights or obligations would be materially impaired;

               (ix) To prescribe the consideration for the grant of each Award
or other right under the Plan and to determine the sufficiency of such
consideration;

               (x) To determine the disposition of each Award or other right
under the Plan in the event of a Participant's divorce or dissolution of
marriage;

               (xi) To determine whether Awards under the Plan will be granted
in replacement of other grants under an incentive or other compensation plan of
an acquired business;

               (xii) To correct any defect, supply any omission, or reconcile
any inconsistency in the Plan or any Award agreement;

                                      -6-
<PAGE>

               (xiii) To establish or verify the extent of satisfaction of any
performance goals or other conditions applicable to the grant, issuance,
exercisability, vesting and/or ability to retain any Award; and

               (xiv) To take any other actions deemed necessary or advisable for
the administration of the Plan.

Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.

SECTION 4. ELIGIBILITY.

        (a) General Rule. Only Employees shall be eligible for the grant of
ISOs. Only Employees, Consultants and Outside Directors shall be eligible for
the grant of Restricted Shares, Stock Units, Nonstatutory Options or SARs.

        (b) Automatic Grants to Outside Directors.

               (i) Each Outside Director who first joins the Board of Directors
after the Effective Date of the Plan, and who was not previously an Employee,
shall receive a Nonstatutory Option, subject to approval of the Plan by the
Company's stockholders, to purchase 20,000 Shares (subject to adjustment under
Section 11) on the first business day after his or her election to the Board of
Directors. The Shares subject to each Option granted under this Section 4(b)(i)
shall vest quarterly over a three-year period, such that 8.33% of the total
number of Shares subject to such Option shall vest and become exercisable at the
end of each quarter, beginning at the end of the first quarter after the date of
grant. Each Outside Director who is a member of the Board of Directors on the
Effective Date of the Plan shall receive a Nonstatutory Option to purchase
20,000 Shares (subject to adjustment under Section 11) on the Effective Date of
the Plan (the "Initial Grant"). The Shares subject to such Initial Grant shall
vest quarterly over a three-year period, such that 8.33% of the total number of
Shares subject to such Option shall vest and become exercisable at the end of
each quarter, beginning at the end of the first quarter after the Effective Date
of the Plan. Notwithstanding the foregoing, each such Option shall become vested
if a Change in Control occurs with respect to the Company during the Optionee's
Service.

               (ii) On the first business day following each anniversary of the
Initial Grant, commencing with the first anniversary after the Initial Grant,
each Outside Director who continues to serve as a member of the Board of
Directors shall receive an Option to purchase 5,000 Shares (subject to
adjustment under Section 11), provided that such Outside Director has served on
the Board of Directors for at least six months. Each Option granted under this
Section 4(b)(ii) shall vest and become exercisable quarterly, in equal quarterly
installments, over a one-year period. Notwithstanding the foregoing, each Option
granted under this Section 4(b)(ii) shall become vested if a Change in Control
occurs with respect to the Company during the Optionee's Service.

                                      -7-
<PAGE>

ratably over 12 months. Notwithstanding the foregoing, each Option granted under
this Section 4(b)(ii) shall become vested if a Change in Control occurs with
respect to the Company during the Optionee's Service.

               (iii) The Exercise Price of all Nonstatutory Options granted to
an Outside Director under this Section 4(b) shall be equal to 100% of the Fair
Market Value of a Share on the date of grant, payable in one of the forms
described in Section 8(a), (b) or (d).

               (iv) All Nonstatutory Options granted to an Outside Director
under this Section 4(b) shall terminate on the earlier of (A) the day before the
tenth anniversary of the date of grant of such Options or (B) the date twelve
months after the termination of such Outside Director's Service for any reason;
provided, however, that any such Options that are not vested upon the
termination of the Outside Director's Service for any reason shall terminate
immediately and may not be exercised.

        (c) Ten-Percent Stockholders. An Employee who owns more than 10% of the
total combined voting power of all classes of outstanding stock of the Company,
a Parent or Subsidiary shall not be eligible for the grant of an ISO unless such
grant satisfies the requirements of Section 422(c)(5) of the Code.

        (d) Attribution Rules. For purposes of Section 4(c) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for such Employee's brothers, sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or for
a corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries.

        (e) Outstanding Stock. For purposes of Section 4(c) above, "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.

SECTION 5. STOCK SUBJECT TO PLAN.

        (a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares or treasury Shares. The aggregate number of Shares
authorized for issuance as Awards under the Plan shall not exceed 900,000
Shares, plus (x) any Shares remaining available for grant of awards under the
Company's 1998 Stock Incentive Plan on the effective date of the Plan (including
Shares subject to outstanding options under the Company's 1998 Stock Incentive
Plan on the effective date of this Plan that are subsequently forfeited or
terminate for any other reason before being exercised and unvested Shares that
are forfeited pursuant to such plan after the effective date of this Plan) and
(y) an annual increase on the first day of each fiscal year during the term of
the Plan, beginning January 1, 2006, in each case in an amount equal to the
lesser of (i) 1,100,000 Shares, (ii) 4% of the outstanding Shares on the last
day of the immediately preceding year, or (iii) an amount determined by the
Board of Directors. The limitations of this Section 5(a) shall be subject to
adjustment pursuant to Section 11. The number of Shares that are

                                      -8-

<PAGE>

subject to Options or other rights outstanding at any time under the Plan shall
not exceed the number of Shares which then remain available for issuance under
the Plan. The Company, during the term of the Plan, shall at all times reserve
and keep available sufficient Shares to satisfy the requirements of the Plan.

        (b) Award Limitation. Subject to the provisions of Section 11, no
Participant may receive Options, SARs, Restricted Shares or Stock Units under
the Plan in any calendar year that relate to more than 180,000 Shares, except
that grants to a Participant in the calendar year in which his or her service
first commences shall not relate to more than 720,000 Shares.

        (c) Additional Shares. If Restricted Shares or Shares issued upon the
exercise of Options are forfeited, then such Shares shall again become available
for Awards under the Plan. If Stock Units, Options or SARs are forfeited or
terminate for any other reason before being exercised, then the corresponding
Shares shall again become available for Awards under the Plan. If Stock Units
are settled, then only the number of Shares (if any) actually issued in
settlement of such Stock Units shall reduce the number available under Section
5(a) and the balance shall again become available for Awards under the Plan. If
SARs are exercised, then only the number of Shares (if any) actually issued in
settlement of such SARs shall reduce the number available in Section 5(a) and
the balance shall again become available for Awards under the Plan.

SECTION 6. RESTRICTED SHARES.

        (a) Restricted Stock Agreement. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.

        (b) Payment for Awards. Subject to the following sentence, Restricted
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the extent
that an Award consists of newly issued Restricted Shares, the Award recipient
shall furnish consideration with a value not less than the par value of such
Restricted Shares in the form of cash, cash equivalents, or past services
rendered to the Company (or a Parent or Subsidiary), as the Committee may
determine.

        (c) Vesting. Each Award of Restricted Shares may or may not be subject
to vesting. Vesting shall occur, in full or in installments, upon satisfaction
of the conditions specified in the Restricted Stock Agreement. A Restricted
Stock Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Restricted Shares of thereafter, that all or
part of such Restricted Shares shall become vested in the event that a Change in
Control occurs with respect to the Company.

                                      -9-
<PAGE>

        (d) Voting and Dividend Rights. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Restricted Stock Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be subject
to the same conditions and restrictions as the Award with respect to which the
dividends were paid.

        (e) Restrictions on Transfer of Shares. Restricted Shares shall be
subject to such rights of repurchase, rights of first refusal or other
restrictions as the Committee may determine. Such restrictions shall be set
forth in the applicable Restricted Stock Agreement and shall apply in addition
to any general restrictions that may apply to all holders of Shares.

SECTION 7. TERMS AND CONDITIONS OF OPTIONS.

        (a) Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The Stock Option Agreement shall specify whether the Option is
an ISO or an NSO. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical. Options may be granted in
consideration of a reduction in the Optionee's other compensation.

        (b) Number of Shares. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 11.

        (c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the
Fair Market Value of a Share on the date of grant, except as otherwise provided
in 4(c), and the Exercise Price of an NSO shall not be less 85% of the Fair
Market Value of a Share on the date of grant. Notwithstanding the foregoing, a
Stock Option Agreement may specify that the exercise price of an NSO may vary in
accordance with a predetermined formula. Subject to the foregoing in this
Section 7(c), the Exercise Price under any Option shall be determined by the
Committee at its sole discretion. The Exercise Price shall be payable in one of
the forms described in Section 8.

        (d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.

        (e) Exercisability and Term. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement

                                      -10-

<PAGE>

shall also specify the term of the Option; provided that the term of an ISO
shall in no event exceed 10 years from the date of grant (five years for
Employees described in Section 4(c). A Stock Option Agreement may provide for
accelerated exercisability in the event of the Optionee's death, disability, or
retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's Service. Options may
be awarded in combination with SARs, and such an Award may provide that the
Options will not be exercisable unless the related SARs are forfeited. Subject
to the foregoing in this Section 7(e), the Committee at its sole discretion
shall determine when all or any installment of an Option is to become
exercisable and when an Option is to expire.

        (f) Exercise of Options. Upon Termination of Service. Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service with the
Company and its Subsidiaries, and the right to exercise the Option of any
executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.

        (g) Effect of Change in Control. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company.

        (h) Leaves of Absence. An Employee's Service shall cease when such
Employee ceases to be actively employed by, or a Consultant to, the Company (or
any subsidiary) as determined in the sole discretion of the Board of Directors.
For purposes of Options, Service does not terminate when an Employee goes on a
bona fide leave of absence, that was approved by the Company in writing, if the
terms of the leave provide for continued service crediting, or when continued
service crediting is required by applicable law. However, for purposes of
determining whether an Option is entitled to ISO status, an Employee's Service
will be treated as terminating 90 days after such Employee went on leave, unless
such Employee's right to return to active work is guaranteed by law or by a
contract. Service terminates in any event when the approved leave ends, unless
such Employee immediately returns to active work. The Company determines which
leaves count toward Service, and when Service terminates for all purposes under
the Plan.

        (i) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 11.

        (j) Modification, Extension and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
options or may accept the cancellation of outstanding options (to the extent not
previously exercised), whether or not

                                      -11-
<PAGE>

granted hereunder, in return for the grant of new Options for the same or a
different number of Shares and at the same or a different exercise price, or in
return for the grant of the same or a different number of Shares. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, materially impair his or her rights or obligations under such Option.

        (k) Restrictions on Transfer of Shares. Any Shares issued upon exercise
of an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.

        (l) Buyout Provisions. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.

SECTION 8. PAYMENT FOR SHARES.

        (a) General Rule. The entire Exercise Price or Purchase Price of Shares
issued under the Plan shall be payable in lawful money of the United States of
America at the time when such Shares are purchased, except as provided in
Section 8(b) through Section 8(g) below.

        (b) Surrender of Stock. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative. Such Shares shall be valued at their Fair Market Value on the
date when the new Shares are purchased under the Plan. The Optionee shall not
surrender, or attest to the ownership of, Shares in payment of the Exercise
Price if such action would cause the Company to recognize compensation expense
(or additional compensation expense) with respect to the Option for financial
reporting purposes.

        (c) Services Rendered. At the discretion of the Committee, Shares may be
awarded under the Plan in consideration of services rendered to the Company or a
Subsidiary prior to the award. If Shares are awarded without the payment of a
Purchase Price in cash, the Committee shall make a determination (at the time of
the award) of the value of the services rendered by the Offeree and the
sufficiency of the consideration to meet the requirements of Section 6(b).

        (d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.

        (e) Exercise/Pledge. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and

                                      -12-

<PAGE>

to deliver all or part of the loan proceeds to the Company in payment of the
aggregate Exercise Price.

        (f) Promissory Note. To the extent that a Stock Option Agreement or
Restricted Stock Agreement so provides, payment may be made all or in part by
delivering (on a form prescribed by the Company) a full-recourse promissory
note. However, the par value of the Common Shares being purchased under the
Plan, if newly issued, shall be paid in cash or cash equivalents.

        (g) Other Forms of Payment. To the extent that a Stock Option Agreement
or Restricted Stock Agreement so provides, payment may be made in any other form
that is consistent with applicable laws, regulations and rules.

        (h) Limitations under Applicable Law. Notwithstanding anything herein or
in a Stock Option Agreement or Restricted Stock Agreement to the contrary,
payment may not be made in any form that is unlawful, as determined by the
Committee in its sole discretion.

SECTION 9. STOCK APPRECIATION RIGHTS.

        (a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced
by a SAR Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.

        (b) Number of Shares. Each SAR Agreement shall specify the number of
Shares to which the SAR pertains and shall provide for the adjustment of such
number in accordance with Section 11.

        (c) Exercise Price. Each SAR Agreement shall specify the Exercise Price.
A SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.

        (d) Exercisability and Term. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. A SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. A SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.

        (e) Effect of Change in Control. The Committee may determine, at the
time of granting a SAR or thereafter, that such SAR shall become fully
exercisable as to all Common

                                      -13-

<PAGE>

Shares subject to such SAR in the event that a Change in Control occurs with
respect to the Company.

        (f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Shares, (b) cash or (c) a combination of Shares and
cash, as the Committee shall determine. The amount of cash and/or the Fair
Market Value of Shares received upon exercise of SARs shall, in the aggregate,
be equal to the amount by which the Fair Market Value (on the date of surrender)
of the Shares subject to the SARs exceeds the Exercise Price.

        (g) Modification or Assumption of SARs. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of a SAR shall, without the consent of the
holder, materially impair his or her rights or obligations under such SAR.

SECTION 10. STOCK UNITS.

        (a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall
be evidenced by a Stock Unit Agreement between the recipient and the Company.
Such Stock Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need
not be identical. Stock Units may be granted in consideration of a reduction in
the recipient's other compensation.

        (b) Payment for Awards. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.

        (c) Vesting Conditions. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company.

        (d) Voting and Dividend Rights. The holders of Stock Units shall have no
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Share while the Stock Unit is outstanding.
Dividend equivalents may be converted into additional Stock Units. Settlement of
dividend equivalents may be made in the form of cash, in the form of Shares, or
in a combination of both. Prior to distribution, any dividend equivalents which
are not paid shall be

                                      -14-

<PAGE>

subject to the same conditions and restrictions (including without limitation,
any forfeiture conditions) as the Stock Units to which they attach.

        (e) Form and Time of Settlement of Stock Units. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Shares over a series of trading days. Vested
Stock Units may be settled in a lump sum or in installments. The distribution
may occur or commence when all vesting conditions applicable to the Stock Units
have been satisfied or have lapsed, or it may be deferred to any later date. The
amount of a deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an Award of Stock Units is settled, the number of
such Stock Units shall be subject to adjustment pursuant to Section 11.

        (f) Death of Recipient. Any Stock Units Award that becomes payable after
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.

        (g) Creditors' Rights. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.

SECTION 11. ADJUSTMENT OF SHARES.

        (a) Adjustments. In the event of a subdivision of the outstanding Stock,
a declaration of a dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has a material effect on
the price of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of:

               (i) The number of Options, SARs, Restricted Shares and Stock
Units available for future Awards under Section 5;

               (ii) The limitations set forth in Sections 5(a) and (b);

               (iii) The number of NSOs to be granted to Outside Directors under
Section 4(b);

                                      -15-
<PAGE>

               (iv) The number of Shares covered by each outstanding Option and
SAR;

               (v) The Exercise Price under each outstanding Option and SAR; or

               (vi) The number of Stock Units included in any prior Award which
has not yet been settled.

Except as provided in this Section 11, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.

        (b) Dissolution or Liquidation. To the extent not previously exercised
or settled, Options, SARs and Stock Units shall terminate immediately prior to
the dissolution or liquidation of the Company.

        (c) Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for:

               (i) The continuation of the outstanding Awards by the Company, if
the Company is a surviving corporation;

               (ii) The assumption of the outstanding Awards by the surviving
corporation or its parent or subsidiary;

               (iii) The substitution by the surviving corporation or its parent
or subsidiary of its own awards for the outstanding Awards;

               (iv) Full exercisability or vesting and accelerated expiration of
the outstanding Awards; or

               (v) Settlement of the full value of the outstanding Awards in
cash or cash equivalents followed by cancellation of such Awards.

        (d) Reservation of Rights. Except as provided in this Section 11, an
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.

                                      -16-
<PAGE>

SECTION 12. DEFERRAL OF AWARDS.

        The Committee (in its sole discretion) may permit or require a
Participant to:

        Have cash that otherwise would be paid to such Participant as a result
of the exercise of a SAR or the settlement of Stock Units credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company's books;

        Have Shares that otherwise would be delivered to such Participant as a
result of the exercise of an Option or SAR converted into an equal number of
Stock Units; or

        Have Shares that otherwise would be delivered to such Participant as a
result of the exercise of an Option or SAR or the settlement of Stock Units
converted into amounts credited to a deferred compensation account established
for such Participant by the Committee as an entry on the Company's books. Such
amounts shall be determined by reference to the Fair Market Value of such Shares
as of the date when they otherwise would have been delivered to such
Participant.

        A deferred compensation account established under this Section 12 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 12.

SECTION 13. AWARDS UNDER OTHER PLANS.

        The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Shares issued under this Plan. Such Shares shall
be treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under
Section 5.

SECTION 14. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.

        (a) Effective Date. No provision of this Section 14 shall be effective
unless and until the Board of Directors has determined to implement such
provision.

        (b) Elections to Receive NSOs, Restricted Shares or Stock Units. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board of Directors.
Such NSOs, Restricted Shares and Stock Units shall be issued under the Plan. An
election under this Section 14 shall be filed with the Company on the prescribed
form.

                                      -17-

<PAGE>

        (c) Number and Terms of NSOs, Restricted Shares or Stock Units. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board of
Directors. The terms of such NSOs, Restricted Shares or Stock Units shall also
be determined by the Board of Directors.

SECTION 15. LEGAL AND REGULATORY REQUIREMENTS.

        Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable. The Company shall not be liable to a
Participant or other persons as to: (a) the non-issuance or sale of Shares as to
which the Company has been unable to obtain from any regulatory body having
jurisdiction the authority deemed by the Company's counsel to be necessary to
the lawful issuance and sale of any Shares under the Plan; and (b) any tax
consequences expected, but not realized, by any Participant or other person due
to the receipt, exercise or settlement of any Award granted under the Plan.

SECTION 16. WITHHOLDING TAXES.

        (a) General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.

        (b) Share Withholding. The Committee may permit a Participant to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Shares that otherwise would be issued
to him or her or by surrendering all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued at their Fair Market Value on
the date when taxes otherwise would be withheld in cash. In no event may a
Participant have Shares withheld that would otherwise be issued to him or her in
excess of the number necessary to satisfy the legally required minimum tax
withholding.

SECTION 17. OTHER PROVISIONS APPLICABLE TO AWARDS.

        (a) Transferability. Unless the agreement evidencing an Award (or an
amendment thereto authorized by the Committee) expressly provides otherwise, no
Award granted under this Plan, nor any interest in such Award, may be sold,
assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred in
any manner (prior to the vesting and lapse of any and all restrictions
applicable to Shares issued under such Award), other than by will or the laws of
descent and distribution; provided, however, that an ISO may be transferred or
assigned only to

                                      -18-

<PAGE>

the extent consistent with Section 422 of the Code. Any purported assignment,
transfer or encumbrance in violation of this Section 17(a) shall be void and
unenforceable against the Company.

        (b) Qualifying Performance Criteria. The number of Shares or other
benefits granted, issued, retainable and/or vested under an Award may be made
subject to the attainment of performance goals for a specified period of time
relating to one or more of the following performance criteria, either
individually, alternatively or in any combination, applied to either the Company
as a whole or to a business unit or Subsidiary, either individually,
alternatively or in any combination, and measured either annually or
cumulatively over a period of years, on an absolute basis or relative to a
pre-established target, to previous years' results or to a designated comparison
group or index, in each case as specified by the Committee in the Award: (a)
cash flow, (b) earnings per share, (c) earnings before interest, taxes and
amortization, (d) return on equity, (e) total stockholder return, (f) share
price performance, (g) return on capital, (h) return on assets or net assets,
(i) revenue, (j) income or net income, (k) operating income or net operating
income, (l) operating profit or net operating profit, (m) operating margin or
profit margin, (n) return on operating revenue, (o) return on invested capital,
or (p) market segment shares ("Qualifying Performance Criteria"). The Committee
may appropriately adjust any evaluation of performance under a Qualifying
Performance Criteria to exclude any of the following events that occurs during a
performance period: (i) asset write-downs, (ii) litigation or claim judgments or
settlements, (iii) the effect of changes in tax law, accounting principles or
other such laws or provisions affecting reported results, (iv) accruals for
reorganization and restructuring programs and (v) any extraordinary nonrecurring
items as described in Accounting Principles Board Opinion No. 30 and/or in
managements' discussion and analysis of financial condition and results of
operations appearing in the Company's annual report to stockholders for the
applicable year. The Committee shall determine the Qualifying Performance
Criteria not later than the 90th day of the performance period, and shall
determine and certify, for each Participant, the extent to which the Qualifying
Performance Criteria have been met. The Committee may not in any event increase
the amount of compensation payable under the Plan upon the attainment of a
Qualifying Performance Goal to a Participant who is a "covered employee" within
the meaning of Section 162(m) of the Code.

SECTION 18. NO EMPLOYMENT RIGHTS.

        No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason, with or
without notice.

SECTION 19. DURATION AND AMENDMENTS.

        (a) Term of the Plan. The Plan, as set forth herein, shall terminate
automatically on July 21, 2014 and may be terminated on any earlier date
pursuant to Subsection (b) below.

                                      -19-

<PAGE>

        (b) Right to Amend or Terminate the Plan. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any Award granted before amendment of the Plan shall not be materially impaired
by such amendment, except with consent of the Participant. An amendment of the
Plan shall be subject to the approval of the Company's stockholders only to the
extent required by applicable laws, regulations or rules.

        (c) Effect of Termination. No Awards shall be granted under the Plan
after the termination thereof. The termination of the Plan shall not affect
Awards previously granted under the Plan.

               [Remainder of this page intentionally left blank]

                                      -20-

<PAGE>

SECTION 20. EXECUTION.

        To record the adoption of the Plan by the Board of Directors, the
Company has caused its authorized officer to execute the same.

                                          PEOPLESUPPORT, INC.

                                          By
                                             -----------------------------------
                                                     Lance Rosenzweig
                                           President and Chief Executive Officer

                                      -21-

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