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                                                                     Exhibit 4.3

                            ASCENDANT SOLUTIONS, INC.

                           2002 EQUITY INCENTIVE PLAN

                             Adopted March 14, 2002

         1.       PURPOSE OF THE PLAN.

         The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates may be given an
opportunity to acquire a proprietary interest in the Company. Under the Plan,
the Company may provide various types of long-term incentive awards, including
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock
Reload Options and Other Stock-Based Awards, in order to retain the services of
Persons who are now Employees of or Consultants to the Company and its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such Persons to exert maximum efforts for the
success of the Company and its Affiliates. Options granted under the Plan may be
Incentive Stock Options or Nonqualified Stock Options, as determined by the
Committee at the time of grant of an Option and subject to the applicable
provisions of Section 422 of the Code and the regulations promulgated
thereunder.

         2.       DEFINITIONS.

         As used herein, the following definitions shall apply:

         (a)      "Affiliate" means, with respect to any Person, any Parent or
Subsidiary of such Person, whether such Parent or Subsidiary is now or hereafter
existing.

         (b)      "Agreement" means the agreement (including an Option
Agreement) between the Company and the Holder setting forth the terms and
conditions of an Award under the Plan.

         (c)      "Applicable Laws" means all applicable federal, state, local
or foreign laws, statutes, regulations and legal requirements, including without
limitation the requirements of the Stock Exchange and the legal requirements
relating to the administration of stock option plans and equity incentive plans
(and the issuance of shares of capital stock thereunder) under U.S. state
corporate laws, U.S. federal and state securities laws, the Code and the
applicable laws of any foreign country or jurisdiction where any Awards are, or
will be, granted under the Plan.

         (d)      "Award" means an award of Options, Stock Appreciation Rights,
Restricted Stock, Deferred Stock, Stock Reload Options or Other Stock-Based
Awards under the Plan.

         (e)      "Beneficial Owner" means a "beneficial owner" as such term is
used in Rule 13d-3 promulgated under the Exchange Act.

         (f)      "Board" means the Board of Directors of the Company.

         (g)      "Change of Control" means, with respect to any Award, the
occurrence at any time after the date of grant of such Award of (i) any Person
or Group of Persons becoming for the first time the Beneficial Owner, directly
or indirectly, of more than fifty percent (50%) of the total combined voting
power of all classes of capital stock of the Company normally entitled to vote
for the election of directors of the Company ("Voting Stock"), other than as a
result of a transfer or series of related transfers of Voting Stock from a
Person or Group of Persons who immediately prior to such transfer or transfers
was

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the Beneficial Owner, and who after giving effect to such transfer or transfers
continues to be the Beneficial Owner, of more than fifty percent (50%) of the
Voting Stock of the Company; (ii) a merger or consolidation of the Company with
or into another Person or the merger of another Person into the Company as a
consequence of which those Persons who held all of the Voting Stock of the
Company immediately prior to such merger or consolidation do not hold either
directly or indirectly a majority of the Voting Stock of the Company (or, if
applicable, the surviving company of such merger or consolidation) after the
consummation of such merger or consolidation; (iii) the sale of all or
substantially all of the assets of the Company to any Person or Group of Persons
(other than to (A) a Person or Group of Persons which owns, directly or
indirectly, a majority or more of the Common Stock of the Company, (B) a
Subsidiary of the Company, or (C) a Person all of whose equity interests are
owned directly or indirectly by the Company); or (iv) any event or series of
events (which event or series of events must include a proxy fight or proxy
solicitation with respect to the election of directors of the Company made in
opposition to the nominees recommended by the Continuing Directors) during any
period of 12 consecutive months, as a result of which a majority of the Board
consists of individuals other than Continuing Directors.

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

         (i)      "Committee" means (a) the compensation committee (the
"Compensation Committee") of the Board (or in the event that there is not a
Compensation Committee, then the Board) with respect to Awards granted to all
Employees and Consultants of the Company (other than Non-Employee Directors of
the Company) and (b) the entire Board (regardless of whether there is a
Compensation Committee) with respect to Awards granted to Non-Employee Directors
of the Company. During any period of time in which the Company is subject to the
reporting requirements of the Exchange Act, the Compensation Committee shall be
comprised solely of not less than two members, each of whom shall be (i) a
Non-Employee Director and (ii) unless otherwise determined by the Board, an
"outside director" within the meaning of Treasury Regulation Section
1.162-27(e)(3) under Section 162(m) of the Code. Appointment of Compensation
Committee members shall be effective upon acceptance of appointment.
Compensation Committee members may be removed by the Board at any time and may
resign at any time. Vacancies in the Compensation Committee shall be filled by
the Board.

         (j)      "Common Stock" means the common stock, par value $.0001 per
share, of the Company.

         (k)      "Company" means Ascendant Solutions, Inc., a Delaware
corporation.

         (l)      "Consultant" means (i) any Person who is engaged by the
Company or any Affiliate of the Company to render consulting or advisory
services and is compensated for such services and (ii) any Director of the
Company, whether such Director is compensated for such services or not.

         (m)      "Continuing Directors of the Company" means, with the respect
to any period of 12 consecutive months, (i) any members of the Board on the
first day of such period, (ii) any members of the Board elected after the first
day of such period at any annual meeting of shareholders who were nominated by
the Board or a committee thereof, if a majority of the members of the Board or
such committee were Continuing Directors of the Company within the meaning of
clause (i) above at the time of such nomination, and (iii) any members of the
Board elected to succeed Continuing Directors of the Company by the Board or a
committee thereof, if a majority of the members of the Board or such committee
were Continuing Directors of the Company within the meaning of clause (i) or
(ii) above at the time of such election.

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         (n)      "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship that an Employee or Consultant has
with the Company or any Affiliate is not interrupted or terminated. Continuous
Status as an Employee or Consultant shall not be considered interrupted in the
case of (i) any leave of absence approved in writing by the Company or any
Affiliate or (ii) transfers between locations of the Company or between the
Company or any Affiliate or any successor. A leave of absence approved by the
Company shall include sick leave, military leave, or any other personal leave
approved by an authorized representative of the Company or any Affiliate. For
purposes of Incentive Stock Options, no such leave may exceed 90 days, unless
reemployment upon expiration of such leave is guaranteed by statute or contract.
If reemployment upon expiration of a leave of absence approved by the Company or
any Affiliate is not so guaranteed, on the 91st day of such leave any Incentive
Stock Option held by the Holder shall cease to be treated for tax purposes as an
Incentive Stock Option and shall be treated for tax purposes as a Nonqualified
Stock Option.

         (o)      "Corporate Affiliate" means, with respect to any Person, any
Parent Corporation or Subsidiary Corporation of such Person, whether such Parent
Corporation or Subsidiary Corporation is now or hereafter existing.

         (p)      "Deferred Stock" means the Shares of Common Stock to be
received at the end of a specified deferral period under an Award made pursuant
to Section 10 below.

         (q)      "Director" means a member of the Board.

         (r)      "Director Fee Investment Option Grant Program" means the
director fee investment option grant program in effect under Section 11 of the
Plan.

         (s)      "Disability" shall have the meaning given it or any similar
term in the employment agreement of the Holder with the Company or an Affiliate;
provided, however, that if that Holder has no such employment agreement or if
the employment agreement applicable to the Holder does not specify the meaning
of such term, "Disability" shall mean "disability" as such term is defined in
Section 22(e)(3) of the Code.

         (t)      "Employee" means any individual Person, including Officers and
Directors, employed by the Company or any Affiliate of the Company. The payment
of a Director's fee or the reimbursement of a Director's expenses by the Company
shall not be sufficient to constitute "employment" by the Company.

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

         (v)      "Fair Market Value" means the value of a Share of Common Stock
determined as follows:

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

                  (ii)     If the Common Stock is not listed on any established
         stock exchange or quoted on a national market system, but is regularly
         quoted by a recognized securities dealer (whose selling prices are not
         reported), its Fair Market Value shall be the mean between the high bid
         and

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         low asked prices for the Common Stock on the last market trading day
         prior to the date of determination; or

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

         (w)      "Group" means a "group" as such term is used in Section
13(d)(3) of the Exchange Act.

         (x)      "Holder" means a Person who has received an Award under the
Plan.

         (y)      "Immediate Family Members" means (a) the children,
grandchildren, spouse, siblings (and their spouses) or parents of the Holder or
(b) any bona fide trusts, partnerships or other entities controlled by the
Holder or one or more Immediate Family Members, or whose beneficiaries are the
Holder and/or one or more Immediate Family Members of the Holder.

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

         (aa)     "IPO Date" means the closing date of the first sale to the
public of the Company's Common Stock pursuant to an effective registration
statement under the Securities Act of 1933, as amended.

         (bb)     "Non-Employee Director" means a "Non-Employee Director" within
the meaning of Rule 16b-3.

         (cc)     "Nonqualified Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

         (dd)     "Officer" means an individual Person who is an officer of the
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.

         (ee)     "Option" means any option to purchase Shares of Common Stock
which is granted pursuant to the Plan (including any options granted pursuant to
Section 11 hereof).

         (ff)     "Option Agreement" means the written option agreement,
substantially in the form attached hereto as Exhibit A or Exhibit B (or such
other form as may be approved by the Committee for use under the Plan pursuant
to Section 3(b)(v) hereof), between the Company and Holder evidencing the grant
of an Option.

         (gg)     "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for new Options with a lower exercise price.

         (hh)     "Optioned Stock" means the Shares of Common Stock subject to
an Option.

         (ii)     "Other Stock-Based Awards" means Awards (other than Options,
Stock Appreciation Rights, Restricted Stock, Deferred Stock and Stock Reload
Options) denominated or payable in, valued in whole or in part by reference to,
or otherwise based on or related to Shares of Common Stock.

         (jj)     "Parent" means any Person (other than the Company) in an
unbroken chain of Persons ending with the Company if, at the time an Award is
granted, each of the Persons other than the Company

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owns stock (or other equity interests) possessing 50% or more of the total
combined voting power of all classes of stock (or other equity interests) in one
or more of the other Persons in such chain.

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

         (ll)     "Person" means any individual, corporation, partnership,
limited liability company, joint venture, estate, trust, unincorporated
association, or any other entity.

         (mm)     "Plan" means this Ascendant Solutions, Inc. 2002 Equity
Incentive Plan.

         (nn)     "Restricted Stock" means Shares of Common Stock received under
an Award made pursuant to Section 9 below that is subject to restrictions under
Section 9.

         (oo)     "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
Act or any successor rule thereto.

         (pp)     "SAR Value" means, with respect to an individual Stock
Appreciation Right, the excess of the Fair Market Value of one Share over the
exercise price per share specified in a related Option in the case of a Tandem
Stock Appreciation Right, or over the Stock Appreciation Right price per share
in the case of a Stock Appreciation Right awarded on a free standing basis.

         (qq)     "Share" means a share of Common Stock.

         (rr)     "Stock Appreciation Right" means the right, pursuant to an
Award granted under Section 8 hereof, to recover an amount equal to the SAR
Value.

         (ss)     "Stock Exchange" means, at any point in time, any established
stock exchange on which the Common Stock is then listed or any national market
system, including without limitation The Nasdaq Stock Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, on which the Common Stock is then
quoted.

         (tt)     "Stock Reload Option" means any option granted under Section
7(e) as a result of the payment of the exercise price of an Option and/or the
withholding tax related thereto in the form of Common Stock owned by the Holder
or the withholding of Common Stock by the Company.

         (uu)     "Subsidiary" means any Person (other than the Company) in any
unbroken chain of Persons beginning with the Company if, at the time of granting
of an Award, each of the Persons (other than the last Person in the unbroken
chain) owns stock (or other equity interests) possessing 50% or more of the
total combined voting power of all classes of stock (or other equity interests)
in one of the other Persons in such chain.

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

         (ww)     "Tandem Stock Appreciation Right" means a Stock Appreciation
Right granted in tandem with all or part of any Option granted under the Plan.

         (xx)     "Voting Stock" shall have the meaning set forth in the
definition of "Change of Control" above.

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         3.       ADMINISTRATION OF THE PLAN.

         (a)      Plan Administration. The Plan at all times shall be
administered by the Committee. The Committee shall act by a majority of its
members in office. The Committee may act either by vote at a meeting or by a
memorandum or other written instrument signed by a majority of the Committee.
Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities incurred
by members of the Committee in connection with the administration of the Plan
shall be borne by the Company. The Committee may employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Company
and its Officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons.

         (b)      Powers of the Committee. Subject to the provisions of the Plan
and subject to the approval of any relevant authorities, including the approval,
if required, of the Stock Exchange, the Committee shall have the full authority
to award: (i) Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock,
(iv) Deferred Stock, (v) Stock Reload Options and/or (vi) Other Stock-Based
Awards. For purposes of illustration and not of limitation, the Committee shall
have the authority (subject only to the express provisions of the Plan):

                  (i)      to determine the Fair Market Value of the Common
         Stock;

                  (ii)     to select the Consultants and Employees to whom
         Awards may from time to time be granted hereunder;

                  (iii)    to determine whether and to what extent Awards or any
         combination thereof are granted hereunder;

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

                  (v)      to approve the forms of Agreements (including Option
         Agreements) for use under the Plan;

                  (vi)     to determine the terms and conditions, not
         inconsistent with the terms of the Plan, of any Award granted
         hereunder, which terms and conditions may include, but will not be
         limited to, the exercise price of an Option; any specified performance
         goals or other criteria which must be attained for the vesting of an
         Award; any restrictions or limitations applicable to any Awards,
         including, without limitation, any rights of first refusal, repurchase
         rights or other restrictions on transfer applicable to such Award as
         may be set forth in the Agreement evidencing such Award; and any
         vesting, exchange, surrender, cancellation, acceleration, termination,
         exercise or forfeiture provisions applicable to any Awards;

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

                  (viii)   to institute an Option Exchange Program; and

                  (ix)     to construe and interpret the terms of the Plan and
         the Awards granted pursuant to the Plan.

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         (c)      Effect of Committee's Decision. All decisions, determinations
and interpretations of the Committee shall be final and binding on all Holders
of any Awards. No member of the Board or any Committee administering the Plan
shall be liable for any action taken or determination made in good faith with
respect to the Plan or any Award granted hereunder, and all members of the Board
or any Committee administering the Plan shall be fully protected by the Company
in respect of any such action or determination.

         4.       STOCK SUBJECT TO THE PLAN.

         (a)      The maximum aggregate number of Shares that may be acquired by
Holders of Awards granted under the Plan is 2,000,000 Shares. The Shares may be
authorized but unissued Shares of Common Stock or may be reacquired Shares of
Common Stock.

         If any Shares of Common Stock that are subject to an Option granted
hereunder cease to be subject to such Option, or if any Shares of Common Stock
that are subject to any other Award granted hereunder are forfeited or any such
Award otherwise terminates without a payment being required to be made to the
Holder in the form of Common Stock, such Shares shall again be available for
distribution in connection with future grants of Options and other Awards under
the Plan. Only net Shares issued upon a stock-for-stock exercise (including
Common Stock used for withholding taxes) shall be counted against the number of
Shares available under the Plan.

         (b)      The maximum number of Shares with respect to which Options or
Stock Appreciation Rights may be granted under the Plan during any fiscal year
of the Company to any Employee or Consultant shall not exceed 1,500,000 (in each
case subject to adjustment as provided in Section 13 of the Plan).

         If an Option or Stock Appreciation Right is cancelled in the same
fiscal year of the Company in which it was granted (other than in connection
with a transaction described in Section 13 of the Plan), the cancelled Option or
Stock Appreciation Right will be counted against the limit set forth this
Section 4(b). For this purpose, if the exercise price of an Option or the base
amount on which a Stock Appreciation Right is calculated is reduced, the
transaction will be treated as a cancellation of the Option or Stock
Appreciation Right, as applicable, and the grant of a new Option or new Stock
Appreciation Right, as applicable.

         5.       ELIGIBILITY.

         (a)      Awards may be made or granted to Employees (including Officers
and Directors) and Consultants of the Company and its Affiliates who, in the
sole and unreviewable determination of the Committee, are deemed to have
rendered or to be able to render services to the Company or its Affiliates and
who are deemed to have contributed or to have the potential to contribute to the
success of the Company or its Affiliates. No Incentive Stock Option shall be
granted to any Person who is not an Employee of the Company or a Corporate
Affiliate of the Company at the time of grant.

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

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         (c)      Neither the Plan nor any Award shall confer upon any Holder
any right with respect to continuation of his or her employment or consulting
relationship with the Company or any Affiliate, nor shall it interfere in any
way with his or her right or the Company's or an Affiliate's right to terminate
his or her employment or consulting relationship at any time, with or without
cause.

         6.       OPTION EXERCISE PRICE AND CONSIDERATION.

         (a)      The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Committee;
provided that the exercise price for Options granted under the Director Fee
Investment Option Grant Program shall be determined pursuant to Section 11
hereof; and provided further that in the case of an Incentive Stock Option
(which in all cases shall be subject to the Code):

                  (i)      granted to an Employee who, at the time of grant of
         such Option, owns stock representing more than ten percent (10%) of the
         voting power of all classes of stock of the Company or any Corporate
         Affiliate, the per share exercise price shall not be less than 110% of
         the Fair Market Value per Share on the date of grant; and

                  (ii)     granted to any other Employee, the per share exercise
         price shall not be less than 100% of the Fair Market Value per Share on
         the date of grant.

         (b)      The type of consideration to be paid for the Shares to be
issued upon exercise of an Option, including the method of payment, shall be
determined by the Committee (and, in the case of an Incentive Stock Option,
shall be determined at the time of grant and shall be subject to the Code). Such
consideration shall be paid, to the extent permitted by Applicable Laws at the
time the Option is exercised, either (i) in cash or check, or (ii) at the
discretion of the Committee, in one or a combination of the following ways
(which may be in combination with or in lieu of payment by cash or check): (A)
by delivery to the Company of other Shares of Common Stock of the Company that
(x) in the case of Shares acquired upon exercise of an Option, have been owned
by the Holder for more than six months on the date of surrender or such other
period as may be required to avoid a charge to the Company's earnings for
financial reporting purposes, and (y) have a Fair Market Value on the exercise
date equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised, (B) according to a deferred payment or other arrangement
with the Person to whom the Option is granted or to whom the Option is
transferred pursuant to Section 16, (C) a reduction in the amount of any Company
liability to the Holder, including any liability attributable to the Holder's
participation in any Company-sponsored deferred compensation program or
arrangement, (D) when permitted by Applicable Laws, through a "same day sale"
commitment from the Holder (and if applicable a broker-dealer that is a member
of the National Association of Securities Dealers (a "NASD Dealer")), whereby
the Holder irrevocably elects to exercise the Option and to sell at least that
number of Shares so purchased to pay the aggregate exercise price of all of the
Shares so purchased, and the Holder (or, if applicable, the NASD Dealer) commits
upon sale (or, in the case of the NASD Dealer, upon receipt) of such Shares to
forward an amount equal to the aggregate exercise price of such Shares directly
to the Company, with any sale proceeds in excess of such amount being for the
benefit of the Holder, or (E) in any other form of legal consideration that may
be acceptable to the Committee. In making its determination as to the type of
consideration to accept, the Committee may consider if acceptance of such
consideration may be reasonably expected to benefit the Company. In addition,
such consideration shall be accompanied by the delivery by the Holder of a
properly executed exercise notice together with such other documentation as the
Committee and a broker, if applicable, shall require to effect an exercise of
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price.

         7.       EXERCISE OF OPTION.

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         (a)      Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Committee, including performance criteria with respect to
the Company and/or the Holder, and as shall be permissible under the terms of
the Plan. At the discretion of the Committee, the Option Agreement may, but need
not, include a provision whereby the Holder may elect at any time before the
Holder's Continuous Status as an Employee or Consultant terminates to exercise
the Option as to any part or all of the Shares subject to the Option prior to
the full vesting of the Option. Any unvested Shares so purchased shall (unless
otherwise set forth in the Option Agreement evidencing such Options) be subject
to (i) terms and conditions similar to those applicable to Restricted Stock
under Section 9(b) hereof, (ii) a repurchase option in favor of the Company, and
(iii) any other restrictions the Committee determines to be appropriate.

         The total number of Shares subject to an Option may, but need not, be
allotted in periodic installments (which may, but need not, be equal). The
Option Agreement may provide that from time to time during each of such
installment periods, the Option may become exercisable with respect to some or
all of the Shares allotted to that period and may be exercised with respect to
some or all of the Shares allotted to such period and/or any prior period as to
which the Option became vested but was not fully exercised.

         An Option may not be exercised for a fraction of a Share. Exercise of
an Option in any manner shall result in a decrease in the number of Shares that
thereafter may be available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.

         Subject to Section 19, an Option shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Option Agreement by the Person entitled to exercise the Option
and full payment for the Shares with respect to which the Option is exercised
has been received by the Company. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote, receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly upon
exercise of the Option. No adjustment shall be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 13 hereof.

         (b)      Termination of Employment or Consulting Relationship. Subject
to Section 7(c) and Section 7(d) below and the applicable Option Agreement, in
the event of termination of a Holder's Continuous Status as an Employee or
Consultant, such Holder may exercise his or her Option to the extent that the
Holder was entitled to exercise it at the date of such termination; provided,
however, that such Option may be exercised only within such period of time as is
determined by the Committee at the date of grant. Such time period shall not, in
the case of an Incentive Stock Option, exceed three (3) months after the date of
such termination and shall not, in any case, be later than the expiration date
of the term of such Option as set forth in the Option Agreement. To the extent
that the Holder was not entitled to exercise the Option at the date of such
termination, or if the Holder does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate and the
Shares covered by such Option shall revert to the Plan. A Holder's Continuous
Status as an Employee or Consultant shall not be terminated in the event of
Holder's change of status from an Employee to a Consultant or from a Consultant
to an Employee; provided, however, that in the event of a Holder's change of
status from an Employee to a Consultant, any Incentive Stock Option granted to
such Employee shall automatically cease to be treated for tax purposes as an
Incentive Stock Option and shall be treated for tax purposes as a Nonqualified
Stock Option on the day that is three months and one day following such change
of status.

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         Further, the Committee may provide in the Option Agreement evidencing a
grant of Options that upon termination of a Holder's Continuous Status as an
Employee or Consultant, the Committee may elect in its sole discretion that the
portion of any Option unexercised as of the date of termination shall be
exercisable for Shares of Common Stock or, in lieu thereof, for an amount in
cash equal to the excess of the Fair Market Value of the Common Stock over the
exercise price, times the number of Shares of Common Stock for which the Option
is being exercised. Such exercise shall be effected in the manner set forth in
Section 6(b) hereof, except that in the event that the Committee elects pursuant
to this Section 7(b) to deliver cash instead of Shares of Common Stock, the
Holder shall not be required to pay the exercise price to the Company. In the
event that the Committee elects pursuant to this Section 7(b) to deliver cash
instead of Shares of Common Stock and, on the date of such exercise, the Fair
Market Value of the Common Stock is less than or equal to the applicable
exercise price, then the Holder shall not be entitled to any cash, stock or
other property upon such exercise, and the Holder shall have no further rights
with respect to the portion of the Option so exercised.

         (c)      Disability of Holder. In the event of termination of a
Holder's Continuous Status as an Employee or Consultant as a result of his or
her Disability, the Holder may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise the Option to the
extent he or she otherwise was entitled to exercise it at the date of such
termination. If such Disability is not a "disability" as such term is defined in
Section 22(e)(3) of the Code, then in the case of an Incentive Stock Option such
Incentive Stock Option shall automatically cease to be treated for tax purposes
as an Incentive Stock Option and shall be treated for tax purposes as a
Nonqualified Stock Option on the day that is three months and one day following
such termination. To the extent that the Holder was not entitled to exercise the
Option at the date of termination, or if the Holder does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate and the Shares covered by such Option shall revert to the Plan.

         (d)      Death of Holder. In the event of the death of a Holder, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement) by the Holder's estate or by any
Person who acquired the right to exercise the Option by bequest or inheritance
(the "Option Beneficiary"), but only to the extent that the Holder was entitled
to exercise the Option on the date of death. To the extent that, at the time of
death, the Holder was not entitled to exercise the Option, or if the Option
Beneficiary 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.

         (e)      Stock Reload Option. The Committee may also grant to the
Holder (concurrently with the grant of an Incentive Stock Option and at or after
the time of grant in the case of a Nonqualified Stock Option) a Stock Reload
Option exercisable for a number of shares up to (but not exceeding) the amount
of Shares of Common Stock (i) held by the Holder for at least six months and
(ii) used to pay all or part of the exercise price of an Option or withheld by
the Company as payment for withholding taxes. Such Stock Reload Option shall
have an exercise price of the Fair Market Value as of the date of the Stock
Reload Option grant. Unless the Committee determines otherwise, (i) a Stock
Reload Option may be exercised commencing one year after it is granted and shall
expire on the date of expiration of the Option to which the Stock Reload Option
is related and (ii) shall otherwise be treated as an Option for all purposes
under the Plan.

         (f)      Tax Withholding.
                  ---------------

                  (i)      As a condition of the exercise of an Option granted
         under the Plan, the Holder (or in the case of the Holder's death, the
         Option Beneficiary) shall make such arrangements as the

                                       10

<PAGE>

         Committee may require for the satisfaction of any applicable federal,
         state, local or foreign withholding tax obligations that may arise in
         connection with the exercise of an Option and the issuance of Shares.
         The Company shall not be required to issue any Shares under the Plan
         until such obligations are satisfied.

                  (ii)     In the case of an Employee and in the absence of any
         other arrangement, the Employee shall be deemed to have directed the
         Company to withhold or collect from his or her compensation an amount
         sufficient to satisfy such tax obligations from the next payroll
         payment otherwise payable after the date of an exercise of the Option.

                  (iii)    If permitted by the Committee, in its discretion, in
         the case of a Holder other than an Employee (or in the case of an
         Employee where the next payroll payment is not sufficient to satisfy
         such tax obligations, with respect to any remaining tax obligations),
         in the absence of any other arrangement and to the extent permitted
         under Applicable Laws, the Holder shall be deemed to have elected to
         have the Company withhold from the Shares to be issued upon exercise of
         the Option that number of Shares having a Fair Market Value determined
         as of the applicable Tax Date (as defined below) equal to the minimum
         statutory withholding rates for federal and state tax purposes,
         including payroll taxes, applicable to the exercise. For purposes of
         this Section 7(f)(iii), the Fair Market Value of the Shares to be
         withheld shall be determined on the date that the amount of tax to be
         withheld is to be determined under the Applicable Laws (the "Tax
         Date").

                  (iv)     If permitted by the Committee, in its discretion, a
         Holder may satisfy his or her tax withholding obligations upon exercise
         of an Option by any method of payment and form of consideration
         allowable under Section 6(b) hereof.

                  (v)      Any election or deemed election by a Holder to have
         Shares withheld to satisfy tax withholding obligations under Section
         7(f)(iii) or (iv) above shall be irrevocable as to the particular
         Shares as to which the election is made and shall be subject to the
         consent or disapproval of the Committee. Any election by a Participant
         under Section 7(f)(iv) above must be made on or prior to the applicable
         Tax Date.

         8.       STOCK APPRECIATION RIGHTS.

         (a)      Grant and Exercise. Stock Appreciation Rights may be granted
in tandem with (i.e., Tandem Stock Appreciation Right) or in conjunction with
all or part of any Option granted under the Plan or may be granted on a
free-standing basis. In the case of a Nonqualified Stock Option, a Tandem Stock
Appreciation Right may be granted either at or after the time of the grant of
such Nonqualified Stock Option. In the case of an Incentive Stock Option, a
Tandem Stock Appreciation Right may be granted only at the time of the grant of
such Incentive Stock Option, and will be subject to the Code.

         (b)      Terms and Conditions. Stock Appreciation Rights shall be
subject to the following terms and conditions:

                  (i)      Exercise. Tandem Stock Appreciation Rights shall be
         exercisable only at such time or times and to the extent that the
         Options to which they relate shall be exercisable in accordance with
         the provisions of Section 7 hereof and this Section 8 and shall be
         subject to the Code with respect to related Incentive Stock Options and
         such additional limitations on exercise as shall be determined by the
         Committee and set forth in the Agreement. A Tandem Stock Appreciation
         Right may be exercised only when the Fair Market Value of the Shares
         underlying

                                       11

<PAGE>

         the Option to which it relates exceeds the Option's exercise price.
         Other Stock Appreciation Rights shall be exercisable at such time or
         times and subject to such terms and conditions as shall be determined
         by the Committee and set forth in the Agreement.

                  (ii)     Termination. A Tandem Stock Appreciation Right shall
         terminate and shall no longer be exercisable upon the termination or
         exercise of the related Option, except that, unless otherwise
         determined by the Committee at the time of grant, a Tandem Stock
         Appreciation Right granted with respect to less than the full number of
         Shares covered by a related Option shall not be reduced until after the
         number of Shares remaining under the related Option equals the number
         of Shares covered by the Tandem Stock Appreciation Right. Other Stock
         Appreciation Rights shall terminate and shall no longer be exercisable
         upon such terms and conditions as shall be determined by the Committee
         and as set forth in the Agreement.

                  (iii)    Method of Exercise. A Tandem Stock Appreciation Right
         may be exercised by a Holder by surrendering the applicable portion of
         the related Option. Other Stock Appreciation Rights may be exercised by
         a Holder upon surrender thereof, or upon such terms and conditions as
         shall be determined by the Committee and as set forth in the Agreement.
         Upon such exercise and surrender, the Holder shall be entitled to
         receive such amount in the form determined pursuant to Section 8(b)(iv)
         below. Options which have been so surrendered, in whole or in part,
         shall no longer be exercisable to the extent the related Tandem Stock
         Appreciation Rights have been exercised.

                  (iv)     Receipt of SAR Value. Upon the exercise of each
         individual Stock Appreciation Right covered by an Award of Stock
         Appreciation Rights, a Holder shall be entitled to receive up to, but
         not more than, an amount in cash and/or Shares of Common Stock equal to
         the SAR Value for such individual Stock Appreciation Right, with the
         Committee having the right to determine the form of payment.

                  (v)      Shares Affected Upon Plan. Upon the exercise of a
         Tandem Stock Appreciation Right, the Option or part thereof to which
         such Tandem Stock Appreciation Right is related shall be deemed to have
         been exercised for the purpose of the limitation set forth in Section 4
         hereof on the number of Shares of Common Stock to be issued under the
         Plan, but only to the extent of the number of Shares, if any, issued
         under the Tandem Stock Appreciation Right at the time of exercise based
         upon the SAR Value.

         9.       RESTRICTED STOCK.

         (a)      Grant. Shares of Restricted Stock may be awarded either alone
or in addition to other Awards granted under the Plan. The Committee shall
determine the Employees and/or Consultants to whom, and the time or times at
which, grants of Restricted Stock will be awarded, the number of Shares to be
awarded, the price (if any) to be paid by the Holder, the time or times within
which such Awards may be subject to forfeiture ("Restriction Period"), the
vesting schedule and rights to acceleration thereof, and all other terms and
conditions of the Awards.

         (b)      Terms and Conditions. Each Award of Restricted Stock shall be
subject to the following terms and conditions:

                  (i)      Certificates. Restricted Stock, when issued, will be
         represented by a stock certificate or certificates registered in the
         name of the Holder to whom such Restricted Stock shall have been
         awarded. During the Restriction Period, certificates representing the
         Restricted Stock and any securities constituting Retained Distributions
         (as defined below) shall bear a legend to

                                       12

<PAGE>

         the effect that ownership of the Restricted Stock (and such Retained
         Distributions), and the enjoyment of all rights appurtenant thereto,
         are subject to the restrictions, terms and conditions provided in the
         Plan and the Agreement. Such certificates shall be deposited by the
         Holder with the Company, together with stock powers or other
         instruments of assignment, each endorsed in blank, which will permit
         transfer to the Company of all or any portion of the Restricted Stock
         and any securities constituting Retained Distributions that shall be
         forfeited or that shall not become vested in accordance with the Plan
         and the Agreement.

                  (ii)     Rights of Holder. Restricted Stock shall constitute
         issued and outstanding Shares of Common Stock for all corporate
         purposes. The Holder will have the right to vote such Restricted Stock,
         to receive and retain all regular cash dividends and other cash
         equivalent distributions as the Board may in its sole discretion
         designate, pay or distribute on such Restricted Stock and to exercise
         all other rights, powers and privileges of a holder of Common Stock
         with respect to such Restricted Stock, with the exceptions that (A) the
         Holder will not be entitled to delivery of the stock certificate or
         certificates representing such Restricted Stock until the Restriction
         Period shall have expired and unless all other vesting requirements
         with respect thereto shall have been fulfilled; (B) the Company will
         retain custody of the stock certificate or certificates representing
         the Restricted Stock during the Restriction Period; (C) other than
         regular cash dividends and other cash equivalent distributions as the
         Board may in its sole discretion designate, pay or distribute, the
         Company will retain custody of all distributions ("Retained
         Distributions") made or declared with respect to the Restricted Stock
         (and such Retained Distributions will be subject to the same
         restrictions, terms and conditions as are applicable to the Restricted
         Stock) until such time, if ever, as the Restricted Stock with respect
         to which such Retained Distributions shall have been made, paid or
         declared shall have become vested and with respect to which the
         Restriction Period shall have expired; and (D) a breach of any of the
         restrictions, terms or conditions contained in this Plan or the
         Agreement or otherwise established by the Committee with respect to any
         Restricted Stock or Retained Distributions will cause a forfeiture of
         such Restricted Stock and any Retained Distributions with respect
         thereto.

                  (iii)    Vesting: Forfeiture. Upon the expiration of the
         Restriction Period with respect to each Award of Restricted Stock and
         the satisfaction of any other applicable restrictions, terms and
         conditions (A) all such Restricted Stock shall become vested in
         accordance with the terms of the Agreement, and (B) any Retained
         Distributions with respect to such Restricted Stock shall become vested
         to the extent that the Restricted Stock related thereto shall have
         become vested. Any such Restricted Stock and Retained Distributions
         that do not vest shall be forfeited to the Company and the Holder shall
         not thereafter have any rights with respect to such Restricted Stock
         and Retained Distributions that shall have been so forfeited.

         10.      DEFERRED STOCK.

         (a)      Grant. Shares of Deferred Stock may be awarded either alone or
in addition to other Awards granted under the Plan. The Committee shall
determine the Employees and/or Consultants to whom, and the time or times at
which, grants of Deferred Stock shall be awarded, the number of shares of
Deferred Stock to be awarded, the duration of the period ("Deferral Period")
during which, and the conditions under which, receipt of the Shares will be
deferred, and all the other terms and conditions of the Awards.

         (b)      Terms and Conditions. Each Award of Deferred Stock shall be
subject to the following terms and conditions:

                                       13

<PAGE>

                  (i)      Certificates. At the expiration of the Deferral
         Period (or the Additional Deferral Period referred to in Section
         10(b)(iii) below, where applicable), share certificates shall be
         delivered to the Holder, or his legal representative, representing the
         number of Shares equal to the Shares covered by the Award of Deferred
         Stock.

                  (ii)     Vesting; Forfeiture. Upon the expiration of the
         Deferral Period (or the Additional Deferral Period, where applicable)
         with respect to each Award of Deferred Stock and the satisfaction of
         any other applicable limitations, terms or conditions, such Deferred
         Stock shall become vested in accordance with the terms of the
         Agreement. Any Deferred Stock that does not vest shall be forfeited to
         the Company and the Holder shall not thereafter have any rights with
         respect to such Deferred Stock that has been so forfeited. Prior to the
         expiration of the Deferral Period (or the Additional Deferral Period,
         where applicable), such Deferred Stock shall not be treated as issued
         and outstanding Shares of the Company.

                  (iii)    Additional Deferral Period. A Holder may request to,
         and the Committee may at any time, defer the receipt of an Award (or an
         installment of an Award) for an additional specified period or until
         the occurrence of a specified event ("Additional Deferral Period").
         Subject to any exceptions adopted by the Committee, such request must
         be made at least one year prior to expiration of the Deferral Period
         for such Award of Deferred Stock (or such installment).

         11.      DIRECTOR FEE INVESTMENT OPTION GRANT PROGRAM.

         (a)      Grant. A Director Fee Investment Option Grant Program may be
(but is not required to be) implemented by the Board as of the first day of any
calendar year beginning after the IPO Date. Upon such implementation, each
Non-Employee Director who at such time receives an annual retainer fee payable
in cash for his or her service on the Board may elect to apply all or any
portion of such annual retainer fee to the acquisition of an Option grant under
this Director Fee Investment Option Grant Program. Such election must be filed
with the Company's Chief Financial Officer prior to the first day of the
calendar year for which the election is to be in effect. Each Non-Employee
Director who files such a timely election with respect to his or her annual
retainer fee shall automatically be granted an Option under this Director Fee
Investment Option Grant Program on the first trading day in January in the
calendar year for which that fee would otherwise be payable.

         (b)      Terms and Conditions. Each Option shall be a Nonqualified
Stock Option governed by the terms and conditions specified below:

                  (i)      Exercise Price. The exercise price per Share shall be
         thirty-three and one-third percent (33-1/3%) of the Fair Market Value
         per Share on the Option grant date. The exercise price shall become
         immediately due upon exercise of the Option and shall be payable in one
         or more of the alternative forms authorized under Section 6(b) hereof.

                  (ii)     Number of Option Shares. The number of Shares subject
         to the Option shall be determined pursuant to the following formula
         (rounded down to the nearest whole number):

                           X = A / (B x 66-2/3%), where

                           X is the number of Option shares,

                           A is the dollar amount of the annual retainer fee
                           subject to the Non-Employee Director's election, and

                                       14

<PAGE>

                           B is the Fair Market Value per Share on the Option
                           grant date.

                  (iii)    Exercise. If granted, the Option shall become
         exercisable in a series of twelve (12) successive equal monthly
         installments upon the Holder's completion of each month of Board
         service during the calendar year in which the Option is granted. Each
         Option shall have a maximum term of ten (10) years measured from the
         Option grant date.

                  (iv)     Remaining Terms. Each Option granted under this
         Director Fee Investment Option Grant Program shall be subject to (x)
         the terms and conditions of Section 7 hereof to the extent such terms
         and conditions are not inconsistent with this Section 11(b) and (y)
         such other terms and conditions as may be determined by the Board and
         set forth in the Option Agreement evidencing such Options.

         12.      OTHER STOCK-BASED AWARDS.

         (a)      Grant and Exercise. Other Stock-Based Awards may be awarded,
subject to limitations under Applicable Laws, that are denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or related
to Shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the Plan, including, without limitation, purchase rights, Shares of
Common Stock awarded which are not subject to any restrictions or conditions,
convertible or exchangeable debentures, or other rights convertible into or
exchangeable for Shares of Common Stock and Awards valued by reference to the
value of securities of or the performance of specified Subsidiaries or the
Parent of the Company. Other Stock-Based Awards may be awarded either alone or
in addition to or in tandem with any other Awards under this Plan or any other
plan of the Company or any Affiliate.

         (b)      Eligibility For Other Stock-Based Awards. The Committee shall
determine the Employees and/or Consultants to whom, and the time or times at
which, grants of such Other Stock-Based Awards shall be made, the number of
Shares of Common Stock to be awarded pursuant to such Awards, and all other
terms and conditions of the Awards.

         (c)      Terms and Conditions. Each Other Stock-Based Award shall be
subject to such terms and conditions as may be determined by the Committee and
set forth in the Agreement evidencing such Award.

                                       15

<PAGE>

         13.      ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.

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

         (b)      Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Committee shall notify each
Holder of an outstanding Award granted hereunder at least fifteen (15) days
prior to such proposed action. To the extent it has not been previously
exercised, the Award shall terminate immediately prior to the consummation of
such proposed action; provided, however, that the Committee may, in the exercise
of its sole and unreviewable discretion in such instances, declare that any
Award shall terminate as of an earlier date fixed by the Committee and give each
Holder the right to exercise his or her rights as to all or any part of the
Award, including Shares as to which the Award would not otherwise be
exercisable.

         (c)      Merger or Asset Sale. Subject to Section 13(d), in the event
of the merger of the Company into, or the consolidation of the Company with,
another Person in which the shareholders of the Company receive cash or
securities of another issuer, or any combination thereof, in exchange for their
Shares of Common Stock, or the sale of all or substantially all of the assets of
the Company, each outstanding Award shall be assumed or an equivalent option or
right substituted by the successor Person or an Affiliate of the successor
Person. In the event that the successor Person refuses to assume or substitute
for the Award, the Holder shall fully vest in and have the right to exercise the
Award (provided it has not already terminated), including Shares as to which it
would not otherwise be vested or exercisable. If an Award becomes fully vested
and exercisable in lieu of assumption or substitution in the event of a merger,
consolidation or sale of assets, the Committee shall notify the Holder that the
Award shall be fully exercisable for a period of fifteen (15) days from the date
of such notice, and the Award shall terminate upon the expiration of such
period. For the purposes of this Section 13(c), the Award shall be considered
assumed if, following the merger, consolidation or sale of assets, the option or
right substituted for such Award confers the right to purchase or receive, for
each Share of Common Stock subject to the Award immediately prior to the merger,
consolidation or sale of assets, the per share consideration (whether stock,
cash, or other securities or property) received in the merger, consolidation or
sale of assets by holders of Common Stock (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the merger, consolidation or sale of assets is not solely common
stock of the successor Person or its Parent (if any), the Committee may, with
the consent of the successor Person, provide for the consideration to be
received upon the exercise of the Award, for each Share of Common Stock subject
to the Award, to be solely common stock of the successor Person or its Parent
(if any) equal in fair market value to the per share consideration received by
holders of Common Stock in the merger, consolidation or sale of assets.

                                       16

<PAGE>

         (d)      Change of Control. Notwithstanding anything to the contrary,
the Committee may grant Awards which provide for the acceleration of the vesting
of Shares subject to the Award upon a Change of Control. Such provisions shall
be set forth in the Agreement evidencing such Award.

         (e)      Further Adjustments. In the event of any change of a type
described in Section 13(a) or Section 13(c) above, the Committee shall make any
further adjustment to the maximum number of Shares which may be acquired under
the Plan pursuant to the exercise of Awards, the maximum number of Shares for
which Awards may be granted to any one Employee or Consultant and the number of
Shares and price per Share subject to outstanding Awards as shall be equitable
to prevent dilution or enlargement of rights under such Awards, and the
determination of the Committee as to these matters shall be conclusive and
binding on the Holder; provided, however, that (i) each such adjustment with
respect to an Incentive Stock Option shall comply with the rules of Section
424(a) of the Code (or any successor provision) and (ii) in no event shall any
adjustment be made which would cause any Incentive Stock Option granted
hereunder to no longer be an "incentive stock option" as defined in Section 422
of the Code.

         (f)      No Limitation on Right to Merge, Etc. The grant of Awards
pursuant to the Plan shall not restrict in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, consolidate, dissolve, liquidate,
or sell or transfer all or any part of its business or assets.

         14.      TERM OF PLAN.

         The Plan shall become effective upon the earlier to occur of its
adoption by the Board or its approval by the shareholders of the Company, as
described in Section 22 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 18 of the Plan.

         15.      TERM OF OPTIONS.

         The term of each Option and other Award shall be the term stated in the
applicable Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof; and provided further that in the case
of an Incentive Stock Option granted to a Holder who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Corporate Affiliate, the term of
the Option shall be no more than five (5) years from the date of grant thereof.

         16.      NON-TRANSFERABILITY OF AWARDS.

         An Incentive Stock Option shall not be transferable except by will or
by the laws of descent and distribution and shall be exercisable during the
lifetime of the Holder to whom the Incentive Stock Option is granted only by
such Holder. Any other Award, including a Nonqualified Stock Option, shall not
be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order, as defined by the Code or by
Title I of the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder (a "QDRO"), and shall be exercisable during the lifetime of
the Holder to whom the Option is granted only by such Holder or any transferee
pursuant to a QDRO; provided, however, that the Committee, in its discretion,
may allow for transferability of Nonqualified Stock Options by a Holder to
Immediate Family Members. Any Nonqualified Stock Option grants that are
transferable are further conditioned on the Holder and the applicable Immediate
Family Members agreeing to abide by the Company's then current stock option
transfer guidelines. A Tandem Stock Appreciation Right may not be transferred
except when the corresponding Option is transferred as permitted by this Section
16 and, when the corresponding Option is transferred, the Tandem Stock Option

                                       17

<PAGE>

Appreciation Right must be transferred to the same permitted transferee to whom
the Option is transferred.

         17.      TIME OF GRANTING AWARDS.

         The date of grant of an Award shall, for all purposes, be the date on
which the Committee makes the determination granting such Award, or such other
date as is determined by the Committee. Notice of the determination shall be
given to each Employee or Consultant to whom an Award is so granted within a
reasonable time after the date of such grant.

         18.      AMENDMENT AND TERMINATION OF THE PLAN.

         The Board may amend or terminate the Plan in any respect whatsoever,
provided that any such amendment or termination of the Plan shall not affect
Award already granted and such Award shall remain in full force and effect as if
the Plan had not been amended or terminated. In addition, to the extent
necessary and desirable to comply with Rule 16b-3 (or any other Applicable Law
or regulation, including the requirements of the National Association of
Securities Dealers or the Stock Exchange), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.

         19.      CONDITIONS UPON ISSUANCE OF SHARES.

         Shares shall not be issued pursuant to an Award unless the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
Applicable Laws, including, without limitation, the Securities Act of 1933, as
amended (the "Securities Act"), the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of the Stock Exchange, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

         The Company may require any Holder, as a condition of receiving Shares
pursuant to an Award, (i) to give written assurances satisfactory to the Company
as to the Holder's knowledge and experience in financial and business matters
and/or to employ a purchaser representative reasonably satisfactory to the
Company who is knowledgeable and experienced in financial and business matters,
and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Award; (ii) to
give written assurances satisfactory to the Company stating that such Holder is
acquiring the Shares subject to the Award for such Holder's own account and not
with any present intention of selling or otherwise distributing such Shares;
(iii) to deliver such other documentation as may be necessary to comply with
federal and state securities laws and all other Applicable Laws; and (iv) to
sign a counterpart to and agree to be bound by all of the terms and conditions
of the Company's shareholders' agreement as then in effect. These requirements,
and any assurances given pursuant to such requirements, shall be inoperative if
(i) the issuance of the Shares upon the exercise of or pursuant to the Award has
been registered under a then currently effective registration statement under
the Securities Act and all applicable state securities laws, or (ii) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws and other Applicable Laws. The Company may, upon advice of
counsel to the Company, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with the
Plan, applicable securities laws and other Applicable Laws, including, but not
limited to, legends restricting the transfer of the Shares, and may enter
stop-transfer orders against the transfer of the Shares issued upon the exercise
of or pursuant to an Award.

         The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of

                                       18

<PAGE>

any Shares hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.

         20.      RESERVATION OF SHARES.

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

         21.      AGREEMENTS.

         Options shall be evidenced by Option Agreements, and other Awards shall
be evidenced by other Agreements, each in such form as the Committee shall
approve from time to time.

         22.      SHAREHOLDER APPROVAL.

         Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted by the Board. Such shareholder approval shall be obtained to
the extent and in manner required under Applicable Laws and the rules of the
Stock Exchange.

         23.      USE OF PROCEEDS FROM STOCK.

         The proceeds, if any, from the sale of Common Stock pursuant to Options
or other Awards shall constitute general funds of the Company.

         24.      MISCELLANEOUS.

         (a)      Acceleration of Vesting. The Committee shall have the power to
accelerate the time at which an Award may first be exercised or the time during
which an Award or any part thereof will vest, notwithstanding the provisions in
the Agreement evidencing the Award stating the time at which it may first be
exercised or the time during which it will vest.

         (b)      Rule 16b-3. With respect to Persons subject to Section 16 of
the Exchange Act, transactions under the Plan are intended to comply with all
applicable conditions of Rule 16b-3 and with respect to such Persons all
transactions shall be subject to such conditions regardless of whether they are
expressly set forth in the Plan or the Agreement. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall not apply to
such Persons or their transactions and shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.

         (c)      Grants Exceeding Allotted Shares. If the number of Shares of
Common Stock subject to an Award granted pursuant to the Plan exceeds, as of the
date of grant, the number of Shares that may be issued under the Plan without
additional shareholder approval, such Award shall be void with respect to such
excess Shares, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 18 of the Plan.

         (d)      Notice. Any written notice to the Company required by any of
the provisions of the Plan shall be addressed to the Secretary of the Company at
15455 North Dallas Parkway, Suite 500, Addison, Texas 75001, Attn: Secretary and
shall become effective when it is received. Any written notice to Holders
required by any provisions of the Plan shall be addressed to the Holder at the
address on file with the Company and shall become effective three days after it
is mailed by certified mail, postage prepaid to such address or at the time of
delivery if delivered sooner by messenger or overnight courier.

                                       19

<PAGE>

         (e)      Savings Clause. Notwithstanding any other provision hereof,
the Plan is intended to qualify as a plan pursuant to which Incentive Stock
Options may be issued under Section 422 of the Code. If the Plan or any
provision of the Plan shall be held to be invalid or to fail to meet the
requirements of Section 422 of the Code or the regulations promulgated
thereunder, such invalidity or failure shall not affect the remaining parts of
the Plan or such provisions which apply only to Nonqualified Stock Options, but
rather it shall be construed and enforced as if the Plan or the affected
provision thereof, as the case may be, complied in all respects with the
requirements of Section 422 of the Code.

         (f)      Governing Law. The Plan and all rights and obligations
thereunder shall be construed in accordance with and governed by the laws of the
State of Texas without regard to its conflict of laws rules.

             [THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK.]

                                       20

<PAGE>

                                         Exhibit A to 2002 Equity Incentive Plan
                                         ---------------------------------------

                            ASCENDANT SOLUTIONS, INC.

                           2002 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT

                               (Standard Exercise)

[Optionee's name and address]

         This Stock Option Agreement (this "Option Agreement") is entered into
as of ______ __________, 2002, by and between you ("Optionee") and Ascendant
Solutions, Inc., (the "Company"). Unless otherwise defined herein, all defined
terms used herein shall have the meanings set forth in the 2002 Equity Incentive
Plan of the Company (the "Plan").

         1.       Grant of Option. The Company hereby grants to Optionee an
option (the "Option") to purchase the number of shares (the "Shares") of the
Common Stock, par value $.0001 per share (the "Common Stock"), of the Company
set forth below at the exercise price and on the other terms and conditions set
forth below, subject to the terms and conditions of this Option Agreement and
the Plan (which is incorporated herein by reference), including the provisions
thereof relating to increases in the number of shares covered by this Option
upon the occurrence of certain specified events, as follows:

         Grant Number                             ______________________________
         Date of Grant ("Date of Grant")          ______________________________
         Vesting Commencement Date                ______________________________
         Exercise Price per Share ("Exercise      ______________________________
         Price Per Share")
         Total Number of Shares Granted           ______________________________
         Total Exercise Price                     ______________________________
         Type of Option:
                  ____ Incentive Stock Option
                  ____ Nonqualified Stock Option
         Term/Expiration Date: _________________
         (No more than 10 years from date
         of grant, 5 years for certain grants)

         If designated above as an Incentive Stock Option, this Option is
intended (subject to Section 5(b) of the Plan) to qualify as an Incentive Stock
Option as defined in Section 422 of the Code; provided, however, the Company has
not made, and will not be deemed to make hereby, any representations or
warranties to Optionee with respect to such qualification.

                                       21

<PAGE>

         2.       Vesting Schedule.
                  ----------------

                  (a)      This Option may be exercised, in whole or in part, in
accordance with the following schedule. Except only as specifically provided
elsewhere herein or in the Plan, this Option shall be exercisable in the
following cumulative installments as follows:

[Note: the vesting schedule is to be completed upon grant of the Option]

                  (b)      Notwithstanding the vesting schedule set forth above,
in the event of Optionee's death, Disability or other termination of Optionee's
Continuous Status as an Employee or Consultant (regardless of the reason),
Options that have not become vested and exercisable under Section 2(a) shall
cease vesting, shall not be exercisable and shall automatically be forfeited and
cancelled on the date of such termination.

                  (c)      Notwithstanding the vesting schedule set forth above,
and so long as the Option has not been terminated, in the event of a "Change of
Control" as defined in the Plan, the vesting schedule above shall be accelerated
such that the Option shall be deemed to be fully vested immediately prior to
such event.

[Note: delete the foregoing paragraph if the Option does not automatically
accelerate upon a change of control.]

         3.       Exercise of Option.
                  ------------------

                  (a)      This Option shall be exercisable, with respect to any
or all of the Shares, during its term in accordance with the vesting schedule
set out in Section 2 hereof and in accordance with the applicable provisions of
the Plan and this Option Agreement. In the event of Optionee's death, Disability
or other termination of Optionee's Continuous Status as an Employee or
Consultant (regardless of the reason), this Option shall be exercisable only in
accordance with the applicable provisions of the Plan and this Option Agreement
(including Section 2(b) and Section 4 hereof).

                  (b)      To exercise this Option, Optionee must deliver to the
Company an executed exercise agreement in the form attached hereto as Exhibit A
(the "Exercise Agreement") which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised
(this Option may be exercised in one or more installments, provided that this
Option may not be exercised as to fewer than one-hundred (100) Shares), any
restrictions (including restrictions on transfer) imposed on the Shares, and
such other representations and agreements as to the Optionee's investment intent
with respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Agreement shall be signed
by the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Agreement shall be accompanied by payment
of the Exercise Price Per Share multiplied by the number of Shares in respect of
which the Option is being exercised (the "Exercise Price"). This Option shall be
deemed to be exercised upon receipt by the Company of such executed Exercise
Agreement accompanied by the Exercise Price.

                  (c)      The Optionee shall, upon notification of the amount
due (if any) as a result of the exercise of the Option and prior to or
concurrent with delivery of the certificate representing the Shares, pay to the
Company as provided in the Plan amounts necessary to satisfy applicable federal,
state and local tax withholding requirements.

                  (d)      No Shares will be issued pursuant to the exercise of
an Option unless such issuance and such exercise shall comply with this Option
Agreement and Section 19 of the Plan.

                                       22

<PAGE>

Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.

         4.       Termination Period. Optionee may exercise that portion of the
Option that is vested on the date of termination (or becomes vested by reason of
such termination pursuant to this Agreement) for three months (or such shorter
period provided for elsewhere herein or in the Plan) after termination of
Optionee's Continuous Status as an Employee or Consultant, or for such longer
period upon Optionee's death or Disability as provided in the Plan. If the
Optionee's status changes from Employee to Consultant or Consultant to Employee,
this Option Agreement shall remain in effect. In no event may Optionee exercise
this Option after the Term/Expiration Date as provided above in Section 1.
Notwithstanding the foregoing, in the event that Optionee's Continuous Status as
an Employee or Consultant is terminated by the Company for Cause, this Option
(both the vested and unvested portions thereof) will terminate on the date of
such termination and will not be exercisable thereafter. For purposes of this
Option Agreement, "Cause" means the occurrence of any of the following events or
reasons:

                  (a)      Optionee's conviction for a felony offense or
commission by Optionee of any act abhorrent to the community that the Company
considers materially damaging to or tending to discredit the reputation of the
Company;

                  (b)      Dishonesty, fraud, willful misconduct, unlawful
discrimination or theft on the part of Optionee;

                  (c)      Optionee's using for Optionee's own benefit any
confidential or proprietary information of the Company, or willfully or
negligently divulging any such information to third parties without the prior
written consent of the Company;

                  (d)      Optionee's public drunkenness, public use of illegal
substances or drugs or the use, possession, distribution or being under the
influence of alcohol or illegal substances or drugs in the workplace (the only
exception is that Optionee may consume alcohol reasonably and responsibly, if he
or she so chooses, at legitimate business events and functions where alcohol is
legally available);

                  (e)      the determination by the Company that Optionee has
continually failed or refused to comply, after notice of and a reasonable
opportunity to cure such failure or refusal, with the policies, standards,
regulations, instructions, or directions of the Company as they currently exist
or as they may be modified from time to time; or

                  (f)      any violation by the Optionee of any Noncompetition,
Nondiversion, or Nondisclosure Agreement between the Optionee and the Company
(the "Noncompetition Agreement"), or any part of any noncompetition,
nondiversion, nondisclosure or similar agreement that amends, extends,
supplements, modifies or supersedes the Noncompetition Agreement.

         5.       Method of Payment. The purchase price of Shares acquired
pursuant to the Option shall be paid as set forth in the Plan. THE USE OF SHARES
OF STOCK ACQUIRED OR TO BE ACQUIRED TO PAY FOR EXERCISED SHARES MAY HAVE INCOME
TAX CONSEQUENCES FOR THE OPTIONEE.

         6.       Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, and may not be exercised if the issuance of such Shares upon such
exercise or the method of payment of consideration for such shares would
constitute a violation of any applicable federal or state securities or other
law or regulation, including any rule under Part 221 of Title 12 of the Code of
Federal Regulations as promulgated by the Federal Reserve Board.

                                       23

<PAGE>

         7.       Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution or as otherwise set forth in the Plan and may be exercised during
the lifetime of Optionee only by Optionee or a permitted transferee as set forth
in the Plan. The terms of the Plan and this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.

         8.       Term of Option. This Option may be exercised only within the
term set out in Section 1 hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement. The limitations
set forth in Sections 5, 6 and 15 of the Plan regarding Options designated as
Incentive Stock Options and Options granted to more than ten percent (10%)
shareholders shall apply to this Option.

         9.       Changes in Capital Structure. The Optionee agrees and
acknowledges that the Company shall have the right at any time and from time to
time after the date of this Option Agreement to authorize additional classes or
series of capital stock, some of which may entitle the holders thereof to
greater rights than the holders of the Common Stock into which this Option is
convertible, and to issue shares thereunder, subject only to the limits imposed
by Applicable Laws.

         10.      Tax Consequences. The grant and/or exercise of the Option will
have federal and state income tax consequences. THE OPTIONEE SHOULD CONSULT A
TAX ADVISER UPON THE GRANT OF THE OPTION AND BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES ACQUIRED UPON EXERCISE, PARTICULARLY WITH RESPECT TO HIS
OR HER STATE'S TAX LAWS.

         11.      Entire Agreement. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and this Option Agreement may not be
amended except by means of a writing signed by the Company and Optionee. If any
inconsistency should exist between the terms and conditions of this Option
Agreement and the Plan, the Plan shall govern and control.

         12.      Governing Law. This Option Agreement is governed by Texas law
except for that body of law pertaining to conflict of laws.

         13.      Warranties, Representations and Covenants. The undersigned
Optionee warrants and represents that he or she has reviewed the Plan and this
Option Agreement in their entirety, has had an opportunity to obtain the advice
of counsel prior to executing this Option Agreement and fully understands all of
the provisions of the Plan and this Option Agreement. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions relating to the Plan and this Option Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR
EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS OPTION AGREEMENT, NOR IN THE PLAN,
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.

                                       24

<PAGE>

         14.      Relation to Other Benefits; Termination of Employment. Any
economic or other benefit to the Optionee under this Option Agreement or the
Plan will not be taken into account in determining any benefits to which the
Optionee may be entitled under any profit-sharing, retirement or similar benefit
or compensation plan maintained by the Company and will not affect the amount of
any life insurance coverage available to any beneficiary under any life
insurance plan covering employees of the Company. No provision of this Option
Agreement will limit in any way whatsoever any right that the Company may
otherwise have to terminate the employment or adjust the compensation of the
Optionee at any time.

         [Note: If applicable, insert here any other terms and conditions of the
Option as determined by the Committee, such as any specified performance goals
or other criteria which must be attained for the vesting of the Option; any
additional restrictions or limitations applicable to the Option; and any
additional vesting, exchange, surrender, cancellation, acceleration,
termination, exercise or forfeiture provisions applicable to the Option.]

                                       THE COMPANY:

                                       ASCENDANT SOLUTIONS, INC.

                                       By:
                                           -------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title:
                                              ----------------------------------

                                       OPTIONEE:

                                       -----------------------------------------
                                       Signature

                                       -----------------------------------------
                                       Print Name

                                       -----------------------------------------
                                       Residence Address

                                       -----------------------------------------
                                       Area Code/Telephone Number

                                       25

<PAGE>

                                             Exhibit A to Stock Option Agreement
                                             -----------------------------------
                                                             (Standard Exercise)
                                                             -------------------

                            ASCENDANT SOLUTIONS, INC.

                           2002 EQUITY INCENTIVE PLAN

                               EXERCISE AGREEMENT

                               (Standard Exercise)

Ascendant Solutions, Inc.
15455 North Dallas Parkway
Suite 500
Addison, Texas 75001

Attention: Secretary

         1.       Exercise of Option. Effective as of today, ________, 200__,
the undersigned ("Purchaser") hereby elects, pursuant to this Exercise Agreement
(this "Exercise Agreement"), to exercise _____ options (the "Options") to
purchase ______ shares (the "Shares") of the Common Stock of Ascendant
Solutions, Inc., (the "Company") under and pursuant to the 2002 Equity Incentive
Plan (the "Plan") and the Stock Option Agreement dated _______, 200__ (the
"Option Agreement"). The purchase price for the Shares shall be $_____, as
specified in the Option Agreement. Unless otherwise defined herein, all defined
terms used herein shall have the meanings set forth in the Plan.

         2.

                  Delivery of Payment. Purchaser herewith delivers to the
Company the full purchase price for the Shares of ____________________________.
THE USE OF SHARES OF STOCK ACQUIRED OR TO BE ACQUIRED FOR EXERCISED SHARES MAY
HAVE INCOME TAX CONSEQUENCES FOR THE PURCHASER.

         3.       Representations and Warranties of Purchaser; Compliance with
Securities Laws. Purchaser represents and warrants to the Company that:

                  (a)      Agrees to Terms of the Plan. Purchaser has received a
copy of the Plan and the Option Agreement, has read and understands the terms of
the Plan and the Option Agreement, and agrees to be bound by their terms and
conditions. Purchaser acknowledges that there may be adverse tax consequences
upon exercise of the Options or disposition of the Shares, and that Purchaser
should consult a tax adviser prior to such exercise or disposition.

                  (b)      Purchase for Own Account for Investment. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser has no present intention of selling or otherwise
disposing of all or any portion of the Shares and no one other than Purchaser
has any beneficial ownership of any of the Shares.

                  (c)      Access to Information. Purchaser has had access to
all information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that

                                       26

<PAGE>

Purchaser reasonably considers important in making the decision to purchase the
Shares and Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.

                  (d)      Understanding of Risks. Purchaser is fully aware of:
(i) the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (e.g., that Purchaser may not be
able to sell or dispose of the Shares or use them as collateral for loans); (iv)
the qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Shares. Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.

                  (e)      No General Solicitation. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation in
connection with the offer sale and purchase of the Shares.

                  (f)      Compliance with U.S. Federal Securities Laws and
State Securities Laws. Purchaser understands and acknowledges that the Shares
have not been registered with the Securities and Exchange Commission (the "SEC")
under the Securities Act and that, notwithstanding any other provision of this
Exercise Agreement to the contrary, the exercise of any rights to purchase any
Shares is expressly conditioned upon compliance with the Securities Act and all
applicable state securities laws. Purchaser agrees to cooperate with the Company
to ensure compliance with such laws.

         4.       Restricted Securities; Restrictions on Transfers.
                  ------------------------------------------------

                  (a)      No Transfer Unless Registered or Exempt. Purchaser
understands that Purchaser may not transfer any Shares except pursuant to this
Exercise Agreement and unless such Shares are registered under the Securities
Act or qualified under applicable state securities laws or unless, in the
opinion of counsel to the Company, exemptions from such registration and
qualification requirements are available. Purchaser understands that only the
Company may file a registration statement with the SEC and that the Company is
under no obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be available
or may not permit Purchaser to transfer all or any of the Shares in the amounts
or at the times proposed by Purchaser.

                  (b)      SEC Rule 144. In addition, Purchaser has been advised
that SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held for a
minimum of one (1) year, and in certain cases two (2) years, after they have
been purchased and paid for (within the meaning of Rule 144). Purchaser
understands that Rule 144 may indefinitely restrict transfer of the Shares so
long as Purchaser remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.

                  (c)      Disposition of Shares. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares unless and until:

                           (i)      Purchaser shall have complied with all
requirements of this Exercise Agreement applicable to the disposition of the
Shares;

                           (ii)     Purchaser shall have provided the Company
with written assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration of the
Shares under the Securities Act or (ii) all appropriate action necessary for

                                       27

<PAGE>

compliance with the registration requirements of the Securities Act or any
exemption from registration available under the Securities Act (including Rule
144) has been taken; and

                           (iii)    Purchaser shall have provided the Company
with such other written assurances and agreements, in form and substance
satisfactory to the Company, as may be requested by the Company pursuant to the
Plan.

                  (d)      Restrictions on Transfer. Subject to Section 6(f)
below, Purchaser shall not sell, transfer, assign, grant a lien or security
interest in, pledge, hypothecate, encumber, gift or otherwise dispose of
("Transfer") any Shares without the prior written consent of the Company. In
addition, any proposed Transfer shall be subject to the Company's Right of First
Refusal (as defined below) pursuant to Section 6 below.

                  (e)      Transferee Obligations. Each person (other than the
Company) to whom the Shares are Transferred by means of one of the permitted
Transfers specified in Section 6(f) of this Exercise Agreement must, as a
condition precedent to the validity of such Transfer, acknowledge in writing to
the Company that such person is bound by the provisions of this Exercise
Agreement and that the transferred Shares are subject to (i) the Company's Right
of First Refusal granted hereunder and (ii) the market stand-off provisions of
Section 5, to the same extent such Shares would be so subject if retained by the
Purchaser.

         5.       Market Standoff Agreement. Purchaser agrees in connection with
any registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Shares without
the prior written consent of the Company or such underwriters, as the case may
be, for such period of time (not to exceed 180 days) after the effective date of
such registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.

         6.       Company's Right of First Refusal. Before any Shares acquired
by Purchaser hereunder and held by Purchaser or any permitted transferee of such
Shares (either being sometimes referred to herein as the "Purchaser") may be
Transferred, the Company and/or its assignee(s) shall have an assignable right
of first refusal to purchase the Shares proposed to be Transferred (the "Offered
Shares") on the terms and conditions set forth in this Section 6 (the "Right of
First Refusal").

                  (a)      Notice of Proposed Transfer. The Purchaser of the
Offered Shares shall deliver to the Company a written notice (the "Notice")
stating: (i) the Purchaser's bona fide intention to Transfer the Offered Shares;
(ii) the name of each proposed bona fide purchaser or other transferee
("Proposed Transferee"); (iii) the number of Offered Shares to be Transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Purchaser proposes to Transfer the Offered Shares (the "Offered
Price") and (v) that the Purchaser will offer to Transfer the Offered Shares to
the Company and/or its assignee(s) at the Offered Price as provided in this
Section 6.

                  (b)      Exercise of Right of First Refusal: At any time
within thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Purchaser, elect to purchase
all (or, with the consent of the Purchaser, less than all) the Offered Shares
proposed to be Transferred to any one or more of the Proposed Transferees named
in the Notice, at the purchase price determined as specified below.

                  (c)      Purchase Price: The purchase price for the Offered
Shares purchased under this Section 6 will be the Offered Price. If the Offered
Price includes consideration other than cash, then the

                                       28

<PAGE>

cash equivalent value of the non-cash consideration shall conclusively be deemed
to be the value of such non-cash consideration as determined in good faith by
the Board.

                  (d)      Payment: Payment of the Offered Price will be
payable, at the option of the Company and/or its assignee(s) (as applicable), by
check or by cancellation of all or a portion of any outstanding indebtedness of
the Purchaser to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The Offered
Price will be paid without interest within sixty (60) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.

                  (e)      Transfer. If all of the Offered Shares proposed in
the Notice to be Transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section 6, then the
Purchaser may Transfer such Offered Shares to that Proposed Transferee at the
Offered Price or at a higher price; provided that such Transfer is consummated
within 120 days after the date of the Notice, and provided further, that (i) any
such Transfer is effected in compliance with all applicable securities laws and
(ii) the Proposed Transferee agrees in writing that the provisions of this
Section 6 will continue to apply to the Offered Shares in the hands of such
Proposed Transferee. If the Offered Shares described in the Notice are not
Transferred to the Proposed Transferee within such 120 day period, then a new
Notice must be given to the Company, and the Company will again be offered the
Right of First Refusal before any Shares held by the Purchaser may be
Transferred.

                  (f)      Exempt Transfers: Notwithstanding anything to the
contrary in Section 4(d) or in this Section 6, the following Transfers of
Offered Shares will be exempt from the Right of First Refusal: (i) the Transfer
of any or all of the Offered Shares during Purchaser's lifetime by gift or on
Purchaser's death by will or intestacy to any Immediate Family Member (as such
term is defined in the Plan) of Purchaser, provided that each transferee or
other recipient agrees in a writing satisfactory to the Company that the
provisions of this Section 6 will continue to apply to the Transferred Shares in
the hands of such transferee or other recipient; (ii) any Transfer of Shares
made pursuant to a statutory merger or statutory consolidation of the Company
with or into another corporation or corporations (except that the Right of First
Refusal will continue to apply thereafter to such Shares, in which case the
surviving corporation of such merger or consolidation shall succeed to the
rights of the Company under this Section 6 unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any Transfer of Shares
pursuant to the winding up and dissolution of the Company.

                  (g)      Termination of Right of First Refusal: The Company's
Right of First Refusal will terminate on the IPO Date.

         7.       Rights as Shareholder. The Purchaser shall not be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
Shares for which such Option is exercised including, but not limited to, rights
to vote or to receive dividends unless and until the Purchaser has satisfied all
requirements for exercise of the Option pursuant to its terms, the certificates
evidencing such Shares have been issued and the Purchaser has become a record
holder of such Shares. A share certificate for the number of Shares so acquired
shall be issued to the Purchaser as soon as practicable after exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date all the conditions set forth above are
satisfied, except as provided in Section 13 of the Plan.

         8.       Tax Consultation. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.

                                       29

<PAGE>

         9.       Legends. Purchaser understands and agrees that the Company
will cause a legend regarding the Company's Right of First Refusal to be placed
upon any certificate(s) or other documents or instruments evidencing ownership
of the Shares by the Purchaser, in addition to any other legends required under
federal and state securities laws including the following legends:

         "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR OFFERED
         FOR SALE IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR
         THE SHARES UNDER SUCH ACT, (II) A 'NO ACTION' LETTER OF THE SECURITIES
         AND EXCHANGE COMMISSION WITH RESPECT TO SUCH SALE OR OFFER, OR (III) AN
         OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT REGISTRATION
         UNDER SUCH ACT IS NOT REQUIRED WITH RESPECT TO SUCH SALE OR OFFER."

         "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
         TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
         COMPLIANCE WITH THE TERMS OF WRITTEN AGREEMENTS BETWEEN THE CORPORATION
         AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST
         TO THE SHARES). SUCH AGREEMENTS GRANT CERTAIN RIGHTS OF FIRST REFUSAL
         TO THE CORPORATION. THE SECRETARY OF THE CORPORATION WILL UPON WRITTEN
         REQUEST FURNISH A COPY OF SUCH AGREEMENTS TO THE HOLDER HEREOF WITHOUT
         CHARGE."

         10.      Entire Agreement. The Plan and the Option Agreement are
incorporated herein by reference. This Exercise Agreement, the Plan and the
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter
hereof, and this Exercise Agreement may not be amended except by means of a
writing signed by the Company and Purchaser. If any inconsistency should exist
between the terms and conditions of this Exercise Agreement and the terms of the
Option Agreement, the terms of the Option Agreement shall govern and control. If
any inconsistency should exist between the terms and conditions of this Exercise
Agreement and the terms of the Plan, the terms of the Plan shall govern and
control.

         11.      Governing Law. This Exercise Agreement is governed by Texas
law except for that body of law pertaining to conflict of laws.

                                       30

<PAGE>

Submitted by:                          Accepted by:

PURCHASER:                             THE COMPANY:

                                       ASCENDANT SOLUTIONS, INC.

                                       By:
------------------------------             ------------------------------
Signature

                                       Its:
------------------------------              -----------------------------
Print Name

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

                                       15455 North Dallas Parkway
------------------------------         Suite 500
                                       Addison, Texas 75001
------------------------------         Attn: Secretary

                                       31

<PAGE>

                                         Exhibit B to 2002 Equity Incentive Plan
                                         ---------------------------------------

                            ASCENDANT SOLUTIONS, INC.

                           2002 EQUITY INCENTIVE PLAN

                             STOCK OPTION AGREEMENT

                            (Immediately Exercisable)

[Optionee's name and address]

         This Stock Option Agreement (this "Option Agreement") is entered into
as of ______ __________, 2002, by and between you ("Optionee") and Ascendant
Solutions, Inc. (the "Company"). Unless otherwise defined herein, all defined
terms used herein shall have the meanings set forth in the 2002 Equity Incentive
Plan of the Company (the "Plan").

         1.       Grant of Option. The Company hereby grants to Optionee an
option (the "Option") to purchase the number of shares (the "Shares") of the
Common Stock, par value $.0001 per share (the "Common Stock"), of the Company
set forth below at the exercise price and on the other terms and conditions set
forth below, subject to the terms and conditions of this Option Agreement and
the Plan (which is incorporated herein by reference), including the provisions
thereof relating to increases in the number of shares covered by this Option
upon the occurrence of certain specified events, as follows:

         Grant Number                                ___________________________
         Date of Grant ("Date of Grant")             ___________________________
         Vesting Commencement Date                   ___________________________
         Exercise Price per Share ("Exercise         ___________________________
         Price Per Share")
         Total Number of Shares Granted              ___________________________
         Total Exercise Price                        ___________________________
         Type of Option:
                  ____ Incentive Stock Option
                  ____ Nonqualified Stock Option
         Term/Expiration Date: _________________
         (No more than 10 years from date
         of grant, 5 years for certain grants)

         If designated above as an Incentive Stock Option, this Option is
intended (subject to Section 5(b) of the Plan) to qualify as an Incentive Stock
Option as defined in Section 422 of the Code; provided, however, the Company has
not made, and will not be deemed to make hereby, any representations or
warranties to Optionee with respect to such qualification.

                                       32

<PAGE>

         2.       Vesting Schedule.
                  ----------------

                  (a)      Except only as specifically provided elsewhere herein
or in the Plan, the Shares issuable upon exercise of this Option shall become
vested, in whole or in part, in cumulative installments in accordance with the
following vesting schedule:

[Note: the vesting schedule is to be completed upon grant of the Option]

Shares that are vested pursuant to the schedule set forth in this Section 2(a)
are "Vested Shares." Shares that are not vested pursuant to the schedule set
forth in this Section 2(a) are "Unvested Shares."

                  (b)      Notwithstanding the vesting schedule set forth above,
in the event of Optionee's death, Disability or other termination of Optionee's
Continuous Status as an Employee or Consultant (regardless of the reason),
Shares that have not become vested under Section 2(a) shall cease vesting and
shall automatically become subject to the Company's Repurchase Option pursuant
to Section 6 of the Exercise Agreement (as defined below) on the date of such
termination.

                  (c)      Notwithstanding the vesting schedule set forth above,
and so long as the Option has not been terminated, in the event of a "Change of
Control" as defined in the Plan, the vesting schedule above shall be accelerated
such that the Shares issuable upon exercise of this Option shall be deemed to be
fully vested immediately prior to such event.

[Note: delete the foregoing paragraph if the Option does not automatically
accelerate upon a change of control.]

         3.       Exercise of Option.
                  ------------------

                  (a)      This Option is immediately exercisable with respect
to any or all of the Vested and Unvested Shares, during its term and in
accordance with the applicable provisions of the Plan and this Option Agreement.
However, any Unvested Shares issued upon exercise of this Option will be subject
to the restrictions set forth in Section 6 of the Exercise Agreement until such
Shares become Vested Shares in accordance with the schedule set forth in Section
2 hereof. In the event of Optionee's death, Disability or other termination of
Optionee's Continuous Status as an Employee or Consultant (regardless of the
reason), this Option shall be exercisable only in accordance with the applicable
provisions of the Plan and this Option Agreement (including Section 3(b) and
Section 4 hereof).

                  (b)      Notwithstanding anything in Section 3(a) to the
contrary, in the event of Optionee's death, Disability or other termination of
Optionee's Continuous Status as an Employee or Consultant (regardless of the
reason), this Option, to the extent not already exercised, shall cease to be
exercisable as to any Unvested Shares and shall automatically be forfeited and
cancelled with respect to such Unvested Shares.

                  (c)      To exercise this Option, Optionee must deliver to the
Company an executed exercise agreement in the form attached hereto as Exhibit A
(the "Exercise Agreement") which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised
(this Option may be exercised in one or more installments, provided that this
Option may not be exercised as to fewer than one-hundred (100) Shares), any
restrictions (including restrictions on transfer) imposed on the Shares, and
such other representations and agreements as to the Optionee's investment intent
with respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Agreement shall be signed
by the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Agreement shall be

                                       33

<PAGE>

accompanied by payment of the Exercise Price Per Share multiplied by the number
of Shares in respect of which the Option is being exercised (the "Exercise
Price"). This Option shall be deemed to be exercised upon receipt by the Company
of such executed Exercise Agreement accompanied by the Exercise Price.

                  (d)      The Optionee shall, upon notification of the amount
due (if any) as a result of the exercise of the Option and prior to or
concurrent with delivery of the certificate representing the Shares, pay to the
Company as provided in the Plan amounts necessary to satisfy applicable federal,
state and local tax withholding requirements.

                  (e)      No Shares will be issued pursuant to the exercise of
an Option unless such issuance and such exercise shall comply with this Option
Agreement and Section 19 of the Plan. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to the Optionee on the date
on which the Option is exercised with respect to such Shares.

         4.       Termination Period. Optionee may exercise that portion of the
Option covering Vested Shares on the date of termination (or that covers Shares
that become Vested Shares by reason of such termination pursuant to this
Agreement) for three months (or such shorter period provided for elsewhere
herein or in the Plan) after termination of Optionee's Continuous Status as an
Employee or Consultant, or for such longer period upon Optionee's death or
Disability as provided in the Plan. If the Optionee's status changes from
Employee to Consultant or Consultant to Employee, this Option Agreement shall
remain in effect. In no event may Optionee exercise this Option after the
Term/Expiration Date as provided above in Section 1. Notwithstanding the
foregoing, in the event that Optionee's Continuous Status as an Employee or
Consultant is terminated by the Company for Cause, this Option (both the portion
covering Vested Shares and the portion covering Unvested Shares), to the extent
not already exercised, will terminate on the date of such termination and will
not be exercisable thereafter. For purposes of this Option Agreement, "Cause"
means the occurrence of any of the following events or reasons:

                  (a)      Optionee's conviction for a felony offense or
commission by Optionee of any act abhorrent to the community that the Company
considers materially damaging to or tending to discredit the reputation of the
Company;

                  (b)      Dishonesty, fraud, willful misconduct, unlawful
discrimination or theft on the part of Optionee;

                  (c)      Optionee's using for Optionee's own benefit any
confidential or proprietary information of the Company, or willfully or
negligently divulging any such information to third parties without the prior
written consent of the Company;

                  (d)      Optionee's public drunkenness, public use of illegal
substances or drugs or the use, possession, distribution or being under the
influence of alcohol or illegal substances or drugs in the workplace (the only
exception is that Optionee may consume alcohol reasonably and responsibly, if he
or she so chooses, at legitimate business events and functions where alcohol is
legally available);

                  (e)      the determination by the Company that Optionee has
continually failed or refused to comply, after notice of and a reasonable
opportunity to cure such failure or refusal, with the policies, standards,
regulations, instructions, or directions of the Company as they currently exist
or as they may be modified from time to time; or

                  (f)      any violation by the Optionee of any Noncompetition,
Nondiversion, or Nondisclosure Agreement between the Optionee and the Company
(the "Noncompetition Agreement"),

                                       34

<PAGE>

or any part of any noncompetition, nondiversion, nondisclosure or similar
agreement that amends, extends, supplements, modifies or supersedes the
Noncompetition Agreement.

         5.       Method of Payment. The purchase price of Shares acquired
pursuant to the Option shall be paid as set forth in the Plan. THE USE OF SHARES
OF STOCK ACQUIRED OR TO BE ACQUIRED TO PAY FOR EXERCISED SHARES MAY HAVE INCOME
TAX CONSEQUENCES FOR THE OPTIONEE.

         6.       Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, and may not be exercised if the issuance of such Shares upon such
exercise or the method of payment of consideration for such shares would
constitute a violation of any applicable federal or state securities or other
law or regulation, including any rule under Part 221 of Title 12 of the Code of
Federal Regulations as promulgated by the Federal Reserve Board.

         7.       Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution or as otherwise set forth in the Plan and may be exercised during
the lifetime of Optionee only by Optionee or a permitted transferee as set forth
in the Plan. The terms of the Plan and this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.

         8.       Term of Option. This Option may be exercised only within the
term set out in Section 1 hereof, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement. The limitations
set forth in Sections 5, 6 and 15 of the Plan regarding Options designated as
Incentive Stock Options and Options granted to more than ten percent (10%)
shareholders shall apply to this Option.

         9.       Changes in Capital Structure. The Optionee agrees and
acknowledges that the Company shall have the right at any time and from time to
time after the date of this Option Agreement to authorize additional classes or
series of capital stock, some of which may entitle the holders thereof to
greater rights than the holders of the Common Stock into which this Option is
convertible, and to issue shares thereunder, subject only to the limits imposed
by Applicable Laws.

         10.      Tax Consequences. The grant and/or exercise of the Option
and/or the lapse of restrictions on the Shares will have federal and state
income tax consequences. THE OPTIONEE SHOULD CONSULT A TAX ADVISER UPON THE
GRANT OF THE OPTION AND BEFORE EXERCISING THE OPTION OR DISPOSING OF THE SHARES
ACQUIRED UPON EXERCISE, PARTICULARLY WITH RESPECT TO HIS OR HER STATE'S TAX
LAWS.

         11.      Entire Agreement. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and this Option Agreement may not be
amended except by means of a writing signed by the Company and Optionee. If any
inconsistency should exist between the terms and conditions of this Option
Agreement and the Plan, the Plan shall govern and control.

         12.      Governing Law. This Option Agreement is governed by Texas law
except for that body of law pertaining to conflict of laws.

         13.      Warranties, Representations and Covenants. The undersigned
Optionee warrants and represents that he or she has reviewed the Plan and this
Option Agreement in their entirety, has had an opportunity to obtain the advice
of counsel prior to executing this Option Agreement and fully understands all of
the provisions of the Plan and this Option Agreement. Optionee hereby agrees to
accept

                                       35

<PAGE>

as binding, conclusive and final all decisions or interpretations of the
Committee upon any questions relating to the Plan and this Option Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR
EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING
GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS OPTION AGREEMENT, NOR IN THE PLAN,
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.

         14.      Relation to Other Benefits; Termination of Employment. Any
economic or other benefit to the Optionee under this Option Agreement or the
Plan will not be taken into account in determining any benefits to which the
Optionee may be entitled under any profit-sharing, retirement or similar benefit
or compensation plan maintained by the Company and will not affect the amount of
any life insurance coverage available to any beneficiary under any life
insurance plan covering employees of the Company. No provision of this Option
Agreement will limit in any way whatsoever any right that the Company may
otherwise have to terminate the employment or adjust the compensation of the
Optionee at any time.

         [Note: If applicable, insert here any other terms and conditions of the
Option as determined by the Committee, such as any specified performance goals
or other criteria which must be attained for the vesting of the Shares; any
additional restrictions or limitations applicable to the Option or Shares; and
any additional vesting, exchange, surrender, cancellation, acceleration,
termination, exercise or forfeiture provisions applicable to the Option or
Shares.]

                                       THE COMPANY:

                                       ASCENDANT SOLUTIONS, INC.

                                       By:
                                           -------------------------------------
                                       Name:
                                             -----------------------------------
                                       Title:
                                              ----------------------------------

                                       OPTIONEE:

                                       -----------------------------------------
                                       Signature

                                       -----------------------------------------
                                       Print Name

                                       -----------------------------------------
                                       Residence Address

                                       -----------------------------------------
                                       Area Code/Telephone Number

                                       36

<PAGE>

                                             Exhibit A to Stock Option Agreement
                                             -----------------------------------
                                                       (Immediately Exercisable)
                                                       -------------------------

                            ASCENDANT SOLUTIONS, INC.

                           2002 EQUITY INCENTIVE PLAN

                               EXERCISE AGREEMENT

                            (Immediately Exercisable)

Ascendant Solutions, Inc.
15455 North Dallas Parkway
Suite 500
Addison, Texas 75001

Attention: Secretary

         1.       Exercise of Option. Effective as of today, ________, 200__,
the undersigned ("Purchaser") hereby elects, pursuant to this Exercise Agreement
(this "Exercise Agreement"), to exercise _____ options (the "Options") to
purchase ______ shares (the "Shares") of the Common Stock of Ascendant
Solutions, Inc. (the "Company") under and pursuant to the 2002 Equity Incentive
Plan (the "Plan") and the Stock Option Agreement dated _______, 200__ (the
"Option Agreement"). The purchase price for the Shares shall be $_____, as
specified in the Option Agreement. Unless otherwise defined herein, all defined
terms used herein shall have the meanings set forth in the Plan. Shares that are
vested pursuant to the schedule set forth in Section 2(a) of the Option
Agreement are referred to herein as "Vested Shares." Shares that are not vested
pursuant to the schedule set forth in Section 2(a) of the Option Agreement are
referred to herein as "Unvested Shares."

         2.       Delivery of Payment. Purchaser herewith delivers to the
Company the full purchase price for the Shares of ________________. THE USE OF
SHARES OF STOCK ACQUIRED OR TO BE ACQUIRED FOR EXERCISED SHARES MAY HAVE INCOME
TAX CONSEQUENCES FOR THE PURCHASER.

         3.       Representations and Warranties of Purchaser; Compliance with
Securities Laws. Purchaser represents and warrants to the Company that:

                  (a)      Agrees to Terms of the Plan. Purchaser has received a
copy of the Plan and the Option Agreement, has read and understands the terms of
the Plan and the Option Agreement, and agrees to be bound by their terms and
conditions. Purchaser acknowledges that there may be adverse tax consequences
upon exercise of the Options or disposition of the Shares, and that Purchaser
should consult a tax adviser prior to such exercise or disposition.

                  (b)      Purchase for Own Account for Investment. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser has no present intention of selling or otherwise
disposing of all or any portion of the Shares and no one other than Purchaser
has any beneficial ownership of any of the Shares.

                                       37

<PAGE>

                  (c)      Access to Information. Purchaser has had access to
all information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.

                  (d)      Understanding of Risks. Purchaser is fully aware of:
(i) the highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and the
restrictions on transferability of the Shares (e.g., that Purchaser may not be
able to sell or dispose of the Shares or use them as collateral for loans); (iv)
the qualifications and backgrounds of the management of the Company; and (v) the
tax consequences of investment in the Shares. Purchaser is capable of evaluating
the merits and risks of this investment, has the ability to protect Purchaser's
own interests in this transaction and is financially capable of bearing a total
loss of this investment.

                  (e)      No General Solicitation. At no time was Purchaser
presented with or solicited by any publicly issued or circulated newspaper,
mail, radio, television or other form of general advertising or solicitation in
connection with the offer sale and purchase of the Shares.

                  (f)      Compliance with U.S. Federal Securities Laws and
State Securities Laws. Purchaser understands and acknowledges that the Shares
have not been registered with the Securities and Exchange Commission (the "SEC")
under the Securities Act and that, notwithstanding any other provision of this
Exercise Agreement to the contrary, the exercise of any rights to purchase any
Shares is expressly conditioned upon compliance with the Securities Act and all
applicable state securities laws. Purchaser agrees to cooperate with the Company
to ensure compliance with such laws.

         4.       Restricted Securities; Restrictions on Transfers.
                  ------------------------------------------------

                  (a)      No Transfer Unless Registered or Exempt. Purchaser
understands that Purchaser may not transfer any Shares except pursuant to this
Exercise Agreement and unless such Shares are registered under the Securities
Act or qualified under applicable state securities laws or unless, in the
opinion of counsel to the Company, exemptions from such registration and
qualification requirements are available. Purchaser understands that only the
Company may file a registration statement with the SEC and that the Company is
under no obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be available
or may not permit Purchaser to transfer all or any of the Shares in the amounts
or at the times proposed by Purchaser.

                  (b)      SEC Rule 144. In addition, Purchaser has been advised
that SEC Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held for a
minimum of one (1) year, and in certain cases two (2) years, after they have
been purchased and paid for (within the meaning of Rule 144). Purchaser
understands that Rule 144 may indefinitely restrict transfer of the Shares so
long as Purchaser remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.

                  (c)      Disposition of Shares. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares unless and until:

                           (i)      Purchaser shall have complied with all
requirements of this Exercise Agreement applicable to the disposition of the
Shares;

                                       38

<PAGE>

                           (ii)     Purchaser shall have provided the Company
with written assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration of the
Shares under the Securities Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or any
exemption from registration available under the Securities Act (including Rule
144) has been taken; and

                           (iii)    Purchaser shall have provided the Company
with such other written assurances and agreements, in form and substance
satisfactory to the Company, as may be requested by the Company pursuant to the
Plan.

                  (d)      Restrictions on Transfer. Subject to Section 7(f)
below, Purchaser shall not sell, transfer, assign, grant a lien or security
interest in, pledge, hypothecate, encumber, gift or otherwise dispose of
("Transfer") any Vested Shares without the prior written consent of the Company.
In addition, any proposed Transfer of Vested Shares shall be subject to the
Company's Right of First Refusal (as defined below) pursuant to Section 7 below.
None of the Unvested Shares may be Transferred by Purchaser.

                  (e)      Transferee Obligations. Each person (other than the
Company) to whom the Vested Shares are Transferred by means of one of the
permitted Transfers specified in Section 7(f) of this Exercise Agreement must,
as a condition precedent to the validity of such Transfer, acknowledge in
writing to the Company that such person is bound by the provisions of this
Exercise Agreement and that the transferred Vested Shares are subject to (i) the
Company's Right of First Refusal granted hereunder and (ii) the market stand-off
provisions of Section 5, to the same extent such Vested Shares would be so
subject if retained by the Purchaser.

         5.       Market Standoff Agreement. Purchaser agrees in connection with
any registration of the Company's securities that, upon the request of the
Company or the underwriters managing any public offering of the Company's
securities, Purchaser will not sell or otherwise dispose of any Vested Shares
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) after the
effective date of such registration requested by such managing underwriters and
subject to all restrictions as the Company or the underwriters may specify.

         6.       Unvested Shares.
                  ---------------

                  (a)      Repurchase Option. In the event of termination of
Purchaser's Continuous Status as an Employee or Consultant for any reason or no
reason, with or without Cause (as defined in the Option Agreement), or if
Purchaser, the Purchaser's legal representative, or any other holder of Unvested
Shares acquired upon exercise of the Option attempts to Transfer any Unvested
Shares prior to the Shares becoming Vested Shares in accordance with Section 2
of the Option Agreement, the Company shall have the right to repurchase the
Unvested Shares under the terms and subject to the conditions set forth herein
(the "Repurchase Option"). The Company may exercise its Repurchase Option by
written notice to the Purchaser (i) with respect to any event of termination of
Purchaser's Continuous Status as an Employee or Consultant for any reason or no
reason, with or without Cause, within sixty (60) days after termination of
Purchaser's Continuous Status as an Employee or Consultant and (ii) with respect
to any attempted Transfer of Unvested Shares prior to termination of Purchaser's
Continuous Status as an Employee or Consultant, within the period beginning on
the day the Purchaser, the Purchaser's legal representative, or any other holder
of Unvested Shares acquired upon exercise of the Option attempts to Transfer any
Unvested Shares and ending on the earlier of (A) sixty (60) days after the
Company receives written notice from the Purchaser, the Purchaser's legal
representative, or any other holder of Unvested Shares of such attempted
Transfer and (B) sixty (60) days after termination of Purchaser's Continuous
Status as an Employee or Consultant. If the Company fails to give notice within
such sixty (60) day period, the

                                       39

<PAGE>

Repurchase Option shall terminate unless the Company and the Purchaser have
extended the time for the exercise of the Repurchase Option. The purchase price
per share being repurchased by the Company under the Repurchase Option shall be
an amount equal to the Purchaser's Exercise Price (as defined in the Option
Agreement), as adjusted in the event of any stock split, reverse stock split,
subdivision, combination or similar recapitalization of the Common Stock (the
"Repurchase Price"). The Company shall pay the aggregate Repurchase Price to the
Purchaser in cash within thirty (30) days after the date of the written notice
to the Purchaser of the Company's exercise of the Repurchase Option. The Company
shall have the right to assign the Repurchase Option at any time, whether or not
such option is then exercisable, to one or more persons as may be selected by
the Company.

                  (b)      Escrow of Unvested Shares. Upon issuance, the
certificates for the Unvested Shares will be deposited in escrow with the
Secretary of the Company. Each deposited certificate will be accompanied by a
duly executed Assignment Separate from Certificate in the form of Exhibit A
attached hereto. The deposited certificates, together with any other assets or
securities from time to time deposited with the Company pursuant to the
requirements of this Exercise Agreement, will remain in escrow until such time
or times as the certificates (or other assets and securities) are to be released
or otherwise surrendered for cancellation in accordance herewith.

                  (c)      Voting and Dividend Rights. The Unvested Shares shall
constitute issued and outstanding shares of Common Stock for all corporate
purposes. Purchaser will have the right to vote such Unvested Shares, to receive
and retain all regular cash dividends and other cash equivalent distributions as
the Board may in its sole discretion designate, pay or distribute on such
Unvested Shares and to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such Unvested Shares, with the exceptions
that (A) the Purchaser will not be entitled to delivery of the stock certificate
or certificates representing any Unvested Shares until such Shares become Vested
Shares in accordance with Section 2 of the Option Agreement (unless earlier
repurchased pursuant to the Company's Repurchase Option); (B) the Company will
retain custody of the stock certificate or certificates representing the
Unvested Shares on the terms set forth in this Section 6; and (C) other than
regular cash dividends and other cash equivalent distributions as the Board may
in its sole discretion designate, pay or distribute, the Company will retain
custody of all distributions ("Retained Distributions") made or declared with
respect to the Unvested Shares (and such Retained Distributions will be subject
to the same restrictions, terms and conditions as are applicable to the Unvested
Shares).

                  (d)      Release of Shares from Escrow. Should the Company
elect to exercise its Repurchase Option under this Section 6 with respect to any
Unvested Shares, then the escrowed certificates for such Unvested Shares
(together with any other assets or securities issued with respect thereto) will
be delivered to the Company for cancellation, concurrently with the payment to
the Purchaser of an amount equal to the Repurchase Price for such Unvested
Shares, and the Purchaser will cease to have any further rights or claims with
respect to such Unvested Shares (or other assets or securities). If such
Repurchase Option is not exercised by the Company, then on the date such Shares
become Vested Shares in accordance with Section 2 of the Option Agreement, the
certificates for such Shares (as well as all other vested assets and securities)
will be released from escrow and delivered to the Purchaser.

         7.       Company's Right of First Refusal. Before any Vested Shares
acquired by Purchaser hereunder and held by Purchaser or any permitted
transferee of such Vested Shares (either being sometimes referred to herein as
the "Purchaser") may be Transferred, the Company and/or its assignee(s) shall
have an assignable right of first refusal to purchase the Vested Shares proposed
to be Transferred (the "Offered Shares") on the terms and conditions set forth
in this Section 7 (the "Right of First Refusal").

                                       40

<PAGE>

                  (a)      Notice of Proposed Transfer. The Purchaser of the
Offered Shares shall deliver to the Company a written notice (the "Notice")
stating: (i) the Purchaser's bona fide intention to Transfer the Offered Shares;
(ii) the name of each proposed bona fide purchaser or other transferee
("Proposed Transferee"); (iii) the number of Offered Shares to be Transferred to
each Proposed Transferee; (iv) the bona fide cash price or other consideration
for which the Purchaser proposes to Transfer the Offered Shares (the "Offered
Price") and (v) that the Purchaser will offer to Transfer the Offered Shares to
the Company and/or its assignee(s) at the Offered Price as provided in this
Section 7.

                  (b)      Exercise of Right of First Refusal: At any time
within thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Purchaser, elect to purchase
all (or, with the consent of the Purchaser, less than all) the Offered Shares
proposed to be Transferred to any one or more of the Proposed Transferees named
in the Notice, at the purchase price determined as specified below.

                  (c)      Purchase Price: The purchase price for the Offered
Shares purchased under this Section 7 will be the Offered Price. If the Offered
Price includes consideration other than cash, then the cash equivalent value of
the non-cash consideration shall conclusively be deemed to be the value of such
non-cash consideration as determined in good faith by the Board.

                  (d)      Payment: Payment of the Offered Price will be
payable, at the option of the Company and/or its assignee(s) (as applicable), by
check or by cancellation of all or a portion of any outstanding indebtedness of
the Purchaser to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The Offered
Price will be paid without interest within sixty (60) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.

                  (e)      Transfer. If all of the Offered Shares proposed in
the Notice to be Transferred to a given Proposed Transferee are not purchased by
the Company and/or its assignee(s) as provided in this Section 7, then the
Purchaser may Transfer such Offered Shares to that Proposed Transferee at the
Offered Price or at a higher price; provided that such Transfer is consummated
within 120 days after the date of the Notice, and provided further, that (i) any
such Transfer is effected in compliance with all applicable securities laws and
(ii) the Proposed Transferee agrees in writing that the provisions of this
Section 7 will continue to apply to the Offered Shares in the hands of such
Proposed Transferee. If the Offered Shares described in the Notice are not
Transferred to the Proposed Transferee within such 120 day period, then a new
Notice must be given to the Company, and the Company will again be offered the
Right of First Refusal before any Vested Shares held by the Purchaser may be
Transferred.

                  (f)      Exempt Transfers: Notwithstanding anything to the
contrary in Section 4(d) or in this Section 7, the following Transfers of
Offered Shares will be exempt from the Right of First Refusal: (i) the Transfer
of any or all of the Offered Shares during Purchaser's lifetime by gift or on
Purchaser's death by will or intestacy to any Immediate Family Member (as such
term is defined in the Plan) of Purchaser, provided that each transferee or
other recipient agrees in a writing satisfactory to the Company that the
provisions of this Section 7 will continue to apply to the Transferred Shares in
the hands of such transferee or other recipient; (ii) any Transfer of Vested
Shares made pursuant to a statutory merger or statutory consolidation of the
Company with or into another corporation or corporations (except that the Right
of First Refusal will continue to apply thereafter to such Vested Shares, in
which case the surviving corporation of such merger or consolidation shall
succeed to the rights of the Company under this Section 7 unless the agreement
of merger or consolidation expressly otherwise provides); or (iii) any Transfer
of Vested Shares pursuant to the winding up and dissolution of the Company.

                                       41

<PAGE>

                  (g)      Termination of Right of First Refusal: The Company's
Right of First Refusal will terminate on the IPO Date.

         8.       Rights as Shareholder. The Purchaser shall not be deemed to be
the holder of, or to have any of the rights of a holder with respect to, any
Shares for which such Option is exercised including, but not limited to, rights
to vote or to receive dividends unless and until the Purchaser has satisfied all
requirements for exercise of the Option pursuant to its terms, the certificates
evidencing such Shares have been issued and the Purchaser has become a record
holder of such Shares. A share certificate for the number of Vested Shares so
acquired shall be issued to the Purchaser as soon as practicable after exercise
of the Option. No adjustment will be made for a dividend or other right for
which the record date is prior to the date all the conditions set forth above
are satisfied, except as provided in Section 13 of the Plan.

         9.       Section 83(b) Election. Purchaser understands that under
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), the
difference between the exercise price paid for any Unvested Shares and their
fair market value on the date any forfeiture restrictions applicable to such
shares lapse will be reportable as ordinary income at that time. For this
purpose, the term "forfeiture restrictions" includes the right of the Company to
repurchase the Unvested Shares pursuant to its Repurchase Option under Section 6
hereof. Purchaser understands that Purchaser may elect to be taxed at the time
the Unvested Shares are acquired hereunder to the extent the fair market value
of the Unvested Shares differs from the Exercise Price, rather than when and as
such Unvested Shares cease to be subject to such forfeiture restrictions, by
filing an election under Section 83(b) of the Code with the I.R.S. within thirty
(30) days after the date of purchase hereunder (a "Section 83(b) Election"). If
the fair market value of the Unvested Shares at the date of purchase equals the
Exercise Price paid (and thus no tax is payable), a Section 83(b) Election must
be made to avoid adverse tax consequences in the future. An example of the form
for making this Section 83(b) Election is attached as Exhibit B hereto.
Purchaser understands that failure to make this Section 83(b) Election filing
within the thirty (30) day period may result in the recognition of ordinary
income by the Purchaser as the forfeiture restrictions lapse. PURCHASER
ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY, AND NOT THE COMPANY'S,
TO FILE A TIMELY SECTION 83(b) ELECTION, EVEN IF PURCHASER REQUESTS THAT THE
COMPANY OR ITS REPRESENTATIVES MAIL THIS FILING ON PURCHASER'S BEHALF. PURCHASER
FURTHER ACKNOWLEDGES THAT COMPANY HAS MADE NO REPRESENTATIONS REGARDING THE
APPLICATION OF SECTION 83 OF THE CODE TO THE RESTRICTED SHARES. PURCHASER IS
RELYING SOLELY ON PURCHASER'S ADVISORS WITH RESPECT TO THE APPLICABILITY OF
SECTION 83 OF THE CODE AND THE DECISION AS TO WHETHER OR NOT TO FILE A SECTION
83(b) ELECTION

         10.      Tax Consultation. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase or
disposition of the Shares. Purchaser represents that Purchaser has consulted
with any tax consultants Purchaser deems advisable in connection with the
purchase or disposition of the Shares and that Purchaser is not relying on the
Company for any tax advice.

         11.      Legends. Purchaser understands and agrees that the Company
will cause a legend regarding the Company's Repurchase Option and Right of First
Refusal to be placed upon any certificate(s) or other documents or instruments
evidencing ownership of the Shares by the Purchaser, in addition to any other
legends required under federal and state securities laws including the following
legends:

         "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933. THE SHARES MAY NOT BE SOLD OR OFFERED
         FOR SALE IN THE ABSENCE OF (I) AN EFFECTIVE REGISTRATION STATEMENT FOR
         THE SHARES UNDER SUCH ACT, (II) A `NO

                                       42

<PAGE>

         ACTION' LETTER OF THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT
         TO SUCH SALE OR OFFER, OR (III) AN OPINION OF COUNSEL SATISFACTORY TO
         THE CORPORATION THAT REGISTRATION UNDER SUCH ACT IS NOT REQUIRED WITH
         RESPECT TO SUCH SALE OR OFFER."

         "THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED,
         TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
         COMPLIANCE WITH THE TERMS OF WRITTEN AGREEMENTS BETWEEN THE CORPORATION
         AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST
         TO THE SHARES). SUCH AGREEMENTS GRANT CERTAIN REPURCHASE RIGHTS AND
         RIGHTS OF FIRST REFUSAL TO THE CORPORATION. THE SECRETARY OF THE
         CORPORATION WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENTS
         TO THE HOLDER HEREOF WITHOUT CHARGE."

         12.      Entire Agreement. The Plan and the Option Agreement are
incorporated herein by reference. This Exercise Agreement, the Plan and the
Option Agreement constitute the entire agreement of the parties with respect to
the subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter
hereof, and this Exercise Agreement may not be amended except by means of a
writing signed by the Company and Purchaser. If any inconsistency should exist
between the terms and conditions of this Exercise Agreement and the terms of the
Option Agreement, the terms of the Option Agreement shall govern and control. If
any inconsistency should exist between the terms and conditions of this Exercise
Agreement and the terms of the Plan, the terms of the Plan shall govern and
control.

         13.      Governing Law. This Exercise Agreement is governed by Texas
law except for that body of law pertaining to conflict of laws.

Submitted by:                          Accepted by:

PURCHASER:                             THE COMPANY:

                                       ASCENDANT SOLUTIONS, INC.

                                       By:
------------------------------             ------------------------------
Signature

                                       Its:
------------------------------             ------------------------------
Print Name

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

                                       15455 North Dallas Parkway
------------------------------         Suite 500
                                       Addison, Texas 75001
------------------------------         Attn: Secretary

                                       43

<PAGE>

                                                 Exhibit A to Exercise Agreement
                                                 -------------------------------
                                                       (Immediately Exercisable)
                                                       -------------------------

                      ASSIGNMENT SEPARATE FROM CERTIFICATE

         FOR VALUE RECEIVED ____________________ hereby sells, assigns and
transfers unto [_____________________________], a [_________] corporation (the
"Company"), _________ (_______) shares of the Capital Stock of _____________
standing in _____________ name on the books of said ______________ represented
by Certificate No. _______________ herewith and does hereby irrevocably
constitute and appoint ____________________ Attorney to transfer the said stock
on the books of the within named Company with full power of substitution in the
premises.

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

                                       Signature
                                                 -------------------------------

                                       Signature
                                                 -------------------------------

                                       44

<PAGE>

                                                 Exhibit B to Exercise Agreement
                                                 -------------------------------
                                                       (Immediately Exercisable)
                                                       -------------------------

                             FORM OF 83(b) ELECTION

         This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.

         (1)      The person who performed the services is:

                  Name:
                  Address:
                  Taxpayer Ident.  No.:
                  Taxable Year: Calendar Year 200[__]

         (2)      The property with respect to which the election is being made
                  is _________ shares of the common stock of [___________], Inc.

         (3)      The property was transferred on [__________], 200[__].

         (4)      The property is subject to a repurchase option pursuant to
                  which the issuer has the right to acquire the property at the
                  original purchase price if for any reason [___________'s]
                  services for the issuer terminates.

         (5)      The fair market value at the time of transfer (determined
                  without regard to any restriction other than a restriction
                  which by its terms will never lapse) is $[_______] per share.

         (6)      The amount paid for such property is $[___________]per share.

         (7)      A copy of this statement was furnished to [_____________],
                  Inc. for whom the undersigned rendered the service underlying
                  the transfer of property.

         (8)      This statement is executed as of: [______________].

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

                                       45<PAGE>
                                                                    EXHIBIT 10.3

                       THE 2000 EQUITY PARTICIPATION PLAN

                                       OF

                             GEN-PROBE INCORPORATED

              Gen-Probe Incorporated, a Delaware corporation, has adopted The
2000 Equity Participation Plan of Gen-Probe Incorporated (the "Plan"), effective
August 17, 2000, 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, 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 and/or rights which recognize such
growth, development and financial success.

              (2) To enable the Company to obtain and retain the services of
Directors, Employees and Consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights 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 to
Non-Employee Directors, the term "Administrator" shall refer to the Board. With
reference to the administration of the Plan with respect to any other Options,
the term "Administrator" shall refer to the Committee, except to the extent the
Board has assumed the authority for administration of the Plan as provided in
Section 7.2.

              1.3. Board. "Board" shall mean the Board of Directors of the
Company.

              1.4. 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
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 possessing more than fifty percent (50%) of the
total combined voting power of the
<PAGE>
Company's outstanding securities pursuant to a tender or exchange offer for
securities of the Company; 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 a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity or another 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; provided, however,
that a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no person acquires more than 25% of
the combined voting power of the Company's then outstanding voting securities
shall not constitute a Change in Control; 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.

              1.5. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

              1.6. Committee. "Committee" shall mean the Board, or Compensation
Committee of the Board, or another committee or subcommittee of the Board,
appointed as provided in Section 7.1.

              1.7. Common Stock. "Common Stock" shall mean the Common Stock of
the Company, par value $0.0001 per share.

              1.8. Company. "Company" shall mean Gen-Probe Incorporated, a
Delaware corporation.

              1.9. Consultant. "Consultant" shall mean any consultant or adviser
(other than an Employee) if:

              (a) the consultant or adviser renders bona fide services to the
Company;

                                       2
<PAGE>
              (b) 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

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

              1.10. Director. "Director" shall mean a member of the Board.
"Director" shall include both a member of the Board who is an Employee and a
Non-Employee Director.

              1.11. DRO. "DRO" shall mean a domestic relations order as defined
by the Code or Title I of the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder.

              1.12. 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.

              1.13. Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.

              1.14. 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 a successor quotation system, 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 such successor
quotation system, 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 (c) if
Common Stock is not publicly traded on an exchange and not quoted on NASDAQ or a
successor quotation system, the fair market value of a share of Common Stock as
established by the Administrator acting in good faith, which value shall be
final and binding on any Holder or other person entitled under an Option.

              1.15. Holder. "Holder" shall mean a person who has been granted an
Option.

              1.16. 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.

              1.17. Non-Employee Director. "Non-Employee Director" shall mean a
member of the Board who is not an Employee.

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

                                       3
<PAGE>
              1.19. 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 Non-Employee Directors and
Consultants shall be Non-Qualified Stock Options.

              1.20. Option Agreement. "Option 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 Option, as the
Administrator shall determine, consistent with the Plan.

              1.21. Option Limit. "Option Limit" shall mean One Million
(1,000,000) shares of Common Stock, as adjusted pursuant to Section 8.3 of the
Plan.

              1.22. 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.

              1.23. Plan. "Plan" shall mean The 2000 Equity Participation Plan
of Gen-Probe Incorporated.

              1.24. 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.

              1.25. Section 162(m) Employee. "Section 162(m) Employee" shall
mean any Employee designated by the Administrator as a Employee whose
compensation for the fiscal year in which the 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.

              1.26. Securities Act. "Securities Act" shall mean the Securities
Act of 1933, as amended from time to time.

              1.27. 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.

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

                                       4
<PAGE>
              1.29. 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,
disability or retirement; but excluding terminations where there is a
simultaneous engagement by or commencement of employment with the Company or any
Subsidiary or a parent corporation thereof (within the meaning of Section 422 of
the Code). 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 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.

              1.30. Termination of Directorship. "Termination of Directorship"
shall mean the time when a Holder who is a Non-Employee Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, removal, failure to be re-elected, death, disability 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 Non-Employee Directors.

              1.31. 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 or a parent corporation thereof (within the meaning of
Section 422 of the Code), (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 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.

                                   ARTICLE II.

                             SHARES SUBJECT TO PLAN

                                       5
<PAGE>
              2.1. Shares Subject to Plan.

              (a) The shares of stock subject to Options shall be Common Stock,
subject to Section 8.3 of the Plan. The aggregate number of such shares which
may be issued upon exercise of such Options shall not exceed Eight Million
(8,000,000). The shares of Common Stock issuable upon exercise of such Options
may be either previously authorized but unissued shares or treasury shares.

              (b) The maximum number of shares of Common Stock which may be
subject to Options granted under the Plan to any individual in any calendar year
shall not exceed the Option 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 Option Limit.

              (c) Notwithstanding the foregoing, if the offer or sale of shares
of Common Stock under the Plan is subject to Section 260.140.45 of Title 10 of
the California Code of Regulations (or other applicable law limiting the offers
or sales of shares of Common Stock under the Plan), the aggregate number of
shares of Common Stock issuable upon the exercise of all outstanding Options
(together with options and similar awards outstanding under any other stock
option plan of the Company) and the total number of shares provided for under
any stock bonus or similar plan of the Company shall not exceed thirty percent
(30%) (or such other higher percentage limitation as may be approved by the
stockholders of the Company pursuant to Section 260.140.45) of the then
outstanding shares of Common Stock, as calculated in accordance with the
conditions and exclusions of Section 260.140.45 (or such other limitation under
applicable law).

              2.2. Add-Back of Options. If any Option expires or is canceled
without having been fully exercised, the number of shares of Common Stock
subject to such Option but as to which such Option was not exercised prior to
its expiration or cancellation may again be optioned hereunder, subject to the
limitations of Section 2.1. Furthermore, any shares subject to Options which are
adjusted pursuant to Section 8.3 and become exercisable with respect to shares
of stock of another corporation shall be considered cancelled and may again be
optioned hereunder, subject to the limitations of Section 2.1. Shares of Common
Stock which are delivered by the Holder or withheld by the Company upon the
exercise of any Option under the Plan, in payment of the exercise price thereof
or tax withholding thereon, 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 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 OPTIONS

              3.1. Option Agreement. Each Option shall be evidenced by an Option
Agreement. Option Agreements evidencing Options intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and

                                       6
<PAGE>
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Option 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) Employees.

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

              (b) Notwithstanding anything in the Plan to the contrary, the
Committee may grant any Option to a Section 162(m) Employee that vests or
becomes exercisable upon the attainment of performance goals which are related
to one or more of the Performance Criteria.

              (c) Furthermore, notwithstanding any other provision of the Plan,
any Option which is granted to a Section 162(m) Employee 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 and such Options 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 Option granted 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 the Options
granted hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule.

              3.4. At-Will Employment. Nothing in the Plan or in any Option
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
or consulting agreement between the Holder and the Company and any Subsidiary.

                                   ARTICLE IV.

                        GRANTING OF OPTIONS TO EMPLOYEES,
                     CONSULTANTS AND NON-EMPLOYEE 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. Any Non-Employee Director selected by the Board pursuant to Section
4.5(a)(i) shall be eligible to be granted an

                                       7
<PAGE>
Option. All grants shall be made at the discretion of the Committee or the
Board, as the case may be, and no person shall be entitled to a grant of an
Option as a matter of right.

              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) Select from among the Employees or Consultants
       (including Employees or Consultants who have previously been granted
       Options under the Plan) such of them as in its opinion should be granted
       Options;

                     (ii) Subject to the Option Limit, determine the number of
       shares of Common Stock to be subject to such Options granted to the
       selected 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 an 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, and the Committee shall authorize one or more of the officers of
the Company to prepare, execute and deliver the Option Agreement with respect to
such Option.

              (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.

                                       8
<PAGE>
              4.5. Granting of Options to Non-Employee Directors.

              (a) Subject to Section 4.5(b), the Board shall from time to time,
in its absolute discretion, and subject to applicable limitations of the Plan:

                     (i) Determine whether to grant Options to Non-Employee
       Directors, and, in the event Options are so granted, select from among
       the Non-Employee Directors (including Non-Employee Directors who have
       previously been granted Options under the Plan) such of them as in its
       opinion should be granted Options;

                     (ii) Subject to the Option Limit, determine the number of
       shares of Common Stock to be subject to such Options granted to the
       selected Non-Employee Directors; and

                     (iii) Determine the terms and conditions of such Options,
       consistent with the Plan.

              (b) Upon the selection of a Non-Employee Director to be granted an
Option, and the grant of an Option to a Non-Employee Director, the Board 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, and the Board
shall authorize one or more officers of the Company to prepare, execute and
deliver the Option Agreement with respect to such Option.

              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 Non-Employee
Directors in lieu of directors' fees which would otherwise be payable to such
Non-Employee 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 of Common
Stock 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:

                     (a) in the case of Incentive Stock Options, such price
       shall not be less than 100% of the Fair Market Value of a share of Common
       Stock on the date the Option is modified, extended or renewed for
       purposes of Section 424(h) of the Code;

                     (b) 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

                                       9
<PAGE>
       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); and

                     (c) To the extent required by Section 25102(o) of the
       California Corporations Code and the regulations thereunder, in the case
       of Options granted to an individual then owning 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
       260.140.41 of Title 10 of the California Code of Regulations), 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.

              5.2. Option Term. The term of an Option granted to an Employee or
Consultant shall be set by the Committee in its absolute discretion; provided,
however, that the term shall not be more than ten (10) years from the date the
Option is granted; and, provided, further, that, in the case of Incentive Stock
Options, the term shall not be more than 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, or the requirements of Section 25102(o) of the California Corporations
Code and the regulations thereunder, 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, to the extent required by Section 25102(o) of the
California Corporations Code and the regulations thereunder, except with regard
to Options granted to officers of the Company or any Subsidiary, Directors or
Consultants, in no event shall an Option granted hereunder become vested and
exercisable at a rate of less than twenty percent (20%) per year over five (5)
years from the date the Option is granted, subject to the continued employment
of the Holder with the Company or the Subsidiaries or other reasonable
conditions established by the Committee. At any time after grant of an Option,
the Committee may, in its 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 and becomes exercisable.

              (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 Option Agreement or by
action of the Committee following the grant of the Option.

                                       10
<PAGE>
              (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 or other options shall be treated as
non-qualified stock 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
or other options into account in the order in which they were granted. For
purposes of this Section 5.3(c), the Fair Market Value of stock shall be
determined as of the time the Option or other options with respect to such stock
is granted.

              5.4. Terms of Options Granted to Non-Employee Directors. The price
per share of the shares subject to each Option granted to a Non-Employee
Director shall equal 100% of the Fair Market Value of a share of Common Stock on
the date the Option is granted; provided, however, that, to the extent required
by Section 25102(o) of the California Corporations Code and the regulations
thereunder, in the case of Options granted to a Non-Employee Director then
owning 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 260.140.41 of Title 10 of the California Code of
Regulations), such price shall be not less than 110% of the Fair Market Value of
a share of Common Stock on the date the Option is granted. The period during
which the right to exercise, in whole or in part, an Option granted to a
Non-Employee Director vests in the Holder shall be set by the Administrator and
the Administrator may determine that an Option may not be exercised in whole or
in part for a specified period after it is granted. The term of each Option
granted to a Non-Employee Director shall be determined by the Administrator and
shall be no greater than ten (10) years from the date the Option is granted. No
portion of an Option which is unexercisable at Termination of Directorship shall
thereafter become exercisable. Options granted to Non-Employee Directors under
Section 4.5 shall be subject to such other terms and conditions as are
determined by the Administrator.

              5.5. 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

                     (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 Administrator) of
       the shares of the predecessor entity that were subject to the grant
       assumed or substituted for by the Company; over

                                       11
<PAGE>
                     (d) the aggregate exercise price of such shares.

              5.6. Restrictions on Common Stock. The Administrator may, in its
sole discretion, provide under the terms of an Option that shares of Common
Stock purchased upon exercise of such Option shall be subject to repurchase from
the Holder by the Company, or shall 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 and the Subsidiaries, Company
performance and individual performance; provided, however, that, by action taken
after the Common Stock is purchased upon exercise of the Option, the
Administrator may, on such terms and conditions as it may determine to be
appropriate, terminate the Company's repurchase right or remove any or all of
the restrictions imposed by the terms of the Option Agreement. The Company's
right to repurchase the Common Stock from the Holder then subject to the right
shall provide that immediately upon a Termination of Employment, a Termination
of Consultancy, or a Termination of Directorship, as applicable, and for such
period as the Administrator shall determine, the Company shall have the right to
purchase the Common Stock at a price per share equal to the price paid by the
Holder for such Common Stock, or such other price as is determined by the
Administrator; provided, however, that, in the event of a Change in Control,
such right of repurchase shall terminate immediately prior to the effective date
of such Change in Control. Shares of Common Stock purchased upon the exercise of
an Option may not be sold, transferred or encumbered until any repurchase right
and any and all restrictions are terminated or expire. The Secretary of the
Company or such other escrow holder as the Administrator may appoint shall
retain physical custody of each certificate representing such shares of Common
Stock until the repurchase right and any and all of the restrictions imposed
under the Option Agreement with respect to the shares evidenced by such
certificate terminate, expire or shall have been removed. In order to enforce
the restrictions imposed upon shares of Common Stock hereunder, the
Administrator shall cause a legend or legends to be placed on certificates
representing all shares of Common Stock that are still subject to any repurchase
right or restrictions under Option Agreements, which legend or legends shall
make appropriate reference to the conditions imposed thereby. 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 Common Stock as of the date of transfer of the
Common 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 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.

                                       12
<PAGE>
              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 8.1 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 sole and absolute
       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 surrender
       of shares of Common Stock then issuable upon exercise of the Option
       having a Fair Market Value on the date of Option exercise equal to the
       aggregate exercise price of the Option or exercised portion thereof; (iv)
       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 (v) allow payment through
       any combination of the consideration provided in the foregoing
       subparagraphs (ii), (iii) and (iv).

              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;

                                       13
<PAGE>
                     (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
Option 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. Exercise of Options following Termination. To the extent
required by Section 25102(o) of the California Corporations Code and Section
260.140.41 of Title 10 of the California Code of Regulations (or other
applicable law), an Option may be exercised in the event of Termination of
Consultancy, Termination of Directorship or Termination of Employment (other
than for cause as defined by applicable law, the Option Agreement or a contract
of employment with the Holder), to the extent that such Option is exercisable on
the date of such Termination:

                     (a) for a period of at least six months (or such longer
       period as is required by applicable law) from the date of such
       Termination if such Termination was caused by death or disability, and

                                       14
<PAGE>
                     (b) for a period of at least 30 days (or such longer period
       as is required by applicable law) from the date of such Termination if
       such Termination was caused by reason other than the death or disability
       of the Holder.

              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.

                                 ADMINISTRATION

              7.1. Committee. Prior to the Company's initial registration of
Common Stock under Section 12 of the Exchange Act, the Committee shall consist
of the entire Board. Following such registration, the Committee shall be the
Compensation Committee of the Board (or another committee or a subcommittee of
the Board assuming the functions of the Committee under the Plan), and the
Compensation Committee (or other committee or subcommittee) shall consist solely
of two or more Non-Employee Directors appointed by and holding office at the
pleasure of the Board, each of whom is both a "non-employee director" as defined
by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the
Code. 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.

              7.2. 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
Option 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 rules and to amend any Option Agreement
provided that the rights or obligations of the Holder of the Option that is the
subject of any such Option Agreement are not affected adversely. 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 assume any and all
rights and duties of the Committee under the Plan, except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee. 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 Non-Employee Directors.

              7.3. 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.

              7.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be

                                       15
<PAGE>
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 Options, 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.

              7.5. Delegation of Authority to Grant Options. The Committee may,
but need not, delegate from time to time some or all of its authority to grant
Options 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 Options to individuals (a) who
are subject on the date of the grant to the reporting rules under Section 16(a)
of the Exchange Act, (b) who are Section 162(m) Employees or (c) 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 7.5 shall serve in such capacity at the pleasure of the
Committee.

                                  ARTICLE VIII.

                            MISCELLANEOUS PROVISIONS

              8.1. Not Transferable. No Option under the Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of
descent and distribution or, subject to the consent of the Administrator,
pursuant to a DRO, unless and until such Option has been exercised, or the
shares underlying such Option have been issued, and all restrictions applicable
to such shares have lapsed. No Option 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 any portion thereof) granted to him under the Plan, unless it has been
disposed of with the consent of the Administrator pursuant to a DRO. After the
death of the Holder, any exercisable portion of an Option may, prior to the time
when such portion becomes unexercisable under the Plan or the applicable Option
Agreement, be exercised by his personal representative or by any person

                                       16
<PAGE>
empowered to do so under the deceased Holder's will or under the then applicable
laws of descent and distribution.

              Notwithstanding the foregoing provisions of this Section 8.1, and
subject to the requirements of Section 260.140.41 of Title 10 of the California
Code of Regulations (to the extent applicable), the Administrator, in its sole
discretion, may determine to grant a Non-Qualified Stock Option which, by its
terms as set forth in the applicable Option Agreement, may be transferred by the
Holder, in writing and with prior written notice to the Administrator, to any
one or more Permitted Transferees (as defined below), subject to the following
terms and conditions: (a) a Non-Qualified Stock Option transferred to a
Permitted Transferee shall not be assignable or transferable by the Permitted
Transferee other than by will or the laws of descent and distribution; (b) any
Non-Qualified Stock Option which is transferred to a Permitted Transferee shall
continue to be subject to all the terms and conditions of the Non-Qualified
Stock Option as applicable to the original Holder (other than the ability to
further transfer the Non-Qualified Stock Option); and (c) the Holder and the
Permitted Transferee shall execute any and all documents requested by the
Administrator, including, without limitation, documents to: (i) confirm the
status of the transferee as a Permitted Transferee, (ii) satisfy any
requirements for an exemption for the transfer under applicable federal and
state securities laws and (iii) evidence the transfer. For purposes of this
Section, "Permitted Transferee" shall mean, with respect to a Holder, any child,
stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the Holder's household (other than a tenant or employee), a trust in
which these persons (or the Holder) control the management of assets, and any
other entity in which these persons (or the Holder) owns more than fifty percent
(50%) of the voting interests, or any other transferee specifically approved by
the Administrator after taking into account any state or federal tax or
securities laws applicable to transferable Non-Qualified Stock Options.

              8.2. Amendment, Suspension or Termination of the Plan. Except as
otherwise provided in this Section 8.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board. However, without approval of the Company's stockholders
given within twelve months before or after the action by the Board, no action of
the Board may, except as provided in Section 8.3, 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 Option
theretofore granted or awarded, unless the Option itself otherwise expressly so
provides. No Options may be granted or awarded during any period of suspension
or after termination of the Plan, and in no event may any Option be granted
under the Plan after the first to occur of the following events:

                     (a) The expiration of ten years from the date the Plan is
       adopted by the Board; or

                     (b) The expiration of ten years from the date the Plan is
       approved by the Company's stockholders under Section 8.4.

                                       17
<PAGE>
              8.3. Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events.

              (a) Subject to Section 8.3(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 Option, 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 Options may be granted
       (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 Option Limit),

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

                     (iii) the exercise price with respect to any Option.

              (b) Subject to Sections 8.3(b)(vii) and 8.3(d), in the event of
any transaction or event described in Section 8.3(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 Option or by
action taken prior to the occurrence of such transaction or event (any such
action applied to Employees and former Employees to be applied uniformly) 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 Option 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 cancellation of any such
       Option for an amount of cash equal to the amount that could have been
       attained upon the exercise of such Option or realization of the Holder's
       rights had such Option been currently exercisable or fully vested, or the
       replacement of such Option with other rights or property selected by the
       Administrator in its sole discretion;

                                       18
<PAGE>
                     (ii) To provide that the Option cannot vest or be exercised
       after such event;

                     (iii) To provide that such Option 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 Option;

                     (iv) To provide that such Option 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; and

                     (v) To make adjustments in the number and type of shares of
       Common Stock (or other securities or property) subject to outstanding
       Options and/or in the terms and conditions of (including the exercise
       price), and the criteria included in, outstanding Options and Options
       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 Option Agreement upon
       some or all shares of Common Stock may be terminated and some or all
       shares of such Common Stock may cease to be subject to repurchase after
       such event.

                     (vii) Notwithstanding any other provision of the Plan, in
       the event of a Change in Control, each outstanding Option 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 Option and may be exercised for any or
       all of those shares as fully-vested shares of Common Stock.

              (c) Subject to Sections 8.3(d), 3.2 and 3.3, the Administrator
may, in its discretion, include such further provisions and limitations in any
Option, Option Agreement or certificate, as it may deem equitable and in the
best interests of the Company.

              (d) With respect to Options which are granted to Section 162(m)
Employees and are intended to qualify as performance-based compensation under
Section 162(m)(4)(C), no adjustment or action described in this Section 8.3 or
in any other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause such Option to fail to so qualify under Section
162(m)(4)(C), or any successor provisions thereto. No adjustment or action
described in this Section 8.3 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 Option is
not to

                                       19
<PAGE>
comply with such exemptive conditions. The number of shares of Common Stock
subject to any Option 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 Option Agreement would so qualify, then this Plan and any
Option Agreement shall be interpreted so as to preserve such accounting
treatment, and to the extent that any provision of the Plan or any Option
Agreement would disqualify the transaction from pooling of interests accounting
treatment (including, if applicable, an entire Option 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 Option Agreement and the
Options 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
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.

              8.4. Approval of Plan by Stockholders. The Plan shall 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. Options may be granted prior
to such stockholder approval; provided, however, that such Options shall not be
exercisable nor shall such Options 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 Options previously
granted or awarded under the Plan shall thereupon be canceled and become null
and void.

              8.5. 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 Option. 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 Option (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 Option (or which may be repurchased from the Holder of such
Option 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 Option shall be limited to the number of shares which
have a Fair Market Value on the

                                       20
<PAGE>
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.

              8.6. Forfeiture Provisions. Subject to the limitations of
applicable law, pursuant to its general authority to determine the terms and
conditions applicable to Options under the Plan, the Administrator shall have
the right to provide, in the terms of Options made under the Plan, or to require
a Holder to agree by separate written instrument, that if (a)(i) the Holder at
any time, or during a specified time period, engages in any activity in
competition with the Company, or which is inimical, contrary or harmful to the
interests of the Company, as further defined by the Administrator or (ii) the
Holder incurs a Termination of Employment, Termination of Consultancy or
Termination of Directorship for cause, then (b) (i) any proceeds, gains or other
economic benefit actually or constructively received by the Holder upon any
exercise of the Option, or upon the receipt or resale of any Common Stock
underlying the Option, must be paid to the Company, and (ii) the Option shall
terminate and any unexercised portion of the Option (whether or not vested)
shall be forfeited.

              8.7. 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.

              8.8. Compliance with Laws. The Plan, the granting and vesting of
Options under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Options granted 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 Options granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such laws, rules
and regulations.

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

                                       21
<PAGE>
              8.10. Reservation of Shares. The Company, during the term of this
Plan, shall at all times reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of the Plan.

              8.11. Information to Holders and Purchasers. To the extent
required by Section 25102(o) of the California Corporation Code and Section
260.140.46 of Title 10 of the California Code of Regulations (or other
applicable law), the Company shall provide to each Holder of an Option and to
each person who acquires shares of Common Stock pursuant to the Plan, not less
frequently than annually during the period such Holder holds an Option, and, in
the case of a Holder or other person who acquires shares of Common Stock
pursuant to the Plan, during the period such Holder or person owns such shares,
copies of the Company's annual financial statements. Notwithstanding the
preceding sentence, the Company shall not be required to provide such statements
to Employees, Directors and Consultants whose duties in connection with the
Company assure their access to equivalent information.

              8.12. Repurchase Provisions. The Administrator in its discretion
may provide that the Company may repurchase shares of Common Stock acquired upon
exercise of an Option upon a Holder's Termination of Consultancy, Termination of
Directorship or Termination of Employment; provided, however, that any such
repurchase right shall be set forth in the applicable Option Agreement or in
another agreement entered into pursuant to such Option Agreement; and, provided,
further, that, to the extent required by Section 25102(o) of the California
Corporation Code and Section 260.140.41 of Title 10 of the California Code of
Regulations (or other applicable law), any such repurchase of shares of Common
Stock from a person who is not an officer of the Company or any Subsidiary, a
Director or a Consultant shall be upon the following terms: (a) if the
repurchase option gives the Company the right to repurchase the shares upon
Termination of Employment at not less than the Fair Market Value of the shares
to be purchased on the date of Termination of Employment, then (i) the right to
repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares within ninety (90) days of Termination of Employment
(or in the case of shares issued upon exercise of Options after such date of
termination, within ninety (90) days after the date of the exercise) or such
longer period as may be agreed to by the Administrator and the person and (ii)
the right shall terminate when the shares of Common Stock become publicly
traded; and (b) if the repurchase right gives the Company the right to
repurchase the shares upon Termination of Employment at the original purchase
price for such shares, then (i) the right to repurchase at the original purchase
price shall lapse at the rate of at least twenty percent (20%) of the shares per
year over five (5) years from the date the Option is granted (without respect to
the date the Option was exercised or became exercisable) and (ii) the right to
repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares within ninety (90) days of Termination of Employment
(or, in the case of shares issued upon exercise of Options after such date of
Termination of Employment, within ninety (90) days after the date of the
exercise) or such longer period as may be agreed to by the Administrator and the
person.

              8.13. Investment Intent. The Company may require a Holder or other
person purchasing shares of Common Stock, as a condition of exercising or
acquiring Common Stock under any Option, to give written assurances satisfactory
to the Company as to the Holder's or other person's knowledge and experience in
financial and business matters and/or to employ a

                                       22
<PAGE>
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that such Holder or person is
capable of evaluating, alone or together with the representative, the merits and
risks of exercising the Option; and to give written assurances satisfactory to
the Company stating that the person is acquiring the stock subject to the Option
for such Holder or person's own account and not with any present intention of
selling or otherwise distributing the Common Stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative if
the issuance of the shares upon the exercise or acquisition of Common Stock
under the applicable Option has been registered under a then currently effective
registration statement under the Securities Act, or as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.

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

              8.15. 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.

                                      * * *

              I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of Gen-Probe Incorporated on August 17, 2000.

              Executed on this 30th day of October 2000.

                                               --------------------------
                                               R. William Bowen, Jr.
                                               Assistant Secretary

                                      * * *

                     I hereby certify that the foregoing Plan was duly adopted
by the sole shareholder of Gen-Probe Incorporated on August 17, 2000.

                     Executed on this 30th day of October 2000.

                                               --------------------------
                                               R. William Bowen, Jr.
                                               Assistant Secretary

                                       23

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