Document:

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                                                                    EXHIBIT 10.3

                        SETTLEMENT AGREEMENT AND RELEASE

        THIS SETTLEMENT AGREEMENT ("Agreement") is made and entered into as of
January __, 2001, by and between Wentworth, LLC, a Cayman Islands limited
liability company ("Wentworth") and ESAT, Inc., a Nevada corporation ("ESAT"),
in accordance with the terms and conditions set forth below.

                                 R E C I T A L S

        1. On or about December 29, 1999, Wentworth and ESAT entered into that
certain Securities Purchase Agreement (the "Series C Securities Purchase
Agreement") whereby Wentworth purchased 50,000 shares of Series C Convertible
Preferred Stock from ESAT, for the sum of $5,000,000 (the "Series C Preferred").

        2. On or about April 13, 2000, Wentworth and ESAT entered into that
certain Securities Purchase Agreement (the "Series D Securities Purchase
Agreement") whereby Wentworth purchased 75,000 shares of Series D Convertible
Preferred Stock from ESAT, for the sum of $7,500,000 (the "Series D Preferred").

        3. On or about July 27, 2000, Wentworth and ESAT entered into that
certain Securities Purchase Agreement (the "Series E Securities Purchase
Agreement") (the Series C Securities Purchase Agreement, Series D Securities
Purchase Agreement and the Series E Securities Purchase Agreement are hereby
sometimes collectively referred to as the "Purchase Agreements") whereby
Wentworth purchased 30,000 shares of Series E Convertible Preferred Stock from
ESAT, for the sum of $3,000,000 (the "Series E Preferred").

        4. On or about August 9, 2000, Wentworth and ESAT entered into that
certain Private Equity Credit Agreement (the "Credit Agreement"), as amended as
of October 6, 2000, whereby Wentworth funded $2,000,000 to ESAT.

        5. Wentworth submitted to ESAT a conversion notice for 366,206 shares of
ESAT common stock on November 14, 2000 and a second conversion notice for
1,169,107 shares on December 8, 2000 in connection with its holdings of the
Series D Preferred (the "Conversion Notices")

        6. Wentworth delivered a redemption notice, dated January 11, 2001 (as
amended January 12, 2001) (the "Redemption Notice") requiring ESAT to redeem all
of the outstanding Series D Preferred (except for the Series D Preferred that
were subject to conversion) for the sum of $8,531,254 (assuming a redemption
date of January 17, 2001) (the "Series D Redemption Amount") and also required
ESAT to pay late penalties (pursuant to the Certificate of Designation for the
Series D Preferred) in connection with the late delivery of shares due pursuant
to the Conversion Notices which penalty equaled approximately $41,074 as of
January 17, 2001 (the "Late Penalties").

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        7. ESAT had verbally informed Wentworth that it was delaying honoring
the Conversion Notices as a result of concerns by its officers and directors
that Wentworth wrongfully shorted ESAT Common Stock in violation of either the
Purchase Agreements (and related documents) or federal securities laws and
regulations, including the Securities Act and the Exchange Act (as defined in
the Purchase Agreements).

        8. ESAT has since determined that it has no evidence that Wentworth has
either breached the Purchase Agreements, or federal securities laws and on or
about January 23, 2001, ESAT honored the Conversion Notices by delivering to
Wentworth 1,535,213 shares of its common stock (the "Series D Common Shares").

        9. Wentworth has agreed to rescind the Redemption Notice and waive the
Late Penalties on the condition that ESAT release all claims it may have against
Wentworth and waive all defenses to its performance under the Purchase Agreement
pursuant to the terms and conditions of this Agreement.

        10. Accordingly, it is the intention and desire of ESAT to settle,
compromise, release and dismiss, fully and completely and forever, each and
every claim that it may have against Wentworth.

        NOW, THEREFORE, in consideration of the mutual covenants, agreements,
representations and warranties herein contained, the parties agree as follows:

                                      TERMS

                                    ARTICLE I
               RESCISSION OF REDEMPTION NOTICE AND LATE PENALTIES

        1.1 Wentworth's Rescission and Waiver of a Portion of Penalties. On the
condition that within three days of the date hereof, ESAT honors all outstanding
conversion notices for the Series C Preferred and the Series E Preferred by
delivering free trading shares required thereby, and on the further condition
that ESAT release any and all claims against Wentworth pursuant to Section ___,
hereof, Wentworth hereby agrees to rescind the Redemption Notice. Wentworth
hereby further agrees that on the condition that the terms and conditions of
this Agreement are complied with by ESAT, Wentworth shall forgive the Late
Penalties.

        1.2 ESAT's Honoring Outstanding and Future Conversion Notices. ESAT
hereby agrees and acknowledges that Wentworth's rescission and waiver pursuant
to Section 1.1 hereof is conditioned, in part, upon ESAT's agreement to honor
all of outstanding conversion notices by Wentworth in connection with the Series
C Preferred and the Series E Preferred. Accordingly, ESAT hereby agrees that it
shall deliver free trading common shares as required by all of said outstanding
conversion notices. ESAT represents and warrants that said common shares and the
Series D Common Shares are registered with the Securities and Exchange
Commission pursuant to the Prospectus, dated August 21, 2000 and hereby
represents and warrants to Wentworth that the Prospectus is effective as of the
date hereof and, except for the secured loan reflected in documents executed
concurrently herewith and matters disclosed in Schedule 2.1(h) hereto, will
file, on or before February 5, 2001, a post-effective amendment pursuant to the
terms of the side letter confirming same executed January 24, 2001.

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                                   ARTICLE II
                         REPRESENTATIONS AND WARRANTIES

        2.1 ESAT's Representations and Warranties. ESAT hereby makes the
following representations and warranties, each of which representations and
warranties is and shall be (i) true in all respects as of the date of this
Agreement, and (ii) shall survive the closing of the transactions contemplated
hereby:

               (a) Concerning the Settlement Shares. The Series D Common Shares
have been duly authorized and validly issued, are fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder. There are no preemptive rights of any stockholder of ESAT, as such,
to acquire the Series D Common Shares.

               (b) Reporting Company Status. ESAT is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Nevada and has the requisite corporate power to own its properties and to carry
on its business as now being conducted. ESAT is duly qualified as a foreign
corporation to do business and is in good standing in each jurisdiction where
the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of ESAT and its subsidiaries,
taken as a whole. ESAT has registered its Common Stock pursuant to Section 12 of
the 1934 Act, and the Common Stock is listed and traded on the NASDAQ/Bulletin
Board market. ESAT has received no notice, either oral or written, with respect
to the continued eligibility of the Common Stock for such listing, and ESAT has
maintained all requirements for the continuation of such listing.

               (c) Authorized Shares. ESAT has, as of December 31, 2000,
approximately 24,000,000 shares of Common Stock outstanding, and has sufficient
authorized and unissued Shares necessary to effect the delivery of the Series D
Common Shares and the conversion of all of the currently outstanding Series C
Preferred, Series D, Preferred and Series E Preferred (and has reserved
15,000,000 additional shares of ESAT common stock to satisfy the exercise of
that certain Warrant delivered by ESAT to Wentworth in consideration for
Wentworth's prior financing of ESAT (the "Warrant")). Attached hereto as Exhibit
D is a "Capitalization Report" issued by ESAT's transfer agent, which discloses
the outstanding shares of ESAT as of December 31, 2000. ESAT hereby acknowledges
and agrees that Wentworth is relying on the representation contained in this
paragraph and said transfer agent report to verify that in no event shall
Wentworth beneficially own more than 4.99% of the outstanding shares of common
stock of ESAT.

               (d) Settlement Agreement. This Agreement and the transactions
contemplated hereby, have been duly and validly authorized by ESAT. This
Agreement has been duly executed and delivered by ESAT and is a valid and
binding agreement of ESAT, enforceable in accordance with its terms, and
subject, as to enforceability, to general principles of equity and to
bankruptcy, insolvency, moratorium, and other similar laws affecting the
enforcement of creditors' rights generally.

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               (e) Non-contravention. The execution and delivery of this
Agreement by ESAT, the issuance of the Settlement Shares, and the consummation
by ESAT of the other transactions contemplated by this Agreement, do not and
will not conflict with or result in a breach by ESAT of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of ESAT, each as currently in effect, (ii) any indenture, mortgage,
deed of trust, or other material agreement or instrument to which ESAT is a
party or by which it or any of its properties or assets are bound, including any
listing agreement for the Common Stock (except as herein set forth), (iii) to
its knowledge, any existing applicable law, rule, or regulation or any
applicable decree, judgment, or order of any court, United States federal or
state regulatory body, administrative agency, or other governmental body having
jurisdiction over ESAT or any of its properties or assets, or (iv) any listing
agreement for its Common Stock, except such conflict, breach or default which
would not have a material adverse effect on the transactions contemplated
herein.

               (f) Approvals. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of ESAT is required to be obtained
by ESAT for the issuance of the Settlement Shares as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained.

               (g) SEC Filings. None of ESAT's SEC Reports contained, at the
time they were filed, any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading, except as corrected by an amended filing made prior to the
date hereof. As of the date of this Agreement, ESAT is current with all
requisite forms, reports (and exhibits thereto) which it is required to file the
SEC.

               (h) Absence of Certain Changes. Except as set forth in Schedule
2.1(h) hereto, since September 30, 2000, there has been no material adverse
change and no material adverse development in the business, properties,
operations, condition (financial or otherwise), or results of operations of ESAT
and its subsidiaries, taken as a whole, except as disclosed in ESAT's SEC
Reports. Except as set forth in Schedule 2.1(h) hereto, since September 30,
2000, ESAT has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.

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               (i) Full Disclosure. There is no fact known to ESAT (other than
general economic conditions known to the public generally or as disclosed in
ESAT's SEC Reports), that has not been disclosed in writing to Wentworth that
(i) would reasonably be expected to have a material adverse effect on the
business or financial condition of ESAT or (ii) would reasonably be expected to
materially and adversely affect the ability of ESAT to perform its obligations
pursuant to this Agreement.

               (j) Absence of Litigation. Except for the Litigation and as set
forth in ESAT's SEC Reports, which Wentworth has reviewed, there is no action,
suit, proceeding, inquiry or investigation before or by any court, public board
or body pending or, to the knowledge of ESAT, threatened against or affecting
ESAT, wherein an unfavorable decision, ruling or finding would have a material
adverse effect on the properties, business or financial condition, results of
operation or prospects of ESAT and its subsidiaries, the transactions
contemplated by this Agreement, or which would adversely affect the validity or
enforceability of, or the authority or ability of ESAT to perform its
obligations under, this Agreement.

               (k) Absence of Events of Default. No Event of Default (or its
equivalent term), as defined in the respective agreement to which ESAT is a
party, and no event which, with the giving of notice or the passage of time or
both, would become an Event of Default (or its equivalent term) (as so defined
in such agreement), has occurred and is continuing, which would have a material
adverse effect on ESAT's financial condition or results of operations.

               (l) Prior Issues. During the 12 months preceding the date hereof,
ESAT has not issued any free trading Common Stock other than that connected to
the Registration Statement or convertible securities in capital transactions
which have not been fully disclosed in ESAT's filings with the SEC. All such
issuances have been fully converted into shares of common stock and there is no
outstanding unconverted debt or convertible securities from those transactions.

               (m) No Undisclosed Liabilities or Events. Except as set forth in
Schedule 2.1(h) hereto, ESAT has no liabilities or obligations other than those
disclosed in ESAT's SEC Reports or those incurred in the ordinary course of
ESAT's business since September 30, 2000, and which, individually or in the
aggregate, do not or would not have a material adverse effect on the properties,
business, condition (financial or otherwise), results of operations or prospects
of ESAT and its subsidiaries, taken as a whole. No events or circumstances have
occurred or exist with respect to ESAT or its properties, business, condition
(financial or otherwise), results of operations or prospects, which, under
applicable law, rule or regulation, require public disclosure or announcement
prior to the date hereof by ESAT but which have not been so publicly announced
or disclosed.

               (n) No Default. Except for the Purchase Agreements and related
documents, ESAT is not in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound.

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               (o) No Integrated Offering. Neither ESAT nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, made any offer or sales of any security or solicited any offers to
buy any security under circumstances that would eliminate the availability of
the exemption from registration under Regulation D in connection with the offer
and sale of the Settlement Shares as contemplated hereby.

        2.2 Wentworth's Representations and Warranties. Wentworth hereby makes
the following representations and warranties, each of which representations and
warranties is and shall be (i) true in all respects as of the date of this
Agreement, and (ii) shall survive the closing of the transactions contemplated
hereby:

               (a) Settlement Agreement. This Agreement has been duly and
validly authorized, executed and delivered on behalf of Wentworth and is a valid
and binding agreement of Wentworth enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.

               (b) Non-contravention. The execution and delivery of this
Agreement by Wentworth and the consummation by Wentworth of the other
transactions contemplated by this Agreement, do not and will not conflict with
or result in a breach by Wentworth of any of the terms or provisions of, or
constitute a default under (i) the incorporation/formation documents of
Wentworth, as currently in effect, (ii) any indenture, mortgage, deed of trust,
or other material agreement or instrument to which Wentworth is a party or by
which it or any of its properties or assets are bound, or (iii) to its
knowledge, any existing applicable law, rule, or regulation or any applicable
decree, judgment, or order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over Wentworth or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein.

                                   ARTICLE III
                                RELEASE OF CLAIMS

        Except for the performance by the parties of the provisions of this
Agreement and further except for the representations, warranties and indemnities
of the parties contained herein (which representations, warranties and
indemnities shall survive the consummation of this Agreement and as to which the
parties shall continue to be liable), ESAT, for itself and on behalf of all its
direct and indirect partners, officers, directors, employees, affiliates (both
persons and entities), representatives, agents, servants, trustees,
beneficiaries, predecessors in interest, successors in interest, assigns,
nominees and insurers (collectively, the "Releasing Parties"), shall be deemed
to have released and forever discharged Wentworth and Southridge Capital
Management, LLC, a Delaware limited liability company ("Southridge") (which
provides investment advisory services to Wentworth), and all direct and indirect
partners, officers, directors, employees, affiliates(both persons and entities,
including, without limitation, Steven Hicks, Dan Pickett, Navigator Management
and Thomson Kernaghan) and representatives, agents, servants, trustees,
beneficiaries, predecessors in interest, successors in interest, assigns,
nominees and insurers of Wentworth and Southridge (collectively "related
parties"), of and from any and all claims, demands, actions and causes of
action, whether known or unknown, fixed or contingent, that any

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of the Releasing Parties may have had, may now have or may hereafter acquire
with respect to any matters whatsoever arising (on or prior to the date hereof)
under or in any way related to (i) Purchase Agreements and Credit Agreement and
all agreements entered into in connection therewith (collectively the
"Documents"), (ii) any act which may constitute a defense to the performance of
the Documents, and (iii) any claims ESAT may have against Wentworth and related
parties with respect to or in connection with any alleged violation of any state
or Federal securities laws, including the Securities Act and the Exchange Act
(as defined in the Purchase Agreements).

        The parties agree not to divulge the terms of this Agreement to any
person or entity whatsoever, unless required to do so by law or as provided for
in this Agreement.

        ESAT represents, warrants and covenants that it has not, and at the time
this release becomes effective will not have, sold, assigned, transferred or
otherwise conveyed to any other person or entity all or any portion of its
rights, claims, demands, actions or causes of action herein released.

        ESAT acknowledges that it is familiar with Section 1542 of the Civil
Code of the State of California, which provides as follows:

               "A general release does not extend to claims which the creditor
               does not know or suspect to exist in his favor at the time of
               executing the release, which if known by him must have materially
               affected his settlement with the debtor."

        ESAT hereby waives any and all rights and benefits that it now has or in
the future may have under Section 1542 of the Civil Code (and under the
comparable provisions of any other applicable law) and agrees and acknowledges
that this Agreement contains a full and final release applying to unknown and
unanticipated claims, injuries or damages arising out of the subject matter
hereof, as well as to those now known or disclosed.

        ESAT represents and warrants that it has relied wholly upon its own
judgment, belief and knowledge of the existence, nature, extent or duration of
any claim, demand, debt, damage, liability, account, reckoning, obligation,
cost, expense, cause of action, chosen action, right of indemnity, agreement or
promise that it may have against Wentworth and the other released parties and
that it has made full investigations with respect to potential rights and claims
released and that it has not been influenced to any extent whatsoever in making
the releases contemplated by this agreement by any representation or statement
regarding any such matter. Each party further represents and warrants that it is
executing and delivering this Agreement and, as applicable, the releases
contemplated hereunder after having received full legal advise as to its rights
hereunder and the legal effect thereof from legal counsel of its own choosing.
Notwithstanding the above, this Agreement is not intended to and does not,
release or extinguish the rights of any of the parties to enforce this
Agreement.

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                                   ARTICLE IV
                               GENERAL PROVISIONS

        5.1 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire understanding, arrangement and agreement among the
parties hereto or any of them with respect to the subject matter hereof, and
supersedes all prior agreements, arrangements, understandings, negotiations and
discussions with respect thereto among the parties hereto.

        5.2 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.

        5.3 Modifications in Writing. No provisions of this Agreement may be
amended, supplemented or waived except by a writing signed by the party or
parties to be bound thereby.

        5.4 Execution in Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall be considered one and the
same agreement and each of which shall be deemed an original.

        5.5 Severability. In case any provision of this Agreement shall be held
illegal, invalid or unenforceable, the legality, validity and enforceability of
the remaining provisions hereof shall not in any way be affected or impaired
thereby.

        5.6 Construction. This Agreement shall be governed by and construed
under the laws of the State of California. The parties acknowledge that each
party and its counsel have reviewed and revised this Agreement and that no rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall be employed in the interpretation of this Agreement or
any amendments or exhibits to it or any document executed and delivered by
either party in connection with this Agreement. All captions in this Agreement
are for reference only and shall not be used in the interpretation of this
Agreement or any related document. If any provision of this Agreement shall be
determined to be illegal or unenforceable, such determination shall not affect
any other provision of this Agreement and all such other provisions shall remain
in full force and effect. All Exhibits attached hereto are hereby incorporated
herein by reference.

        5.7 Attorneys' Fees. In the event any dispute between the parties to
this Agreement should result in litigation or other proceeding, the prevailing
party shall be reimbursed by the non-prevailing party for all reasonable costs
and expenses, including, without limitation, reasonable attorneys' fees,
incurred by the prevailing party in connection with such litigation or other
proceeding and any appeal thereof. Such costs, expenses and fees shall be
included in and made a part of the judgment recovered by the prevailing party,
if any.

        5.8 Conflicting Terms. To the extent any of the terms herein conflict
with the terms of the Loan Documents, the terms herein shall prevail.

        5.9 Informed Consent. The parties admit, acknowledge and declare that
each has given mature and careful thought and consideration to the making of
this Agreement and to all of the obligations hereby undertaken and the rights
hereby extinguished or created; that this Agreement is entered into voluntarily,
after advice of counsel, free of undue influence, coercion,

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duress, menace or fraud of any kind; that this Agreement and each and every
paragraph and every part hereof has been carefully read and explained; and, that
each fully and completely understands and is cognizant of all of the terms and
conditions in this Agreement.

        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

                                      Wentworth II, LP,
                                      a Cayman Islands limited liability company

                                      By  /s/
                                         ---------------------------------------
                                          its authorized agent

                                      ESAT, Inc.,
                                      a Nevada corporation

                                      By  /s/ CHESTER L. NOBLETT, JR.
                                         ---------------------------------------
                                          its authorized agent

Approved as to form and content:

By  /s/
  -------------------------------------
    Michael S. Rosenblum,
    Counsel for Wentworth

Approved as to form and content:

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

  -------------------------------------
    Counsel for ESAT, Inc.

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                                 SCHEDULE 2.1(h)

        In October, 2000, the Company sold to certain investors approximately
75% of the authorized and issued shares of common stock in i-xposure, Inc. The
purchase agreements require eSat, Inc. to guarantee a $300,000 loan made by the
investors to I-xposure, Inc., as well as guarantee an aggregate of approximately
$360,000 of i-xposure, Inc.'s revenues for the period October, 2000 through
December, 2000. Such amounts were accrued in the financial statements filed with
the Company's Form 10-Q for the quarter ended September 30, 2000.

        In January, 2000, a claim was asserted against the Company by its
immediate former Chief Executive Officer, seeking a severance payment of
$300,000. This amount was accrued in the financial statements filed with the
Company's Form 10-Q for the quarter ended September 30, 2000.

        In January, 2000, a claim was asserted against the Company by two
shareholders alleging fraud and material omission of fact as represented by a
former Chief Executive Officer of the Company. The claim alleges damages of
$434,000.

        In June 2000, the Company entered into an agreement with a supplier of
radio frequency equipment for use in its fixed wireless business line. The
agreement requires the Company to purchase specified quantities of product
through October, 2003. The failure of the Company to meet the stated purchase
commitments could result in a liability to the supplier of approximately
$5,000,000. The equipment has not performed as specified in the agreement in
multiple material aspects. Accordingly, the Company is seeking rescission of the
contract.

                                       10<PAGE>   1
                                                                    EXHIBIT 10.5

                                  MP3.COM, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

                ADOPTED BY THE BOARD OF DIRECTORS ON MAY 13, 1999
                  APPROVED BY THE STOCKHOLDERS ON JULY 16, 1999
                ADJUSTED FOR THREE-FOR-TWO SPLIT ON JULY 16, 1999
              AMENDED BY THE BOARD OF DIRECTORS ON JANUARY 25, 2001

        1. PURPOSE.

           (a) The purpose of this Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of MP3.com, Inc., a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.

           (b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").

           (c) The Company, by means of the Plan, seeks to retain the services
of its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.

           (d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.

        2. ADMINISTRATION.

           (a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.

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

               (i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).

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               (ii)  To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.

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

               (iv)  To amend the Plan as provided in paragraph 13.

               (v)   Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.

           (c) The Board may delegate administration of the Plan to a Committee
composed of one (1) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

           (d) Any interpretation of the Plan by the Board of any decision made
by it under the Plan shall be final and binding on all persons.

        3. SHARES SUBJECT TO THE PLAN.

           (a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate three hundred thousand
(300,000) shares of the Company's common stock (the "Common Stock"). If any
right granted under the Plan shall for any reason terminate without having been
exercised, the Common Stock not purchased under such right shall again become
available for the Plan.

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

        4. GRANT OF RIGHTS; OFFERING.

           (a) The Board or the Committee may from time to time grant or provide
for the grant of rights to purchase Common Stock of the Company under the Plan
to eligible employees (an "Offering") on a date or dates (the "Offering
Date(s)") selected by the Board or the Committee. Each Offering shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate, which shall comply with the requirements

                                       2
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of Section 423(b)(5) of the Code that all employees granted rights to purchase
stock under the Plan shall have the same rights and privileges. The terms and
conditions of an Offering shall be incorporated by reference into the Plan and
treated as part of the Plan. The provisions of separate Offerings need not be
identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering or
otherwise) the period during which the Offering shall be effective, which period
shall not exceed twenty-seven (27) months beginning with the Offering Date, and
the substance of the provisions contained in paragraphs 5 through 8, inclusive.

           (b) If an employee has more than one (1) right outstanding under the
Plan, unless he or she otherwise indicates in agreements or notices delivered
hereunder, a right with a lower exercise price (or an earlier-granted right if
two (2) rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right if two (2) rights have identical exercise prices) will be exercised.

        5. ELIGIBILITY.

           (a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year, and, for Offerings commencing after
January 25, 2001, such employee has not been on leave of absence from the
Company more than ninety (90) days (other than a leave of absence in which such
employee's reemployment with the Company is (X) specifically provided for in a
written agreement with the Company or (Y) required by applicable statute or
regulation).

           (b) The Board or the Committee may provide that each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:

               (i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;

                                       3
<PAGE>   4

               (ii)  the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and

               (iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.

           (c) No employee shall be eligible for the grant of any rights under
the Plan if, immediately after any such rights are granted, such employee owns
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Affiliate. For purposes
of this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply
in determining the stock ownership of any employee, and stock which such
employee may purchase under all outstanding rights and options shall be treated
as stock owned by such employee.

           (d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.

           (e) Officers of the Company and any designated Affiliate shall be
eligible to participate in Offerings under the Plan; provided, however, that the
Board may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.

        6. RIGHTS; PURCHASE PRICE.

           (a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase up to the
number of shares of Common Stock of the Company purchasable with a percentage
designated by the Board or the Committee not exceeding fifteen percent (15%) of
such employee's Earnings (as defined in subparagraph 7(a)) during the period
which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one (1) or more dates during an Offering
(the "Purchase Date(s)") on which rights granted under the Plan shall be
exercised and purchases of Common Stock carried out in accordance with such
Offering.

           (b) In connection with each Offering made under the Plan, the Board
or the Committee may specify a maximum number of shares that may be purchased by
any employee as well as a maximum aggregate number of shares that may be
purchased by all eligible employees pursuant to such Offering. In addition, in
connection with each Offering that contains

                                       4
<PAGE>   5

more than one (1) Purchase Date, the Board or the Committee may specify a
maximum aggregate number of shares which may be purchased by all eligible
employees on any given Purchase Date under the Offering. If the aggregate
purchase of shares upon exercise of rights granted under the Offering would
exceed any such maximum aggregate number, the Board or the Committee shall make
a pro rata allocation of the shares available in as nearly a uniform manner as
shall be practicable and as it shall deem to be equitable.

           (c) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:

               (i)  an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or

               (ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Purchase Date.

        7. PARTICIPATION; WITHDRAWAL; TERMINATION.

           (a) An eligible employee may become a participant in the Plan
pursuant to an Offering by delivering an enrollment agreement to the Company
within the time specified in the Offering, in such form as the Company provides.
Each such agreement shall authorize payroll deductions of up to the maximum
percentage specified by the Board or the Committee of such employee's Earnings
during the Offering. "Earnings" is defined as an employee's regular salary or
wages (including amounts thereof elected to be deferred by the employee, that
would otherwise have been paid, under any arrangement established by the Company
that is intended to comply with Section 125, Section 401(k), Section 402(e)(3),
Section 402(h) or section 403(b) of the Code, and also including any deferrals
under a non-qualified deferred compensation plan or arrangement established by
the Company), and also, if determined by the Board or the Committee and set
forth in the terms of the Offering, may include any or all of the following: (i)
overtime pay, (ii) commissions, (iii) bonuses, incentive pay, profit sharing and
other remuneration paid directly to the employee, and/or (iv) other items of
remuneration not specifically excluded pursuant to the Plan. Earnings shall not
include the cost of employee benefits paid for by the Company or an Affiliate,
education or tuition reimbursements, imputed income arising under any group
insurance or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company or an Affiliate under any employee benefit plan, and similar
items of compensation, as determined by the Board or the Committee.
Notwithstanding the foregoing, the Board or Committee may modify the definition
of "Earnings" with respect to one or more Offerings as the Board or Committee
determines appropriate. The payroll deductions made for each participant shall
be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional payments
into his or her account only if specifically provided

                                       5
<PAGE>   6

for in the Offering and only if the participant has not had the maximum amount
withheld during the Offering.

           (b) At any time during an Offering, a participant may terminate his
or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board or the Committee in the Offering. Upon
such withdrawal from the Offering by a participant, the Company shall distribute
to such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new enrollment agreement in order to
participate in subsequent Offerings under the Plan.

           (c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon the earlier to occur of (i) cessation of any
participating employee's employment with the Company and any designated
Affiliate, for any reason, (ii) ninety (90) days following commencement of a
participating employee's leave of absence from the Company, unless such
employee's reemployment with the Company is (X) specifically provided for in a
written agreement with the Company or (Y) required by applicable statute or
regulation. The Company shall distribute to any such employee all of his or her
accumulated payroll deductions (reduced to the extent, if any, such deductions
have been used to acquire stock for the terminated employee), under the
Offering, without interest.

           (d) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.

        8. EXERCISE.

           (a) On each Purchase Date specified therefor in the relevant
Offering, each participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering. No fractional shares shall be issued upon the exercise of rights
granted under the Plan. The amount, if any, of accumulated payroll deductions
remaining in each participant's account after the purchase of shares which is
less than the amount required to purchase one share of Common Stock on the final
Purchase Date of an Offering shall be held in each such participant's account
for the purchase of shares under the next Offering under the Plan, unless such
participant withdraws from such next Offering, as provided in subparagraph 7(b),
or is no longer eligible to be granted rights under the Plan, as provided in
paragraph 5, in which case such amount shall be

                                       6
<PAGE>   7

distributed to the participant after such final Purchase Date, without interest.
The amount, if any, of accumulated payroll deductions remaining in any
participant's account after the purchase of shares which is equal to the amount
required to purchase one or more whole shares of Common Stock on the final
Purchase Date of an Offering shall be distributed in full to the participant
after such Purchase Date, without interest.

           (b) No rights granted under the Plan may be exercised to any extent
unless the shares to be issued upon such exercise under the Plan (including
rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the "Securities Act") and
the Plan is in material compliance with all applicable state, foreign and other
securities and other laws applicable to the Plan. If on a Purchase Date in any
Offering hereunder the Plan is not so registered or in such compliance, no
rights granted under the Plan or any Offering shall be exercised on such
Purchase Date, and the Purchase Date shall be delayed until the Plan is subject
to such an effective registration statement and such compliance, except that the
Purchase Date shall not be delayed more than twelve (12) months and the Purchase
Date shall in no event be more than twenty-seven (27) months from the Offering
Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance,
no rights granted under the Plan or any Offering shall be exercised and all
payroll deductions accumulated during the Offering (reduced to the extent, if
any, such deductions have been used to acquire stock) shall be distributed to
the participants, without interest.

        9. COVENANTS OF THE COMPANY.

           (a) During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such rights.

           (b) The Company shall seek to obtain from each federal, state,
foreign or other regulatory commission or agency having jurisdiction over the
Plan such authority as may be required to issue and sell shares of stock upon
exercise of the rights granted under the Plan. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such rights
unless and until such authority is obtained.

        10. USE OF PROCEEDS FROM STOCK.

        Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.

        11. RIGHTS AS A STOCKHOLDER.

        A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the

                                       7
<PAGE>   8

participant's shareholdings acquired upon exercise of rights under the Plan are
recorded in the books of the Company (or its transfer agent).

       12. ADJUSTMENTS UPON CHANGES IN STOCK.

           (a) If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")

           (b) In the event of: (1) a dissolution or liquidation of the Company;
(2) a lease, sale, or other disposition of all or substantially all of the
assets of the Company; (3) a merger or consolidation in which the Company is not
the surviving corporation; (4) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; (5) the
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), or any comparable successor provisions (excluding any employee benefit
plan, or related trust, sponsored or maintained by the Company or any Affiliate
of the Company) of the beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor rule) of securities
of the Company representing at least fifty percent (50%) of the combined voting
power entitled to vote in the election of directors; or (6) the individuals who,
as of the date of the adoption of this Plan, are members of the Board (the
"Incumbent Board"; (if the election, or nomination for election by the Company's
stockholders, of a new director was approved by a vote of at least fifty percent
(50%) of the members of the Board then comprising the Incumbent Board, such new
director shall upon his or her election be considered a member of the Incumbent
Board) cease for any reason to constitute at least fifty percent (50%) of the
Board; then the Board in its sole discretion may take any action or arrange for
the taking of any action among the following: (i) any surviving or acquiring
corporation may assume outstanding rights or substitute similar rights for those
under the Plan, (ii) such rights may continue in full force and effect, or (iii)
all participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to or within a reasonable period of time following the
transaction described above and the participants' rights under the ongoing
Offering terminated.

       13. AMENDMENT OF THE PLAN OR OFFERINGS.

                                       8
<PAGE>   9

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

               (i)   Increase the number of shares reserved for rights under the
Plan;

               (ii)  Modify the provisions as to eligibility for participation
in the Plan or an Offering (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act, or any comparable successor rule ("Rule
16b-3"); or

               (iii) Modify the Plan or an Offering in any other way if such
modification requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.

It is expressly contemplated that the Board may amend the Plan or an Offering in
any respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under an Offering
into compliance therewith.

           (b) The Board may, in its sole discretion, submit any amendment to
the Plan or an Offering for stockholder approval.

           (c) Rights and obligations under any rights granted before amendment
of the Plan or Offering shall not be impaired by any amendment of the Plan,
except with the consent of the person to whom such rights were granted, or
except as necessary to comply with any laws or governmental regulations, or
except as necessary to ensure that the Plan and/or rights granted under an
Offering comply with the requirements of Section 423 of the Code.

       14. DESIGNATION OF BENEFICIARY.

           (a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if applicable, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
an Offering but prior to delivery to the participant 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 the Plan in the event
of such participant's death during an Offering.

           (b) Such designation of beneficiary may be changed by the participant
at any time by written notice in the form prescribed by the Company. In the
event of the death of a

                                       9
<PAGE>   10

participant and in the absence of a beneficiary validly designated under the
Plan who is living (or if an entity, is otherwise in existence) at the time of
such participant's death, the Company shall deliver such shares and/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 sole discretion, may deliver such shares and/or cash to the
spouse or to any one (1) 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 determine.

        15. TERMINATION OR SUSPENSION OF THE PLAN.

            (a) The Board in its discretion, may suspend or terminate the Plan
at any time. The Plan shall automatically terminate if all the shares subject to
the Plan pursuant to subparagraph 3(a) are issued. No rights may be granted
under the Plan while the Plan is suspended or after it is terminated.

            (b) Rights and obligations under any rights granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except as expressly provided in the Plan or with the consent of the person to
whom such rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under an Offering comply with the requirements of Section 423 of
the Code.

        16. EFFECTIVE DATE OF PLAN.

        The Plan shall become effective on the same day on which the Company's
registration statement under the Securities Act with respect to the initial
public offering of shares of the Company's Common Stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan had been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.

        17. CHOICE OF LAW.

        All questions concerning the construction, validity and interpretation
of this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.

                                       10
<PAGE>   11

                                  MP3.COM, INC.
                      EMPLOYEE STOCK PURCHASE PLAN OFFERING

               ADOPTED BY THE BOARD OF DIRECTORS ON MAY 13, 1999
             AMENDED BY THE BOARD OF DIRECTORS ON JANUARY 25, 2001

1.      GRANT; OFFERING DATE.

        (a) The Board of Directors (the "Board") of MP3.com, Inc. (the
"Company"), pursuant to the Company's Employee Stock Purchase Plan (the "Plan"),
hereby authorizes the grant of rights to purchase shares of the common stock of
the Company ("Common Stock") to all Eligible Employees (an "Offering"). The
first Offering shall begin on the effective date of the initial public offering
of the Company's Common Stock and end on July 31, 2001 (the "Initial Offering").
Thereafter, an Offering shall begin on August 1, 2001 and on each August 1 every
second year thereafter, and each such offering shall end on the day prior to the
second anniversary of its Offering Date. The first day of an Offering is that
Offering's "Offering Date."

        (b) Notwithstanding the foregoing: (i) if any Offering Date falls on a
day that is not a Trading Day (as defined herein), then such Offering Date shall
instead fall on the next subsequent Trading Day and (ii) if any Purchase Date
falls on a day that is not a Trading Day, then such Purchase Date shall instead
fall on the immediately preceding Trading Day. "Trading Day" shall mean any day
the exchange(s) or market(s) on which the Common Stock is listed, whether it be
any established stock exchange, The Nasdaq National Market, The Nasdaq SmallCap
Market or otherwise, is open for trading.

        (c) Notwithstanding anything to the contrary, in the event that the Fair
Market Value (as defined herein) of a share of Common Stock on any Purchase Date
during an Offering is less than the Fair Market Value of a share of Common Stock
on the Offering Date of such Offering (or on the last Trading Day prior to the
Offering Date of such Offering for Offerings commencing after January 25, 2001),
then following the purchase of Common Stock on such Purchase Date: (i) the
Offering shall terminate and (ii) all participants in the just-terminated
Offering shall automatically be enrolled in the Offering that shall commence on
the next Trading Day following the Purchase Date. Except as provided in
paragraph 4, "Fair Market Value" shall mean the closing sales price for the
Common Stock (or the closing bid price, if no sales were reported) as quoted on
any established stock exchange or traded on the Nasdaq National Market or the
Nasdaq SmallCap Market and as reported in The Wall Street Journal or such other
source as the Board deems reliable.

        (d) Prior to the commencement of any Offering, the Board (or the
Committee described in subparagraph 2(c) of the Plan, if any) may change any or
all terms of such Offering and any subsequent Offerings. The granting of rights
pursuant to each Offering hereunder shall occur on each respective Offering Date
unless, prior to such date (a) the Board (or the Committee) determines that such
Offering shall not occur, or (b) no shares remain available for issuance under
the Plan in connection with the Offering.

<PAGE>   12

        (e) Notwithstanding any other provisions of an Offering, if the terms of
an Offering as previously established by the Board would, as a result of a
change to applicable accounting standards, as a result of obtaining shareholder
approval during such Offering for shares of Common Stock that would be issued
under such Offering (but for the provisions of this Section 1(e)), or otherwise,
generate a charge to earnings, such Offering shall terminate effective as of the
earlier of (1) the day prior to the date such change of accounting standards
would otherwise first apply to the Offering or (2) the day prior to the date
upon which the maximum aggregate number of shares of Common Stock available to
be purchased by all Eligible Employees under such Offering (excluding any
additional shares of Common Stock made available for issuance under the Plan by
approval of the shareholders of the Company during the Offering) exceeds the
aggregate number of whole shares purchasable by all Eligible Employees based
upon the aggregate of such Employees' payroll deductions accumulated pursuant to
such Offering (the "Offering Termination Date"), and such Offering Termination
Date shall be the final Purchase Date of such Offering. A subsequent Offering
shall commence on such date and on such terms as shall be provided by the Board
of Directors of the Company.

2.      ELIGIBLE EMPLOYEES.

        (a) All employees of the Company and each of its Affiliates (as defined
in the Plan) incorporated in the United States, shall be granted rights to
purchase Common Stock under each Offering on the Offering Date of such Offering,
provided that each such employee otherwise meets the employment requirements of
subparagraph 5(a) of the Plan (an "Eligible Employee") and that each Eligible
Employee may only contribute to one Offering at any given point in time.
Notwithstanding the foregoing, the following employees shall not be Eligible
Employees or be granted rights under an Offering: (i) part-time or seasonal
employees whose customary employment is less than twenty (20) hours per week or
five (5) months per calendar year; (ii) 5% stockholders (including ownership
through unexercised and/or unvested stock options) described in subparagraph
5(c) of the Plan; and (iii) for Offerings commencing after January 25, 2001,
employees who have been on leave of absence from the Company more than ninety
(90) days unless such employee's reemployment with the Company or its Affiliate
is (X) specifically provided for in a written agreement with the Company or (Y)
required by applicable statute or regulation.

        (b) Notwithstanding the foregoing, each person who first becomes an
Eligible Employee during any Offering and at least six (6) months prior to the
final Purchase Date (as defined in paragraph 6 hereof) of the Offering will, on
the next February 1 or August 1 during that Offering following the date that
person first becomes an Eligible Employee, receive a right under such Offering,
which right shall thereafter be deemed to be a part of the Offering. Such right
shall have the same characteristics as any rights originally granted under the
Offering except that:

            (1) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes (with the exception of the purposes
contained in Section 1(c) herein), including determination of the exercise price
of such right; and

            (2) the Offering for such right shall begin on its Offering Date and
end coincident with the end of the ongoing Offering.

                                       2
<PAGE>   13

3.      RIGHTS.

        (a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the right to purchase the
number of shares of Common Stock purchasable with up to fifteen percent (15%) of
such employee's Earnings paid during the period of such Offering beginning after
such Eligible Employee first commences participation; provided, however, that no
employee may purchase Common Stock on a particular Purchase Date that would
result in more than fifteen percent (15%) of such employee's Earnings in the
period from the Offering Date to such Purchase Date having been applied to
purchase shares under all ongoing Offerings under the Plan and all other plans
of the Company intended to qualify as "employee stock purchase plans" under
Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"). For
this Offering, "Earnings" means the base salary paid to an employee (including
all amounts elected to be deferred by the employee, that would otherwise have
been paid, under any cash or deferred arrangement established by the Company),
overtime pay, commissions, and bonuses, but excluding other remuneration paid
directly to the employee, profit sharing, the cost of employee benefits paid for
by the Company, education or tuition reimbursements, imputed income arising
under any Company group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company under any employee benefit
plan, and similar items of compensation.

        (b) Notwithstanding the foregoing, the maximum number of shares of
Common Stock an Eligible Employee may purchase on any Purchase Date in an
Offering shall be such number of shares as has a Fair Market Value (determined
as of the Offering Date for such Offering) equal to (x) $25,000 multiplied by
the number of calendar years in which the right under such Offering has been
outstanding at any time, minus (y) the Fair Market Value of any other shares of
Common Stock (determined as of the relevant Offering Date with respect to such
shares) which, for purposes of the limitation of Section 423(b)(8) of the Code,
are attributed to any of such calendar years in which the right is outstanding.
The amount in clause (y) of the previous sentence shall be determined in
accordance with regulations applicable under Section 423(b)(8) of the Code based
on (i) the number of shares previously purchased with respect to such calendar
years pursuant to such Offering or any other Offering under the Plan, or
pursuant to any other Company plans intended to qualify as "employee stock
purchase plans" under Section 423 of the Code, and (ii) the number of shares
subject to other rights outstanding on the Offering Date for such Offering
pursuant to the Plan or any other such Company plan.

        (c) The maximum aggregate number of shares available to be purchased by
all Eligible Employees under an Offering shall be the number of shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
shares of Common Stock upon exercise of rights granted under the Offering would
exceed the maximum aggregate number of shares available, the Board shall make a
pro rata allocation of the shares available in a uniform and equitable manner.

4.      PURCHASE PRICE.

        The purchase price of the Common Stock under the Offering shall be the
lesser of: (i) eighty-five percent (85%) of the Fair Market Value of the Common
Stock on the Offering Date

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<PAGE>   14

(or, for Offerings commencing after January 25, 2001, on the last Trading Day
prior to the Offering Date of such Offering) or (ii) or eighty-five percent
(85%) of the Fair Market Value of the Common Stock on the Purchase Date, in each
case rounded up to the nearest whole cent per share. For the Initial Offering,
the Fair Market Value of the Common Stock at the time when the Offering
commences shall be the price per share at which shares of Common Stock are first
sold to the public in the Company's initial public offering as specified in the
final prospectus with respect to that public offering.

5.      PARTICIPATION.

        (a) An Eligible Employee may elect to participate in an Offering only at
the beginning of the Offering, or such later date specified in subparagraph
2(b). An Eligible Employee shall become a participant in an Offering by
delivering an enrollment form authorizing payroll deductions. Such deductions
must be either a fixed dollar amount per pay period, up to a maximum dollar
amount which is less than or equal to fifteen percent (15%) of Earnings, or in
whole percentages of Earnings, with a minimum percentage of one percent (1%) and
a maximum percentage of fifteen percent (15%). A participant may not make
additional payments into his or her account. The agreement shall be made on such
enrollment form as the Company provides, and must be delivered to the Company
prior to the date participation is to be effective, unless a later time for
filing the enrollment form is set by the Company for all Eligible Employees with
respect to a given Offering. For the Initial Offering, the time for filing an
enrollment form and commencing participation for individuals who are Eligible
Employees on the Offering Date for the Initial Offering shall be determined by
the Company and communicated to such Eligible Employees.

        (b) A participant may decrease his or her participation level during the
course of a six (6) month purchase interval one (1) time, and only by delivering
notice to the Company at least ten (10) days in advance of the Purchase Date in
such form as the Company prescribes; provided that a participant may (i) reduce
his or her deductions to zero percent (0%) upon ten (10) days' prior notice, or
within such shorter period as determined by the Board and communicated to the
participants, by delivering a notice in such form as the Company provides, (ii)
may increase or decrease his or her participation level at any time to become
effective on the day following the next subsequent Purchase Date, or (iii) may
withdraw from an Offering and receive his or her accumulated payroll deductions
from the Offering (reduced to the extent, if any, such deductions have been used
to acquire Common Stock for the participant on any prior Purchase Dates) without
interest, at any time prior to the end of the Offering, excluding only each ten
(10) day period immediately preceding a Purchase Date, by delivering a
withdrawal notice to the Company in such form as the Company provides. A
participant who has withdrawn from an Offering shall not again participate in
such Offering, but may participate in subsequent Offerings under the Plan in
accordance with the terms thereof.

6.      PURCHASES.

        Subject to the limitations contained herein, on each Purchase Date, each
participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering. "Purchase
Date" shall be defined as each January 31 and July

                                       4
<PAGE>   15

31. The first Purchase Date under the Initial Offering shall be January 31,
2000. Notwithstanding the foregoing, if any Purchase Date falls on a day that is
not a Trading Day, then such Purchase Date shall instead fall on the immediately
preceding Trading Day.

7.      NOTICES AND AGREEMENTS.

        Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering, shall be deemed effectively given
upon receipt or, in the case of notices and agreements delivered by the Company,
five (5) days after deposit in the United States mail, postage prepaid.

8.      EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.

        The rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code and to
comply with the requirements of an available exemption from potential liability
under Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") set forth in Rule 16b-3 promulgated under the Exchange Act.

9.      OFFERING SUBJECT TO PLAN.

        Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.

                                       5

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