Document:

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EXHIBIT 10 (a)

                            FOURTH AMENDMENT TO LEASE

        This Fourth Amendment to Lease ("Agreement") is dated for reference
purposes only as of March 31, 2000, by and between Equus 213 1, LLC, a
California limited liability company, ("Lessor") successor in interest to
Carlsbad Research Center Number Six, ("Original Lessor"), and International
Lottery & Totalizator Systems, Inc., a California corporation ("Lessee").

RECITALS

A.      Original Lessor and Lessee entered into that certain Lease agreement
        dated June 26, 1992, (the "Lease"), whereby Lessee leased from Original
        Lessor the Premises known as 2131 Faraday Avenue, Carlsbad, CA 92008.
        The Lease was subsequently amended by the First Amendment to Lease,
        dated December 20, 1994, by the Second Amendment to Lease dated June 6,
        1995, and by the Third Amendment to Lease dated August 19, 1999.

B.      Among other things, the Third Amendment (i) required the Lessor to
        divide the building located at 2131 Faraday Avenue, Carlsbad, California
        (hereinafter "Building") into two or more separate premises, (ii)
        reduced the size of the original Premises, and (iii) extended the term
        of the Lease through June 30, 2005.

C.      Lessee now desires to further modify the Lease, as amended, to revise
        (i) the size of the Premises, (ii) the Rent, (iii) the security Deposit,
        (iv) the Term, and make further revisions as set forth herein.

NOW, THEREFORE, in consideration of the facts contained in the Recitals above,
the mutual covenants and conditions below, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree to further amend the Lease as follows:

AGREEMENT

1.      Premises and Project. The Premises, hereinafter also referred to as
        Suite 100, 2131 Faraday Avenue, Carlsbad, California, consists of
        approximately 24,791 rentable square feet, as shown on the attached
        Exhibit A (which replaces the previous Exhibit A). Lessee's pro-rata
        share ("Share") of the Building and Project Operating Expenses (as
        defined below) is 56.33 % (24,791 sq ft / 44,013 sq ft). The Project is
        hereby defined as the Building and the Common Areas (as defined below).

2.      Term. The Term of the Lease is hereby extended through January 31, 2006
        (the "Extended Term").

3.      Rent. All monetary obligations of Lessee to Lessor under the terms of
        this Lease (except for the Security Deposit) are deemed to be rent
        ("Rent"). Each month during the term of the Lease, Lessee shall pay Base
        Rent to Lessor as follows:

        April 1, 2000     -      September 30, 2000    $24,791
        October 1, 2000   -      September 30, 2001    $25,535
        October 1, 2001   -      September 30, 2002    $26,301
        October 1, 2002   -      September 30, 2003    $27,090
        October 1, 2003   -      September 30, 2004    $27,902
        October 1, 2004   -      September 30, 2005    $28,740
        October 1, 2005   -      January 31, 2006      $29,602

4.      Security Deposit. Notwithstanding a dispute between Lessor and Lessee
        regarding whether or not interest should have been added to Lessee's
        original Security Deposit (which would have increased the Original
        Security deposit from $28,668.12 to $45,000), Lessor and Lessee agree
        that Lessee's Security Deposit is currently $ 100,000. The Security
        Deposit shall not bear interest for the benefit of Lessee.

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5.      Project Operating Expenses. Project Operating Expenses are hereinafter
        defined as all costs and expenses associated with or in connection with
        the ownership, operation, management, maintenance and repair of the
        entire Building and Common Areas of the Project. Project Operating
        Expenses include (for illustration purposes only), but are not limited
        to, real property taxes and a property management fee in the amount of
        3% of Lessor's monthly gross receipts from tenant(s) located at the
        Building. Project Operating Expenses that are specifically attributable
        to Lessee's Premises or to any other tenant's premises in the Building,
        shall be allocated entirely to Lessee's Premises or to any other
        tenant's premises, as applicable, in Lessor's reasonable discretion.

        During Lessee's occupancy of the Premises prior to March 31, 2000,
        Lessee occupied the entire Building and was responsible for paying all
        Project Operating Expenses. From and after April 1, 2000, Lessee is
        responsible for and shall reimburse Lessor for Lessee's Share of all
        Project Operating Expenses. On or before October 31, 2000, Lessor and
        Lessee agree to provide each other details of amounts that have been
        incurred and or paid relating to Project Operating Expenses for the
        period April 1, 2000, through October 31, 2000. Lessor shall equitably
        reconcile such amounts, and Lessor and Lessee agree to pay any amounts
        owed between the parties. After October 31, 2000, if either party
        identifies additional Project Operating Expenses that should have been
        included in the aforementioned reconciliation, such additional expenses
        must be communicated in writing to the other party no later than
        December 31, 2000, for a final reconciliation of amounts owing between
        the parties for the period prior to October 31, 2000.

        From and after April 1, 2000, Lessee shall not be required to directly
        obtain earthquake insurance. If Lessor is required by Lessor's lender to
        obtain earthquake insurance, such insurance shall be purchased by Lessor
        and Lessee shall reimburse to Lessor Lessee's pro rata share of the cost
        as part of Project Operating Expenses.

        From and after April 1, 2000, Lessor shall procure and maintain, subject
        to reimbursement by Lessee as part of Project Operating Expenses, a
        heating, ventilation and air conditioning system maintenance contract
        acceptable to Lessor in its reasonable discretion.

        Beginning November 1, 2000, Lessee's Share of Project Operating Expenses
        shall be payable by Lessee to Lessor within 10 days after a reasonably
        detailed statement of actual expenses is presented to Lessee. At
        Lessor's option, however, an amount may be estimated by Lessor from time
        to time of Lessee's Share of annual Project Operating Expenses, that
        shall be payable monthly during each 12 month period of the Lease term,
        on the same day as the Base Rent is due hereunder. Lessor's estimate
        shall be based on Project Operating Expenses incurred during the
        previous 12-month period, adjusted for inflation and other costs
        reasonably anticipated by Lessor. Lessor shall deliver to Lessee within
        60 days after the expiration of each calendar year a reasonably detailed
        statement showing Lessee's Share of the actual Project Operating
        Expenses incurred during the preceding year. If Lessee's payments during
        the preceding year exceed Lessee's Share as indicated on such statement,
        Lessee shall be credited the amount of such over-payment against
        Lessee's Share of Project Operating Expenses next becoming due. If
        Lessee's payments during the preceding year were less than Lessee's
        Share as indicated on such statement, Lessee shall pay to Lessor the
        amount of the deficiency within 10 days after delivery by Lessor to
        Lessee of the statement.

6.      Utilities. Lessee will be responsible for payment (direct to the
        applicable provider) of all utilities metered exclusively to Lessee's
        Premises. Lessee's Share of non-exclusively-metered utilities paid by
        Lessor shall be reimbursed to Lessor by Lessee as part of Project
        Operating Expenses. If Lessor determines, in its reasonable judgment,
        that Lessee is using more than its pro-rata share of non-exclusively
        metered utilities, or that Lessee is generating such a large volume of
        trash as to require an increase in the size of the dumpster and/or an
        increase in the number of times per month that the dumpster is emptied,
        then Lessee agrees to pay such increased costs.

7.      Common Areas. The term "Common Areas" is defined as all areas and
        facilities outside the Premises and within the exterior boundary line of
        the Project and interior utility raceways and installations within the
        Premises that are provided and designated by the Lessor from time to
        time for the general non-exclusive use of Lessor, Lessee and other
        tenants of the Project and their respective employees,

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        suppliers, shippers, customers, contractors and invitees, including
        without limitation parking areas, loading and unloading areas, trash
        areas, roadways, walkways, driveways and landscaped areas.

        Lessor grants to Lessee, for the benefit of Lessee and its employees,
        suppliers, shippers, contractors, customers and invitees, during the
        term of this Lease, the non-exclusive right to use, in common with
        others entitled to such use, the Common Areas as they exist from time to
        time, subject to any rights, powers, and privileges reserved by Lessor
        under the terms hereof or under the terms of any rules and regulations
        or restrictions governing the use of the Project. Under no circumstances
        shall the right herein granted to use the Common Areas be deemed to
        include the right to store any property, temporarily or permanently, in
        the Common Areas. Any such storage shall be permitted only by the prior
        written consent of Lessor or Lessor's designated agent, which consent
        may be revoked at any time. In the event that any unauthorized storage
        shall occur, then Lessor shall have the right, after giving Lessee five
        (5) days written notice, in addition to such other rights and remedies
        that it may have, to remove the property and charge the cost to Lessee,
        which cost shall be immediately payable upon demand by Lessor.

        Lessor or such other person(s) as Lessor may appoint shall have the
        exclusive control and management of the Common Areas and shall have the
        right, from time to time, to establish, modify, amend and enforce
        reasonable rules and regulations ("Rules and Regulations") for the
        management, safety, care, and cleanliness of the grounds, the parking
        and unloading of vehicles and the preservation of good order, as well as
        for the convenience of other occupants or tenants of the Building and
        the Project and their invitees. Lessee agrees to abide by and conform to
        all of the Building and the Project and their invitees Lessee agrees to
        abide by and conform to all such Rules and Regulations, and to cause its
        employees, suppliers, shippers, customers, contractors and invitees to
        so abide and conform. Lessor shall not be responsible to Lessee for the
        non-compliance with said Rules and Regulations by other tenants of the
        Project.

8.      Construction. The parties hereby acknowledge and agree that, at Lessor's
        cost, Lessor has completed the dividing of the original Premises. All
        construction work required of Lessor has been performed in accordance
        with all applicable laws and governmental regulations and to Lessee's
        satisfaction. Lessor has no further obligation to Lessee in connection
        with the dividing of the original Premises.

        The parties hereby acknowledge and agree that Lessor has fulfilled its
        obligation to provide Lessee an Improvement Allowance in the amount of
        $67,590 for Lessee to make improvements to its new Premises. Lessee
        represents and warrants that all such improvements were constructed in
        accordance with all applicable laws and governmental regulations, in a
        professional and workmanlike manner, and that Lessee has obtained all
        necessary permits and required approvals. Lessor has no further
        obligation to Lessee in connection with Lessee's improvements within
        Lessee's Premises. Lessee is responsible and shall pay for the cost of
        all improvements within Lessee's Premises, and shall keep them free from
        all and any liens.

9.      Parking. Lessee shall be entitled to use sixty nine (69) unreserved and
        reserved parking spaces (2.8 parking spaces per 1000 square feet of
        space leased) on those portions of the Common Areas designated from time
        to time by Lessor for parking. Lessee shall not use more parking spaces
        than said number. Said parking spaces shall be used for parking by
        vehicles no larger than full-size passenger automobiles or pick-up
        trucks, herein called "Permitted Size Vehicles." Lessor may regulate the
        loading and unloading of vehicles by adopting Rules and Regulations as
        provided above. No vehicles other than Permitted Size Vehicles may be
        parked in the Common Areas without the prior written permission of
        Lessor.

        Lessee shall not permit or allow any vehicles that belong to or are
        controlled by Lessee or Lessee's employees, suppliers, shippers,
        customers, contractors or invitees to be loaded, unloaded, or parked in
        areas other than those designated by Lessor for such activities. Lessee
        shall not service or store any vehicles in the Common Areas. If Lessee
        permits or allows any of the prohibited activities described herein,
        then Lessor shall have the right, without notice, in addition to such
        other rights and remedies that it may have, to remove or tow away the
        vehicle involved and charge the cost to Lessee, which cost shall be
        immediately payable upon demand by Lessor.

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10.     Further to Section 10 of the Third Amendment, the parties acknowledge
        and agree that Lessee has removed the generator and air compressor at
        the rear of the Building and has no need to and shall not reinstall
        similar equipment during the Term of the Lease.

11.     By executing the Third Amendment To Lease, Lessee acknowledges and
        agrees that it did not exercise (i) its Option to Renew the original
        Premises (Section 54 of the Lease), (ii) its Right of First Refusal to
        lease any space located at 2195 Faraday Avenue (Section 57 of the
        Lease), and (iii) its First Right to Negotiate for the purchase of the
        entire building (Section 58), all of which thereby became null and void,
        and Lessee has no further rights in connection therewith.

12.     Except as specifically modified herein, all other terms and conditions
        of the Lease (as amended) shall remain unchanged and in full force and
        effect. In the event of conflict between the terms of the Lease and this
        Fourth Amendment, the terms of this Fourth Amendment shall prevail.

IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as
of the date first written above.

<TABLE>
<CAPTION>
LESSOR                                       LESSEE
<S>                                          <C>
Equus 2131, LLC,                             International Lottery & Totalizator
a California limited liability company       Systems, Inc., a California corporation

By:  /s/ David R. Bourne                     By:  /s/ M. Mark Michalko
    ----------------------------------           -----------------------------------
Name:    David R. Bourne                     Name:    M. Mark Michalko

Its:  Manager                                Its:  President
</TABLE>

                                       4<PAGE>   1

EXHIBIT 10 (g)

                       THE 2000 EQUITY PARTICIPATION PLAN

                                       OF

                INTERNATIONAL LOTTERY & TOTALIZATOR SYSTEMS, INC.

        International Lottery & Totalizator Systems, Inc., a California
corporation, has adopted The 2000 Equity Participation Plan of International
Lottery & Totalizator Systems, Inc. (the "Plan"), for the benefit of its
eligible employees, consultants and directors.

        The purposes of the Plan are as follows:

        (1) To provide an additional incentive for directors, key Employees and
Consultants (as such terms are defined below) to further the growth, development
and financial success of the Company by personally benefiting through the
ownership of Company stock which recognizes such growth, development and
financial success.

        (2) To enable the Company to obtain and retain the services of
directors, key Employees and Consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company which will reflect the growth, development and financial success of the
Company.

                                   ARTICLE I.

                                   DEFINITIONS

        1.1 GENERAL. Wherever the following terms are used in the Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.

        1.2 ADMINISTRATOR. "Administrator" shall mean the entity that conducts
the general administration of the Plan as provided herein. With reference to the
administration of the Plan with respect to Options granted or Restricted Stock
awarded to Independent Directors, the term "Administrator" shall refer to the
Board. With reference to the administration of the Plan with respect to any
other Award, the term "Administrator" shall refer to the Committee unless the
Board has assumed the authority for administration of the Plan generally as
provided in Section 10.2.

        1.3 AWARD. "Award" shall mean an Option or a Restricted Stock award
which may be awarded or granted under the Plan (collectively, "Awards").

        1.4 AWARD AGREEMENT. "Award Agreement" shall mean a written agreement
executed by an authorized officer of the Company and the Holder which shall
contain such terms and conditions with respect to an Award as the Administrator
shall determine, consistent with the Plan.

        1.5 AWARD LIMIT. "Award Limit" shall mean One Hundred Thousand (100,000)
shares of Common Stock, as adjusted pursuant to Section 9.3 of the Plan.

        1.6 BOARD. "Board" shall mean the Board of Directors of the Company.

        1.7 CHANGE IN CONTROL. "Change in Control" shall mean a change in
ownership or control of the Company effected through any of the following
transactions:

                (a) any person or related group of persons (other than the
Company, Berjaya Lottery Management (H.K.) Limited and its affiliates, or a
person that, prior to such transaction, directly or indirectly controls, is
controlled by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of securities

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possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders; or

                (b) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months (or less) such that a majority of
the Board members (rounded up to the nearest whole number) ceases, by reason of
one or more proxy contests for the election of Board members, to be comprised of
individuals who either (i) have been Board members continuously since the
beginning of such period or (ii) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (i) who were still in office at the time such election or
nomination was approved by the Board; or

                (c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation (or other entity), other
than (i) a merger or consolidation with Berjaya Lottery Management (H.K.)
Limited or its affiliates or (ii) a merger or consolidation which would result
in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 66-2/3% of the
combined voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or

                (d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets to any person other
than Berjaya Lottery Management (H.K.) Limited or its affiliates.

        1.8 Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.

        1.9 Committee. "Committee" shall mean the Compensation Committee of the
Board, or another committee or subcommittee of the Board, appointed as provided
in Section 10.1.

        1.10 Common Stock. "Common Stock" shall mean the common stock of the
Company, no par value, and any equity security of the Company issued or
authorized to be issued in the future, but excluding any preferred stock and any
warrants, options or other rights to purchase Common Stock.

        1.11 Company. "Company" shall mean International Lottery & Totalizator
Systems, Inc., a California corporation.

        1.12 Consultant. "Consultant" shall mean any consultant or adviser if:

                (a) the consultant or adviser renders bona fide services to the
Company; the services rendered by the consultant or adviser are not in
connection with the offer or sale of securities in a capital-raising transaction
and do not directly or indirectly promote or maintain a market for the Company's
securities; and

                (b) the consultant or adviser is a natural person who has
contracted directly with the Company to render such services.

        1.13 Director. "Director" shall mean a member of the Board.

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

        1.15 Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company, or of
any corporation which is a Subsidiary.

        1.16 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended.

        1.17 Fair Market Value. "Fair Market Value" of a share of Common Stock
as of a given date shall be (a) the closing price of a share of Common Stock on
the principal exchange on which shares of Common Stock are then trading, if any
(or as reported on any composite index which includes such principal exchange),
on the trading day previous to such date, or if shares were not traded on the
trading day previous to such date, then on the next preceding date on which a
trade occurred, or (b) if Common Stock is not traded on an exchange but is
quoted on NASDAQ or if quotations are available in the over-the-counter market
("OTC"), the mean between the closing representative bid and asked prices for
the Common Stock on the trading day previous to such date as reported by NASDAQ
or on the OTC; or (c) if Common Stock is not publicly traded on an exchange and
not quoted on NASDAQ or on the OTC, the Fair Market Value of a share of Common
Stock as established by the Administrator acting in good faith.

        1.18 Holder. "Holder" shall mean a person who has been granted or
awarded an Award.

        1.19 Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Administrator.

        1.20 Independent Director. "Independent Director" shall mean a member of
the Board who is not an Employee of the Company.

        1.21 Non-Qualified Stock Option. "Non-Qualified Stock Option" shall mean
an Option which is not designated as an Incentive Stock Option by the
Administrator.

        1.22 Option. "Option" shall mean a stock option granted under Article IV
of the Plan. An Option granted under the Plan shall, as determined by the
Administrator, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
Consultants shall be Non-Qualified Stock Options.

        1.23 Performance Criteria. "Performance Criteria" shall mean the
following business criteria with respect to the Company, any Subsidiary or any
division or operating unit: (a) net income, (b) pre-tax income, (c) operating
income, (d) cash flow, (e) earnings per share, (f) return on equity, (g) return
on invested capital or assets, (h) cost reductions or savings, (i) funds from
operations, (j) appreciation in the fair market value of Common Stock and (k)
earnings before any one or more of the following items: interest, taxes,
depreciation or amortization.

        1.24 Plan. "Plan" shall mean The 2000 Equity Participation Plan of
International Lottery & Totalizator Systems, Inc.

        1.25 Restricted Stock. "Restricted Stock" shall mean Common Stock
awarded under Article VII of the Plan.

        1.26 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.

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        1.27 Section 162(m) Participant. "Section 162(m) Participant" shall mean
any key Employee designated by the Administrator as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.

        1.28 Securities Act. "Securities Act" shall mean the Securities Act of
1933, as amended.

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

        1.30 Substitute Award. "Substitute Award" shall mean an Option granted
under this Plan upon the assumption of, or in substitution for, outstanding
equity awards previously granted by a company or other entity in connection with
a corporate transaction, such as a merger, combination, consolidation or
acquisition of property or stock; provided, however, that in no event shall the
term "Substitute Award" be construed to refer to an award made in connection
with the cancellation and repricing of an Option.

        1.31 Termination of Consultancy. "Termination of Consultancy" shall mean
the time when the engagement of a Holder as a Consultant to the Company or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, by resignation, discharge, death or retirement; but
excluding terminations where there is a simultaneous commencement of employment
with the Company or any Subsidiary. The Administrator, in its absolute
discretion, shall determine the effect of all matters and questions relating to
Termination of Consultancy, including, but not by way of limitation, the
question of whether a Termination of Consultancy resulted from a discharge for
good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Consultancy. Notwithstanding any other provision of
the Plan, the Company or any Subsidiary has an absolute and unrestricted right
to terminate a Consultant's service at any time for any reason whatsoever, with
or without cause, except to the extent expressly provided otherwise in writing.

        1.32 Termination of Directorship. "Termination of Directorship" shall
mean the time when a Holder who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship with respect to Independent
Directors.

        1.33 Termination of Employment. "Termination of Employment" shall mean
the time when the employee-employer relationship between a Holder and the
Company or any Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (a) terminations where
there is a simultaneous reemployment or continuing employment of a Holder by the
Company or any Subsidiary, (b) at the discretion of the Administrator,
terminations which result in a temporary severance of the employee-employer
relationship, and (c) at the discretion of the Administrator, terminations which
are followed by the simultaneous establishment of a consulting relationship by
the Company or a Subsidiary with the former employee. The Administrator, in its
absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Employment, including, but not by way of limitation,
the question of whether a Termination of Employment resulted from a discharge
for good cause, and all questions of whether a particular leave of absence
constitutes a Termination of Employment; provided, however, that, with respect
to Incentive Stock Options, unless otherwise determined by the Administrator in
its discretion, a leave of absence, change in status from an employee to an
independent contractor or other change in the employee-employer relationship
shall constitute a Termination of Employment if, and to the extent that, such
leave of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section.

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                                   ARTICLE II.

                             SHARES SUBJECT TO PLAN

        2.1 Shares Subject to Plan.

                (a) The shares of stock subject to Awards shall be Common Stock,
initially shares of the Company's Common Stock, no par value. The aggregate
number of such shares which may be issued upon exercise of such Options or
rights or upon any such awards under the Plan shall not exceed Two Hundred
Thousand (200,000) increased on January 1 of each year this Plan is in effect by
a number of shares equal to three percent (3%) of the total number of
outstanding shares of Common Stock on that date subject to the limitation that
the total number of shares of the Company's Common Stock subject to option under
all plans of the Company shall not exceed ten percent (10%) of the total number
of outstanding shares of Common Stock on that date, as calculated in accordance
with the conditions and exclusions of Title 10, Section 260.140.45 of the
California Code of Regulations. The shares of Common Stock issuable upon
exercise of such Options or rights or upon any such awards may be either
previously authorized but unissued shares or treasury shares.

                (b) The maximum number of shares which may be subject to Awards,
granted under the Plan to any individual in any fiscal year shall not exceed the
Award Limit. To the extent required by Section 162(m) of the Code, shares
subject to Options which are canceled continue to be counted against the Award
Limit.

        2.2 Add-back of Options. If any Option expires or is canceled without
having been fully exercised, or is exercised in whole or in part for cash as
permitted by the Plan, the number of shares subject to such Option but as to
which such Option was not exercised prior to its expiration, cancellation or
exercise may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1. Furthermore, any shares subject to Awards which are
adjusted pursuant to Section 9.3 and become exercisable with respect to shares
of stock of another corporation shall be considered cancelled and may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. If any shares of Restricted Stock are surrendered by the Holder or
repurchased by the Company pursuant to Section 7.4 or 7.5 hereof, such shares
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Notwithstanding the provisions of this Section 2.2, no shares of
Common Stock may again be optioned, granted or awarded if such action would
cause an Incentive Stock Option to fail to qualify as an incentive stock option
under Section 422 of the Code.

                                  ARTICLE III.

                               GRANTING OF AWARDS

        3.1 Award Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.

        3.2 Provisions Applicable to Section 162(m) Participants.

                (a) The Committee, in its discretion, may determine whether an
Award is to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code.

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                (b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Award to a Section 162(m) Participant, including
Restricted Stock the restrictions with respect to which lapse upon the
attainment of performance goals which are related to one or more of the
Performance Criteria.

                (c) To the extent necessary to comply with the performance-based
compensation requirements of Section 162(m)(4)(C) of the Code, with respect to
any Award granted under Article VII which may be granted to one or more Section
162(m) Participants, no later than ninety (90) days following the commencement
of any fiscal year in question or any other designated fiscal period or period
of service (or such other time as may be required or permitted by Section 162(m)
of the Code), the Committee shall, in writing, (i) designate one or more Section
162(m) Participants, (ii) select the Performance Criteria applicable to the
fiscal year or other designated fiscal period or period of service, (iii)
establish the various performance targets, in terms of an objective formula or
standard, and amounts of such Awards, as applicable, which may be earned for
such fiscal year or other designated fiscal period or period of service and (iv)
specify the relationship between Performance Criteria and the performance
targets and the amounts of such Awards, as applicable, to be earned by each
Section 162(m) Participant for such fiscal year or other designated fiscal
period or period of service. Following the completion of each fiscal year or
other designated fiscal period or period of service, the Committee shall certify
in writing whether the applicable performance targets have been achieved for
such fiscal year or other designated fiscal period or period of service. In
determining the amount earned by a Section 162(m) Participant, the Committee
shall have the right to reduce (but not to increase) the amount payable at a
given level of performance to take into account additional factors that the
Committee may deem relevant to the assessment of individual or corporate
performance for the fiscal year or other designated fiscal period or period of
service.

                (d) Furthermore, notwithstanding any other provision of the
Plan, any Award which is granted to a Section 162(m) Participant and is intended
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code shall be subject to any additional limitations set
forth in Section 162(m) of the Code (including any amendment to Section 162(m)
of the Code) or any regulations or rulings issued thereunder that are
requirements for qualification as performance-based compensation as described in
Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the
extent necessary to conform to such requirements.

        3.3 Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of the Plan, the Plan, and any Award granted or awarded to any
individual who is then subject to Section 16 of the Exchange Act, shall be
subject to any additional limitations set forth in any applicable exemptive rule
under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of
the Exchange Act) that are requirements for the application of such exemptive
rule. To the extent permitted by applicable law, the Plan and Awards granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

        3.4 Consideration. In consideration of the granting of an Award under
the Plan, the Holder shall agree, in the Award Agreement, to remain in the
employ of (or to consult for or to serve as an Independent Director of, as
applicable) the Company or any Subsidiary for a period of at least one year (or
such shorter period as may be fixed in the Award Agreement or by action of the
Administrator following grant of the Award) after the Award is granted (or, in
the case of an Independent Director, until the next annual meeting of
stockholders of the Company).

        3.5 At-Will Employment. Nothing in the Plan or in any Award Agreement
hereunder shall confer upon any Holder any right to continue in the employ of,
or as a Consultant for, the Company or any Subsidiary, or as a director of the
Company, or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Holder at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in a written employment agreement
between the Holder and the Company and any Subsidiary.

                                       6
<PAGE>   7

                                   ARTICLE IV.

                        GRANTING OF OPTIONS TO EMPLOYEES,
                      CONSULTANTS AND INDEPENDENT DIRECTORS

        4.1 Eligibility. Any Employee or Consultant selected by the Committee
pursuant to Section 4.4(a)(i) shall be eligible to be granted an Option. Each
Independent Director of the Company shall be eligible to be granted Options at
the times and in the manner set forth in Section 4.5.

        4.2 Disqualification for Stock Ownership. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.

        4.3 Qualification of Incentive Stock Options. No Incentive Stock Option
shall be granted to any person who is not an Employee.

        4.4 Granting of Options to Employees and Consultants.

                (a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of the Plan:

                        (i) Determine which Employees are key Employees and
select from among the key Employees or Consultants (including Employees or
Consultants who have previously received Awards under the Plan) such of them as
in its opinion should be granted Options;

                        (ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected key Employees or
Consultants;

                        (iii) Subject to Section 4.3, determine whether such
Options are to be Incentive Stock Options or Non-Qualified Stock Options and
whether such Options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code; and

                        (iv) Determine the terms and conditions of such Options,
consistent with the Plan; provided, however, that the terms and conditions of
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code.

                (b) Upon the selection of a key Employee or Consultant to be
granted an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option as it
deems appropriate.

                (c) Any Incentive Stock Option granted under the Plan may be
modified by the Committee, with the consent of the Holder, to disqualify such
Option from treatment as an "incentive stock option" under Section 422 of the
Code.

        4,5 Granting of Options to Independent Directors.

The Board shall from time to time, in its absolute discretion, and subject to
applicable limitations of the Plan:

                                       7
<PAGE>   8

                (a) Select from among the Independent Directors (including
Independent Directors who have previously received Options under the Plan) such
of them as in its opinion should be granted Options;

                (b) Subject to the Award Limit, determine the number of shares
to be subject to such Options granted to the selected Independent Directors;

                (c) Subject to the provisions of Article 5, determine the terms
and conditions of such Options, consistent with the Plan.

                All the foregoing Option grants authorized by this Section 4.5
are subject to stockholder approval of the Plan.

                                       8
<PAGE>   9

        4.6 Options in Lieu of Cash Compensation. Options may be granted under
the Plan to Employees and Consultants in lieu of cash bonuses which would
otherwise be payable to such Employees and Consultants and to Independent
Directors in lieu of directors' fees which would otherwise be payable to such
Independent Directors, pursuant to such policies which may be adopted by the
Administrator from time to time.

                                   ARTICLE V.

                                TERMS OF OPTIONS

        5.1 Option Price. The price per share of the shares subject to each
Option granted to Employees and Consultants shall be set by the Committee;
provided, however, that such price shall be no less than 100% of the Fair Market
Value of a share of Common Stock on the date the Option is granted and in the
case of Incentive Stock Options granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code), such price
shall not be less than 110% of the Fair Market Value of a share of Common Stock
on the date the Option is granted (or the date the Option is modified, extended
or renewed for purposes of Section 424(h) of the Code).

        5.2 Option Term. The term of an Option granted to an Employee or
consultant shall be set by the Committee in its discretion; provided, however,
that the term shall not be more than ten (10) years from the date the Option is
granted, or in the case of Incentive Stock Options five (5) years from the date
the Incentive Stock Option is granted if the Incentive Stock Option is granted
to an individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation thereof (within the meaning of
Section 422 of the Code). Except as limited by requirements of Section 422 of
the Code and regulations and rulings thereunder applicable to Incentive Stock
Options, the Committee may extend the term of any outstanding Option in
connection with any Termination of Employment or Termination of Consultancy of
the Holder, or amend any other term or condition of such Option relating to such
a termination.

        5.3 Option Vesting.

                (a) The period during which the right to exercise, in whole or
in part, an Option granted to an Employee or a Consultant vests in the Holder
shall be set by the Committee and the Committee may determine that an Option may
not be exercised in whole or in part for a specified period after it is granted;
provided, however, that, (i) each Option shall become exercisable no later than
five (5) years after such Option is granted and at least 20% of each Option
shall become exercisable on each anniversary of the date such Option is granted,
and (ii) unless the Committee otherwise provides in the terms of the Award
Agreement or otherwise, no Option shall be exercisable by any Holder who is then
subject to Section 16 of the Exchange Act within the period ending six months
and one day after the date the Option is granted. At any time after grant of an
Option, the Committee may, in its sole and absolute discretion and subject to
whatever terms and conditions it selects, accelerate the period during which an
Option granted to an Employee or Consultant vests.

                (b) No portion of an Option granted to an Employee or Consultant
which is unexercisable at Termination of Employment or Termination of
Consultancy, as applicable, shall thereafter become exercisable, except as may
be otherwise provided by the Committee either in the Award Agreement or by
action of the Committee following the grant of the Option.

                (c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by a Holder during any calendar year (under the
Plan and all other incentive stock option plans of the Company and any parent or
subsidiary corporation, within the meaning of Section 422 of the Code) of the
Company, exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth in
the preceding sentence shall be applied by taking Options into account in the
order in which they were granted.

                                       9
<PAGE>   10

For purposes of this Section 5.3(c), the Fair Market Value of stock shall be
determined as of the time the Option with respect to such stock is granted.

        5.4 Terms of Options Granted to Independent Directors. The price per
share of the shares subject to each Option granted to an Independent Director
shall equal 100% of the Fair Market Value of a share of Common Stock on the date
the Option is granted. Options granted to Independent Directors shall become
exercisable in cumulative annual installments of 50% on each of the first and
second anniversaries of the date of Option grant and, subject to Section 6.6,
the term of each Option granted to an Independent Director shall be five (5)
years from the date the Option is granted, except that any Option granted to an
Independent Director may by its terms become immediately exercisable in full
upon the retirement of the Independent Director in accordance with the Company's
retirement policy applicable to directors. No portion of an Option which is
unexercisable at Termination of Directorship shall thereafter become
exercisable.

        5.5 Termination of Employment, Directorship or Consultancy. In the event
of a Holder's Termination of Employment, Termination of Directorship or
Termination of Consultancy (other than for cause or upon the Holder's death or
Disability), the Optionee may exercise his or her Option, but only within such
period of time as is determined by the Administrator (which period shall not be
less than thirty (30) days from the date of such termination, nor in the case of
an Incentive Stock Option, more than three (3) months from and after the date of
termination), and only to the extent that the Holder was entitled to exercise it
at the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Award Agreement). In the event of a
Holder's Termination of Employment, Termination of Directorship or Termination
of Consultancy for cause (as defined in the applicable Award Agreement), then
the Option shall terminate immediately upon such termination for cause. If, at
the date of termination described in this Section 5.5, the Holder is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination described in this Section 5.5, the Holder does not exercise his or
her Option within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to the Plan.

        5.6 Disability of Holder. In the event of a Holder's Termination of
Employment, Termination of Directorship or Termination of Consultancy as a
result of the Optionee's Disability, the Holder may exercise his or her Option,
but only within such period of time as is determined by the Administrator (which
period shall not be less than six (6) months from the date of such termination,
nor more than one (1) year from and after such termination), and only to the
extent that the Holder was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). If, at the date of termination
described in this Section 5.6, the Holder is not entitled to exercise his or her
entire Option, the shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination described in this Section 5.6,
the Holder does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to the Plan.

        5.7 Death of Holder. In the event of the death of a Holder, the Option
may be exercised, at any time within such period as is determined by the
Administrator (which period shall not be less than six (6) months following the
date of death) by the Holder's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, and only to the extent the Holder
was entitled to exercise the Option at the date of death (but in no event later
than the expiration of the term of such Option as set forth in the Award
Agreement). If, at the time of death, the Holder was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to the Plan. If, after death, the Holder's estate or a
person who acquired the right to exercise the Option by bequest or inheritance
does not exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to the Plan.

        5.8 Substitute Awards. Notwithstanding the foregoing provisions of this
Article V to the contrary, in the case of an Option that is a Substitute Award,
the price per share of the shares subject to such Option may be less than the
Fair Market Value per share on the date of grant, provided, that the excess of:

                (a) the aggregate Fair Market Value (as of the date such
Substitute Award is granted) of the shares subject to the Substitute Award; over

                                       10
<PAGE>   11

                (b) the aggregate exercise price thereof; does not exceed the
excess of;

                (c) the aggregate fair market value (as of the time immediately
preceding the transaction giving rise to the Substitute Award, such fair market
value to be determined by the Committee) of the shares of the predecessor entity
that were subject to the grant assumed or substituted for by the Company; over

                (d) the aggregate exercise price of such shares.

                                   ARTICLE VI.

                               EXERCISE OF OPTIONS

        6.1 Partial Exercise. An exercisable Option may be exercised in whole or
in part. However, an Option shall not be exercisable with respect to fractional
shares and the Administrator may require that, by the terms of the Option, a
partial exercise be with respect to a minimum number of shares.

        6.2 Manner of Exercise. All or a portion of an exercisable Option shall
be deemed exercised upon delivery of all of the following to the Secretary of
the Company or his office:

                (a) A written notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion thereof,
is exercised. The notice shall be signed by the Holder or other person then
entitled to exercise the Option or such portion of the Option;

                (b) Such representations and documents as the Administrator, in
its absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Administrator may, in its absolute
discretion, also take whatever additional actions it deems appropriate to effect
such compliance including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and registrars;

                (c) In the event that the Option shall be exercised pursuant to
Section 9.1 by any person or persons other than the Holder, appropriate proof of
the right of such person or persons to exercise the Option; and

                (d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Administrator, may in its discretion (i) allow a delay in payment
up to thirty (30) days from the date the Option, or portion thereof, is
exercised; (ii) allow payment, in whole or in part, through the delivery of
shares of Common Stock which have been owned by the Holder for at least six
months, duly endorsed for transfer to the Company with a Fair Market Value on
the date of delivery equal to the aggregate exercise price of the Option or
exercised portion thereof; (iii) allow payment, in whole or in part, through the
delivery of property of any kind which constitutes good and valuable
consideration; (iv) allow payment, in whole or in part, through the delivery of
a full recourse promissory note bearing interest (at no less than such rate as
shall then preclude the imputation of interest under the Code) and payable upon
such terms as may be prescribed by the Administrator; (v) allow payment, in
whole or in part, through the delivery of a notice that the Holder has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price, provided that payment of such
proceeds is then made to the Company upon settlement of such sale; or (vi) allow
payment through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv) and (v). In the case of a promissory note, the
Administrator may also prescribe the form of such note and the security to be
given for such note. The Option may not be exercised, however, by delivery of a
promissory note or by a loan from the Company when or where such loan or other
extension of credit is prohibited by law.

                                       11
<PAGE>   12

        6.3 Conditions to Issuance of Stock Certificates. The Company shall not
be required to issue or deliver any certificate or certificates for shares of
stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

                (a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;

                (b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Administrator shall, in its absolute discretion, deem necessary
or advisable;

                (c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Administrator shall, in its
absolute discretion, determine to be necessary or advisable;

                (d) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and

                (e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax, which in the discretion of
the Administrator may be in the form of consideration used by the Holder to pay
for such shares under Section 6.2(d).

        6.4 Rights as Stockholders. Holders shall not be, nor have any of the
rights or privileges of, stockholders of the Company in respect of any shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such shares have been issued by the Company to such
Holders.

        6.5 OWNERSHIP AND TRANSFER RESTRICTIONS. The Administrator, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. The Holder shall give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(a) two years from the date of granting (including the date the Option is
modified, extended or renewed for purposes of Section 424(h) of the Code) such
Option to such Holder or (b) one year after the transfer of such shares to such
Holder.

        6.6 Limitations on Exercise of Options Granted to Independent Directors.
No Option granted to an Independent Director may be exercised to any extent by
anyone after the first to occur of the following events:

                (a) the expiration of twelve (12) months from the date of the
Holder's death;

                (b) the expiration of twelve (12) months from the date of the
Holder's Termination of Directorship by reason of his permanent and total
disability (within the meaning of Section 22(e)(3) of the Code);

                                       12
<PAGE>   13

                (c) the expiration of three (3) months from the date of the
Holder's Termination of Directorship for any reason other than such Holder's
death or his permanent and total disability, unless the Holder dies within said
three-month period; or

                (d) the expiration of five (5) years from the date the Option
was granted.

        6.7 Additional Limitations on Exercise of Options. Holders may be
required to comply with any timing or other restrictions with respect to the
settlement or exercise of an Option, including a window-period limitation, as
may be imposed in the discretion of the Administrator.

                                  ARTICLE VII.

                            AWARD OF RESTRICTED STOCK

        7.1 Eligibility. Subject to the Award Limit, Restricted Stock may be
awarded to any Employee who the Administrator determines is a key Employee or
any Consultant or any Independent Director who the Administrator determines
should receive such an Award.

        7.2 Award of Restricted Stock

                (a) The Administrator may from time to time, in its absolute
discretion:

                        (i) Determine which Employees are key Employees and
select from among the key Employees, Consultants (including Employees or
Consultants who have previously received other Awards under the Plan) or
Independent Directors such of them as in its opinion should be awarded
Restricted Stock; and

                        (ii) Determine the purchase price, if any, and other
terms and conditions applicable to such Restricted Stock, consistent with the
Plan. The Administrator shall establish the purchase price, if any, and form of
payment for Restricted Stock. In all cases, legal consideration shall be
required for each issuance of Restricted Stock.

                (b) Upon the selection of a key Employee, Consultant or
Independent Director to be awarded Restricted Stock, the Administrator shall
instruct the Secretary of the Company to issue such Restricted Stock and may
impose such conditions on the issuance of such Restricted Stock as it deems
appropriate.

        7.3 Rights as Stockholders. Subject to Section 7.4, upon delivery of the
shares of Restricted Stock to the escrow holder pursuant to Section 7.6, the
Holder shall have, unless otherwise provided by the Administrator, all the
rights of a stockholder with respect to said shares, subject to the restrictions
in his Award Agreement, including the right to receive all dividends and other
distributions paid or made with respect to the shares; provided, however, that
in the discretion of the Administrator, any extraordinary distributions with
respect to the Common Stock shall be subject to the restrictions set forth in
Section 7.4.

        7.4 Restriction. All shares of Restricted Stock issued under the Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Administrator shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment with
the Company, Company performance and individual performance; provided, however,
that, unless the Administrator otherwise provides in the terms of the Award
Agreement or otherwise, no share of Restricted Stock granted to a person subject
to Section 16 of the Exchange Act shall be sold, assigned or otherwise
transferred until at least six months and one day have elapsed from the date on
which the Restricted Stock was issued, and provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants, by
action taken after the Restricted Stock is issued, the Administrator may, on
such terms and conditions as it may determine to be appropriate, remove any or
all of the restrictions imposed by the terms of the Award Agreement. Restricted
Stock may not be sold or

                                       13
<PAGE>   14

encumbered until all restrictions are terminated or expire. If no consideration
was paid by the Holder upon issuance, a Holder's rights in unvested Restricted
Stock shall lapse, and such Restricted Stock shall be surrendered to the Company
without consideration, upon Termination of Employment or, if applicable, upon
Termination of Consultancy with the Company; provided, however, that the
Administrator in its sole and absolute discretion may provide that such rights
shall not lapse in the event of a Termination of Employment following a "change
of ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or disability; provided, further, except with respect to
shares of Restricted Stock granted to Section 162(m) Participants, the
Administrator in its sole and absolute discretion may provide that no such lapse
or surrender shall occur in the event of a Termination of Employment, or a
Termination of Consultancy, without cause or following any Change in Control of
the Company or because of the Holder's retirement, or otherwise.

        7.5 Repurchase of Restricted Stock. The Administrator shall provide in
the terms of each individual Award Agreement that the Company shall have the
right to repurchase from the Holder the Restricted Stock then subject to
restrictions under the Award Agreement immediately upon a Termination of
Employment or, if applicable, upon a Termination of Consultancy between the
Holder and the Company, at a cash price per share equal to the price paid by the
Holder for such Restricted Stock; provided, however, that the Administrator in
its sole and absolute discretion may provide that no such right of repurchase
shall exist in the event of a Termination of Employment following a "change of
ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Holder's death or disability; provided, further, that, except with
respect to shares of Restricted Stock granted to Section 162(m) Participants,
the Administrator in its sole and absolute discretion may provide that no such
right of repurchase shall exist in the event of a Termination of Employment or a
Termination of Consultancy without cause or following any Change in Control of
the Company or because of the Holder's retirement, or otherwise.

        7.6 Escrow. The Secretary of the Company or such other escrow holder as
the Administrator may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Award Agreement with respect to the shares evidenced by such certificate expire
or shall have been removed.

        7.7 Legend. In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Administrator shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Award Agreements, which legend or legends
shall make appropriate reference to the conditions imposed thereby.

        7.8 Section 83(b) Election. If a Holder makes an election under Section
83(b) of the Code, or any successor section thereto, to be taxed with respect to
the Restricted Stock as of the date of transfer of the Restricted Stock rather
than as of the date or dates upon which the Holder would otherwise be taxable
under Section 83(a) of the Code, the Holder shall deliver a copy of such
election to the Company immediately after filing such election with the Internal
Revenue Service.

                                  ARTICLE VIII.

                                 ADMINISTRATION

        8.1 Compensation Committee. The Compensation Committee (or another
committee or a subcommittee of the Board assuming the functions of the Committee
under the Plan) shall consist of two or more Independent Directors appointed by
and holding office at the pleasure of the Board. Appointment of Committee
members shall be effective upon acceptance of appointment. Committee members may
resign at any time by delivering written notice to the Board. Vacancies in the
Committee may be filled by the Board.

        8.2 Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
Award Agreements, and to adopt such rules for the administration,
interpretation, and application of the Plan as are consistent therewith, to
interpret, amend or revoke any such

                                       14
<PAGE>   15

rules and to amend any Award Agreement provided that the rights or obligations
of the Holder of the Award that is the subject of any such Award Agreement are
not affected adversely. Any such grant or award under the Plan need not be the
same with respect to each Holder. Any such interpretations and rules with
respect to Incentive Stock Options shall be consistent with the provisions of
Section 422 of the Code. In its absolute discretion, the Board may at any time
and from time to time exercise any and all rights and duties of the Committee
under the Plan. Notwithstanding the foregoing, the full Board, acting by a
majority of its members in office, shall conduct the general administration of
the Plan with respect to Options granted to Independent Directors.

        8.3 Majority Rule; Unanimous Written Consent. The Committee shall act by
a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

        8.4 Compensation; Professional Assistance; Good Faith Actions. Members
of the Committee shall receive such compensation, if any, for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of the Plan
shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Holders, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all
members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

        8.5 Delegation of Authority to Grant Awards. The Committee may, but need
not, delegate from time to time some or all of its authority to grant Awards
under the Plan to a committee consisting of one or more members of the Committee
or of one or more officers of the Company; provided, however, that the Committee
may not delegate its authority to grant Awards to individuals (i) who are
subject on the date of the grant to the reporting rules under Section 16(a) of
the Exchange Act, (ii) who are Section 162(m) Participants or (iii) who are
officers of the Company who are delegated authority by the Committee hereunder.
Any delegation hereunder shall be subject to the restrictions and limits that
the Committee specifies at the time of such delegation of authority and may be
rescinded at any time by the Committee. At all times, any committee appointed
under this Section 8.5 shall serve in such capacity at the pleasure of the
Committee.

                                   ARTICLE IX.

                            MISCELLANEOUS PROVISIONS

        9.1 Not Transferable. No Award under the Plan may be sold, pledged,
assigned or transferred in any manner other than by will or the laws of descent
and distribution, by instrument to an inter vivos or testamentary trust in which
the Awards are to be passed to beneficiaries upon the death of the trustor (or
"settlor"); except that to the extent federal and state exemptions from
registration are available, Awards which are Non-Qualified Stock Options also
shall be transferable by gift to "immediate family" as that term is defined in
17 C.F.R. 240.16a-1(e), or as may otherwise be allowed by Title 10, Section
260.140.41 of the California Code of Regulations or any successor regulation. No
Award or interest or right therein shall be liable for the debts, contracts or
engagements of the Holder or his successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

                During the lifetime of the Holder, only he may exercise an
Option or other Award (or any portion thereof) granted to him under the Plan.
After the death of the Holder, any exercisable portion of an Option or other
Award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Award Agreement, be exercised by his personal
representative or by any person empowered to do so under the deceased Holder's
will or under the then applicable laws of descent and distribution.

                                       15
<PAGE>   16

        9.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN. Except as
otherwise provided in this Section 9.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Administrator. However, without approval of the Company's
stockholders given within twelve months before or after the action by the
Administrator, no action of the Administrator may, except as provided in Section
9.3, increase the limits imposed in Section 2.1 on the maximum number of shares
which may be issued under the Plan. No amendment, suspension or termination of
the Plan shall, without the consent of the Holder alter or impair any rights or
obligations under any Award theretofore granted or awarded, unless the Award
itself otherwise expressly so provides. No Awards may be granted or awarded
during any period of suspension or after termination of the Plan. Unless sooner
terminated, the Plan shall terminate ten years from the earlier of the date the
Plan is adopted by the Board and the date the Plan is approved by the
shareholders of the Company.

        9.3 Changes in Common Stock or Assets of the Company, Acquisition or
Liquidation of the Company and Other Corporate Events.

                (a) Subject to Section 9.3 (d), in the event that the
Administrator determines that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company, or
exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Administrator's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to an Award, then the Administrator shall, in
such manner as it may deem equitable, adjust any or all of

                        (i) the number and kind of shares of Common Stock (or
other securities or property) with respect to which Awards may be granted or
awarded (including, but not limited to, adjustments of the limitations in
Section 2.1 on the maximum number and kind of shares which may be issued and
adjustments of the Award Limit),

                        (ii) the number and kind of shares of Common Stock (or
other securities or property) subject to outstanding Awards, and

                        (iii) the grant or exercise price with respect to any
Award.

                (b) Subject to Sections 9.3(b)(vii) and 9.3(d), in the event of
any transaction or event described in Section 9.3(a) or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the
Company, or the financial statements of the Company or any affiliate, or of
changes in applicable laws, regulations, or accounting principles, the
Administrator, in its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Award or by
action taken prior to the occurrence of such transaction or event and either
automatically or upon the Holder's request, is hereby authorized to take any one
or more of the following actions whenever the Administrator determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any Award under the Plan, to facilitate such transactions or
events or to give effect to such changes in laws, regulations or principles:

                        (i) To provide for either the purchase of any such Award
for an amount of cash equal to the amount that could have been attained upon the
exercise of such Award or realization of the Holder's rights had such Award been
currently exercisable or payable or fully vested or the replacement of such
Award with other rights or property selected by the Administrator in its sole
discretion;

                        (ii) To provide that the Award cannot vest, be exercised
or become payable after such event;

                                       16
<PAGE>   17

                        (iii) To provide that such Award shall be exercisable as
to all shares covered thereby, notwithstanding anything to the contrary in
Section 5.3 or 5.4 or the provisions of such Award;

                        (iv) To provide that such Award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or shall
be substituted for by similar options, rights or awards covering the stock of
the successor or survivor corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices;

                        (v) To make adjustments in the number and type of shares
of Common Stock (or other securities or property) subject to outstanding Awards,
and in the number and kind of outstanding Restricted Stock and/or in the terms
and conditions of (including the grant or exercise price), and the criteria
included in, outstanding options, rights and awards and options, rights and
awards which may be granted in the future;

                        (vi) To provide that, for a specified period of time
prior to such event, the restrictions imposed under an Award Agreement upon some
or all shares of Restricted Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted Stock may cease to be
subject to repurchase under Section 7.5 or forfeiture under Section 7.4 after
such event; and

                        (vii) Notwithstanding any other provision of the Plan,
in the event of a Change in Control, each outstanding Award shall, immediately
prior to the effective date of the Change in Control, automatically become fully
exercisable for all of the shares of Common Stock at the time subject to such
rights and may be exercised for any or all of those shares as fully-vested
shares of Common Stock.

                (c) Subject to Sections 9.3(d), 3.2 and 3.3, the Administrator
may, in its discretion, include such further provisions and limitations in any
Award, agreement or certificate, as it may deem equitable and in the best
interests of the Company.

                (d) With respect to Awards which are granted to Section 162(m)
Participants and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 9.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Award to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action
described in this Section 9.3 or in any other provision of the Plan shall be
authorized to the extent that such adjustment or action would cause the Plan to
violate Section 422(b)(1) of the Code. Furthermore, no such adjustment or action
shall be authorized to the extent such adjustment or action would result in
short-swing profits liability under Section 16 or violate the exemptive
conditions of Rule 16b-3 unless the Administrator determines that the Award is
not to comply with such exemptive conditions. The number of shares of Common
Stock subject to any Award shall always be rounded to the next whole number.

                (e) Notwithstanding the foregoing, in the event that the Company
becomes a party to a transaction that is intended to qualify for "pooling of
interests" accounting treatment and, but for one or more of the provisions of
this Plan or any Award Agreement would so qualify, then this Plan and any Award
Agreement shall be interpreted so as to preserve such accounting treatment, and
to the extent that any provision of the Plan or any Award Agreement would
disqualify the transaction from pooling of interests accounting treatment
(including, if applicable, an entire Award Agreement), then such provision shall
be null and void. All determinations to be made in connection with the preceding
sentence shall be made by the independent accounting firm whose opinion with
respect to "pooling of interests" treatment is required as a condition to the
Company's consummation of such transaction.

                (f) The existence of the Plan, the Award Agreement and the
Awards granted hereunder shall not affect or restrict in any way the right or
power of the Company or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of stock or of options, warrants or rights to purchase stock or of
bonds, debentures, preferred or prior preference stocks whose rights are
superior to or affect the Common Stock or the rights thereof or which are

                                       17
<PAGE>   18

convertible into or exchangeable for Common Stock, or the dissolution or
liquidation of the company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.

        9.4 Approval of Plan by Stockholders. The Plan will be submitted for the
approval of the Company's stockholders within twelve months after the date of
the Board's initial adoption of the Plan. Awards may be granted or awarded prior
to such stockholder approval, provided that such Awards shall not be exercisable
nor shall such Awards vest prior to the time when the Plan is approved by the
stockholders, and provided further that if such approval has not been obtained
at the end of said twelve-month period, all Awards previously granted or awarded
under the Plan shall thereupon be canceled and become null and void. In
addition, if the Board determines that Awards other than Options or Stock
Appreciation Rights which may be granted to Section 162(m) Participants should
continue to be eligible to qualify as performance-based compensation under
Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to
and approved by the Company's stockholders no later than the first stockholder
meeting that occurs in the fifth year following the year in which the Company's
stockholders previously approved the Performance Criteria.

        9.5 Tax Withholding. The Company shall be entitled to require payment in
cash or deduction from other compensation payable to each Holder of any sums
required by federal, state or local tax law to be withheld with respect to the
issuance, vesting, exercise or payment of any Award. The Administrator may in
its discretion and in satisfaction of the foregoing requirement allow such
Holder to elect to have the Company withhold shares of Common Stock otherwise
issuable under such Award (or allow the return of shares of Common Stock) having
a Fair Market Value equal to the sums required to be withheld. Notwithstanding
any other provision of the Plan, the number of shares of Common Stock which may
be withheld with respect to the issuance, vesting, exercise or payment of any
Award (or which may be repurchased from the Holder of such Award within six
months after such shares of Common Stock were acquired by the Holder from the
Company) in order to satisfy the Holder's federal and state income and payroll
tax liabilities with respect to the issuance, vesting, exercise or payment of
the Award shall be limited to the number of shares which have a Fair Market
Value on the date of withholding or repurchase equal to the aggregate amount of
such liabilities based on the minimum statutory withholding rates for federal
and state tax income and payroll tax purposes that are applicable to such
supplemental taxable income.

        9.6 Loans. The Committee may, in its discretion, extend one or more
loans to key Employees in connection with the exercise or receipt of an Award
granted or awarded under the Plan, or the issuance of Restricted Stock awarded
under the Plan. The terms and conditions of any such loan shall be set by the
Committee.

        9.7 Effect of Plan Upon Options and Compensation Plans. The adoption of
the Plan shall not affect any other compensation or incentive plans in effect
for the Company or any Subsidiary. Nothing in the Plan shall be construed to
limit the right of the Company (a) to establish any other forms of incentives or
compensation for Employees, Directors or Consultants of the Company or any
Subsidiary or (b) to grant or assume options or other rights or awards otherwise
than under the Plan in connection with any proper corporate purpose including
but not by way of limitation, the grant or assumption of options in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, partnership, limited liability
company, firm or association.

        9.8 Compliance with Laws. The Plan, the granting and vesting of Awards
under the Plan and the issuance and delivery of shares of Common Stock and the
payment of money under the Plan or under Awards granted or awarded hereunder are
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
the Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.

                                       18
<PAGE>   19

        9.9 Titles. Titles are provided herein for convenience only and are not
to serve as a basis for interpretation or construction of the Plan.

        9.10 Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
California without regard to conflicts of laws thereof.

        9.13 Regulatory Approvals. No Options will be granted or be exercisable
under the Plan until there has been compliance with all applicable requirements
of the Securities Act, the California General Securities Act of 1968, as
amended, and any other requirement of law or of any regulatory body with
jurisdiction over such issuance and delivery.

        9.14 Effective Date of Plan. The Plan shall become effective as
determined by the Board, but only after the date the shareholders of the Company
approve the Plan, by vote or written consent, which approval must be within
twelve (12) months after the Plan has been adopted by the Board. The Plan was
adopted by the Board on March 26, 2000.

        9.15 Financial Statements. Throughout the term of any Option, the
Company shall deliver to the holder of such Option, not later than one hundred
twenty (120) days after the close of each of the Company's fiscal years during
the term of such Option, a balance sheet and an income statement for such fiscal
year.

                                       19

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