Document:

EXHIBIT 10.2

                           COMPAQ COMPUTER CORPORATION

                              RETENTION AGREEMENT

     THIS AGREEMENT is made this 8 day of September 2000 (the "Effective Date"),
by and between MICHAEL J. LARSON, (the "Executive") and COMPAQ COMPUTER
CORPORATION, 20555 SH 249, Houston, Texas 77070 ("Compaq").

                                  INTRODUCTION

A. The Executive is employed by Compaq as its Senior Vice President and Group
General Manager, Consumer.

B. Compaq wishes to make an incentive compensation payment to Executive in
consideration for his attainment of specific tenure objectives during his
employment with Compaq, subject to the terms and conditions of this Agreement.

                                    COVENANTS

1.    INCENTIVE COMPENSATION

      Subject to the terms and conditions of this Agreement, Compaq agrees to
pay the Executive (a) the amount of $1,000,000, less applicable tax withholdings
("Initial Payment"), on September 8, 2000 ("Initial Payment Date"), and (b) an
additional $1,000,000, less applicable tax withholdings ("Subsequent Payment")
on December 28, 2003 ("Subsequent Payment Date").

2.    CONDITIONS PRECEDENT TO SUBSEQUENT PAYMENT

      Compaq shall not be liable for making the Subsequent Payment to the
Executive unless Executive is employed by Compaq as of the Subsequent Payment
Date in his current position or a comparable level executive position.

3.    TERMINATION OF EXECUTIVE'S EMPLOYMENT

     3.1 VOLUNTARY TERMINATION. In the event of Executive's voluntary
termination of employment prior to August 28, 2002, Executive agrees to repay in
full the amount of the Initial Payment. Such payment shall be made by Executive
within 10 days of the effective date of his termination of employment. In the
event of Executive's voluntary termination of employment prior to the Subsequent
Payment Date, in no event shall Executive be entitled to any part of the
Subsequent Payment.

     3.2 INVOLUNTARY TERMINATION, DISABILITY, OR DEATH. Executive will be
entitled to receive a partial Subsequent Payment ("Partial Subsequent Payment")
equal to x, pursuant to the formula

                   x = ($2,000,000 times a divided by b), minus $1,000,000,

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where a = the number of full months that has elapsed since the date of this
Agreement, and b = 40, if the Executive's employment with Compaq is terminated
prior to the Subsequent Payment Date for any of the following reasons:

            (a) Executive's employment is terminated by Compaq without "Cause"
(as defined below);

            (b) Executive resigns within ninety days after a material diminution
in his job responsibilities and/or duties within Compaq;

            (c) Executive resigns or his employment is terminated within 180
days after there is a "Change in Control" of Compaq (as defined below);

            (d) Executive resigns after becoming "Disabled" (as defined below)
or his employment is terminated after he becomes Disabled;

            (e) Executive resigns because of a decision of the Board of
Directors to establish his base compensation at an amount less than 75% of the
greater of (a) his annual base salary in effect on the Effective Date or (b) his
annual base salary in effect during the calendar year preceding the Board's
decision, and such resignation is tendered within ninety days after Executive is
notified of such decision.

            3.2.1 For purposes of this Agreement, "Cause" shall mean termination
for reason of: (a) Executive's conviction of a felony or any other criminal act
involving moral turpitude; (b) Executive's deliberate and intentional continuing
refusal to substantially perform his duties and obligations under this Agreement
(except by reason of incapacity due to illness or accident) if Executive (i)
shall have either failed to remedy such alleged breach within fifteen days from
the date written notice is given by the Secretary of Compaq demanding that
Executive remedy such alleged breach, or (ii) shall have failed to take
reasonable steps in good faith to that end during such fifteen-day period,
provided, with respect to (ii) that, after the end of such fifteen-day period,
there shall have been delivered to Executive a certified copy of a resolution of
the Board of Directors of Compaq, finding that Executive was guilty of conduct
set forth in this clause (b) and specifying the particulars thereof in detail,
and that Executive has failed to take reasonable steps in good faith to remedy
such alleged breach; or (c) upon a finding by a majority vote of the Board of
Directors that Executive engaged in willful fraud or defalcation either of which
involved material funds or other assets of Compaq.

            . 3.2.2 For purposes of this Agreement, a "Change in Control" of
Compaq shall mean and shall be deemed to have occurred if: (a) any "person" as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (other than Compaq, any trustee or other
fiduciary holding securities under any employee benefit plan of Compaq, or any
company owned, directly or indirectly, by the stockholders of Compaq in
substantially the same proportions as their ownership of stock of Compaq), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of Compaq representing 30% or more
of the combined voting power of Compaq's then-outstanding securities; (b) during
any period of two consecutive years (not including any period

                                       2
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prior to the Effective Date of this Agreement), individuals who at the beginning
of such period constitute the Board of Directors, and any new director (other
than a director designated by a person who has entered into an agreement with
Compaq to effect a transaction described in clause (a), (c), or (d) of this
Paragraph) whose election by the Board of Directors or nomination for election
by Compaq's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board of
Directors; (c) the stockholders of Compaq approve a merger or consolidation of
Compaq with any other corporation, other than a merger or consolidation which
would result in the voting securities of Compaq outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than 50% of the
combined voting power of the voting securities of Compaq or such surviving
entity outstanding immediately after such merger or consolidation; provided,
however, that a merger or consolidation effected to implement a recapitalization
of Compaq (or similar transaction) in which no person acquires more than 30% of
the combined voting power of Compaq's then-outstanding securities shall not
constitute a Change in Control of Compaq; or (d) the stockholders of Compaq
approve a plan of complete liquidation of Compaq or an agreement for the sale or
disposition by Compaq of all or substantially all of Compaq's assets.

            3.2.3 For purposes of this Agreement, "Disabled" or "Disability"
shall mean a determination by independent competent medical authority that
Executive is unable to perform, even with reasonable accommodations, the
essential duties of his job and that in all reasonable medical likelihood such
inability will continue for a period in excess of 180 days. Unless otherwise
agreed by Executive and Compaq, the independent medical authority shall be
selected by Executive and Compaq each selecting a board certified licensed
physician and the two physicians selected shall designate an independent medical
authority, whose determination of Disability shall be binding upon Compaq and
Executive.

            3.2.4 Notwithstanding any other provision of this Agreement, in the
event that payment is made to Executive pursuant to a Change in Control, if a
reduction in the amount of the Subsequent Payment or Partial Subsequent Payment
Executive otherwise would be entitled to receive under this Agreement would
result in a greater "Net After-Tax Amount" (as defined below), then such
reduction shall be made to provide the greatest Net After-Tax Amount. A
nationally recognized accounting firm acceptable to Executive and Compaq shall
make the determination of whether any such payment reduction shall be effected
and such determination shall be binding upon Executive and Compaq. Compaq shall
pay the cost of such determination. For purposes of this Section, "Net After-Tax
Amount" shall mean the net amount of payments Executive is entitled to receive
under this Agreement after giving effect to all taxes which would be applicable
to such payments, including, but not limited to, any tax under Section 4999 of
the Internal Revenue Code of 1986, as amended.

      3.3 RESCISSION OF AWARD. In the event that any of the following has
occurred: (a) at anytime before February 28, 2002, with respect to the Initial
Payment, or (b) at anytime before June 30, 2005, with respect to any Subsequent
Payment or Partial Subsequent Payment, Compaq may rescind the applicable of the
Initial Payment, Subsequent Payment, or Partial Subsequent Payment, with written
notice of such rescission to be given to Executive no later than (x) February
28, 2004, with respect to the Initial Payment, and (y) June 30, 2007, with
respect to any Subsequent Payment or Partial Subsequent Payment:

                                       3
<PAGE>
            3.3.1 The Executive, directly or indirectly, in any state of the
United States or in any foreign country where Compaq or any of its subsidiaries
or affiliated companies is conducting business, renders services for any
organization or engages directly or indirectly in any business which is
competitive with 3.3.1 Compaqthe business unit of Compaq managed by Executive at
the time of his departure from Compaq's employment;

            3.3.2 The Executive discloses to anyone outside Compaq, or uses in
other than Compaq's business, without prior written authorization from Compaq,
any confidential information or material, as defined in Compaq's Intellectual
Property Assignment and Confidentiality Agreement, relating to the business of
Compaq, acquired by the Executive either during or after employment with Compaq;

            3.3.3 The failure or refusal to disclose promptly and to assign to
Compaq, pursuant to Compaq's Intellectual Property Assignment and
Confidentiality Agreement, all right, title and interest in any invention or
idea, patentable or not, made or conceived by the Executive during employment by
Compaq, relating in any manner to the actual or anticipated business, research
or development work of Compaq or the failure or refusal to do anything
reasonably necessary to enable Compaq to secure a patent where appropriate in
the United States and in other countries;

            3.3.4 Any attempt, directly or indirectly, to solicit, request or
induce any individual who was employed by Compaq, its subsidiaries, or other
affiliated entities, within the immediately preceding six months before
employment by Executive or any entity of which he is an employee, or any
attempt, directly or indirectly, to solicit the trade or business of any current
or prospective customer, supplier or partner of Compaq, its subsidiaries, or
other affiliated entities.

      In the event of any such rescission, the Executive shall pay to Compaq the
full amount of the Initial Payment, Subsequent Payment, or Partial Subsequent
Payment, as the case may be. Such repayment shall be made within 10 days after
written notice is given to the Executive by Compaq of the rescission and the
reasons for it. However, in the event Compaq believes that the Executive has
violated 3.3.1 or 3.3.4 above, Compaq shall, before giving any notice of
rescission to the Executive, provide the Executive with written notice of the
reason it believes the Executive has violated 3.3.1 or 3.3.4 and give the
Executive a reasonable time, not to Compaq.exceed 10 business days, to cure the
alleged violation or obtain Compaq's written approval of the activity in
question.

      It is expressly understood and agreed that Compaq and Executive consider
the restrictions contained in this Section 3.3 to be reasonable and necessary
for the purposes of preserving and protecting the business, goodwill, and
proprietary information of Compaq. Executive acknowledges that he has received
sufficient consideration under this Agreement to justify such restrictions.
These covenants are in addition to any other obligations pursuant to any other
Compaq policy or agreement between Compaq and Executive regarding this subject
matter.

4.    CLAIMS RESOLUTION PROCESS

      4.1 If the Executive has any claim in connection with this Agreement, he
agrees to submit his claim in writing to Compaq's Senior Vice President, Human
Resources, who will promptly respond to the Executive normally within 21 days
from the receipt of the claim.

                                       4
<PAGE>
      4.2 If the Executive disagrees with Compaq's determination, the parties
agree to attempt to settle the Executive's claim by non-binding mediation held
in Houston, Texas and administrated by the American Arbitration Association
("AAA") under its National Rules for the Resolution of Employment Disputes.

      4.3 If the parties fail to reach a settlement as a result of the mediation
process, any claim or controversy in connection with this Agreement shall be
finally settled by binding arbitration conducted by AAA, held in Houston, Texas
pursuant to AAA's National Rules for the Resolution of Employment Disputes. A
judgment based upon the arbitrator's decision may be entered and enforced in any
Texas court having jurisdiction.

      4.4 The cost of the foregoing mediation and arbitration shall be borne
equally by the parties.

5.    MISCELLANEOUS

      5.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas, USA.

      5.2 This Agreement is an incentive compensation arrangement and does not
grant the Executive any rights of continued employment nor alter the Executive's
"at will" employment status.

      5.3 Compaq makes no representation concerning the tax treatment under
federal, state or local laws of the compensation paid to the Executive under
this Agreement. Compaq will withhold any taxes required by law, including FICA,
at the time payment is made to the Executive.

      5.4 This Agreement is personal to Executive and any rights to receive
compensation under this Agreement may not be assigned or transferred to any
third party, unless required by applicable law.

      5.5 The Executive acknowledges and agrees that this Agreement represents
the entire agreement between the Executive and Compaq regarding the subject
matter hereof and that all promises, commitments, or representations of any
kind, verbal or otherwise, which have been made to the Executive are contained
in this Agreement.

      5.6 Any changes or modifications to this Agreement must be in writing and
signed by the Executive and Compaq.

      5.7 If any term, provision, covenant or remedy of this Agreement or the
application thereof to any person or circumstances shall, to any extent, be
construed to be invalid or unenforceable in whole or in part, then such term,
provision, covenant or remedy shall be construed in a manner so as to permit its
enforceability under the applicable law to the fullest extent permitted by law.
In any case, the remaining provisions of this Agreement or the application
thereof to any person or circumstances, other than those to which they have been
held invalid or unenforceable, shall remain in full force and effect.

                                       5
<PAGE>
      5.8 If Executive is in breach of any of the promises and covenants set
forth in this Agreement, Compaq shall have the right, without in any way
limiting any other legal or equitable remedy available to it, to seek specific
performance of the Agreement, any and all damages resulting from the breach, and
any attorney's fees and costs incurred in bringing the action.

      IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first set forth above.

COMPAQ COMPUTER CORPORATION

By:   /S/ YVONNE R. JACKSON                  /S/ MICHAEL J. LARSON
   ------------------------------            ---------------------------------
                                                 Michael J. Larson

Title: SR. V.P. HUMAN RESOURCES
      ---------------------------
Date:           9-8-00                       Date:         9/8/00
      ---------------------------                  ---------------------------

                                       6EX-4.1

	

ALATION SYSTEMS, INC.

1998 STOCK OPTION PLAN

     1.
Establishment, Purpose and Term of Plan. 

	 	     
1.1
Establishment. The Alation Systems, Inc, 1998 Stock Option Plan (the “Plan”) is
hereby established effective as of March 11, 1998.

	 	     
1.2
Purpose. The purpose of the Plan is to advance the interests of the Participating Company
Group and its shareholders by providing an incentive to attract, retain and reward
persons performing services for the Participating Company Group and by motivating such
persons to contribute to the growth and profitability of the Participating Company Group.

	 	     
1.3
Term of Plan. The Plan shall continue in effect until the earlier of its termination by
the Board or the date on which all of the shares of Stock available for issuance under
the Plan have been issued and all restrictions on such shares under the terms of the Plan
and the agreements evidencing Options granted under the Plan have lapsed. However, all
Options shall be granted, if at all, within ten (10) years from the earlier of the date
the Plan is adopted by the Board or the date the Plan is duly approved by the
shareholders of the Company.

	

     2.
Definitions and Construction. 

	 	     
2.1
Definitions. Whenever used herein, the following terms shall have their respective
meanings set forth below:

	 	     (a)
“Board”means the Board of Directors of the Company. If one or more Committees
have been appointed by the Board to administer the Plan, “Board”also means such
Committee(s).

	 	     (b)
“Code”means the Internal Revenue Code of 1986, as amended, and any applicable
regulations promulgated thereunder.

	 	     (c)
“Committee”means the Compensation Committee or other committee of the Board
duly appointed to administer the Plan and having such powers as shall be specified by the
Board. Unless the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein, including, without limitation,
the power to amend or terminate the Plan at any time, subject to the terms of the Plan
and any applicable limitations imposed by law.

	 	     (d)
“Company”means Alation Systems, Inc., a California corporation, or any
successor corporation thereto.

	 	     (e)
“Consultant”means any person, including an advisor, engaged by a Participating
Company to render services other than as an Employee or a Director.

	 	     (f)
“Director”means a member of the Board or of the board of directors of any other
Participating Company.

	 	     (g)
“Disability”means the inability of the Optionee, in the opinion of a qualified
physician acceptable to the Company, to perform the major duties of the Optionee’s
position with the Participating Company Group because of the sickness or injury of the
Optionee.

	 	     (h)
“Employee”means any person treated as an employee (including an officer or a
Director who is also treated as an employee) in the records of a Participating Company
and, with respect to any Incentive Stock Option granted to such person, who is an
employee for purposes of Section 422 of the Code; provided, however, that neither service
as a Director nor payment of a director’s fee shall be sufficient to constitute
employment for purposes of the Plan.

	 	     (i)
“Exchange Act”means the Securities Exchange Act of 1934, as amended.

	 	     (j)
“Fair Market Value”means, as of any date, the value of a share of Stock or
other property as determined by the Board, in its sole discretion, or by the Company, in
its sole discretion, if such determination is expressly allocated to the Company herein,
subject to the following:

	 	     (i)
If, on such date, there is a public market for the Stock, the Fair Market Value of a
share of Stock shall be the closing sale price of a share of Stock (or the mean of the
closing bid and asked prices of a share of Stock if the Stock is so quoted instead) as
quoted on the Nasdaq National Market, the Nasdaq Small-Cap Market or such other national
or regional securities exchange or market system constituting the primary market for the
Stock, as reported in the Wall Street Journal or such other source as the Company deems
reliable. If the relevant date does not fall on a day on which the Stock has traded on
such securities exchange or market system, the date on which the Fair Market Value shall
be established shall be the last day on which the Stock was so traded prior to the
relevant date, or such other appropriate day as shall be determined by the Board, in its
sole discretion.

	 	     (ii)
If, on such date, there is no public market for the Stock, the Fair Market Value of a
share of Stock shall be as determined by the Board without regard to any restriction
other than a restriction which, by its terms, will never lapse.

	 	     (k)
“Incentive Stock Option”means an Option intended to be (as set forth in the
Option Agreement) and which qualifies as an incentive stock option within the meaning of
Section 422(b) of the Code.

	 	     (l)
“Insider”means an officer or a Director of the Company or any other person
whose transactions in Stock are subject to Section 16 of the Exchange Act.

	 	     
(m)
“Nonstatutory Stock Option”means an Option not intended to be (as set forth in
the Option Agreement) or which does not qualify as an Incentive Stock Option.

	 	     
(n)
“Option”means a right to purchase Stock (subject to adjustment as provided in
Section 4.2) pursuant to the terms and conditions of the Plan. An Option may be either an
Incentive Stock Option or a Nonstatutory Stock Option.

	 	     
(o)
“Option Agreement”means a written agreement between the Company and an Optionee
setting forth the terms, conditions and restrictions of the Option granted to the
Optionee and any shares acquired upon the exercise thereof.

	 	     
(p)
“Optionee”means a person who has been granted one or more Options.

	 	     
(q)
“Parent Corporation”means any present or future “parent corporation”of
the Company, as defined in Section 424(e) of the Code.

	 	     
(r)
“Participating Company”means the Company or any Parent Corporation or
Subsidiary Corporation.

	 	     
(s)
“Participating Company Group”means, at any point in time, all corporations
collectively which are then Participating Companies.

	 	     
(t)
“Rule 16b-3”means Rule 16b-3 under the Exchange Act, as amended from time to
time, or any successor rule or regulation.

	 	     
(u)
“Securities Act”means the Securities Act of 1933, as amended.

	 	     
(v)
“Service”means an Optionee’s employment or service with the Participating
Company Group, whether in the capacity of an Employee, a Director or a Consultant. The
Optionee’s Service shall not be deemed to have terminated merely because of a change
in the capacity in which the Optionee renders Service to the Participating Company Group
or a change in the Participating Company for which the Optionee renders such Service,
provided that there is no interruption or termination of the Optionee’s Service.
Furthermore, an Optionee’s Service with the Participating Company Group shall not be
deemed to have terminated if the Optionee takes any military leave, sick leave, or other
bona fide leave of absence approved by the Company; provided, however, that if any such
leave exceeds ninety (90) days, on the ninety-first (91st) day of such leave the Optionee’s
Service shall be deemed to have terminated unless the Optionee’s right to return to
Service with the Participating Company Group is guaranteed by statute or contract.
Notwithstanding the foregoing, unless otherwise designated by the Company or required by
law, a leave of absence shall not be treated as Service for purposes of determining
vesting under the Optionee’s Option Agreement. The Optionee’s Service shall be
deemed to have terminated either upon an actual termination of Service or upon the
corporation for which the Optionee performs Service ceasing to be a Participating
Company. Subject to the foregoing, the Company, in its sole discretion, shall determine
whether the Optionee’s Service has terminated and the effective date of such
termination.

	 	     (w)
“Stock”means the common stock of the Company, as adjusted from time to time in
accordance with Section 4.2.

	 	     (x)
“Subsidiary Corporation”means any present or future “subsidiary corporation”of
the Company, as defined in Section 424(f) of the Code.

	 	     (y)
“Ten Percent Owner Optionee”means an Optionee who, at the time an Option is
granted to the Optionee, owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of a Participating Company within the
meaning of Section 422(b)(6) of the Code.

	 	     
2.2
Construction. Captions and titles contained herein are for convenience only and shall not
affect the meaning or interpretation of any provision of the Plan. Except when otherwise
indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or”is not intended to be exclusive,
unless the context clearly requires otherwise.

	

     3.
Administration. 

	 	     
3.1
Administration by the Board. The Plan shall be administered by the Board. All questions
of interpretation of the Plan or of any Option shall be determined by the Board, and such
determinations shall be final and binding upon all persons having an interest in the Plan
or such Option. Any officer of a Participating Company shall have the authority to act on
behalf of the Company with respect to any matter, right, obligation, determination or
election which is the responsibility of or which is allocated to the Company herein,
provided the officer has apparent authority with respect to such matter, right,
obligation, determination or election.

	 	     
3.2
Administration with Respect to Insiders. With respect to participation by Insiders in the
Plan, at any time that any class of equity security of the Company is registered pursuant
to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the
requirements, if any, of Rule 16b-3.

	 	     
3.3
Powers of the Board. In addition to any other powers set forth in the Plan and subject to
the provisions of the Plan, the Board shall have the full and final power and authority,
in its sole discretion:

	 	     (a)
to determine the persons to whom, and the time or times at which, Options shall be
granted and the number of shares of Stock to be subject to each Option;

	 	     (b)
to designate Options as Incentive Stock Options or Nonstatutory Stock Options;

	 	     (c)
to determine the Fair Market Value of shares of Stock or other property;

	 	     (d)
to determine the terms, conditions and restrictions applicable to each Option (which need
not be identical) and any shares acquired upon the exercise thereof, including, without
limitation, (i) the exercise price of the Option, (ii) the method of payment for shares
purchased upon the exercise of the Option, (iii) the method for satisfaction of any tax
withholding obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and conditions of
the exercisability of the Option or the vesting of any shares acquired upon the exercise
thereof, (v) the time of the expiration of the Option, (vi) the effect of the Optionee’s
termination of Service with the Participating Company Group on any of the foregoing, and
(vii) all other terms, conditions and restrictions applicable to the Option or such
shares not inconsistent with the terms of the Plan;

	 	     (e)
to approve one or more forms of Option Agreement;

	 	     (f)
to amend, modify, extend, cancel, renew, reprice or otherwise adjust the exercise price
of, or grant a new Option in substitution for, any Option or to waive any restrictions or
conditions applicable to any Option or any shares acquired upon the exercise thereof;

	 	     (g)
to accelerate, continue, extend or defer the exercisability of any Option or the vesting
of any shares acquired upon the exercise thereof, including with respect to the period
following an Optionee’s termination of Service with the Participating Company Group;

	 	     (h)
to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to
adopt supplements to, or alternative versions of, the Plan, including, without
limitation, as the Board deems necessary or desirable to comply with the laws of, or to
accommodate the tax policy or custom of, foreign jurisdictions whose citizens may be
granted Options; and

	 	     (i)
to correct any defect, supply any omission or reconcile any inconsistency in the Plan or
any Option Agreement and to make all other determinations and take such other actions
with respect to the Plan or any Option as the Board may deem advisable to the extent
consistent with the Plan and applicable law.

	

     4.
Shares Subject to Plan. 

	 	     
4.1
Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the
maximum aggregate number of shares of Stock that may be issued under the Plan shall be
four million (4,000,000) and shall consist of authorized but unissued or reacquired
shares of Stock or any combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled or if shares of Stock are acquired upon the exercise
of an Option subject to a Company repurchase option and are repurchased by the Company at
the Optionee’s exercise price, the shares of Stock allocable to the unexercised
portion of such Option or such repurchased shares of Stock shall again be available for
issuance under the Plan. Notwithstanding the foregoing, at any such time as the offer and
sale of securities pursuant to the Plan is subject to compliance with Section 260.140.45
of Title 10 of the California Code of Regulations (“Section 260.140.45”), the
total number of shares of Stock issuable upon the exercise of all outstanding Options
(together with options outstanding under any other stock option plan of the Company) and
the total number of shares provided for under any stock bonus or similar plan of the
Company shall not exceed thirty percent (30%) (or such other higher percentage limitation
as may be approved by the shareholders of the Company pursuant to Section 260.140.45) of
the then outstanding shares of the Company as calculated in accordance with the
conditions and exclusions of Section 260.140.45.

	 	     
4.2
Adjustments for Changes in Capital Structure. In the event of any stock dividend, stock
split, reverse stock split, recapitalization, combination, reclassification or similar
change in the capital structure of the Company, appropriate adjustments shall be made in
the number and class of shares subject to the Plan and to any outstanding Options and in
the exercise price per share of any outstanding Options. If a majority of the shares
which are of the same class as the shares that are subject to outstanding Options are
exchanged for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change Event, as defined in Section 8.1) shares of another corporation (the
“New Shares”), the Board may unilaterally amend the outstanding Options to
provide that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price per share of, the
outstanding Options shall be adjusted in a fair and equitable manner as determined by the
Board, in its sole discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 4.2 shall be rounded up or down to
the nearest whole number, as determined by the Board, and in no event may the exercise
price of any Option be decreased to an amount less than the par value, if any, of the
stock subject to the Option. The adjustments determined by the Board pursuant to this
Section 4.2 shall be final, binding and conclusive.

	

     5.
Eligibility and Option Limitations. 

	 	     
5.1
Persons Eligible for Options. Options may be granted only to Employees, Consultants, and
Directors. For purposes of the foregoing sentence, “Employees,”“Consultants”and
“Directors”shall include prospective Employees, prospective Consultants and
prospective Directors to whom Options are granted in connection with written offers of an
employment or other service relationship with the Participating Company Group. Eligible
persons may be granted more than one (1) Option.

	 	     
5.2
Option Grant Restrictions. Any person who is not an Employee on the effective date of the
grant of an Option to such person may be granted only a Nonstatutory Stock Option. An
Incentive Stock Option granted to a prospective Employee upon the condition that such
person become an Employee shall be deemed granted effective on the date such person
commences Service with a Participating Company, with an exercise price determined as of
such date in accordance with Section 6.1.

	 	     
5.3
Fair Market Value Limitation. To the extent that options designated as Incentive Stock
Options (granted under all stock option plans of the Participating Company Group,
including the Plan) become exercisable by an Optionee for the first time during any
calendar year for stock having a Fair Market Value greater than One Hundred Thousand
Dollars ($100,000), the portion of such options which exceeds such amount shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5.3, options
designated as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of stock shall be determined as of the time
the option with respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different limitation
shall be deemed incorporated herein effective as of the date and with respect to such
Options as required or permitted by such amendment to the Code. If an Option is treated
as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason
of the limitation set forth in this Section 5.3, the Optionee may designate which portion
of such Option the Optionee is exercising. In the absence of such designation, the
Optionee shall be deemed to have exercised the Incentive Stock Option portion of the
Option first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

	

     6.
Terms and Conditions of Options. 

	 	     
Options
shall be evidenced by Option Agreements specifying the number of shares of Stock covered
thereby, in such form as the Board shall from time to time establish. No Option or
purported Option shall be a valid and binding obligation of the Company unless evidenced
by a fully executed Option Agreement. Option Agreements may incorporate all or any of the
terms of the Plan by reference and shall comply with and be subject to the following
terms and conditions: 

	 	     
6.1
Exercise Price. The exercise price for each Option shall be established in the sole
discretion of the Board; provided, however, that (a) the exercise price per share for an
Incentive Stock Option shall be not less than the Fair Market Value of a share of Stock
on the effective date of grant of the Option, (b) the exercise price per share for a
Nonstatutory Stock Option shall be not less than eighty-five percent (85%) of the Fair
Market Value of a share of Stock on the effective date of grant of the Option, and (c) no
Option granted to a Ten Percent Owner Optionee shall have an exercise price per share
less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an Option
(whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than the minimum exercise price set forth above if such Option is
granted pursuant to an assumption or substitution for another option in a manner
qualifying under the provisions of Section 424(a) of the Code.

	 	     
6.2
Exercise Period. Options shall be exercisable at such time or times, or upon such event
or events, and subject to such terms, conditions, performance criteria, and restrictions
as shall be determined by the Board and set forth in the Option Agreement evidencing such
Option; provided, however, that (a) no Option shall be exercisable after the expiration
of ten (10) years after the effective date of grant of such Option, (b) no Incentive
Stock Option granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option, (c) no
Option granted to a prospective Employee, prospective Consultant or prospective Director
may become exercisable prior to the date on which such person commences Service with a
Participating Company, and (d) with the exception of an Option granted to an officer,
Director or Consultant, no Option shall become exercisable at a rate less than twenty
percent (20%) per year over a period of five (5) years from the effective date of grant
of such Option, subject to the Optionee’s continued Service. Subject to the
foregoing, unless otherwise specified by the Board in the grant of an Option, any Option
granted hereunder shall have a term of ten (10) years from the effective date of grant of
the Option.

	 	     
6.3
Payment of Exercise Price.

	 	     (a)
Forms of Consideration Authorized. Except as otherwise provided below, payment of the
exercise price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company,
or attestation to the ownership, of shares of Stock owned by the Optionee having a Fair
Market Value (as determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state securities laws or
agreements with an underwriter for the Company) not less than the exercise price, (iii)
by the assignment of the proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the Option (including, without limitation,
through an exercise complying with the provisions of Regulation T as promulgated from
time to time by the Board of Governors of the Federal Reserve System) (a “Cashless
Exercise”), (iv) by the Optionee’s promissory note in a form approved by the
Company, (v) by such other consideration as may be approved by the Board from time to
time to the extent permitted by applicable law, or (vi) by any combination thereof. The
Board may at any time or from time to time, by adoption of or by amendment to the
standard forms of Option Agreement described in Section 7, or by other means, grant
Options which do not permit all of the foregoing forms of consideration to be used in
payment of the exercise price or which otherwise restrict one or more forms of
consideration.

	 	     (b)
Limitations on Forms of Consideration.

	 	     (i)
Tender of Stock. Notwithstanding the foregoing, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such
tender, or attestation to the ownership, of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of the Company’s
stock. Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock unless such shares
either have been owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

	 	     (ii)
Cashless Exercise. The Company reserves, at any and all times, the right, in the Company’s
sole and absolute discretion, to establish, decline to approve or terminate any program
or procedures for the exercise of Options by means of a Cashless Exercise.

	 	     (iii)
Payment by Promissory Note. No promissory note shall be permitted if the exercise of an
Option using a promissory note would be a violation of any law. Any permitted promissory
note shall be on such terms as the Board shall determine at the time the Option is
granted. The Board shall have the authority to permit or require the Optionee to secure
any promissory note used to exercise an Option with the shares of Stock acquired upon the
exercise of the Option or with other collateral acceptable to the Company. Unless
otherwise provided by the Board, if the Company at any time is subject to the regulations
promulgated by the Board of Governors of the Federal Reserve System or any other
governmental entity affecting the extension of credit in connection with the Company’s
securities, any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the extent
necessary to comply with such applicable regulations.

	 	     
6.4
Tax Withholding. The Company shall have the right, but not the obligation, to deduct from
the shares of Stock issuable upon the exercise of an Option, or to accept from the
Optionee the tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the federal, state, local and
foreign taxes, if any, required by law to be withheld by the Participating Company Group
with respect to such Option or the shares acquired upon the exercise thereof.
Alternatively or in addition, in its sole discretion, the Company shall have the right to
require the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax withholding
obligations of the Participating Company Group arising in connection with the Option or
the shares acquired upon the exercise thereof. The Company shall have no obligation to
deliver shares of Stock or to release shares of Stock from an escrow established pursuant
to the Option Agreement until the Participating Company Group’s tax withholding
obligations have been satisfied by the Optionee.

	 	     
6.5
Repurchase Rights. Shares issued under the Plan may be subject to a right of first
refusal, one or more repurchase options, or other conditions and restrictions as
determined by the Board in its sole discretion at the time the Option is granted. The
Company shall have the right to assign at any time any repurchase right it may have,
whether or not such right is then exercisable, to one or more persons as may be selected
by the Company. Upon request by the Company, each Optionee shall execute any agreement
evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder
and shall promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate legends
evidencing any such transfer restrictions.

	 	     
6.6
Effect of Termination of Service.

	 	     (a)
Option Exercisability. Subject to earlier termination of the Option as otherwise provided
herein, an Option shall be exercisable after an Optionee’s termination of Service as
follows:

	 	     (i)
Disability. If the Optionee’s Service with the Participating Company Group is
terminated because of the Disability of the Optionee, the Option, to the extent
unexercised and exercisable on the date on which the Optionee’s Service terminated,
may be exercised by the Optionee (or the Optionee’s guardian or legal
representative) at any time prior to the expiration of six (6) months (or such longer
period of time as determined by the Board, in its sole discretion) after the date on
which the Optionee’s Service terminated, but in any event no later than the date of
expiration of the Option’s term as set forth in the Option Agreement evidencing such
Option (the “Option Expiration Date”).

	 	     (ii)
Death. If the Optionee’s Service with the Participating Company Group is terminated
because of the death of the Optionee, the Option, to the extent unexercised and
exercisable on the date on which the Optionee’s Service terminated, may be exercised
by the Optionee’s legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee’s death at any time prior to the
expiration of six (6) months (or such longer period of time as determined by the Board,
in its sole discretion) after the date on which the Optionee’s Service terminated,
but in any event no later than the Option Expiration Date. The Optionee’s Service
shall be deemed to have terminated on account of death if the Optionee dies within thirty
(30) days after the Optionee’s termination of Service.

	 	     (iii)
Other Termination of Service. If the Optionee’s Service with the Participating
Company Group terminates for any reason, except Disability or death, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the Optionee’s
Service terminated, may be exercised by the Optionee within thirty (30) days (or such
longer period of time as determined by the Board, in its sole discretion) after the date
on which the Optionee’s Service terminated, but in any event no later than the
Option Expiration Date.

	 	     (b)
Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise of
an Option within the applicable time periods set forth in Section 6.6(a) is prevented by
the provisions of Section 11 below, the Option shall remain exercisable until one (1)
month after the date the Optionee is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.

	 	     (c)
Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 6.6(a) of shares acquired upon
the exercise of the Option would subject the Optionee to suit under Section 16(b) of the
Exchange Act, the Option shall remain exercisable until the earliest to occur of (i) the
tenth (10th) day following the date on which a sale of such shares by the Optionee would
no longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day after
the Optionee’s termination of Service, or (iii) the Option Expiration Date.

	

     7.
Standard Forms of Option Agreement. 

	 	     
7.1
Incentive Stock Options. Unless otherwise provided by the Board at the time the Option is
granted, an Option designated as an “Incentive Stock Option”shall comply with
and be subject to the terms and conditions set forth in the form of Incentive Stock
Option Agreement adopted by the Board concurrently with its adoption of the Plan and as
amended from time to time.

	 	     
7.2
Nonstatutory Stock Options. Unless otherwise provided by the Board at the time the Option
is granted, an Option designated as a “Nonstatutory Stock Option”shall comply
with and be subject to the terms and conditions set forth in the form of Nonstatutory
Stock Option Agreement adopted by the Board concurrently with its adoption of the Plan
and as amended from time to time.

	 	     
7.3
Authority to Vary Terms. The Board shall have the authority from time to time to vary the
terms of any of the standard forms of Option Agreement described in this Section 7 either
in connection with the grant or amendment of an individual Option or in connection with
the authorization of a new standard form or forms; provided, however, that the terms and
conditions of any such new, revised or amended standard form or forms of Option Agreement
are not inconsistent with the terms of the Plan.

	

     8.
Change in Control. 

	 	     
8.1
Definitions.

	 	     (a)
An “Ownership Change Event”shall be deemed to have occurred if any of the
following occurs with respect to the Company:

	 	     (i)
the direct or indirect sale or exchange in a single or series of related transactions by
the shareholders of the Company of more than fifty percent (50%) of the voting stock of
the Company;

	 	     (ii)
a merger or consolidation in which the Company is a party;

	 	     (iii)
the sale, exchange, or transfer of all or substantially all of the assets of the Company;
or

	 	     (iv)
a liquidation or dissolution of the Company.

	 	     (b)
A “Change in Control”shall mean an Ownership Change Event or a series of
related Ownership Change Events (collectively, the “Transaction”) wherein the
shareholders of the Company immediately before the Transaction do not retain immediately
after the Transaction, in substantially the same proportions as their ownership of shares
of the Company’s voting stock immediately before the Transaction, direct or indirect
beneficial ownership of more than fifty percent (50%) of the total combined voting power
of the outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the “Transferee Corporation(s)”),
as the case may be. For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the voting
stock of one or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or through one or
more subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple Ownership
Change Events are related, and its determination shall be final, binding and conclusive.

	 	     
8.2
Effect of Change in Control on Options. In the event of a Change in Control, any
unexercisable or unvested portion of the outstanding Options shall be immediately
exercisable and vested in full as of the date ten (10) days prior to the date of the
Change in Control. The exercise or vesting of any Option that was permissible solely by
reason of this Section 8.2 shall be conditioned upon the consummation of the Change in
Control. In addition, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the “Acquiring Corporation”),
may either assume the Company’s rights and obligations under outstanding Options or
substitute for outstanding Options substantially equivalent options for the Acquiring
Corporation’s stock. For purposes of this Section 8.2, an Option shall be deemed
assumed if, following the Change in Control, the Option confers the right to purchase in
accordance with its terms and conditions, for each share of Stock subject to the Option
immediately prior to the Change in Control, the consideration (whether stock, cash or
other securities or property) to which a holder of a share of Stock on the effective date
of the Change in Control was entitled. Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Change in Control nor
exercised as of the date of the Change in Control shall terminate and cease to be
outstanding effective as of the date of the Change in Control. Notwithstanding the
foregoing, shares acquired upon exercise of an Option prior to the Change in Control and
any consideration received pursuant to the Change in Control with respect to such shares
shall continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of which is
subject to the outstanding Options immediately prior to an Ownership Change Event
described in Section 8.1(a)(i) constituting a Change in Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group within the
meaning of Section 1504(a) of the Code without regard to the provisions of Section
1504(b) of the Code, the outstanding Options shall not terminate unless the Board
otherwise provides in its sole discretion.

	

     9.
Provision of Information. 

	 	     
At
least annually, copies of the Company’s balance sheet and income statement for the
just completed fiscal year shall be made available to each Optionee and purchaser of
shares of Stock upon the exercise of an Option. The Company shall not be required to
provide such information to persons whose duties in connection with the Company assure
them access to equivalent information.

	

     10.
Nontransferability of Options. 

	 	     
During
the lifetime of the Optionee, an Option shall be exercisable only by the Optionee or the
Optionee’s guardian or legal representative. No Option shall be assignable or
transferable by the Optionee, except by will or by the laws of descent and distribution.

	

     11.
Compliance with Securities Law. 

	 	     
The
grant of Options and the issuance of shares of Stock upon exercise of Options shall be
subject to compliance with all applicable requirements of federal, state and foreign law
with respect to such securities. Options may not be exercised if the issuance of shares
of Stock upon exercise would constitute a violation of any applicable federal, state or
foreign securities laws or other law or regulations or the requirements of any stock
exchange or market system upon which the Stock may then be listed. In addition, no Option
may be exercised unless (a) a registration statement under the Securities Act shall at
the time of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (b) in the opinion of legal counsel to the Company, the shares
issuable upon exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act. The
inability of the Company to obtain from any regulatory body having jurisdiction the
authority, if any, deemed by the Company’s legal counsel to be necessary to the
lawful issuance and sale of any shares hereunder shall relieve the Company of any
liability in respect of the failure to issue or sell such shares as to which such
requisite authority shall not have been obtained. As a condition to the exercise of any
Option, the Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or regulation
and to make any representation or warranty with respect thereto as may be requested by
the Company.

	

     12.
Indemnification. 

	 	     
In
addition to such other rights of indemnification as they may have as members of the Board
or officers or employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to act for the
Board or the Company is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys’fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection with any
appeal therein, to which they or any of them may be a party by reason of any action taken
or failure to act under or in connection with the Plan, or any right granted hereunder,
and against all amounts paid by them in settlement thereof (provided such settlement is
approved by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that such
person is liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the opportunity at its
own expense to handle and defend the same.

	

     13.
Termination or Amendment of Plan. 

	 	     
The
Board may terminate or amend the Plan at any time. However, subject to changes in
applicable law, regulations or rules that would permit otherwise, without the approval of
the Company’s shareholders, there shall be (a) no increase in the maximum aggregate
number of shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (b) no change in the class of persons eligible to receive
Incentive Stock Options, and (c) no other amendment of the Plan that would require
approval of the Company’s shareholders under any applicable law, regulation or rule.
In any event, no termination or amendment of the Plan may adversely affect any then
outstanding Option or any unexercised portion thereof, without the consent of the
Optionee, unless such termination or amendment is required to enable an Option designated
as an Incentive Stock Option to qualify as an Incentive Stock Option or is necessary to
comply with any applicable law, regulation or rule.

	

     14.
Shareholder Approval. 

	 	     
The
Plan or any increase in the maximum number of shares of Stock issuable thereunder as
provided in Section 4.1 (the “Maximum Shares”) shall be approved by the
shareholders of the Company within twelve (12) months of the date of adoption thereof by
the Board. Options granted prior to shareholder approval of the Plan or in excess of the
Maximum Shares previously approved by the shareholders shall become exercisable no
earlier than the date of shareholder approval of the Plan or such increase in the Maximum
Shares, as the case may be.

	

     IN
WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing
Plan was duly adopted by the Board on March 11, 1998. 

	 	/s/ Mark Moore
————————————
Secretary

	

PLAN HISTORY

	March 11,
1998		 Board adopts Plan, with an initial reserve of 4,000,000 shares.

	March 11,
1998 		Shareholders approve Plan, with an initial reserve of 4,000,000 shares.

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