Document:

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                                                                    EXHIBIT 10.1

                              INDEMNITY AGREEMENT

         This Indemnity Agreement (this "AGREEMENT"), dated as of March ___,
2000, is made by and between Handspring, Inc., a Delaware corporation (the
"COMPANY"), and _________________________, a director and/or officer of the
Company (the "INDEMNITEE").

                                    RECITALS

         A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;

         B. Based on their experience as business managers, the Board of
Directors of the Company (the "BOARD OF DIRECTORS") has concluded that, to
retain and attract talented and experienced individuals to serve as officers and
directors of the Company, and to encourage such individuals to take the business
risks necessary for the success of the Company, it is necessary for the Company
contractually to indemnify officers and directors and to assume for itself
maximum liability for expenses and damages in connection with claims against
such officers and directors in connection with their service to the Company;

         C. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized (the "DELAWARE LAW"), empowers the Company to indemnify
by agreement its officers, directors, employees, agents and persons who serve,
at the request of the Company, as directors, officers, employees or agents of
other corporations or enterprises, and expressly provides that the
indemnification provided by the Law is not exclusive; and

         D. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director or officer of the Company free from undue
concern for claims for damages arising out of or related to such services to the
Company.

         NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:

         1. DEFINITIONS.

                  1.1 Agent. For the purposes of this Agreement, "AGENT" of the
Company means any person who (a) is or was a director or officer of the Company
or a subsidiary of the Company, (b) is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or an affiliate of the
Company; or (c) was a director or officer of a foreign or domestic corporation
which was a predecessor corporation of the Company, including, without
limitation, Handspring, Inc., a California corporation, or was a director or
officer of another enterprise or affiliate of the Company at the request of, for
the convenience of, or to represent the interests of such

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predecessor corporation. The term "ENTERPRISE" includes any employee benefit
plan of the Company, its subsidiaries, affiliates and predecessor corporations.

                  1.2 Expenses. For purposes of this Agreement, "EXPENSES"
includes all direct and indirect costs of any type or nature whatsoever,
including, without limitation, all attorneys' fees and related disbursements and
other out-of-pocket costs actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.

                  1.3 Proceeding. For the purposes of this Agreement,
"PROCEEDING" means any threatened, pending or completed action, suit or other
proceeding, whether civil, criminal, administrative, investigative or any other
type whatsoever arising on or after the date of this Agreement, regardless of
when the act of Indemnities or failure to act occurred.

                  1.4 Subsidiary. For purposes of this Agreement, "SUBSIDIARY"
means any corporation of which more than fifty percent (50%) of the outstanding
voting securities is owned directly or indirectly by the Company, by the Company
and one or more of its subsidiaries or by one or more subsidiaries of the
Company.

         2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue
to serve as an agent of the Company, at the will of the Company, or under
separate agreement, if such agreement exists, in the capacity the Indemnitee
currently serves as an agent of the Company, faithfully and to the best of his
ability, so long as he is duly appointed or elected and qualified in accordance
with the applicable provisions of the charter documents of the Company or any
subsidiary of the Company; provided, however, that the Indemnitee may at any
time and for any reason resign from such position, subject to any contractual
obligation that the Indemnitee may have assumed apart from this Agreement, and
the Company or any subsidiary shall have no obligation under this Agreement to
continue the Indemnitee in any such position.

         3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall, to the extent
that the Board of Directors determines it to be economically reasonable,
maintain a policy of directors' and officers' liability insurance ("DIRECTOR AND
OFFICER INSURANCE"), on such terms and conditions as may be approved by the
Board of Directors, BUT IN NO EVENT LESS THAN $[ ].

         4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company
shall indemnify the Indemnitee as provided in this Agreement, and to the fullest
extent permitted by law.

                  4.1 Third Party Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding other than
an action by or in the right of the Company, by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify Indemnitee against any and all
expenses and liabilities of any type whatsoever (including, but not limited to,
judgments, fines, ERISA excise taxes or penalties and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding if he acted in
good faith and in a manner he reasonably believed to

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be in, or not opposed to, the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Notwithstanding the preceding, it is the intention of the
parties hereto that Indemnitee shall be indemnified to the full extent
authorized or permitted by Delaware Law and, therefore, to the extent Delaware
Law shall permit broader contractual indemnification, this contract shall be
deemed amended to incorporate such broader indemnification.

                  4.2 Derivative Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he is or was an agent of the Company, or by reason of anything done or not
done by him in any such capacity, the Company shall indemnify the Indemnitee
against any amounts paid in settlement of any such proceeding and all expenses
actually and reasonably incurred by him in connection with the investigation,
defense, settlement or appeal of such proceeding if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the Company; provided, however, that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been finally adjudged to be liable to the Company by a
court of competent jurisdiction due to willful misconduct of a culpable nature
in the performance of his duty to the Company, unless and only to the extent
that the Court of Chancery or the court in which such proceeding was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such amounts which the Court of Chancery or
such other court shall deem proper. Notwithstanding the preceding, it is the
intention of the parties hereto that Indemnitee shall be indemnified to the full
extent authorized or permitted by Delaware Law and, therefore, to the extent
Delaware Law shall permit broader contractual indemnification, this contract
shall be deemed amended to incorporate such broader indemnification.

                  4.3 Exception for Amounts Covered by Insurance.
Notwithstanding the foregoing, the Company shall not be obligated to indemnify
the Indemnitee for expenses or liabilities of any type whatsoever, including,
but not limited to, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement, to the extent such have been paid directly to the
Indemnitee by Director and Officer Insurance.

         5. PARTIAL INDEMNIFICATION AND CONTRIBUTION.

                  5.1 Partial Indemnification. If the Indemnitee is entitled
under any provision of this Agreement to indemnification by the Company for some
or a portion of any expenses or liabilities of any type whatsoever (including,
but not limited to, judgments, fines, ERISA excise taxes or penalties and
amounts paid in settlement) incurred by him in the investigation, defense,
settlement or appeal of a proceeding but is not entitled, however, to
indemnification for all of the total amount thereof, then the Company shall
nevertheless indemnify the Indemnitee for such total amount except as to the
portion thereof to which the Indemnitee is not entitled to indemnification.

                  5.2 Contribution. If the Indemnitee is not entitled to the
indemnification provided in Section 4 for any reason other than the statutory
limitations set forth in the Delaware Law, then in respect of any threatened,
pending or completed proceeding in which the Company

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is jointly liable with the Indemnitee, or would be if joined in such proceeding,
the Company shall contribute to the amount of expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and reasonably
incurred and paid or payable by the Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and the Indemnitee on the other hand from the transaction from which
such proceeding arose and (ii) the relative fault of the Company on the one hand
and of the Indemnitee on the other hand in connection with the events which
resulted in such expenses, judgments, fines or settlement amounts, as well as
any other relevant equitable considerations. The relative fault of the Company
on the one hand and of the Indemnitee on the other hand shall be determined by
reference to, among other things, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent the circumstances
resulting in such expenses, judgments, fines or settlement amounts. The Company
agrees that it would not be just and equitable if contribution pursuant to this
Section 5 were determined by pro rata allocation or any other method of
allocation which does not take account of the foregoing equitable
considerations.

         6. MANDATORY ADVANCEMENT OF EXPENSES.

                  6.1 Advancement. Subject to Section 9 below, the Company shall
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. The Indemnitee hereby undertakes
to promptly repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company under the provisions of this Agreement, the
Certificate of Incorporation or Bylaws of the Company, the Delaware Law or
otherwise. The advances to be made hereunder shall be paid by the Company to the
Indemnitee within thirty (30) days following delivery of a written request
therefor by the Indemnitee to the Company.

                  6.2 Exception. Notwithstanding the foregoing provisions of
this Section 6, the Company shall not be obligated to advance any expenses to
the Indemnitee arising from a lawsuit filed directly by the Company against the
Indemnitee if an absolute majority of the members of the Board reasonably
determines in good faith, within thirty (30) days of the Indemnitee's request to
be advanced expenses, that the facts known to them at the time such
determination is made demonstrate clearly and convincingly that the Indemnitee
acted in bad faith. If such a determination is made, the Indemnitee may have
such decision reviewed by another forum, in the manner set forth in Sections
8.3, 8.4 and 8.5 hereof, with all references therein to "indemnification" being
deemed to refer to "advancement of expenses," and the burden of proof shall be
on the Company to demonstrate clearly and convincingly that, based on the facts
known at the time, the Indemnitee acted in bad faith. The Company may not avail
itself of this Section 6.2 as to a given lawsuit if, at any time after the
occurrence of the activities or omissions that are the primary focus of the
lawsuit, the Company has undergone a change in control. For this purpose, a
change in control shall mean a given person or group of affiliated persons or
groups increasing their beneficial ownership interest in the Company by at least
twenty (20) percentage points without advance approval by the Board of
Directors.

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         7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.

                  7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.

                  7.2 If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7.1 hereof, the Company has
Director and Officer Insurance in effect, the Company shall give prompt notice
of the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such D&O Insurance policies.

                  7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, which approval shall not be unreasonably withheld,
upon the delivery to the Indemnitee of written notice of its election to do so.
After delivery of such notice, approval of such counsel by the Indemnitee and
the retention of such counsel by the Company, the Company will not be liable to
the Indemnitee under this Agreement for any fees of counsel subsequently
incurred by the Indemnitee with respect to the same proceeding, provided,
however, that: (a) the Indemnitee shall have the right to employ his own counsel
in any such proceeding at the Indemnitee's expense; (b) the Indemnitee shall
have the right to employ his own counsel in connection with any such proceeding,
at the expense of the Company, if such counsel serves in a review, observer,
advice and counseling capacity and does not otherwise materially control or
participate in the defense of such proceeding; and (c) if (i) the employment of
counsel by the Indemnitee has been previously authorized by the Company, (ii)
the Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and the Indemnitee in the conduct of any such
defense or (iii) the Company shall not, in fact, have employed counsel to assume
the defense of such proceeding, then the fees and expenses of the Indemnitee's
counsel shall be at the expense of the Company.

         8. DETERMINATION OF RIGHT TO INDEMNIFICATION.

                  8.1 To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in Section 4.1 or
4.2 of this Agreement or in the defense of any claim, issue or matter described
therein, the Company shall indemnify the Indemnitee against expenses actually
and reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding, or such claim, issue or matter, as the case may be.

                  8.2 In the event that Section 8.1 is inapplicable, or does not
apply to the entire proceeding, the Company shall nonetheless indemnify the
Indemnitee unless the Company shall prove by clear and convincing evidence to a
forum listed in Section 8.3 below that the Indemnitee has not met the applicable
standard of conduct required to entitle the Indemnitee to such indemnification.

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                  8.3 The Indemnitee shall be entitled to select the forum in
which the validity of the claim under Section 8.2 hereof that the Indemnitee is
not entitled to indemnification will be heard from among the following,
provided, however, that the Indemnitee can select a forum consisting of the
stockholders of the Company only with the approval of the Company: (a) a quorum
of the Board of Directors consisting of directors who are not parties to the
proceeding for which indemnification is being sought; (b) the stockholders of
the Company; (c) independent legal counsel mutually agreed upon by the
Indemnitee and the Board of Directors, which counsel shall make such
determination in a written opinion; (d) a panel of three arbitrators, one of
whom is selected by the Company, another of whom is selected by the Indemnitee
and the last of whom is selected by the first two arbitrators so selected; or
(e) the Court of Chancery of Delaware or other court having jurisdiction of
subject matter and the parties.

                  8.4 As soon as practicable, and in no event later than thirty
(30) days after the forum has been selected pursuant to Section 8.3 above, the
Company shall, at its own expense, submit to the selected forum its claim that
the Indemnitee is not entitled to indemnification, and the Company shall act in
the utmost good faith to assure the Indemnitee a complete opportunity to defend
against such claim.

                  8.5 If the forum selected in accordance with Section 8.3
hereof is not a court, then after the final decision of such forum is rendered,
the Company or the Indemnitee shall have the right to apply to the Court of
Chancery of Delaware, the court in which the proceeding giving rise to the claim
for indemnification by the Indemnitee is or was pending or any other court of
competent jurisdiction, for the purpose of appealing the decision of such forum,
provided, however, that such right is executed within sixty (60) days after the
final decision of such forum is rendered. If the forum selected in accordance
with Section 8.3 hereof is a court, then the rights of the Company or the
Indemnitee to appeal any decision of such court shall be governed by the
applicable laws and rules governing appeals of the decision of such court.

                  8.6 Notwithstanding any other provision in this Agreement to
the contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement, unless a court of competent jurisdiction finds
that each of the material claims and/or defenses of the Indemnitee in any such
proceeding was frivolous or not made in good faith.

         9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

                  9.1 Claims Initiated by Indemnitee. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense, other than with
respect to proceedings specifically authorized by the Board of Directors or
brought to establish or enforce a right to indemnification and/or advancement of
expenses arising under this Agreement, the charter documents of the Company or
any subsidiary or any statute or law or otherwise, but such indemnification or

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advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate; or

                  9.2 Unauthorized Settlements. To indemnify the Indemnitee
hereunder for any amounts paid in settlement of a proceeding unless the Company
consents in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or

                  9.3 Securities Law Actions. To indemnify the Indemnitee on
account of any suit in which judgment is rendered against the Indemnitee for an
accounting of profits made from the purchase or sale by the Indemnitee of
securities of the Company pursuant to the provisions of Section l6(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or

                  9.4 Unlawful Indemnification. To indemnify the Indemnitee if a
final decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful. In this respect, the Company and the
Indemnitee have been advised that the Securities and Exchange Commission takes
the position that indemnification for liabilities arising under the federal
securities laws is against public policy and, therefore, is unenforceable and
that claims for indemnification should be submitted to appropriate courts for
adjudication.

         10. NON-EXCLUSIVITY. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Certificate of Incorporation or Bylaws of the Company, the vote of the
stockholders or disinterested directors of the Company, other agreements or
otherwise, both as to action in the official capacity of the Indemnitee and to
action in another capacity while occupying his position as an agent of the
Company, and the rights of the Indemnitee hereunder shall continue after the
Indemnitee has ceased acting as an agent of the Company and shall inure to the
benefit of the heirs, executors and administrators of the Indemnitee.

         11. GENERAL PROVISIONS.

                  11.1 Interpretation of Agreement. It is understood that the
parties hereto intend this Agreement to be interpreted and enforced so as to
provide indemnification and advancement of expenses to the Indemnitee to the
fullest extent now or hereafter permitted by law, except as expressly limited
herein.

                  11.2 Severability. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever, then: (a) the validity, legality and enforceability of the remaining
provisions of this Agreement, including, without limitation, all portions of any
paragraphs of this Agreement containing any such provision held to be invalid,
illegal or unenforceable that are not themselves invalid, illegal or
unenforceable, shall not in any way be affected or impaired thereby; and (b) to
the fullest extent possible, the provisions of this Agreement, including,
without limitation, all portions of any paragraphs of this Agreement containing
any such provision held to be invalid, illegal or unenforceable that are not
themselves invalid, illegal or unenforceable, shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable and to give effect to Section 11.1 hereof.

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                  11.3 Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof,
whether or not similar, nor shall such waiver constitute a continuing waiver.

                  11.4 Subrogation. In the event of full payment under this
Agreement, the Company shall be subrogated to the extent of such payment to all
of the rights of recovery of the Indemnitee, who shall execute all documents
required and shall do all acts that may be necessary or desirable to secure such
rights and to enable the Company effectively to bring suit to enforce such
rights.

                  11.5 Counterparts. This Agreement may be executed in one or
more counterparts, which shall together constitute one agreement.

                  11.6 Successors and Assigns. The terms of this Agreement shall
bind, and shall inure to the benefit of, the successors and assigns of the
parties hereto.

                  11.7 Notice. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (a) if delivered by hand and signed for by the party addressee or (b) if
mailed by certified or registered mail, with postage prepaid, on the third
business day after the mailing date. The addresses for notice to either party
are as shown on the signature page of this Agreement or as subsequently modified
by written notice.

                  11.8 Governing Law. This Agreement shall be governed
exclusively by and construed according to the laws of the State of California,
as applied to contracts between California residents entered into and to be
performed entirely within California.

                  11.9 Consent to Jurisdiction. The Company and the Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the State
of California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.

                  11.10 Attorneys' Fees. In the event Indemnitee is required to
bring any action to enforce rights under this Agreement, including, without
limitation, the expenses of any proceeding described in Section 3, the
Indemnitee shall be entitled to all reasonable fees and expenses in bringing and
pursuing such action, unless a court of competent jurisdiction finds each of the
material claims of the Indemnitee in any such action was frivolous and not made
in good faith.

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         IN WITNESS WHEREOF, the parties hereto have entered into this Indemnity
Agreement effective as of the date first written above.

<TABLE>
<CAPTION>

<S>                                                     <C>
HANDSPRING, INC.                                        INDEMNITEE:

By:
   --------------------------------------------         --------------------------------------------
Name: Donna L. Dubinsky

Title: President and Chief Executive Officer

Address: 189 Bernardo Avenue                            Address:
        ---------------------------------------                 ------------------------------------
Mountain View, California 94043
-----------------------------------------------         --------------------------------------------
</TABLE>

                                       9<PAGE>   1
                                                                    EXHIBIT 10.2

                                HANDSPRING, INC.

                           1998 EQUITY INCENTIVE PLAN

                        AS ADOPTED ON OCTOBER 8, 1998 AND

                          AS AMENDED ON AUGUST 4, 1999

         1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options and Restricted Stock. Capitalized
terms not defined in the text are defined in Section 22 hereof. This Plan is
intended to be a written compensatory benefit plan within the meaning of Rule
701 promulgated under the Securities Act.

         2. SHARES SUBJECT TO THE PLAN.

                  2.1 Number of Shares Available. Subject to Sections 2.2 and 17
hereof, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 5,846,154 Shares or such lesser number of Shares
as permitted under Section 260.140.45 of Title 10 of the California Code of
Regulations. Subject to Sections 2.2 and 17 hereof, Shares previously granted
will again be available for grant and issuance in connection with future Awards
under this Plan that: (i) are subject to issuance upon exercise of an Option but
cease to be subject to such Option for any reason other than exercise of such
Option or (ii) are subject to a Restricted Stock Award that otherwise terminates
without Shares being issued. At all times the Company will reserve and keep
available a sufficient number of Shares as will be required to satisfy the
requirements of all Awards granted and outstanding under this Plan.

                  2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (i) the number of Shares reserved for issuance under
this Plan, (ii) the Exercise Prices of and number of Shares subject to
outstanding Options and (iii) the Purchase Prices of and number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the shareholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be paid in cash at the Fair Market
Value of such fraction of a Share or will be rounded down to the nearest whole
Share, as determined by the Committee.

         3. ELIGIBILITY. ISOs (as defined in Section 5 hereof) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in
Section 5 hereof) and Restricted Stock Awards may be granted to employees,
officers, directors and consultants of the Company or any Parent or Subsidiary
of the Company; provided such consultants render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under this Plan.

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         4. ADMINISTRATION.

                  4.1 Committee Authority. This Plan will be administered by the
Committee or the Board if no Committee is created by the Board. Subject to the
general purposes, terms and conditions of this Plan, and to the direction of the
Board, the Committee will have full power to implement and carry out this Plan.
Without limitation, the Committee will have the authority to:

                  (a)      construe and interpret this Plan, any Award Agreement
                           and any other agreement or document executed pursuant
                           to this Plan;

                  (b)      prescribe, amend and rescind rules and regulations
                           relating to this Plan;

                  (c)      approve persons to receive Awards;

                  (d)      determine the form and terms of Awards;

                  (e)      determine the number of Shares or other consideration
                           subject to Awards;

                  (f)      determine whether Awards will be granted singly, in
                           combination with, in tandem with, in replacement of,
                           or as alternatives to, other Awards under this Plan
                           or awards under any other incentive or compensation
                           plan of the Company or any Parent or Subsidiary of
                           the Company;

                  (g)      grant waivers of any conditions of this Plan or any
                           Award;

                  (h)      determine the terms of vesting, exercisability and
                           payment of Awards;

                  (i)      correct any defect, supply any omission, or reconcile
                           any inconsistency in this Plan, any Award, any Award
                           Agreement, any Exercise Agreement or any Restricted
                           Stock Purchase Agreement;

                  (j)      determine whether an Award has been earned; and

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

                  4.2 Committee Discretion. Unless in contravention of any
express terms of this Plan or Award, any determination made by the Committee
with respect to any Award will be made in its sole discretion either (i) at the
time of grant of the Award, or (ii) subject to Section 5.9 hereof, at any later
time. Any such determination will be final and binding on the Company and on all
persons having an interest in any Award under this Plan. The Committee may
delegate to one or more officers of the Company the authority to grant an Award
under this Plan, provided such officer or officers are members of the Board.

         5. OPTIONS. The Committee may grant Options to eligible persons
described in Section 3 hereof and will determine whether such Options will be
Incentive Stock Options within the meaning of the Code ("ISOS") or Nonqualified
Stock Options ("NQSOS"), the number of Shares subject to the Option, the
Exercise Price of the Option, the period during which the Option may be
exercised, and all other terms and conditions of the Option, subject to the
following:

                                       2
<PAGE>   3

                  5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Award Agreement which will expressly identify the Option
as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.

                  5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
a later date is otherwise specified by the Committee. The Stock Option Agreement
and a copy of this Plan will be delivered to the Participant within a reasonable
time after the granting of the Option.

                  5.3 Exercise Period. Options may be exercisable immediately
but subject to repurchase pursuant to Section 11 hereof or may be exercisable
within the times or upon the events determined by the Committee as set forth in
the Stock Option Agreement governing such Option; provided, however, that no
Option will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and provided further that no ISO granted to a person who
directly or by attribution owns more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of any Parent or
Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will be exercisable after
the expiration of five (5) years from the date the ISO is granted. The Committee
also may provide for Options to become exercisable at one time or from time to
time, periodically or otherwise, in such number of Shares or percentage of
Shares as the Committee determines. Subject to earlier termination of the Option
as provided herein, each Participant who is not an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company shall have
the right to exercise an Option granted hereunder at the rate of no less than
twenty percent (20%) per year over five (5) years from the date such Option is
granted.

                  5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
eighty-five percent (85%) of the Fair Market Value of the Shares on the date of
grant; provided that (i) the Exercise Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares on the date of
grant and (ii) the Exercise Price of any Option granted to a Ten Percent
Shareholder will not be less than one hundred ten percent (110%) of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 hereof.

                  5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant). The Exercise Agreement will state (i) the number of
Shares being purchased, (ii) the restrictions imposed on the Shares purchased
under such Exercise Agreement, if any, and (iii) such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws. Participant shall execute and deliver to
the Company the Exercise Agreement together with payment in full of the Exercise
Price, and any applicable taxes, for the number of Shares being purchased.

                                       3
<PAGE>   4

                  5.6 Termination. Subject to earlier termination pursuant to
Sections 17 and 18 hereof and notwithstanding the exercise periods set forth in
the Stock Option Agreement, exercise of an Option will always be subject to the
following:

                  (a)      If the Participant is Terminated for any reason other
                           than death, Disability or for Cause, then the
                           Participant may exercise such Participant's Options
                           only to the extent that such Options are exercisable
                           upon the Termination Date. Such Options must be
                           exercised by the Participant, if at all, as to all or
                           some of the Vested Shares calculated as of the
                           Termination Date, within three (3) months after the
                           Termination Date (or within such shorter time period,
                           not less than thirty (30) days, or within such longer
                           time period, not exceeding five (5) years, after the
                           Termination Date as may be determined by the
                           Committee, with any exercise beyond three (3) months
                           after the Termination Date deemed to be an NQSO) but
                           in any event, no later than the expiration date of
                           the Options.

                  (b)      If the Participant is Terminated because of
                           Participant's death or Disability (or the Participant
                           dies within three (3) months after a Termination
                           other than for Cause), then Participant's Options may
                           be exercised only to the extent that such Options are
                           exercisable by Participant on the Termination Date.
                           Such options must be exercised by Participant (or
                           Participant's legal representative or authorized
                           assignee), if at all, as to all or some of the Vested
                           Shares calculated as of the Termination Date, within
                           twelve (12) months after the Termination Date (or
                           within such shorter time period, not less than six
                           (6) months, or within such longer time period, not
                           exceeding five (5) years, after the Termination Date
                           as may be determined by the Committee, with any
                           exercise beyond (i) three (3) months after the
                           Termination Date when the Termination is for any
                           reason other than the Participant's death or
                           disability, within the meaning of Section 22(e)(3) of
                           the Code, or (ii) twelve (12) months after the
                           Termination Date when the Termination is for
                           Participant's disability, within the meaning of
                           Section 22(e)(3) of the Code, deemed to be an NQSO)
                           but in any event no later than the expiration date of
                           the Options.

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

                  5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.

                  5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed One Hundred Thousand
Dollars ($100,000). If the Fair Market Value of Shares on the date of grant with
respect to which ISOs are exercisable for the first time by a Participant during
any calendar year

                                       4
<PAGE>   5

exceeds One Hundred Thousand Dollars ($100,000), then the Options for the first
One Hundred Thousand Dollars ($100,000) worth of Shares to become exercisable in
such calendar year will be ISOs and the Options for the amount in excess of One
Hundred Thousand Dollars ($100,000) that become exercisable in that calendar
year will be NQSOs. In the event that the Code or the regulations promulgated
thereunder are amended after the Effective Date (as defined in Section 18
hereof) to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, then such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.

                  5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. Subject to Section 5.10 hereof, the Committee may
reduce the Exercise Price of outstanding Options without the consent of
Participants by a written notice to them; provided, however, that the Exercise
Price may not be reduced below the minimum Exercise Price that would be
permitted under Section 5.4 hereof for Options granted on the date the action is
taken to reduce the Exercise Price.

                  5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISOs will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant, to disqualify any Participant's ISO
under Section 422 of the Code.

         6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares that are subject to certain
specified restrictions. The Committee will determine to whom an offer will be
made, the number of Shares the person may purchase, the Purchase Price, the
restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:

                  6.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan will be evidenced by an Award
Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form
(which need not be the same for each Participant) as the Committee will from
time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The Restricted Stock Award will be accepted by the
Participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the Shares to the Company within thirty (30) days from the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the Shares to the Company within such thirty (30)
days, then the offer will terminate, unless otherwise determined by the
Committee.

                  6.2 Purchase Price. The Purchase Price of Shares sold pursuant
to a Restricted Stock Award will be determined by the Committee and will be at
least eighty-five percent (85%) of the Fair Market Value of the Shares on the
date the Restricted Stock Award is granted or at the time the purchase is
consummated, except in the case of a sale to a Ten Percent Shareholder, in which
case the Purchase Price will be one hundred percent (100%) of the Fair Market
Value on

                                       5
<PAGE>   6

the date the Restricted Stock Award is granted or at the time the purchase is
consummated. Payment of the Purchase Price must be made in accordance with
Section 7 hereof.

                  6.3 Restrictions. Restricted Stock Awards may be subject to
the restrictions set forth in Section 11 hereof or such other restrictions not
inconsistent with Section 25102(o) of the California Corporations Code.

         7. PAYMENT FOR SHARE PURCHASES.

                  7.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:

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

                  (b)      by surrender of shares that: (i) either (A) have been
                           owned by Participant for more than six (6) months and
                           have been paid for within the meaning of SEC Rule 144
                           (and, if such shares were purchased from the Company
                           by use of a promissory note, such note has been fully
                           paid with respect to such shares) or (B) were
                           obtained by Participant in the public market and (ii)
                           are clear of all liens, claims, encumbrances or
                           security interests;

                  (c)      by tender of a full recourse promissory note having
                           such terms as may be approved by the Committee and
                           bearing interest at a rate sufficient to avoid
                           imputation of income under Sections 483 and 1274 of
                           the Code; provided, however, that Participants who
                           are not employees or directors of the Company will
                           not be entitled to purchase Shares with a promissory
                           note unless the note is adequately secured by
                           collateral other than the Shares;

                  (d)      by waiver of compensation due or accrued to the
                           Participant from the Company for services rendered;

                  (e)      with respect only to purchases upon exercise of an
                           Option, and provided that a public market for the
                           Company's stock exists:

                           (i)      through a "same day sale" commitment from
                                    the Participant and a broker-dealer that is
                                    a member of the National Association of
                                    Securities Dealers (an "NASD DEALER")
                                    whereby the Participant irrevocably elects
                                    to exercise the Option and to sell a portion
                                    of the Shares so purchased sufficient to pay
                                    the total Exercise Price, and whereby the
                                    NASD Dealer irrevocably commits upon receipt
                                    of such Shares to forward the total Exercise
                                    Price directly to the Company; or

                           (ii)     through a "margin" commitment from the
                                    Participant and an NASD Dealer whereby the
                                    Participant irrevocably elects to exercise
                                    the Option and to pledge the Shares so
                                    purchased to the NASD Dealer in a margin
                                    account as security for a loan from the NASD
                                    Dealer in the amount of the total Exercise
                                    Price, and whereby the NASD Dealer
                                    irrevocably commits upon receipt of

                                       6
<PAGE>   7

                                    such Shares to forward the total Exercise
                                    Price directly to the Company; or

                  (f) by any combination of the foregoing.

                  7.2 Loan Guarantees. The Committee may, in its sole
discretion, elect to assist the Participant in paying for Shares purchased under
this Plan by authorizing a guarantee by the Company of a third-party loan to the
Participant.

         8. WITHHOLDING TAXES.

                  8.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash by the Company, such payment
will be net of an amount sufficient to satisfy federal, state, and local
withholding tax requirements.

                  8.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Award that is subject to tax withholding and the Participant is obligated to
pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.

         9. PRIVILEGES OF STOCK OWNERSHIP.

                  9.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock. The Participant will have no right to retain such stock
dividends or stock distributions with respect to Unvested Shares that are
repurchased pursuant to Section 11 hereof. The Company will comply with Section
260.140.1 of Title 10 of the California Code of Regulations with respect to the
voting rights of Common Stock.

                  9.2 Financial Statements. The Company will provide financial
statements to each Participant annually during the period such Participant has
Awards outstanding, or as otherwise required under Section 260.140.46 of Title
10 of the California Code of Regulations. Notwithstanding the foregoing, the
Company will not be required to provide such financial statements to
Participants when issuance is limited to key employees whose services in
connection with the Company assure them access to equivalent information.

                                       7
<PAGE>   8

         10. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, other than by
will or by the laws of descent and distribution, and may not be made subject to
execution, attachment or similar process. During the lifetime of the Participant
an Award will be exercisable only by the Participant or Participant's legal
representative and any elections with respect to an Award may be made only by
the Participant or Participant's legal representative.

         11.      RESTRICTIONS ON SHARES.

                  11.1 Right of First Refusal. At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the Award
Agreement a right of first refusal to purchase all Shares that a Participant (or
a subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
provided that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the Securities Act.

                  11.2 Right of Repurchase. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Award Agreement
a right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness owed to the Company by the
Participant following such Participant's Termination at any time within the
later of ninety (90) days after the Participant's Termination Date and the date
the Participant purchases Shares under the Plan at the Participant's Exercise
Price or Purchase Price, as the case may be, provided that, unless the
Participant is an officer, director or consultant of the Company or of a Parent
or Subsidiary of the Company, such right of repurchase lapses at the rate of no
less than twenty percent (20%) per year over five (5) years from: (a) the date
of grant of the Option or (b) in the case of Restricted Stock, the date the
Participant purchases the Shares.

         12. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.

         13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares set forth in Section 11 hereof, the Committee may require
the Participant to deposit all certificates representing Shares, together with
stock powers or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated by the
Company to hold in escrow until such restrictions have lapsed or terminated. The
Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates. Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Plan will be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant's obligation to the Company under the promissory note; provided,
however, that the Committee may require or accept other or additional forms of
collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be

                                       8
<PAGE>   9

required to execute and deliver a written pledge agreement in such form as the
Committee will from time to time approve.

         14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.

         15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Award will not be effective
unless such Award is in compliance with all applicable federal and state
securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to (i) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (ii) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.

         16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.

         17. CORPORATE TRANSACTIONS.

                  17.1 Assumption or Replacement of Awards by Successor or
Acquiring Corporation. In the event of (i) a dissolution or liquidation of the
Company, (ii) a merger or consolidation in which the Company is not the
surviving corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company or their relative stock holdings and the Awards granted under this
Plan are assumed, converted or replaced by the successor or acquiring
corporation, which assumption, conversion or replacement will be binding on all
Participants), (iii) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder which merges with the Company in such merger, or
which

                                       9
<PAGE>   10

owns or controls another corporation which merges with the Company in such
merger) cease to own their shares or other equity interests in the Company, or
(iv) the sale of all or substantially all of the assets of the Company, any or
all outstanding Awards may be assumed, converted or replaced by the successor or
acquiring corporation (if any), which assumption, conversion or replacement will
be binding on all Participants. In the alternative, the successor or acquiring
corporation may substitute equivalent Awards or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Awards). The successor or acquiring
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions and other provisions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Section 17.1. In the event such
successor or acquiring corporation (if any) does not assume or substitute
Awards, as provided above, pursuant to a transaction described in this Section
17.1, then notwithstanding any other provision in this Plan to the contrary, the
vesting of such Awards will accelerate and the Options will become exercisable
in full prior to the consummation of such event at such times and on such
conditions as the Committee determines, and if such Options are not exercised
prior to the consummation of the corporate transaction, they shall terminate in
accordance with the provisions of this Plan.

                  17.2 Other Treatment of Awards. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 17, in
the event of the occurrence of any transaction described in Section 17.1 hereof,
any outstanding Awards will be treated as provided in the applicable agreement
or plan of merger, consolidation, dissolution, liquidation or sale of assets.

                  17.3 Assumption of Awards by the Company. The Company, from
time to time, also may substitute or assume outstanding awards granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (i) granting an Award under this Plan in substitution of
such other company's award or (ii) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.

         18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Awards pursuant to this Plan; provided, however, that: (i) no Option
may be exercised prior to initial shareholder approval of this Plan; (ii) no
Option granted pursuant to an increase in the number of Shares approved by the
Board shall be exercised prior to the time such increase has been approved by
the shareholders of the Company;

                                       10
<PAGE>   11

(iii) in the event that initial shareholder approval is not obtained within the
time period provided herein, all Awards granted hereunder shall be canceled, any
Shares issued pursuant to any Award shall be canceled and any purchase of Shares
issued hereunder shall be rescinded; and (iv) Awards granted pursuant to an
increase in the number of Shares approved by the Board which increase is not
timely approved by shareholders shall be canceled, any Shares issued pursuant to
any such Awards shall be canceled, and any purchase of Shares subject to any
such Award shall be rescinded.

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

         20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9 hereof,
the Board may at any time terminate or amend this Plan in any respect, including
without limitation amendment of any form of Award Agreement or instrument to be
executed pursuant to this Plan; provided, however, that the Board will not,
without the approval of the shareholders of the Company, amend this Plan in any
manner that requires such shareholder approval pursuant to Section 25102(o) of
the California Corporations Code or the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans.

         21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.

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

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

                  "AWARD AGREEMENT" means, with respect to each Award, the
signed written agreement between the Company and the Participant setting forth
the terms and conditions of the Award, including the Stock Option Agreement and
Restricted Stock Agreement.

                  "BOARD" means the Board of Directors of the Company.

                  "CAUSE" means Termination because of (i) any willful, material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, officer, director or
consultant to the Company or a Parent or Subsidiary of the Company, including
without

                                       11
<PAGE>   12

limitation, the willful and continued failure or refusal of the Participant to
perform the material duties required of such Participant as an employee,
officer, director or consultant of the Company or a Parent or Subsidiary of the
Company, other than as a result of having a Disability, or a breach of any
applicable invention assignment and confidentiality agreement or similar
agreement between the Company or a Parent or Subsidiary of the Company and the
Participant, (iv) Participant's disregard of the policies of the Company or any
Parent or Subsidiary of the Company so as to cause loss, damage or injury to the
property, reputation or employees of the Company or a Parent or Subsidiary of
the Company, or (v) any other misconduct by the Participant which is materially
injurious to the financial condition or business reputation of, or is otherwise
materially injurious to, the Company or a Parent or Subsidiary of the Company.

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

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

                  "COMPANY" means Handspring, Inc. or any successor corporation.

                  "DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.

                  "EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.

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

                  (a)      if such Common Stock is then quoted on the Nasdaq
                           National Market, its closing price on the Nasdaq
                           National Market on the 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;

                  (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 by
                           The Wall Street Journal (or, if not so reported, as
                           otherwise reported by any newspaper or other source
                           as the Board may determine); or

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

                  "OPTION" means an award of an option to purchase Shares
pursuant to Section 5 hereof.

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

                                       12
<PAGE>   13

owns stock representing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

                  "PARTICIPANT" means a person who receives an Award under this
Plan.

                  "PLAN" means this Handspring, Inc. 1998 Equity Incentive Plan,
as amended from time to time.

                  "PURCHASE PRICE" means the price at which a Participant may
purchase Restricted Stock.

                  "RESTRICTED STOCK" means Shares purchased pursuant to a
Restricted Stock Award.

                  "RESTRICTED STOCK AWARD" means an award of Shares pursuant to
Section 6 hereof.

                  "SEC" means the Securities and Exchange Commission.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended.

                  "SHARES" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 17 hereof,
and any successor security.

                  "SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
representing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.

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

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

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

                                       13

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