Document:

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                                                                   EXHIBIT 10.1

                              AMENDED AND RESTATED

                           INVESTORS' RIGHTS AGREEMENT

         This Amended and Restated Investors' Rights Agreement (the "AGREEMENT")
is effective as of July 6, 2000 by and among DoubleTwist, Inc. (the "COMPANY")
and the holders of Preferred Stock listed on SCHEDULE A attached hereto (the
"INVESTORS").

                                    RECITALS
                                    --------

         WHEREAS, on February 3, 1997, the Company entered into a Series B
Preferred Stock Warrant Purchase Agreement (the "SERIES B AGREEMENT") with and
issued shares of Series B Preferred Stock to the investors listed on EXHIBIT A
thereto;

         WHEREAS, on February 3, 1997, the Company entered into an Investors'
Rights Agreement with the investors listed on SCHEDULE A thereto;

         WHEREAS, on December 10, 1998, the Company entered into a Series C
Preferred Stock Purchase Agreement (the "SERIES C AGREEMENT") with and issued
shares of Series C Preferred Stock to the investors listed on EXHIBIT A thereto;

         WHEREAS, in connection with the sale of the Company's Series C
Preferred Stock, the Company amended and restated the Investors' Rights
Agreement dated February 3, 1997 and entered into the Amended and Restated
Investors' Rights Agreement dated December 10, 1998;

         WHEREAS, on February 18, 2000, the Company entered into a Series D
Preferred Stock Purchase Agreement (the "SERIES D AGREEMENT") with and issued
shares of Series D Preferred Stock to the investors listed on EXHIBIT A thereto;

         WHEREAS, in connection with the sale of the Company's Series D
Preferred Stock, the Company amended and restated the Investors' Rights
Agreement dated December 10, 1998 and entered into the Amended and Restated
Investors' Rights Agreement dated February 18, 2000 (the "PRIOR RIGHTS
AGREEMENT");

         WHEREAS, the parties to the Prior Rights Agreement desire to amend and
restate the Prior Rights Agreement for the purpose of including certain new
parties to the Agreement; and

         WHEREAS, simultaneously herewith, the Company is entering into a Series
E Preferred Stock Purchase Agreement (the "SERIES E AGREEMENT") with and issuing
shares of Series E Preferred Stock to the investors named in EXHIBIT A thereto.

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         NOW THEREFORE, it is hereby agreed as follows:

     1. CERTAIN DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:

               (a) The term "ACT" shall mean the Securities Act of 1933, as
amended;

               (b) The term "FORM S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission (the "SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC;

               (c) The term "HOLDER" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof in accordance with
Section 3.12 hereof,

               (d) The term "PREFERRED STOCK" shall mean the Series E Preferred
Stock, and Series D Preferred Stock, Series C Preferred Stock, Series B
Preferred Stock and any shares of Series A1 Preferred Stock held by KPCB Java
Fund, L.P., KPCB Life Sciences Zaibatsu Fund II, L.P. and Kleiner Perkins
Caufield & Byers VIII, L.P.

               (e) The terms "REGISTER," "REGISTERED," and "REGISTRATION" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act and the declaration or ordering of
effectiveness of such registration statement or document;

               (f) The term "REGISTRABLE SECURITIES" means (1) the Common Stock
issued or issuable upon conversion of the Series E Preferred Stock issued
pursuant to the Series E Preferred Stock issued pursuant to the Series E
Agreement, (2) the Common Stock issued or issuable upon conversion of the Series
D Preferred Stock issued pursuant to the Series D Agreement, (3) the Common
Stock issued or issuable upon conversion of the Series C Preferred Stock issued
pursuant to the Series C Agreement, (4) the Common Stock issued or issuable upon
conversion of the Series B Preferred Stock issued pursuant to the Series B
Agreement and issued upon exercise of the Warrants (as defined in the Series B
Agreement), (5) any Common Stock issued or issuable upon conversion of Series A1
Preferred Stock held by KPCB Java Fund, L.P., KPCB Life Sciences Zaibatsu Fund
II, L.P. and Kleiner Perkins Caufield & Byers VIII, L.P. and (6) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of
any warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Preferred Stock

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or Common Stock, excluding in all cases, however, (i) any Registrable Securities
sold by a person in a transaction in which such person's rights under Section 3
are not assigned, or (ii) any Registrable Securities sold to or through a broker
or dealer or underwriter in a public distribution or a public securities
transaction;

               (g) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities; and

               (h) The term "RESTRICTED SECURITIES" shall mean the securities of
the Company required to bear the legend set forth in Section 2 hereof.

     2. RESTRICTIVE LEGEND.

          Each certificate representing the Preferred Stock and the Common Stock
issuable upon conversion thereof or any other securities issued in respect of
the Preferred Stock or the Common Stock issuable upon conversion thereof upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall be stamped or otherwise imprinted with a legend in the
following form (in addition to any legend required under applicable state
securities laws):

                  THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
                  FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
                  SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE
                  SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION UNLESS
                  THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
                  ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
                  FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
                  SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF
                  THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT
                  NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
                  THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
                  PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.

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     3. REGISTRATION RIGHTS.

         3.1 REQUEST FOR REGISTRATION.

               (a) If the Company shall receive at any time after the earlier of
(X) February 31, 2002 or (Y) the date 180 days after the effective date of the
Company's initial public offering, a written request from Holders holding (i) at
least 20% of the Registrable Securities then outstanding or (ii) any lesser
number of shares if the anticipated aggregate offering price would exceed
$15,000,000 that the Company file a registration statement under the Act
covering the registration of such Registrable Securities, then the Company
shall, within ten (10) days of the receipt thereof, give written notice of such
request to all Holders and shall, subject to the limitations of Section 3.1(b),
effect as soon as practicable, and in any event within 90 days of the receipt of
such request, the registration under the Act of all such Registrable Securities
which the Holders request to be registered within twenty (20) days of the
receipt of such written notice by the Company, PROVIDED, HOWEVER, that the
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 3.1(a):

                    (i) during the period starting with the date sixty (60) days
prior to the Company's estimated date of filing of (as determined by the
Company's Board of Directors in writing with such writing being delivered to the
Holders), and ending on the date 120 days immediately following the effective
date of, any registration statement pertaining to securities of the Company
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;

                    (ii) after the Company has effected two such registrations
pursuant to this Section 3.1(a), and such registrations have been declared or
ordered effective for the time specified in 3.3(a); or

                    (iii) if the Company shall furnish to such Holders a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its stockholders for a registration statement to
be filed at such time, then the Company's obligation to use its best efforts to
register, qualify or comply under this Section 3.1(a) shall be deferred for a
period not to exceed 90 days from the date of receipt of written request from
the Holders; PROVIDED, HOWEVER, that the Company may not utilize this right more
than once in any twelve-month period under this Section or under Section
3.11(a)(3).

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               (b) If the Holders initiating the registration request hereunder
(the "INITIATING HOLDERS") intend to distribute the Registrable Securities
covered by their request by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to this Section 3.1 and the
Company shall include such information in the written notice referred to in
Section 3.1(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
3.3(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 3.1, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and any shares to be so excluded shall be determined in the following sequence:
(i) first, securities held by any other persons or entities (other than Holders
holding Registrable Securities) not having registration rights or having
contractual, incidental "piggyback" rights to include such securities in the
registration statement, (ii) second, shares sought to be registered by the
Company, and (iii) third, the Registrable Securities sought to be registered by
each Holder on a pro rata basis in accordance with the total number of
Registrable Securities sought to be registered by the Holders.

          3.2 COMPANY REGISTRATION. If (but without any obligation to do so) the
Company proposes to register (including for this purpose a registration effected
by the Company for stockholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, or a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after written notice by the Company, the
Company shall, subject to the provisions of Section 3.7, cause to be registered
under the Act all of the Registrable Securities that each such Holder has
requested to be registered.

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          3.3 OBLIGATIONS OF THE COMPANY. Whenever required under this Section 3
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:

               (a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to be declared or ordered effective, and keep such
registration statement effective until the earlier to occur of the sale of all
Registrable Securities under such registration statement or for ninety (90)
days.

               (b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.

               (c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.

               (d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
PROVIDED, HOWEVER, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions except
in those jurisdictions in which the Company is already qualified or subject to
service of process.

               (e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriters of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
the Holders greater than the obligations set forth in Section 3.9(b) and (d).

               (f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing and
correct such misrepresentation or omission as expeditiously as reasonably
possible.

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               (g) Furnish, at the request of any Holder requesting registration
of Registrable Securities pursuant to this Section 3, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 3, if such securities are being
sold through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, in form and
substance as is customarily given to underwriters in an underwritten
registration public offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) if such
offering is being underwritten, a letter dated such date, from the independent
certified public accountants of the Company, in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters.

               (h) Cause all such Registrable Securities registered pursuant
hereunder to securities be listed on each securities exchange or the Nasdaq
National Market on which similar securities issued by the Company are then
listed.

               (i) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.

               (j) In connection with an underwritten offering, to the extent
requested by the managing underwriters or Holders, participate in and support
customary efforts to sell the Registrable Securities in the offering; including
without limitation, participating in "road shows."

          3.4 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 3 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.

          3.5 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with the
registration, filing or qualification pursuant to Section 3.1, including all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company; PROVIDED, HOWEVER, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 3.1 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all

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participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to a demand
registration pursuant to Section 3.1; provide further, that if at the time of
such withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 3.1.

          3.6 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 3.2 for each Holder (which right may be assigned as provided
in Section 3.12), including all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.

          3.7 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 3.2 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
according to the total amount of securities entitled to be included therein
owned by each selling stockholder or in such other proportions as shall mutually
be agreed to by such selling stockholders, PROVIDED, HOWEVER, the Holders shall
have the first right to include all of their shares in the offering before any
shares held by other selling stockholders) and in no event shall the shares held
by the selling Holders included in the offering be reduced below 25% of the
shares sold in any offering with the exception of the Company's initial public
offering. For purposes of apportionment, any selling stockholder which is a
Holder of Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such Holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
stockholder", and any pro rata reduction with respect to such "selling
stockholder" shall be based upon the aggregate amount shares carrying
registration rights

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owned by all entities and individuals included in such "selling stockholder," as
defined in this sentence.

          3.8 DELAY OF REGISTRATION. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 3.

          3.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 3:

               (a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), against any losses, claims, damages or liabilities (joint or
several) to which they may become subject under the Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively, a
"VIOLATION"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the Exchange Act, any state securities law or any rule or
regulation promulgated under the Act, the Exchange Act or any state securities
law; and the Company will pay to each such Holder, underwriter or controlling
person, as incurred, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; PROVIDED, HOWEVER, that the indemnity agreement contained
in this Section 3.9(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability, or action to the extent that it arises out of or is based
upon a Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.

               (b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other

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Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the Exchange Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 3.9(b), in connection with investigating or defending
any such loss, claim, damage, liability, or action; PROVIDED, HOWEVER, that the
indemnity agreement contained in this Section 3.9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder (which consent shall
not be unreasonably withheld). In no event shall any indemnity under this
Section 3.9(b) exceed the net proceeds from the offering received by such
Holder.

               (c) Promptly after receipt by an indemnified party under this
Section 3.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 3.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.9, but the omission to so deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 3.9.

               (d) If the indemnification provided for in this Section 3.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss, claim
or liability in such proportion as is appropriate to reflect the relative fault
of the indemnifying party on the one hand and of

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the indemnified party on the other in connection with the Violation(s) that
resulted in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by a court of law by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. In no event shall any contribution by a Holder
hereunder exceed the net proceeds from the offering received by such Holder.

               (e) The obligations of the Company and Holders under this
Section 3.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 3.9.

          3.10 REPORTS UNDER THE SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:

               (a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;

               (b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;

               (c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the Exchange Act; and

               (d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the Exchange Act (at
any time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed

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by the Company and (iii) such other information as may be reasonably requested
in availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

          3.11 FORM S-3 REGISTRATION.

               (a) If the Company shall receive from any Holder or Holders, a
written request or requests that the Company effect a registration on Form S-3
(or any comparable successor form) and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:

                    (i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and

                    (ii) as soon as practicable, effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
PROVIDED, HOWEVER, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 3.11: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the (net of any underwriters'
discounts or commissions) of less than $1,000,000; (3) if the Company shall
furnish to the Holders a certificate signed by the Chief Executive Officer of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
stockholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 90 days after receipt of
the request of Holder or Holders under this Section 3.11; PROVIDED, HOWEVER,
that the Company shall not utilize this right more than once in any twelve (12)
month period under this Section or under Section 3.1(a)(iii); (4) if the Company
has already effected two registrations on Form S-3 in any twelve (12) month
period for the Holders pursuant to this Section 3.11; or (5) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance except in those jurisdictions in which
the Company is already qualified or subject to service of process.

                                      -12-
<PAGE>

               (b) If the Holders initiating the registration request hereunder
intend to distribute the Registrable Securities covered by their request by
means of an underwriting, they shall so advise the Company as part of their
request made pursuant to this Section 3.11 and the Company shall include such
information in the written notice referred to in Section 3.11(a)(i). In such
event, the right of any Holder to include his Registrable Securities in such
registration conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Holders
initiating the registration request hereunder and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
3.3(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Holders initiating the registration request hereunder.
Notwithstanding any other provision of this Section 3.11, if the underwriter
advises the Holders initiating the registration request hereunder in writing
that marketing factors require a limitation of the number of shares to be
underwritten, then the Holders initiating the registration request hereunder
shall so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto and any shares to be so excluded shall be
determined in the following sequence: (i) first, securities held by any other
persons or entities (other than Holders holding Registrable Securities) not
having registration rights or having contractual, incidental "piggyback" rights
to include such securities in the registration statement, (ii) second, shares
sought to be registered by the Company, and (iii) third, the Registrable
Securities sought to be registered by each Holder on a pro rata basis in
accordance with the total number of Registrable Securities sought to be
registered by the Holders.

               (c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders and use its best efforts to keep such
registration statement effective until the registered shares are sold or for six
months, whichever comes first. All expenses incurred in connection with a
registration requested pursuant to Section 3.11, including all registration,
filing, qualification, printer's and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding any underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the Company. Registrations effected pursuant to
this Section 3.11 shall not be counted as registrations effected pursuant to
Section 3.1 or 3.2.

          3.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee who acquires at least the
lesser of (i) all of such Holder's Registrable Securities or (ii) 500,000 shares
of Registrable Securities, provided

                                      -13-
<PAGE>

the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such registration rights are being assigned;
and provided further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. Notwithstanding the
above, such rights may be assigned or transferred by a Holder to a transferee or
assignee (regardless of the number of shares transferred or assigned) who is:

               (a) a limited partner, general partner, former partner,
stockholder, unitholder or affiliate of a Holder or the beneficial owner of any
interest in Holder; or

               (b) an investment fund to which MDS Capital Corp. provides
management or investment advisory services (an "MDS Fund"), whether or not such
MDS Fund was a Holder prior to such transfer or assignment, where the assignor
or transferor is an MDS Fund.

          3.13 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Sections 3.1 or 3.11 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included, (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in Section 3.1(a) or within one
hundred twenty (120) days of the effective date of any registration affected
pursuant to Section 3.1 or (c) grant any registration rights superior to those
contained herein.

          3.14 "MARKET STAND-OFF" AGREEMENT. Each holder of securities which are
or at one time were Registrable Securities (or which are or were convertible
into Registrable Securities) hereby agrees that, during a period not to exceed
180 days, following the effective date of a registration statement of the
Company filed under the Act unless otherwise consented by any underwriters, it
shall not, to the extent requested by the Company and such underwriter, sell or
otherwise transfer or dispose of any securities of the Company held by it at any
time during such period except Common Stock included in such registration;
PROVIDED, HOWEVER, that:

               (a) such agreement shall be applicable only to the first such
registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;

                                      -14-
<PAGE>

               (b) all officers, directors and 5% or greater stockholders of the
Company enter into similar agreements; and

               (c) such agreement shall not be applicable to securities
acquired in the Company's initial public offering of its Common Stock or the
open market following the Company's initial public offering of its Common
Stock.

         In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.

          3.15 TERMINATION OF REGISTRATION RIGHTS. No stockholder shall be
entitled to exercise any right provided for in this Section 3 after the five (5)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
initial firm commitment underwritten offering of its Common Stock.

     4. RIGHT OF FIRST OFFER.

          4.1 GRANT OF RIGHT. Subject to the terms and conditions specified in
this Section 4, the Company hereby grants to each Investor holding at least
100,000 shares of Registrable Securities a right of first offer with respect to
future sales by the Company of its Future Shares (as hereinafter defined). For
purposes of this Section 4, the term "Investor" includes any limited or general
partners, former limited or general partners, stockholders, unitholders or
affiliates of the Investor and any beneficial owners or any interest in the
Investor ("Others"). The right of first offer granted under this Section 4 is
assignable or transferable by an Investor:

               (a) To any person or entity to whom either all, or not less than
500,000 of such Investor's Registrable Securities are transferred, or

               (b) To any transferee which is an MDS Fund (where the transferor
is an MDS Fund), regardless of whether or not such transferee or assignee was a
Holder prior to such transfer or assignment and regardless of how many
Registrable Securities are transferred.

The Investor shall be entitled to apportion the right of first offer hereby
granted among itself and Others, and any such permitted transferees, in such
proportions as it deems appropriate.

          4.2 FUTURE SHARES. "FUTURE SHARES" shall mean shares of any capital
stock of the Company, whether now authorized or not, and any rights, options or
warrants to purchase such capital stock, and securities of any type that are, or
may become,

                                      -15-
<PAGE>

convertible into such capital stock; PROVIDED, HOWEVER, that Future
Shares do not include (i) the shares of Series E Preferred Stock listed on
Exhibit A to the Series E Agreement and an additional 1,000,000 shares of Series
E Preferred Stock thereafter or the Common Stock issued or issuable upon the
conversion of the Series E Preferred Stock, (ii) any shares of Series D
Preferred Stock or the Common Stock issued or issuable upon the conversion of
the Series D Preferred Stock, (iii) any shares of Series C Preferred Stock or
the Common Stock issued or issuable upon the conversion of the Series C
Preferred Stock, (iv) any shares of Preferred Stock outstanding as of the date
of this Agreement or the Common Stock issued or issuable upon the conversion of
such Preferred Stock, (v) securities offered pursuant to a registration
statement filed under the Act, (vi) securities issued pursuant to the
acquisition of another corporation by the Company by merger of, purchase of
substantially all of the assets of or other reorganization, (vii) all warrants
to purchase shares of the Company's Common Stock or Preferred Stock outstanding
on February 1, 2000 and the shares issuable upon exercise of such warrants,
(viii) all shares of Common Stock, warrants or options to purchase Common Stock
or other securities issued to employees, officers, directors, scientific
advisors and consultants of the Company pursuant to any plan or arrangement
approved by the board of directors of the Company, (ix) all securities issuable
to lending or leasing institutions pursuant to any plan or arrangement approved
by the board of directors of the Company and (x) all securities issued or
issuable to licensors or corporate partners of the Company upon approval of the
board of director of the Company, if in transactions with primarily
non-financing purposes.

          4.3 NOTICE. In the event the Company proposes to offer any of its
Future Shares, the Company shall first make an offering of such Future Shares to
each Investor in accordance with the following provisions:

               (a) The Company shall deliver a notice in accordance with Section
8.2 hereof (the "NOTICE") to the Investors stating (i) its bona fide intention
to offer such Future Shares, (ii) the number of such Future Shares to be
offered, (iii) the price, if any, for which it proposes to offer such Future
Shares and (iv) subject to subsection (b) below, a statement as to the number of
days from receipt of such Notice within which the Investor must respond to such
Notice.

               (b) Within 10 business days after receipt of the Notice, the
Investor or may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of the Future Shares offered which
equals the proportion that the number of shares of Common Stock issued and held,
or issuable upon conversion of Preferred Stock then held, by such Investor bears
to the total number of shares of Common Stock issued and held, or issuable upon
conversion of the Preferred Stock then held, by all Investors. The Company shall
promptly, in writing, inform each Investor that agrees to purchase all the
shares available to it (a "FULLY-EXERCISING INVESTOR") of any

                                      -16-
<PAGE>

other Investor's failure to do likewise. During the five-business-day period
commencing after receipt of such information, each Fully-Exercising Investor
shall be entitled to obtain that portion of the Future Shares for which
Investors were entitled to subscribe but which were not subscribed by the
Investors or other holders of similar rights of first refusal, which is equal to
the proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of Preferred Stock then held, by such Fully-Exercising
Investor bears to the total number of Common Stock issued and held, or issuable
upon conversion of the Preferred Stock then held, by all Fully-Exercising
Investors who wish to purchase some of the unsubscribed shares. The closing of
the sale of Future Shares by the Company to each Investor upon exercise of its
rights under this Section 4 shall take place simultaneously with the closing of
the sale of Future Shares to third parties.

          4.4 SALE AFTER NOTICE. If all such Future Shares referred to in the
Notice are not elected to be obtained as provided in Section 4.3 hereof, the
Company may, during the 90-day period following the expiration of the period
provided in Section 4.3 hereof, offer the remaining unsubscribed Future Shares
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Future Shares within such
period, or if such agreement is not consummated within 90 days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Future Shares shall not be offered unless first reoffered to the Investors in
accordance herewith.

          4.5 TERMINATION OF RIGHTS. The rights provided for in this Section 4
shall terminate upon the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
initial firm commitment underwritten offering of its securities to the general
public.

     5. RIGHT OF FIRST OFFER ON INITIAL PUBLIC OFFERING.

          5.1 GRANT OF RIGHT. Subject to the terms and conditions specified in
this Section 5, any applicable laws and comments received by the Staff of the
SEC, the Company hereby grants to the holders of Series C Preferred Stock (the
"SERIES C HOLDERS") a right of first offer with respect to up to $10.0 million
of its securities offered pursuant to a registration statement filed by the
Company under the Act in connection with the initial firm commitment
underwritten offering of its securities to the general public (the "IPO
SECURITIES").

          5.2 NOTICE.

               (a) Within 10 business days of the date the Company first files a
registration statement under the Act in connection with the initial firm
commitment

                                      -17-
<PAGE>

underwritten offering of its securities to the general public, the Company shall
deliver a notice in accordance with Section 8.2 hereof (the "IPO NOTICE") to
each Series C Holder stating (i) the number and type of such securities to be
offered, (ii) the price for which it proposes to offer such securities and (iii)
subject to subsection (b) below, a statement as to the number of days from
receipt of the IPO Notice within which such Series C Holder must respond to the
IPO Notice.

               (b) Subject to the dollar limitation set forth in Section 5.1,
within 5 business days after receipt of the IPO Notice, each Series C Holder may
elect to purchase or obtain, at the "Price to Public" and on the terms specified
in the IPO Notice, up to that portion of such IPO Securities which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon conversion of the Series C Preferred Stock then held, by such
Series C Holder bears to the total number of shares of Common Stock issued and
held, or issuable upon conversion of the Series C Preferred Stock then held, by
all Series C Holders. The Company shall promptly, in writing, inform each Series
C Holder that elects to purchase all the IPO Securities available to it (a
"FULLY-EXERCISING HOLDER") of any other Series C Holder's failure to do
likewise. During the 5 business days period commencing after receipt of such
information, each Fully-Exercising Holder shall be entitled to obtain that
portion of the IPO Securities for which the Series C Holders were entitled to
subscribe but which were not subscribed for by such Series C Holders, which is
equal to the proportion that the number of shares of Common Stock issued and
held, or issuable upon conversion of the Series C Preferred Stock then held, by
such Fully-Exercising Holder to the total number of shares of Common Stock
issued and held, or issuable upon conversion of the Series C Preferred Stock
then held, by all Fully-Exercising Holders who wish to purchase some of the
unsubscribed IPO Securities. The sale of IPO Securities by the Company to each
Series C Holder upon exercise of its rights under this Section 5 shall take
place in accordance with the plan of distribution of the managing underwriter of
the offering.

          5.3 SALE AFTER NOTICE. If all IPO Securities referred to in the IPO
Notice are not elected to be obtained as provided in Section 5.2 hereof, the
Company may sell those securities pursuant to the offering.

          5.4 ASSIGNMENT. The right of first offer granted under this Section is
not assignable other than to:

               (a) any limited or general partner, former limited or general
partner, stockholder, unitholder or affiliate of a Series C Holder or any
beneficial owner of any interest in a Series C Holder, or

               (b) an MDS Fund (where the transferor is an MDS Fund), regardless
of whether or not such transferee or assignee was a Series C Holder prior to
such transfer or assignment and regardless of how many Series C Shares are
transferred.

                                      -18-
<PAGE>

     6. INFORMATION RIGHTS.

          6.1 DELIVERY OF FINANCIAL STATEMENTS. The Company will provide each
Investor the following reports for so long as the Investor is a holder of a
minimum of 100,000 shares of Registrable Securities (a "MAJOR INVESTOR"),
including for purposes of this Section 6 any such shares which have been
transferred to a constituent partner of an Investor:

               (a) as soon as practicable after the end of each calendar year,
and in any event within 90 days thereafter, consolidated balance sheets of the
Company and its subsidiaries, if any, as of the end of such calendar year, and
consolidated statements of income, stockholders' equity and cash flows of the
Company and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles on a basis consistent with prior years
and setting forth in each case in comparative form the figures for the previous
calendar year, all in reasonable detail and audited by independent "Big Five"
public accountants of national standing selected by the Company and reasonably
acceptable to the Investors.

               (b) as soon as practicable after the end of each calendar month,
and in any event within thirty (30) days thereafter, a consolidated balance
sheet of the Company as of the end of each such month, and a consolidated
statement of income and a consolidated statement of cash flows of the Company
for such month and for the current fiscal year to date, including a comparison
to plan figures for such period, prepared in accordance with generally accepted
accounting principles consistently applied with the exception that no notes need
be attached to such statements and year-end audit adjustments need not have been
made, all in reasonable detail and certified by the Company's chief financial
officer;

               (c) as soon as practicable prior to the end of each fiscal year,
and in any event no later than thirty (30) days prior thereto, a five-year
strategic business plan and operating budget (including a description of
intended uses of funds) for the Company and its subsidiaries, if any.

               (d) promptly upon receipt thereof (and in any event within five
business days thereafter), the Company shall deliver to each Major Investor
copies of all management letters and reports submitted to the Company by
independent certified public accountants in connection with any annual, interim
or special audit of the Company made by such accountants.

          6.2 OBSERVER RIGHTS. So long as the aggregate holdings of all MDS
Funds are not less than the holdings that would otherwise be required to
constitute a Major Investor, the Company will permit any one person identified
by any MDS Fund (the "OBSERVER") to attend all meetings of the Company's Board
of Directors and all

                                      -19-
<PAGE>

committees thereof (whether in person, telephonic or other) in a non-voting,
observer capacity and shall provide to the Observer, concurrently with the
members of the Board of Directors, and in the same manner, notices of such
meetings and copies of all materials provided to such members; PROVIDED,
HOWEVER, that the Observer shall agree to hold in confidence and trust all
information so provided.

          6.3 BOARD MEETINGS. The Board of Directors shall meet at least once
every two months with at least one meeting per year held in Boston,
Massachusetts. The Company shall use its best efforts to ensure that its Chief
Executive Officer and senior vice-presidents are available for such meetings.
The Company shall promptly reimburse in full each director of the Company
elected by the Series C Holders (voting as a separate class) and each director
of the Company elected by the Series D Holders (voting as a separate class) and
the Observer for all of their reasonable out of pocket expenses incurred in
attending each meeting of the Board of Directors of the Company or any committee
thereof.

          6.4 BOARD COMMITTEES.

               (a) The Board of Directors shall establish and maintain a
Compensation Committee to administer the Company's employee stock plans,
including the 1996 Equity Incentive Plan, and to make recommendations to the
Board of Directors with respect to management compensation and terms of
employment. The Board of Directors shall have the power to accept or reject any
recommendation of the Compensation Committee but shall not approve compensation
for an employee in an amount that differs from the amount recommended by the
Compensation Committee. The Compensation Committee shall be comprised of at
least two (2) and no more than four (4) directors; PROVIDED, HOWEVER, that at
least one member of the Compensation Committee shall be a director elected by
the Series C Holders (voting as a separate class) and at least one shall be a
director elected by the Series D Holders (voting as a separate class).

               (b) The Board of Directors shall establish and maintain an Audit
Committee to review the results and scope of the Company's annual audit and
other services provided by the Company's independent auditors. The Audit
Committee shall be comprised of at least two (2) and no more than four (4)
directors; PROVIDED, HOWEVER, that at least one member of the Audit Committee
shall be a director elected by the Series C Holders (voting as a separate class)
and at least one shall be a director elected by the Series D Holders (voting as
a separate class).

                                      -20-
<PAGE>

          6.5 OPTION PLAN ADMINISTRATION.

               (a) Unless otherwise agreed by the Board of Directors, any
options granted by the Company after the date of this Agreement to the Company's
founders, management, directors or consultants shall become exercisable at the
rate of 25% after the first anniversary of the date of grant and three
forty-eighths (3/48) each quarter thereafter, so long as the optionee continues
to be an employee, directors or consultant of the Company.

               (b) The Board of Directors has amended the Company's form of
stock option agreement pursuant to the Company's 1996 Equity Incentive Plan to
provide that, as a condition precedent to the issuance of any shares of Common
Stock upon the exercise of an option granted pursuant to the Company's 1996
Equity Incentive Plan, the exercising option holder agrees to be bound by the
terms and conditions of the Company's Amended and Restated Co-Sale Agreement,
dated the date hereof.

          6.6 TERMINATION OF COVENANTS. The covenants set forth in this Section
6 shall terminate as to Investors and be of no further force or effect when the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the firm commitment underwritten offering of
its securities to the general public is consummated.

     7. AMENDMENTS TO PRIOR AGREEMENT; WAIVERS.

          7.1 PRIOR INVESTORS' RIGHTS AGREEMENT. The Prior Rights Agreement is
hereby replaced and superseded in its entirety by this Agreement.

          7.2 WAIVERS. The holders of the Series Al Preferred, Series B
Preferred, Series C Preferred and Series D Preferred hereby waive any rights
they may have pursuant to the Prior Rights Agreement to receive notice of the
issuance of or to purchase or otherwise acquire any shares of the Series E
Preferred and the Common Stock issuable upon conversion of such Series E
Preferred pursuant to the Series E Agreement.

     8. MISCELLANEOUS PROVISIONS.

          8.1 WAIVERS AND AMENDMENTS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of at least a majority
of the then outstanding shares of Registrable Securities. Notwithstanding the
foregoing, to the extent any amendment or waiver would adversely affect any
particular class of the Company's securities, the written consent of at least a
majority of the then outstanding shares of Registrable Securities of that class
must be obtained to affect such amendment or waiver.

                                      -21-
<PAGE>

Any amendment or waiver effected in accordance with this Section 8.1 shall be
binding upon each person or entity which is granted certain rights under this
Agreement and the Company.

          8.2 NOTICES. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, delivery by fax with
confirmation of receipt, delivery by nationally recognized courier or five
business days after deposit with the United States Post Office (by first class
mail, postage prepaid), addressed: (a) if to the Company, at 1999 Harrison
Street, Suite 1100, Oakland, California 94612-3517 (or at such other address as
the Company shall have furnished to the Investors in writing) attention to Chief
Executive Officer and (b) if to an Investor, at the address of such person shown
on Schedule A hereto.

          8.3 DESCRIPTIVE HEADINGS. The descriptive headings herein have been
inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.

          8.4 GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the State of California as applied to agreements among
California residents, made and to be performed entirely within the State of
California.

          8.5 ATTORNEY'S FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

          8.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in
this Agreement, this Agreement shall benefit and bind the successors, assigns,
heirs, executors and administrators of the parties to this Agreement.

          8.7 ENTIRE AGREEMENT. This Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subject
matter of this Agreement.

          8.8 SEPARABILITY; SEVERABILITY. Unless expressly provided in this
Agreement, the rights of each Investor under this Agreement are several rights,
not rights jointly held with any other Investors. Any invalidity, illegality or
limitation on the enforceability of this Agreement with respect to any Investor
shall not affect the validity, legality or enforceability of this Agreement with
respect to the other Investors. If any provision of this Agreement is judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired.

                                      -22-
<PAGE>

          8.9 STOCK SPLITS. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.

          8.10 AGGREGATION OF STOCK. All Registrable Securities (as applicable)
held or acquired by affiliated entities or persons of the Investors, shall be
aggregated for the purpose of determining the availability of any rights under
this Agreement.

          8.11 SUBSEQUENT SALES. In the event that the Company shall conduct
subsequent sales of shares of Series E Preferred Stock pursuant to and in
accordance with the terms of Section 2.3 of the Series E Agreement, any
purchaser of such shares shall be deemed a Holder and an Investor with all of
the rights of a Holder and an Investor under this Agreement; provided that as a
condition thereto such Holder or Investor shall sign and deliver to the Company
a counterpart signature page to this Agreement.

          8.12 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.

         The foregoing Agreement is executed as of the date first above written.

                                COMPANY:
                                DOUBLETWIST, INC.

                                By: /s/ JOHN COUCH
                                   ---------------------------------
                                    John Couch
                                    Chief Executive Officer

                                MERLIN BioMED, L.P.

                                By: /s/
                                   ---------------------------------

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

                                      -23-
<PAGE>

                                MERLIN BioMED II, L.P.

                                 By: /s/
                                   ---------------------------------

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

                                 MERLIN BioMED INT'L, L.P.

                                 By: /s/
                                   ---------------------------------

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

                                 PHARMA W/HEALTH

                                 By: /s/
                                   ---------------------------------

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

                                 TAIB Funds, LTD

                                 By: /s/
                                   ---------------------------------

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

                                 INVESTORS:

                                 VENTRO CORPORATION

                                 By: /s/
                                   ---------------------------------

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

                                      -24-
<PAGE>

                                 BOSTON MILLENNIA PARTNERS LIMITED PARTNERSHIP

                                 By: Glen Partners Limited Partnership

                                 By: /s/ MARTIN J. HERNON
                                    --------------------------------

                                 Title: GENERAL PARTNER
                                       -----------------------------

                                 BOSTON MILLENNIA ASSOCIATES I PARTNERSHIP

                                 By: /s/ MARTIN J. HERNON
                                    --------------------------------

                                 Title: GENERAL PARTNER
                                       -----------------------------

                                      -25-
<PAGE>

                                 INVESCO GLOBAL HEALTH SCIENCES FUND

                                 By: /s/
                                    --------------------------------
                                 Title: TREASURER
                                        ----------------------------

                                      -26-
<PAGE>

                                 MOSS FOREST VENTURES

                                 By: /s/ FRANK MONTGOMERY
                                    -------------------------------
                                 Title:
                                       ----------------------------

                                      -27-
<PAGE>

                                 MICHAEL R. BURBANK

                                 By: /s/ MICHAEL R. BURBANK
                                   --------------------------------

                                      -28-
<PAGE>

                                 STAR BAY PARTNERS, L.P.

                                 By: APH Capital Management LLC
                                     Its General Partner

                                 By: Levensohn Capital Management LLC
                                     Its Managing Member

                                 By: /s/ PASCAL N. LEVENSOHN
                                    -------------------------------
                                     Pascal N. Levensohn
                                     Managing Member

                                      -29-
<PAGE>

                                 BB BIOVENTURES L.P.

                                 By: BAB BIOVENTURES L.P.
                                     Its General Partner

                                     By: BAB BIOVENTURES, N.V.
                                         Its General Partner

                                 By: /s/
                                    ----------------------------
                                 Name:
                                      --------------------------
                                 Title:
                                       -------------------------

                                 MPM BIOVENTURES PARALLEL FUND, L.P.

                                 By: MPM BIOVENTURES I L.P.
                                     Its General Partner

                                 By: MPM BIOVENTURES I LLC
                                     Its General Partner

                                 By: /s/
                                    ----------------------------
                                 Name:
                                      --------------------------
                                 Title:
                                       -------------------------

                                 MPM ASSET MANAGEMENT
                                 INVESTORS 200A LLC

                                 By: /s/
                                    ----------------------------
                                 Name:
                                      --------------------------
                                 Title:
                                       -------------------------

                                      -30-
<PAGE>

                                 GEIGER FAMILY REVOCABLE TRUST

                                 By: /s/ WILLIAM GEIGER
                                    ----------------------------
                                 Title:
                                       -------------------------

                                      -31-
<PAGE>

                                 INSTITUTIONAL VENTURE PARTNERS VII, L.P.

                                 By: /s/ SAMUEL D. COLELLA
                                    -----------------------------
                                 Title: GENERAL PARTNER
                                       --------------------------

                                 INSTITUTIONAL VENTURE MANAGEMENT VII, L.P.

                                 By: /s/ SAMUEL D. COLELLA
                                    -----------------------------
                                 Title: GENERAL PARTNER
                                       --------------------------

                                 IVP FOUNDERS FUND I

                                 By: /s/ SAMUEL D. COLELLA
                                    -----------------------------
                                 Title: GENERAL PARTNER
                                       --------------------------

                                      -32-
<PAGE>

                                 SOUTHERN FARM BUREAU CASUALTY INSURANCE COMPANY

                                 By: /s/ DAVID STIPE
                                    -----------------------------
                                 Title: Assistant Investment Manager,
                                        Southern Farm Bureau, Casualty
                                        Insurance Company

                                      -33-
<PAGE>

                                 LONE BALSAM, L.P.
                                 Kerry A. Tyler
                                 Managing Director
                                 Lone Pine Associates, LLC, General Partner

                                 By: /s/ KERRY A. TYLER
                                    ------------------------------

                                 LONE SEQUOIA, L.P.
                                 Kerry A. Tyler
                                 Managing Director
                                 Lone Pine Associates, LLC, General Partner

                                 By:     /s/ KERRY A. TYLER
                                    ------------------------------

                                 LONE SPRUCE, L.P.
                                 Kerry A. Tyler
                                 Managing Director
                                 Lone Pine Associates, LLC, General Partner

                                 By: /s/ KERRY A. TYLER
                                    ------------------------------

                                 LONE CYPRESS, L.P.
                                 Kerry A. Tyler
                                 Managing Director
                                 Lone Pine Associates, LLC, General Partner

                                 By: /s/ KERRY A. TYLER
                                    ------------------------------

                                      -34-
<PAGE>

                                 MAYFIELD VIII,
                                 a California Limited Partnership

                                 By: Mayfield VIII Management, L.L.C.
                                     Its General Partner

                                 By: /s/ A. GRANT HEIDRICH
                                    ------------------------------
                                 Title: GENERAL PARTNER
                                       ---------------------------

                                 MAYFIELD ASSOCIATES FUND III,
                                 a California Limited Partnership

                                 By: Mayfield VIII Management, L.L.C.
                                     Its General Partner

                                 By: /s/ A. GRANT HEIDRICH
                                    ------------------------------
                                 Title: GENERAL PARTNER
                                       ---------------------------

                                 A. GRANT HEIDRICH III, TRUSTEE OF
                                 PROPERTY TRUST UDT 5-31-84

                                 By: /s/ A. GRANT HEIDRICH
                                    ------------------------------
                                 Title:  TRUSTEE
                                       ---------------------------

                                 GENE TRUST

                                 By: /s/ A. GRANT HEIDRICH
                                    ------------------------------
                                 Title: TRUSTEE
                                       ---------------------------

                                      -35-
<PAGE>

                                 THE HEALTHCARE AND BIOTECHNOLOGY VENTURE FUND

                                 By: MDS Capital Corp.
                                     Its Manager

                                 By: /s/
                                    ------------------------------

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

                                 MDS LIFE SCIENCES TECHNOLOGY
                                 BARBADOS INVESTMENT TRUST

                                 By: /s/
                                    ------------------------------
                                 Title:
                                       ---------------------------

                                 MDS LIFE SCIENCES TECHNOLOGY
                                 FUND USA, L.P.

                                 By: MDS Capital USA (GP) Inc.
                                     Its General Partner

                                 By: /s/
                                    ------------------------------
                                 Title:
                                       ---------------------------

                                      -36-

<PAGE>

                                 MDS LIFE SCIENCES TECHNOLOGY
                                 FUND LIMITED PARTNERSHIP

                                 By: MDS Life Sciences Technology Fund
                                     (GP) Inc.
                                     Its General Partner

                                 By: /s/
                                    ------------------------------

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

                                      -37-
<PAGE>

                                 DAVID THOMASSEN

                                 /s/ DAVID THOMASSEN
                                 --------------------------------

                                      -38-
<PAGE>

                                 T. ROWE PRICE NEW HORIZONS FUND, L.P.

                                 By: /s/
                                    ------------------------------

                                 Title: PORTFOLIO MANAGER
                                       ---------------------------

                                 T. ROWE PRICE HEALTH SCIENCES FUND, INC.

                                 By: /s/
                                    ------------------------------

                                 Title: PORTFOLIO MANAGER
                                       ---------------------------

                                 GREEN LINE HEALTH SCIENCES FUND, L.P.

                                 By: /s/
                                    ------------------------------

                                 Title: PORTFOLIO MANAGER
                                       ---------------------------

                                      -39-
<PAGE>

                                 AMERINDO TECHNOLOGY GROWTH FUND II, INC.

                                 By: /s/ GARY TANAKA
                                    ------------------------------
                                    Gary Tanaka
                                    Director

                                      -40-
<PAGE>

                                 WILLIAM SLATTERY

                                 /s/ WILLIAM SLATTERY
                                 ------------------------------

                                      -41-
<PAGE>

                                 THE BURRILL AGBIO CAPITAL FUND

                                 By: /s/ JOHN KIM
                                    ------------------------------
                                 Title: MANAGING DIRECTOR
                                       ---------------------------

                                      -42-
<PAGE>

                                 KPCB JAVA FUND

                                 By: KPCB VIII Associates

                                 By: /s/
                                    ------------------------------
                                 Title:
                                       ---------------------------

                                 KLEINER PERKINS CAUFIELD & BYERS VIII, L.P.

                                 By: KPCB VIII Associates

                                 By: /s/
                                    ------------------------------
                                 Title:
                                       ---------------------------

                                 KPCB VIII FOUNDERS FUND, L.P.

                                 By: /s/
                                    ------------------------------

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

                                 KPCB LIFE SCIENCES ZAIBATSU
                                 FUND II

                                 By: KPCB VII Associates

                                 By: /s/
                                    ------------------------------

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

                                      -43-
<PAGE>

                                    EXHIBIT A
                                    ---------
                                LIST OF INVESTORS

Amerindo Technology Growth Fund II, Inc.
c/o Amerindo Investment Company
399 Park Avenue, 22nd Floor
New York City, NY 10022
Attn:  David Manizer

BB Bio Ventures LP
c/o MPM Capital Advisors LLC
One Cambridge Center
Cambridge, MA 02142
Attn:  Todd Foley

Boston Millennia Partners Limited Partnership
30 Rowes Wharf
Boston, MA 02110
Attn:  Martin J. Hernon

Boston Millennia Associates I Partnership
30 Rowes Wharf
Boston, MA 02110
Attn:  Martin J. Hemon

Michael Burbank
442 Oxford Way
Santa Cruz, CA 95060

The Burrill Agbio Capital Fund
c/o Burill & Company
120 Montgomery Street, Suite 1370
San Francisco, CA 94104
Attn:  John Kim

The Geiger Family Revocable Trust
Hixon/West
100 East Corson Street
4th Floor, Suite B
Pasadena, CA 91103-3840

                                      -44-
<PAGE>

Attn:  Gene Murray

Green Line Health Sciences Fund, Inc.
c/o T. Rowe Price
100 East Pratt Street
Baltimore, MD 21202
Attn:  Bonnie Maher

The Health Care and Biotechnology Venture Fund
100 International Boulevard
Etobicoke Ontario Canada M9W 6J6
Attn:  Gregory D. Gubitz

Institutional Venture Partners VII
3000 Sand Hill Road, Bldg. 2, Suite 290
Menlo Park, CA 94025
Attn:  Samuel D. Colella

Institutional Venture Management VII
3000 Sand Hill Road, Bldg. 2, Suite 290
Menlo Park, CA 94025
Attn:  Samuel D. Colella

Invesco Global Health Sciences Fund
7800 E Union Avenue, Suite 1100
Denver, CO 80237
Attn:  Joan McMullen and John Schoerer

IVP Founders Fund I
3000 Sand Hill Road, Bldg. 2, Suite 290
Menlo Park, CA 94025
Attn:  Samuel D. Colella

KPCB Java Fund, L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
Attn:  Brook Byers

KPCB Life Sciences Zaibatsu Fund II, L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
Attn:  Brook Byers

                                      -45-
<PAGE>

KPCB VIII Founders Fund, L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
Attn:  Brook Byers

Kleiner Perkins Caufield & Byers VIII, IL.P.
2750 Sand Hill Road
Menlo Park, CA 94025
Attn:  Brook Byers

Lone Balsam, L.P.
c/o Lone Pine Capital
2 Greenwich Plaza
Greenwich, CT 06830
Attn:  Kerry Tyler

Lone Cypress Limited
c/o Lone Pine Capital
2 Greenwich Plaza
Greenwich, CT 06830
Attn:  Kerry Tyler

Lone Sequoia, L.P.
c/o Lone Pine Capital
2 Greenwich Plan
Greenwich, CT 06830
Attn:  Kerry Tyler

Lone Spruce, L.P.
c/o Lone Pine Capital
2 Greenwich Plan
Greenwich, CT 06830
Attn:  Kerry Tyler

David Mainzer
c/o Amerindo Investment Company
399 Park Avenue, 22nd Floor
New York City, NY 10022

                                      -46-
<PAGE>

Mayfield VIII, L.P.
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
Attn:  A. Grant Heidrich, III

Mayfield Associates Fund III, L.P.
2800 Sand Hill Road, Suite 250
Menlo Park, CA 94025
Attn:  A. Grant Heidrich, III

MDS LIfe Sciences Technology Fund Limited Partnership
100 International Boulevard
Etobicoke Ontario Canada M9W 6J6
Attn:  Gregory D. Gubitz

MDS Life Sciences Technology Fund USA, L.P.
100 International Boulevard
Etobicoke Ontario Canada M9W 6J6
Attn:  Gregory D. Gubitz

MDS Life Sciences Technology Barbados Investment Trust
Ernst & Young Trust Corporation
P.O. Box 261, Bush Hill, Bay Street
Bridgetown, Barbados, W.I.
Attn:  Penny Ettinger

Merlin BioMed, L.P.
230 Park Avenue, Suite 928
New York, NY 10169
Attn:  Maureen McEnroe

Merlin BioMed II, L.P.
230 Park Avenue, Suite 928
New York, NY 10169
Attn:  Maureen McEnroe

Merlin BioMed INT'L, LTD
230 Park Avenue, Suite 928
New York, NY 10169
Attn: Maureen McEnroe

                                      -47-
<PAGE>

PHARMA W/HEALTH
c/o Merlin BioMed
230 Park Avenue, Suite 928
New York, NY 10169
Attn:  Maureen McEnroe

TAIB Funds, LTD
c/o Merlin BioMed
230 Park Avenue, Suite 928
New York, NY 10169
Attn:  Maureen McEnroe

Mitsui & Co. (U.S.A.)
200 Park Avenue, 36th Floor
New York, NY 10166-0130
Attn:  Richard See

Moss Forest Venture
113 Eastpointe Circle
Madison, MS 39110
Attn:  Frank Montgomery

MPM Asset Management Investors 2000A LLC
c/o MPM Capital Advisors LLC
One Cambridge Center
Cambridge, MA 02142
Attn:  Todd Foley

MPM Bio Ventures Parallel Fund LP
c/o MPM Capital Advisors LLC
One Cambridge Center
Cambridge, MA 02142
Attn:  Todd Foley

Star Bay Partners, L.P.
44 Montgomery Street, Suite 2000
San Francisco, CA 94104
Attn:  Frank Brown

                                      -48-
<PAGE>

Southern Farm Bureau Casualty Insurance Company
1800 E. County Line Road
Ridgeland, MS 39157
Attn:  David Stipe

T. Rowe Price Bean Sciences Fund, Inc.
c/o T. Rowe Price
100 East Pratt Street
Baltimore, MD 21202
Attn:  Bonnie Maher

T. Rowe Price New Horizons Fund, Inc.
c/o T. Rowe Price
100 East Pratt Street
Baltimore, MD 21202
Attn:  Bonnie Maher

David Thomassen
6248 Buena Vista Avenue
Oakland, CA 94618

Ventro
1500 Plymouth Street
Mountain View, CA 94943
Attn:  Jerry Natoli

                                      -49-<PAGE>

                              PANGEA SYSTEMS, INC.
                           1996 EQUITY INCENTIVE PLAN
                        AS ADOPTED AS OF AUGUST 19, 1996

         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 and
Subsidiaries, 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 24
hereof.

         2.       SHARES SUBJECT TO THE PLAN.

                  2.1      NUMBER OF SHARES AVAILABLE. Subject to Sections 2.2
and 19 hereof, the total number of Shares reserved and available for grant and
issuance pursuant to this Plan will be 1,750,000 Shares. Subject to Sections 2.2
and 19 hereof, Shares will again be available for and issuance in connection
with future Awards under this Plan that: (a) at subject to 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 Participants Exercise Price or Purchase
Price, as the case may be, or (c) are subject to an Award that otherwise
terminates without Shares being issued. At all times the Company will reserve
and keep available a sufficient number of Shares as will 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, stock split, reverse stock
split, subdivision, combination, or similar a 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 of the Company and compliance with applicable
securities laws; PROVIDED, HOWEVER, that fractions of a Share will not be issued
but will either be at Fair Market Value of such fraction of a Share or will be
rounded up to the nearest as determined by the Committee.

         3.       ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be
granted only to employees (including officers and directors who are also
employees) of the Company or of a Parent or Subsidiary of the Company. All other
Awards may be granted to employees, officers, directors, consultants and
advisors of the Company or any Parent or Subsidiary of the Company; provided
such consultants and advisors render bona fide

<PAGE>

services not in connection with the offer and sale of securities in a
capital-raising transaction. 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 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;

                  (e)      determine the number of Shares or other 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 plan of the Company, or any
                           Parent or Subsidiary 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, any Award
                           Agreement or any Exercise Agreement;

                  (j)      determine whether an Award has been earned;

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

                  (l)      determine the date Options are forfeited or deemed to
                           expire upon the exercise of any tandem SAR.

                                       2
<PAGE>

                  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. 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.

         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 each option, the Exercise Price of each Option, the
period during which each Option may be exercised, and all other terms, and
conditions of each 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 b the Committee. The Stock Option Agreement and a
copy of this Plan will be delivered by the Participant within a reasonable time
after the granting of the Option.

                  5.3      EXERCISE PERIOD. Options may be exercisable
immediately (subject to repurchase pursuant to Section 13 hereof) or may be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing Option; PROVIDED, HOWEVER,
that 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 any
Parent or Subsidiary of the Company ("Ten Percent Shareholders") will be
exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for the 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.

                  5.4      EXERCISE PRICE. The Exercise Price of an Option will
be determined by the Committee when the Option is granted and may be not less
than 85% of the Fair Market Value of the Shares on the date of grant; provided
that (i) the Exercise Price of an

                                       3
<PAGE>

ISO will be not less than 100% of the Fair Market Value of the Shares on the
date of grant and (ii) the Exercise Price of any Option 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 9 hereof.

                  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, and any applicable taxes, for the
number of Shares being purchased.

                  5.6      TERMINATION. Subject to earlier termination pursuant
to Section 19.1 hereof and 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, Disability or for Cause, 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 time period, not less than thirty (30) days,
                           as may be specified in the Stock Option Agreement) or
                           such longer time period not exceeding five (5) years
                           after the Termination as may be determined by the
                           Committee, with any exercise beyond three (3) months
                           after the Termination Date deemed to be an NQSO, but
                           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 or for Cause), then Participant's Options
                           may be exercised 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 time period, not
                           less than (6) months, as may be specified in the
                           Stock Option Agreement) or such longer time period
                           not exceeding five (5) years after the Termination
                           Date as may be determined by the Committee, with any
                           exercise beyond (a) three (3) months after

                                       4
<PAGE>

                           the Termination Date when the Termination is for any
                           reason other than the Participant's death or
                           disability, within the meaning of 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, within the meaning
                           of Section 22(e)(3) of the Code, deemed to be an
                           NQSO, but in any event no later than the expiration
                           date of the Options.

                  (c)      If the Participant is terminated for Cause, then
                           Participant's options shall expire on such
                           Participant's Termination Date, or at such later time
                           and on such conditions as determined by the
                           Committee.

                  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, or of a SAR not granted in tandem with an Option (including a SAR that
can be settled in cash), provided that such minimum number will not prevent
Participant from exercising the Option or SAR 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 a by a Participant during any calendar year
(under this Plan or under any other incentive stock option plan of the Company
or any Parent or Subsidiary of the Company) will not exceed $100,000.00. 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
$100,000.00, then the Options for the first, $100,000.00 worth of Shares to
become exercisable in such calendar year be ISOs and the Options for the amount
in excess of $100,000.00 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 (as defined below) 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 the effective date of such amendment.

                  5.9      MODIFICATION, EXTENSION OF RENEWAL. The Committee may
modify or renew outstanding Options and authorize the grant of new Options in
substitution or, 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 affected 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 hereof for Options
granted on the date the action is taken to reduce the Exercise Price.

                                       5
<PAGE>

                  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.       STOCK APPRECIATION RIGHTS.

                  6.1      GRANT. Subject to the terms and conditions of this
Plan, the Committee may grant a SAR to any Participant either (a) in tandem with
the grant of an ISO, (b) in tandem with the grant of an NQSO or (c) independent
of the grant of an ISO or NQSO. Each grant of a SAR which is in tandem with the
grant of an ISO or an NQSO will be evidenced by the same Award Agreement as the
ISO or NQSO which is granted in tandem with such SAR and such SAR will relate to
the same number of Shares as such Option. Each SAR which is granted independent
of an ISO or NQSO will be evidenced by a separate Award Agreement which will
state the number of Shares to which such SAR will relate and such other terms
and conditions as the Committee in its sole discretion deems are consistent with
the terms of this Plan, including conditions on the exercise of such SAR which
relate to the employment of the Participant or the requirement that the
Participant exchange a prior outstanding Option and/or SAR.

                  6.2      PAYMENT AT EXERCISE. Upon the exercise of a SAR in
accordance with the terms of the related Award Agreement, the Participant will
(subject to the terms and conditions of this Plan and such Award Agreement)
receive a payment equal to the excess, if any, of the SAR Exercise Price for the
number of Shares of the SAR being exercised at that time over the SAR Grant
Price for such Shares. Such payment may be made in whole Shares or in cash, or
partially in Shares and partially in cash, as determined under the Award
Agreement. If payment is made in whole or in part in Shares, such Shares will be
valued for this purpose at the SAR Exercise Price, and any payment in Shares
which calls for a payment in a fractional Share automatically will be paid in
cash based on such valuation.

                  6.3      SPECIAL TERMS AND CONDITIONS. Each Award Agreement
which evidences the grant of a SAR will incorporate such terms and conditions as
the Committee in its absolute discretion are consistent with the terms of this
Plan and the Award Agreement for the ISOs and NQSOs, if any, granted in tandem
with such SAR except that (a) if a SAR is in tandem with an ISO or a NQSO, the
SAR will be exercisable only when the related ISO or NQSO is exercisable and (b)
the Participant's right to exercise a SAR granted in tandem with an ISO or NQSO
will be forfeited to the extent that the Participant exercises the related ISO
or NQSO and the Participant's right to exercise the ISO or NQSO will be
forfeited to the extent Participant exercises the related SAR, but any such
forfeiture will not count as a forfeiture for purposes of making the Shares
subject to such Option or SAR again available for use under Section 2 hereof.

                                       6
<PAGE>

         7.       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 restrictions to which the
Share will be subject and all other term and conditions of the Restricted Stock
Award, subject to the following:

                  7.1      FORM OF RESTRICTED STOCK. 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 term and
conditions of this Plan. The offer of Restricted Stock will be accepted by the
Participant's 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.

                  7.2      PURCHASE PRICE. The Purchase Price of Shares sold
pursuant to a Restricted Stock Award will be determined by the Committee and
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 9
hereof.

                  7.3      RESTRICTIONS. Restricted Stock Awards will be subject
to the restrictions set forth in Section 13 of this Plan or such other
restrictions (if any) as the Committee may impose.

         8.       STOCK BONUSES.

                  8.1      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 or Subsidiary of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent or Subsidiary
of the Company 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 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

                                       7
<PAGE>

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 or Subsidiary and/or individual performance
factors or upon such other criteria as the Committee may determine; PROVIDED,
HOWEVER, that performance-based bonuses shall be restricted to individuals
earning at least $60,000.00 per year and of adequate sophistication and
sufficiently empowered to achieve the performance goals.

                  8.2      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 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 or extraordinary or unusual items, events or circumstances to avoid
windfalls or hardships.

                  8.3      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.

                  8.4      TERMINATION DURING PERFORMANCE. If a Participant is
Terminated during a Performance Period for any reason, and 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 will
determine otherwise.

         9.       PAYMENT FOR SHARE PURCHASES.

                  9.1      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 when permitted by law:

                                       8
<PAGE>

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

                  (b)      at the discretion of the Committee, 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 and (3)
                           are clear of all liens, claims, encumbrances or
                           security interests;

                  (c)      at the discretion of the Committee, 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;

                  (d)      by waiver of compensation due or accrued to the
                           Participant for services, tendered;

                  (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 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" 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, 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

                                       9
<PAGE>

                  (f)      by any combination of the foregoing.

                  9.2      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.

         10.      WITHHOLDING TAXES.

                  10.1     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, an amount sufficient
to satisfy federal, state and local withholding tax requirements shall be
withheld from such payment by the Company.

                  10.2     STOCK WITHHOLDING. When, under applicable tax laws, a
Participant incurs tax liability m connection with the exercise or vesting of
any Award that is subject tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion 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 to
be withheld, determined on the date that the amount of tax to be withheld is to
be determined. All elections by a Participant to have Shares withheld for this
purpose will be in accordance with the requirements established by the Committee
for such elections and be in writing in a form acceptable to the Committee.

         11.      PRIVILEGES OF STOCK OWNERSHIP.

                  11.1     VOTING AND DIVIDENDS. No Participant will have any of
the rights of a shareholder with respect to any Shares until the Share 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 purchase price or Exercise Price
pursuant to Section 13 hereof.

                                       10
<PAGE>

                  11.2     FINANCIAL STATEMENTS. The Company will provide
financial statements to each Participant prior to such Participant's purchase of
Shares under this Plan, and to each Participant annually during the period such
Participant has Awards 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.

         12.      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.

         13.      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) a right of first refusal to purchase all or a portion of the Shares that a
Participant (or a subsequent transferee may propose to transfer to a third
party, and/or (b) a right to repurchase all or a portion of the Unvested Shares
held by a Participant following such Participant's Termination at any time
within ninety (90) days after Participant's Termination Date for cash and/or
cancellation of purchase money indebtedness, at the Participant's Exercise Price
or Purchase Price, as the case may be, PROVIDED that to the extent the
Participant is not an officer, director or consultant of the Company, such right
of repurchase described, in this subparagraph 13(b) lapses at the rate of at
least twenty percent (20%) per year over five (5) years from: (A) the date of
grant of the Option or (B) in the case of Restricted Stock, the date the
Participant purchases the Shares. The right of first refusal will terminate when
the Company's securities become publicly traded.

         14.      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 state or 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.

         15.      ESCROW; PLEDGE OF SHARES. To enforce the Company's right of
repurchase set forth in Section 13 on a Participant's Shares that are not Vested
(as defined in the Award Agreement), the Committee may require the Participant
to deposit all certificates representing Shares, together with stock powers or
other instruments, of transfer approved by the Committee, appropriately endorsed
in blank, with the Company or an agent designated the Company to hold in escrow
until such right of repurchase shall have lapsed or terminated (PROVIDED,
HOWEVER, that such Shares will be retained in escrow

                                       11
<PAGE>

so long as such Shares secure any debts to the Company), 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. 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.

         16.      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. 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.

         17.      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 an 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 agencies that the Company
determines are necessary or advisable, and/or (b) compliance with any exemption
or completion of any registration 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 exemption,
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.

         18.      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

                                       12
<PAGE>

continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.

         19.      CORPORATE TRANSACTIONS.

                  19.1     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 this Plan are assumed, convened 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 immediately prior to such merger
(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, or (d) the sale of all of the
assets of the Company, any or all outstanding Awards may be assumed, converted
or replaced by successor corporation (if any), which assumption, conversion or
replacement will be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent or Awards or provide
substantially similar consideration to Participants as was provided to
shareholders (after taking into account the existing provisions of the Awards).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject to repurchase restrictions and other provisions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Section 19.1. In the event such
successor corporation (if any) refuses to assume or substitute Options, as
provided above, pursuant to a transaction described in this Section 19.1, then
notwithstanding any other provision in this Plan to the contrary, such Options
will expire on such transaction at such time and on such conditions as the Board
will determine.

                  19.2     OTHER TREATMENT OF AWARDS. Subject to any greater
rights granted to Participants under the foregoing provisions of this Section
19, in the event of the occurrence of any transaction described in Section 19.1
hereof, any outstanding Awards will be treated as provided in the applicable
agreement or plan of merger, dissolution, liquidation or sale of assets.

                  19.3     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,

                                       13
<PAGE>

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 been granted under this
Plan if the terms of such assumed award could be applied to an Award granted
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.

         20.      ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become
effective on the date that it is adopted by the Board (the "Effective Date").
This Plan will be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Pan), consistent with applicable laws, within twelve
(12) months before or after the Effective Date. 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.

         21.      TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as
provided herein, this Plan will terminate ten (10) years from the Effective Date
or, if earlier, ten (10) years after the date of shareholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.

         22.      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.

         23.      NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan
the Board, the submission of this Plan to the shareholders of the Company for
approval,

                                       14
<PAGE>

nor any provision of this Plan will be construed as creating any limitations on
the power of the Board to adopt such additional 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.

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

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

         "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.

         "Cause" means Termination because of (i) any willful material violation
by the Participant of any law or regulation applicable to the business of the
Company or a Parent or Subsidiary of the Company, the Participant's conviction
for, or guilty plea to, a felony or a crime involving moral turpitude, any
willful perpetration by the Participant of a common law fraud or any unlawful
use by the Participant of drugs or other controlled substances, (ii) the
Participant's commission of an act of personal dishonesty which involves
personal profit in connection with the Company or any other entity having a
business relationship with the Company, (iii) any material breach by the
Participant of any provision of any agreement or understanding between the
Company and the Participant regarding the terms of the Participant's service as
an employee, director, consultant, independent contractor or adviser to the
Company or a Parent or Subsidiary of the Company, including without limitation,
the willful and continued failure or refusal of the Participant to perform the
material duties required of such Participant as an employee, director,
consultant, independent contractor or adviser of the Company or a Parent or
Subsidiary of the Company, other than as a result of being Disabled, or a branch
of any applicable invention assignment and confidentiality agreement or similar
agreement between the Company and the Participant, (iv) Participant's disregard
of the policies of the Company so as to cause loss, damage or injury to the
property, reputation or employees of the Company or a Parent or Subsidiary of
the Company, or (v) any other misconduct by the Participant which is injurious
to the financial condition or business reputation of, or is otherwise materially
injurious to the Company or a Parent or Subsidiary of the Company.

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

                                       15
<PAGE>

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

         "Company" means Pangea Systems, Inc. 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 as follows:

                  (a)      if such Common Stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq National Market on the last
trading day prior to the date of determination as reported in The Wall Street
Journal:

                  (b)      if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing price on the last trading
day prior to the date of determination on the principal national securities
exchange on which the Common Stock is listed or admitted to trading as reported
in The Wall Street Journal.

                  (c)      if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and asked prices on
the last trading day prior to the date of determination as reported by The Wall
Street Journal; (or, if not so reported, as otherwise reported by any newspaper
or other source as the Board may determine); or

                  (d)      if none of the foregoing is applicable, by the
Committee in good faith.

         "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 hereof.

         "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company, if each of such corporations
other than the

                                       16
<PAGE>

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 Pangea Systems, Inc. 1996 Equity Incentive Plan, as
amended from, time to time.

         "Purchase Price" means the price at which a Participant may purchase
Restricted Stock.

         "Restricted Stock Award" means an award of Shares pursuant to Section 7
hereof.

         "SAR" or "Stock Appreciation Right" means the contractual right granted
to a Participant pursuant to Section 6.1 hereof to receive a payment upon the
exercise of such right which reflects the appreciation in the Fair Market Value
of the number of Shares for which such right was granted during the period
beginning on the date of grant and ending on the date such SAR is exercised.

         "SAR Exercise Date" means the date on which the exercise of an SAR
occurs under the related Award Agreement.

         "SAR Exercise Price" means the Fair Market Value of a Share on the SAR
Exercise Date.

         "SAR Grant Price" means the price which would have been the Exercise
Price for one Share if the SAR had been granted as an Option or, if the SAR is
granted in tandem with an Option, the Exercise Price for the related Option.

         "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, no par value,
reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 19
hereof, and any successor security.

         "Stock Bonus" means an award of Shares, or cash in lien of Shares,
pursuant to Section 8 hereof.

         "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last 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.

                                       17
<PAGE>

         "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, officer, director, consultant or advisor to the
Company or a Parent or Subsidiary of the Company. An employee will not be deemed
to have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided
that such leave is for a period of not more than 90 days unless reemployment
upon the expiration of such leave is guaranteed by contract or statute, or
unless provided otherwise pursuant to policy adopted from time to time by the
Company and issued and promulgated to employees in writing. In the case of any
employee on an approved leave of absence, the Committee may make such provisions
respecting suspension of vesting of the Award while on leave from the employ of
the Company or a Subsidiary as it may deem appropriate, except that in no event
may an Option be exercised after the expiration of the term set forth in the
Stock Option Agreement. The Committee will have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the Termination Date").

         "Unvested Shares" means "Unvested Shares" as defined in the Award
Agreement.

         "Vested Shares" means "Vested Shares" as defined in the Award
Agreement.

                                       18

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