Document:

<PAGE>
                                                                   Exhibit 10.49

SEVENTH AMENDMENT TO
LOAN AND SECURITY AGREEMENT                            FLEET RETAIL FINANCE INC.
                                                            ADMINISTRATIVE AGENT
                                                            AND COLLATERAL AGENT

                                                         As of September 4, 2002

      THIS SEVENTH AMENDMENT is made in consideration of the mutual covenants
contained herein and benefits to be derived herefrom to the August 24, 2000 Loan
and Security Agreement (as amended and in effect, the "LOAN AGREEMENT") between

                  Fleet Retail Finance Inc., a Delaware corporation with its
            principal executive offices at 40 Broad Street, Boston,
            Massachusetts, as Administrative Agent and as Collateral Agent for
            the ratable benefit of a syndicate of lenders (defined therein as
            the "Revolving Credit Lenders"), and

                  The Revolving Credit Lenders

            On the one hand

            and

            The Gymboree Corporation, a Delaware corporation with its principal
            executive offices at 700 Airport Boulevard, Burlingame, California
            94010, as agent for the following and as agent for any other Person
            which becomes a Borrower as provided in Section 2:2-23 of the Loan
            Agreement:

            The Gymboree Corporation (a Delaware corporation); and Gymboree
            Manufacturing, Inc., Gymboree Operations, Inc., Gymboree Play
            Programs, Inc., Gymboree Retail Stores, Inc., The Gymboree Stores,
            Inc., and Gym-Mark, Inc. (each a California corporation with its
            principal executive offices at 700 Airport Boulevard, Burlingame,
            California 94010);

      on the other,

                                   WITNESSETH:

      SECTION 1. CAPITALIZED TERMS: All capitalized terms used herein and not
otherwise defined shall have the same meaning herein as in the Loan Agreement.

      SECTION 2. AMENDMENTS OF LOAN AGREEMENT:
<PAGE>
      Subject to the satisfaction of the Conditions to Effectiveness of the
Seventh Amendment set forth in Section 4, below, the Loan Agreement is hereby
amended as follows:

            a.    Article 1 of the Loan Agreement is hereby amended as follows:

                  i. the definition of "Availability Reserves" is hereby amended
      by inserting the following at the end thereof:

            (vi)  Daylight Overdraft Reserve.

                  ii. the definition of "Eligible Investments" is hereby deleted
      in its entirety and the following substituted in its stead:

            "ELIGIBLE INVESTMENTS": Each of the following: (a) Marketable direct
                  or guaranteed obligations of the United States of America or
                  any state thereof which mature within one (1) year from the
                  date of purchase by the Borrower; (b) demand deposits,
                  certificates of deposit, bankers acceptances and time deposits
                  of United States banks having total assets in excess of
                  $1,000,000,000.00; (c) securities commonly known as
                  "commercial paper" issued by a corporation organized and
                  existing under the laws of the United States of America or any
                  state thereof that at the time of purchase have been rated and
                  the ratings for which are not less than "P 1" if rated by
                  Moody's Investors Services, Inc., and not less than "A 1" if
                  rated by Standard and Poor's, and (d) amounts invested by
                  Fleet National Bank on behalf of the Borrowers in money market
                  funds (or similar type funds acceptable to the Administrative
                  Agent) as long as Fleet manages or otherwise retains control
                  of such investments, which investments, in each instance ((a)
                  through (d)), are subject to a prior perfected security
                  interest in favor of the Collateral Agent.

                  iii. The definition of "Revolving Credit Ceiling" is hereby
      deleted in its entirety, and the following substituted in its stead:

            "REVOLVING CREDIT CEILING": $60,000,000.00, as of the effective date
                  of the Seventh Amendment.

                  iv. by adding the following new definitions thereto:

                  (1)   "DAYLIGHT OVERDRAFT RESERVE": Shall mean that amount
                        determined by the Administrative Agent from time to time
                        in its reasonable discretion as being appropriate to
                        cover daylight overdrafts in the Operating Account
                        during the period in which no Revolving Credit Loans
                        remain outstanding. As of the effective date of the
                        Seventh Amendment, the amount of the Daylight Overdraft
                        Reserve shall be $2,000,000.00.

                                                                          Page 2
<PAGE>
                  (2)   "SEVENTH AMENDMENT": Shall mean that certain Seventh
                        Amendment to Loan and Security Agreement dated
                        September 4, 2002 by and among the Borrowers, the Agent
                        and the Revolving Credit Lenders.

            b.    Article 2 of the Loan Agreement is hereby amended as follows:

                  i. Section 2-12 of the Loan Agreement is hereby deleted in its
      entirety, and the following substituted in its stead:

                  2-12. INTEREST ON REVOLVING CREDIT LOANS: THE PRICING GRID.
            The Eurodollar Margin and the Base Margin shall be determined from
            the following Pricing Grid. Commencing as of the effective date of
            the Seventh Amendment, the Eurodollar Margin and the Base Margin
            shall be established at Tier II. Commencing August 3, 2002, the
            Eurodollar Margin and the Base Margin shall be set, quarterly, as
            of the first day of each Fiscal quarter, as provided in the
            following Pricing Grid:

<TABLE>
<CAPTION>
TIER        AVERAGE AVAILABILITY FOR MOST          EURODOLLAR     BASE MARGIN
            RECENTLY COMPLETED FISCAL QUARTER      MARGIN
<S>         <C>                                    <C>            <C>
I           Equal to or greater than $20 MM        175 Basis      Zero
                                                   Points
II          Equal to or greater than $10MM and     200 Basis      Zero
            less than $20MM                        Points

III         Less than $10 MM                       225 Basis      Zero
                                                   Points
</TABLE>

            provided that, for purposes of calculating the Eurodollar Margin and
            the Base Margin, Average Availability shall be determined without
            regard to any Daylight Overdraft Reserve established from time to
            time.

                  ii. Section 6-4 is hereby amended by deleting the second (2nd)
      sentence therefrom in its entirety, and substituting the following in its
      stead:

            Provided Availability is not less than $15,000,000.00, Inventory, as
      reported on the Borrowing Base Certificate, may be rolled forward on a
      monthly basis. If after giving effect to any request for any loan, credit,
      advance or financial accommodations under the Revolving Credit,
      Availability would be less than $15,000,000.00, then prior to the making
      of such loan, credit, advance or financial accommodation, the Borrowing
      Base Certificate which the Lead Borrower is required to provide to the
      Administrative Agent pursuant to this Agreement shall report Inventory
      rolled forward as of the most recent week end. Further, if Availability
      shall at any time be less than $15,000,000.00 for three (3) consecutive
      days, Inventory, as reported on the Borrowing Base Certificate shall be
      rolled forward on a weekly basis, unless and until the Administrative
      Agent determines otherwise.

                  iii. Section 6-5 is hereby deleted in its entirety, and the
      following substituted in its stead:

                        6-5.  INTENTIONALLY OMITTED.

                                                                          Page 3
<PAGE>
                  iv. Section 6-10(d) is hereby amended by deleting the
      following from the first (1st) line thereof:

                  Four (4)

                  and substituting the following in its stead:

                  Two (2)

                  v. Section 6-12(b) is hereby deleted in its entirety, and the
      following substituted in its stead:

                  (b) The Borrowers shall not incur Consolidated Capital
            Expenditures during any fiscal year in excess of $25 Million.

                  vi. EXHIBIT 2:2-24 of the Loan Agreement is amended to read as
      Schedule 2:2-24 annexed hereto and incorporated herein by reference.

      SECTION 3. RATIFICATION OF LOAN DOCUMENTS. NO CLAIMS AGAINST ANY LENDER:

            (a) Except as provided herein, all terms and conditions of the Loan
Agreement and of the other Loan Documents remain in full force and effect. The
Lead Borrower and each Borrower hereby ratifies, confirms, and re-affirms all
and singular the terms and conditions, including execution and delivery, of the
Loan Documents.

            (b) There is no basis nor set of facts on which any amount (or any
portion thereof) owed by any Borrower under the Loan Agreement could be reduced,
offset, waived, or forgiven, by rescission or otherwise; nor is there any claim,
counterclaim, off set, or defense (or other right, remedy, or basis having a
similar effect) available to any Borrower with regard to thereto; nor is there
any basis on which the terms and conditions of any of the Liabilities could be
claimed to be other than as stated on the written instruments which evidence
such Liabilities. To the extent that any Borrower or any such guarantor has (or
ever had) any such claims against the Agent or any Lender, each hereby
affirmatively WAIVES and RELEASES the same.

      SECTION 4. CONDITIONS TO EFFECTIVENESS OF SEVENTH AMENDMENT:

            The effectiveness of this Seventh Amendment is conditioned on the
satisfaction of each of the following:

            (a) This Seventh Amendment shall have been duly executed and
delivered by each of the Borrowers, the Revolving Credit Lenders and the Agents
and shall be in full force and effect.

            (b) The Borrowers shall have paid all reasonable attorneys' fees and

                                                                          Page 4
<PAGE>
expenses incurred by the Agents in connection with the preparation, negotiation
and execution of this Seventh Amendment.

      SECTION 5. MISCELLANEOUS:

            (a) The parties acknowledge that Back Bay Capital Funding LLC, as
Term Lender, has been paid in full and is no longer a party to the Loan
Agreement.

            (b) This Seventh Amendment may be executed in several counterparts
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, and all of which together shall constitute one
instrument.

            (c) This Seventh Amendment expresses the entire understanding of the
parties with respect to the transactions contemplated hereby. No prior
negotiations or discussions shall limit, modify, or otherwise affect the
provisions hereof.

            (d) Any determination that any provision of this Seventh Amendment
or any application hereof is invalid, illegal, or unenforceable in any respect
and in any instance shall not affect the validity, legality, or enforce ability
of such provision in any other instance, or the validity, legality, or enforce
ability of any other provisions of this Seventh Amendment.

            (e) The Borrower shall pay on demand all reasonable costs and
expenses of the Agents, including, without limitation, reasonable attorneys'
fees in connection with the preparation, negotiation, execution, and delivery of
this Seventh Amendment.

            (f) This Seventh Amendment shall be construed, governed, and
enforced pursuant to the laws of The Commonwealth of Massachusetts and shall
take effect as sealed instrument.

      Except as amended hereby and by the First, Second, Third, Fourth, Fifth
Amendments, and all letter agreements concerning the Loan Agreement, all terms
and conditions of the Loan Agreement, as previously amended to date, shall
remain in full force and effect.

                              THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT:

                                                       FLEET RETAIL FINANCE INC.

                                        By /s/ Sally A. Sheehan
                                          --------------------------------------
                                        Name Sally A. Sheehan
                                             -----------------------------------
                                        Title Director
                                             -----------------------------------

                                                                         Page 5
<PAGE>
                                                   THE REVOLVING CREDIT LENDERS:
                                                      FLEET RETAIL FINANCE INC.

                                        By /s/ Sally Sheehan
                                          --------------------------------------
                                        Name Sally Sheehan
                                             -----------------------------------
                                        Title Director
                                             -----------------------------------

                                           THE CIT GROUP / BUSINESS CREDIT, INC.

                                        By /s/ Michael Gardner
                                          --------------------------------------
                                        Name Michael Gardner
                                             -----------------------------------
                                        Title Vice President
                                             -----------------------------------

                                                    FOOTHILL CAPITAL CORPORATION

                                        By /s/ Lan Wong
                                          --------------------------------------
                                        Name Lan Wong
                                             -----------------------------------
                                        Title Assistant Vice President
                                             -----------------------------------

                                                                          Page 6
<PAGE>
                                                        THE GYMBOREE CORPORATION
                                                               ("LEAD BORROWER")

                                          By /s/ Myles McCormick
                                            ------------------------------------
                                 Print Name: Myles McCormick
                                            ------------------------------------
                                      Title: CFO
                                            ------------------------------------

                                                                    "BORROWERS":
                                                    GYMBOREE MANUFACTURING, INC.

                                          By /s/ Myles McCormick
                                            ------------------------------------
                                 Print Name: Myles McCormick
                                            ------------------------------------
                                      Title: CFO
                                            ------------------------------------

                                                       GYMBOREE OPERATIONS, INC.

                                          By /s/ Myles McCormick
                                            ------------------------------------
                                 Print Name: Myles McCormick
                                            ------------------------------------
                                      Title: CFO
                                            ------------------------------------

                                                    GYMBOREE PLAY PROGRAMS, INC.

                                          By /s/ Myles McCormick
                                            ------------------------------------
                                 Print Name: Myles McCormick
                                            ------------------------------------
                                      Title: CFO
                                            ------------------------------------

                                                    GYMBOREE RETAIL STORES, INC.

                                          By /s/ Myles McCormick
                                            ------------------------------------
                                 Print Name: Myles McCormick
                                            ------------------------------------
                                      Title: CFO
                                            ------------------------------------

                                                                          Page 7
<PAGE>
                                                       THE GYMBOREE STORES, INC.

                                          By /s/ Myles McCormick
                                            ------------------------------------
                                 Print Name: Myles McCormick
                                            ------------------------------------
                                      Title: CFO
                                            ------------------------------------

                                                                  GYM-MARK, INC.

                                          By /s/ Myles McCormick
                                            ------------------------------------
                                 Print Name: Myles McCormick
                                            ------------------------------------
                                      Title: CFO
                                            ------------------------------------

                                                                          Page 8<PAGE>
                                                                   Exhibit 10.50

                            THE GYMBOREE CORPORATION

                            2002 STOCK INCENTIVE PLAN

      1.    Purposes of the Plan. The purposes of this 2002 Stock Incentive Plan
            are:

            -     to attract and retain the best available personnel,

            -     to provide additional incentive to Employees, Consultants and
                  Outside Directors, and

            -     to promote the success of the Company's business.

      2.    Definitions. As used herein, the following definitions shall apply:

            "ADMINISTRATOR" means the Board or any Committee as shall be
administering the Plan, in accordance with Section 4 of the Plan.

            "APPLICABLE LAWS" means the legal requirements relating to the
administration of stock incentive plans under state corporate and securities
laws and the Code.

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

            "CAUSE" means, unless otherwise defined in the instrument evidencing
the Option or in a written employment or services agreement between the Company
or a Subsidiary or Parent and the Optionee, 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.

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

            "COMMITTEE" means a Committee appointed by the Board in accordance
with Section 4 of the Plan.

            "COMMON STOCK" means the Common Stock of the Company.

            "COMPANY" means The Gymboree Corporation, a Delaware corporation.

            "CONSULTANT" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services and who is compensated for
such services, so long as such Consultant (a) renders bona fide services that
are not in connection with the offer and sale of the Company's securities in a
capital-raising transaction and (b) does not directly or indirectly promote or
maintain a market for the Company's securities.

<PAGE>

            "CONTINUOUS STATUS AS AN EMPLOYEE, CONSULTANT OR OUTSIDE DIRECTOR"
means that the employment, consulting or Outside Director relationship is not
interrupted or terminated by the Company, any Parent or Subsidiary. Continuous
Status as an Employee, Consultant or Outside Director shall not be considered
interrupted in the case of: (i) change of status from an Employee to a
Consultant; (ii) change in status from a Consultant to an Employee; (iii) any
leave of absence approved by the Administrator, including sick leave, military
leave, or any other personal leave; provided, however, that for purposes of
Incentive Stock Options, any such leave may not exceed ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute; or (iv) transfers between
locations of the Company or between the Company, its Parent, its Subsidiaries or
its successor.

            "DIRECTOR" means a member of the Board.

            "DISABILITY" unless otherwise defined by the Administrator or in an
employment contract means total and permanent disability as defined in Section
22(e)(3) of the Code.

            "EMPLOYEE" means any person employed by the Company or any Parent or
Subsidiary of the Company.

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

            "FAIR MARKET VALUE" means the per share value of Common Stock
determined in good faith by the Administrator or, if the Common Stock is (a)
listed on the Nasdaq National Market, the closing sales price for the Common
Stock as reported by that market for regular session trading for a single
trading day (b) listed on the New York Stock Exchange or the American Stock
Exchange, the closing sales price for the Common Stock as such price is
officially quoted in the composite tape of transactions on such exchange for
regular session trading for a single trading day, (c) quoted on the Nasdaq
SmallCap Market, the last sales price as reported by that market for a single
trading day, or (d) quoted on the OTC Bulletin Board Service or by the National
Quotation Bureau, Inc., the average of the high bid and low asked prices
reported by such service for a single trading day. If there is no such reported
price for the Common Stock for the date in question, then such price on the last
preceding date for which such price exists shall be determinative of Fair Market
Value.

            "INCENTIVE STOCK OPTION" means an Option granted with the intention
to qualify as an "incentive stock option" within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.

            "NONSTATUTORY STOCK OPTION" means an Option granted with the
intention to not qualify as an Incentive Stock Option.

            "NOTICE OF GRANT" means a written notice evidencing certain terms
and conditions of an individual Option. The Notice of Grant is part of the
Option Agreement.

                                      -2-
<PAGE>

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

            "OPTION" means the right to purchase Common Stock granted pursuant
to the Plan.

            "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option. The
Option Agreement is subject to the terms and conditions of the Plan.

            "OPTIONED STOCK" means the Common Stock subject to an Option.

            "OPTIONEE" means an Employee, Consultant or Outside Director who
holds an outstanding Option.

            "OUTSIDE DIRECTOR" shall mean a member of the Board who is not an
Employee or a Consultant.

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

            "PLAN" means The Gymboree Corporation 2002 Stock Incentive Plan, as
amended and restated from time to time.

            "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect when discretion is being exercised with respect to
the Plan.

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

            "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 12 of the Plan.

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

      3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares that may be authorized for
issuance under the Plan is 1,100,000 Shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. However, should the
Company reacquire Shares that were issued pursuant to the exercise of an Option,
such Shares shall not become available for future grant under the Plan.

      In addition, (a) any authorized shares not issued or subject to
outstanding awards under the Company's 1993 Stock Option Plan (the "Prior Plan")
on the date of stockholder approval of the Plan and (b) any shares subject to
outstanding awards under the Prior Plan on

                                      -3-
<PAGE>

such date that cease to be subject to such awards (other than by reason of
exercise or settlement of the awards to the extent they are exercised for or
settled in Shares), up to an aggregate maximum of 4,231,075 shares, subject to
adjustment from time to time as provided in Section 12, shall cease, as of such
date, to be available for grant and issuance under the Prior Plan, but shall be
available for issuance under the Plan.

      If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares that were subject thereto shall become
available for future grant under the Plan.

      4.    Administration of the Plan.

            (a)   Procedure.

                  (i) Multiple Administrative Bodies. The Plan may be
      administered by different Committees with respect to different groups of
      persons providing services to the Company.

                  (ii) Section 162(m). To the extent that the Administrator
      determines it to be desirable to qualify Options granted hereunder as
      "performance-based compensation" within the meaning of Section 162(m) of
      the Code, the Plan shall be administered by a Committee of two or more
      "outside directors" within the meaning of Section 162(m) of the Code.

                  (iii) Rule 16b-3. To the extent desirable to qualify
      transactions hereunder as exempt under Rule 16b-3, the transactions
      contemplated hereunder shall be structured to satisfy the requirements for
      exemption under Rule 16b-3.

                  (iv) Other Administration. Other than as provided above, the
      Plan shall be administered by (A) the Board or (B) a Committee, which
      committee shall be constituted to satisfy Applicable Laws.

            (b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

                  (i) to select the Consultants and Employees to whom Options
      may be granted hereunder;

                  (ii) to determine whether and to what extent Options are
      granted hereunder;

                  (iii) to determine the number of shares of Common Stock to be
      covered by each Option;

                                      -4-
<PAGE>

                  (iv) to approve forms of agreements for use under the Plan;

                  (v) to determine the terms and conditions, not inconsistent
      with the terms of the Plan, of any Option. Such terms and conditions may
      include, but are not limited to, the exercise price, the time or times
      when Options may be exercised (which may be based on performance
      criteria), any vesting acceleration or waiver of forfeiture restrictions,
      and any restriction or limitation regarding any Option or the shares of
      Common Stock relating thereto, based in each case on such factors as the
      Administrator, in its sole discretion, shall determine;

                  (vi) to determine whether, to what extent and under what
      circumstances Common Stock and other amounts payable with respect to an
      Option shall be deferred either automatically or at the election of the
      participant (including providing for and determining the amount (if any)
      of any deemed earnings on any deferred amount during any deferral period);

                  (vii) to construe and interpret the terms of the Plan;

                  (viii) to prescribe, amend and rescind rules and regulations
      relating to the Plan;

                  (ix) to authorize any person to execute on behalf of the
      Company any instrument required to effect the grant of an Option
      previously granted by the Administrator;

                  (x) to determine the terms and restrictions applicable to
      Options; and

                  (xi) to make all other determinations deemed necessary or
      advisable for administering the Plan.

            (c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees.

            (d) Separate Programs. The Administrator may establish one or more
separate programs under the Plan for the purpose of issuing particular forms of
Options to one or more classes of grantees on such terms and conditions as
determined by the Administrator from time to time.

      5.    Eligibility.

      (a) Options may be granted to Employees, Consultants and Outside Directors
of the Company and any Subsidiary or Parent as the Administrator from time to
time selects, provided that (i) Incentive Stock Options may only be granted to
Employees and (ii) only

                                      -5-
<PAGE>

Nonstatutory Stock Options may be granted to Outside Directors, and such grants
may only be made in accordance with the provisions of Section 5(b) hereof.

      (b) All grants of Options to Outside Directors under this Plan shall be
automatic and non-discretionary and shall be made in accordance with the
following provisions:

      (i)   On the date first elected to the Board (the "Initial Grant") and on
            each anniversary date of such election (the "Annual Grant")
            thereafter during his or her term as an Outside Director, each
            Outside Director shall automatically receive an Option to purchase
            2,500 Shares. In addition, each Outside Director who is appointed
            the chairperson of a committee of the Board shall receive an Option
            to purchase 500 Shares as of the date of Board approval of such
            appointment (the "Committee Grant").

      (ii)  The terms of an Option granted to an Outside Director shall be as
            follow:

      (A)   the term of the Option shall be ten (10) years;

      (B)   except as otherwise provided in Section 10 of the Plan, the Option
            shall be exercisable only while the Outside Director remains a
            Director;

      (C)   the exercise price shall be 100% of the Fair Market Value on the
            date of grant of the Option;

      (D)   the Initial Grant shall vest and become exercisable one-fourth
            (1/4th) on the one-year anniversary of the date of grant, and an
            additional one-forty-eighth (1/48th) shall vest at the end of each
            one month period thereafter;

      (E)   the Annual Grant shall vest and become exercisable one-forty-eighth
            (1/48th) at the end of each one month period following the date of
            grant; and

      (F)   the Committee Grant shall vest and become exercisable
            one-forty-eighth (1/48th) at the end of each one month period
            following the date of grant; provided, that if the date of grant
            occurs before the first anniversary of an Outside Director's initial
            election to the Board ("First Anniversary Date"), no vesting shall
            occur prior to the First Anniversary Date but on the First
            Anniversary Date, vesting shall occur on a pro-rated basis for the
            period from the date of grant to the First Anniversary Date.

      6.    Limitations.

            (a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value on the date of grant: (i) of Shares subject to an Optionee's Incentive
Stock Options which (ii) become exercisable for the

                                      -6-
<PAGE>

first time 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 6(a), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares shall be determined as of the time of grant.

            (b) Neither the Plan nor any Option shall confer upon an Optionee
any right with respect to continuing the Optionee's employment relationship,
consulting relationship or directorship with the Company, nor shall they
interfere in any way with the Optionee's right or the Company's right to
terminate such relationship at any time, with or without Cause.

            (c) The following limitations shall apply to grants of Options:

                  (i) No Employee shall be granted, in any fiscal year of the
            Company, Options to purchase more than 400,000 Shares.

                  (ii) In connection with his or her initial service or
            promotion, an Employee may be granted Options to purchase up to an
            additional 400,000 Shares, which shall not count against the limit
            set forth in subsection (i) above.

                  (iii)The foregoing limitations shall be adjusted
            proportionately in connection with any change in the Company's
            capitalization as described in Section 12.

      7. Term of Plan. Subject to Section 20 of the Plan and any resolution of
the Board of Directors concerning effectiveness, the Plan shall become effective
upon the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company as described in Section 20 of the Plan. It shall
continue in effect for a term of ten (10) years unless terminated earlier under
Section 15 of the Plan.

      8. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.

      9. Option Exercise Price and Consideration.

                                      -7-
<PAGE>

            (a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:

                  (i)   In the case of an Incentive Stock Option

                        (A) granted to an Employee who, at the time the
                  Incentive Stock Option is granted, owns stock representing
                  more than ten percent (10%) of the voting power of all classes
                  of stock of the Company or any Parent or Subsidiary, the per
                  Share exercise price shall be no less than 110% of the Fair
                  Market Value per Share on the date of grant.

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

                  (ii) In the case of a Nonstatutory Stock Option, the per Share
      exercise price shall be no less than 100% of the Fair Market Value per
      Share on the date of grant.

            (b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.

            (c) Payment of Exercise Price. The exercise price for shares
purchased under an Option shall be paid in full to the Company by delivery of
the consideration equal to the product of the Option exercise price and the
number of shares purchased. Such consideration must be paid before the Company
will issue or cause to be issued the Shares being purchased and must be in a
form or combination of forms acceptable to the Administrator for that purchase,
which forms may include:

                  (i) cash;

                  (ii) check;

                  (iii) promissory note (which note shall bear a rate of
      interest and contain such terms, including that such note shall be full
      recourse, as necessary to avoid charges to the Company's earnings for
      financial reporting purposes);

                  (iv) other Shares which (A) in the case of Shares acquired
      upon exercise of an Option, have been owned by the Optionee for more than
      six months on the date of surrender, and (B) have a Fair Market Value on
      the date of surrender equal

                                      -8-
<PAGE>

      to the aggregate exercise price of the Shares as to which said Option
      shall be exercised;

                  (v) as 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 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, all in accordance with the regulations of the Federal Reserve
      Board; or

                  (vi) such other consideration and method of payment for the
      issuance of Shares to the extent permitted by Applicable Laws.

            (d) Repricing of Options. Except as set forth in Section 12, the
exercise price of outstanding Options may not be changed without stockholder
approval of such change.

      10.   Exercise of Option.

            (a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.

      An Option may not be exercised for a fraction of a Share.

      An Option shall be deemed exercised when the Company (or a Company
designated representative) receives: (i) written notice of exercise (in
accordance with the Option Agreement) from the person entitled to exercise the
Option, and (ii) full payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement and the
Plan. Shares issued upon exercise of an Option shall be issued in the name of
the Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the stock certificate evidencing such Shares is issued
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a stockholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly after the Option is
exercised. 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 12 of the Plan. Exercising an Option in any manner shall
decrease the number of Shares thereafter 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.

                                      -9-
<PAGE>

            (b) Termination of Employment Relationship, Consulting Relationship
or Directorship. In the event that an Optionee's Continuous Status as an
Employee, Consultant or Outside Director terminates (other than upon the
Optionee's death or Disability), the Optionee may exercise his or her Option,
but only within such period of time as is determined by the Administrator, and
only to the extent that the Optionee was entitled to exercise it at the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). In the case of an Incentive Stock
Option, the Administrator shall determine such period of time (in no event to
exceed ninety (90) days from the date of termination) when the Option is
granted. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan. An Optionee's transfer of employment or service
relationship between or among the Company or a Parent, or a Subsidiary shall not
be considered a termination of termination for purposes of this Section 10.

            (c) Disability of Optionee. In the event that an Optionee's
Continuous Status as an Employee, Consultant or Outside Director terminates as a
result of the Optionee's Disability, the Optionee may exercise his or her Option
at any time within twelve (12) months from the date of such termination, but
only to the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

            (d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall immediately
revert to the Plan.

      11. Non-Transferability of Options. Unless determined otherwise by the
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the

                                      -10-
<PAGE>

Administrator makes an Option transferable, such Option shall contain such
additional terms and conditions as the Administrator deems appropriate.

      12. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
Sale or Change of Control.

            (a) Changes in Capitalization. The number of shares of Common Stock
covered by each outstanding Option, and the number of shares of Common Stock
which have been authorized for issuance under the Plan but as to which no
Options have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; 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 Option.

            (b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.

            (c) Merger or Asset Sale. Subject to the provisions of paragraph (d)
hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall be assumed or an equivalent option or right shall be
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation does not
agree to assume the Option or to substitute an equivalent option or right, the
Administrator shall, in lieu of such assumption or substitution, provide for the
Optionee to have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which it would not otherwise be exercisable. If
the Administrator makes an Option fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee that the Option shall be fully exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will terminate
upon the expiration of such period. For the purposes of this paragraph, the
Option shall be considered

                                      -11-
<PAGE>

assumed if, following the merger or sale of assets, the option or right confers
the right to purchase, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation and the
Optionee, provide for the consideration to be received upon the exercise of the
Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in Fair Market
Value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.

            (d) Change of Control. In the event of a "Change of Control" of the
Company, as defined in paragraph (e) below, the following acceleration and
valuation provisions shall apply:

                  (i) Any Options outstanding as of the date on which such
      Change of Control is determined to have occurred that are not yet
      exercisable and vested on such date shall become fully exercisable and
      vested;

                  (ii) To the extent that they are exercisable and vested, all
      outstanding Options, unless otherwise determined by the Board at or after
      grant, shall be terminated in exchange for a cash payment at the Change of
      Control Price (defined below), reduced by the exercise price applicable to
      such Options. These cash proceeds shall be paid to the Optionee or, in the
      event of death of an Optionee prior to payment, to the estate of the
      Optionee or to a person who acquired the right to exercise the Option by
      bequest or inheritance.

            (e) Definition of "Change of Control." For purposes of this Section
12, a "Change of Control" means the happening of any of the following:

                  (i) When any "person," as such term is used in Sections 13(d)
      and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
      Company employee benefit plan, including any trustee of such plan acting
      as trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3
      under the Exchange Act), directly or indirectly, of securities of the
      Company representing fifty percent (50%) or more of the combined voting
      power of the Company's then outstanding securities entitled to vote
      generally in the election of directors; or

                  (ii) The stockholders of the Company approve a merger or
      consolidation of the Company with any other corporation, other than a
      merger or consolidation which would result in the voting securities of the
      Company outstanding immediately prior thereto continuing to represent
      (either by remaining outstanding or

                                      -12-
<PAGE>

      by being converted into voting securities of the surviving entity) at
      least fifty percent (50%) of the total voting power represented by the
      voting securities of the Company or such surviving entity outstanding
      immediately after such merger or consolidation, or the stockholders of the
      Company approve an agreement for the sale or disposition by the Company of
      all or substantially all the Company's assets; or

                  (iii) A change in the composition of the Board of Directors of
      the Company, as a result of which fewer than a majority of the directors
      are Incumbent Directors. "Incumbent Directors" shall mean directors who
      either (A) are directors of the Company as of the date the Plan is
      approved by the stockholders, or (B) are elected, or nominated for
      election, to the Board of Directors of the Company with the affirmative
      votes of at least a majority of the Incumbent Directors at the time of
      such election or nomination (but shall not include an individual whose
      election or nomination is in connection with an actual or threatened proxy
      contest relating to the election of directors to the Company).

            (f) Change of Control Price. For purposes of this Section 12,
"Change of Control Price" shall be, as determined by the Board, (i) the highest
Fair Market Value of a Share within the 60-day period immediately preceding the
date of determination of the Change of Control Price by the Board (the "60-Day
Period"), or (ii) the highest price paid per Share, as determined by the Board,
in any bona fide transaction related to the Change of Control of the Company, at
any time within the 60-Day Period, or (iii) such lower price as the Board, in
its discretion, determines to be a reasonable estimate of the fair market value
of a Share.

      13. Withholding. The Company may require the Optionee to pay to the
Company the amount of any taxes that the Company is required by applicable
federal, state, local or foreign law to withhold with respect to the grant,
vesting or exercise of an Option. The Company shall not be required to issue any
shares of Common Stock under the Plan until such obligations are satisfied.

      The Administrator may permit or require an Optionee to satisfy all or part
of his or her tax withholding obligations by (a) paying cash to the Company, (b)
having the Company withhold from any cash amounts otherwise due or to become due
from the Company to the Optionee, or (c) having the Company withhold a number of
shares of Common Stock that would otherwise be issued to the Optionee having a
value equal to the tax withholding obligations, or (d) surrendering a number of
shares of Common Stock the Optionee already owns having a value equal to the tax
withholding obligations. The value of the Shares so withheld may not exceed the
employer's minimum required tax withholding rate, and the value of the Shares so
tendered may not exceed such rate to the extent the Optionee has owned the
surrendered shares for less than six months if such limitation is necessary to
avoid a charge to the Company for financial reporting purposes.

                                      -13-
<PAGE>

      14. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.

      15. Amendment and Termination of the Plan.

            (a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.

            (b) Stockholder Approval. The Company shall obtain stockholder
approval of the Plan and any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws, including, without limitation, the
requirements of any exchange or quotation system on which the Common Stock is
listed or quoted.

            (c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.

      16. Conditions Upon Issuance of Shares.

            (a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act, the Exchange Act, the rules
and regulations promulgated thereunder, Applicable Laws, and the requirements of
any stock exchange or quotation system upon which the Shares may then be listed
or quoted, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

            (b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the 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.

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

      18. 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.

                                      -14-
<PAGE>

      19. Choice of Law. The Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the laws of the United
States, shall be governed by the laws of the state of California without giving
effect to principles of conflicts of law.

      20. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the manner and to the degree required under Applicable Law.

                                      -15-

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