Document:

EXHIBIT 4.1

                            STOCK PURCHASE AGREEMENT

Conceptus, Inc.
1021 Howard Avenue
San Carlos, CA  94070

Ladies & Gentlemen:

    The  undersigned,   ___________________________   (the  "Investor"),  hereby
confirms its agreement with you as follows:

1.  This Stock Purchase Agreement (the "Agreement") is made effective as of July
20, 2000 between Conceptus,  Inc., a Delaware  corporation (the "Company"),  and
the Investor.

2.  The Company has  authorized  the issuance and sale of up to 1,940,000 shares
(the  "Shares") of common stock of the Company,  $0.003 par value per share (the
"Common Stock"),  subject to adjustment by the Company's Board of Directors,  to
certain investors in a private placement (the "Offering").

3. The Company and the Investor  agree that the Investor  will purchase from the
Company  and the  Company  will  issue and sell to the  Investor  ______________
Shares,  for a purchase  price of $7.2531 per share,  or an  aggregate  purchase
price of  $______________,  pursuant to the Terms and Conditions for Purchase of
Shares  attached  hereto as Annex I and  incorporated  herein by reference as if
fully set forth herein. Unless otherwise requested by the Investor, certificates
representing  the Shares  purchased by the Investor  will be  registered  in the
Investor's name and address as set forth below.

4.  The Investor represents  that,  except as set forth below, (a) it has had no
position, office or other material relationship within the past three years with
the  Company or its  affiliates,  (b) neither it, nor any group of which it is a
member or to which it is  related,  beneficially  owns  (including  the right to
acquire  or vote)  any  securities  of the  Company  and (c) it has no direct or
indirect affiliation or association with any NASD member. Exceptions:

__________________________________________________________________
_________________________________________________________________.
    (If no exceptions,  write "none." If left blank,  response will be deemed to
be "none.")

    Please confirm that the foregoing correctly sets forth the agreement between
us by signing in the space provided below for that purpose.

                    ---------------------------------------------------------
                    "INVESTOR"

                    By:
                         ----------------------------------------------------
                    Print Name:
                                 --------------------------------------------
                    Title:
                            -------------------------------------------------
                    Address:
                              -----------------------------------------------
                    Tax ID No.:
                                 --------------------------------------------
                    Contact name:
                                   ------------------------------------------
                    Telephone:
                                ---------------------------------------------
                    Name in which shares should be registered
                    (if different):
                                   ------------------------------------------

AGREED AND ACCEPTED:
-------------------
CONCEPTUS, INC.

____________________________
By:      Steven Bacich
         President and CEO

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                                     ANNEX I

                   TERMS AND CONDITIONS FOR PURCHASE OF SHARES

    1. Authorization and Sale of the Shares. Subject to the terms and conditions
of this  Agreement,  the  Company  has  authorized  the sale of up to  1,940,000
Shares. The Company reserves the right to increase or decrease this number.

    2. Agreement to Sell and Purchase the Shares; Subscription Date.

       2.1 At the Closing  (as  defined in Section 3), the Company  will sell to
the Investor,  and the Investor  will purchase from the Company,  upon the terms
and  conditions  hereinafter  set  forth,  the number of Shares set forth on the
signature page hereto at the purchase price set forth on such signature page.

       2.2 The  Company  is  entering  into  this  same  form of Stock  Purchase
Agreement with certain other investors (the "Other  Investors")  effective as of
the date hereof  (the  "Subscription  Date") and  expects to  complete  sales of
Shares to them. (The Investor and the Other Investors are hereinafter  sometimes
collectively  referred to as the  "Investors,"  and this Agreement and the Stock
Purchase  Agreements  executed by the Other Investors are hereinafter  sometimes
collectively referred to as the "Agreements.")

    3.  Delivery of the Shares at Closing.  The  completion  of the purchase and
sale of the Shares (the "Closing") shall occur (the "Closing Date") on the third
business  day after the  Subscription  Date (or upon  such  earlier  date as the
Company and the Investors shall agree), at the offices of the Company's counsel.
At the  Closing,  the Company  shall  deliver to the  Investor one or more stock
certificates  representing  the number of Shares set forth on the signature page
hereto,  each such  certificate to be registered in the name of the Investor or,
if so  indicated  on the  signature  page  hereto,  in  the  name  of a  nominee
designated by the Investor.  The Company's obligation to issue the Shares to the
Investor shall be subject to the following conditions,  any one or more of which
may be waived by the  Company:  (a)  receipt by the  Company of a  certified  or
official bank check or wire transfer of funds in the full amount of the purchase
price for the Shares being  purchased  hereunder  as set forth on the  signature
page hereto; (b) completion of the purchases and sales under the Agreements with
the Other Investors;  and (c) the accuracy of the representations and warranties
made by the Investors and the fulfillment of those undertakings of the Investors
to be fulfilled prior to the Closing. The Investor's  obligation to purchase the
Shares shall be subject to the  following  conditions,  any one or more of which
may be waived by the Investor:  (a) receipt by the Investor of one or more stock
certificates  representing  the number of Shares set forth on the signature page
hereto;  (b)  receipt  by the  Investor  of an opinion  letter,  dated as of the
Closing Date, from Latham & Watkins, counsel to the Company; (c) the accuracy of
the  representations  and warranties  made by the Company and the fulfillment of
those  undertakings of the Company to be fulfilled prior to the Closing;  (d) on
the  Closing  Date,  no legal  action,  suit or  proceeding  shall be pending or
threatened which seeks to restrain or prohibit the transactions  contemplated by
the  Agreements;  (e) the Company  shall have  delivered  to the  Investors  its
certificate,  dated the  Closing  Date,  duly  executed

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by its Chief Executive  Officer to the effect set forth in clause (c) above; (f)
the receipt by the  Investors of a  certificate,  dated the Closing Date, of the
Secretary or Assistant  Secretary of the Company  certifying (i) the certificate
of  incorporation  and bylaws of the Company as in effect on the  Closing  Date,
(ii) all resolutions of the board of directors (and  committees  thereof) of the
Company relating to the Agreements and the transactions contemplated thereby and
(iii) the incumbency of all officers of the Company executing the Agreements and
any other agreement or document contemplated thereby.

    4.  Representations,  Warranties  and Covenants of the Company.  The Company
hereby represents and warrants to, and covenants with, the Investor, as follows:

        4.1  Organization.  Each of the  Company  and its  Subsidiaries  is duly
organized  and  validly  existing  in  good  standing  under  the  laws  of  the
jurisdiction of its  organization.  Each of the Company and its Subsidiaries (as
defined  in  Rule  405  under  the  Securities  Act of  1933,  as  amended  (the
"Securities  Act")) has full power and authority to own,  operate and occupy its
properties and to conduct its business as presently  conducted and is registered
or qualified to do business and in good standing in each  jurisdiction  in which
it owns or leases property or transacts  business and where the failure to be so
qualified would have a material  adverse effect upon the financial  condition or
business,  operations,  assets or prospects of the Company and its Subsidiaries,
considered as one enterprise,  and no proceeding has been instituted in any such
jurisdiction,  revoking,  limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification.

        4.2 Due Authorization. The Company has all requisite power and authority
to execute,  deliver and perform its obligations  under the Agreements,  and the
Agreements have been duly  authorized and validly  executed and delivered by the
Company  and  constitute  legal,  valid and  binding  agreements  of the Company
enforceable against the Company in accordance with their terms, except as rights
to indemnity and contribution may be limited by state or federal securities laws
or the public  policy  underlying  such laws,  except as  enforceability  may be
limited by  applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
similar laws affecting  creditors' and contracting parties' rights generally and
except  as  enforceability  may be  subject  to  general  principles  of  equity
(regardless  of whether such  enforceability  is  considered  in a proceeding in
equity or at law).

        4.3 Non-Contravention. The execution and delivery of the Agreements, the
issuance and sale of the Shares to be sold by the Company under the  Agreements,
the  fulfillment  of the terms of the  Agreements  and the  consummation  of the
transactions  contemplated  thereby will not (A) conflict  with or  constitute a
violation of, or default (with or without the giving of notice or the passage of
time or both) under, (i) any material bond, debenture, note or other evidence of
indebtedness,  or under any material lease, indenture,  mortgage, deed of trust,
loan  agreement,  joint  venture or other  agreement or  instrument to which the
Company or any  Subsidiary is a party or by which it or any of its  Subsidiaries
or their  respective  properties are bound,  (ii) the charter,  by-laws or other
organizational  documents  of the Company or any  Subsidiary,  or (iii) any law,
administrative  regulation,  ordinance  or  order of any  court or  governmental
agency,  arbitration  panel  or  authority

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applicable to the Company or any Subsidiary or their respective  properties,  or
(B)  result in the  creation  or  imposition  of any lien,  encumbrance,  claim,
security interest or restriction  whatsoever upon any of the material properties
or assets of the Company or any Subsidiary or an  acceleration  of  indebtedness
pursuant to any  obligation,  agreement or  condition  contained in any material
bond,  debenture,  note or any other  evidence of  indebtedness  or any material
indenture, mortgage, deed of trust or any other agreement or instrument to which
the Company or any  Subsidiary is a party or by which any of them is bound or to
which any of the property or assets of the Company or any Subsidiary is subject.
No  consent,  approval,  authorization  or  other  order  of,  or  registration,
qualification  or filing  with,  any  regulatory  body,  administrative  agency,
self-regulatory  organization,  stock exchange or market, or other  governmental
body in the United  States is required  for the  execution  and  delivery of the
Agreements  and the valid issuance and sale of the Shares to be sold pursuant to
the  Agreements,  other than such as have been made or obtained,  and except for
any  securities  filings  required to be made under federal or state  securities
laws.

        4.4  Reporting  Status.  The  Company  has filed in a timely  manner all
documents  that the Company was required to file under the  Securities  Exchange
Act of 1934, as amended (the "Exchange Act"), during the 12 months preceding the
date of  this  Agreement.  The  following  documents  complied  in all  material
respects with the SEC's  requirements as of their  respective  filing dates, and
the  information  contained  therein as of the date  thereof  did not contain an
untrue statement of a material fact or omit to state a material fact required to
be stated  therein or necessary to make the  statements  therein in light of the
circumstances  under where they were made not  misleading,  except to the extent
that  information  contained in any such document has been revised or superseded
by a later filed SEC Document (as defined below):

        (i)   The  Company's  Annual  Report  on Form  10-K for the  year  ended
              December 31, 1999, as amended, including the exhibits thereto (the
              "Form 10-K"); and

        (ii)  all other documents,  including the exhibits thereto, filed by the
              Company  with the SEC since  December  31,  1999  pursuant  to the
              reporting   requirements  of  the  Exchange  Act,   including  the
              Company's  Quarterly  Reports on Form 10-Q for the quarters  ended
              March 31, 2000 and June 30, 2000 (together with the Form 10-K, the
              "SEC Documents").

        The SEC Documents (together with press releases and other documents made
publicly  available by the Company),  when taken together as a whole,  as of the
date hereof,  do not contain an untrue  statement of a material  fact or omit to
state a material  fact  required to be stated  therein or  necessary to make the
statements therein in light of the circumstances  under which they were made not
misleading.

        4.5 Capitalization.  As of the date hereof, the authorized capital stock
of the  Company  consists of  30,000,000  shares of Common  Stock and  3,000,000
shares of  preferred  stock,  par value  $.003 per share,  of the  Company  (the
"Preferred  Stock"). As of June 30, 2000, there were approximately (i) 9,728,964
shares of Common Stock issued and  outstanding,  (ii) no shares of the

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Preferred Stock issued and  outstanding,  (iii)  2,106,040  shares of the Common
Stock reserved for issuance upon exercise of outstanding stock options issued by
the Company to current or former  employees,  consultants  and  directors of the
Company and its  Subsidiaries,  (iv) 81,561 shares of Common Stock  reserved and
available for issuance  pursuant to the Company's  1995 Employee  Stock Purchase
Plan,  and (v) no other  shares or options,  warrants or other rights to acquire
shares of capital  stock of the Company or securities  convertible  into capital
stock of the Company. The Company is, directly or indirectly, the registered and
beneficial  owner of all of the  outstanding  shares of capital stock of each of
its  Subsidiaries.  All outstanding  shares of Common Stock are duly authorized,
validly issued,  fully paid and nonassessable,  free from any liens or any other
encumbrances  created by the Company  with  respect to the issuance and delivery
thereof and not subject to preemptive rights. Other than as disclosed in the SEC
Documents,  there  are no  outstanding  rights,  options,  warrants,  preemptive
rights,  rights of first refusal  agreements,  commitments or similar rights for
the purchase or  acquisition  from the Company of any securities of the Company.
The Shares to be sold pursuant to the Agreements have been duly authorized,  and
when issued and paid for in accordance  with the terms of the Agreements will be
duly and validly  issued,  fully paid and  nonassessable,  free and clear of all
pledges,  liens,  encumbrances and other restrictions  (other than those arising
under federal or state  securities laws as a result of the private  placement of
the Shares to the Investors). No preemptive right, co-sale right, right of first
refusal or other similar right exists with respect to the Shares or the issuance
and sale thereof.  No further approval or authorization of any stockholder,  the
Board of  Directors  of the Company or others is required  for the  issuance and
sale of the Shares.  Except as set forth in the SEC Documents,  no holder of any
of the  securities  of the  Company  or any of its  Subsidiaries  has any rights
("demand,"  "piggyback"  or  otherwise)  to have such  securities  registered by
reason of the  intention  to file,  filing or  effectiveness  of a  Registration
Statement (as defined in Section 7.1 hereof).

        4.6  Legal  Proceedings.  There is no  material  legal  or  governmental
proceeding pending or, to the knowledge of the Company,  threatened to which the
Company or any  Subsidiary  or any  officer or  director  of the  Company or any
Subsidiary in their capacity as such officer or director is or may be a party or
of which the  business or property of the Company or any  Subsidiary  is subject
that  is  not  disclosed  in  the  SEC  Documents.  There  is no  action,  suit,
proceeding,  inquiry or  investigation  before or by any court,  public board or
body (including,  without  limitation,  the SEC) pending or, to the knowledge of
the  Company,  threatened  against  or  affecting  the  Company  or  any  of its
Subsidiaries wherein an unfavorable decision,  ruling or finding could adversely
affect the  validity or  enforceability  of, or the  authority or ability of the
Company to perform its obligations under the Agreements.

        4.7  No  Violations.  Neither  the  Company  nor  any  Subsidiary  is in
violation  of its  charter,  bylaws,  or other  organizational  document,  or in
violation of any law, administrative regulation, ordinance or order of any court
or governmental agency, arbitration panel or authority applicable to the Company
or any Subsidiary,  which violation,  individually or in the aggregate, would be
reasonably likely to have a material adverse effect on the business, operations,
assets or prospects or financial  condition of the Company and its Subsidiaries,
considered  as one  enterprise,  or is in default (and there exists no condition
which,  with or without the  passage of time or giving of notice or both,  would
constitute a default) in any material  respect in the  performance  of any bond,

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debenture,  note  or any  other  evidence  of  indebtedness  in  any  indenture,
mortgage,  deed of trust or any other material  agreement or instrument to which
the  Company  or any  Subsidiary  is a party  or by  which  the  Company  or any
Subsidiary is bound or by which the  properties of the Company or any Subsidiary
are bound,  which would be reasonably  likely to have a material  adverse effect
upon the business, operations, assets or prospects or financial condition of the
Company and its Subsidiaries, considered as one enterprise.

        4.8 Governmental  Permits,  Etc. With the exception of the matters which
are dealt  with  separately  in Section  4.1,  4.4,  4.12 and 4.13,  each of the
Company  and  its   Subsidiaries   has  all  necessary   franchises,   licenses,
certificates and other authorizations from any foreign,  federal, state or local
government  or  governmental  agency,  department,  or body  that are  currently
necessary for the operation of the business of the Company and its  Subsidiaries
as currently conducted,  except where the failure to currently possess could not
reasonably  be expected  to have a material  adverse  effect upon the  business,
operations,  assets or prospects  or financial  condition of the Company and its
Subsidiaries, considered as one enterprise.

        4.9 Intellectual Property. Each of the Company and its Subsidiaries owns
or possesses  sufficient rights to use all patents,  patent rights,  trademarks,
copyrights,  licenses,  inventions,  trade  secrets,  trade  names and  know-how
(collectively,  "Intellectual  Property")  that are necessary for the conduct of
its  business as now  conducted  except  where the failure to  currently  own or
possess would not have a material  adverse effect on the financial  condition or
business of the  Company  and its  Subsidiaries  considered  as one  enterprise.
Except as set forth in the SEC Documents, (i) neither the Company nor any of its
Subsidiaries  has  received  any  notice  of,  or  has  any  knowledge  of,  any
infringement   of  asserted  rights  of  a  third  party  with  respect  to  any
Intellectual  Property  that,  individually  or in the  aggregate,  would have a
material  adverse  effect on the  financial  condition or business,  operations,
assets or  prospects  of the  Company  and its  Subsidiaries  considered  as one
enterprise and (ii) neither the Company nor any of its Subsidiaries has received
any  notice of any  infringement  rights by a third  party  with  respect to any
Intellectual  Property  that,  individually  or in the  aggregate,  would have a
material  adverse effect upon the business,  operations,  assets or prospects or
financial  condition  of the Company  and its  Subsidiaries,  considered  as one
enterprise.

        4.10 Financial  Statements.  The financial statements of the Company and
the related  notes  thereto  included in the SEC Documents  present  fairly,  in
accordance with generally accepted accounting principles, the financial position
of the Company and its Subsidiaries as of the dates  indicated,  and the results
of its  operations  and cash  flows  for the  periods  therein  specified.  Such
financial  statements  (including  the  related  notes)  have been  prepared  in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods therein  specified,  except as set forth in the SEC
Documents and subject in the case of unaudited financial  statements,  to normal
year-end audit adjustments.

        4.11  No  Material  Adverse  Change.  Except  as  disclosed  in the  SEC
Documents,  since December 31, 1999 there has not been (i) any material  adverse
change in the financial condition,  earnings or prospects of the Company and its
Subsidiaries  considered as one  enterprise  nor has any material  adverse event
occurred to the Company or its  Subsidiaries,  (ii) any material

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adverse  event  affecting  the  Company  or any of its  Subsidiaries,  (iii) any
obligation,  direct or  contingent,  that is  material  to the  Company  and its
Subsidiaries  considered  as one  enterprise,  incurred by the  Company,  except
obligations  incurred in the ordinary  course of business,  (iv) any dividend or
distribution  of any kind  declared,  paid or made on the  capital  stock of the
Company or any of its  Subsidiaries,  or (v) any loss or damage  (whether or not
insured) to the  physical  property  of the  Company or any of its  Subsidiaries
which has been  sustained  which has a material  adverse effect on the condition
(financial or otherwise),  earnings, operations,  business or business prospects
of the Company and its  Subsidiaries  considered  as one  enterprise.  Except as
disclosed in the SEC Documents,  neither the Company nor any of its Subsidiaries
has (i) sold, assigned, transferred,  abandoned, mortgaged, pledged or subjected
to lien any of its material properties,  tangible or intangible, or rights under
any material  contract,  permit,  license,  franchise or other agreement or (ii)
waived or cancelled any indebtedness or other obligations owed to the Company or
any such Subsidiary.

        4.12 NASDAQ Listing.  The Company's Common Stock is registered  pursuant
to Section  12(g) of the Exchange Act and is listed on The Nasdaq Stock  Market,
Inc. National Market (the "Nasdaq National  Market"),  and the Company has taken
no  action  designed  to,  or  likely to have the  effect  of,  terminating  the
registration of the Common Stock under the Exchange Act or de-listing the Common
Stock from the Nasdaq  National  Market,  nor to the Company's  knowledge is the
National   Association   of  Securities   Dealers,   Inc.   ("NASD")   currently
contemplating  terminating  such listing.  The Company and the Common Stock meet
the criteria for continued listing and trading on the Nasdaq National Market.

        4.13  Listing  of  the  Shares.   The  Company  shall  comply  with  all
requirements  of the National  Association  of  Securities  Dealers,  Inc.  with
respect to the  issuance  of the Shares  and the  listing  thereof on the Nasdaq
National Market. In furtherance  thereof, the Company shall use its best efforts
to take such actions as may be necessary  and as soon as  practicable  and in no
event later than 20 days after the Closing Date to file with the Nasdaq National
Market an application or other document  required by the Nasdaq  National Market
and pay all  applicable  fees for the  listing  of the  Shares  with the  Nasdaq
National Market and shall provide evidence of such filing to the Investors.  The
Company  knows of no reason why the Shares will not be  eligible  for listing on
the Nasdaq National Market.

        4.14 No Manipulation  of Stock.  The Company has not taken and will not,
in violation  of  applicable  law,  take,  any action  designed to or that might
reasonably be expected to cause or result in  stabilization  or  manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.

        4.15 S-3 Status.  The Company meets the requirements for the use of Form
S-3 for the  registration  of the resale of the Shares by the Investors and will
use its best efforts to maintain S-3 status with the SEC during the Registration
Period (as defined in Section 7.1(c)).

        4.16  Insurance.  The Company  maintains  and will  continue to maintain
insurance  against  loss or  damage  by fire or other  casualty  and such  other
insurance,  including,  but not limited

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to, product liability  insurance,  in such amounts and covering such risks as is
reasonably  adequate  consistent  with industry  practice for the conduct of its
business  and the value of its  properties,  all of which  insurance  is in full
force and effect.

        4.17 Tax Matters. The Company has filed all material federal,  state and
local income and  franchise  and other tax returns  required to be filed and has
paid all taxes  due in  accordance  therewith,  and no tax  deficiency  has been
determined adversely to the Company which has had (nor does the Company have any
knowledge of any tax deficiency  which, if determined  adversely to the Company,
might have) a material adverse effect on the condition (financial or otherwise),
earnings, operations,  business or prospects of the Company and its Subsidiaries
considered as one enterprise .

        4.18  Investment  Company.  The Company is not an  "investment  company"
within the meaning of such term under the Investment Company Act of 1940 and the
rules and regulations of the SEC thereunder.

        4.19 No Registration.  Assuming the accuracy of the  representations and
warranties  made by, and  compliance  with the  covenants  of, the  Investors in
Section 5 hereof,  no  registration  of the Shares under the  Securities  Act is
required in  connection  with the offer and sale of the Shares by the Company to
the Investors as contemplated by the Agreements.

        4.20  Internal  Accounting  Controls.  The Company and its  Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the  Company's  board of directors,  to provide  reasonable  assurance  that (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting  principles  and to maintain  asset  accountability,  (iii) access to
assets is permitted  only in accordance  with  management's  general or specific
authorization and (iv) the recorded  accountability  for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.

        4.21 Form D. The Company agrees to file one or more Forms D with respect
to the  Shares  on a timely  basis as  required  under  Regulation  D under  the
Securities  Act to claim the exemption  provided by Rule 506 of Regulation D and
to provide a copy thereof to the Investors and their counsel promptly after such
filing.

        4.22 Certain Future Financings and Related Actions.

             (a) The Company will not sell, offer to sell, solicit offers to buy
or  otherwise  negotiate  in  respect  of  any  "security"  (as  defined  in the
Securities  Act) that is or could be integrated with the sale of the Shares in a
manner that would require the  registration  of the Shares under the  Securities
Act.

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             (b) The Company  shall not offer,  sell,  contract to sell or issue
(or  engage any person to assist  the  Company  in taking any such  action)  any
equity securities or securities convertible into,  exchangeable for or otherwise
entitling  the holder to acquire,  any Common  Stock at a price below the market
price of the Common Stock  during the period from the date of this  Agreement to
the  effective  date of the  Registration  Statement;  provided,  however,  that
nothing  in this  Section  4.22(b)  shall  prohibit  the  Company  from  issuing
securities (v) to employees, directors, officers, advisors or consultants of the
Company; (w) upon exercise of conversion,  exchange,  purchase or similar rights
issued,  granted or given by the Company and  outstanding as of the date of this
Agreement;  (x) pursuant to a public offering  underwritten on a firm commitment
basis  registered  under the Securities  Act; (y) for the purpose of funding the
acquisition  of securities or assets of any entity in a single  transaction or a
series of related  transactions;  or (z) pursuant to a strategic  partnership or
alliance  agreement,  loan  agreement,  equipment  lease or  similar  commercial
agreement (including licensing and similar arrangements).

        4.23 Use of Proceeds.  The Company  will use the net  proceeds  from the
sale of the Shares for working capital and other general corporate purposes.

    5.  Representations, Warranties and Covenants of the Investor.

        5.1 The Investor  represents  and warrants to, and covenants  with,  the
Company  that:  (i) the  Investor  is an  "accredited  investor"  as  defined in
Regulation  D under  the  Securities  Act and the  Investor  has the  knowledge,
sophistication  and  experience  necessary  to make,  and is  qualified  to make
decisions  with  respect to,  investments  in shares  presenting  an  investment
decision like that involved in the purchase of the Shares, including investments
in securities issued by the Company and investments in comparable companies, and
has  requested,  received,  reviewed and  considered  all  information it deemed
relevant  in making an  informed  decision  to  purchase  the  Shares;  (ii) the
Investor  is  acquiring  the  number of Shares set forth on the  signature  page
hereto for its own account for investment only and with no present  intention of
distributing  any of such  Shares  in  violation  of the  Securities  Act or any
arrangement or understanding  with any other persons  regarding the distribution
of such Shares;  (iii) the Investor  will not,  directly or  indirectly,  offer,
sell,  pledge,  transfer or otherwise  dispose of (or solicit any offers to buy,
purchase or otherwise  acquire or take a pledge of) any of the Shares  except in
compliance with the Securities  Act,  applicable  state  securities laws and the
respective rules and regulations promulgated  thereunder;  (iv) the Investor has
filled in all  requested  information  on the  signature  page hereto for use in
preparation of the  Registration  Statement and the answers thereto are true and
correct  as of the date  hereof and will be true and  correct as of the  Closing
Date; (v) the Investor will notify the Company  promptly of any change in any of
such  information  until such time as the Investor has sold all of its Shares or
until the  Company  is no longer  required  to keep the  Registration  Statement
effective;  and (vi) the  Investor  has,  in  connection  with its  decision  to
purchase the number of Shares set forth on the  signature  page  hereto,  relied
only  upon the SEC  Documents,  other  publicly  available  information  and the
representations  and warranties of the Company  contained  herein.  The Investor
understands that its acquisition of the Shares has not been registered under the
Securities  Act or registered  or qualified  under any state  securities  law in
reliance on specific  exemptions  therefrom,  which  exemptions may

                                       9

<PAGE>

depend  upon,  among  other  things,  the bona  fide  nature  of the  Investor's
investment intent as expressed herein.

        5.2 The Investor  acknowledges  that the Company has represented that no
action has been or will be taken in any  jurisdiction  outside the United States
by the Company that would  permit an offering of the Shares,  or  possession  or
distribution  of offering  materials in connection with the issue of the Shares,
in any  jurisdiction  outside the United States where action for that purpose is
required.  If the Investor is located or domiciled  outside the United States it
agrees  to comply  with all  applicable  laws and  regulations  in each  foreign
jurisdiction in which it purchases,  offers,  sells or delivers Shares or has in
its possession or  distributes  any offering  material,  in all cases at its own
expense.

        5.3 The Investor hereby  covenants with the Company not to make any sale
of the Shares without complying with the provisions of this Agreement, including
Section 7.2 hereof,  provided  that the Company  complies  with its  obligations
under  Section  7.1,  without   effectively   causing  the  prospectus  delivery
requirement  under the  Securities Act to be satisfied,  if applicable,  and the
Investor  acknowledges  that the  certificates  evidencing  the  Shares  will be
imprinted  with a legend that  prohibits  their  transfer  except in  accordance
therewith.  The Investor  acknowledges that there may occasionally be times when
the Company, based on the advice of its counsel, determines that, subject to the
limitations of Section 7.2, it must suspend the use of the Prospectus  forming a
part of the  Registration  Statement  until  such  time as an  amendment  to the
Registration  Statement has been filed by the Company and declared  effective by
the SEC or until the Company has amended or supplemented such Prospectus.

        5.4 The Investor further represents and warrants to, and covenants with,
the Company that (i) the Investor has full right, power,  authority and capacity
to enter into this  Agreement and to consummate  the  transactions  contemplated
hereby and has taken all necessary  action to authorize the execution,  delivery
and  performance of this  Agreement and (ii) this Agreement  constitutes a valid
and binding  obligation  of the  Investor  enforceable  against the  Investor in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws  affecting
creditors'   and   contracting   parties'   rights   generally   and  except  as
enforceability  may be subject to general  principles of equity  (regardless  of
whether such  enforceability  is considered in a proceeding in equity or at law)
and except as the indemnification  and contribution  agreements of the Investors
herein may be legally unenforceable.

        5.5 Investor will not, prior to the  effectiveness  of the  Registration
Statement,  sell, offer to sell, solicit offers to buy, dispose of, loan, pledge
or grant any right with respect to (collectively,  a "Disposition"),  the Common
Stock of the Company in  violation  of the  Securities  Act,  nor will  Investor
engage  in any  hedging  or  other  transaction  which is  designed  to or could
reasonably be expected to lead to or result in a Disposition  of Common Stock of
the Company by the  Investor or any other  person or entity in  violation of the
Securities  Act. Such  prohibited  hedging or other  transactions  would include
without  limitation  effecting  any short  sale or  having  in effect  any short
position (whether or not such sale or position is against the box and regardless
of when such position

                                       10

<PAGE>

was entered into) or any purchase, sale or grant of any right (including without
limitation  any put or call  option)  with  respect to the  Common  Stock of the
Company or with respect to any security (other than a broad-based  market basket
or index) that includes, relates to or derives any significant part of its value
from the Common Stock of the Company.

        5.6 The Investor understands that nothing in this Agreement or any other
materials  presented to the Investor in connection with the purchase and sale of
the Shares  constitutes  legal,  tax or  investment  advice.  The  Investor  has
consulted such legal, tax and investment advisors as it, in its sole discretion,
has deemed necessary or appropriate in connection with its purchase of Shares.

    6.  Survival of Representations,  Warranties and Agreements. Notwithstanding
any  investigation  made  by  any  party  to  this  Agreement,   all  covenants,
agreements,  representations and warranties made by the Company and the Investor
herein  shall  survive the  execution  of this  Agreement,  the  delivery to the
Investor of the Shares being purchased and the payment therefor.

    7.  Registration of the Shares; Compliance with the Securities Act.

        7.1 Registration Procedures and Expenses. The Company shall:

            (a) subject to receipt of necessary  information from the Investors,
use its best efforts to prepare and file with the SEC,  within 30 days after the
Closing Date, a registration  statement (the  "Registration  Statement") on Form
S-3 to enable the resale of the  Registrable  Shares (as  defined  below) by the
Investors on a delayed or continuous basis under Rule 415 of the Securities Act.
"Registrable  Shares"  means (a) all  shares of Common  Stock  purchased  in the
Offering,  (b) Penalty Shares (as defined below),  if any, and (c) any shares of
capital stock issued or issuable,  from time to time, upon any reclassification,
share  combination,  share  subdivision,  stock split,  share dividend,  merger,
consolidation or similar transaction or event or otherwise as a distribution on,
in exchange  for or with respect to any of the  foregoing,  in each case held at
the relevant time by an Investor;

            (b)  use  its  best   efforts,   subject  to  receipt  of  necessary
information from the Investors,  to cause the  Registration  Statement to become
effective within 120 days after the Closing Date;

            (c) use its best  efforts  to  prepare  and  file  with the SEC such
amendments and supplements to the Registration Statement and the Prospectus used
in  connection  therewith and take all such other actions as may be necessary to
keep  the  Registration  Statement  current  and  effective  for a  period  (the
"Registration   Period")  not  exceeding,   with  respect  to  each   Investor's
Registrable  Shares,  the earlier of (i) the second  anniversary  of the Closing
Date,  (ii) the date on which the  Investor may sell all Shares then held by the
Investor  without  restriction  by the volume  limitations of Rule 144(e) of the
Securities  Act,  and (iii)  such time as all  Registrable  Shares  held by such
Investor  have been sold (A)  pursuant to a  registration  statement,  (B) to or
through a broker or dealer or underwriter in a public  distribution  or a public
securities transaction, and/or (C) in a

                                       11

<PAGE>

transaction exempt from the registration and prospectus delivery requirements of
the Securities Act under Section 4(1) thereof so that all transfer  restrictions
and  restrictive  legends  with  respect  thereto,  if any, are removed upon the
consummation of such sale.

            (d)  promptly  furnish to the  Investor  with  respect to the Shares
registered  under  the  Registration  Statement  such  number  of  copies of the
Registration Statement,  Prospectuses and Preliminary Prospectuses in conformity
with the  requirements  of the  Securities  Act and such other  documents as the
Investor may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Shares by the Investor;

            (e) promptly  take such action as may be  necessary  to qualify,  or
obtain,  an  exemption  for the  Registrable  Shares  under  such  of the  state
securities laws of United States jurisdictions as shall be necessary to qualify,
or  obtain  an  exemption  for,  the sale of the  Registrable  Shares  in states
specified in writing by the Investor;  provided, however, that the Company shall
not be  required  to qualify to do  business or consent to service of process in
any jurisdiction in which it is not now so qualified or has not so consented;

            (f) bear all expenses in connection with the procedures in paragraph
(a) through (e) of this Section 7.1 and the  registration of the Shares pursuant
to the Registration  Statement,  regardless of whether a Registration  Statement
becomes effective, including without limitation: (i) all registration and filing
fees and expenses (including filings made with the NASD); (ii) fees and expenses
of compliance with federal  securities and state "blue sky" or securities  laws;
(iii) expenses of printing (including printing  certificates for the Registrable
Securities  and  Prospectuses),  messenger and delivery  services and telephone;
(iv) all  application and filing fees in connection with listing the Registrable
Securities  on a national  securities  exchange or  automated  quotation  system
pursuant  to the  requirements  hereof;  and (v) all fees and  disbursements  of
counsel of the Company  and  independent  certified  public  accountants  of the
Company  (including the expenses of any special audit and "cold comfort" letters
required by or  incident  to such  performance);  provided,  however,  that each
Investor  shall be  responsible  for  paying  the  underwriting  commissions  or
brokerage fees, and taxes of any kind (including,  without limitation,  transfer
taxes)  applicable  to any  disposition,  sale or  transfer  of such  Investor's
Registrable  Securities.  The Company  shall,  in any event,  bear its  internal
expenses  (including,  without  limitation,  all  salaries  and  expenses of its
officers and employees  performing legal or accounting  duties),  the expense of
any annual  audit,  rating  agency fees and the fees and expenses of any person,
including special experts, retained by the Company;

            (g) advise the Investors, within two business days by e-mail, fax or
other type of  communication,  and, if requested  by such  person,  confirm such
advice in writing:  (i) after it shall receive notice or obtain knowledge of the
issuance of any stop order by the SEC delaying or suspending  the  effectiveness
of the  Registration  Statement or of the initiation or threat of any proceeding
for that purpose,  or any other order issued by any state securities  commission
or other  regulatory  authority  suspending the  qualification or exemption from
qualification  of such  Registrable  Securities  under state securities or "blue
sky" laws;  and it will promptly use its best efforts to prevent the issuance of
any stop  order or other  order or to  obtain  its  withdrawal  at the  earliest
possible

                                       12

<PAGE>

moment  if such  stop  order or other  order  should  be  issued;  (ii) when the
Prospectus or any  Prospectus  Supplement or  post-effective  amendment has been
filed,  and, with respect to the  Registration  Statement or any  post-effective
amendment  thereto,  when the same has  become  effective;  and (iii)  after the
Company shall receive notice or obtain knowledge of the existence of any fact or
the  happening of any event that makes any  statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or supplement thereto,
or any document  incorporated by reference  therein untrue, or that requires the
making of any  additions  to or changes  in the  Registration  Statement  or the
Prospectus in order to make the statements therein not misleading;

            (h)  otherwise  use its best  efforts to comply with all  applicable
rules and regulations of the SEC;

            (i) use its best  efforts  to cause  all  Registrable  Shares  to be
listed on each securities exchange or market, if any, on which equity securities
issued by the Company are then listed; and

            (j) use its best efforts to take all other steps necessary to effect
the registration of the Registrable Shares contemplated hereby and to enable the
Investors to sell the Shares under Rule 144.

            (k)  The  Company  further  agrees  that,  in  the  event  that  the
Registration  Statement has not (i) been filed with the SEC within 30 days after
the  Closing  Date or (ii) been  declared  effective  by the SEC within 120 days
after the Closing  Date (each such event  referred to in clauses (i) and (ii), a
"Registration  Default"),  for all or part of each  30-day  period  (a  "Penalty
Period")  during which the  Registration  Default remains  uncured,  the Company
shall issue or pay, as  applicable,  to each Investor 1% for each Penalty Period
of the aggregate purchase price paid by the Investor for its Shares,  payable in
validly issued,  fully paid and nonassessable  shares of Common Stock (valued at
the average of the closing  price of the Common Stock for the three trading days
ending on the last trading day of such Penalty Period) (the "Penalty Shares") or
cash,  at the option of the Company;  provided,  that if the issuance of Penalty
Shares by the Company  would result in the Company being  required  under NASDAQ
rules  or other  applicable  rules  to  obtain  the  approval  of the  Company's
shareholders,  then the Company  shall pay cash  rather than issue such  Penalty
Shares to the extent  needed to avoid such  shareholder  approval.  The  Company
shall deliver said shares or cash payment to the Investor by the fifth  business
day after the end of each such Penalty Period.  Notwithstanding  anything to the
contrary in Section 7.3 or any other provision of this  Agreement,  the issuance
of the Penalty  Shares or cash as provided in this  Section  7.1(k) shall be the
Investor's sole and exclusive remedy in the event of any  Registration  Default;
provided,  however,  that if the foregoing  remedy is deemed  unenforceable by a
court of competent  jurisdiction then the Investor shall have all other remedies
available at law or in equity.

        7.2 Transfer of Shares; Suspension.

            (a) The Investor  agrees that it will not effect any  Disposition of
the Shares or its right to  purchase  the Shares  that would  constitute  a sale
within  the  meaning  of  the  Securities

                                       13

<PAGE>

Act except as contemplated in the Registration  Statement referred to in Section
7.1 and as described  below or otherwise in accordance  with the Securities Act,
and that it will promptly  notify the Company of any changes in the  information
set forth in the  Registration  Statement  regarding the Investor or its plan of
distribution.

            (b)  Except in the event  that  paragraph  (c)  below  applies,  the
Company shall, at all times during the Registration Period, promptly (i) prepare
and file  from  time to time  with  the SEC a  post-effective  amendment  to the
Registration Statement or a supplement to the related Prospectus or a supplement
or amendment to any document incorporated therein by reference or file any other
required document so that such Registration Statement will not contain an untrue
statement  of a material  fact or omit to state a material  fact  required to be
stated therein or necessary to make the statements  therein not misleading,  and
so that,  as  thereafter  delivered  to  purchasers  of the  Shares  being  sold
thereunder,  such Prospectus will not contain an untrue  statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements  therein,  in light of the circumstances under which they
were made,  not  misleading;  (ii) provide the Investor  copies of any documents
filed  pursuant to Section  7.2(b)(i);  and (iii) inform each  Investor that the
Company has complied with its obligations in Section  7.2(b)(i) (or that, if the
Company has filed a post-effective amendment to the Registration Statement which
has not yet been  declared  effective,  the Company  will notify the Investor to
that  effect,  will use its best  efforts  to secure the  effectiveness  of such
post-effective  amendment as promptly as possible and will  promptly  notify the
Investor  pursuant to Section  7.2(b)(i)  hereof when the  amendment  has become
effective).

            (c) Subject to paragraph (d) below,  in the event (i) of any request
by the SEC or any other  federal  or state  governmental  authority  during  the
period  of  effectiveness  of  the  Registration  Statement  for  amendments  or
supplements to a Registration  Statement or related Prospectus or for additional
information;  (ii) of the  issuance  by the SEC or any  other  federal  or state
governmental  authority  of any stop order  suspending  the  effectiveness  of a
Registration  Statement or the initiation of any  proceedings  for that purpose;
(iii) of the  receipt by the  Company of any  notification  with  respect to the
suspension of the  qualification  or exemption from  qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or threatening
of any proceeding for such purpose;  or (iv) of any event or circumstance  which
necessitates  the  making  of any  changes  in  the  Registration  Statement  or
Prospectus, or any document incorporated or deemed to be incorporated therein by
reference,  so that,  in the  case of the  Registration  Statement,  it will not
contain  any untrue  statement  of a material  fact or any  omission  to state a
material fact required to be stated  therein or necessary to make the statements
therein  not  misleading,  and that in the case of the  Prospectus,  it will not
contain  any untrue  statement  of a material  fact or any  omission  to state a
material fact required to be stated  therein or necessary to make the statements
therein,  in the light of the  circumstances  under  which they were  made,  not
misleading;  then the  Company  shall  deliver a  certificate  in writing to the
Investor  (the  "Suspension  Notice") to the effect of the  foregoing  and, upon
receipt of such  Suspension  Notice,  the Investor will refrain from selling any
Registrable Shares pursuant to the Registration Statement (a "Suspension") until
the  Investor's  receipt  of  copies of a  supplemented  or  amended  Prospectus
prepared  and filed by the  Company,  or until it is  advised  in writing by the
Company that the current  Prospectus may be used, and has received copies of any
additional or supplemental  filings that are incorporated or deemed incorporated
by reference in any

                                       15

<PAGE>

such Prospectus.  In the event of any Suspension,  the Company will use its best
efforts to cause the use of the Prospectus so suspended to be resumed as soon as
reasonably  practicable  after  the  delivery  of a  Suspension  Notice  to  the
Investor.  In addition to and without  limiting any other  remedies  (including,
without limitation, at law or at equity) available to the Investor, the Investor
shall be entitled to specific performance in the event that the Company fails to
comply with the provisions of this Section 7.2(c).

            (d)  Notwithstanding  the foregoing  paragraphs of this Section 7.2,
the Investor shall not be prohibited from selling  Registrable  Shares under the
Registration  Statement as a result of  Suspensions  on more than two  occasions
(for two separate suspension events) of not more than 30 days each in any twelve
month period.

            (e) Provided that a Suspension  is not then in effect,  the Investor
may sell Registrable Shares under the Registration  Statement,  provided that it
arranges for delivery of a current  Prospectus to the transferee of such Shares.
Upon receipt of a request  therefor,  the Company has agreed to provide,  at its
own expense,  an adequate number of current  Prospectuses  (including  documents
incorporated  by reference  therein) to the Investor and to supply copies to any
other parties requiring such Prospectuses.

            (f) In the event of a sale of  Registrable  Shares  by the  Investor
under  the  Registration  Statement,  the  Investor  must  also  deliver  to the
Company's  transfer  agent,  with  a copy  to  the  Company,  a  Certificate  of
Subsequent Sale  substantially in the form attached hereto as Exhibit A, so that
the Registrable Shares may be properly transferred.

        7.3   Indemnification. For the purpose of this Section 7.3:

        (i)   the term "Selling  Stockholder" shall include the Investor and any
affiliate of such Investor;

        (ii)  the  term   "Registration  Statement"  shall  include  any  final
Prospectus,  exhibit,  supplement  or  amendment  included in or relating to the
Registration Statement referred to in Section 7.1; and

        (iii) the term "untrue  statement" shall include any untrue statement or
alleged untrue  statement,  or any omission or alleged  omission to state in the
Registration  Statement  or  Prospectus  a material  fact  required to be stated
therein  or  necessary  to make  the  statements  therein,  in the  light of the
circumstances under which they were made, not misleading.

              (a) The Company agrees to indemnify and hold harmless each Selling
Stockholder  from and  against  any  losses,  claims,  damages,  liabilities  or
expenses  to which  such  Selling  Stockholder  may  become  subject  (under the
Securities  Act  or  otherwise)  insofar  as  such  losses,   claims,   damages,
liabilities or expenses (or actions or proceedings in respect thereof) arise out
of, or are based upon (i) any untrue  statement of a material fact  contained in
the  Registration  Statement or  Prospectus,  (ii) any failure by the Company to
fulfill any undertaking  included in the

                                       15

<PAGE>

Registration Statement,  or (iii) any breach of any representation,  warranty or
covenant  made by the Company in this  Agreement,  and the Company will promptly
reimburse such Selling  Stockholder  for any reasonable  legal or other expenses
incurred  in  investigating,   defending  or  preparing  to  defend,   settling,
compromising or paying any such action, proceeding or claim, provided,  however,
that the  Company  shall not be liable in any such case to the extent  that such
loss,  claim,  damage,  liability or expense  arises  solely out of, or is based
solely upon, an untrue statement made in such Registration Statement in reliance
upon and in conformity with written information furnished to the Company by such
Selling  Stockholder  specifically  for use in preparation  of the  Registration
Statement  or the  failure  of such  Selling  Stockholder  to  comply  with  its
covenants and agreements contained in Sections 5.3 or 7.2 hereof respecting sale
of the Shares or any statement or omission in any  Prospectus  that is corrected
in any subsequent  Prospectus  that was delivered to the Investor at least three
business  days  prior  to  the   pertinent   sale  or  sales  by  the  Investor.
Notwithstanding  the  foregoing,  the Company shall not be liable to any Selling
Stockholder for any consequential damages,  including lost profits,  solely with
respect  to losses,  claims,  damages,  liabilities  or  expenses  to which such
Selling Stockholder may become subject arising out of, or based upon, any breach
of any  representation,  warranty  or  covenant  made  by the  Company  in  this
Agreement.

              (b) The Investor agrees  (severally and not jointly with any other
Investor) to indemnify and hold  harmless the Company (and each person,  if any,
who controls the Company within the meaning of Section 15 of the Securities Act,
each  officer  of the  Company  who signs the  Registration  Statement  and each
director  of  the  Company)  from  and  against  any  losses,  claims,  damages,
liabilities  or expenses to which the Company (or any such officer,  director or
controlling  person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages,  liabilities or expenses (or actions or
proceedings  in respect  thereof) arise solely out of, or are based solely upon,
(i) any failure to comply with the covenants and agreements contained in Section
5.3 or 7.2 hereof respecting sale of the Shares, or (ii) any untrue statement of
a material fact contained in the Registration Statement if such untrue statement
was made in reliance upon and in conformity with written  information  furnished
by the  Investor  specifically  for  use  in  preparation  of  the  Registration
Statement (provided,  however, that no Investor shall be liable in any such case
for any untrue  statement in any  Registration  Statement or  Prospectus if such
statement  has been  corrected in writing by such  Investor and delivered to the
Company at least three business days prior to the pertinent sale or sales by the
Investor),  and the  Investor  will  reimburse  the  Company  (or such  officer,
director  or  controlling  person),  as the case may be,  for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend,
settling,   compromising  or  paying  any  such  action,  proceeding  or  claim.
Notwithstanding the foregoing,  (x) the Investor's  aggregate liability pursuant
to this  subsection  (b) and  subsection  (d) shall be limited to the net amount
received by the Investor from the sale of the Shares and (y) the Investor  shall
not be liable to the  Company  for any  consequential  damages,  including  lost
profits, solely with respect to losses, claims, damages, liabilities or expenses
to which the Company (or any  officer,  director  or  controlling  person as set
forth above) may become subject (under the Securities Act or otherwise), arising
out of, or based upon,  any failure to comply with the covenants and  agreements
contained in Section 5.3 or 7.2 hereof respecting sale of the Shares.

                                       16

<PAGE>

              (c) Promptly after receipt by any  indemnified  person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought  against an  indemnifying  person  pursuant  to this  Section  7.3,  such
indemnified person shall notify the indemnifying person in writing of such claim
or of the  commencement  of such  action,  but the  omission  to so  notify  the
indemnifying  party will not relieve it from any liability  which it may have to
any  indemnified  party  under this  Section 7.3 (except to the extent that such
omission  materially and adversely  affects the indemnifying  party's ability to
defend such action) or from any liability otherwise than under this Section 7.3.
Subject to the provisions  hereinafter  stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such  indemnified  party,  shall be entitled to assume the defense thereof,
with counsel reasonably  satisfactory to such indemnified  person.  After notice
from the  indemnifying  person to such  indemnified  person of its  election  to
assume the defense thereof, such indemnifying person shall not be liable to such
indemnified  person  for  any  legal  expenses  subsequently  incurred  by  such
indemnified  person in connection with the defense  thereof,  provided  further,
however,  that if there exists or shall exist a conflict of interest  that would
make it inappropriate,  in the opinion of counsel to the indemnified person, for
the same counsel to represent both the indemnified  person and such indemnifying
person or any affiliate or associate  thereof,  the indemnified  person shall be
entitled to retain its own counsel at the expense of such  indemnifying  person;
provided, however, that no indemnifying person shall be responsible for the fees
and expenses of more than one separate counsel  (together with appropriate local
counsel) for all indemnified  parties. In no event shall any indemnifying person
be liable in respect of any amounts paid in  settlement of any action unless the
indemnifying  person shall have approved the terms of such settlement;  provided
that such consent shall not be unreasonably  withheld.  No  indemnifying  person
shall,  without the prior written consent of the indemnified person,  effect any
settlement  of any  pending  or  threatened  proceeding  in respect of which any
indemnified person is or could have been a party and indemnification  could have
been  sought  hereunder  by such  indemnified  person,  unless  such  settlement
includes an unconditional  release of such indemnified person from all liability
on claims that are the subject matter of such proceeding.

              (d) If the  indemnification  provided  for in this  Section 7.3 is
unavailable  to or  insufficient  to hold  harmless an  indemnified  party under
subsection  (a)  or  (b)  above  in  respect  of any  losses,  claims,  damages,
liabilities or expenses (or actions or proceedings in respect thereof)  referred
to therein,  then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses,  claims,  damages,
liabilities or expenses (or actions in respect thereof) in such proportion as is
appropriate to reflect the relative fault of the Company on the one hand and the
Investor on the other in  connection  with the  statements or omissions or other
matters which resulted in such losses, claims, damages,  liabilities or expenses
(or  actions  in  respect  thereof),  as well as any  other  relevant  equitable
considerations.  The relative  fault shall be  determined by reference to, among
other things, in the case of an untrue  statement,  whether the untrue statement
relates to information supplied by the Company on the one hand or an Investor on
the other and the parties' relative intent, knowledge, access to information and
opportunity  to correct or prevent  such untrue  statement.  The Company and the
Investors agree that it would not be just and equitable if contribution pursuant
to this  subsection  (d) were  determined  by pro rata  allocation  (even

                                       17

<PAGE>

if the  Investors  were treated as one entity for such  purpose) or by any other
method  of   allocation   which  does  not  take  into  account  the   equitable
considerations  referred  to above in this  subsection  (d).  The amount paid or
payable by an indemnified  party as a result of the losses,  claims,  damages or
liabilities (or actions in respect thereof) referred to above in this subsection
(d) shall be deemed to include any legal or other expenses  reasonably  incurred
by such indemnified party in connection with investigating or defending any such
action or claim.  Notwithstanding  the  provisions  of this  subsection  (d), no
Investor  shall be required to contribute any amount in excess of the net amount
received  by the  Investor  from the sale of the  Shares.  No  person  guilty of
fraudulent  misrepresentation  (within  the  meaning  of  Section  11(f)  of the
Securities  Act) shall be entitled to  contribution  from any person who was not
guilty of such fraudulent misrepresentation.  The Investors' obligations in this
subsection to  contribute  are several in proportion to their sales of Shares to
which such loss relates and not joint.

              (e) The parties to this Agreement hereby acknowledge that they are
sophisticated  business  persons  who were  represented  by  counsel  during the
negotiations regarding the provisions hereof including,  without limitation, the
provisions  of  this  Section  7.3,  and  are  fully  informed   regarding  said
provisions.

        7.4 Rule 144. For a period of two years  following the date hereof,  the
Company agrees with each holder of Registrable Shares to:

            (a) comply with the requirements of Rule 144(c) under the Securities
Act with respect to current public information about the Company;

            (b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act (at any time it is subject to such reporting requirements); and

            (c) furnish to any holder of  Registrable  Shares upon request (i) a
written  statement by the Company as to its compliance with the  requirements of
said Rule 144(c) and the reporting  requirements  of the  Securities Act and the
Exchange Act (at any time it is subject to such reporting requirements),  (ii) a
copy of the most recent  annual or quarterly  report of the  Company,  and (iii)
such other  reports and  documents of the Company as such holder may  reasonably
request to avail itself of any similar rule or regulation of the SEC allowing it
to sell any such securities without registration.

        7.5 Termination of Conditions and Obligations.  The conditions precedent
imposed  by Section 5 or this  Section 7 upon  Dispositions  of the  Registrable
Shares by the Investor shall cease and terminate as to any particular  number of
the  Registrable  Shares and the  restrictive  legend shall be removed when such
Registrable  Shares shall have been effectively  registered under the Securities
Act and sold or otherwise  disposed of in accordance with the intended method of
disposition set forth in the  Registration  Statement  covering such Registrable
Shares or at such time as an opinion of counsel  reasonably  satisfactory to the
Company  shall have been  rendered  to the effect that such  conditions  are not
necessary in order to comply with the Securities Act (provided that such opinion
shall  not  be  required  if  the  Company  shall  be  furnished   with  written
documentation

                                       18

<PAGE>

reasonably satisfactory to it that such Registrable Shares are being transferred
in a customary  transaction  exempt from  registration  under Rule 144 under the
Securities Act).

    8. Notices. Except as specifically permitted by Section 7.1(g), all notices,
requests, consents and other communications hereunder shall be in writing, shall
be mailed (A) if within  domestic  United  States by  first-class  registered or
certified airmail, or nationally  recognized overnight express courier,  postage
prepaid, or by facsimile, or (B) if delivered from outside the United States, by
International  Federal  Express or  facsimile,  and shall be deemed given (i) if
delivered by first-class  registered or certified mail domestic,  three business
days after so mailed,  (ii) if  delivered  by  nationally  recognized  overnight
carrier,  one business day after so mailed,  (iii) if delivered by International
Federal  Express,  two business  days after so mailed,  and (iv) if delivered by
facsimile,  upon  electric  confirmation  of receipt and shall be  delivered  as
addressed as follows:

       (a) if to the Company, to:

                Conceptus, Inc.
                1021 Howard Ave.
                San Carlos, CA  94070
                Attn:  President and CEO
                Phone:  (650) 802-7240
                Telecopy:  (650) 610-8363

           with a copy to:

                Latham & Watkins
                135 Commonwealth Drive
                Menlo Park, CA  94025
                Attn:  Ora T. Fisher, Esq.
                Phone:  (650) 328-4600
                Telecopy:  (650) 463-2600

       (b) if to the Investor,  at its address on the signature page hereto,  or
           at such other address or addresses as may have been  furnished to the
           Company in writing,

           with a copy to:

                Morrison & Foerster
                1290 Avenue of the Americas
                New York, NY  10104
                Attn:  Jeffrey Marcus, Esq.
                Phone:  (212) 468-8137
                Telecopy:  (212) 468-7900

                                       19

<PAGE>

    9. Changes. This Agreement may not be modified or amended except pursuant to
an instrument in writing signed by the Company and the Investor.

    10.  Headings.  The headings of the various  sections of this Agreement have
been inserted for  convenience  of reference  only and shall not be deemed to be
part of this Agreement.

    11.  Severability.  In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity,  legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

    12.  Governing  Law. This  Agreement  shall be governed by, and construed in
accordance  with, the internal laws of the State of  California,  without giving
effect to the principles of conflicts of law.

    13.  Entire  Agreement.  This  Agreement  constitutes  the entire  agreement
between the parties hereto pertaining to the subject matter hereof,  and any and
all other  written  or oral  agreements  relating  to such  subject  matter  are
expressly cancelled.

    14. Finders Fees.  Each of the Company and the Investor  represents  that it
neither  is nor  will  be  obligated  for  any  finder's  fee or  commission  in
connection with this transaction other than those certain fees payable solely by
the Company to PaineWebber.

    15.   Counterparts.   This   Agreement  may  be  executed  in  two  or  more
counterparts, each of which shall constitute an original, but all of which, when
taken together, shall constitute but one instrument,  and shall become effective
when  one or more  counterparts  have  been  signed  by each  party  hereto  and
delivered to the other parties.

    16. Successors and Assigns. This Agreement shall inure to the benefit of and
be binding  upon the  successors  and  permitted  assigns of the Company and the
Investors,  including  without  limitation  and  without the need for an express
assignment,  affiliates of the Investors. With respect to transfers that are not
made pursuant to the  Registration  Statement,  the rights and obligations of an
Investor under this Agreement shall be  automatically  assigned by such Investor
to any transferee of all or any portion of such  Investor's  Registrable  Shares
who is a Permitted Transferee (as defined below); provided, however, that within
two business days prior to the transfer,  (i) the Company is provided  notice of
the transfer  including the name and address of the transferee and the number of
Registrable Shares transferred;  and (ii) that such transferee agrees in writing
to be bound by the terms of this Agreement.  (For purposes of this "Agreement, a
"Permitted  Transferee"  shall  mean  any  Person  who  (a)  is  an  "accredited
investor,"  as that term is defined  in Rule  501(a) of  Regulation  D under the
Securities Act and (b) is a transferee of at least 20,000  Registrable Shares as
permitted  under the securities  laws of the United  States).  Upon any transfer
permitted by this Section 16, the Company shall be obligated to such  transferee
to perform all of its covenants  under this Agreement as if such transferee were
an Investor.

                                       20

<PAGE>

    17.  Expenses.  Each of the  Company  and the  Investors  shall bear its own
expenses in connection  with the  preparation  and negotiation of the Agreement;
provided,  that,  notwithstanding  the foregoing,  the Company agrees to pay the
reasonable fees and  disbursements,  up to $25,000,  of Morrison & Foerster LLP,
counsel to the Investors, in connection with the negotiation,  documentation and
consummation of the Agreement and the transactions contemplated thereby.

                                       21

<PAGE>

                                                                       Exhibit A

                         CERTIFICATE OF SUBSEQUENT SALE

ChaseMellon Shareholder Services, L.L.C.
235 Montgomery Street, 23rd Floor
San Francisco, CA  94104
Attention:  Gloria Pouncil

                  RE:      Sale of  Shares of Common  Stock of  Conceptus,  Inc.
                           (the "Company") pursuant to the Company's  Prospectus
                           dated _____________ (the "Prospectus")

Ladies and Gentlemen:

    The undersigned  hereby certifies,  in connection with the sale of shares of
Common Stock of the Company included in the table of Selling Stockholders in the
Prospectus,  that the undersigned has sold the shares pursuant to the Prospectus
and in a manner  described  under  the  caption  "Plan of  Distribution"  in the
Prospectus  and that such sale complies  with all  applicable  securities  laws,
including,  without  limitation,  the Prospectus  delivery  requirements  of the
Securities Act of 1933, as amended.

Selling Stockholder (the beneficial owner):
                                            ------------------------------------
Record Holder (e.g., if held in name of nominee):
                                                  ------------------------------
Restricted Stock Certificate No.(s):
                                     -------------------------------------------
Number of Shares Sold:
                       ---------------------------------------------------------
Date of Sale:
              ------------------------------------------------------------------

    In the event  that you  receive  a stock  certificate(s)  representing  more
shares of Common Stock than have been sold by the  undersigned,  then you should
return to the  undersigned a newly issued  certificate for such excess shares in
the name of the Record Holder and BEARING A  RESTRICTIVE  LEGEND.  Further,  you
should place a stop transfer on your records with regard to such certificate.

                                        Very truly yours,

Dated:                                  By:
       --------------------                 ------------------------------------

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

                                        Title:
                                               ---------------------------------

cc:      President and CEO
         Conceptus, Inc.
         1021 Howard Avenue
         San Carlos, CA  94070CELLEGY PHARMACEUTICALS, INC.             Exhibit 4.04

                           1995 EQUITY INCENTIVE PLAN

                            As Adopted June 26, 1995
                           Amended as of May 31, 2000

                1. PURPOSE. The purpose of this Plan is to provide incentives to
attract,  retain and  motivate  eligible  persons  whose  present and  potential
contributions  are  important  to  the  success  of  the  Company,  its  Parent,
Subsidiaries  and Affiliates,  by offering them an opportunity to participate in
the Company's future performance through awards of Options, Restricted Stock and
Stock Bonuses.  Capitalized terms not defined in the text are defined in Section
23.

                2. SHARES SUBJECT TO THE PLAN.

                    2.1 Number of Shares Available.  Subject to Sections 2.2 and
18, the total  number of Shares  reserved and  available  for grant and issuance
pursuant to this Plan will be 3,450,000 less any shares which are issued, or are
issuable upon exercise of options granted pursuant to the 1992 Stock Option Plan
adopted by the Company (the "Prior Plan"). The pool of Shares issuable hereunder
is  comprised  of any Shares not  subject to an option  granted  pursuant to the
Prior Plan plus any Shares issuable upon exercise of options granted pursuant to
the Prior Plan that expire or become unexercisable for any reason without having
been exercised in full. Upon the Effective Date (as defined below) of this Plan,
no further stock options  shall be granted  pursuant to the Prior Plan.  Options
granted pursuant to the Prior Plan shall continue to be governed by the terms of
the Prior Plan.  Subject to Sections 2.2 and 18, Shares that: (a) are subject to
issuance  upon  exercise of an Option but cease to be subject to such Option for
any reason  other than  exercise  of such  Option;  (b) are  subject to an Award
granted  hereunder  but are forfeited or are  repurchased  by the Company at the
original issue price;  or (c) are subject to an Award that otherwise  terminates
without  Shares being issued;  will again be available for grant and issuance in
connection  with future  Awards under this Plan.  At all times the Company shall
reserve and keep available a sufficient number of Shares as shall be required to
satisfy the requirements of all outstanding  Options granted under this Plan and
all other outstanding but unvested Awards granted under this Plan.

                    2.2  Adjustment  of Shares.  In the event that the number of
outstanding  Shares is  changed  by a stock  dividend,  recapitalization,  stock
split,  reverse  stock  split,  subdivision,  combination,  reclassification  or
similar change in the capital  structure of the Company  without  consideration,
then (a) the number of Shares  reserved  for issuance  under this Plan,  (b) the
Exercise Prices of and number of Shares subject to outstanding  Options, and (c)
the number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the shareholders of the
Company and compliance with applicable securities laws; provided,  however, that
fractions  of a Share will not be issued but will  either be  replaced by a cash
payment  equal to the Fair Market  Value of such  fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.

                3. ELIGIBILITY.  ISOs (as  defined  in  Section 5 below) may  be
granted  only to  employees  (including  officers  and  directors  who are  also
employees) of the Company or of a Parent or

<PAGE>

Subsidiary  of the  Company.  All other  Awards  may be  granted  to  employees,
officers,  directors,  consultants  and  advisors  of the Company or any Parent,
Subsidiary or Affiliate of the Company;  provided such  consultants and advisors
render  bona  fide  services  not in  connection  with  the  offer  and  sale of
securities  in a  capital-raising  transaction.  No person  will be  eligible to
receive more than 350,000  Shares in any calendar  year under this Plan pursuant
to the grant of Awards  hereunder.  A person may be granted  more than one Award
under this Plan.

                4. ADMINISTRATION.

                    4.1 Committee  Authority.  This Plan will be administered by
the  Committee or by the Board acting as the  Committee.  Subject to the general
purposes,  terms and conditions of this Plan, and to the direction of the Board,
the Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:

               (a)  construe and interpret  this Plan,  any Award  Agreement and
                    any other  agreement or document  executed  pursuant to this
                    Plan;

               (b)  prescribe,  amend and rescind rules and regulations relating
                    to this Plan;

               (c)  select persons to receive Awards;

               (d)  determine  the form and terms of Awards  (which  need not be
                    identical),  including but not limited to, the time or times
                    at which Options shall be  exercisable  and the extension or
                    acceleration of any such provisions or limitations, based in
                    each case on such factors as the Committee shall  determine,
                    in its sole discretion;

               (e)  determine  the  number  of  Shares  or  other  consideration
                    subject to Awards;

               (f)  determine   whether  Awards  will  be  granted  singly,   in
                    combination  with, in tandem with, in replacement  of, or as
                    alternatives  to,  other Awards under this Plan or any other
                    incentive or compensation plan of the Company or any Parent,
                    Subsidiary or Affiliate of the Company;

               (g)  grant waivers of Plan or Award conditions;

               (h)  determine the vesting, exercisability and payment of Awards;

               (i)  correct any defect,  supply any  omission or  reconcile  any
                    inconsistency   in  this  Plan,   any  Award  or  any  Award
                    Agreement;

               (j)  determine whether an Award has been earned;

               (k)  make all other determinations necessary or advisable for the
                    administration of this Plan.

                    4.2  Committee  Discretion.  Any  determination  made by the
Committee  with respect to any Award will be made in its sole  discretion at the
time of grant of the Award or,  unless in  contravention  of any express term of
this Plan or Award, at any later time, and such  determination will be final and
binding on the Company and on all persons  having an interest in any Award under
this Plan.

                                       2
<PAGE>

The  Committee may delegate to one or more officers of the Company the authority
to grant an Award under this Plan to  Participants  who are not  Insiders of the
Company.

                    4.3  Compliance  with Code  Section  162(m).  If two or more
members of the Board are Outside Directors,  the Committee shall be comprised of
at least two members of the Board, all of whom are Outside Directors.

                    4.4  Liability  and  Indemnification  of the  Committee.  No
member of the group  constituting the Committee,  or any employee of the Company
to whom the Committee delegates certain administrative  responsibilities,  shall
be liable for any act or  omission  on such  member's  or  employee's  own part,
including  but not limited to the exercise of any power or  discretion  given to
such member, or employee as delegatee, under this Plan, except for those acts or
omissions  resulting  from such member's or employee's  own gross  negligence or
willful  misconduct.  The Company shall indemnify each present and future member
of the group  constituting  the Committee  and each present and future  employee
delegated  administrative  responsibilities by such Committee against,  and each
member  of  the  group   constituting   the  Committee  or  employee   delegated
administrative  responsibilities  by such  Committee  shall be entitled  without
further act on his or her part to  indemnity  from the Company for, all expenses
(including  the amount of judgments or  settlements  approved by the Company and
made with a view to the  curtailment of costs of litigation,  other than amounts
paid to the Company  itself)  reasonably  incurred by such person in  connection
with or  arising  out of any  action,  suit or  proceeding  to the  full  extent
permitted by law and by the Articles of Incorporation and Bylaws of the Company.

                5. OPTIONS.  The Committee may grant Options to eligible persons
and will determine  whether such Options will be Incentive  Stock Options within
the meaning of the Code ("ISOs") or Nonqualified  Stock Options  ("NQSOs"),  the
number of Shares subject to the Option,  the Exercise  Price of the Option,  the
period  during  which the  Option  may be  exercised,  and all  other  terms and
conditions of the Option, subject to the following:

                    5.1 Form of Option  Grant.  Each Option  granted  under this
Plan will be evidenced by an Award Agreement  which will expressly  identify the
Option as an ISO or an NQSO ("Stock Option Agreement"), and will be in such form
and contain such provisions (which need not be the same for each Participant) as
the Committee  may from time to time approve,  and which will comply with and be
subject to the terms and conditions of this Plan.

                    5.2 Date of Grant.  The date of grant of an  Option  will be
the date on which the Committee  makes the  determination  to grant such Option,
unless  otherwise  specified by the Committee.  The Stock Option Agreement and a
copy of this Plan will be delivered to the Participant  within a reasonable time
after the granting of the Option.

                    5.3 Exercise  Period.  Unless  otherwise  established by the
Committee with respect to any individual or group of individuals, an Option will
become exercisable with respect to 25% of the Shares on the first anniversary of
the Vesting Start Date (as defined below),  with respect to an additional 25% of
the Shares on the second  anniversary of the Vesting Start Date, with respect to
an additional  25% of the Shares on the third  anniversary  of the Vesting Start
Date, with respect to an additional 25% of the Shares on the fourth  anniversary
of the Vesting Start Date. The Vesting Start Date is the date of grant,  or such
other date as the Committee determines in its discretion.  The Committee may use
its  discretion to establish  different  vesting  schedules  with respect to any
individual  or group of  individuals.  No Option will be  exercisable  after the
expiration  of ten (10) years from the date the Option is granted;  and provided
further that no ISO granted to a person who directly or by attribution owns more
than ten  percent  (10%) of the total  combined  voting  power of all classes of
stock of the Company or of

                                       3
<PAGE>

any Parent or  Subsidiary of the Company  ("Ten  Percent  Shareholder")  will be
exercisable  after the  expiration  of five (5)  years  from the date the ISO is
granted.  The  Committee  also may provide for the exercise of Options to become
exercisable at one time or from time to time, periodically or otherwise, in such
number of Shares or percentage of Shares as the  Committee  determines.  Options
granted to Insiders,  however,  may not be exercisable,  in whole or in part, at
any time prior to the  six-month  anniversary  of the date of grant,  unless the
Committee  determines  that the  foregoing  provision is not necessary to comply
with  the  provisions  of Rule  16b-3 as  promulgated  under  Section  16 of the
Exchange Act or that such Rule is not applicable to the Plan or the Participant.

                    5.4 Exercise  Price.  The Exercise  Price of an NQSO will be
determined by the Committee when the Option is granted; provided,  however, that
if expressly  required by one or more state securities  authorities or laws as a
condition of issuing Awards and Shares in compliance with the securities laws of
such state, the exercise price of an NQSO shall not be less than 85% of the Fair
Market  Value of the Shares on the date of grant and the  Exercise  Price of any
NQSO  granted to a Ten  Percent  Shareholder  shall not be less than 110% of the
Fair Market Value of the Shares on the date of grant.  The Exercise  Price of an
ISO will be not less than  100% of the Fair  Market  Value of the  Shares on the
date of  grant  and the  Exercise  Price  of any ISO  granted  to a Ten  Percent
Shareholder will not be less than 110% of the Fair Market Value of the Shares on
the date of grant.  Payment for the Shares  purchased  may be made in accordance
with Section 8 of this Plan.

                    5.5 Method of  Exercise.  Options may be  exercised  only by
delivery  to the  Company of a written  stock  option  exercise  agreement  (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each  Participant),  stating the number of Shares being purchased,  the
restrictions  imposed on the Shares purchased under such Exercise Agreement,  if
any, and such representations and agreements regarding Participant's  investment
intent and access to information  and other matters,  if any, as may be required
or desirable by the Company to comply with applicable  securities laws, together
with  payment  in full of the  Exercise  Price for the  number  of Shares  being
purchased.

                    5.6  Termination.  Notwithstanding  the exercise periods set
forth in the  Stock  Option  Agreement,  exercise  of an Option  will  always be
subject to the following:

               (a)  If the Participant is Terminated for any reason except death
                    or  Disability,  then  the  Participant  may  exercise  such
                    Participant's  Options  only to the extent that such Options
                    would have been  exercisable  upon the  Termination  Date no
                    later than three (3) months after the  Termination  Date (or
                    such  shorter or longer time period not  exceeding  five (5)
                    years  as  may be  determined  by the  Committee,  with  any
                    exercise beyond three (3) months after the Termination  Date
                    deemed to be an NQSO),  but in any event,  no later than the
                    expiration date of the Options.

               (b)  If the  Participant is Terminated  because of  Participant's
                    death or Disability  (or the  Participant  dies within three
                    (3)  months  after  a  Termination  other  than  because  of
                    Participant's  death  or  Disability),   then  Participant's
                    Options  may be  exercised  only  to the  extent  that  such
                    Options would have been  exercisable  by  Participant on the
                    Termination  Date and must be exercised by  Participant  (or
                    Participant's legal  representative or authorized  assignee)
                    no later than twelve (12) months after the Termination  Date
                    (or such  shorter  (but not less than six  months) or longer
                    time  period  not  exceeding   five  (5)  years  as  may  be
                    determined by the Committee,  with any such exercise  beyond
                    (a) three (3)  months  after the  Termination  Date when the
                    Termination  is for any reason other than the  Participant's
                    death or disability  other

                                       4
<PAGE>

                    than defined in Section  22(e)(3) of the Code, or (b) twelve
                    (12) months after the Termination  Date when the Termination
                    is for  Participant's  death or Disability,  deemed to be an
                    NQSO), but in any event no later than the expiration date of
                    the Options.

                    5.7  Limitations  on Exercise.  The  Committee may specify a
reasonable  minimum number of Shares that may be purchased on any exercise of an
Option,  provided  that such minimum  number will not prevent  Participant  from
exercising  the  Option  for the full  number  of  Shares  for  which it is then
exercisable.

                    5.8  Limitations  on ISOs.  The aggregate  Fair Market Value
(determined  as of the date of grant) of Shares  with  respect to which ISOs are
exercisable for the first time by a Participant  during any calendar year (under
this Plan or under any other  incentive  stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) will not exceed $100,000. If the
Fair Market  Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000,  then the  Options  for the first  $100,000  worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become  exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the  Effective  Date of this Plan to provide for a different  limit on the
Fair Market  Value of Shares  permitted  to be subject to ISOs,  such  different
limit will be  automatically  incorporated  herein and will apply to any Options
granted after the effective date of such amendment.

                    5.9  Modification,  Extension or Renewal.  The Committee may
modify,  extend or renew  outstanding  Options  and  authorize  the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant,  impair any of such  Participant's  rights
under any Option  previously  granted.  Any  outstanding  ISO that is  modified,
extended,  renewed or  otherwise  altered  will be treated  in  accordance  with
Section  424(h) of the Code.  The  Committee  may reduce the  Exercise  Price of
outstanding  Options without the consent of  Participants  effected by a written
notice to them;  provided,  however,  that the Exercise Price may not be reduced
below the minimum  Exercise  Price that would be permitted  under Section 5.4 of
this Plan for  Options  granted  on the date the  action is taken to reduce  the
Exercise Price.

                    5.10  No   Disqualification.   Notwithstanding   any   other
provision  in  this  Plan,  no  term  of this  Plan  relating  to  ISOs  will be
interpreted,  amended or altered,  nor will any discretion or authority  granted
under this Plan be exercised, so as to disqualify this Plan under Section 422 of
the Code or, without the consent of the Participant  affected, to disqualify any
ISO under Section 422 of the Code.

                6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible  person Shares that are subject to  restrictions.
The Committee will determine to whom an offer will be made, the number of Shares
the  person  may  purchase,  the price to be paid (the  "Purchase  Price"),  the
restrictions  to which the Shares will be subject,  if any,  and all other terms
and conditions of the Restricted Stock Award, subject to the following:

                    6.1 Form of Restricted  Stock Award.  All purchases  under a
Restricted  Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement  ("Restricted  Stock  Purchase  Agreement")  that will be in such form
(which need not be the same for each  Participant)  as the  Committee  will from
time to time  approve,  and will  comply  with and be  subject  to the terms and
conditions of this Plan.  The offer of Restricted  Stock will be accepted by the
Participant's

                                       5
<PAGE>

execution  and delivery of the  Restricted  Stock  Purchase  Agreement  and full
payment for the Shares to the Company  within thirty (30) days from the date the
Restricted Stock Purchase  Agreement is delivered to the person.  If such person
does not execute and deliver the Restricted Stock Purchase  Agreement along with
full  payment for the Shares to the Company  within  thirty (30) days,  then the
offer  will  terminate,  unless  otherwise  determined  by  the  Committee.  The
Committee,  however,  may provide that, if required under Rule 16b-3 promulgated
under  Section  16 of the  Exchange  Act,  Restricted  Stock  Awards  granted to
Insiders  shall not  become  exercisable  until six months and one day after the
grant date and shall then be  exercisable  for 10 trading  days at the  Purchase
Price specified by the Committee in accordance with Section 6.2.

                    6.2  Purchase  Price.  The  Purchase  Price of  Shares  sold
pursuant  to a  Restricted  Stock  Award will be  determined  by the  Committee;
provided,  that if expressly  required by any state securities  authorities as a
condition of the offer and sale of Shares subject to Restricted  Stock Awards in
compliance with the securities laws of such state, the Purchase Price will be at
least 85% of the Fair  Market  Value of the  Shares  on the date the  Restricted
Stock  Award  is  granted,  except  in  the  case  of a  sale  to a Ten  Percent
Shareholder,  in which case the  Purchase  Price will be 100% of the Fair Market
Value. Payment of the Purchase Price may be made in accordance with Section 8 of
this Plan.

                    6.3 Restrictions. Restricted Stock Awards will be subject to
such  restrictions  (if any) as the  Committee  may impose.  The  Committee  may
provide for the lapse of such restrictions in installments and may accelerate or
waive  such  restrictions,  in whole  or  part,  based  on  length  of  service,
performance or such other factors or criteria as the Committee may determine.

                7.  STOCK BONUSES.

                    7.1 Awards of Stock  Bonuses.  A Stock  Bonus is an award of
Shares  (which may consist of  Restricted  Stock) for  services  rendered to the
Company or any Parent, Subsidiary or Affiliate of the Company. A Stock Bonus may
be awarded for past  services  already  rendered to the Company,  or any Parent,
Subsidiary or Affiliate of the Company  (provided that the Participant  pays the
Company  the par value,  if any,  of the Shares  awarded by such Stock  Bonus in
cash) pursuant to an Award Agreement (the "Stock Bonus  Agreement") that will be
in such form (which need not be the same for each  Participant) as the Committee
will from time to time approve, and will comply with and be subject to the terms
and conditions of this Plan. A Stock Bonus may be awarded upon  satisfaction  of
such performance goals as are set out in advance in the Participant's individual
Award Agreement (the  "Performance  Stock Bonus Agreement") that will be in such
form (which need not be the same for each  Participant)  as the  Committee  will
from time to time approve,  and will comply with and be subject to the terms and
conditions of this Plan.  Stock Bonuses may vary from Participant to Participant
and between groups of Participants, and may be based upon the achievement of the
Company,  Parent,  Subsidiary or Affiliate and/or individual performance factors
or upon such other criteria as the Committee may determine.

                    7.2 Terms of Stock Bonuses. The Committee will determine the
number of Shares to be awarded to the  Participant  and whether such Shares will
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance  goals  pursuant to a Performance  Stock Bonus  Agreement,  then the
Committee will determine: (a) the nature, length and starting date of any period
during which performance is to be measured (the  "Performance  Period") for each
Stock Bonus;  (b) the  performance  goals and criteria to be used to measure the
performance,  if any;  (c) the  number  of  Shares  that may be  awarded  to the
Participant;  and (d) the extent to which such Stock  Bonuses  have been earned.
Performance Periods may overlap and Participants may participate  simultaneously
with respect to Stock Bonuses that are subject to different  Performance Periods
and different performance

                                       6
<PAGE>

goals  and other  criteria.  The  number  of Shares  may be fixed or may vary in
accordance with such performance  goals and criteria as may be determined by the
Committee.  The Committee  may adjust the  performance  goals  applicable to the
Stock  Bonuses to take into account  changes in law and  accounting or tax rules
and to make such  adjustments as the Committee deems necessary or appropriate to
reflect the impact of extraordinary or unusual items, events or circumstances to
avoid windfalls or hardships.

                    7.3 Form of Payment. The earned portion of a Stock Bonus may
be paid  currently  or on a  deferred  basis  with  such  interest  or  dividend
equivalent,  if any, as the Committee may determine.  Payment may be made in the
form of  cash,  whole  Shares,  including  Restricted  Stock,  or a  combination
thereof,  either in a lump sum payment or in installments,  all as the Committee
will determine.

                    7.4 Termination During Performance  Period. If a Participant
is Terminated during a Performance Period for any reason,  then such Participant
will be entitled to payment (whether in Shares,  cash or otherwise) with respect
to the Stock Bonus only to the extent  earned as of the date of  Termination  in
accordance  with the  Performance  Stock Bonus  Agreement,  unless the Committee
determines otherwise.

                8.  PAYMENT FOR SHARE PURCHASES.

                    8.1 Payment.  Payment for Shares purchased  pursuant to this
Plan  may be made in cash  (by  check)  or,  where  expressly  approved  for the
Participant by the Committee and where permitted by law:

               (a)  by  cancellation  of  indebtedness  of  the  Company  to the
                    Participant;

               (b)  by surrender  of shares that either:  (1) have been owned by
                    Participant  for more than six (6) months and have been paid
                    for within the meaning of SEC Rule 144 (and,  if such shares
                    were purchased from the Company by use of a promissory note,
                    such note has been fully paid with respect to such  shares);
                    or (2) were obtained by Participant in the public market;

               (c)  by tender of a full  recourse  promissory  note  having such
                    terms  as  may be  approved  by the  Committee  and  bearing
                    interest at a rate sufficient to avoid  imputation of income
                    under Sections 483 and 1274 of the Code; provided,  however,
                    that  Participants who are not employees or directors of the
                    Company  will not be  entitled  to  purchase  Shares  with a
                    promissory  note  unless the note is  adequately  secured by
                    collateral other than the Shares;  provided,  further,  that
                    the portion of the Purchase  Price equal to the par value of
                    the Shares, if any, must be paid in cash;

               (d)  by waiver of compensation  due or accrued to the Participant
                    for services rendered;  provided,  further, that the portion
                    of the Purchase  Price equal to the par value of the Shares,
                    if any, must be paid in cash;

               (e)  with respect only to purchases  upon  exercise of an Option,
                    and provided that a public  market for the  Company's  stock
                    exists:

                    (1)  through  a  "same  day   sale"   commitment   from  the
                         Participant and a broker-dealer that is a member of the
                         National  Association  of Securities  Dealers (an "NASD
                         Dealer") whereby the Participant  irrevocably elects to
                         exercise the

                                       7
<PAGE>

                         Option and to sell a portion of the Shares so purchased
                         to pay for the  Exercise  Price,  and  whereby the NASD
                         Dealer irrevocably  commits upon receipt of such Shares
                         to forward the Exercise  Price directly to the Company;
                         or

                    (2)  through a "margin"  commitment from the Participant and
                         a  NASD  Dealer  whereby  the  Participant  irrevocably
                         elects to exercise  the Option and to pledge the Shares
                         so purchased to the NASD Dealer in a margin  account as
                         security  for a loan from the NASD Dealer in the amount
                         of the  Exercise  Price,  and  whereby  the NASD Dealer
                         irrevocably  commits  upon  receipt  of such  Shares to
                         forward the Exercise Price directly to the Company; or

               (f)  by any combination of the foregoing.

                    8.2 Loan Guarantees.  The Committee may help the Participant
pay for Shares  purchased  under this Plan by  authorizing  a  guarantee  by the
Company of a third-party loan to the Participant.

                9.  WITHHOLDING TAXES.

                    9.1 Withholding Generally.  Whenever Shares are to be issued
in  satisfaction  of Awards granted under this Plan, the Company may require the
Participant  to remit to the Company an amount  sufficient  to satisfy  federal,
state  and local  withholding  tax  requirements  prior to the  delivery  of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount  sufficient  to  satisfy  federal,   state,  and  local  withholding  tax
requirements.

                    9.2 Stock  Withholding.  When,  under applicable tax laws, a
Participant  incurs tax liability in connection  with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld,  the Committee may allow the
Participant  to satisfy the minimum  withholding  tax  obligation by electing to
have the  Company  withhold  from the Shares to be issued  that number of Shares
having a Fair Market Value equal to the minimum amount  required to be withheld,
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").  All  elections by a Participant  to have Shares  withheld for
this purpose will be made in writing in a form  acceptable  to the Committee and
will be subject to the following restrictions:

               (a)  the election must be made on or prior to the applicable
                    Tax Date;

               (b)  once made, then except as provided below,  the election will
                    be irrevocable  as to the particular  Shares as to which the
                    election is made;

               (c)  all elections  will be subject to the consent or disapproval
                    of the Committee;

               (d)  if the  Participant  is an  Insider  and if the  Company  is
                    subject  to  Section  16(b)  of the  Exchange  Act:  (1) the
                    election  may not be made  within six (6) months of the date
                    of grant of the Award,  except as otherwise permitted by SEC
                    Rule 16b-3(e) under the Exchange Act, and (2) either (A) the
                    election to use stock  withholding  must be irrevocably made
                    at least six (6) months prior to the Tax Date (although such
                    election  may be revoked at any time at least six (6) months
                    prior to the Tax Date)

                                       8
<PAGE>

                    or (B) the  exercise  of the Option or election to use stock
                    withholding  must  be  made  in  the  ten  (10)  day  period
                    beginning  on the third day  following  the  release  of the
                    Company's  quarterly or annual summary statement of sales or
                    earnings; and

               (e)  in the  event  that the Tax Date is  deferred  until six (6)
                    months after the delivery of Shares under  Section  83(b) of
                    the Code,  the  Participant  will receive the full number of
                    Shares with respect to which the exercise  occurs,  but such
                    Participant will be unconditionally obligated to tender back
                    to the Company the proper number of Shares on the Tax Date.

                10. PRIVILEGES OF STOCK OWNERSHIP.

                    10.1 Voting and Dividends.  No Participant  will have any of
the rights of a  shareholder  with  respect  to any Shares  until the Shares are
issued to the  Participant.  After  Shares  are issued to the  Participant,  the
Participant  will be a shareholder and have all the rights of a shareholder with
respect to such Shares, including the right to vote and receive all dividends or
other distributions made or paid with respect to such Shares;  provided, that if
such  Shares  are  Restricted  Stock,  then any  new,  additional  or  different
securities the  Participant  may become entitled to receive with respect to such
Shares by virtue of a stock  dividend,  stock  split or any other  change in the
corporate  or  capital  structure  of the  Company  will be  subject to the same
restrictions as the Restricted Stock;  provided,  further,  that the Participant
will have no right to retain such stock  dividends or stock  distributions  with
respect to Shares that are repurchased at the  Participant's  original  Purchase
Price pursuant to Section 12.

                    10.2  Financial  Statements.  If  expressly  required by any
state securities  authorities as a condition of the offer and issuance of Awards
in compliance with the securities laws of such state,  the Company shall provide
to each  Participant  during the period such  Participant  holds an  outstanding
Award a copy of the financial  statements  of the Company as prepared  either by
the Company or independent  certified  public  accountants of the Company.  Such
financial statements shall be delivered as soon as practicable following the end
of the Company's fiscal year during the period Awards are outstanding; provided,
however,  the Company will not be required to provide such financial  statements
to Participants whose services in connection with the Company assure them access
to equivalent information.

                11.  TRANSFERABILITY.  Awards  granted under this Plan,  and any
interest therein, will not be transferable or assignable by Participant, and may
not be made subject to execution,  attachment or similar process, otherwise than
by will or by the laws of descent and  distribution  or as  consistent  with the
specific  Plan and Award  Agreement  provisions  relating  thereto.  During  the
lifetime  of  the  Participant  an  Award  will  be  exercisable   only  by  the
Participant, and any elections with respect to an Award, may be made only by the
Participant.

                12.  RESTRICTIONS ON SHARES. At the discretion of the Committee,
the Company may reserve to itself and/or its  assignee(s) in the Award Agreement
a right to  repurchase  a portion of or all  Shares  that are not  "Vested"  (as
defined in the Stock Option  Agreement)  held by a  Participant  following  such
Participant's Termination at any time within ninety (90) days after the later of
Participant's  Termination Date and the date Participant  purchases Shares under
this Plan, for cash and/or cancellation of purchase money  indebtedness,  at the
Participant's  original Purchase Price,  provided,  that the right to repurchase
lapses at the rate of at least  20% per year  over five (5) years  from the date
the Shares were  purchased  (or from the date of grant of options in the case of
Shares obtained  pursuant to a Stock Option  Agreement and Stock Option Exercise
Agreement),  and if the right to repurchase is

                                       9
<PAGE>

assignable,  the assignee must pay the Company,  upon assignment of the right to
repurchase, cash equal to the excess of the Fair Market Value of the Shares over
the original Purchase Price.

                13.   CERTIFICATES.   All   certificates  for  Shares  or  other
securities  delivered  under this Plan will be  subject  to such stock  transfer
orders,  legends and other  restrictions  as the Committee may deem necessary or
advisable, including restrictions under any applicable federal, state or foreign
securities law, or any rules,  regulations and other  requirements of the SEC or
any stock  exchange or automated  quotation  system upon which the Shares may be
listed or quoted.

                14. ESCROW;  PLEDGE OF SHARES.  To enforce any restrictions on a
Participant's  Shares,  the Committee may require the Participant to deposit all
certificates  representing  Shares  (other  than  Shares  with  respect to which
consideration  has been fully paid by the  Participant  (in forms  other than by
promissory  notes) and received by the  Company),  together with stock powers or
other instruments of transfer approved by the Committee,  appropriately endorsed
in blank,  with the  Company or an agent  designated  by the  Company to hold in
escrow until such restrictions have lapsed or terminated,  and the Committee may
cause a legend or  legends  referencing  such  restrictions  to be placed on the
certificates.  Any  Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required  to pledge and  deposit  with the  Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory  note;  provided,  however,  that the Committee may
require or accept other or additional  forms of collateral to secure the payment
of such  obligation  and,  in any event,  the  Company  will have full  recourse
against the Participant under the promissory note  notwithstanding any pledge of
the  Participant's  Shares or other collateral or the Company's resort to any or
all of such collateral. In connection with any pledge of the Shares, Participant
will be required to execute and deliver a written pledge  agreement in such form
as the Committee will from time to time approve.  The Shares  purchased with the
promissory  note may be  released  from the  pledge  on a pro rata  basis as the
promissory note is paid.  Notwithstanding  any other provision in this Plan, the
Committee  may not  require  deposit in escrow or retain in escrow  evidence  of
unencumbered  Shares  for  which  consideration  has  been  fully  paid  by  the
Participant  (in a form other than by  promissory  notes)  and  received  by the
Company.

                15.  EXCHANGE AND BUYOUT OF AWARDS.  The  Committee  may, at any
time or from  time to time,  authorize  the  Company,  with the  consent  of the
respective  Participants,  to issue new Awards in exchange for the surrender and
cancellation of any or all outstanding  Awards.  Notwithstanding  the foregoing,
the Committee may at any time buy from a Participant an Award previously granted
with   payment  in  cash,   Shares   (including   Restricted   Stock)  or  other
consideration,  based on such  terms and  conditions  as the  Committee  and the
Participant may agree. The Committee may at any time cancel Options upon payment
to each  Participant  in cash,  with  respect to each  Option to the extent then
exercisable,  of any amount which, in the absolute  discretion of the Committee,
is  determined  to be  equivalent  to any  excess  of the  market  value (at the
effective time of such event) of the  consideration  that such Participant would
have received if the Option had been  exercised  before the effective  time over
the Exercise Price of the Option.

                16.  SECURITIES LAW AND OTHER  REGULATORY  COMPLIANCE.  An Award
will not be effective  unless such Award is in  compliance  with all  applicable
federal and state  securities  laws,  rules and regulations of any  governmental
body, and the  requirements of any stock exchange or automated  quotation system
upon which the Shares may then be listed or quoted, as they are in effect on the
date of grant of the Award and also on the date of exercise  or other  issuance.
Notwithstanding  any other  provision  in this Plan,  the  Company  will have no
obligation to issue or deliver certificates for Shares under this Plan prior to:
(a)  obtaining  any  approvals  from  governmental

                                       10
<PAGE>

agencies that the Company  determines  are  necessary or  advisable;  and/or (b)
completion of any  registration or other  qualification of such Shares under any
state or  federal  law or  ruling  of any  governmental  body  that the  Company
determines to be necessary or advisable. The Company will be under no obligation
to  register  the  Shares  with  the  SEC  or  to  effect  compliance  with  the
registration,  qualification  or listing  requirements  of any state  securities
laws, stock exchange or automated quotation system, and the Company will have no
liability for any inability or failure to do so.

                17. NO OBLIGATION  TO EMPLOY.  Nothing in this Plan or any Award
granted  under this Plan will  confer or be deemed to confer on any  Participant
any right to continue in the employ of, or to  continue  any other  relationship
with, the Company or any Parent, Subsidiary or Affiliate of the Company or limit
in any way the right of the Company or any Parent,  Subsidiary  or  Affiliate of
the Company to terminate  Participant's  employment or other relationship at any
time, with or without cause.

                18. CORPORATE TRANSACTIONS.

                    "18.1  Assumption or Replacement of Awards by Successor.  In
the event of (a) a dissolution or  liquidation  of the Company,  (b) a merger or
consolidation in which the Company is not the surviving  corporation (other than
a merger or consolidation with a wholly-owned  subsidiary,  a reincorporation of
the Company in a different jurisdiction,  or other transaction in which there is
no substantial change in the shareholders of the Company or their relative stock
holdings  and the Awards  granted  under  this Plan are  assumed,  converted  or
replaced by the successor  corporation,  which assumption will be binding on all
Participants),  (c) a merger in which the Company is the  surviving  corporation
but after  which the  shareholders  of the Company  (other than any  shareholder
which merges (or which owns or controls another  corporation  which merges) with
the Company in such merger) cease to own their shares or other equity  interests
in the Company,  (d) the sale of substantially all of the assets of the Company,
or (e) any other transaction which qualifies as a "corporate  transaction" under
Section 424(a) of the Code wherein the  shareholders  of the Company give up all
of their equity  interest in the Company  (except for the  acquisition,  sale or
transfer of all or  substantially  all of the outstanding  shares of the Company
from or by the shareholders of the Company),  the vesting of all Options held by
an employee of the Company on the date of such transaction  shall accelerate and
the options will become  exercisable in full prior to the  consummation  of such
events at such time and on such  conditions  as the Board will  determine and if
such  options  are not  exercised  prior to the  consummation  of the  corporate
transaction,  they shall  terminate in  accordance  with the  provisions of this
Plan.  Notwithstanding  the  foregoing,  the Board may, in its sole  discretion,
provide  that the vesting of any or all other  Awards  granted  pursuant to this
Plan will accelerate  upon a transaction  described in this Section 18.1. If the
Board  exercises  such  discretion  with  respect to Options,  such Options will
become  exercisable in full prior to the consummation of such event at such time
and on such  conditions  as the Board  determines,  and if such  Options are not
exercised  prior to the  consummation of the corporate  transaction,  they shall
terminate at such time as determined by the Board."

                    18.2  Other  Treatment  of Awards.  Subject  to any  greater
rights granted to  Participants  under the foregoing  provisions of this Section
18, in the event of the occurrence of any transaction described in Section 18.1,
any outstanding  Awards will be treated as provided in the applicable  agreement
or plan of merger,  consolidation,  dissolution,  liquidation, sale of assets or
other "corporate transaction."

                    18.3 Assumption of Awards by the Company. The Company,  from
time to time,  also may  substitute  or assume  outstanding  awards  granted  by
another company, whether in connection with an acquisition of such other company
or otherwise,  by either;  (a) granting an Award under this Plan in substitution
of such other  company's  award;  or (b)  assuming  such award as if it had

                                       11
<PAGE>

been granted under this Plan if the terms of such assumed award could be applied
to an Award granted under this Plan.  Such  substitution  or assumption  will be
permissible  if the holder of the  substituted  or assumed award would have been
eligible to be granted an Award under this Plan if the other company had applied
the rules of this Plan to such grant.  In the event the Company assumes an award
granted by another  company,  the terms and conditions of such award will remain
unchanged  (except that the  exercise  price and the number and nature of Shares
issuable  upon  exercise  of any  such  option  will be  adjusted  appropriately
pursuant  to Section  424(a) of the Code).  In the event the  Company  elects to
grant a new Option rather than assuming an existing option,  such new Option may
be granted with a similarly adjusted Exercise Price.

                19.  ADOPTION AND  SHAREHOLDER  APPROVAL.  This Plan will become
effective on the closing of the Company's  registered initial public offering of
securities (the "Effective Date"); provided, however, that if the Effective Date
does not occur on or before December 31, 1995, this Plan and any Options granted
hereunder will terminate as of December 31, 1995 having never become  effective.
This Plan shall be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan),  consistent with applicable  laws,  within twelve
(12) months before or after the date this Plan is adopted by the Board. Upon the
Effective  Date,  the Board may grant  Awards  pursuant to this Plan;  provided,
however,  that:  (a) no Option may be  exercised  prior to  initial  shareholder
approval  of this Plan;  (b) no Option  granted  pursuant  to an increase in the
number of Shares  subject to this Plan  approved by the Board will be  exercised
prior to the time such  increase has been  approved by the  shareholders  of the
Company;  and (c) in the event that shareholder approval of such increase is not
obtained within the time period provided  herein,  all Awards granted  hereunder
will be canceled,  any Shares issued pursuant to any Award will be canceled, and
any purchase of Shares  hereunder  will be rescinded.  So long as the Company is
subject to Section  16(b) of the Exchange  Act, the Company will comply with the
requirements of SEC Rule 16b-3  promulgated  thereunder (or its  successor),  as
amended, with respect to shareholder approval.

                20. TERM OF PLAN. Unless earlier  terminated as provided herein,
this Plan will  terminate  ten (10)  years from the date this Plan is adopted by
the Board or, if earlier, the date of shareholder approval.

                21.  AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate  or amend  this  Plan in any  respect,  including  without  limitation
amendment of any form of Award  Agreement or instrument to be executed  pursuant
to this Plan; provided,  however,  that the Board will not, without the approval
of the shareholders of the Company,  amend this Plan in any manner that requires
such shareholder  approval  pursuant to the Code or the regulations  promulgated
thereunder as such  provisions  apply to ISO plans or (if the Company is subject
to the  Exchange  Act or Section  16(b) of the  Exchange  Act)  pursuant  to the
Exchange Act or SEC Rule 16b-3  promulgated  thereunder (or its  successor),  as
amended, respectively.

                22.  NONEXCLUSIVITY  OF THE PLAN.  Neither the  adoption of this
Plan by the  Board,  the  submission  of this  Plan to the  shareholders  of the
Company  for  approval,  nor any  provision  of this Plan will be  construed  as
creating  any  limitations  on the power of the Board to adopt  such  additional
compensation  arrangements  as  it  may  deem  desirable,   including,   without
limitation,  the granting of stock options and bonuses otherwise than under this
Plan, and such  arrangements  may be either  generally  applicable or applicable
only in specific cases.

                                    Exhibit 1

                                       12
<PAGE>

                23. DEFINITIONS.  As used in this Plan, the following terms will
have the following meanings:

                    "Affiliate"   means  any  corporation   that  directly,   or
indirectly through one or more intermediaries,  controls or is controlled by, or
is under common control with, another  corporation,  where "control"  (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect,  of the power to cause the direction of the  management  and
policies of the corporation, whether through the ownership of voting securities,
by contract or otherwise.

                    "Award"  means any award  under  this  Plan,  including  any
Option, Restricted Stock or Stock Bonus.

                    "Award  Agreement"  means,  with respect to each Award,  the
signed written agreement  between the Company and the Participant  setting forth
the terms and conditions of the Award.

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

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

                    "Committee"  means the  committee  appointed by the Board to
administer this Plan, or if no such committee is appointed, the Board.

                    "Company" means Cellegy Pharmaceuticals,  Inc. a corporation
organized  under  the  laws  of  the  State  of  California,  or  any  successor
corporation.

                    "Disability"  means  a  disability,   whether  temporary  or
permanent, partial or total, as determined by the Committee.

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

                    "Exercise  Price"  means  the  price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.

                    "Fair Market  Value" means,  as of any date,  the value of a
share  of the  Company's  Common  Stock  determined  by the  Board  in its  sole
discretion, exercised in good faith; provided, however, that if the Common Stock
of the Company is quoted on the Small Cap Market of the National  Association of
Securities  Dealers  Automated  Quotation  System  or is  regularly  quoted by a
recognized  securities dealer, and selling prices are reported,  the Fair Market
Value per share shall be the  closing  sales price for such stock or the closing
bid if no sales were reported,  as quoted on such system or by such dealer,  for
the date the value is to be determined (or if there are not sales for such date,
then for the last preceding  business day on which there were sales);  provided,
however,  that if the Common  Stock of the Company is listed on any  established
stock exchange or a national  market system,  including  without  limitation the
National  Market  System  of the  National  Association  of  Securities  Dealers
Automated Quotation System, the Fair Market Value per share 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 largest such  exchange)  for the date
the value is to be determined (or if there are not sales for such date, then for
the last preceding  business day on which there were sales),  as reported in the
Wall Street Journal or similar publication.

                                       13
<PAGE>

                    "Insider" means an officer or director of the Company or any
other person whose  transactions  in the  Company's  Common Stock are subject to
Section 16 of the Exchange Act.

                    "Option"  means an award of an  option  to  purchase  Shares
pursuant to Section 5.

                    "Outside Directors" shall mean any director who is not (i) a
current  employee of the Company or any Parent,  Subsidiary  or Affiliate of the
Company,  (ii) a former  employee of the Company or any  Parent,  Subsidiary  or
Affiliate of the Company who is receiving  compensation for prior service (other
than benefits under a  tax-qualified  pension  plan),  (iii) a current or former
officer of the Company or any Parent,  Subsidiary or Affiliate of the Company or
(iv) currently  receiving  compensation  for personal  services in any capacity,
other  than as a  director,  from  the  Company  or any  Parent,  Subsidiary  or
Affiliate  of the  Company;  provided,  however,  that at such  time as the term
"Outside  Director",  as  used in  Section  162(m)  is  defined  in  regulations
promulgated under Section 162(m) of the Code,  "Outside Director" shall have the
meaning  set  forth in such  regulations,  as  amended  from time to time and as
interpreted by the Internal Revenue Service.

                    "Parent" means any  corporation  (other than the Company) in
an unbroken chain of corporations ending with the Company, if at the time of the
granting of an Award under this Plan, each of such  corporations  other than the
Company owns stock  possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

                    "Participant"  means a person who  receives  an Award  under
this Plan.

                    "Plan" means this Cellegy  Pharmaceutical,  Inc. 1995 Equity
Incentive Plan, as amended from time to time.

                    "Restricted  Stock Award" means an award of Shares  pursuant
to Section 6.

                    "SEC" means the Securities and Exchange Commission.

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

                    "Shares" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.

                    "Stock  Bonus" means an award of Shares,  or cash in lieu of
Shares, pursuant to Section 7.

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

                    "Termination"  or "Terminated"  means,  for purposes of this
Plan with  respect to a  Participant,  that the  Participant  has for any reason
ceased to provide  services as an employee,  director,  consultant or advisor to
the Company or a Parent,  Subsidiary or Affiliate of the Company,  except in the
case of sick leave,  military leave,  or any other leave of absence  approved by
the Committee,  provided that such leave is for a period of not more than ninety
(90) days, or  reinstatement  upon the expiration of such leave is guaranteed by
contract  or statute.  The  Committee  will have sole  discretion  to  determine

                                       14

<PAGE>

whether a Participant  has ceased to provide  services and the effective date on
which the Participant ceased to provide services (the "Termination Date").

                                       15

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