Document:

Exhibit 4.1

                             SUBSCRIPTION AGREEMENT

      This Subscription Agreement ("Agreement") is entered into this 9th day of
December, 2002, between Telesource International, Inc., a Delaware corporation
(the "Company"), and Financial Management Co., W.L.L. ("Subscriber").

      1. Subscription, Purchase and Closing.

            1.1 The Subscriber, intending to be legally bound, hereby subscribes
for and agrees to purchase 4,000,000 shares (the "Shares") of the Series A
Preferred Stock, par value $.01 per share (the "Series A Preferred"), of the
Company, at a price of $1.50 per Share (the "Purchase Price"), upon the terms
and conditions set forth in this Agreement. The terms of the Series A Preferred
are set forth in the certificate of designations attached hereto as Exhibit A.

            1.2 The Shares subscribed for hereby shall not be deemed owned by
Subscriber, nor shall Subscriber be deemed a holder of securities of the Company
until this subscription has been accepted by the Company and the Purchase Price
with respect to such Shares has been paid. Subscriber understands and agrees
that the Company reserves the right to reject this subscription for the Shares
in whole or in part, in its sole discretion, at any time through the Tranche 1
Closing Date (as such term is defined in Section 1.5).

            1.3 In the event of rejection of this subscription, or in the event
the sale of the Shares is not consummated for any reason (in which event this
Agreement shall be deemed to be rejected), this Agreement shall have no force or
effect.

            1.4 Subscriber hereby agrees to deliver one-half of the Purchase
Price ($3,000,000) to purchase one-half of the number of Shares subscribed for
hereunder on the Tranche 1 Closing Date set pursuant to Section 1.5 and to
deliver the remaining one-half of the Purchase Price ($3,000,000) to purchase
the remaining one-half of the number of Shares subscribed for hereunder on the
Tranche 2 Closing Date set pursuant to Section 1.5.

            1.5 The closing of the transactions contemplated herein shall take
place on two dates mutually agreed upon by the Company and the Subscriber, with
the first date occurring no later than December 16, 2002 (the "Tranche 1 Closing
Date") and the second date occurring no later than March 3, 2002 (the "Tranche 2
Closing Date" and, collectively with the Tranche 1 Closing Date, the "Closing
Dates").

            1.6 Payment of the portion of the Purchase Price for the Shares to
be purchased on each Closing Date shall be made by 1:00 p.m. on the applicable
Closing Date by wire transfer of immediately available funds or at such other
time and by such other means as the Company shall approve. The Company will
notify Subscriber as to payment instructions. Upon the Closing Date, the Company
will deliver certificates representing the Shares purchased by Subscriber.

      2. Conditions to Closing.

            (a) The obligations of the Subscriber to proceed with the Closing is
      subject to the following conditions, any and all of which may be waived by
      Subscriber in whole or in part:

            (i)   Each of the representations and warranties of the Company
                  shall be true and correct on the Tranche 1 Closing Date,
                  except to the extent the same expressly relate to an earlier
                  date;

            (ii)  The Company shall be in full compliance with the terms,
                  covenants and conditions of this Agreement.

<PAGE>

            (b) The obligations of the Company to proceed with the Closing is
      subject to the following conditions, any and all of which may be waived by
      the Company in whole or in part:

            (i)   Each of the representations and warranties of the Subscriber
                  shall be true and correct on the Tranche 1 Closing Date,
                  except to the extent the same expressly relate to an earlier
                  date;

            (ii)  The Subscriber shall be in full compliance with the terms,
                  covenants and conditions of this Agreement.

      3. Representations, Warranties and Agreements of Subscriber. Subscriber
hereby represents and warrants to the Company, and hereby covenants and agrees
with the Company, as follows:

            (a) Subscriber has full power and authority to enter into this
      Agreement and to perform its obligations hereunder. All requisite action
      on the part of Subscriber necessary for the authorization, execution,
      delivery and performance of Subscriber's obligations under this Agreement
      and for the purchase of the Shares has been taken, and this Agreement,
      when executed by a duly authorized officer of Subscriber, will be a valid
      and binding agreement of Subscriber, enforceable in accordance with its
      terms, except as such enforceability may be limited by (i) bankruptcy,
      insolvency, reorganization or other similar laws and legal and equitable
      principles limiting or affecting the rights of creditors generally and/or
      (ii) general principles of equity, regardless of whether considered in a
      proceeding in equity or at law, and except as rights to indemnification
      hereunder may be limited by Federal or state securities laws.

            (b) Subscriber has carefully read this Agreement and, to the extent
      Subscriber believes necessary, has discussed with Subscriber's counsel and
      other professional advisor(s) the representations, warranties, covenants
      and agreements which Subscriber makes by signing it, and any applicable
      limitations upon Subscriber's transfer of the Shares issuable thereunder.
      Subscriber acknowledges that Subscriber has not relied upon the legal
      counsel or accountants for the Company regarding the transactions
      contemplated by this Agreement, and Subscriber has been advised to engage
      separate legal counsel and accountants to represent Subscriber's
      individual interest and advise Subscriber regarding the structure of, and
      risks associated with, such transactions.

            (c) Subscriber acknowledges that the Company has delivered to
      Subscriber within a reasonable time prior to the execution of this
      Subscription Agreement a copy of the Company's most recent Annual Report
      on Form 10-K, and all subsequently filed Quarterly Reports on Form 10-Q
      and Current Reports on Form 8-K, and such other documents as Subscriber
      (and Subscriber's attorney, accountant and/or other advisors) deemed
      pertinent in order for Subscriber to make an informed investment decision.

            (d) Subscriber further acknowledges that no representations or
      warranties of any nature have been made to Subscriber with respect to the
      ultimate economic consequences or tax consequences of Subscriber's
      investment in the Company. Subscriber acknowledges that any forecasted
      financial data which may have been given to Subscriber is for illustration
      purposes only and no assurance is given that actual results will
      correspond with the results contemplated in any such data.

            (e) Subscriber acknowledges that Subscriber has had the opportunity
      to ask questions of, and receive answers from, or obtain additional
      information from, the executive officers of the Company concerning the
      financial and other affairs of the Company, and, to the extent deemed
      necessary, Subscriber has asked such questions and received satisfactory
      answers and desires to invest in the Company. In evaluating the
      suitability of an investment in the Company, the Subscriber has not relied
      upon any representations or other information (whether oral or written)
      other than as set forth in this Agreement or as contained in any documents
      delivered or answers given in writing by the Company to questions
      furnished to the Company. Subscriber has been advised and acknowledges
      that no federal or state agency has made any finding or determination as
      to the fairness or merits of an investment in the Company and that no such
      agency has made any recommendation or endorsement whatsoever with respect
      to such an investment.

<PAGE>

            (f) Subscriber is an "accredited investor" as that term is defined
      in Rule 501 of Regulation D promulgated by the U.S. Securities and
      Exchange Commission (the "SEC") under the Securities Act of 1933, as
      amended (the "Securities Act"). For this purpose, Subscriber understands
      that an "accredited investor" includes:

                  (i) any individual who: (A) has a net worth (with spouse) in
            excess of $1 million; or (B) has had an individual income in excess
            of $200,000 (or joint income with spouse in excess of $300,000) in
            each of the two most recent years and who reasonably expects the
            same income level for the current year; or (C) who is an executive
            officer or director of the Company;

                  (ii) any entity in which all of the equity owners or partners
            are "accredited investors"; or

                  (iii) any corporation or partnership with total assets in
            excess of $5,000,000 that was not formed for the specific purpose of
            purchasing the securities subscribed hereunder.

            (g) Subscriber considers himself/herself/itself to be a
      sophisticated investor in companies similarly situated to the Company, and
      Subscriber has substantial knowledge and experience in financial and
      business matters (including knowledge of finance, securities and
      investments, generally, and experience and skill in investments based on
      actual participation) such that Subscriber is capable of evaluating the
      merits and risks of the prospective investment in the Company.

            (h) Subscriber's current address is as set forth on the signature
      page hereof. If Subscriber is an entity which does not meet the
      classification set forth under Section 2(e)(iii) above, each of
      Subscriber's equity owners and/or partners has the same jurisdiction of
      residence as the Subscriber's jurisdiction of organization and none of
      Subscriber's equity owners and/or partners has any present intention of
      moving from such jurisdiction.

            (i) Subscriber has been advised and acknowledges that the issuance
      of the Shares will not be registered under the Securities Act, in reliance
      upon the exemption(s) from registration promulgated thereunder, and,
      therefore, are "restricted securities." Subscriber also acknowledges that
      the issuance of the Shares will not be registered under the securities
      laws of any state. Consequently, Subscriber agrees that the Shares cannot
      be resold unless they are registered under the Securities Act and
      applicable state securities laws, or unless an exemption from such
      registration requirements is available. Subscriber has been advised and
      acknowledges that the Company is under no obligation to take any action
      necessary in order to make available any exemption for the transfer of the
      Shares without registration.

            (j) Subscriber is purchasing the Shares solely for Subscriber's own
      account and not as nominee for, representative of, or otherwise on behalf
      of, any other person. Subscriber is purchasing the Shares with the
      intention of holding the Shares for investment, with no present intention
      of participating directly or indirectly in a subsequent public
      distribution of the Shares unless registered under the Securities Act and
      applicable state securities laws, or unless an exemption from such
      registration requirements is available. Subscriber shall not make any
      sale, transfer or other disposition of the Shares in violation of state or
      federal law.

            (k) Subscriber has been advised that there is no assurance that the
      Company will continue to be a "Public Company" (i.e., a company with
      equity securities registered with the SEC pursuant to the Securities
      Exchange Act of 1934, as amended (the "Exchange Act") or, even if the
      Company continues to be a Public Company, that there will be an active
      market for the Shares. Subscriber is aware that Subscriber's investment in
      the Company is speculative and involves a high degree of risk of loss
      arising from, among other things, substantial market, operational,
      competitive and other risks, and, having made Subscriber's own evaluation
      of the risks associated with this investment, Subscriber is aware and
      Subscriber has been advised that Subscriber must bear the economic risks
      of a purchase of the Shares indefinitely.

            (l) Subscriber acknowledges that the Shares were not offered to
      Subscriber by means of any form of general or public solicitation or
      general advertising, or publicly disseminated advertisements or

<PAGE>

      sales literature, including (i) any advertisement, article, notice or
      other communication published in any newspaper, magazine or similar media,
      or broadcast over television or radio, or (ii) any seminar or meeting to
      which Subscriber was invited by any of the foregoing means of
      communication.

            (m) Subscriber understands and agrees that the Company, and all
      current and future stockholders of the Company, are relying on the
      agreements and representations contained herein.

            (n) In connection with the purchase of the Shares by Subscriber,
      Subscriber has not paid and will not pay, and has no knowledge of the
      payment of, any commission or other direct or indirect renumeration to any
      person or entity for soliciting or otherwise coordinating the purchase of
      the Shares.

            (o) Subscriber has been advised and agrees that there will be placed
      on any certificates representing the Shares, or any substitution(s)
      thereof, a legend stating in substance the following (and including any
      restrictions or conditions that may be required by any applicable state
      law), and Subscriber has been advised and further agrees that the Company
      will refuse to permit the transfer of the Shares out of Subscriber's name
      in the absence of compliance with the terms of such legend:

            "The shares represented by this certificate have not been registered
      under the Securities Act of 1933, as amended, or under any state
      securities laws and may not be sold, pledged, transferred, assigned or
      otherwise disposed of except in accordance with such Act and the rules and
      regulations thereunder and in accordance with applicable state securities
      laws. The Company will transfer such shares only upon receipt of evidence
      satisfactory to the Company, which may include an opinion of counsel, that
      the registration provisions of such Act have been compiled with or that
      such registration is not required and that such transfer will not violate
      any applicable state securities laws."

            (p) Subscriber is aware that the Company may offer and sell
      additional shares of Preferred Stock, Common Stock or other securities in
      the future, thereby diluting Subscriber's percentage equity ownership of
      the Company.

      4. Representations of the Company. As used in this Section 4, the
following capitalized terms shall have the meanings set forth below:

            "Contract" means any agreement, indenture, lease, sublease, license,
sublicense, promissory note, evidence of indebtedness, insurance policy,
annuity, mortgage, restriction, commitment, obligation or other contract,
agreement or instrument (whether written or oral).

            "GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.

            "Material Adverse Change" or "Material Adverse Effect" means, with
respect to any Person, any change or effect that is or is reasonably likely to
be materially adverse to the financial condition, business, prospects or results
of operations of such Person.

            "Person(s)" means any individual, sole proprietorship, partnership,
joint venture, trust, limited liability company, incorporated organization,
association, corporation, institution, public benefit corporation, entity or
government (whether federal, state, county, city, municipal or otherwise,
including, without limitation, any instrumentality, division, agency, body or
department thereof).

            Subscriber is subscribing for the Shares based upon the following
representations and warranties of the Company, which the Company hereby confirms
by accepting this subscription:

            (a) Organization. The Company is a corporation duly organized,
      validly existing and in good standing under the laws of the State of
      Delaware and has the corporate power to own and/or lease its properties
      and to conduct its business in the places where such properties are now
      owned, leased or operated or such business is presently conducted.

<PAGE>

      The Company is duly qualified and licensed as a foreign corporation in the
      State of Illinois and in each additional jurisdiction in which it owns or
      leases real property or in which its operations or activities would
      otherwise require such qualification.

            (b) Authorization. The execution, delivery and performance of this
      Agreement by the Company has been duly and validly authorized and approved
      by its Board of Directors, and this Agreement, when executed by a duly
      authorized officer of this Company, will be a valid and binding agreement
      of the Company, enforceable in accordance with its terms, except as such
      enforceability may be limited by (i) bankruptcy, insolvency,
      reorganization or other similar laws and legal and equitable principles
      limiting or affecting the rights of creditors generally and/or (ii)
      general principles of equity, regardless of whether considered in a
      proceeding in equity or at law, and except as rights to indemnification
      hereunder may be limited by Federal or state securities laws.

            (c) Capitalization. The authorized capital stock of the Company
      consists of 50,000,000 shares of Common Stock, $.01 par value per share,
      and 10,000,000 shares of Preferred Stock, 4,000,000 of which have been
      designated as the Series A Preferred, and the remainder of which have not
      been designated. All issued and outstanding shares of capital stock of the
      Company have been, and as of the Closing Date will be, duly authorized and
      validly issued and are fully paid and non-assessable.

            (d) No Violations; Defaults. The execution and delivery of this
      Agreement and the consummation of the transactions contemplated by this
      Agreement will not (i) violate, result (with the lapse of time or giving
      of notice, or both) in a violation of, conflict with, or constitute a
      default under, or permit the termination or acceleration of the maturity
      of, any material indebtedness or material obligation of the Company; (ii)
      violate, result (with the lapse of time or giving of notice, or both) in a
      violation of, conflict with or constitute a default under, any material
      term of, or permit the termination of, any material note, mortgage,
      indenture, license, agreement, contract, arrangement, understanding or
      other instrument to which the Company is a party, or by which it is bound,
      or the Certificate of Incorporation or By Laws of the Company; (iii)
      except as contemplated by this Agreement or where the absence would not
      have a material adverse effect on the Company or its subsidiaries, taken
      as a whole, require consent, approval, waiver or authorization from or
      registration or filing with any party, including but not limited to any
      party to any material agreement to which the Company is a party or by
      which it is bound or by any regulatory or governmental agency, body or
      entity (except as obtained prior to the Closing); or (iv) violate any
      statute, law, rule, regulation or ordinance, or any judgment, decree,
      order, regulation or rule of any court, tribunal, administrative or
      governmental agency, body or entity to which the Company or its properties
      are subject.

            (e) Validity of Securities. The Shares, when issued in accordance
      with the terms and conditions hereof, will be duly authorized, validly
      issued, fully paid and non-assessable, and the delivery to Subscriber of
      the Shares delivered pursuant to this Agreement shall vest in it good and
      marketable title thereto, free of any and all liens, options,
      encumbrances, charges, third-party rights or claims of any nature
      whatsoever except for restrictions on transfers imposed by law.

            (f) No Commissions. The Company has not incurred any other
      obligation for any finder's or broker's or agent's fees or commissions in
      connection with the sale of the Shares.

            The Company represents that the foregoing representations and
warranties are true and correct as of the date hereof and, unless the Company
otherwise notifies Subscriber prior to the Closing Date, shall be true and
correct as of the Closing Date. The foregoing representations and warranties
shall survive the Closing Date.

      5. Security.

            5.1 As security for the obligations of the Company to pay the
      dividends required on the Series A Preferred, the Company agrees to
      provide the security set forth in this Section 5. The Company is the
      holder of a series of promissory notes issued by Commonwealth Utilities
      Corporation, each in the amount of $180,000 (the "CUC Notes"). One CUC
      Note matures at the end of each month through February 28, 2009, and is
      payable to the bearer thereof.

<PAGE>

            5.2 The Company shall deliver one CUC Note for each two million
      shares of Series A Preferred then owned by the Subscriber. The CUC Note
      for the first two million shares of Series A Preferred will be the CUC
      Note maturing on July 31, 2003. The CUC Note for the second two million
      shares of Series A Preferred will be an additional CUC Note maturing on
      January 31, 2004. Each CUC Note is to be replaced with a new CUC Note
      within 30 days after payment of all dividends accrued through the
      immediately preceding Dividend Date by delivery to the Subscriber of a
      replacement CUC Note and by the Subscriber returning to the Company the
      CUC Note which is being replaced. Detailed replacement schedule for the
      CUC Notes is attached hereto as Exhibit B.

            5.3 Subscriber may present any such CUC Note to the issuer thereof
      for payment up to the amount of dividends that have accrued but have not
      been timely paid to Subscriber. Such payment shall be deemed to satisfy
      the Company's requirement to pay an equivalent amount of dividends on the
      Series A Preferred held by Subscriber, and such dividends shall be deemed
      to have been paid on the date of maturity of the CUC Note.

      6. Indemnification.

            6.1 Indemnification by the Company. The Company shall indemnify
Subscriber from and against any and all losses, damages, liabilities, claims,
charges, actions, proceedings, demands, judgments, settlement costs and expenses
of any nature whatsoever (including, without limitation, attorneys' fees and
expenses) or deficiencies resulting from any breach of a representation,
warranty or covenant by the Company and all claims, charges, actions or
proceedings incident to or arising out of the foregoing.

            6.2 Indemnification by the Subscriber. Subscriber shall indemnify
the Company from and against any and all losses, damages, liabilities, claims,
charges, actions, proceedings, demands, judgments, settlement costs and expenses
of any nature whatsoever (including, without limitation, attorneys' fees and
expenses) or deficiencies resulting from any breach of a representation,
warranty or covenant by Subscriber and all claims, charges, actions or
proceedings incident to or arising out of the foregoing.

            6.3 Indemnification Procedures. A party entitled to indemnification
under this Section (an "Indemnified Party") shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section (an "Indemnifying Party") of any action commenced against or by it
in respect of which indemnity may be sought hereunder, but failure to so notify
an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
except to the extent such failure shall have prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party. In any
such action, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the contrary or (ii) the named parties in
any such action (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing or
conflicting interests between them. The Indemnifying Party shall not be liable
for any settlement of any proceeding effected without its written consent (which
shall not be unreasonably withheld or delayed by such Indemnifying Party), but
if settled with such consent or if there be final judgment for the plaintiff,
the Indemnifying Party shall indemnify the Indemnified Party from and against
any loss, damage or liability by reason of such settlement or judgment.

      7. Miscellaneous.

            7.1 Amendment; Waiver. Neither this Agreement nor any provisions
hereof shall be waived, modified, discharged or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge or termination is sought to be enforced.

            7.2 Notices. Any notice, demand or other communication which any
party hereby may be required or may elect to give to anyone interested hereunder
shall be sufficiently given if (a) deposited, postage prepaid, in a United
States mail letter box, registered or certified mail, return receipt requested,
addressed to such address as may

<PAGE>

be given herein three business days after such deposit, or (b) delivered
personally at such address. The parties' addresses for notices are set forth on
the signature page.

            7.3 Counterparts. This Agreement may be executed through the use of
separate signature pages or in any number of counterparts, and each of such
counterparts shall, for all purposes, constitute one agreement binding on all
the parties, notwithstanding that all parties are not signatories to the same
counterpart.

            7.4 Successors and Assigns. Except as otherwise provided herein, the
Agreement shall be binding upon and inure to the benefit of the parties and
their successors, legal representatives and assigns.

            7.5 Entire Agreement. This Agreement (including the Exhibits
attached hereto) contains the entire agreement of the parties, and there are no
representations, covenants or other agreements except as stated or referred to
herein.

            7.6 Assignment. This Agreement is not transferable or assignable by
Subscriber except as may be provided herein.

            7.7 Governing Law. This Agreement shall be governed by and construed
in accordance with the law of the State of Illinois applicable to agreements
made and to be performed in that State.

            7.8 Submission to Jurisdiction. The Company and Subscriber each
hereby submits to the non-exclusive jurisdiction of the United States District
Court for the Northern District of Illinois and of any Illinois state court
sitting in the City of Chicago for purposes of all legal proceedings arising out
of or relating to this Agreement or the transactions contemplated hereby or
thereby. The Company and Subscriber each irrevocably waives, to the fullest
extent permitted by law, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum.

<PAGE>

            IN WITNESS WHEREOF, Subscriber has caused to be executed this
Agreement as of the date indicated and agrees to be bound by this Agreement.

                              SUBSCRIBER:

                              Al Soor Consulting
                              --------------------------------------------------
                              [exact name to appear on stock certificate]

                              By:   /s/ Waleed Ali Mohamed Mahdi
                                 -----------------------------------------------
                                  Name:  Waleed Ali Mohamed Mahdi
                                  Title:   Chairman and Chief Executive Officer
                                           Al Soor Consulting for Financial
                                           Management Co. W.L.L.

                              PO Box 1034, Safat 13031 Kuwait
                              --------------------------------------------------
                              [Principal Address]

Accepted By:

TELESOURCE INTERNATIONAL

By: /s/ Bud Curley                      .
    -------------------------------------
   Name: Bud Curley
   Title:  Chief Financial Officer
           and Vice President

860 Parkview Blvd., Lombard, IL 60148

Principal Address

<PAGE>

                                    EXHIBIT A

                   See Exhibit 3.1 Certificate of Designations

<PAGE>

                                    EXHIBIT B

                          CUC NOTE REPLACEMENT SCHEDULE

Pursuant to Section 5.2 of the Subscription Agreement, the Company will deliver
one promissory note for each two million shares of Series A Preferred then owned
by the Subscriber. The CUC Note for the first two million shares of Series A
Preferred will be the CUC Note maturing on July 31, 2003. The CUC Note for the
second two million shares of Series A Preferred will be an additional CUC Note
maturing on January 31, 2004. Each CUC Note is to be replaced with a new CUC
Note within 30 days after payment of all dividends accrued through the
immediately preceding Dividend Date by delivery to the Subscriber of a
replacement CUC Note and by the Subscriber returning to the Company the CUC Note
which is being replaced. as follows:

<TABLE>
<CAPTION>
                       CUC Promissory Note Held by    CUC Promissory Note to be given to
    Dividend Date              Subscriber                Subscriber as a Replacement
-------------------   -----------------------------  ------------------------------------
<S>                        <C>                              <C>
   June 30, 2003             July 31, 2003                    July 31, 2004

 December 31, 2003         January 31, 2004                  January 31, 2005

   June 30, 2004             July 31, 2004                    July 31, 2005

 December 31, 2004         January 31, 2005                  January 31, 2006

   June 30, 2005             July 31, 2005                    July 31, 2006

 December 31, 2005         January 31, 2006                  January 31, 2007

   June 30, 2006             July 31, 2006                    July 31, 2007

 December 31, 2006         January 31, 2007                  January 31, 2008

   June 30, 2007             July 31, 2007                    April 30, 2008

 December 31, 2007         January 31, 2007                 Not to be replaced
</TABLE><PAGE>
                                                                   EXHIBIT 10.07

                                FORMFACTOR, INC.

                        2002 EMPLOYEE STOCK PURCHASE PLAN

                            As Adopted April 18, 2002

        1. ESTABLISHMENT OF PLAN. FormFactor, Inc. (the "COMPANY") proposes to
grant options for purchase of the Company's Common Stock to eligible employees
of the Company and its Participating Subsidiaries (as hereinafter defined)
pursuant to this Employee Stock Purchase Plan (this "PLAN"). For purposes of
this Plan, "PARENT CORPORATION" and "SUBSIDIARY" shall have the same meanings as
"parent corporation" and "subsidiary corporation" in Sections 424(e) and 424(f),
respectively, of the Internal Revenue Code of 1986, as amended (the "CODE").
"PARTICIPATING SUBSIDIARIES" are Parent Corporations or Subsidiaries that the
Board of Directors of the Company (the "BOARD") designates from time to time as
corporations that shall participate in this Plan. The Company intends this Plan
to qualify as an "employee stock purchase plan" under Section 423 of the Code
(including any amendments to or replacements of such Section), and this Plan
shall be so construed. Any term not expressly defined in this Plan but defined
for purposes of Section 423 of the Code shall have the same definition herein. A
total of 1,500,000 shares of the Company's Common Stock is reserved for issuance
under this Plan. In addition, on each January 1, the aggregate number of shares
of the Company's Common Stock reserved for issuance under the Plan shall be
increased automatically by a number of shares equal to 1% of the total number of
outstanding shares of the Company Common Stock on the immediately preceding
December 31; provided, that the Board or the Committee may in its sole
discretion reduce the amount of the increase in any particular year; and,
provided further, that the aggregate number of shares issued over the term of
this Plan shall not exceed 20,000,000 shares. Such number shall be subject to
adjustments effected in accordance with Section 14 of this Plan.

        2. PURPOSE. The purpose of this Plan is to provide eligible employees of
the Company and Participating Subsidiaries with a convenient means of acquiring
an equity interest in the Company through payroll deductions, to enhance such
employees' sense of participation in the affairs of the Company and
Participating Subsidiaries, and to provide an incentive for continued
employment.

        3. ADMINISTRATION. This Plan shall be administered by the Compensation
Committee of the Board (the "COMMITTEE"). Subject to the provisions of this Plan
and the limitations of Section 423 of the Code or any successor provision in the
Code, all questions of interpretation or application of this Plan shall be
determined by the Committee and its decisions shall be final and binding upon
all participants. Members of the Committee shall receive no compensation for
their services in connection with the administration of this Plan, other than
standard fees as established from time to time by the Board for services
rendered by Board members serving on Board committees. All expenses incurred in
connection with the administration of this Plan shall be paid by the Company.

        4. ELIGIBILITY. Any employee of the Company or the Participating
Subsidiaries is eligible to participate in an Offering Period (as hereinafter
defined) under this Plan except the following:

               (a) employees who are not employed by the Company or a
Participating Subsidiary prior to the beginning of such Offering Period or prior
to such other time period as specified by the Committee, except that employees
who are employed on the Effective Date of the Registration Statement filed by
the Company with the Securities and Exchange Commission ("SEC") under the
Securities Act of 1933, as amended (the "SECURITIES ACT") registering the
initial public offering of the Company's Common Stock shall be eligible to
participate in the first Offering Period under the Plan;

               (b) employees who are customarily employed for twenty (20) hours
or less per week;

               (c) employees who are customarily employed for five (5) months or
less in a calendar year;

<PAGE>

               (d) employees who, together with any other person whose stock
would be attributed to such employee pursuant to Section 424(d) of the Code, own
stock or hold options to purchase stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or any of its Participating Subsidiaries or who, as a result of being granted an
option under this Plan with respect to such Offering Period, would own stock or
hold options to purchase stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any of
its Participating Subsidiaries; and

               (e) individuals who provide services to the Company or any of its
Participating Subsidiaries as independent contractors who are reclassified as
common law employees for any reason except for federal income and employment tax
purposes.

        5. OFFERING DATES. The offering periods of this Plan (each, an "OFFERING
PERIOD") shall be of twenty-four (24) months duration commencing on February 1
and August 1 of each year and ending on January 31 and July 31 of each year;
provided, however, that the first such Offering Period shall commence on the
date on which the registration statement filed by the Company with the SEC under
the Securities Act registering the initial public offering of the Company's
Common Stock is declared effective by the SEC (the "FIRST OFFERING DATE") and
shall end on July 31, 2004 (the "FIRST OFFERING PERIOD"). Each Offering Period
shall consist of four (4) six month purchase periods (individually, a "PURCHASE
PERIOD") during which payroll deductions of the participants are accumulated
under this Plan. The First Offering Period shall consist of no more than five
and no fewer than three Purchase Periods, any of which may be greater or less
than six months as determined by the Committee. The first business day of each
Offering Period is referred to as the "OFFERING DATE". The last business day of
each Purchase Period is referred to as the "PURCHASE DATE". The Committee shall
have the power to change the Offering Dates, the Purchase Dates and the duration
of Offering Periods or Purchase Periods without stockholder approval if such
change is announced prior to the relevant Offering Period or prior to such other
time period as specified by the Committee.

        6. PARTICIPATION IN THIS PLAN. Eligible employees may become
participants in an Offering Period under this Plan on the Offering Date after
satisfying the eligibility requirements by delivering a subscription agreement
to the Company prior to such Offering Date, or such other time period as
specified by the Committee; provided, however, that all eligible employees
employed on or before the First Offering Date will be automatically enrolled in
the First Offering Period. Notwithstanding the foregoing, (i) an eligible
employee may elect to decrease the number of shares of Common Stock that such
employee would otherwise be permitted to purchase pursuant to Section 7 below
for the First Offering Period and/or purchase shares of Common Stock for the
First Offering Period through payroll deductions by delivering a subscription
agreement to the Company within thirty (30) days following the First Offering
Date after the filing of an effective registration statement pursuant to Form
S-8 and (ii) the Committee may set a later time for filing the subscription
agreement authorizing payroll deductions for all eligible employees with respect
to a given Offering Period. Except as provided above with respect to the First
Offering Period, an eligible employee who does not deliver a subscription
agreement to the Company after becoming eligible to participate in an Offering
Period shall not participate in that Offering Period or any subsequent Offering
Period unless such employee enrolls in this Plan by filing a subscription
agreement with the Company prior to such Offering Period, or such other time
period as specified by the Committee. Once an employee becomes a participant in
an Offering Period by filing a subscription agreement, such employee will
automatically participate in the Offering Period commencing immediately
following the last day of the prior Offering Period unless the employee
withdraws or is deemed to withdraw from this Plan or terminates further
participation in the Offering Period as set forth in Section 11 below. Such
participant is not required to file any additional subscription agreement in
order to continue participation in this Plan.

        7. GRANT OF OPTION ON ENROLLMENT. Enrollment by an eligible employee in
this Plan with respect to an Offering Period will constitute the grant (as of
the Offering Date) by the Company to such employee of an option to purchase on
the Purchase Date up to that number of shares of Common Stock of the Company
determined by a fraction, the numerator of which is the amount accumulated in
such employee's payroll deduction account during such Purchase Period and the
denominator of which is the lower of (i) eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Offering Date (but
in no event less than the par value of a

                                       2
<PAGE>

share of the Company's Common Stock), or (ii) eighty-five percent (85%) of the
fair market value of a share of the Company's Common Stock on the Purchase Date
(but in no event less than the par value of a share of the Company's Common
Stock), provided, however, that for each Purchase Period within the First
Offering Period the numerator shall be fifteen percent (15%) of the eligible
employee's compensation for such Purchase Period and PROVIDED, FURTHER, that the
number of shares of the Company's Common Stock subject to any option granted
pursuant to this Plan shall not exceed the lesser of (x) the maximum number of
shares set by the Committee pursuant to Section 10(c) below with respect to the
applicable Purchase Date, or (y) the maximum number of shares which may be
purchased pursuant to Section 10(b) below with respect to the applicable
Purchase Date. The fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 8 below.

        8. PURCHASE PRICE. The purchase price per share at which a share of
Common Stock will be sold in any Offering Period shall be eighty-five percent
(85%) of the lesser of:

               (a) The fair market value on the Offering Date; or

               (b) The fair market value on the Purchase Date.

        The term "FAIR MARKET VALUE" means, as of any date, the value of a share
of the Company's Common Stock determined as follows:

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

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

               (c) if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the date
of determination as reported in The Wall Street Journal.

Notwithstanding the foregoing, for purposes of the First Offering Date, fair
market value shall be the price per share at which shares of the Company's
Common Stock are initially offered for sale to the public by the Company's
underwriters in the initial public offering of the Company's Common Stock
pursuant to a registration statement filed with the SEC under the Securities
Act.

        9. PAYMENT OF PURCHASE PRICE; CHANGES IN PAYROLL DEDUCTIONS; ISSUANCE OF
SHARES.

               (a) The purchase price of the shares is accumulated by regular
payroll deductions made during each Offering Period, PROVIDED, HOWEVER, that for
the First Offering Period the purchase price of the shares shall be paid by the
eligible employee in cash on each Purchase Date within the First Offering Period
unless the eligible employee elects to purchase such shares through payroll
deductions after the filing of an effective Form S-8 registration statement
pursuant to the second sentence of Section 6 above within thirty (30) days
following the First Offering Period. The deductions are made as a percentage of
the participant's compensation in one percent (1%) increments not less than one
percent (1%), nor greater than fifteen percent (15%) or such lower limit set by
the Committee. Compensation shall mean all W-2 cash compensation, including, but
not limited to, base salary, wages, commissions, overtime, shift premiums, plus
draws against commissions, provided, however, that for purposes of determining a
participant's compensation, any election by such participant to reduce his or
her regular cash remuneration under Sections 125 or 401(k) of the Code shall be
treated as if the participant did not make such election. Payroll deductions
shall commence on the first payday of the Offering Period and shall continue to
the end of the Offering Period unless sooner altered or terminated as provided
in this Plan.

               (b) A participant may increase or decrease the rate of payroll
deductions during an Offering Period by filing with the Company a new
authorization for payroll deductions, in which case the new rate shall

                                       3
<PAGE>

become effective for the next payroll period commencing after the Company's
receipt of the authorization and shall continue for the remainder of the
Offering Period unless changed as described below. Such change in the rate of
payroll deductions may be made at any time during an Offering Period, but not
more than one (1) change may be made effective during any Purchase Period. A
participant may increase or decrease the rate of payroll deductions for any
subsequent Offering Period by filing with the Company a new authorization for
payroll deductions prior to the beginning of such Offering Period, or such other
time period as specified by the Committee.

               (c) A participant may reduce his or her payroll deduction
percentage to zero during an Offering Period by filing with the Company a
request for cessation of payroll deductions. Such reduction shall be effective
beginning with the next payroll period after the Company's receipt of the
request and no further payroll deductions will be made for the duration of the
Offering Period. Payroll deductions credited to the participant's account prior
to the effective date of the request shall be used to purchase shares of Common
Stock of the Company in accordance with Section (e) below. A participant may not
resume making payroll deductions during the Offering Period in which he or she
reduced his or her payroll deductions to zero.

               (d) All payroll deductions made for a participant are credited to
his or her account under this Plan and are deposited with the general funds of
the Company. No interest accrues on the payroll deductions. All payroll
deductions received or held by the Company may be used by the Company for any
corporate purpose, and the Company shall not be obligated to segregate such
payroll deductions.

               (e) On each Purchase Date, so long as this Plan remains in effect
and provided that the participant has not submitted a signed and completed
withdrawal form before that date which notifies the Company that the participant
wishes to withdraw from that Offering Period under this Plan and have all
payroll deductions accumulated in the account maintained on behalf of the
participant as of that date returned to the participant, the Company shall apply
the funds then in the participant's account to the purchase of whole shares of
Common Stock reserved under the option granted to such participant with respect
to the Offering Period to the extent that such option is exercisable on the
Purchase Date. The purchase price per share shall be as specified in Section 8
of this Plan. Any cash remaining in a participant's account after such purchase
of shares shall be refunded to such participant in cash, without interest;
provided, however that any amount remaining in such participant's account on a
Purchase Date which is less than the amount necessary to purchase a full share
of Common Stock of the Company shall be carried forward, without interest, into
the next Purchase Period or Offering Period, as the case may be. In the event
that this Plan has been oversubscribed, all funds not used to purchase shares on
the Purchase Date shall be returned to the participant, without interest. No
Common Stock shall be purchased on a Purchase Date on behalf of any employee
whose participation in this Plan has terminated prior to such Purchase Date.

               (f) As promptly as practicable after the Purchase Date, the
Company shall issue shares for the participant's benefit representing the shares
purchased upon exercise of his or her option.

               (g) During a participant's lifetime, his or her option to
purchase shares hereunder is exercisable only by him or her. The participant
will have no interest or voting right in shares covered by his or her option
until such option has been exercised.

        10.    LIMITATIONS ON SHARES TO BE PURCHASED.

               (a) No participant shall be entitled to purchase stock under this
Plan at a rate which, when aggregated with his or her rights to purchase stock
under all other employee stock purchase plans of the Company or any Subsidiary,
exceeds $25,000 in fair market value, determined as of the Offering Date (or
such other limit as may be imposed by the Code) for each calendar year in which
the employee participates in this Plan. The Company shall automatically suspend
the payroll deductions of any participant as necessary to enforce such limit
provided that when the Company automatically resumes such payroll deductions,
the Company must apply the rate in effect immediately prior to such suspension.

                                       4
<PAGE>

               (b) No more than two hundred percent (200%) of the number of
shares determined by using eighty-five percent (85%) of the fair market value of
a share of the Company's Common Stock on the Offering Date as the denominator
may be purchased by a participant on any single Purchase Date.

               (c) No participant shall be entitled to purchase more than the
Maximum Share Amount (as defined below) on any single Purchase Date. Prior to
the commencement of any Offering Period or prior to such time period as
specified by the Committee, the Committee may, in its sole discretion, set a
maximum number of shares which may be purchased by any employee at any single
Purchase Date (hereinafter the "MAXIMUM SHARE AMOUNT"). Until otherwise
determined by the Committee, there shall be no Maximum Share Amount. In no event
shall the Maximum Share Amount exceed the amounts permitted under Section 10(b)
above. If a new Maximum Share Amount is set, then all participants must be
notified of such Maximum Share Amount prior to the commencement of the next
Offering Period. The Maximum Share Amount shall continue to apply with respect
to all succeeding Purchase Dates and Offering Periods unless revised by the
Committee as set forth above.

               (d) If the number of shares to be purchased on a Purchase Date by
all employees participating in this Plan exceeds the number of shares then
available for issuance under this Plan, then the Company will make a pro rata
allocation of the remaining shares in as uniform a manner as shall be reasonably
practicable and as the Committee shall determine to be equitable. In such event,
the Company shall give written notice of such reduction of the number of shares
to be purchased under a participant's option to each participant affected.

               (e) Any payroll deductions accumulated in a participant's account
which are not used to purchase stock due to the limitations in this Section 10
shall be returned to the participant as soon as practicable after the end of the
applicable Purchase Period, without interest.

        11. WITHDRAWAL.

               (a) Each participant may withdraw from an Offering Period under
this Plan by signing and delivering to the Company a written notice to that
effect on a form provided for such purpose. Such withdrawal may be elected at
any time prior to the end of an Offering Period, or such other time period as
specified by the Committee.

               (b) Upon withdrawal from this Plan, the accumulated payroll
deductions shall be returned to the withdrawn participant, without interest, and
his or her interest in this Plan shall terminate. In the event a participant
voluntarily elects to withdraw from this Plan, he or she may not resume his or
her participation in this Plan during the same Offering Period, but he or she
may participate in any Offering Period under this Plan which commences on a date
subsequent to such withdrawal by filing a new authorization for payroll
deductions in the same manner as set forth in Section 6 above for initial
participation in this Plan.

               (c) If the Fair Market Value on the first day of the current
Offering Period in which a participant is enrolled is higher than the Fair
Market Value on the first day of any subsequent Offering Period, the Company
will automatically enroll such participant in the subsequent Offering Period.
Any funds accumulated in a participant's account prior to the first day of such
subsequent Offering Period will be applied to the purchase of shares on the
Purchase Date immediately prior to the first day of such subsequent Offering
Period, if any.

        12. TERMINATION OF EMPLOYMENT. Termination of a participant's employment
for any reason, including retirement, death or the failure of a participant to
remain an eligible employee of the Company or of a Participating Subsidiary,
immediately terminates his or her participation in this Plan. In such event, the
payroll deductions credited to the participant's account will be returned to him
or her or, in the case of his or her death, to his or her legal representative,
without interest. For purposes of this Section 12, an employee will not be
deemed to have terminated employment or failed to remain in the continuous
employ of the Company or of a Participating Subsidiary in the case of sick
leave, military leave, or any other leave of absence approved by the Board;
provided that such leave is for a period of not more than ninety (90) days or
reemployment upon the expiration of such leave is guaranteed by contract or
statute.

                                       5
<PAGE>

        13. RETURN OF PAYROLL DEDUCTIONS. In the event a participant's interest
in this Plan is terminated by withdrawal, termination of employment or
otherwise, or in the event this Plan is terminated by the Board, the Company
shall deliver to the participant all payroll deductions credited to such
participant's account. No interest shall accrue on the payroll deductions of a
participant in this Plan.

        14. CAPITAL CHANGES. Subject to any required action by the stockholders
of the Company, the number of shares of Common Stock covered by each option
under this Plan which has not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under this Plan but have
not yet been placed under option (collectively, the "RESERVES"), as well as the
price per share of Common Stock covered by each option under this Plan which has
not yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued and outstanding shares of Common Stock of the
Company resulting from a stock split or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
issued and outstanding shares of Common Stock effected without receipt of any
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Committee, whose determination shall be final, binding and conclusive. Except as
expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.

               In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, declare that this Plan shall terminate as of a date fixed by the
Committee and give each participant the right to purchase shares under this Plan
prior to such termination. In the event of (i) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the stockholders of the Company or their relative stock
holdings and the options under this Plan are assumed, converted or replaced by
the successor corporation, which assumption will be binding on all
participants), (ii) a merger in which the Company is the surviving corporation
but after which the stockholders of the Company immediately prior to such merger
(other than any stockholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iii) the sale of all or
substantially all of the assets of the Company or (iv) the acquisition, sale, or
transfer of more than 50% of the outstanding shares of the Company by tender
offer or similar transaction, the Plan will continue with regard to Offering
Periods that commenced prior to the closing of the proposed transaction and
shares will be purchased based on the Fair Market Value of the surviving
corporation's stock on each Purchase Date, unless otherwise provided by the
Committee.

               The Committee may, if it so determines in the exercise of its
sole discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the event
that the Company effects one or more reorganizations, recapitalizations, rights
offerings or other increases or reductions of shares of its outstanding Common
Stock, or in the event of the Company being consolidated with or merged into any
other corporation.

        15. NONASSIGNABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under this Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 22 below) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be void and
without effect.

        16. REPORTS. Individual accounts will be maintained for each participant
in this Plan. Each participant shall receive promptly after the end of each
Purchase Period a report of his or her account setting forth the total payroll
deductions accumulated, the number of shares purchased, the per share price
thereof and the remaining cash balance, if any, carried forward to the next
Purchase Period or Offering Period, as the case may be.

                                       6
<PAGE>

        17. NOTICE OF DISPOSITION. Each participant shall notify the Company in
writing if the participant disposes of any of the shares purchased in any
Offering Period pursuant to this Plan if such disposition occurs within two (2)
years from the Offering Date or within one (1) year from the Purchase Date on
which such shares were purchased (the "NOTICE PERIOD"). The Company may, at any
time during the Notice Period, place a legend or legends on any certificate
representing shares acquired pursuant to this Plan requesting the Company's
transfer agent to notify the Company of any transfer of the shares. The
obligation of the participant to provide such notice shall continue
notwithstanding the placement of any such legend on the certificates.

        18. NO RIGHTS TO CONTINUED EMPLOYMENT. Neither this Plan nor the grant
of any option hereunder shall confer any right on any employee to remain in the
employ of the Company or any Participating Subsidiary, or restrict the right of
the Company or any Participating Subsidiary to terminate such employee's
employment.

        19. EQUAL RIGHTS AND PRIVILEGES. All eligible employees shall have equal
rights and privileges with respect to this Plan so that this Plan qualifies as
an "employee stock purchase plan" within the meaning of Section 423 or any
successor provision of the Code and the related regulations. Any provision of
this Plan which is inconsistent with Section 423 or any successor provision of
the Code shall, without further act or amendment by the Company, the Committee
or the Board, be reformed to comply with the requirements of Section 423. This
Section 19 shall take precedence over all other provisions in this Plan.

        20. NOTICES. All notices or other communications by a participant to the
Company under or in connection with this Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

        21. TERM; STOCKHOLDER APPROVAL. After this Plan is adopted by the Board,
this Plan will become effective on the First Offering Date (as defined above).
This Plan shall be approved by the stockholders of the Company, in any manner
permitted by applicable corporate law, within twelve (12) months before or after
the date this Plan is adopted by the Board. No purchase of shares pursuant to
this Plan shall occur prior to such stockholder approval. This Plan shall
continue until the earlier to occur of (a) termination of this Plan by the Board
(which termination may be effected by the Board at any time), (b) issuance of
all of the shares of Common Stock reserved for issuance under this Plan, or (c)
ten (10) years from the adoption of this Plan by the Board.

        22. DESIGNATION OF BENEFICIARY.

               (a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under this Plan in the event of such participant's death subsequent to the end
of an Purchase Period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under this Plan in the event
of such participant's death prior to a Purchase Date.

               (b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under this
Plan who is living at the time of such participant's death, the Company shall
deliver such shares or cash to the executor or administrator of the estate of
the participant, or if no such executor or administrator has been appointed (to
the knowledge of the Company), the Company, in its discretion, may deliver such
shares or cash to the spouse or to any one or more dependents or relatives of
the participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.

        23. CONDITIONS UPON ISSUANCE OF SHARES; LIMITATION ON SALE OF SHARES.
Shares shall not be issued with respect to an option unless the exercise of such
option and the issuance and delivery of such shares pursuant thereto shall
comply with all applicable provisions of law, domestic or foreign, including,
without limitation, the Securities Act, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange or automated quotation system upon which the shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

                                       7
<PAGE>

        24. APPLICABLE LAW. The Plan shall be governed by the substantive laws
(excluding the conflict of laws rules) of the State of California.

        25. AMENDMENT OR TERMINATION OF THIS PLAN. The Board may at any time
amend, terminate or extend the term of this Plan, except that any such
termination cannot affect options previously granted under this Plan, nor may
any amendment make any change in an option previously granted which would
adversely affect the right of any participant, nor may any amendment be made
without approval of the stockholders of the Company obtained in accordance with
Section 21 above within twelve (12) months of the adoption of such amendment (or
earlier if required by Section 21) if such amendment would:

               (a) increase the number of shares that may be issued under this
Plan; or

               (b) change the designation of the employees (or class of
employees) eligible for participation in this Plan.

               Notwithstanding the foregoing, the Board may make such amendments
to the Plan as the Board determines to be advisable, if the continuation of the
Plan or any Offering Period would result in financial accounting treatment for
the Plan that is different from the financial accounting treatment in effect on
the date this Plan is adopted by the Board.

                                       8

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