Document:

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[WEBGAIN LOGO]
                                                                   Exhibit 10.13

August 3, 2000

Colin Bodell
107 Reservoir Road
Atherton, CA 94027

Dear Colin:

     On behalf of WebGain, Inc. (the "Company"), I am happy to extend the
following offer of employment to you. This letter will confirm the terms of
your offer of employment with the Company.

     1.  POSITION AND RESPONSIBILITIES. Your title will be Vice President,
Engineering and you will assume and discharge such responsibilities as are
commensurate with such a position. We believe you are well qualified for this
role and we wish to welcome you to the Company.

     2.  COMPENSATION. In consideration of your services, you will be paid an
annualized base salary of $240,000 and an annualized variable salary of
$160,000, payable in accordance with the Company's standard payroll practices.
Your base salary will be reviewed annually by the appropriate management of the
Company.

          We are also offering a $20,000 sign on bonus (subject to withholding
taxes), payable in your first paycheck. Should you voluntarily leave WebGain in
less than one year's time, we will require prorated reimbursement of this bonus
(1/12 per month). Your signature authorizes this deduction from your final
paycheck, if necessary.

     3.  BENEFITS. You will be entitled to receive employee benefits made
available by the Company to similarly situated employees to the extent of your
eligibility.

     4.  STOCK OPTIONS. Under the terms and conditions of the Company's Stock
Plan, you will be granted 1,500,000 options to purchase shares of non-voting
common stock of the Company. The Company's Stock Plan, including the Stock
Option Agreement, will be sent to you separately. The exercise price and grant
date will be set by Board approval following your employment start date.

     5.  CONFIDENTIAL INFORMATION. You agree that you will execute the
Company's Proprietary Information and Inventions Agreement. You further agree
that at all times during the term of your employment and thereafter, you will
abide by the terms of said agreement. You recognize that the Company desires
not to improperly obtain or use any proprietary information or trade secrets of
any former employer or the person or entity.

<PAGE>   2

     6.   CONFLICTING EMPLOYMENT. Prior to receiving this offer of employment
from the Company, you may have been engaged in another employment, occupation,
consulting or other business activity related to the business in which the
Company is now involved or may become involved during the term of your
employment. You acknowledge that your involvement in such business activity
shall cease prior to your employment by the Company. You further agree that,
during the term of your employment with the Company, you will not engage in any
other employment, occupation, consulting or other business activity directly
related to the business in which the Company is now involved or becomes
involved during the term of your employment, nor will you engage in any other
activities that conflict with your obligations to the Company.

     7.   TERM OF EMPLOYMENT. All employment at the Company is "at will". This
means that both you and the Company have the right to terminate employment at
any time, with or without advanced notice, and with or without cause. You may be
demoted or disciplined and the terms of their employment may be altered at any
time, with or without cause, at the discretion of the Company. No one other than
the President of the Company has the authority to alter this arrangement, to
enter into an agreement for employment for a specified period of time, or to
make any agreement contrary to this policy, and any such agreement must be in
writing and must be signed by the President of the Company and by you. However,
in the event of involuntary termination for other than cause, WebGain agrees to
pay 3 months of base salary as severance pay.

     8.   CONTINGENCIES. This offer of employment is contingent upon your
execution of the Proprietary Information and Inventions Agreement, a
satisfactory background check as mentioned in the release you submitted with
your application, as well as your ability to show proof of your identity and
legal right to work in the United States as required by the U.S. Immigration
and Naturalization Service (INS). Therefore, on your first day of employment
you will be asked to provide proof of your identity as well as your legal right
to work in the United States. In most cases, a United States Passport or a
driver's license showing a photo of yourself, and a Social Security Card (which
does not restrict your employment) will satisfy the INS regulation. Please
bring this identification with you on your first day of employment.

     9.   ARBITRATION AGREEMENT. You and the Company agree that any dispute or
claim, including all contract, tort, discrimination and other statutory claims,
arising under or relating to your employment or termination of employment with
WebGain, Inc., but excepting claims under applicable workers' compensation law
and unemployment insurance claims ("arbitrable claims") alleged against the
Company and/or its agents shall be resolved by arbitration. Such arbitration
shall be final and binding on the parties and shall be the exclusive remedy for
arbitrable claims. You and the Company hereby waive any rights each may have to
a jury trial in regard to the arbitrable claims. Arbitration shall be conducted
by the American Arbitration Association in San Francisco, California under the
National Rules for the Resolution of Employment Disputes. In any arbitration,
the burden of proof shall be allocated as provided by applicable law and the
arbitrator shall have the same authority as a court to award equitable relief,
damages, costs, and fees as provided by law for the particular claims asserted.
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of the Company's trade secrets or proprietary information. This arbitration
provision will survive your termination.

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     If any term herein is unenforceable in whole or in part, the remainder
shall remain enforceable to the extent permitted by law.

     We are looking forward to having you join the Company. Please acknowledge
and confirm your acceptance of this offer by August 10, 2000 at which point the
offer will expire. You can accept by signing and returning the enclosed copy of
this letter by fax to 408-517-3730, then sending the original via regular mail.
Please feel free to call me at 408-517-3813 if you have any questions.

                              Sincerely,

                              /s/ CHRISTINA MONZON
                              ----------------------------
                              Christina Monzon
                              Human Resources Manager
                              WebGain, Inc.

Employee Acceptance:

I accept the terms of my employment with the Company as set forth herein. I
understand that this offer letter does not constitute a contract of employment
for any specified period of time, and that my employment relationship may be
terminated by either party, at any time, with or without cause or notice.

Date:  3 August 2000                       /s/ COLIN BODELL
     -------------------------             ------------------------------
                                           Colin Bodell

Anticipated Start Date: August 28, 2000<PAGE>   1
                                                                     EXHIBIT 4.1

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                            HIGHGROUND SYSTEMS, INC.

                                STOCK OPTION PLAN

                        ADOPTED JULY 11, 1995, AS AMENDED

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<PAGE>   2
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                 PAGE
<S>   <C>                                                                        <C>
1.    PURPOSES.....................................................................2

2.    DEFINITIONS..................................................................2

3.    ADMINISTRATION...............................................................4

4.    SHARES SUBJECT TO THE PLAN...................................................5

5.    ELIGIBILITY..................................................................5

6.    OPTION PROVISIONS............................................................6

7.    COVENANTS OF THE COMPANY.....................................................8

8.    USE OF PROCEEDS FROM STOCK...................................................9

9.    MISCELLANEOUS................................................................9

10.   ADJUSTMENTS UPON CHANGES IN STOCK...........................................10

11.   AMENDMENT OF THE PLAN.......................................................11

12.   TERMINATION OR SUSPENSION OF THE PLAN.......................................12

13.   EFFECTIVE DATE OF PLAN......................................................12
</TABLE>

                                       i.

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                            HIGHGROUND SYSTEMS, INC.
                                STOCK OPTION PLAN

                        ADOPTED JULY 11, 1995, AS AMENDED

1. PURPOSES.

         (a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.

         (b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

         (c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.

2. DEFINITIONS.

         (a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.

         (b) "BOARD" means the Board of Directors of the Company.

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

         (d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

         (e) "COMPANY" means HighGround Systems, Inc., a Delaware corporation.

         (f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.

         (g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
the employment or relationship as a Director or Consultant is not interrupted or
terminated. The

                                       2.
<PAGE>   4

Board, in its sole discretion, may determine whether Continuous Status as an
Employee, Director or Consultant shall be considered interrupted in the case of:
(i) any leave of absence approved by the Board, including sick leave, military
leave, or any other personal leave; or (ii) transfers between locations of the
Company or between the Company, Affiliates or their successors.

         (h) "COVERED EMPLOYEE" means the Chief Executive Officer and the four
(4) other highest compensated officers of the Company.

         (i) "DIRECTOR" means a member of the Board.

         (j) "DISINTERESTED PERSON" means a Director who either (i) was not
during the one year prior to service as an administrator of the Plan granted or
awarded equity securities pursuant to the Plan or any other plan of the Company
or any of its affiliates entitling the participants therein to acquire equity
securities of the Company or any of its affiliates except as permitted by Rule
16b-3(c)(2)(i); or (ii) is otherwise considered to be a "disinterested person"
in accordance with Rule 16b-3(c)(2)(i), or any other applicable rules,
regulations or interpretations of the Securities and Exchange Commission.

         (k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

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

         (m) "FAIR MARKET VALUE" means the value of the common stock as
determined in good faith by the Board.

         (n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

         (o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

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

         (q) "OPTION" means a stock option granted pursuant to the Plan.

         (r) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

         (s) "OPTIONEE" means an Employee, Director or Consultant who holds an
outstanding Option.

         (t) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (as defined in the
Treasury regulations promulgated

                                       3.
<PAGE>   5

under Section 162(m) of the Code), is not a former employee of the Company or an
affiliated corporation receiving compensation for prior services (other than
benefits under a tax qualified pension plan), was not an officer of the Company
or an affiliated corporation at any time, and is not currently receiving
compensation for personal services in any capacity other than as a Director, or
(ii) is otherwise considered an "outside director" for purposes of Section
162(m) of the Code.

         (u) "PLAN" means this Stock Option Plan.

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

3. ADMINISTRATION.

         (a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).

         (b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

              (1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.

              (2) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.

              (3) To amend the Plan as provided in Section 11.

              (4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.

         (c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee shall be Disinterested Persons and may also be, in the
discretion of the Board, Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Additionally,
prior to the date of the first registration of an equity security of the Company
under Section 12 of the Exchange Act, and notwithstanding anything to the
contrary

                                       4.
<PAGE>   6

contained herein, the Board may delegate administration of the Plan to any
person or persons and the term "Committee" shall apply to any person or persons
to whom such authority has been delegated. Notwithstanding anything in this
Section 3 to the contrary, the Board or the Committee may delegate to a
committee of one or more members of the Board the authority to grant Options to
eligible persons who (1) are not then subject to Section 16 of the Exchange Act
and/or (2) are either (i) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such
Option, or (ii) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code.

         (d) Any requirement that an administrator of the Plan be a
Disinterested Person shall not apply (i) prior to the date of the first
registration of an equity security of the Company under Section 12 of the
Exchange Act, or (ii) if the Board or the Committee expressly declares that such
requirement shall not apply. Any Disinterested Person shall otherwise comply
with the requirements of Rule 16b-3.

4. SHARES SUBJECT TO THE PLAN.

         (a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate four hundred sixty-eight thousand seven hundred fifty
(468,750) shares of the Company's common stock. If any Option shall for any
reason expire or otherwise terminate, in whole or in part, without having been
exercised in full, the stock not purchased under such Option shall revert to and
again become available for issuance under the Plan.

         (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

5. ELIGIBILITY.

         (a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.

         (b) A Director shall in no event be eligible for the benefits of the
Plan unless at the time discretion is exercised in the selection of the Director
as a person to whom Options may be granted, or in the determination of the
number of shares which may be covered by Options granted to the Director: (i)
the Board has delegated its discretionary authority over the Plan to a Committee
which consists solely of Disinterested Persons; or (ii) the Plan otherwise
complies with the requirements of Rule 16b-3. The Board shall otherwise comply
with the requirements of Rule 16b-3. This subsection 5(b) shall not apply (i)
prior to the date of the first registration of an equity security of the Company
under Section 12 of the Exchange Act, or (ii) if the Board or Committee
expressly declares that it shall not apply.

         (c) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and the Option is not exercisable after the expiration of five (5) years
from the date of grant.

                                       5.
<PAGE>   7

6. OPTION PROVISIONS.

         Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

         (a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

         (b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than fifty percent (50%) of the
Fair Market Value of the stock subject to the Option on the date the Option is
granted.

         (c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, (A) by delivery to the Company of other common stock of
the Company, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or to
whom the Option is transferred pursuant to subsection 6(d), or (C) in any other
form of legal consideration that may be acceptable to the Board.

         In the case of any deferred payment arrangement, interest shall be
payable at least annually and shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under any applicable provisions of
the Code, of any amounts other than amounts stated to be interest under the
deferred payment arrangement.

         (d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
not be transferable except by will or by the laws of descent and distribution or
pursuant to a qualified domestic relations order satisfying the requirements of
Rule 16b-3 and the rules thereunder (a "QDRO"), and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person or
any transferee pursuant to a QDRO. The person to whom the Option is granted may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the Optionee,
shall thereafter be entitled to exercise the Option.

         (e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period

                                       6.
<PAGE>   8

and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

         (f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any assurances
given pursuant to such requirements, shall be inoperative if (i) the issuance of
the shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

         (g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer or shorter period specified in the Option Agreement),
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, after termination, the Optionee does not exercise his or her
Option within the time specified in the Option Agreement, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.

         (h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the

                                       7.
<PAGE>   9

shares covered by such Option shall revert to and again become available for
issuance under the Plan.

         (i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option at the date of death) by the Optionee's estate, by a person who acquired
the right to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period specified in the Option Agreement), or (ii) the expiration of the term of
such Option as set forth in the Option Agreement. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

         (j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.

         (k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.

7. COVENANTS OF THE COMPANY.

         (a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.

         (b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.

                                       8.
<PAGE>   10

8. USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.

9. MISCELLANEOUS.

         (a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.

         (b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.

         (c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment or relationship as a
Director or Consultant of any Employee, Director ,Consultant or Optionee with or
without cause.

         (d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options
granted after 1986 are exercisable for the first time by any Optionee during any
calendar year under all plans of the Company and its Affiliates exceeds One
Hundred Thousand Dollars ($100,000), the Options or portions thereof which
exceed such limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.

         (e) (1) The Board or the Committee shall have the authority to effect,
at any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers of
shares of Common Stock, but having an exercise price per share not less than
fifty percent (50%) of the Fair Market Value (one hundred percent (100%) of the
Fair Market Value in the case of an Incentive Stock Option or, in the case of a
ten percent (10%) shareholder (as defined in subsection 5(c), not less than one
hundred and ten percent (110%) of the Fair Market Value)) per share of Common
Stock on the new grant date.

              (2) Shares subject to an Option canceled under this subsection
9(e) shall continue to be counted against the maximum award of Options permitted
to be granted pursuant to subsection 5(d) of the Plan. The repricing of an
Option under this subsection 9(e), resulting in a reduction of the exercise
price, shall be deemed to be a cancellation of the original Option and the grant
of a substitute Option; in the event of such repricing, both the original and
the substituted Options shall be counted against the maximum awards of Options
permitted to be

                                       9.
<PAGE>   11

granted pursuant to subsection 5(d) of the Plan. The provisions of this
subsection 9(e) shall be applicable only to the extent required by Section
162(m) of the Code.

10. ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan pursuant to
subsection 4(a) and the outstanding Options will be appropriately adjusted in
the class(es) and number of shares and price per share of stock subject to such
outstanding Options.

         (b) In the event of a Change in Control, as defined below, to the
extent permitted by applicable law: (i) any surviving corporation or a parent of
such surviving corporation shall assume any Options outstanding under the Plan
or shall substitute similar Options for those outstanding under the Plan or (ii)
such Options shall continue in full force and effect, unless (iii) the surviving
corporation or parent of the surviving corporation refuses to assume or continue
any Options outstanding under the Plan, or to substitute similar options for
those outstanding under the Plan.

              (1) Unless the surviving corporation in a Change of Control or its
parent assumes, continues or substitutes an Option, immediately prior to the
consummation of a Change in Control, with respect to any person who was
providing services as an Employee, Director or Consultant immediately prior to
the consummation of the Change in Control, any Company repurchase option with
respect to shares acquired by such person under an Option shall lapse and the
Option held by such person shall be fully vested and exercisable; provided,
however, that any repurchase option of the surviving corporation or its parent
with respect to shares acquired by such person under such assumed, continued or
substituted Options shall lapse and such assumed, continued or substituted
Options held by such person shall be fully vested and exercisable if within
twelve (12) months after the consummation of the such corporate transaction (i)
such persons employment with such surviving corporation or parent is terminated
without cause (as defined below) by such surviving corporation or parent or (ii)
such person terminates his or her employment after (A) the duties and
responsibilities of his or her employment with the such surviving corporation or
parent or his or her compensation is materially reduced as compared with his or
her duties and responsibilities or compensation, as the case may be, in effect
during the six (6) months prior to such Change of Control, or (B) after he or
she is required to relocate outside the metropolitan area in which he or she was
employed before the Change of Control.

              (2) In addition, if the surviving corporation or its parent
refuses to assume, continue or substitute such Option, the time during which
such Option may be exercised shall be accelerated, the Optionee shall be given
reasonable opportunity to exercise such Option prior to the consummation of the
Change in Control, and such Option shall be terminated if not exercised prior to
the consummation of the Change in Control.

              (3) For the purposes hereof:

                                      10.
<PAGE>   12

                  (i) "Cause" shall mean conduct constituting fraud, gross
negligence or intentional misconduct;

                  (ii) "Change in Control" shall mean: a. a dissolution,
liquidation, or sale of all or substantially all of the assets of the Company;
b. a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation in which shareholders
immediately before the merger or consolidation have, immediately after the
merger or consolidation, greater stock voting power); c. a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise (other than a reverse merger in which shareholders immediately
before the merger have, immediately after the merger, greater stock voting
power); or (iv) any transaction or series of related transactions in which in
excess of 50% of the Company's voting power is transferred.

11. AMENDMENT OF THE PLAN.

         (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

              (1) Increase the number of shares reserved for Options under the
Plan;

              (2) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires shareholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or

              (3) Modify the Plan in any other way if such modification requires
shareholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.

         (b) The Board may in its sole discretion submit any other amendment to
the Plan for shareholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

         (c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.

         (d) Rights and obligations under any Option granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Option was
granted and (ii) such person consents in writing.

                                      11.
<PAGE>   13

12. TERMINATION OR SUSPENSION OF THE PLAN.

         (a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on July 11, 2005 which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the shareholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.

         (b) Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Option was granted.

13. EFFECTIVE DATE OF PLAN.

         The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.

                                      12.

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