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                                                                   EXHIBIT 10.27

                             HomeGrocer.com, Inc.

                    1997 STOCK INCENTIVE COMPENSATION PLAN

                              SECTION 1.  PURPOSE

     The purpose of the HomeGrocer.com, Inc. 1997 Stock Incentive Compensation
Plan (the "Plan") is to enhance the long-term shareholder value of
HomeGrocer.com, Inc., a Delaware corporation (the "Company"), by offering
opportunities to employees, directors, officers, consultants, agents, advisors
and independent contractors of the Company and its Subsidiaries (as defined in
Section 2) to participate in the Company's growth and success, and to encourage
them to remain in the service of the Company and its Subsidiaries and to acquire
and maintain stock ownership in the Company.

                            SECTION 2.  DEFINITIONS

     For purposes of the Plan, the following terms shall be defined as set forth
below:

2.1  Award

     "Award" means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Options and Stock Awards, or any
combination of the foregoing.

2.2  Board

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

2.3  Cause

     "Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.

2.4  Code

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

2.5  Common Stock

     "Common Stock" means the common stock, par value $0.001 per share, of the
Company.
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2.6  Corporate Transaction

     "Corporate Transaction" means any of the following events:

          (a) Consummation of any merger or consolidation of the Company if
     following such merger or consolidation the holders of the Company's
     outstanding voting securities immediately prior to such merger or
     consolidation own less than 66-2/3% of the outstanding voting securities of
     the surviving corporation;

          (b) Consummation of any sale, lease, exchange or other transfer in one
     transaction or a series of related transactions of all or substantially all
     of the Company's assets other than a transfer of the Company's assets to a
     majority-owned subsidiary corporation (as the term "subsidiary corporation"
     is defined in Section 8.3) of the Company; or

          (c) Approval by the holders of the Common Stock of any plan or
     proposal for the liquidation or dissolution of the Company.

     Ownership of voting securities shall take into account and shall include
ownership as determined by applying Rule 13d-3(d)(1)(i) (as in effect on the
date of adoption of the Plan) under the Exchange Act.

2.7  Disability

     "Disability" means "disability" as that term is defined for purposes of
Section 22(e)(3) of the Code.

2.8  Early Retirement

     "Early Retirement" means early retirement as that term is defined by the
Plan Administrator from time to time for purposes of the Plan.

2.9  Exchange Act

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

2.10 Fair Market Value

     "Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq National Market for a single trading day or (b)
if the Common Stock is listed on the New York Stock Exchange or the American
Stock Exchange, the average of the high and low per share sales prices for the
Common Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day.  If there is no such
reported price for the Common Stock for the date in question, then such

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price on the last preceding date for which such price exists shall be
determinative of Fair Market Value.

2.11  Section Intentionally Left Blank

2.12  Grant Date

      "Grant Date" means the date the Plan Administrator adopted the granting
resolution or a later date designated in a resolution of the Plan Administrator
as the date an Award is to be granted.

2.13  Holder

      "Holder" means:  (i) the person to whom an Award is granted; (ii) for a
Holder who has died, the personal representative of the Holder's estate, the
person(s) to whom the Holder's rights under the Award have passed by will or by
the applicable laws of descent and distribution, or the beneficiary designated
in accordance with Section 10; or (iii) the person(s) to whom an Award has been
transferred in accordance with Section 10.

2.14  Incentive Stock Option

      "Incentive Stock Option" means an Option to purchase Common Stock granted
under Section 7 with the intention that it qualify as an "incentive stock
option" as that term is defined in Section 422 of the Code.

2.15  Nonqualified Stock Option

      "Nonqualified Stock Option" means an Option to purchase Common Stock
granted under Section 7 other than an Incentive Stock Option.

2.16  Option

      "Option" means the right to purchase Common Stock granted under Section 7.

2.17  Plan Administrator

      "Plan Administrator" means the Board or any committee of the Board
designated to administer the Plan under Section 3.1.

2.18  Restricted Stock

      "Restricted Stock" means shares of Common Stock granted under Section 9,
the rights of ownership of which are subject to restrictions prescribed by the
Plan Administrator.

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2.19  Retirement

      "Retirement" means retirement as of the individual's normal retirement
date as that term is defined by the Plan Administrator from time to time for
purposes of the Plan.

2.20  Securities Act

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

2.21  Stock Award

      "Stock Award" means an Award granted under Section 9.

2.22  Subsidiary

      "Subsidiary," except as provided in Section 8.3 in connection with
Incentive Stock Options, means any entity that is directly or indirectly
controlled by the Company or in which the Company has a significant ownership
interest, as determined by the Plan Administrator, and any entity that may
become a direct or indirect parent of the Company.

2.23  Successor Corporation

      "Successor Corporation" has the meaning set forth under Section 11.2.

                          SECTION 3.  ADMINISTRATION

3.1   Plan Administrator

      The Plan shall be administered by the Board or a committee or committees
(which term includes subcommittees) appointed by, and consisting of two or more
members of, the Board.  If and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, the Board shall consider in
selecting the Plan Administrator and the membership of any committee acting as
Plan Administrator, with respect to any persons subject or likely to become
subject to Section 16 of the Exchange Act, the provisions regarding (a) "outside
directors" as contemplated by Section 162(m) of the Code and (b) "nonemployee
directors" as contemplated by Rule 16b-3 under the Exchange Act.  The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible persons to different committees consisting of one
or more members of the Board, subject to such limitations as the Board deems
appropriate.  Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time.

3.2   Administration and Interpretation by the Plan Administrator

      Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters

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relating to Awards under the Plan, including the selection of individuals to be
granted Awards, the type of Awards, the number of shares of Common Stock subject
to an Award, all terms, conditions, restrictions and limitations, if any, of an
Award and the terms of any instrument that evidences the Award. The Plan
Administrator shall also have exclusive authority to interpret the Plan and may
from time to time adopt, and change, rules and regulations of general
application for the Plan's administration. The Plan Administrator's
interpretation of the Plan and its rules and regulations, and all actions taken
and determinations made by the Plan Administrator pursuant to the Plan, shall be
conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.

                     SECTION 4.  STOCK SUBJECT TO THE PLAN

4.1  Authorized Number of Shares

     Subject to adjustment from time to time as provided in Section 11.1, a
maximum of 15,924,334 shares of Common Stock shall be available for issuance
under the Plan.  Shares issued under the Plan shall be drawn from authorized and
unissued shares or shares now held or subsequently acquired by the Company.

4.2  Reuse of Shares

     Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in shares) shall again be
available for issuance in connection with future grants of Awards under the
Plan.

                            SECTION 5.  ELIGIBILITY

     Awards may be granted under the Plan to those officers, directors and
employees of the Company and its Subsidiaries as the Plan Administrator from
time to time selects.  Awards may also be made to consultants, agents, advisors
and independent contractors who provide services to the Company and its
Subsidiaries.

                              SECTION 6.  AWARDS

6.1  Form and Grant of Awards

     The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan.  Such Awards
may include, but are not limited to, Incentive Stock Options, Nonqualified Stock
Options and Stock Awards.  Awards may be granted singly or in combination.

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6.2  Acquired Company Awards

     Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction").  In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
Awards shall be deemed to be Holders.

                         SECTION 7.  AWARDS OF OPTIONS

7.1  Grant of Options

     The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options as Incentive Stock Options or as Nonqualified Stock
Options, which shall be appropriately designated.

7.2  Option Exercise Price

     The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date with respect to
Incentive Stock Options.

7.3  Term of Options

     The term of each Option shall be as established by the Plan Administrator
or, if not so established, shall be 10 years from the Grant Date.

7.4  Exercise of Options

     The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which or the installments in which the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time.  If not so established in the
instrument evidencing the Option, the Option will vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:

Period of Holder's Continuous Employment or

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Service With the Company or Its Subsidiaries        Percent of Total Option
       From the Option Grant Date                That Is Vested and Exercisable
       --------------------------                ------------------------------

             After 1 year                          25% (vests after 12 months)

             After 2 years                              25% (vests monthly)

             After 3 years                              25% (vests monthly)

             After 4 years                              25% (vests monthly)

     To the extent that the right to purchase shares has accrued thereunder, an
Option may be exercised from time to time by written notice to the Company, in
accordance with procedures established by the Plan Administrator, setting forth
the number of shares with respect to which the Option is being exercised and
accompanied by payment in full as described in Section 7.5. The Plan
Administrator may determine at any time that an Option may not be exercised as
to less than 100 shares at any one time (or the lesser number of remaining
shares covered by the Option).

7.5  Payment of Exercise Price

     The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased.  Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, a combination of cash and/or check (if any) and
one or both of the following alternative forms:  (a) tendering (either actually
or, if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, by attestation) Common Stock already owned by the
Holder for at least six months (or any shorter period necessary to avoid a
charge to the Company's earnings for financial reporting purposes) having a Fair
Market Value on the day prior to the exercise date equal to the aggregate Option
exercise price; or (b) if and so long as the Common Stock is registered under
Section 12(b) or 12(g) of the Exchange Act, delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board.  In addition, to the extent permitted by the Plan Administrator
in its sole discretion, the price for shares purchased under an Option may be
paid, either singly or in combination with one or more of the alternative forms
of payment authorized

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by this Section 7.5, by (y) a promissory note delivered pursuant to Section 13;
or (z) such other consideration as the Plan Administrator may permit.

7.6  Post-Termination Exercises

     The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option will continue to be exercisable, and
the terms and conditions of such exercise, if a Holder ceases to be employed by,
or to provide services to, the Company or its Subsidiaries, which provisions may
be waived or modified by the Plan Administrator at any time.  If not so
established in the instrument evidencing the Option, the Option will be
exercisable according to the following terms and conditions, which may be waived
or modified by the Plan Administrator at any time.

     In case of termination of the Holder's employment or services other than by
reason of death or Cause, the Option shall be exercisable, to the extent of the
number of shares purchasable by the Holder at the date of such termination, only
(a) within one year if the termination of the Holder's employment or services is
coincident with Retirement, Early Retirement at the Company's request or
Disability or (b) within three months after the date the Holder ceases to be an
employee, director, officer, consultant, agent, advisor or independent
contractor of the Company or a Subsidiary if termination of the Holder's
employment or services is for any reason other than Retirement, Early Retirement
at the Company's request or Disability, but in no event later than the remaining
term of the Option.  Any Option exercisable at the time of the Holder's death
may be exercised, to the extent of the number of shares purchasable by the
Holder at the date of the Holder's death, by the personal representative of the
Holder's estate, the person(s) to whom the Holder's rights under the Award have
passed by will or the applicable laws of descent and distribution or the
beneficiary designated pursuant to Section 10, at any time or from time to time
within one year after the date of death, but in no event later than the
remaining term of the Option.  Any portion of an Option that is not exercisable
on the date of termination of the Holder's employment or services shall
terminate on such date, unless the Plan Administrator determines otherwise.  In
case of termination of the Holder's employment or services for Cause, the Option
(including any exercisable portion thereof) shall automatically terminate upon
first notification to the Holder of such termination, unless the Plan
Administrator determines otherwise.  If a Holder's employment or services with
the Company are suspended pending an investigation of whether the Holder shall
be terminated for Cause, all the Holder's rights under any Option likewise shall
be suspended during the period of investigation.

     A transfer of employment or services between or among the Company and its
Subsidiaries shall not be considered a termination of employment or services.
The effect of a Company-approved leave of absence on the terms and conditions of
an Option shall be determined by the Plan Administrator, in its sole discretion.

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                SECTION 8.  INCENTIVE STOCK OPTION LIMITATIONS

     To the extent required by Section 422 of the Code, Incentive Stock Options
shall be subject to the following additional terms and conditions:

8.1  Dollar Limitation

     To the extent the aggregate Fair Market Value (determined as of the Grant
Date) of Common Stock with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year (under the Plan and all
other stock option plans of the Company) exceeds $100,000, such portion in
excess of $100,000 shall be treated as a Nonqualified Stock Option.  In the
event the Holder holds two or more such Options that become exercisable for the
first time in the same calendar year, such limitation shall be applied on the
basis of the order in which such Options are granted.

8.2  10% Shareholders

     If an individual owns more than 10% of the total voting power of all
classes of the Company's stock, then the exercise price per share of an
Incentive Stock Option shall not be less than 110% of the Fair Market Value of
the Common Stock on the Grant Date and the Option term shall not exceed five
years.  The determination of 10% ownership shall be made in accordance with
Section 422 of the Code.

8.3  Eligible Employees

     Individuals who are not employees of the Company or one of its parent
corporations or subsidiary corporations may not be granted Incentive Stock
Options.  For purposes of this Section 8.3, "parent corporation" and "subsidiary
corporation" shall have the meanings attributed to those terms for purposes of
Section 422 of the Code.

8.4  Term

     The term of an Incentive Stock Option shall not exceed 10 years.

8.5  Exercisability

     To qualify for Incentive Stock Option tax treatment, an Option designated
as an Incentive Stock Option must be exercised within three months after
termination of employment for reasons other than death, except that, in the case
of termination of employment due to total disability, such Option must be
exercised within one year after such termination.  Employment shall not be
deemed to continue beyond the first 90 days of a leave of absence unless the
Holder's reemployment rights are guaranteed by statute or contract.  For
purposes of this Section 8.5, "total disability" shall mean a mental or physical
impairment of the Holder that is expected to result in death or that has lasted
or is expected to last for a continuous period of 12 months or more and that
causes the Holder to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties for the Company and to be
engaged in any substantial gainful

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activity. Total disability shall be deemed to have occurred on the first day
after the Company and the two independent physicians have furnished their
opinion of total disability to the Plan Administrator.

8.6  Taxation of Incentive Stock Options

     In order to obtain certain tax benefits afforded to Incentive Stock Options
under Section 422 of the Code, the Holder must hold the shares issued upon the
exercise of an Incentive Stock Option for two years after the Grant Date of the
Incentive Stock Option and one year from the date of exercise.  A Holder may be
subject to the alternative minimum tax at the time of exercise of an Incentive
Stock Option.  The Plan Administrator may require a Holder to give the Company
prompt notice of any disposition of shares acquired by the exercise of an
Incentive Stock Option prior to the expiration of such holding periods.

8.7  Promissory Notes

     The amount of any promissory note delivered pursuant to Section 13 in
connection with an Incentive Stock Option shall bear interest at a rate
specified by the Plan Administrator but in no case less than the rate required
to avoid imputation of interest (taking into account any exceptions to the
imputed interest rules) for federal income tax purposes.

                           SECTION 9.  STOCK AWARDS

9.1  Grant of Stock Awards

     The Plan Administrator is authorized to make Awards of Common Stock on such
terms and conditions and subject to such restrictions, if any (which may be
based on continuous service with the Company or the achievement of performance
goals), as the Plan Administrator shall determine, in its sole discretion, which
terms, conditions and restrictions shall be set forth in the instrument
evidencing the Award.  The terms, conditions and restrictions that the Plan
Administrator shall have the power to determine shall include, without
limitation, the manner in which shares subject to Stock Awards are held during
the periods they are subject to restrictions and the circumstances under which
forfeiture of Restricted Stock shall occur by reason of termination of the
Holder's services.

9.2  Issuance of Shares

     Upon the satisfaction of any terms, conditions and restrictions prescribed
in respect to a Stock Award, or upon the Holder's release from any terms,
conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall release, as soon as practicable, to the Holder
or, in the case of the Holder's death, to

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the personal representative of the Holder's estate or as the appropriate court
directs, the appropriate number of shares of Common Stock.

9.3   Waiver of Restrictions

      Notwithstanding any other provisions of the Plan, the Plan Administrator
may, in its sole discretion, waive the forfeiture period and any other terms,
conditions or restrictions on any Restricted Stock under such circumstances and
subject to such terms and conditions as the Plan Administrator shall deem
appropriate.

                          SECTION 10.  ASSIGNABILITY

      No Option granted under the Plan may be assigned or transferred by the
Holder other than by will or by the applicable laws of descent and distribution,
and, during the Holder's lifetime, such Awards may be exercised only by the
Holder.  Notwithstanding the foregoing, and to the extent permitted by Section
422 of the Code, the Plan Administrator, in its sole discretion, may permit such
assignment, transfer and exercisability and may permit a Holder of such Awards
to designate a beneficiary who may exercise the Award or receive compensation
under the Award after the Holder's death; provided, however, that any Award so
assigned or transferred shall be subject to all the same terms and conditions
contained in the instrument evidencing the Award.

                           SECTION 11.  ADJUSTMENTS

11.1  Adjustment of Shares

      In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator shall make proportional adjustments in (i) the maximum number and
kind of securities subject to the Plan as set forth in Section 4.1 and (ii) the
number and kind of securities that are subject to any outstanding Award and the
per share price of such securities, without any change in the aggregate price to
be paid therefor.  The determination by the Plan Administrator as to the terms
of any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, a Corporate Transaction shall not be governed by
this Section 11.1 but shall be governed by Section 11.2.

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11.2  Corporate Transaction

      (a)   Except as otherwise provided in the instrument that evidences the
Award, in the event of any Corporate Transaction, each Award that is at the time
outstanding shall automatically accelerate so that each such Award shall,
immediately prior to the specified effective date for the Corporate Transaction,
become 100% vested and exercisable; provided, however, that no such Award shall
accelerate if and to the extent such Award is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation or parent thereof
(the "Successor Corporation") or to be replaced with a comparable award for the
purchase of shares of the capital stock of the Successor Corporation.

      (b)   Whether or not an Award is assumed or replaced shall be determined
by the Company and the Successor Corporation in connection with the Corporate
Transaction. The determination of Award comparability shall be made by the Plan
Administrator, and its determination shall be conclusive and binding. All such
Awards shall terminate and cease to remain outstanding immediately following the
consummation of the Corporate Transaction, except to the extent assumed by the
Successor Corporation.

      (c)   Subsection intentionally left blank.

      (d)   The acceleration of any Award as provided in this Section 11.2 shall
not occur if, in the opinion of the Company's outside accountants, it would
render unavailable "pooling of interest" accounting for a Corporate Transaction
that would otherwise qualify for such accounting treatment.

11.3  Further Adjustment of Awards

      Subject to Section 11.2, the Plan Administrator shall have the discretion,
exercisable at any time before a sale, merger, consolidation, reorganization,
liquidation or change in control of the Company, as defined by the Plan
Administrator, to take such further action as it determines to be necessary or
advisable, and fair and equitable to Holders, with respect to Awards. Such
authorized action may include (but shall not be limited to) establishing,
amending or waiving the type, terms, conditions or duration of, or restrictions
on, Awards so as to provide for earlier, later, extended or additional time for
exercise, lifting restrictions and other modifications, and the Plan
Administrator may take such actions with respect to all Holders, to certain
categories of Holders or only to individual Holders. The Plan Administrator may
take such action before or after granting Awards to which the action relates and
before or after any public announcement with respect to such sale, merger,
consolidation, reorganization, liquidation or change in control that is the
reason for such action.

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11.4  Limitations

      The grant of Awards will in no way affect the Company's right 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.

                           SECTION 12.  WITHHOLDING

      The Company may require the Holder to pay to the Company the amount of any
withholding taxes that the Company is required to withhold with respect to the
grant, vesting or exercise of any Award. Subject to the Plan and applicable law,
the Plan Administrator may, in its sole discretion, permit the Holder to satisfy
withholding obligations, in whole or in part, (a) by paying cash, (b) by
electing to have the Company withhold shares of Common Stock from the shares to
be issued upon exercise 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, or (c) by transferring shares of Common Stock to the Company that
(i) in the case of shares previously acquired from the Company, have been owned
by the Holder for more than six (6) months on the date of transfer and (ii) have
a Fair Market Value determined as of the applicable Tax Date equal to the
minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes. For purposes of this Section 12, the Fair Market Value
of the shares to be withheld or transferred shall be determined on the date that
the amount of tax to be withheld is to be determined under applicable law (the
"Tax Date"). The Company shall have the right to withhold from any Award or any
shares of Common Stock issuable pursuant to an Award shares with a Fair Market
Value equal to the minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes, or from any cash amounts otherwise due or to
become due from the Company to the Holder an amount equal to such taxes. The
Company may also deduct from any Award any other amounts due from the Holder to
the Company or a Subsidiary.

       SECTION 13.  LOANS, INSTALLMENT PAYMENTS AND
                     LOAN GUARANTEES

      To assist a Holder (including a Holder who is an officer or a director of
the Company) in acquiring shares of Common Stock pursuant to an Award granted
under the Plan, the Plan Administrator, in its sole discretion, may authorize,
either at the Grant Date or at any time before the acquisition of Common Stock
pursuant to the Award, (a) the extension of a loan to the Holder by the Company,
(b) the payment by the Holder of the purchase price, if any, of the Common Stock
in installments, or (c) the guarantee by the Company of a loan obtained by the
Holder from a third party. The terms of any loans, installment payments or loan
guarantees, including the interest rate and terms of and security for repayment,
will be subject to the Plan Administrator's discretion. Loans, installment
payments and loan guarantees may be granted with or without security. The
maximum credit available is the purchase price, if any, of the Common Stock
acquired,

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plus the maximum federal and state income and employment tax liability that may
be incurred in connection with the acquisition.

       SECTION 14.  REPURCHASE AND FIRST REFUSAL RIGHTS

14.1   Repurchase Rights

       The Plan Administrator shall have the discretion to authorize the
issuance of unvested shares of Common Stock pursuant to the exercise of an
Option. Should the Holder cease to be employed by or provide services to the
Company, then all shares of Common Stock issued upon exercise of an Option which
are unvested at the time of cessation of employment or services shall be subject
to repurchase at the exercise price paid for such shares. The terms and
conditions upon which such repurchase right shall be exercisable (including the
period and procedure for exercise) shall be established by the Plan
Administrator and set forth in the agreement evidencing such right.

       All of the Company's outstanding repurchase rights under this Section
14.1 are assignable by the Company at any time. Such rights shall automatically
terminate, and all shares subject to such terminated rights shall immediately
vest in full, upon the occurrence of a Corporate Transaction, except to the
extent: (i) any such repurchase right is expressly assigned to the Successor
Corporation in connection with the Corporate Transaction or (ii) such
termination is precluded by other limitations imposed by the Plan Administrator
at the time the repurchase right is issued.

       The Plan Administrator shall have the discretionary authority,
exercisable either before or after the Holder's cessation of employment or
service, to cancel the Company's outstanding repurchase rights with respect to
one or more shares purchased or purchasable by the Holder under an Option and
thereby accelerate the vesting of such shares in whole or in part at any time.

14.2   First Refusal Rights

       Until the date on which the initial registration of the Common Stock
under Section 12(b) or 12(g) of the Exchange Act first becomes effective, the
Company shall have the right of first refusal with respect to any proposed sale
or other disposition by the Holder of any shares of Common Stock issued pursuant
to an Award granted under the Plan. Such right of first refusal shall be
exercisable in accordance with the terms and conditions established by the Plan
Administrator and set forth in the agreement evidencing such right.

                         SECTION 15.  MARKET STANDOFF

       In connection with the initial public offering of the Company's
securities and upon request of the Company or the underwriters managing any
underwritten offering of the Company's securities, a person shall not sell, make
any short sale of, loan, hypothecate, pledge, grant any option for the purchase
of, or otherwise dispose or transfer for value or

                                      -14-
<PAGE>

otherwise agree to engage in any of the foregoing transactions with respect to,
any shares issued pursuant to an Award granted under the Plan (other than those
included in the registration) 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) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.

       In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, then any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 15, to the same extent the purchased shares are
at such time covered by such provisions.

      In order to enforce the limitations of this Section 15, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.

      SECTION 16.  AMENDMENT AND TERMINATION OF PLAN

16.1  Amendment of Plan

      The Plan may be amended only by the Board in such respects as it shall
deem advisable; however, to the extent required for compliance with Section 422
of the Code or any applicable law or regulation, shareholder approval will be
required for any amendment that will (a) increase the total number of shares as
to which Options may be granted under the Plan or that may be issued as Stock
Awards, (b) modify the class of persons eligible to receive Options, or (c)
otherwise require shareholder approval under any applicable law or regulation.

16.2  Termination of Plan

      The Board may suspend or terminate the Plan at any time. The Plan will
have no fixed expiration date; provided, however, that no Incentive Stock
Options may be granted more than 10 years after the earlier of the Plan's
adoption by the Board and approval by the shareholders.

16.3  Consent of Holder

      The amendment or termination of the Plan shall not, without the consent of
the Holder of any Award under the Plan, impair or diminish any rights or
obligations under any Award theretofore granted under the Plan. Any change or
adjustment to an outstanding Incentive Stock Option shall not, without the
consent of the Holder, be made in a manner so as to constitute a "modification"
that would cause such Incentive Stock Option to fail to continue to qualify as
an Incentive Stock Option.

                                      -15-
<PAGE>

                             SECTION 17.  GENERAL

17.1  Award Agreements

      Awards granted under the Plan shall be evidenced by a written agreement
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.

17.2  Continued Employment or Services; Rights in Awards

      None of the Plan, participation in the Plan or any action of the Plan
Administrator taken under the Plan shall be construed as giving any person any
right to be retained in the employ of the Company or limit the Company's right
to terminate the employment or services of any person.

17.3  Registration

      The Company shall be under no obligation to any Holder to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state securities laws, any shares of Common Stock,
security or interest in a security paid or issued under, or created by, the
Plan, or to continue in effect any such registrations or qualifications if made.
The Company may issue certificates for shares with such legends and subject to
such restrictions on transfer and stop-transfer instructions as counsel for the
Company deems necessary or desirable for compliance by the Company with federal
and state securities laws.

      Inability of the Company to obtain, from any regulatory body having
jurisdiction, the authority deemed by the Company's counsel to be necessary for
the lawful issuance and sale of any shares hereunder or the unavailability of an
exemption from registration for the issuance and sale of any shares hereunder
shall relieve the Company of any liability in respect of the nonissuance or sale
of such shares as to which such requisite authority shall not have been
obtained.

      As a condition to the exercise of an Option or any other receipt of Common
Stock pursuant to an Award under the Plan, the Company may require the Holder to
represent and warrant at the time of any such exercise or receipt that such
shares are being purchased or received only for the Holder's own account and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any
relevant provision of the aforementioned laws. At the option of the Company, a
stop-transfer order against any such shares may be placed on the official stock
books and records of the Company, and a legend indicating that such shares may
not be pledged, sold or otherwise transferred, unless an opinion of counsel is
provided (concurred in by counsel for the Company) stating that such transfer is
not in violation of any applicable law or regulation, may be stamped on stock
certificates to ensure exemption from registration. The Plan Administrator may
also

                                      -16-
<PAGE>

require such other action or agreement by the Holder as may from time to time be
necessary to comply with the federal and state securities laws.

17.4  No Rights as a Shareholder

      No Option shall entitle the Holder to any cash dividend, voting or other
right of a shareholder unless and until the date of issuance under the Plan of
the shares that are the subject of such Option, free of all applicable
restrictions.

17.5  Compliance With Laws and Regulations

      Notwithstanding anything in the Plan to the contrary, the Board, in its
sole discretion, may bifurcate the Plan so as to restrict, limit or condition
the use of any provision of the Plan to Holders who are officers or directors
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning the Plan with respect to other Holders. Additionally, in
interpreting and applying the provisions of the Plan, any Option granted as an
Incentive Stock Option pursuant to the Plan shall, to the extent permitted by
law, be construed as an "incentive stock option" within the meaning of Section
422 of the Code.

17.6  No Trust or Fund

      The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Holder, and no Holder shall
have any rights that are greater than those of a general unsecured creditor of
the Company.

17.7  Severability

      If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.

17.8. Awards Granted to California Residents

      Options and Stock Purchase Rights granted under the Plan to persons
resident in California shall be subject to the provisions set forth in
Attachment A hereto. To the extent the provisions of the Plan conflict with the
------------
provisions set forth on Attachment A, the provisions on Attachment A shall
                        ------------                    ------------
govern the terms of such Options.

                                      -17-
<PAGE>

                          SECTION 18.  EFFECTIVE DATE

     The Plan's effective date is the date on which it is adopted by the Board,
so long as it is approved by the Company's shareholders at any time within 12
months of such adoption.

     Adopted by the Board on October 7, 1997 and approved by the Company's
shareholders on October 7, 1997.

                                      -18-
<PAGE>

                                 Attachment A
                                 ------------

                   Provisions Applicable to Award Recipients
                   -----------------------------------------

                            Resident in California
                            ----------------------

     Until such time as any security of the Company becomes a Listed Security
and if required by Applicable Laws, the following additional terms shall apply
to Options and Stock Awards, and Shares issued upon exercise of such awards,
granted under the HomeGrocer.com, Inc. 1997 Stock Incentive Compensation Plan
(the "Plan") to persons resident in California as of the Grant Date of any such
      ----
award (each such person, a "California Recipient"):
                            --------------------

     1.   In the case of an Option, whether an Incentive Stock Option or a
Nonqualified Stock Option, that is granted to granted to a California Recipient
who, at the time of the grant of such Option, owns stock representing more than
10% of the total combined voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value on the Grant Date.

     2.   In the case of a Nonqualified Stock Option that is granted to any
other California Recipient, the per Share exercise price shall be no less than
85% of the Fair Market Value per Share on the Grant Date.

     3.   In the case of a Stock Award granted to a California Recipient, the
purchase price applicable to stock purchased under such Stock Award shall not be
less than 85% of the Fair Market Value of the Shares as of the Grant Date, or,
in the case of a person owning stock representing more than 10% of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the price shall not be less than 100% of the Fair Market Value of
the Shares as of the Grant Date.

     4.   With respect to an Option or Stock Award issued to any California
Recipient who is not an Officer, Director or Consultant, such Option or Stock
Award shall become exercisable, or any repurchase option in favor of the Company
shall lapse, at the rate of at least 20% per year over five years from the Grant
Date.

     5.   The following rules shall apply to an Option issued to any California
Recipient in the event of termination of the California Recipient's employment
or services with the Company:

          (a)  If such termination was for reasons other than death or
disability, the California Recipient shall have at least 30 days after the date
of such termination (but in no event later than the expiration of the term of
such Option established by the Plan Administrator as of the Grant Date) to
exercise such Option.

                                      -19-
<PAGE>

          (b)  If such termination was on account of the death or disability of
the California Recipient, the Holder of the Option may, but only within six
months from the date of such termination (but in no event later than the
expiration date of the term of such Option established by the Plan Administrator
as of the Grant Date), exercise the Option to the extent the California
Recipient was otherwise entitled to exercise it at the date of such termination.
To the extent that the California Recipient 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 six months from the date of termination,
the Option shall terminate and the Common Stock underlying the unexercised
portion of the Option shall revert to the Plan.

     6.   The Company shall provide financial statements at least annually to
each California Recipient during the period such person has one or more Options
or Stock Awards outstanding, and in the case of an individual who acquired
Shares pursuant to the Plan, during the period such individual owns such Shares.
The Company shall not be required to provide such information if the issuance of
awards under the Plan is limited to key employees whose duties in connection
with the Company assure their access to equivalent information.

     7.   Unless defined below or otherwise in this Attachment, Capitalized
terms shall have the meanings set forth in the Plan. For purposes of this
Attachment, the following definitions shall apply:

     "Applicable Laws" means the legal requirements relating to the
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any stock exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Awards are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.

     "Consultant" means any person, including an advisor, who renders services
to the Company, or any Parent or Subsidiary, and is compensated for such
services, and any Director of the Company whether compensated for such services
or not.

     "Director" means a member of the Board.

     "Listed Security" means listed or approved for listing on a national
securities exchange or designated or approved for designation as a national
market system security on an interdealer quaotation system by the national
Association of Securities Dealers, Inc.

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

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

                                      -20-
<PAGE>

                   PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS

<TABLE>
<CAPTION>
       Date of
      Adoption/
      Amendment/                                                                              Date of Shareholder
      Adjustment                        Section                  Effect of Amendment              Approval
      ----------                        -------                  -------------------              --------
<S>                             <C>                              <C>                         <C>
8/31/98                         4.1                              Increase shares             8/25/98
                                                                 reserved by 3,062,167
9/25/99                         4.1                              Increase shares             9/25/99
                                                                 reserved by 2,900,000
11/23/99                        4.1                              Increase shares             11/22/99
                                                                 reserved to reflect
                                                                 11/23/99 2 for 1 split
1/10/00                         2.11; 11.2(c);                   Remove section 2.11         board approval 1/10/00
                                12;17.8; Attachment A            regarding Good Reason;
                                                                 remove subsection
                                                                 11.2(c) regarding
                                                                 acceleration; add
                                                                 language to Section 12
                                                                 to comply with new
                                                                 accounting rules; add
                                                                 Section 17.8 and
                                                                 Attachment A regarding
                                                                 California optionees.
</TABLE>

                                      -21-<PAGE>

                                                                   EXHIBIT 10.28

                              HOMEGROCER.COM, INC.

                           1999 STOCK INCENTIVE PLAN
                           -------------------------

                              SECTION I.  PURPOSE

     Purposes of the Plan.  The purpose of the HomeGrocer.com, Inc. 1999 Stock
     --------------------
Incentive Plan is to enhance the Company's long-term shareholder value by
offering opportunities to employees, directors, officers, consultants and
advisors of the Company and its affiliates to participate in the Company's
growth and success and to acquire and maintain stock ownership in the Company.
The Plan seeks to achieve this purpose by providing for Awards in the form of
Options, Stock Purchase Rights, Stock Appreciation Rights and Stock Units.

                            SECTION 2. DEFINITIONS

     For purposes of the Plan, the following terms shall be defined as set forth
below:

2.1  "Administrator" means the Board or any of its Committees designated
      -------------
pursuant to Section 4.1 of the Plan.

2.2  "Affiliate" means an entity other than a Subsidiary (as defined below) in
      ---------
which the Company owns an equity interest.

2.3  "Applicable Laws" means the legal requirements relating to the
      ---------------
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any stock exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time.

2.4  "Award" means a grant of an Option, Stock Purchase Right, Stock
      -----
Appreciation Right or Stock Unit under the Plan. Any Award under the Plan may
include one of these elements or a combination of several elements.

2.5  "Award Agreement" means a written agreement between a recipient of a Stock
      ---------------
Appreciation Right or Stock Unit Award under the Plan and the Company reflecting
the terms of the Stock Appreciation Right or Stock Unit Award, and includes any
documents attached to such Award Agreement, including, but not limited to, a
notice of grant and a form of exercise notice.

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

2.7  "Change in Control" means (a) a sale of all or substantially all of the
      -----------------
Company's assets, or (b) a merger, consolidation or other capital reorganization
of the Company with or into another corporation where the holders of more than
50% of the shares of capital stock of the Company outstanding immediately prior
to such transaction do not immediately after such
<PAGE>

transaction continue to hold (either by the voting securities remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 50% of the total voting power represented by the voting
securities of the Company, or such surviving entity, or (c) a change in the
composition of the Board such that during any consecutive two (2) year period
persons who constitute the Board at the beginning of such period (or who were
appointed or approved by a majority of the Board in place at the beginning of
such period) cease to constitute at least 50% of the Board.

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

2.9   "Committee" means one or more committees or subcommittees of the Board
       ---------
appointed to administer the Plan in accordance with Section 4 below.

2.10  "Common Stock" means the Common Stock of the Company.
       ------------

2.11  "Company" means HomeGrocer.com, Inc., a Delaware corporation.
       -------

2.12  "Consultant" means any person, including an advisor, agent or independent
       ----------
contractor, who renders services to the Company, or any Parent, Subsidiary or
Affiliate other than in the capacity of an Employee, including any director of
the Company, whether compensated for such services or not.

2.13  "Continuous Service" means the absence of any interruption or termination
       ------------------
of service as an Employee or Consultant. Continuous Service shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Parent(s), Subsidiaries, Affiliates or their
respective successors. Unless otherwise determined by the Administrator or the
Company, a change in status from a Consultant to an Employee will not constitute
an interruption of Continuous Service. The Administrator shall determine whether
a change in status from an Employee to a Consultant shall constitute an
interruption of Continuous Service.

2.14  "Corporate Transaction" means a sale of all or substantially all of the
       ---------------------
Company's assets, or a merger, consolidation or other capital reorganization of
the Company with or into another corporation.

2.15  "Director" means a member of the Board.
       --------

2.16  "Disability" means total and permanent disability within the meaning of
       ----------
Section 22(e)(3) of the Code.

2.17  "Employee" means any person (including if appropriate, any Named
       --------
Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company, with the status of employment determined
based upon such minimum number of hours or

                                      -2-
<PAGE>

periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment by the Company of a
director's fee to a director shall not be sufficient to constitute "employment"
of such director by the Company.

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

2.19  "Fair Market Value" means, as of any date, the fair market value of Common
       -----------------
Stock determined as follows:

          (a)  If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National Market of
the National Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, its Fair Market Value shall be the closing sales price for
  ------
such stock (or the closing bid, if no sales were reported), as quoted on such
system or exchange, or the exchange with the greatest volume of trading in
Common Stock for the last market trading day prior to the time of determination,
as reported in The Wall Street Journal or such other source as the Administrator
deems reliable;

          (b)  If the Common Stock is quoted on the Nasdaq System (but not on
the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or

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

2.20  "Grant Date" means the date the Administrator adopted the granting
       ----------
resolution or a later date designated in a resolution of the Administrator as
the date an Award is to be granted.  In the case of any grant of an Incentive
Stock Option, the Grant Date shall be the later of the date of the granting
resolution, the date designation in the granting resolution, or the date of
commencement of the Optionee's employment relationship with the Company.

2.21  "Holder" means (i) the person to whom an Award is granted; (ii) for a
       ------
Holder who has died, the personal representative of the Holder's estate, the
person(s) to whom the Holder's rights under the Award have passed by will or by
the applicable laws of descent and distribution, or the beneficiary designated
in accordance with the terms of an Award Agreement; or (iii) the person(s) to
whom an Award has been transferred in accordance with Section 6.2.

2.22  "Incentive Stock Option" means an Option intended to qualify as an
       ----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written Option Agreement.

2.23  "Listed Security" means any security of the Company that is listed or
       ---------------
approved for listing on a national securities exchange or designated or approved
for designation as a national

                                      -3-
<PAGE>

market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.

2.24  "Named Executive" means any individual who, on the last day of the
       ---------------
Company's fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer). Such officer status shall
be determined pursuant to the executive compensation disclosure rules under the
Exchange Act.

2.25  "Nonstatutory Stock Option" means an Option not intended to qualify as an
       -------------------------
Incentive Stock Option, as designated in the applicable written Option
Agreement.

2.26  "Officer" means a person who is an officer of the Company within the
       -------
meaning of Section 16(a) of the Exchange Act and the rules and regulations
promulgated thereunder.

2.27  "Option" means a stock option granted pursuant to the Plan. Options
       ------
granted under the Plan may be Incentive Stock Options (as defined under
Section 422 of the Code) or Nonstatutory Stock Options, as determined by the
Administrator at the time of grant of an Option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder.

2.28  "Option Agreement" means a written agreement between an Optionee and the
       ----------------
Company reflecting the terms of an Option granted under the Plan and includes
any documents attached to such Option Agreement, including, but not limited to,
a notice of stock option grant and a form of exercise notice.

2.29  "Option Exchange Program" means a program whereby outstanding Options are
       -----------------------
exchanged for Options with a lower exercise price.

2.30  "Optioned Stock" means the Common Stock subject to an Option or a Stock
       --------------
Purchase Right.

2.31  "Optionee" means an Employee or Consultant who receives an Option or a
       --------
Stock Purchase Right.

2.32  "Parent" means a "parent corporation," whether now or hereafter existing,
       ------
as defined in Section 424(e) of the Code, or any successor provision.

2.33  "Participant" means any holder of one or more Awards, or the Shares
       -----------
issuable or issued upon exercise of such awards, under the Plan.

2.34  "Plan" means this 1999 Stock Incentive Plan.
       ----

2.35  "Reporting Person" means an Officer, Director, or greater than 10%
       ----------------
stockholder of the Company within the meaning of Rule 16a-2 under the Exchange
Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange
Act.

                                      -4-
<PAGE>

2.36  "Restricted Stock" means shares of Common Stock acquired pursuant to a
       ----------------
grant of a Stock Purchase Right under Section 11 below.

2.37  "Restricted Stock Purchase Agreement" means a written agreement between a
       -----------------------------------
holder of a Stock Purchase Right and the Company reflecting the terms of a Stock
Purchase Right granted under the Plan and includes any documents attached to
such agreement.

2.38  "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act, as the
       ----------
same may be amended from time to time, or any successor provision.

2.39  "Share" means a share of the Common Stock, as adjusted in accordance with
       -----
Section 13 of the Plan.

2.40  "Stock Appreciation Right" means a right to receive in cash from the
       ------------------------
Company the difference between an Exercise Price and the Fair Market Value of a
designated number of Shares.

2.41  "Stock Exchange" means any stock exchange or consolidated stock price
       --------------
reporting system on which prices for the Common Stock are quoted at any given
time.

2.42  "Stock Purchase Right" means the right to purchase Common Stock pursuant
       --------------------
to Section 11 below.

2.43  "Stock Unit"  means an unfunded bookkeeping entry representing the
       ----------
equivalent of one Share.

2.44  "Subsidiary" means a "subsidiary corporation," whether now or hereafter
       ----------
existing, as defined in Section 424(f) of the Code, or any successor provision.

2.45  "Tax Date" for purposes of Section 11 shall mean the date that the amount
       --------
of tax to be withheld is to be determined under the Applicable Laws.

2.46  "Ten Percent Holder" means any person who owns stock representing more
       ------------------
than ten percent (10%) of the voting power of all classes of stock of the
Company or any parent or Subsidiary.

                     SECTION 3. STOCK SUBJECT TO THE PLAN

3.1  Authorized Number of Shares.  Subject to adjustment under the provisions
     ---------------------------
of Section 13 of the Plan, the maximum aggregate number of Shares that may be
optioned and sold under the Plan pursuant to Options or Stock Purchase Rights or
otherwise designated as underlying Stock Appreciation Rights or Stock Units is
12,500,000 Shares of Common Stock, plus an annual increase on the first day of
each of the Company's fiscal years beginning in 2001, 2002, 2003, 2004 and 2005
equal to the lesser of (i) 2,500,000 Shares, (ii) two and one-half percent
(2.5%) of the Shares outstanding on the last day of the immediately preceding
fiscal year, or (iii) such lesser number of Shares as is determined by the
Board. The Shares may be authorized, but unissued, or reacquired Common Stock.

                                      -5-
<PAGE>

3.2  Reuse of Shares.  If an Option, Stock Purchase Right, Stock Appreciation
     ---------------
Right or Stock Unit Award should expire or become unexercisable for any reason
without having been exercised in full, or if an Option is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. In addition, any Shares of Common Stock that are retained
by the Company upon exercise of an Option or Stock Purchase Right in order to
satisfy the exercise or purchase price for such Option or Stock Purchase Right
or any withholding taxes due with respect to such exercise shall be treated as
not issued and shall continue to be available under the Plan. Shares issued
under the Plan and later repurchased by the Company pursuant to any repurchase
right which the Company may have shall not be available for future grant under
the Plan.

                           SECTION 4. ADMINISTRATION

4.1  Plan Administrator.
     ------------------

          (a)  General.  The Plan shall be administered by the Board or a
               -------
Committee, or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Awards to Employees and Consultants.

          (b)  Administration With Respect to Reporting Persons.  With respect
               ------------------------------------------------
to Awards granted to Reporting Persons and Named Executives, the Plan may (but
need not) be administered so as to permit such Awards to qualify for the
exemption set forth in Rule 16b-3 and to qualify as performance-based
compensation under Section 162(m) of the Code.

          (c)  Committee Composition.  If a Committee has been appointed
               ---------------------
pursuant to this Section 4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of any Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove all members of
a Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee administering
the Plan pursuant to Section 5(b) above, to the extent permitted or required by
Rule 16b-3 and Section 162(m) of the Code.

4.2  Powers of the Administrator.  Subject to the provisions of the Plan and in
     ---------------------------
the case of a Committee, the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, including
the approval, if required, of any Stock Exchange, the Administrator shall have
the exclusive authority, in its discretion to determine all matters relating to
Awards under the Plan, including the selection of individuals to be granted
Awards, the type of Awards, the number of Shares of Common Stock subject to an
Award, the Fair Market Value of Common Stock, all terms, conditions,
restrictions and limitations of an Award (including, without limitation, the
exercise or purchase price, the exercisability or settlement time, any vesting
requirements based on service or performance criteria, and any vesting
acceleration or waiver of forfeiture restrictions), and the terms of any
instrument that evidences

                                      -6-
<PAGE>

the Award. The Administrator shall also have the exclusive authority, in its
discretion, to determine whether and under what circumstances an Award may be
settled in cash instead of Common stock, 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, to initiate an Option Exchange Program, and in order to fulfill the
purposes of the Plan and without amending the Plan, to modify grants of Awards
to Participants who are foreign nationals or employed outside of the United
States in order to recognize differences in local law, tax policies or customs.
The Administrator may delegate administrative duties to such of the Company's
Officers as it so determines.

4.3  Interpretation by the Administrator.  The Administrator shall have
     -----------------------------------
exclusive authority to interpret the Plan and the terms of an Award granted
under the Plan, and may from time to time adopt, and change, rules and
regulations of general application for the Plan's administration. The
Administrator's interpretation of the Plan and its rules and regulations, and
all actions taken and determinations made by the Plan Administrator pursuant to
the Plan, shall be conclusive and binding on all parties involved or affected.

                            SECTION 5. ELIGIBILITY

5.1  Recipients of Awards.  Awards may be granted to Employees and Consultants
     --------------------
selected by the Administrator from time to time. Any Participant may, if he or
she is otherwise eligible, be granted additional Awards.

5.2  Limitation on Awards.  Subject to adjustment as provided in Section 13 of
     --------------------
the Plan, the maximum number of Shares which may be subject to Awards granted to
any one Employee under this Plan for any fiscal year of the Company shall be
2,500,000 Shares.

5.3  No Employment Rights.  The Plan shall not confer upon the holder of any
     --------------------
Award any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
holder's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.

                               SECTION 6. AWARDS

6.1  Form and Grant of Awards.  The Administrator shall have the authority, in
     ------------------------
its sole discretion, to determine the type or types of Awards to be made under
the Plan.  Such Awards may include, but are not limited to, Incentive Stock
Options, Nonstatutory Stock Options, Stock Purchase Rights, Stock Appreciation
Rights and Stock Units. In addition, the provisions of Awards need not be the
same with respect to each type of award or with respect to each Participant.

6.2  Assignability of Awards.  No Award granted under the Plan may be assigned,
     -----------------------
transferred, sold, pledged, or disposed of in any manner by the Holder other
than by will or by the laws of descent or distribution, provided that, after the
date upon which the Common Stock becomes a Listed Security, the Administrator
may, in its discretion grant transferable Nonstatutory Stock Options pursuant to
Option Agreements specifying (i) the manner in which

                                      -7-
<PAGE>

such Nonstatutory Stock options are transferable, (ii) that any Option so
assigned or transferred shall be subject to all the same terms and conditions
contained in the Option Agreement, and (ii) that any such transfer shall be
subject to the Applicable Laws. The designation of a beneficiary by a Holder
will not constitute a transfer. An Award may be exercised, during the lifetime
of a Holder of the Award, only by such Holder or a transferee permitted by this
Section 6.2.

6.3  Acquired Company Awards.  Notwithstanding anything in the Plan to the
     -----------------------
contrary, the Administrator may grant Awards under the Plan in substitution for
awards issued under other plans, or assume under the Plan awards issued under
other plans, if the other plans are or were plans of other acquired entities
(the "Acquired Entities") (or the parent of the Acquired Entity) and the new
      -----------------
Award is substituted, or the old award is assumed, by reason of a merger,
consolidation, acquisition of property or of stock reorganization or liquidation
(the "Acquisition Transaction").  In the event that a written agreement pursuant
      -----------------------
to which the Acquisition Transaction is completed is approved by the Board and
said agreement sets forth the terms and conditions of the substitution of or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Administrator without any
further action by the Administrator, except as may be required for compliance
with Rule 16b-3 under the Exchange Act, and the persons holding such Awards
shall be deemed to be Participants.

                         SECTION 7. AWARDS OF OPTIONS

7.1  Grant of Options.  The Administrator is authorized under the Plan, in its
     ----------------
sole discretion, to issue Options as Incentive Stock Options or as Nonstatutory
Stock Options, provided that Incentive Stock Options may be granted only to
Employees of the Company or of a Subsidiary or Parent with respect to the
Company. Nonstatutory Stock Options may be awarded to Employees or Consultants
as determined by the Administrator. Stock Options may be granted either alone,
in addition to, or in tandem with other Awards granted under the Plan and/or
cash awards made outside of the Plan. The terms and conditions of a Stock Option
shall be set forth in an Option Agreement between the Participant and the
Company.

7.2  Designation of Type of Option.  Each Option shall be designated in the
     -----------------------------
Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 7.2, Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the Grant Date with respect to such Option. An Option that
is designated as an Incentive Stock Option that fails to meet the requirements
under Code section 422 at the time of grant, or at any later time in connection
with a change to the terms of such Option, shall be deemed to be a Nonstatutory
Stock Option as of the date such Option fails to meet the requirements under
Code section 422.

                                      -8-
<PAGE>

7.3  Term of Option.  The term of each Option shall be the term stated in the
     --------------
Option Agreement; provided however that the term shall be no more than ten (10)
years from the Grant Date thereof and provided further that, in the case of an
Incentive Stock Option granted to a Ten Percent Holder, the term of the Option
shall be no more than five (5) years from the Grant Date thereof.

7.4  Option Exercise Price.
     ---------------------

          (a)  The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator and set forth in the Option Agreement, but shall be subject to the
following:

               (i)  In the case of an Incentive Stock Option that is:

                    (A) granted to an Employee who, at the time of the grant of
          such Incentive Stock Option is a Ten Percent Holder, the per Share
          exercise price shall be no less than 110% of the Fair Market Value per
          Share on the Grant Date.

                    (B) granted to any other Employee, the per Share exercise
          price shall be no less than 100% of the Fair Market Value per Share on
          the Grant Date.

               (ii) In the case of a Nonstatutory Stock Option, the per Share
     exercise price shall be determined by the Administrator, provided however
     that the per share exercise price of an Option granted to a Named Executive
     of the Company shall be no less than 100% of the Fair Market Value per
     Share on the Grant Date if such Option is intended to qualify as
     performance-based compensation under Section 162(m) of the Code.

               (iii)  Notwithstanding the foregoing, Options may be granted with
     a per Share exercise price other than as required above pursuant to an
     Acquisition Transaction described in Section 6.2.

7.5  Exercise of Options.
     -------------------

          (a)  Vesting.  An Option granted hereunder shall be exercisable at
               -------
such times and under such conditions as determined by the Administrator and
reflected in the Option Agreement (or other documentation provided by the
Company), which may include vesting requirements including performance criteria
with respect to the Company and/or the Optionee. The Administrator shall have
the discretion, after the grant of an Option, to adjust the vesting of an Option
held by a Participant as a result in a change in the terms or conditions under
which such person is providing services to the Company, or for any other reason.
The Administrator shall have the discretion to determine whether and to what
extent the vesting of Options shall be tolled during any unpaid leave of
absence; provided however that in the absence of such determination, vesting of
Options shall be tolled during any such leave. The Administrator may also
determine, at the time of grant of a Stock Option or thereafter, the
circumstances under which the Award will become fully vested, including in the
event of a Change of Control.

                                      -9-
<PAGE>

          (b) Exercise Period; Termination of Continuous Service.  The
              --------------------------------------------------
Administrator shall establish and set forth in each instrument that evidences an
Option the exercise period for such Option, including whether the Option will
continue to be exercisable, and the terms and conditions of such exercise, if an
Optionee's Continuous Service is terminated, which provisions may be waived or
modified by the Administrator at any time in the Administrator's sole
discretion, provided that no Option shall be exercisable later than the
expiration of the term of such Option as set forth in the Option Agreement. If
not so established in the instrument evidencing the Option or later at the
discretion of the Administrator, the Option will be exercisable to the extent
the Optionee was entitled to exercise it at the date of such termination for
ninety (90) days after the date of termination of Continuous Service and, in the
event the termination of Continuous Service was on account of the Optionee's
retirement (as of the Optionee's normal retirement date determined by the
Administrator from time to time for purposes of the Plan), death or Disability
or in the event of death of the Optionee within ninety (90) days of termination
of Continuous Service, the Option will be exercisable to the extent the Optionee
was entitled to exercise it at the date of such termination for twelve (12)
months following the date of termination, provided that no Option shall be
exercisable later than the expiration of the term of such Option as set forth in
the Option Agreement.

          (c) Expiration of Option.  To the extent the Optionee was not entitled
              --------------------
to exercise the Option at the date of termination of Continuous Service, or does
not become entitled to exercise the Option under the terms of the Option
Agreement during a period following termination of Continuous Service, or if the
Option is not exercised by the Holder to the extent so entitled within the time
permitted under the Option Agreement or otherwise by the Administrator, the
Option shall terminate and the Optioned Stock underlying the unexercised portion
of the Option shall revert to the Plan.

          (d) Suspension and Forfeiture of Option Rights upon Termination for
              ---------------------------------------------------------------
Cause.  In the event a Participant is terminated from his or her Continuous
-----
Service by the Company in circumstances that may constitute Cause, such
Participant's right to exercise an Option shall be immediately suspended until
such time as it is determined by the Administrator, in its sole discretion,
whether such circumstances constitute Cause. The Administrator shall notify the
Participant, in writing, within ninety (90) days of the termination of the
Participant's Continuous Service, of its determination with respect to Cause or
of the suspension of its determination until the resolution of any pending
mediation, arbitration or litigation with respect to such termination of
Participant's Continuous Service, and in the absence of such notice, solely for
purposes of this Section 7.5(d), the Administrator shall be deemed to have
determined that the Participant was not terminated from his or her Continuous
Service for Cause. In the event the Administrator determines that such
circumstances constitute Cause, the Administrator shall provide written notice
of such determination to the Participant, and all rights of the Participant with
respect to the Option shall be immediately forfeited and the Option shall be
deemed to have expired on the date of termination of such Participant's
Continuous Service. In the event the Administrator determines that such
circumstances do not constitute Cause, the Administrator shall provide notice of
such determination to Participant and Participant shall have ninety (90) days
from the date of such notice to exercise the Option in accordance with Section
7.5(b) above, provided that no Option shall be exercisable later than the
expiration of the term of such

                                      -10-
<PAGE>

Option as set forth in the Option Agreement. For purposes of this Section
7.5(d), "Cause" shall mean (i) the Participant's disclosure or misuse of Company
confidential or proprietary information, (ii) the Participant's violation of the
Company's policy prohibiting insider trading; (iii) the Participant's violation
of Company policies prohibiting discrimination and harrassment or violation of
any other Company policy under circumstances in which the Company could be held
liable for Participant's actions by a third party; or (iv) any other act of the
Participant that is materially damaging to the reputation of the Company.

7.6  Permissible Consideration.  The 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 Administrator and, in the case of an Incentive Stock Option,
shall be determined at the time of grant. Such consideration must be paid in
cash or by check or, if the Administrator in its sole discretion determines,
either at the time the Option is granted or at any time before it is exercised,
a combination of cash and/or check (if any) and one or more of the following
alternative forms:

          (a)  by tendering (either actually or, if and so long as the Common
Stock is registered under Section 12(b) or 12(g) of the Exchange Act, by
attestation) Common Stock already owned by the Holder for at least six months
(or any shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on the date of
surrender equal to the aggregate option exercise price; or

          (b)  by authorization for the Company to retain from the total number
of Shares as to which the Option is exercised that number of Shares having a
Fair Market Value on the date of exercise equal to the exercise price for the
total number of Shares as to which the Option is exercised plus any applicable
withholding tax obligations that may arise in connection with the exercise; or

          (c)  if and so long as the Common stock is registered under
Section 12(b) or 12(b) of the Exchange Act, by delivery of a properly executed
exercise notice, together with irrevocable instructions, to (i) a brokerage firm
designated by the Company to deliver promptly to the Company the aggregate
amount of sale or loan proceeds to pay the Option exercise price and any
withholding tax obligations that may arise in connection with the exercise and
(ii) the Company to deliver the certificates for such purchased shares directly
to such brokerage firm, all in accordance with the regulations of the Federal
Reserve Board; or

          (d)  by tendering such other consideration as the Administrator may
permit, including a promissory note delivered pursuant to Section 12.

     In making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company, and the Administrator may refuse to
accept a particular form of consideration at the time of any Option exercise if,
in its sole discretion, acceptance of such form of consideration is determined
not in the best interests of the Company at such time.

                                      -11-
<PAGE>

7.7  Procedure for Exercise of Options.  An Option may not be exercised for a
     ---------------------------------
fraction of a Share. 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 by the person entitled to exercise the Option and the
Company has received full payment for the Shares with respect to which the
Option is exercised. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 7.6
of the Plan. 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.

7.8  Rights as a Shareholder.  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 or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, not withstanding 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 will 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 of the Plan.

7.9  Rule 16b-3.  Options granted to Reporting Persons shall comply with Rule
     ----------
16b-3 and shall contain such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption for Plan transactions.

7.10 Buy-Out Provisions.  The Administrator may at any time offer to buy out
     ------------------
for a payment in cash or Shares an Option previously granted based on such terms
and conditions as the Administrator shall establish and communicate to the
Optionee at the time such offer is made.

                       SECTION 8. STOCK PURCHASE RIGHTS

8.1  Grant of Stock Purchase Rights.  Stock Purchase Rights may be granted
     ------------------------------
either alone, in addition to, or in tandem with other Awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, the permissible consideration, the time
within which such person must accept such offer, and the restrictions applicable
to the Shares purchased under the offer. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator setting forth the terms and conditions applicable to the
Restricted Stock purchased pursuant to the Stock Purchase Right.

8.2  Repurchase Option.  Unless the Administrator determines otherwise, the
     -----------------
Restricted Stock Purchase Agreement shall grant the Company a repurchase option
exercisable upon the termination of the purchaser's Continuous Service. The
purchase price for Shares repurchased pursuant to the Restricted Stock Purchase
Agreement shall be the original purchase price paid by the purchaser and may be
paid by cash, check or cancellation of any indebtedness of the purchaser to the
Company. The repurchase option shall lapse at such time or times as the

                                      -12-
<PAGE>

Administrator shall determine. The Administrator may also determine, at the time
of granting a Stock Purchase Right or thereafter, the circumstances under which
the repurchase option will fully lapse, including in the event of a Change of
Control.

8.3  Other Provisions.  The Restricted Stock Purchase Agreement shall contain
     ----------------
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion. The Administrator
has the authority, it its sole discretion, to waive or modify any terms of the
Restricted Stock Purchase Agreement to the extent such waiver or modification
does not adversely impact the rights of the purchaser, or otherwise to waive or
modify any terms of the Restricted Stock Purchase Agreement with the consent of
the purchaser.

8.4  Rights as a Stockholder.  Once the Stock Purchase Right is exercised, the
     -----------------------
purchaser shall have the rights equivalent to those of a stockholder, and shall
be a stockholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company.  No adjustment will be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 13 of the Plan.

8.5  Rule 16b-3.  Stock Purchase Rights granted to Reporting Persons shall
     ----------
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
for Plan transactions, and shall contain such additional conditions or
restrictions as may be required under Applicable Laws.

                     SECTION 9. STOCK APPRECIATION RIGHTS

9.1  Grant of Stock Appreciation Rights. The Administrator is authorized under
     ----------------------------------
the Plan, in its sole discretion, to grant Stock Appreciation Rights to
Employees and Consultants. Stock Appreciation Rights may be granted either
alone, in addition to, or in tandem with other Awards granted under the Plan
and/or cash awards made outside of the Plan. Such Award may provide that the
Stock Appreciation Right will not be exercisable unless the Participant's rights
with respect to the related Awards are forfeited. The terms of each grant of a
Stock Appreciation Right under the Plan as determined by the Administrator,
including the number of shares subject to the Stock Appreciation Right, the
exercise price and exercise period and any vesting conditions, shall be set
forth in an Award Agreement between the participant and the Company. The
Administrator may modify, extend or renew outstanding Stock Appreciation Rights
or may cancel or accept the surrender of outstanding Stock Appreciation Rights
in return for the grant of new Stock Appreciation Rights at the same or a
different price. Any such modification, however, will not alter a Participant's
rights or obligations under a Stock Appreciation Right without the consent of
the Participant.

9.2  Term of Stock Appreciation Right.  The term of each Stock Appreciation
     --------------------------------
Right shall be the term stated in the Award Agreement; provided however that the
term shall be no more than ten (10) years from the Grant Date thereof.

9.3  Stock Appreciation Right Exercise Price.  The Exercise Price for a Stock
     ---------------------------------------
Appreciation Right shall be set forth in the Award Agreement and shall be the
base amount that is subtracted

                                      -13-
<PAGE>

from the Fair Market Value of the Shares at the time of exercise to determine
how much compensation the Participant is entitled to receive in cash and/or
Shares upon exercise of the Stock Appreciation Right, as determined by the
Administrator in its sole discretion. The Exercise Price shall be determined by
the Administrator in its sole discretion, provided however that the Exercise
Price of a Stock Appreciation Right granted to a Named Executive of the Company
shall be no less than 100% of the Fair Market Value per Share on the Grant Date
if such Stock Appreciation Right is intended to qualify as performance-based
compensation under Section 162(m) of the Code.

9.4  Exercise of Stock Appreciation Rights.
     -------------------------------------

          (a)  Vesting.  A Stock Appreciation Right granted hereunder shall be
               -------
exercisable at such times and under such conditions as determined by the
Administrator and reflected in the Award Agreement (or other documentation
provided by the Company), which may include vesting requirements including
performance criteria with respect to the Company and/or the Holder or may
provide that the Stock Appreciation Right is exercisable only if and when a
Change of Control occurs. The Administrator shall have the discretion, after the
grant of a Stock Appreciation Right, to adjust the vesting of a Stock
Appreciation Right held by a Participant as a result in a change in the terms or
conditions under which such person is providing services to the Company, or for
any other reason. The Administrator shall have the discretion to determine
whether and to what extent the vesting of Stock Appreciation Rights shall be
tolled during any unpaid leave of absence; provided however that in the absence
of such determination, vesting of Stock Appreciation Rights shall be tolled
during any such leave. The Administrator may also determine, at the time of
making an Award of Stock Appreciation Rights or thereafter, the circumstances
under which the Award will become fully vested, including in the event of a
Change of Control.

          (b)  Exercise Period; Termination of Continuous Service.  The
               --------------------------------------------------
Administrator shall establish and set forth in each Award Agreement the exercise
period for such Stock Appreciation Right, including whether the Stock
Appreciation Right will continue to be exercisable, and the terms and conditions
of such exercise, if the Holder's Continuous Service is terminated, which
provisions may be waived or modified by the Administrator at any time in the
Administrator's sole discretion, provided that no Stock Appreciation Right shall
be exercisable later than the expiration of the term of such Stock Appreciation
Right as set forth in the Award Agreement. If not so established in the Award
Agreement or later at the discretion of the Administrator pursuant to a written
instrument, the Stock Appreciation Right will terminate on the date the Holder's
Continuous Service is terminated.

          (c)  Expiration of Stock Appreciation Right.  To the extent the Holder
               --------------------------------------
of a Stock Appreciation Right was not entitled to exercise the Stock
Appreciation Right at the date of termination of Continuous Service, or if the
Stock Appreciation Right is not exercised by the Holder to the extent so
entitled within the time permitted under the Award Agreement or otherwise by the
Administrator, the Stock Appreciation Right shall terminate and the Shares
underlying the unexercised portion of the Stock Appreciation Right shall revert
to the Plan.

                                      -14-
<PAGE>

9.5  Payment of Compensation to Holder upon Exercise.  Upon exercise of a Stock
     -----------------------------------------------
Appreciation Right, the Holder shall be entitled to receive compensation in cash
equal to the spread between the Exercise Price and the Fair Market Value of each
Share subject to the Stock Appreciation Right with respect to which it is
exercised, less applicable withholding taxes; provided, however, that in its
sole discretion the Administrator may determine that the Participant shall
receive all or a portion of such compensation in Shares with a Fair Market Value
at the time of exercise equal to the cash compensation that would otherwise be
paid to the Participant, less applicable withholding taxes. The Administrator
may, in its sole discretion, reduce the amount of compensation to be paid to the
Holder of a Stock Appreciation Right upon exercise of the Stock Appreciation
Right by the amount of any indebtedness of such Holder to the Company.

9.6  Procedure for Exercise of Stock Appreciation Rights.  A Stock Appreciation
     ---------------------------------------------------
Right may be exercised by written notice to the Company in such form and manner
as determined by the Administrator. Exercise of a Stock Appreciation Right shall
result in a decrease in the number of Shares that thereafter may be available,
both for purposes of the Plan and for purposes of the Stock Appreciation Right,
by the number of Shares as to which the Stock Appreciation Right is exercised.

9.7  Rights as a Shareholder.  A Holder of a Stock Appreciation Right shall have
     -----------------------
no right to vote or receive dividends or any other rights as a stockholder with
respect to the Shares underlying the Stock Appreciation Right; provided however
that in the event the Administrator determines that any compensation upon
exercise of a Stock Appreciation Right shall be paid in Shares, upon 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 as the Administrator shall determine, the recipient of
such Shares shall have the rights equivalent to those of a stockholder. No
adjustment will 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 of the Plan.

9.8  Creditors' Rights.  A Holder of a Stock Appreciation Right has no rights
     -----------------
other than those of a general creditor of the Company. Stock Appreciation Rights
represent an unfunded and unsecured obligation of the Company, subject to the
terms and conditions of the applicable Award Agreement.

9.9  Rule 16b-3.  Stock Appreciation Rights granted to Reporting Persons shall
     ----------
comply with Rule 16b-3, shall contain such additional conditions or restrictions
as may be required thereunder to qualify for the maximum exemption for Plan
transactions, and shall contain such additional conditions or restrictions as
may be required under Applicable Laws.

9.10 Buy-Out Provisions.  The Administrator may at any time offer to buy out
      ------------------
for a payment in cash or Shares a Stock Appreciation Right previously granted
based on such terms and conditions as the Administrator shall establish and
communicate to the Holder at the time such offer is made.

                                      -15-
<PAGE>

                            SECTION 10. STOCK UNITS

10.1  Grant of Stock Units.  Stock Units may be granted either alone, in
      --------------------
addition to, or in tandem with other Awards granted under the Plan and/or cash
awards made outside of the Plan. The terms and conditions of a Stock Unit shall
be set forth in an Award Agreement between the Participant and the Company.

10.2  Vesting Conditions of Stock Unit Awards.  The Administrator shall
      ---------------------------------------
determine the terms and conditions of Stock Unit Awards, including vesting
conditions based on the recipient's service, individual performance or the
Company's performance or such other criteria as the Administrator may establish,
or the Administrator may determine that no vesting conditions shall apply. The
Administrator may also determine, at the time of making an Award or thereafter,
the circumstances under which the Award will become fully vested, including in
the event of a Change of Control.

10.3  Dividend Equivalents.  The Administrator may specify that a Holder of
      --------------------
Stock Units is entitled to receive dividend equivalents equal the to amount of
cash dividends paid on the same number of Shares. Dividend equivalents may be
converted into additional Stock Units, at the discretion of the Administrator.
The Administrator will determine the time(s) at which dividend equivalents
payable with respect to Stock Units, if any, are distributed and whether
settlement is made in the form of cash, Shares or a combination of both. Prior
to distribution, dividend equivalents will be subject to the same conditions and
restrictions (including forfeiture conditions) as the Stock Units to which they
attach.

10.4  Settlement of Stock Units.  Settlement of vested Stock Units will be made
      -------------------------
in cash, Shares or a combination of both, as determined by the Administrator
before distribution begins. For this purpose, the Administrator may designate
the method of converting the value of Stock Units to cash, including a method
based upon the Fair Market Value of Shares over a series of trading days.
Distribution shall be made in a lump sum or installments, less applicable
withholding taxes, as determined by the Administrator, after all vesting
conditions have been satisfied or have lapsed. The administrator may defer
distribution, or it may permit the Holder to elect a deferred distribution. In
either case, the Administrator may provide for interest or additional dividend
equivalents to be credited on the deferred payment.

10.5  Death of Stock Units Award Holder.  Each Participant who receives an Award
      ---------------------------------
of Stock Units may, by filing the prescribed form with the Company, designate
one or more beneficiaries to receive any settlement of Stock Units that becomes
payable upon the Participant's death. If no designated beneficiary survives the
participant, payment will be made to the Participant's estate. The Administrator
shall determine the time and form of distributions to a Participant's
beneficiary or estate.

10.6  Rights as a Shareholder.  Prior to settlement of Stock Units, a Holder of
      -----------------------
Stock Units shall have no voting rights or other privileges of a stockholder. In
the event the Administrator determines that Stock Units shall be settled in
Shares, the Holder shall have no voting rights or other privileges of a
stockholder 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

                                      -16-
<PAGE>

certificate evidencing such Shares as the Administrator shall determine shall be
distributed in settlement of such Stock Units. No adjustment will 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 10.3 of the Plan.

10.7  Creditors' Rights.  A Holder of Stock Units has no rights other than those
      -----------------
of a general creditor of the Company. Stock Units represent an unfunded and
unsecured obligation of the Company, subject to the terms and conditions of the
applicable Stock Unit Award Agreement.

10.8  Rule 16b-3.  Stock Units granted to Reporting Persons shall comply with
      ----------
Rule 16b-3 and shall contain such additional conditions or restrictions as may
be required thereunder to qualify for the maximum exemption for Plan
transactions, and shall contain such additional conditions or restrictions as
may be required under Applicable Laws.

                            SECTION 11. WITHHOLDING

11.1  General.  The Company may require the Holder to pay to the Company the
      -------
amount of any withholding taxes that the Company is required to withhold with
respect to the grant, vesting or exercise of any Award. As a condition to the
exercise of Awards granted hereunder, the Holder of such Award shall make such
arrangements as the Administrator may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with the exercise, receipt or vesting of such Award. Subject to
Applicable Law, the Administrator, in its discretion, may permit the Holder to
satisfy his or her tax withholding obligations by one or more of the following
methods: (i) cash payment; (ii) payroll deduction out of the Participant's
current compensation; (iii) withholding from the Shares to be issued upon the
exercise of an Option or Stock Purchase Right or upon settlement of a Stock
Unit, as described in Section 11.3 below; or (iv) surrender to the Company of
Shares that (A) in the case of Shares previously acquired from the Company, have
been owned by the participant for more than six (6) months on the date of
surrender, and (B) have a Fair Market Value determined as of the applicable Tax
Date equal to the minimum statutory withholding rates for federal and state tax
purposes, including payroll taxes. The Company shall not be required to issue
any Shares or make any payments under the Plan until such obligations are
satisfied. The Company, in its sole discretion, may also deduct from any Award
any other amounts due from the Holder to the Company or a Subsidiary.

11.2  Withholding for Employee Participants.  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 applicable withholding obligations from the cash
amount payable with respect to any Award, and otherwise from the next payroll
payment otherwise payable after the date of an exercise of an Award.

11.3  Stock Withholding to Satisfy Withholding Tax Obligations.  This Section
      --------------------------------------------------------
11.3 shall apply only after the date, if any, upon which the Common Stock
becomes a Listed Security.

          (a)  In the case of a Participant 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 the
Applicable Laws, the Participant shall be deemed to have elected to

                                      -17-
<PAGE>

have the Company withhold from the Shares to be issued upon the exercise of an
Option or Stock Purchase Right, or upon settlement of a Stock Unit, as
applicable, that number of Shares having a Fair Market Value determined on the
applicable Tax Date equal to the minimum statutory withholding rates for federal
and state tax purposes, including payroll taxes.

          (b)  At the discretion of the Administrator, a Participant may be
permitted to elect to satisfy his or her tax withholding obligations arising in
connection with an Option or a Stock Purchase Right, or in connection with a
Stock Unit to be settled by distribution of Shares, by authorizing the Company
to withhold from the Shares to be issued upon the exercise of an Option or Stock
Purchase Right, or upon settlement of a Stock Unit, as applicable, that number
of Shares having a Fair market Value determined on the applicable Tax Date equal
to the minimum statutory withholding rates for federal and state tax purposes,
including payroll taxes.

          (c)  Any election or deemed election by a participant to have Shares
withheld to satisfy tax withholding obligations under this Section 11.3 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 Administrator. Any
election under Section 11.3(b) above must be made on or prior to the applicable
Tax Date.

          (d)  In the event an election to have Shares withheld is made by a
participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.

11.4  Reporting Persons.  Any surrender by a Reporting Person of previously
      -----------------
owned Shares to satisfy tax withholding obligations arising upon exercise of an
Award must comply with the applicable provisions of Rule 16b-3.

          SECTION 12. LOANS, INSTALLMENT PAYMENTS AND LOAN GUARANTEES

      To assist a Holder (including a Holder who is an Officer or Director, in
acquiring Shares of Common Stock pursuant to an Award granted under the Plan,
the Administrator, in its sole discretion, may authorize, either at the Grant
Date or at any time before acquisition of the Common Stock pursuant to the
Award, a (i) the extension of a loan to the Holder by the Company, (ii) the
payment by the Holder of the purchase price, if any, of the Common Stock in
installments, or (c) the guarantee by the Company of a loan obtained by the
Holder from a third party. The terms of any loans, installment payments or loan
guarantees may be granted with or without security. The maximum credit available
is the purchase price, if any, of the Common Stock acquired, plus the maximum
federal and state income and employment tax liability that may be incurred in
connection with the acquisition. The amount of any promissory note delivered
pursuant to this Section 12 in connection with a purchase of Common Stock under
the Plan shall bear an interest rate specified by the Administrator but in no
case less than the rate required to avoid imputation of interest as compensation
(taking into consideration any exceptions to the imputed interest rules) for
income tax purposes.

                                      -18-
<PAGE>

                            SECTION 13. ADJUSTMENTS

13.1  Changes in Capitalization; Protection Against Dilution.  Subject to any
      ------------------------------------------------------
required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Award, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Awards have yet been granted or that have been returned to the Plan
upon cancellation or expiration of an Award, the number of Shares set forth in
Section 5.2 above, as well as the Exercise Price for each 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, recapitalization 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; provided,
however, that 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 Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Award.

13.2  Dissolution or Liquidation.  In the event of the proposed dissolution or
      --------------------------
liquidation of the Company not constituting a Corporate Transaction, to the
extent it has not been previously exercised or settled prior to the consummation
of such dissolution or liquidation, an Award under the Plan will terminate
immediately prior to the consummation of such proposed action.

13.3  Corporate Transactions; Change in Control.
      -----------------------------------------

          (a)  In the event of a Corporate Transaction, including a Change in
Control, the Administrator may, as to outstanding Awards, (i) provide that
outstanding Awards, or certain types of Awards, shall be assumed or equivalent
Awards shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation (such entity, the "Successor
                                                            ---------
Corporation"), unless the Successor Corporation does not agree to such
-----------
assumption or substitution, in which case such Award shall terminate upon
consummation of the transaction; (ii) provide upon notice to Holders that all
Awards, or certain types of Awards, to the extent then exercisable or to be
exercisable as a result of the Change of Control, must be exercised on or before
a specified date after which the Awards shall terminate; and/or (iii) terminate
all Awards, or certain types of Awards, in their entirety in exchange for a
payment of cash, securities and/or other property equal to the excess of the
Fair Market Value of the Shares with respect to which the Award is vested and
exercisable immediately prior to the Corporate Transaction over the aggregate
exercise price thereof. To facilitate the exercise of Awards that become
exercisable as a result of the Change of Control, the Administrator may adopt
procedures providing for the exercise of unvested Awards contingent on the
consummation of such Change of Control. In addition, the Administrator may
provide that any repurchase right in favor of the Company with respect to Shares
purchased upon exercise of an Option or a Stock Purchase Right shall be

                                      -19-
<PAGE>

assigned to the Successor Corporation, or if not so assigned, shall lapse in
full upon the consummation of the Corporate Transaction.

          (b)  For purposes of this Section 13.3, an Award shall be considered
assumed, or substituted, without limitation, if, at the time of issuance of the
stock or other consideration upon such Change in Control, the Holder of the
assumed or substitute Award would be entitled to receive upon exercise of the
Award the same number and kind of shares of stock or the same amount of
property, cash or securities as such Holder would have been entitled to receive
upon the occurrence of the transaction if the Holder had been, immediately prior
to such transaction, the Holder of the number of Shares of Common Stock covered
by the Award at such time (after giving effect to any adjustments in the number
of Shares covered by the Award as provided for in this Section 13) and the terms
of the assumed or substitute Award are otherwise substantially equivalent to the
terms of the Award immediately prior to the transaction (including the
acceleration of and deemed satisfaction of all vesting conditions of the Award);
provided however that in the case of an Option, if such consideration received
in the Change in Control was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its Parent equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction. Whether or not an Award
is to be assumed or substituted in connection with a Corporate Transaction shall
be determined by the Company, with the determination of comparability made by
the Administrator.

13.4  Certain Distributions.  In the event of any distribution to the Company's
      ---------------------
stockholders of securities of any other entity or other assets (other than
dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Award to reflect the effect of such distribution.

               SECTION 14: AMENDMENT AND TERMINATION OF THE PLAN
               -------------------------------------------------

14.1  Authority to Amend or Terminate.  The Board may at any time amend, alter,
      -------------------------------
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation (other than an adjustment made pursuant to Section 13 above)
shall be made that would impair the rights of any Holder under any outstanding
grant, without his or her consent. Any change or adjustment to an outstanding
incentive stock Option shall not, without the consent of the Holder, be made in
a manner so as to constitute a "modification" that would cause such Incentive
Stock Option to fail to continue to qualify as an Incentive Stock Option. In
addition, to the extent necessary and desirable to comply with the Applicable
Laws the Company shall obtain stockholder approval of any Plan amendment in such
a manner and to such a degree as required.

14.2  Effect of Amendment or Termination.  No amendment or termination of the
      ----------------------------------
Plan shall adversely affect Awards already granted, unless mutually agreed
otherwise between the Holder of such Award and the Administrator, which
agreement must be in writing and signed by the Holder and the Company.

                                      -20-
<PAGE>

                        SECTION 15. GENERAL PROVISIONS

15.1  Conditions Upon Issuance of Shares.  Shares shall not be issued pursuant
      ----------------------------------
to the exercise of an Award unless the exercise of such Award and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any Stock Exchange.

15.2  Warranty of Holder.  As a condition to the exercise of an Award, the
      ------------------
Company may require the Holder to represent and warrant at the time of any such
exercise that any Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by Applicable Law.

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

15.4  Stockholder Approval.  If required by the Applicable Laws, continuance of
      --------------------
the Plan shall be subject to approval by the stockholders of the Company within
twelve months before or after the date the Plan is adopted. Such stockholder
approval shall be obtained in the degree and manner required under the
Applicable Laws. All Awards issued under the Plan shall become void in the event
such approval is not obtained.

15.5  Documents to Optionees.  At the time of issuance of any awards under the
      ----------------------
Plan, the Company shall provide to the recipient of such award a copy of the
Plan and any agreement(s) pursuant to which awards granted under the Plan are
issued.

15.6  Market Standoff.  In connection with the initial public offering of the
      ---------------
Company's securities and upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, a person shall
not sell, make any short sale of, loan, hypothecate, pledge, grant any option
for the purchase of, or otherwise dispose or transfer for value or otherwise
agree to engage in any of the foregoing transactions with respect to, any shares
issued pursuant to an Award granted under the Plan (other than those included in
the registration) without prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.

15.7  Registration.  The Company shall be under no obligation to any Holder to
      ------------
register for offering or resale or to qualify for exemption under the Securities
Act, or to register or qualify

                                      -21-
<PAGE>

under state securities laws, any Shares, security or interest in a security paid
or issued under, or created by, the Plan, or to continue in effect any such
registrations or qualifications if made. The Company may issue certificates for
Shares with such legends and subject to such restrictions on transfer and stop-
transfer instructions as counsel for the Company deems necessary or desirable
for compliance by the Company with Applicable Laws. Inability of the Company to
obtain, from any regulatory body having jurisdiction, the authority deemed by
the Company's counsel to be necessary for the lawful issuance and sale of any
Shares hereunder or the unavailability of an exemption from registration for the
issuance and sale of any Shares hereunder shall relieve the Company of any
liability in respect of the nonissuance or sale of such Shares as to which such
requisite authority shall not have been obtained. The Administrator may also
require such other action or agreement by the Holder as may from time to time be
necessary to comply with Applicable Laws.

15.8  Compliance with Applicable Laws.  Notwithstanding anything in the Plan to
      -------------------------------
the contrary, the board, in its sole discretion, may bifurcate the Plan so as to
restrict, limit or condition the use of any provision of the Plan to Holders who
are Reporting Persons without so restricting, limiting or condition the Plan
with respect to other Holders.

15.9  Awards Granted to California Residents.  Options and Stock Purchase Rights
      --------------------------------------
granted under the Plan to persons resident in California shall be subject to the
provisions set forth in Attachment A hereto.  To the extent the provisions of
                        ------------
the Plan conflict with the provisions set forth on Attachment A, the provisions
                                                   ------------
on Attachment A shall govern the terms of such Options.
   ------------

                                      -22-
<PAGE>

Attachment A
        Provisions Applicable to Award Recipients Resident in California
        ----------------------------------------------------------------

     Until such time as any security of the Company becomes a Listed Security
and if required by the Applicable Laws, the following additional terms shall
apply to Options and Stock Purchase Rights, and Shares issued upon exercise of
such awards, granted under the HomeGrocer.com, Inc. 1999 Stock Incentive
Compensation Plan (the "Plan") to persons resident in California as of the Grant
                        ----
Date of any such award (each such person, a "California Recipient"):
                                             --------------------

     1.  In the case of a Nonstatutory Stock Option, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the Grant
Date.

     2.  In the case of Stock Purchase Rights, the purchase price applicable to
such right shall not be less than 85% of the Fair Market Value of the Shares as
of the date of the offer, or, in the case of a Ten Percent Holder, the price
shall not be less than 100% of the Fair Market Value of the Shares as of the
date of the offer.

     3.  With respect to an Option or Stock Purchase Right issued to any
California Recipient who is not an Officer, Director or Consultant, such Option
or Stock Purchase Right shall become exercisable, or any repurchase option in
favor of the Company shall lapse, at the rate of at least 20% per year over five
years from the date the award is granted.

     4.   (a)  In the event of termination of a California Recipient's
Continuous Service, such California Recipient shall have at least thirty (30)
days after the date of such termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement) to
exercise such Option.

          (b)  In the event of termination of a California Recipient's
Continuous Service as an Employee or Consultant as a result of a disability
which does not fall within the meaning of total and permanent disability (as set
forth in Section 22(e)(3) of the Code), such California Recipient may, but only
within six (6) months from the date of such termination (but 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 otherwise entitled to exercise it
at the date of such termination. However, to the extent that such California
Recipient fails to exercise an Option which is an Incentive Stock Option (within
the meaning of Section 422 of the Code) within three months of the date of such
termination, the Option will not qualify for Incentive Stock Option treatment
under the Code.

     5.   The Company shall provide financial statements at least annually to
each California Recipient during the period such person has one or more Options
or Stock Purchase Rights outstanding, and in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of awards under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.

                                      -23-

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