Document:

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EXHIBIT 10.61

                              READ-RITE CORPORATION

                    WAIVER, FOREBEARANCE AND FIFTH AMENDMENT
                               TO CREDIT AGREEMENT

        This WAIVER, FOREBEARANCE AND FIFTH AMENDMENT TO CREDIT AGREEMENT (this
"Amendment") is dated as of January 28, 2000 and entered into among Read-Rite
Corporation, a Delaware corporation (the "Borrower"), the financial institutions
named on the signature pages hereof (each a "Bank" and collectively the
"Banks"), Canadian Imperial Bank of Commerce, New York Agency, as agent for the
Banks (the "Agent") and issuer of Letters of Credit (the "Designated Issuer")
and is made with reference to that certain Credit Agreement dated as of October
2, 1997 (as amended by the First Amendment to Credit Agreement dated February 5,
1998, the Second Amendment to Credit Agreement dated as of August 10, 1998, the
Waiver and Third Amendment to Credit Agreement dated as of September 27, 1999
and the Waiver and Fourth Amendment to Credit Agreement dated as of December 29,
1999, the "Credit Agreement" and the Credit Agreement (the "Waiver and Fourth
Amendment"), as amended by this Amendment, the "Amended Agreement") among the
Borrower, the Banks, the Designated Issuer and the Agent. Capitalized terms used
herein without definition shall have the same meanings herein as set forth in
the Amended Agreement.

                                    RECITALS

        WHEREAS, the Borrower has requested that the Banks waive certain
provisions and amend certain other provisions set forth in Credit Agreement.

        WHEREAS, the Borrower has requested that the Banks forebear from
exercising their remedies under the Credit Agreement as a result of the
Borrower's breach of the covenants set forth in Sections 6.02(a) to (e)
inclusive of the Credit Agreement.

        NOW, THEREFORE, in consideration of the promises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:

I.      SECTION   AMENDMENTS TO THE CREDIT AGREEMENT

A.                    The definition of the term "Revolving Facility" in Section
1.01 of the Credit Agreement shall be amended by deleting the figure
"$50,000,000" and substituting therefore "$35,000,000".

A.                    There shall be added to Section 1.01 of the Credit
Agreement, in appropriate alphabetical sequence, the following definitions:

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               "Exchange Note Purchase Offer": The offer by the Borrower
        pursuant to that certain S-4 Registration Statement filed with the
        Securities and Exchange Commission on January 27, 2000 to sell up to
        $75,000,000 of Exchange Notes to the holders of its Subordinated Notes.

               "Exchange Notes": Those notes, substantially on the terms set
        forth on Exhibit W hereto, that the Borrower proposes to issue pursuant
        to the Exchange Offer and the Exchange Note Purchase Offer.

               "Exchange Offer": The offer by the Borrower to the holders of its
        Subordinated Notes to exchange such instruments for the Exchange Notes
        substantially on the terms set forth on the Exhibit W hereto.

               "Waiver, Forebearance and Fifth Amendment Termination Date": May
        25, 2000, provided that such date will be extended to August 25, 2000 if
        in connection with the Exchange Note Purchase Offer, the Majority Banks,
        acting in their sole and absolute discretion, and the Borrower have
        reached an agreement as to (i) the lifting of the blocking notice, if
        any, in respect of the Subordinated Notes, (ii) the payment by the
        Borrower of the stub interest to the holders who elect not to exchange
        Subordinated Notes, (iii) the percentage paydown from the proceeds of
        the Exchange Notes Purchase Offer to be received by the Banks under the
        Credit Agreement and (iv) other terms and conditions in respect of
        interest rates, fees and covenants under the Credit Agreement.

A.                    The final sentence of Section 2.04 of the Credit Agreement
is hereby amended and restated to read in its entirety as follows:

               "Notwithstanding the foregoing, from December 29, 1999 until the
        Waiver, Forebearance and Fifth Amendment Termination Date the Borrower
        may not continue any Eurodollar Rate Loan as a Eurodollar Rate Loan or
        convert any Base Rate Loan into a Eurodollar Rate Loan."

A.                    Section 6.01(a) of the Credit Agreement is amended by
adding the following at the end thereof:

               (viii) (a) within 5 days after the end of each week, a report in
        substantially the form of Exhibit X commencing with the week ended
        January 30, 2000, (b) within 5 days after the end of each week, a
        comparison of actual versus forecasted cash flows in substantially the
        form of Exhibit Y, (c) within 15 days after the end of each fiscal
        month, financial statements comparing the Borrower's financial
        performance during such month with the Borrower's projections and (d) at
        the time of delivery of its quarterly financial statements pursuant to
        Section 6.01(a)(ii), a comparison of the Borrower's cash flow statements
        for such fiscal quarter with the Borrower's projections for such
        quarter.

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A.                    Section 6.02(k) of the Credit Agreement is hereby amended
to read in its entirety as follows:

               (k) Asset Sales. Convey, sell, lease, transfer or otherwise
        dispose of (collectively a "Transfer"), or permit any Subsidiary (other
        than Read-Rite SMI) to Transfer, in one transaction or a series of
        transactions, all or any part of its or its Subsidiary's business,
        property or fixed assets, whether now owned or hereafter acquired, other
        than transfers of worn-out or obsolete property, unless all proceeds
        therefrom have been delivered to the Agent and held as collateral
        security until a mutually acceptable sharing arrangement between the
        Borrower and the Majority Banks has been arranged; provided, that upon
        the occurrence of an Event of Default any distribution of such proceeds
        may be made at the discretion of Majority Banks.

A.                    Section 7.02(g)(v) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:

               "(v) Permitted Subordinated Debt or indebtedness evidenced by the
        Exchange Notes;"

A.                    Subsections (t), (u) and (v) of Section 6.02 of the Credit
Agreement are hereby amended to read in their entirety as follows:

               (t) Additional Information. The Borrower shall deliver to the
        Agent on or prior to March 1, 2000 projections (incorporating planned
        asset sales and the estimated costs incurred and savings realized
        therefrom and all other restructuring initiatives) of the Borrower's
        balance sheets, income statements and cash flow statements on a month by
        month basis through the Maturity Date. In addition, the Borrower shall
        provide a 13-week cash flow statements that supports its revised
        projections. PricewaterhouseCoopers ("PWC") shall have reasonable access
        to the Borrower's management to discuss financial information and
        operational information of the Borrower. In addition, the Borrower shall
        provide any information deemed necessary by the Agent and PWC. From time
        to time, PWC shall provide the Agent and the Borrower with budgets in
        connection with its review and analysis of such financial and
        operational information.

               (u) Payment of Fee. If the Borrower shall have not repaid all
        obligations under this Agreement in full and terminated all Commitments
        hereunder on or before Waiver, Forebearance and Fifth Amendment
        Termination Date, on such date the Borrower shall pay a fee equal to 50
        basis points to each Bank, based on such Bank's aggregate Revolving
        Commitment and Term Commitments on such date that has consented to the
        Waiver, Forebearance and Fifth Amendment dated as of January 28, 2000
        not later than noon, Pacific time, on January 31, 2000.

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               (v) Amendment of Designated Account Agreements. On or before
        February 25, 2000, each of the Designated Account Agreements shall be
        amended to provide that the Borrower may not transfer funds from any
        Designated Account to any account that is not a Designated Account other
        than transfers consistent with a monthly budget to be provided to the
        Agent not less than 15 days prior to the beginning of each fiscal month.

A.                    There shall be added to the Credit Agreement a new Section
6.02(w) reading in its entirety as follows:

               (w) Exchange Notes. Pay, prepay, redeem, purchase, defease or
        otherwise satisfy (nor permit any of its Subsidiaries to pay, prepay,
        redeem, purchase, defease or otherwise satisfy) in any manner prior to
        the scheduled payment thereof any indebtedness evidenced by the Exchange
        Notes except upon conversion of the Exchange Notes in accordance with
        their terms and except as otherwise permitted under this Section
        6.02(w); amend, modify or otherwise change the terms of any document,
        instrument or agreement evidencing the Exchange Notes such that such
        amendment, modification or change would (i) cause the outstanding
        aggregate principal amount of all such Exchange Notes so amended,
        modified or changed to be increased as a consequence of such amendment,
        modification or change, (ii) cause the subordination provisions
        applicable to such Exchange Notes to be less favorable to the Agent and
        the Banks than those set forth in the Original Indenture, (iii) increase
        the interest rate applicable thereto or (iv) accelerate the scheduled
        payment thereof; provided that, notwithstanding the prior provisions of
        this Section 6.02(w), the Borrower may at any time convert all or any
        portion of the Exchange Notes into common stock of the Borrower and may
        pay interest on the Exchange Notes in the common stock of the Borrower.
        The Debt of the Borrower under this Agreement shall at all times
        constitute "Designated Senior Indebtedness" under the indenture for the
        Exchange Notes. Only Senior Debt shall constitute "Designated Senior
        Indebtedness" under the indenture for the Exchange Notes.

               Notwithstanding any provision of this Section 6.02 to the
        contrary, but subject in all cases to the subordination provisions
        described in the S-4 Registration Statement filed by the Borrower with
        the Securities and Exchange Commission on January 27, 2000, none of the
        following shall be prohibited by this Section 6.02:

                      (i) the delivery of securities upon conversion of the
        Exchange Notes in accordance with the terms thereof (including the
        payment by the Borrower of cash in lieu of fractional shares in
        connection with such a conversion); and

                      (ii) any mandatory payments of interest on the Exchange
        Notes.

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        Nothing in this Section shall be construed to permit any action that
        would not be permitted under the subordination provisions of any
        indenture or other document governing the terms of the Exchange Notes.

A.                    There shall be added to the Credit Agreement new Exhibits
W, X and Y in the form of Exhibits W, X and Y attached hereto.

I.      SECTION   WAIVERS AND CONSENTS

A.                    By their execution hereof, the Banks hereby waive (i)
compliance by the Borrower with the covenant relating to the funding of
Read-Rite SMI set forth in Section 6.02(j)(viii) of the Credit Agreement to
permit the funding of up to an additional $15,000,000 during the period from
September 30, 1999 through the Waiver, Forebearance and Fifth Amendment
Termination Date; and (ii) Section 6.02(g)(v) and 6.02(o) to permit the Borrower
to make the offer and consummate the transactions contemplated by the Exchange
Offer and the Exchange Note Purchase Offer. Unless extended by the Majority
Banks, the waiver described in clause (i) of the preceding sentence shall
terminate on the Waiver, Forebearance and Fifth Amendment Termination Date, and
on the Waiver, Forebearance and Fifth Amendment Termination Date an Event of
Default will exist if the Borrower is not (and has not been) in compliance with
Sections 6.02(j)(viii), 6.02(g)(v) and 6.02(o) of the Credit Agreement for all
periods from and after September 30, 1999. The waivers granted herein shall be
limited precisely as provided for herein and shall not be deemed to be a waiver
or modification of any other term or provision of the Credit Agreement or to be
a consent to any other transaction or further action on the part of the Borrower
or any of its Subsidiaries which would require the consent of the Banks under
the Credit Agreement.

A.                    Upon the effectiveness of this Amendment, the waivers
granted pursuant to the Waiver and Fourth Amendment shall terminate.

I.      SECTION   FOREBEARANCE

A.                    From the date hereof through the Waiver, Forebearance and
Fifth Amendment Termination Date, the Agent and the Banks agree to forebear from
exercising their respective rights and remedies under the Credit Agreement and
the other Loan Documents, with respect to any failure of the Borrower, from the
period of September 30, 1999 through the Waiver, Forebearance and Fifth
Amendment Termination Date, to comply with the financial covenants set forth in
Section 6.02(a) through (e) inclusive of the Credit Agreement. This agreement to
forbear shall not apply to any other Potential Events of Default or Events of
Default, and shall not toll the time period during which any event would
otherwise become an Event of Default, nor shall it extinguish any Event of
Default that has occurred and is continuing. Notwithstanding the foregoing, the
parties hereto expressly agree that the Agent and the Banks shall be entitled to
send a blocking notice with respect to the Subordinated Notes, and to take all

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other measures that may be necessary or appropriate to prevent the payment of
any interest or principal with respect to the Subordinated Notes.

I.      SECTION   CONDITIONS TO EFFECTIVENESS

        This Amendment shall become effective as of the first date (the "Fifth
Amendment Date") on or before February 4, 2000 upon which the following
conditions have been satisfied:

A.                    The Agent shall have received for each Bank counterparts
hereof duly executed on behalf of the Borrower, the Agent, and the Majority
Banks (or, in lieu of execution by the Majority Banks, notice of the approval of
this Amendment by the Majority Banks satisfactory to the Agent); and

A.                    An acknowledgment and amendment in the form of Exhibit A
hereto duly executed by each party to the Guaranty.

A.                    The Borrower shall have reduced the aggregate outstanding
principal amount of Revolving Loans to an amount not in excess of $35,000,000.

A.                    The Agent shall have received a copy of a board resolution
of the Borrower, in form and substance satisfactory, to the Agent authorizing
the execution, delivery and performance of this Amendment certified by the
Secretary of the Borrower as being in full force and effect on the date hereof.

A.                    The Amendment Fee referred to in Section 5.C of the Waiver
and Fourth Amendment shall have been paid and all other fees and expenses
payable by the Borrower pursuant to the Loan Documents shall have been paid or
provided for.

A.                    All the representations and warranties in Section 4 shall
be true and correct as of the date of this Amendment.

A.                    No Potential Event of Default or Event of Default shall
have occurred and be continuing on the date of this Amendment or will result
from the consummation of this Amendment (after giving effect to this Amendment).

A.                    The Agent shall have received, in form and substance
satisfactory to it, a certificate dated on or before the date of this Amendment
certifying that the conditions in clauses (F) and (G) have been met.

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I.      SECTION   BORROWER'S REPRESENTATIONS AND WARRANTIES

        In order to induce the Agent and the Banks to enter into this Amendment
and to amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to the Agent and each Bank that the following statements
are true, correct and complete:

A.                    CORPORATE POWER AND AUTHORITY. The Borrower has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
this Amendment and the Amended Agreement.

A.                    AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Amendment and the performance of the Amended Agreement have been duly
authorized by all necessary corporate action on the part of the Borrower.
B.                    NO CONFLICT. The execution and delivery by the Borrower of
this Amendment does not and will not contravene (i) any law or any governmental
rule or regulation applicable to the Borrower or any of its Subsidiaries, (ii)
the Certificate of Incorporation or Bylaws of the Borrower, (iii) any order,
judgment or decree of any court or other agency of government binding on the
Borrower or any of its Subsidiaries or (iv) any material agreement or instrument
binding on the Borrower or any of its Subsidiaries.

A.                    GOVERNMENTAL CONSENTS. The execution and delivery by the
Borrower of this Amendment and the performance by the Borrower of the Amended
Agreement do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body.

A.                    BINDING OBLIGATION. This Amendment has been duly executed
and delivered by the Borrower and is the binding obligation of the Borrower,
enforceable against the Borrower in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and
equitable principles relating to or affecting creditors' rights.

A.                    INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM
CREDIT AGREEMENT. The representations and warranties contained in Article V of
the Amended Agreement are and will be true, correct and complete in all material
respects on and as of the date of this Amendment to the same extent as though
made on and as of such date, except to the extent such representations and
warranties specifically relate to an earlier date, in which case they were true,
correct and complete in all material respects on and as of such earlier date.

A.                    ABSENCE OF DEFAULT. No event has occurred and is
continuing as of the date of this Amendment or will result from the consummation
of the transactions

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contemplated by this Amendment that would constitute an Event of Default or a
Potential Event of Default (as determined after giving effect to the amendments
made by this Amendment).

A.                    FINANCIAL CONDITION. The unaudited consolidated balance
sheet of the Borrower for the Borrower's fiscal quarter ended September 30, 1999
and the related consolidated statements of operations and cash flow of the
Borrower for the fiscal quarter then ended, which have been previously
circulated to the Banks, fairly present in all material respects the
consolidated financial condition of the Borrower as at such date and the
consolidated results of the operations of the Borrower for the period ended on
such date, all in accordance with GAAP, consistently applied, subject to
year-end adjustments and the absence of footnotes.

I.      SECTION       MISCELLANEOUS

A.                    REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN AGREEMENTS.

1.                    On and after the Fifth Amendment Date, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of like import referring to the Credit Agreement, and each reference in
the other Loan Agreements to the "Credit Agreement", "thereunder", "thereof" or
words of like import referring to the Credit Agreement shall mean and be a
reference to the Amended Agreement.

1.                    Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Agreements shall remain in full force and
effect and are hereby ratified and confirmed.

1.                    The execution, delivery and performance of this Amendment
shall not, except as expressly provided herein, constitute a waiver of any
provision of, or operate as a waiver of any right, power or remedy of the Agent
or any Bank under, the Credit Agreement or any of the other Loan Agreements nor
to create any course of dealing or otherwise obligate the Agent or the Banks to
forebear or execute similar amendments or any waiver in similar circumstances in
the future.

A.                    COSTS AND EXPENSES. The Borrower covenants to pay to or
reimburse the Agent, upon demand, for all costs and expenses (including
allocated costs of in-house counsel) incurred in connection with the
development, preparation, negotiation, execution and delivery of this Amendment,
the Collateral Documents and the documents and transactions contemplated hereby.

A.                    AMENDMENT FEE. The Borrower hereby agrees to pay to the
Agent on or before the Waiver, Forebearance and Fifth Amendment Termination
Date, for the ratable benefit of the Banks that have consented to the Amendment
not later than

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noon, Pacific time, on January 31, 2000, an amendment fee (the "Amendment Fee")
of 0.50% of the aggregate Revolving Commitments and Term Commitments of such
Banks on such date. The Amendment Fee shall be paid to the Agent in immediately
available funds and shall be non-refundable. The Amendment Fee is in addition to
any fees, costs, expenses or other amounts otherwise payable pursuant to this
Amendment or the Amended Agreement.

A.                    HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.

A.                    APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

A.                    COUNTERPARTS. This Amendment may be executed in any number
of counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. Each of
the parties hereto understands and agrees that this document (and any other
document required herein) may be delivered by any party thereto either in the
form of an executed original or an executed original sent by facsimile
transmission to be followed promptly by mailing of a hard copy original, and
that receipt by the Agent of a facsimile transmitted document purportedly
bearing the signature of a Bank or the Borrower shall bind such Bank or the
Borrower, respectively, with the same force and effect as the delivery of a hard
copy original. Any failure by the Agent to receive the hard copy executed
original of such document shall not diminish the binding effect of receipt of
the facsimile transmitted executed original of such document of the party whose
hard copy page was not received by the Agent.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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        IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

                                        BORROWER:

                                        READ-RITE CORPORATION

                                        By:
                                        Title:

<PAGE>   11

                                        AGENT:

                                        CANADIAN IMPERIAL BANK OF COMMERCE,
                                        NEW YORK AGENCY, as Agent

                                        By:
                                        Title: Managing Director, CIBC World
                                               Markets Corp., AS AGENT

<PAGE>   12

                                        BANKS:

                                        CIBC INC.

                                        By:
                                        Title: Managing Director, CIBC World
                                               Markets Corp., AS AGENT

                                        ABN AMRO BANK N.V.

                                        By:
                                        Title:

                                        By:
                                        Title:

                                        FLEET NATIONAL BANK

                                        By:
                                        Title:

                                        KEYBANK, N.A.

                                        By:
                                        Title:

                                        GENERAL ELECTRIC CAPITAL CORPORATION

                                        By:
                                        Title:

<PAGE>   13

                                        MELLON BANK

                                        By:
                                        Title:

                                        THE MITSUBISHI TRUST AND BANKING
                                        CORPORATION

                                        By:
                                        Title:

                                        THE SUMITOMO BANK LIMITED,
                                        SAN FRANCISCO BRANCH

                                        By:
                                        Title:

                                        THE INDUSTRIAL BANK OF JAPAN LIMITED,
                                        SAN FRANCISCO AGENCY

                                        By:
                                        Title:

                                        BANQUE NATIONALE DE PARIS

                                        By:
                                        Title:

                                        By:
                                        Title:

<PAGE>   14

                                        FOOTHILL PARTNERS III, L.P.

                                        By:
                                        Title:

                                        CERBERUS PARTNERS, L.P.

                                        By:
                                        Title:

                                        WELLS FARGO BANK, N.A.

                                        By:
                                        Title:

                                        THE DESIGNATED ISSUER:

                                        CANADIAN IMPERIAL BANK OF COMMERCE,
                                        NEW YORK AGENCY

                                        By:
                                        Title: Managing Director, CIBC World
                                               Markets Corp., AS AGENT

<PAGE>   15

                                                                       EXHIBIT A
                                     TO WAIVER, FOREBEARANCE AND FIFTH AMENDMENT
                                                             TO CREDIT AGREEMENT

                                January 28, 2000

The parties listed on the acknowledgment page hereof:

        Re:  Credit Agreement dated as of October 2, 1997

Ladies and Gentlemen:

        Please refer to (i) the Credit Agreement dated as of October 2, 1997
(the "Credit Agreement") by and among Read-Rite Corporation (the "Borrower"),
the financial institutions party thereto (the "Banks") and Canadian Imperial
Bank of Commerce, New York Agency, as agent (in such capacity, the "Agent") and
(ii) the Continuing Guaranty dated as of August 10, 1998 (the "Guaranty", which
was executed by you on such date. Pursuant to a waiver, forebearance and
amendment of even date herewith, certain terms of the Credit Agreement were
amended and modified. We hereby request that you (i) consent to the terms of the
amendment, (ii) acknowledge and reaffirm all of your obligations and
undertakings under the Guaranty and (iii) acknowledge and agree that the
Guaranty, as amended by the following paragraph hereof, is and shall remain in
full force and effect in accordance with the terms thereof.

<PAGE>   16

        We and you acknowledge and agree that the Guaranty is ratified and
confirmed in all respects.

                                   Very truly yours,

                                   CANADIAN IMPERIAL BANK OF COMMERCE,
                                   NEW YORK AGENCY, as Agent

                                   By:_________________________________________
                                   Title: Managing Director,
                                          CIBC World Markets Corp., AS AGENT

ACKNOWLEDGED AND AGREED AS
OF THE DATE FIRST ABOVE WRITTEN:

GUARANTORS

SUNWARD TECHNOLOGIES, INC.

By:___________________________________

Title:________________________________

SUNWARD TECHNOLOGIES, CALIFORNIA

By:___________________________________

Title:________________________________<PAGE>   1
                                  FLASHCOM, INC.                       EXH. 10.1
                              AMENDED AND RESTATED
             1999 INCENTIVE STOCK OPTION, NONQUALIFIED STOCK OPTION
                       AND RESTRICTED STOCK PURCHASE PLAN

        The 1999 INCENTIVE STOCK OPTION, NONQUALIFIED STOCK OPTION AND
RESTRICTED STOCK PURCHASE PLAN (the "Plan"), established by FLASHCOM, INC., a
Delaware corporation (the "Company"), and adopted by its Board of Directors as
of the 4th day of June, 1999 (the "Effective Date"), is hereby amended and
restated in its entirety by action of its Board of Directors as of the 24th day
of April, 2000.

                                   ARTICLE 1.

                              PURPOSES OF THE PLAN

        1.1 PURPOSES. The purposes of the Plan are (a) to enhance the Company's
ability to attract and retain the services of qualified employees, officers and
directors (including non-employee officers and directors), and consultants and
other service providers upon whose judgment, initiative and efforts the
successful conduct and development of the Company's business largely depends,
and (b) to provide additional incentives to such persons or entities to devote
their utmost effort and skill to the advancement and betterment of the Company,
by providing them an opportunity to participate in the ownership of the Company
and thereby have an interest in the success and increased value of the Company.

                                   ARTICLE 2.

                                   DEFINITIONS

        For purposes of this Plan, the following terms shall have the meanings
indicated:

        2.1 ADMINISTRATOR. "Administrator" means the Board or, if the Board
delegates responsibility for any matter to the Committee, the term Administrator
shall mean the Committee.

        2.2 AFFILIATED COMPANY. "Affiliated Company" means any "parent
corporation" or "subsidiary corporation" of the Company, whether now existing or
hereafter created or acquired, as those terms are defined in Sections 424(e) and
424(f) of the Code, respectively.

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

        2.4 CHANGE IN CONTROL. "Change in Control" shall mean (i) the
acquisition, directly or indirectly, by any person or group (within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) of the
beneficial ownership of securities of the Company possessing more than fifty
percent (50%) of the total combined voting power of all outstanding securities
of the Company; (ii) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction in which the holders of the
outstanding voting securities of the Company immediately prior to such merger or
consolidation hold, in the aggregate, securities possessing more than fifty
percent (50%) of the total combined voting power of all outstanding voting
securities of the surviving entity immediately after such merger or
consolidation; (iii) a reverse merger in which the Company is the surviving
entity but in which securities possessing more

<PAGE>   2

than fifty percent (50%) of the total combined voting power of all outstanding
voting securities of the Company are transferred to or acquired by a person or
persons different from the persons holding those securities immediately prior to
such merger; (iv) the sale, transfer or other disposition (in one transaction or
a series of related transactions) of all or substantially all of the assets of
the Company; or (v) the approval by the shareholders of a plan or proposal for
the liquidation or dissolution of the Company.

        2.5 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.

        2.6 COMMITTEE. "Committee" means a committee of two or more members of
the Board appointed to administer the Plan, as set forth in Section 7.1 hereof.

        2.7 COMMON STOCK. "Common Stock" means the Common Stock, $.001 par value
of the Company, subject to adjustment pursuant to Section 4.2 hereof.

        2.8 DISABILITY. "Disability" means permanent and total disability as
defined in Section 22(e)(3) of the Code. The Administrator's determination of a
Disability or the absence thereof shall be conclusive and binding on all
interested parties.

        2.9 EFFECTIVE DATE. "Effective Date" means the date on which the Plan is
adopted by the Board, as set forth on the first page hereof.

        2.10 EXERCISE PRICE. "Exercise Price" means the purchase price per share
of Common Stock payable upon exercise of an Option.

        2.11 FAIR MARKET VALUE. "Fair Market Value" on any given date means the
value of one share of Common Stock, determined as follows:

               a. If the Common Stock is then listed or admitted to trading on
the New York Stock Exchange, a NASDAQ market system or similar stock exchange
which reports closing sale prices, the Fair Market Value shall be the closing
sale price on the date of valuation on such stock exchange on which the Common
Stock is then listed or admitted to trading, or, if no closing sale price is
quoted on such day, then the Fair Market Value shall be the closing sale price
of the Common Stock on such exchange on the next preceding day for which a
closing sale price is reported.

               b. If the Common Stock is not then listed or admitted to trading
on the New York Stock Exchange, a NASDAQ market system or similar stock exchange
which reports closing sale prices, the Fair Market Value shall be the average of
the closing bid and asked prices of the Common Stock in the over-the-counter
market on the date of valuation.

               c. If neither (a) nor (b) is applicable as of the date of
valuation, then the Fair Market Value shall be determined by the Administrator
in good faith using any reasonable method of valuation, which determination
shall be conclusive and binding on all interested parties.

        2.12 INCENTIVE OPTION. "Incentive Option" means any Option designated
and qualified as an "incentive stock option" as defined in Section 422 of the
Code.

                                       2
<PAGE>   3

        2.13 INCENTIVE OPTION AGREEMENT. "Incentive Option Agreement" means an
Option Agreement with respect to an Incentive Option.

        2.14 NASD DEALER. "NASD Dealer" means a broker-dealer that is a member
of the National Association of Securities Dealers, Inc.

        2.15 NONQUALIFIED OPTION. "Nonqualified Option" means any Option that is
not an Incentive Option. To the extent that any Option designated as an
Incentive Option fails in whole or in part to qualify as an Incentive Option,
including, without limitation, for failure to meet the limitations applicable to
a 10% Shareholder or because it exceeds the annual limit provided for in Section
5.6 below, it shall to that extent constitute a Nonqualified Option.

        2.16 NONQUALIFIED OPTION AGREEMENT. "Nonqualified Option Agreement"
means an Option Agreement with respect to a Nonqualified Option.

        2.17 OFFEREE. "Offeree" means a Participant to whom a Right to Purchase
has been offered or who has acquired Restricted Stock under the Plan.

        2.18 OPTION. "Option" means any option to purchase Common Stock granted
pursuant to the Plan.

        2.19 OPTION AGREEMENT. "Option Agreement" means the written agreement
entered into between the Company and the Optionee with respect to an Option
granted under the Plan.

        2.20 OPTIONEE. "Optionee" means a Participant who holds an Option.

        2.21 PARTICIPANT. "Participant" means an individual or entity who holds
an Option, a Right to Purchase or Restricted Stock under the Plan.

        2.22 PURCHASE PRICE. "Purchase Price" means the purchase price per share
of Restricted Stock payable upon acceptance of a Right to Purchase.

        2.23 RESTRICTED STOCK. "Restricted Stock" means shares of Common Stock
issued pursuant to Article 6 hereof, subject to any restrictions and conditions
as are established pursuant to such Article 6.

        2.24 RIGHT TO PURCHASE. "Right to Purchase" means a right to purchase
Restricted Stock granted to an Offeree pursuant to Article 6 hereof.

        2.25 SERVICE PROVIDER. "Service Provider" means a consultant or other
person or entity who provides services to the Company or an Affiliated Company
and who the Administrator authorizes to become a Participant in the Plan.

        2.26 RESTRICTED STOCK PURCHASE AGREEMENT. "Restricted Stock Purchase
Agreement" means the written agreement entered into between the Company and the
Offeree with respect to a Right to Purchase offered under the Plan.

                                       3
<PAGE>   4

        2.27 10% SHAREHOLDER. "10% Shareholder" means a person who, as of a
relevant date, owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company or of an
Affiliated Company.

                                   ARTICLE 3.

                                   ELIGIBILITY

        3.1 INCENTIVE OPTIONS. Officers and other key employees of the Company
or of an Affiliated Company (including members of the Board if they are
employees of the Company or of an Affiliated Company) are eligible to receive
Incentive Options under the Plan.

        3.2 NONQUALIFIED OPTIONS AND RIGHTS TO PURCHASE. Officers and other key
employees of the Company or of an Affiliated Company, members of the Board
(whether or not employed by the Company or an Affiliated Company), and Service
Providers are eligible to receive Nonqualified Options or Rights to Purchase
under the Plan.

        3.3 LIMITATION ON SHARES. In no event shall any Participant be granted
Options or Rights to Purchase in any one calendar year pursuant to which the
aggregate number of shares of Common Stock that may be acquired thereunder
exceeds 1,000,000 shares.

                                   ARTICLE 4.

                                   PLAN SHARES

        4.1 SHARES SUBJECT TO THE PLAN. A total of 15,000,000 shares of Common
Stock may be issued under the Plans, subject to adjustment as to the number and
kind of shares pursuant to Section 4.2 and 4.3 hereof. For purposes of this
limitation, in the event that (a) all or any portion of any Option or Right to
Purchase granted or offered under the Plan can no longer under any circumstances
be exercised, or (b) any shares of Common Stock are reacquired by the Company
pursuant to the terms of an Option Agreement or Restricted Stock Purchase
Agreement, the shares of Common Stock allocable to the unexercised portion of
such Option or such Right to Purchase, or the shares so reacquired, shall again
be available for grant or issuance under the Plan.

        4.2 ANNUAL INCREASES IN SHARES. The number of shares authorized for
issuance under the Plan shall be automatically increased on the last day of
each fiscal year of the Company by a number of shares equal to two percent (2%)
of the shares of Common Stock outstanding on such date.

        4.3 CHANGES IN CAPITAL STRUCTURE. In the event that the outstanding
shares of Common Stock are hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, stock split, combination of shares,
reclassification, stock dividend, or other change in the capital structure of
the Company, then appropriate adjustments shall be made by the Administrator to
the aggregate number and kind of shares subject to this Plan, and the number and
kind of shares and the price per share subject to outstanding Option Agreements,
Rights to Purchase and Restricted Stock Purchase Agreements in order to
preserve, as nearly as practical, but not to increase, the benefits to
Participants.

                                       4
<PAGE>   5

                                   ARTICLE 5.

                                     OPTIONS

        5.1 OPTION AGREEMENT. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement which shall specify the number of shares
subject thereto, the Exercise Price per share, and whether the Option is an
Incentive Option or Nonqualified Option. As soon as is practical following the
grant of an Option, an Option Agreement shall be duly executed and delivered by
or on behalf of the Company to the Optionee to whom such Option was granted.
Each Option Agreement shall be in such form and contain such additional terms
and conditions, not inconsistent with the provisions of this Plan, as the
Administrator shall, from time to time, deem desirable, including, without
limitation, the imposition of any rights of first refusal and resale obligations
upon any shares of Common Stock acquired pursuant to an Option Agreement. Each
Option Agreement may be different from each other Option Agreement.

        5.2 EXERCISE PRICE. The Exercise Price per share of Common Stock covered
by each Option shall be determined by the Administrator, subject to the
following: (a) the Exercise Price of an Incentive Option shall not be less than
100% of Fair Market Value on the date the Incentive Option is granted, (b) the
Exercise Price of a Nonqualified Option shall not be less than 85% of Fair
Market Value on the date the Nonqualified Option is granted, and (c) if the
person to whom an Option is granted is a 10% Shareholder on the date of grant,
the Exercise Price shall not be less than 110% of Fair Market Value on the date
the Option is granted.

        5.3 PAYMENT OF EXERCISE PRICE. Payment of the Exercise Price shall be
made upon exercise of an Option and may be made, in the discretion of the
Administrator, subject to any legal restrictions, by: (a) cash; (b) check; (c)
the surrender of shares of Common Stock owned by the Optionee that have been
held by the Optionee for at least six (6) months, which surrendered shares shall
be valued at Fair Market Value as of the date of such exercise; (d) the
Optionee's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Optionee; (f) the waiver of compensation due or accrued to the Optionee for
services rendered; (g) provided that a public market for the Common Stock
exists, a "same day sale" commitment from the Optionee and an NASD Dealer
whereby the Optionee irrevocably elects to exercise the Option and to sell a
portion of the shares so purchased to pay for the Exercise Price and whereby the
NASD Dealer irrevocably commits upon receipt of such shares to forward the
Exercise Price directly to the Company; (h) provided that a public market for
the Common Stock exists, a "margin" commitment from the Optionee and an NASD
Dealer whereby the Optionee irrevocably elects to exercise the Option and to
pledge the shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such shares to
forward the Exercise Price directly to the Company; or (i) any combination of
the foregoing methods of payment or any other consideration or method of payment
as shall be permitted by applicable corporate law.

        5.4 TERM AND TERMINATION OF OPTIONS. The term and provisions for
termination of each Option shall be as fixed by the Administrator, but no Option
may be exercisable more than ten (10) years after the date it is granted. An
Incentive Option granted to a person who is a 10% Shareholder on the date of
grant shall not be exercisable more than five (5) years after the date it is
granted.

                                       5
<PAGE>   6

        5.5 VESTING AND EXERCISE OF OPTIONS. Each Option shall vest and become
exercisable in one or more installments at such time or times and subject to
such conditions, including without limitation the achievement of specified
performance goals or objectives, as shall be determined by the Administrator;
provided, however that Options granted to employees who are not officers,
directors or Service Providers shall vest and become exercisable in installments
of a minimum of 20% per year over a period of five (5) years from the date the
Option is granted.

        5.6 ANNUAL LIMIT ON INCENTIVE OPTIONS. To the extent required for
"incentive stock option" treatment under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Common Stock shall
not, with respect to which Incentive Options granted under this Plan and any
other plan of the Company or any Affiliated Company become exercisable for the
first time by an Optionee during any calendar year, exceed $100,000.

        5.7 NONTRANSFERABILITY OF OPTIONS. No Option shall be assignable or
transferable except by will or the laws of descent and distribution, and during
the life of the Optionee shall be exercisable only by such Optionee.

        5.8 RIGHTS AS STOCKHOLDER. An Optionee or permitted transferee of an
Option shall have no rights or privileges as a stockholder with respect to any
shares covered by an Option until such Option has been duly exercised and
certificates representing shares purchased upon such exercise have been issued
to such person.

        5.9 COMPANY'S REPURCHASE PLAN. In the event of termination of a
Participant's employment or service as a director of the Company for any reason
whatsoever (including death or disability), the Option Agreement may provide, in
the discretion of the Administrator, that the Company, or its assignee, shall
have the right, exercisable at the discretion of the Administrator, to
repurchase shares of Common Stock acquired pursuant to the exercise of an Option
at any time prior to the consummation of the Company's initial public offering
of securities in an offering registered under the Securities Act of 1933, as
amended, and at the price equal to the Fair Market Value per share of Common
Stock (determined in accordance with Section 2.12 hereof) as of the date of
termination of Optionee's employment.

        5.10 RESTRICTIONS ON UNDERLYING SHARES OF COMMON STOCK. Shares of Common
Stock issued pursuant to the exercise of an Option may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Option Agreement.

                                   ARTICLE 6.

                               RIGHTS TO PURCHASE

        6.1 NATURE OF RIGHT TO PURCHASE. A Right to Purchase granted to an
Offeree entitles the Offeree to purchase, for a Purchase Price determined by the
Administrator, shares of Common Stock subject to such terms, restrictions and
conditions as the Administrator may determine at the time of grant ("Restricted
Stock"). Such conditions may include, but are not limited to, continued
employment or the achievement of specified performance goals or objectives.

                                       6
<PAGE>   7

        6.2 ACCEPTANCE OF RIGHT TO PURCHASE. An Offeree shall have no rights
with respect to the Restricted Stock subject to a Right to Purchase unless the
Offeree shall have accepted the Right to Purchase within ten (10) days (or such
longer or shorter period as the Administrator may specify) following the grant
of the Right to Purchase by making payment of the full Purchase Price to the
Company in the manner set forth in Section 6.3 hereof and by executing and
delivering to the Company a Restricted Stock Purchase Agreement. Each Restricted
Stock Purchase Agreement shall be in such form, and shall set forth the Purchase
Price and such other terms, conditions and restrictions of the Restricted Stock,
consistent with the provisions of this Plan, as the Administrator shall, from
time to time, deem desirable. Each Restricted Stock Purchase Agreement may be
different from each other Restricted Stock Purchase Agreement.

        6.3 PAYMENT OF PURCHASE PRICE. Subject to any legal restrictions,
payment of the Purchase Price upon acceptance of a Right to Purchase Restricted
Stock may be made, in the discretion of the Administrator, by: (a) cash; (b)
check; (c) the surrender of shares of Common Stock owned by the Offeree that
have been held by the Offeree for at least six (6) months, which surrendered
shares shall be valued at Fair Market Value as of the date of such exercise; (d)
the Offeree's promissory note in a form and on terms acceptable to the
Administrator; (e) the cancellation of indebtedness of the Company to the
Offeree; (f) the waiver of compensation due or accrued to the Offeree for
services rendered; or (g) any combination of the foregoing methods of payment or
any other consideration or method of payment as shall be permitted by applicable
corporate law.

        6.4 RIGHTS AS A STOCKHOLDER. Upon complying with the provisions of
Section 6.2 hereof, an Offeree shall have the rights of a stockholder with
respect to the Restricted Stock purchased pursuant to the Right to Purchase,
including voting and dividend rights, subject to the terms, restrictions and
conditions as are set forth in the Restricted Stock Purchase Agreement. Unless
the Administrator shall determine otherwise, certificates evidencing shares of
Restricted Stock shall remain in the possession of the Company until such shares
have vested in accordance with the terms of the Restricted Stock Purchase
Agreement.

        6.5 RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in the Restricted Stock Purchase Agreement. In the event
of termination of a Participant's employment, service as a director of the
Company or Service Provider status for any reason whatsoever (including death or
disability), the Restricted Stock Purchase Agreement may provide, in the
discretion of the Administrator, that the Company shall have the right,
exercisable at the discretion of the Administrator, to repurchase (i) at the
original Purchase Price, any shares of Restricted Stock which have not vested as
of the date of termination, and (ii) at Fair Market Value, any shares of
Restricted Stock which have vested as of such date, on such terms as may be
provided in the Restricted Stock Purchase Agreement; provided that the right to
repurchase at the original purchase price lapses at the rate of at least 20% of
the shares per year over five (5) years from the date the Right to Purchase was
granted.

        6.6 VESTING OF RESTRICTED STOCK. The Restricted Stock Purchase Agreement
shall specify the date or dates, the performance goals or objectives which must
be achieved, and any other conditions on which the Restricted Stock may vest.

                                       7
<PAGE>   8

        6.7 DIVIDENDS. If payment for shares of Restricted Stock is made by
promissory note, any cash dividends paid with respect to the Restricted Stock
may be applied, in the discretion of the Administrator, to repayment of such
note.

        6.8 NONASSIGNABILITY OF RIGHTS. No Right to Purchase shall be assignable
or transferable except by will or the laws of descent and distribution.

                                   ARTICLE 7.

                           ADMINISTRATION OF THE PLAN

        7.1 ADMINISTRATOR. Authority to control and manage the operation and
administration of the Plan shall be vested in the Board, which may delegate such
responsibilities in whole or in part to a committee consisting of two (2) or
more members of the Board (the "Committee"). Members of the Committee may be
appointed from time to time by, and shall serve at the pleasure of, the Board.
As used herein, the term "Administrator" means the Board or, with respect to any
matter as to which responsibility has been delegated to the Committee, the term
Administrator shall mean the Committee.

        7.2 POWERS OF THE ADMINISTRATOR. In addition to any other powers or
authority conferred upon the Administrator elsewhere in the Plan or by law, the
Administrator shall have full power and authority: (a) to determine the persons
to whom, and the time or times at which, Incentive Options or Nonqualified
Options shall be granted and Rights to Purchase shall be offered, the number of
shares to be represented by each Option and Right to Purchase and the
consideration to be received by the Company upon the exercise thereof; (b) to
interpret the Plan; (c) to create, amend or rescind rules and regulations
relating to the Plan; (d) to determine the terms, conditions and restrictions
contained in, and the form of, Option Agreements and Restricted Stock Purchase
Agreements; (e) to determine the identity or capacity of any persons who may be
entitled to exercise a Participant's rights under any Option or Right to
Purchase under the Plan; (f) to correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Option Agreement or Restricted
Stock Purchase Agreement; (g) to accelerate the vesting of any Option or release
or waive any repurchase rights of the Company with respect to Restricted Stock;
(h) to extend the exercise date of any Option or acceptance date of any Right to
Purchase; (i) to provide for rights of first refusal and/or repurchase rights;
(j) to amend outstanding Option Agreements and Stock Purchase Agreements to
provide for, among other things, any change or modification which the
Administrator could have provided for upon the grant of an Option or Right to
Purchase or in furtherance of the powers provided for herein; and (k) to make
all other determinations necessary or advisable for the administration of the
Plan, but only to the extent not contrary to the express provisions of the Plan.
Any action, decision, interpretation or determination made in good faith by the
Administrator in the exercise of its authority conferred upon it under the Plan
shall be final and binding on the Company and all Participants.

        7.3 LIMITATION ON LIABILITY. No employee of the Company or member of the
Board or Committee shall be subject to any liability with respect to duties
under the Plan unless the person acts fraudulently or in bad faith. To the
extent permitted by law, the Company shall indemnify each member of the Board or
Committee, and any employee of the Company with duties under the Plan, who was
or is a party, or is threatened to be made a party, to any threatened, pending
or completed proceeding, whether civil, criminal, administrative or
investigative, by reason of such person's conduct in the performance of duties
under the Plan.

                                       8
<PAGE>   9

                                   ARTICLE 8.

                                CHANGE IN CONTROL

        8.1 CHANGE IN CONTROL.

               a. In the event of a Change in Control of the Company, unless
otherwise provided in the following sentence, each Option outstanding under the
Plan shall automatically vest in full so that each such Option shall,
immediately prior to the effective date of the Change in Control, become fully
exercisable for all of the shares of Common Stock at the time subject to that
Option, and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, the foregoing notwithstanding, the shares
subject to an outstanding Option shall not vest on such an accelerated basis if
and to the extent: (i) such Option is assumed by the successor corporation (or
parent thereof) in connection with the Change in Control or (ii) such Option is
to be replaced with a cash incentive program of the successor corporation which
preserves the spread between the exercise price and the per share consideration
received by the stockholders of the Corporation in connection with the Change in
Control on the unvested Option shares and provides for subsequent payout in
accordance with the same vesting schedule applicable to those unvested Option
shares or (iii) the acceleration of such Option is subject to other limitations
imposed by the Administrator at the time of grant.

               b. All outstanding repurchase rights for shares of Restricted
Stock shall also terminate automatically, and the shares of Common Stock subject
to those terminated rights shall immediately vest in full, in the event of any
Change in Control, except to the extent: (i) those repurchase rights are
assigned to the successor corporation (or parent thereof) in connection with
such Change in Control, (ii) such repurchase rights are exercised and replaced
with a cash incentive program of the successor corporation (or parent thereof)
which preserves the spread between the purchase price and the per share
consideration received by the stockholders of the Corporation in connection with
the Change in Control and provides for the subsequent payout of the spread in
accordance with the same vesting schedule applicable to the shares subject to
the repurchase rights, or (iii) such accelerated vesting is precluded by other
limitations imposed by the Administrator at the time the repurchase right is
issued.

               c. Immediately following the consummation of the Change in
Control, all outstanding Options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent thereof).

               d. Each Option which is assumed in connection with a Change in
Control shall be appropriately adjusted, immediately after such Change in
Control, to apply to the number and class of securities which would have been
issuable to the Optionee in consummation of such Change in Control, had the
Option been exercised immediately prior to such Change in Control. Appropriate
adjustments shall also be made to (i) the number and class of securities
available for issuance under the Plan following the consummation of such Change
in Control and (ii) the exercise price payable per share under each outstanding
Option, provided the aggregate exercise price payable for such securities shall
remain the same.

                                       9
<PAGE>   10

               e. The Administrator shall have the discretion, exercisable
either at the time the Option is granted or at any time while the Option remains
outstanding, to structure one or more Options so that those Options shall
automatically accelerate and vest in full or in part (and any repurchase rights
of the Corporation with respect to shares of Restricted Stock shall immediately
terminate in full or in part) upon the occurrence of a Change in Control,
whether or not those Options are to be assumed in the Change in Control.

               f. The Administrator shall also have the discretion, exercisable
either at the time the Option is granted or any time while the Option remains
outstanding, to structure such Option so that the shares subject to that Option
will automatically vest on an accelerated basis (and any repurchase rights of
the Corporation with respect to shares of Restricted Stock shall automatically
vest on an accelerated basis) by reason of a termination, other than for cause
as defined by applicable law, the terms of the Plan, the terms of an Option
Agreement or Restricted Stock Purchase Agreement, or the terms of a contract of
employment, of the Participant's employment with the Corporation within a
designated period following the effective date of any Change in Control in which
the Option is assumed. Any Option so accelerated shall remain exercisable for
the fully-vested Option shares until the expiration or sooner termination of the
Option term.

               g. The portion of any Incentive Option accelerated in connection
with a Change in Control shall remain exercisable as an Incentive Option only to
the extent the applicable One Hundred Thousand Dollar limitation is not
exceeded. To the extent such dollar limitation is exceeded, the accelerated
portion of such Option shall be exercisable as a Nonqualified Option under the
Code.

               h. The grant of Options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

                                   ARTICLE 9.

                      AMENDMENT AND TERMINATION OF THE PLAN

        9.1 AMENDMENTS. The Board may from time to time alter, amend, suspend or
terminate the Plan in such respects as the Board may deem advisable. No such
alteration, amendment, suspension or termination shall be made which shall
substantially affect or impair the rights of any Participant under an
outstanding Option Agreement or Restricted Stock Purchase Agreement without such
Participant's consent. The Board may alter or amend the Plan to comply with
requirements under the Code relating to Incentive Options or other types of
options which give Optionees more favorable tax treatment than that applicable
to Options granted under this Plan as of the date of its adoption. Upon any such
alteration or amendment, any outstanding Option granted hereunder may, if the
Administrator so determines and if permitted by applicable law, be subject to
the more favorable tax treatment afforded to an Optionee pursuant to such terms
and conditions.

                                       10
<PAGE>   11

        9.2 PLAN TERMINATION. Unless the Plan shall theretofore have been
terminated, the Plan shall terminate on the tenth (10th) anniversary of the
Effective Date and no Options or Rights to Purchase may be granted under the
Plan thereafter, but Option Agreements, Restricted Stock Purchase Agreements and
Rights to Purchase then outstanding shall continue in effect in accordance with
their respective terms.

                                   ARTICLE 10.

                                 TAX WITHHOLDING

        10.1 WITHHOLDING. The Company shall have the power to withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
any applicable Federal, state, and local tax withholding requirements with
respect to any Options exercised or Restricted Stock issued under the Plan. To
the extent permissible under applicable tax, securities and other laws, the
Administrator may, in its sole discretion and upon such terms and conditions as
it may deem appropriate, permit a Participant to satisfy his or her obligation
to pay any such tax, in whole or in part, up to an amount determined on the
basis of the highest marginal tax rate applicable to such Participant, by (a)
directing the Company to apply shares of Common Stock to which the Participant
is entitled as a result of the exercise of an Option or as a result of the
purchase of or lapse of restrictions on Restricted Stock or (b) delivering to
the Company shares of Common Stock owned by the Participant. The shares of
Common Stock so applied or delivered in satisfaction of the Participant's tax
withholding obligation shall be valued at their Fair Market Value as of the date
of measurement of the amount of income subject to withholding.

                                   ARTICLE 11.

                                  MISCELLANEOUS

        11.1 BENEFITS NOT ALIENABLE. Other than as provided above, benefits
under the Plan may not be assigned or alienated, whether voluntarily or
involuntarily. Any unauthorized attempt at assignment, transfer, pledge or other
disposition shall be without effect.

        11.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. This Plan is strictly a
voluntary undertaking on the part of the Company and shall not be deemed to
constitute a contract between the Company and any Participant to be
consideration for, or an inducement to, or a condition of, the employment of any
Participant. Nothing contained in the Plan shall be deemed to give the right to
any Participant to be retained as an employee of the Company or any Affiliated
Company or to limit the right of the Company or any Affiliated Company to
discharge any Participant at any time.

        11.3 APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to Option Agreements and Restricted Stock Purchase
Agreements, except as otherwise provided herein, will be used for general
corporate purposes.

                                       11
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