2001 Stock Plan - Microsoft Corp.


                             MICROSOFT CORPORATION

                                2001 STOCK PLAN


     1.   Purpose of the Plan.  The purposes of this Stock Plan are to attract
and retain the best available individuals for positions of substantial
responsibility, to provide additional incentive to such individuals, and to
promote the success of the Company's business by aligning the financial
interests of Employees and Consultants providing personal services to the
Company or to any Parent or Subsidiary of the Company with long-term shareholder
value.

          Awards granted hereunder may be Incentive Stock Options, Nonqualified
Stock Options, Stock Awards, or SARs, at the discretion of the Board and as
reflected in the terms of the Award Agreement.

     2.   Definitions.  As used herein, the following definitions shall apply:

          (a)  "Award" shall mean any award or benefits granted under the Plan,
including Options, Stock Awards, and SARs.

          (b)  "Award Agreement" shall mean a written or electronic agreement
between the Company and the Awardee setting forth the terms of the Award.

          (c)  "Awardee" shall mean the holder of an outstanding Award.

          (d)  "Board" shall mean (i) the Board of Directors of the Company or
(ii) both the Board and the Committee, if a Committee has been appointed in
accordance with Section 4(a) of the Plan.

          (e)  "Code" shall mean the Internal Revenue Code of 1986, as amended.

          (f)  "Committee" shall mean the Compensation Committee appointed by
the Board of Directors in accordance with Section 4(a) of the Plan, if one is
appointed; provided, however, if the Board of Directors appoints more than one
Committee pursuant to Section 4(a), then "Committee" shall refer to the
appropriate Committee, as indicated by the context of the reference.

          (g)  "Common Shares" shall mean the common shares of Microsoft
Corporation.

          (h)  "Company" shall mean Microsoft Corporation, a Washington
corporation and any successor thereto.

          (i)  "Consultant" shall mean any person, except an Employee, engaged
by the Company or any Parent or Subsidiary of the Company, to render personal
services to such entity, including as an advisor.

          (j)  "Continuous Status as a Participant" shall mean (1) for
Employees, the absence of any interruption or termination of service as an
Employee, and (2) for Consultants, the absence of any interruption, expiration,
or termination of such person's consulting or advisory relationship with the
Company or the occurrence of any termination event as set forth in such person's
Award Agreement. Continuous Status as a Participant shall not be considered
interrupted (i) for an Employee in the case of sick leave, maternity leave,
infant care leave, medical emergency leave, military leave, or any other leave
of absence authorized in writing by a Vice President of the Company prior to its
commencement, and (ii) for a Consultant, in the case of any temporary
interruption in such person's availability to provide services to the Company
which has been authorized in writing by a Vice President of the Company prior to
its commencement.

          (k)  "Conversion Options" shall mean the Options described in Section
6(c) of the Plan.

 
          (l)  "Employee" shall mean any person, including an officer, who is a
common law employee of, receives remuneration for personal services to, is
reflected on the official human resources database as an employee of, and is on
the payroll of the Company or any Parent or Subsidiary of the Company. A person
is on the payroll if he or she is paid from the payroll department of the
Company, or any Parent or Subsidiary of the Company. Persons providing services
to the Company, or to any Parent or Subsidiary of the Company, pursuant to an
agreement with a staff leasing organization, temporary workers engaged through
or employed by temporary or leasing agencies, and workers who hold themselves
out to the Company, Parent, or Subsidiary to which they are providing services
as being independent contractors, or as being employed by or engaged through
another company while providing the services are not Employees for purposes of
this Plan, whether or not such persons are, or may be reclassified by the
courts, the Internal Revenue Service, the U. S. Department of Labor, or other
person or entity as, common law employees of the Company, Parent, or Subsidiary,
either solely or jointly with another person or entity.

          (m)  "Effective Date" shall mean January 1, 2001, or such later date
as is determined by the Board.

          (n)  "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

          (o)  "FLSA" shall mean the Fair Labor Standards Act of 1938, as
amended.

          (p)  "Incentive Stock Option" shall mean any Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

          (q)  "Maximum Annual Participant Award" shall have the meaning set
forth in Section 5(b).
 
          (r)  "Nonqualified Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.

          (s)  "Option" shall mean a stock option granted pursuant to Section 6
of the Plan.

          (t)  "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

          (u)  "Participant" shall mean an Employee or Consultant.

          (v)  "Plan" shall mean this 2001 Stock Plan, including any amendments
thereto.

          (w)  "Share" shall mean one Common Share, as adjusted in accordance
with Section 14 of the Plan.

          (x)  "SAR" shall mean a stock appreciation right awarded pursuant to
Section 8 of the Plan.

          (y)  "Stock Award" shall mean a grant of Shares or of a right to
receive Shares or their cash equivalent (or both) pursuant to Section 7 of the
Plan.

          (z)  "Subsidiary" shall mean (i) in the case of an Incentive Stock
Option a "subsidiary corporation," whether now or hereafter existing, as defined
in Section 424(f) of the Code, and (ii) in the case of a Nonqualified Stock
Option, a Stock Award or an SAR, in addition to a subsidiary corporation as
defined in (i), a limited liability company, partnership or other entity in
which the Company controls 50 percent or more of the voting power or equity
interests.

     3.   Shares Subject to the Plan.  Subject to the provisions of Sections 14
and 16 of the Plan, the maximum aggregate number of Shares (increased,
proportionately, in the event of any stock split or stock dividend with respect
to the Shares) which may be awarded and delivered under the Plan shall not
exceed the

 
sum of (a) any Shares available for future awards, as of the Effective Date,
under the Microsoft Corporation 1991 Stock Option Plan, as amended ("1991 Stock
Plan") and (b) any Shares that are represented by awards under the 1991 Stock
Plan which, after the Effective Date, are forfeited, expire, are cancelled
without delivery of Shares, or otherwise result in the return of Shares to the
Company. The Shares may be authorized, but unissued, or reacquired Common
Shares.

          If an Award should expire or become unexercisable for any reason
without having been exercised in full, the undelivered Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future Awards under the Plan.

     4.   Administration of the Plan.

          (a)  Procedure.  The Plan shall be administered by the Board of
Directors of the Company.

               (i)  The Board of Directors may appoint one or more Committees
each consisting of not less than two members of the Board of Directors to
administer the Plan on behalf of the Board of Directors, subject to such terms
and conditions as the Board of Directors may prescribe. Once appointed, such
Committees shall continue to serve until otherwise directed by the Board of
Directors.

               (ii)  From time to time the Board of Directors may increase the
size of the Committee(s) and appoint additional members thereof, remove members
(with or without cause) and appoint new members in substitution therefor, or
fill vacancies however caused.

          (b)  Powers of the Board.  Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, Nonqualified Stock Options, Stock Awards, and SARs; (ii) to determine,
in accordance with Section 11(b) of the Plan, the fair market value of the
Shares; (iii) to determine, in accordance with Section 11(a) of the Plan, the
exercise price per share of Awards to be granted; (iv) to determine the
Participants to whom, and the time or times at which, Awards shall be granted
and the number of Shares to be represented by each Award; (v) to interpret the
Plan; (vi) to prescribe, amend, and rescind rules and regulations relating to
the Plan; including the form of Award Agreement, and manner of acceptance of an
Award, (vii) to determine the terms and provisions of each Award to be granted
(which need not be identical) and, with the consent of the Awardee, modify or
amend each Award; (viii) to authorize conversion or substitution under the Plan
of any or all Conversion Options; (ix) to accelerate or defer (with the consent
of the Awardee) the exercise date of any Option; (x) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Award previously granted by the Board; and (xi) to make all other
determinations deemed necessary or advisable for the administration of the Plan.

          (c)  Effect of Board's Decision.  All decisions, determinations, and
interpretations of the Board shall be final and binding on all Participants and
Awardees.

     5.   Eligibility.

          (a)  Awards may be granted to Participants and to persons to whom
offers of employment as an Employee have been extended; provided that Incentive
Stock Options may only be granted to Employees. For avoidance of doubt,
directors are not eligible to participate in the Plan unless they are Employees
or Consultants.

          (b)  The maximum number of Shares with respect to which an Award or
Awards may be granted to any Participant in any one taxable year of the Company
(the "Maximum Annual Participant Award") shall not exceed 10,000,000 Common
Shares (increased, proportionately, in the event of any stock split or stock
dividend with respect to the Shares). If an Option is in tandem with an SAR,
such that the exercise of the Option or SAR with respect to a Share cancels the
tandem SAR or Option right, respectively, with respect to each Share, the tandem
Option and SAR

 
rights with respect to each Share shall be counted as covering but one Share for
purposes of the Maximum Annual Participant Award.

     6.   Options.

          (a)  Each Option shall be designated in the written or electronic
option agreement as either an Incentive Stock Option or a Nonqualified Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate fair market value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Employee during any calendar year (under all plans of the Company) exceeds
$100,000, such Options shall be treated as Nonqualified Stock Options.

          (b)  For purposes of Section 6(a), Options shall be taken into account
in the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.

          (c)  Options converted or substituted under the Plan for any or all
outstanding stock options and stock appreciation rights held by employees,
consultants, advisors or other option holders granted by entities subsequently
acquired by the Company ("Conversion Options") shall be effective as of the
close of the respective mergers and acquisitions of such entities by the
Company. The Conversion Options may be Incentive Stock Options or Nonqualified
Stock Options, as determined by the Committee; provided, however, that stock
appreciation rights in the acquired entity shall only be converted to or
substituted with Nonqualified Stock Options. The Conversion Options shall be
options to purchase the number of Common Shares determined by multiplying the
number of shares of the acquired entity's common stock underlying each such
stock option or stock appreciation right immediately prior to the closing of
such merger or acquisition by the number specified in the applicable merger or
acquisition agreement for conversion of each share of such entity's common stock
to a Common Share (the "Merger Ratio"). Such Conversion Options shall be
exercisable at an exercise price per Common Share (increased to the nearest
whole cent) equal to the exercise price per share of the acquired entity's
common stock under each such stock option or stock appreciation right
immediately prior to closing divided by the Merger Ratio. No fractional Common
Shares will be issued upon exercise of Conversion Options. In lieu of such
issuance, the Common Shares issued pursuant to each such exercise shall be
rounded to the closest whole Share. All other terms and conditions applicable to
such stock options and stock appreciation rights prior to closing of the
acquisition, including vesting, shall remain unchanged under the Conversion
Options.

     7.   Stock Awards.

          (a)  Stock Awards may be granted either alone, in addition to, or in
tandem with other Awards granted under the Plan. The maximum aggregate number of
Shares underlying all such Stock Awards shall not exceed 25,000,000 Common
Shares (increased, proportionately, in the event of any stock split or stock
dividend with respect to the Shares). Any Stock Award granted to an Employee who
is non-exempt for purposes of the FLSA shall include a vesting period of not
less than six (6) months. After the Committee determines that it will offer a
Stock Award, it will advise the Awardee in writing or electronically, by means
of an Award Agreement, of the terms, conditions and restrictions, including
vesting, if any, related to the offer, including the number of Shares that the
Awardee shall be entitled to receive or purchase, the price to be paid, if any,
and, if applicable, the time within which the Awardee must accept the offer. The
offer shall be accepted by execution of an Award Agreement in the manner
determined by the Committee.

          (b)  Unless the Committee determines otherwise, the Award Agreement
shall provide for the forfeiture of the non-vested Common Shares underlying such
Stock Award upon the Awardee ceasing to be a Participant. To the extent that the
Awardee purchased the Shares granted under such Stock Award and any such Shares
remain non-vested at the time the Awardee ceases to be a Participant, the
cessation of Participant status shall cause an immediate sale of such non-vested
Shares to the Company at the original price per Common Share paid by the
Awardee.

     8.   SARs.

 
          (a)  The Committee shall have the full power and authority,
exercisable in its sole discretion, to grant SARs to selected Awardees. The
Committee is authorized to grant both tandem stock appreciation rights ("Tandem
SARs") and stand-alone stock appreciation rights ("Stand-Alone SARs") as
described below.

          (b)  Tandem SARs.

               (i)  Awardees may be granted a Tandem SAR, exercisable upon such
terms and conditions as the Committee shall establish, to elect between the
exercise of the underlying Section 6 Option for Common Shares or the surrender
of the Option in exchange for a distribution from the Company in an amount equal
to the excess of (A) the fair market value (on the Option surrender date) of the
number of Shares in which the Awardee is at the time vested under the
surrendered Option (or surrendered portion thereof) over (B) the aggregate
exercise price payable for such vested Shares.

               (ii)  No such Option surrender shall be effective unless it is
approved by the Committee, either at the time of the actual Option surrender or
at any earlier time. If the surrender is so approved, then the distributions to
which the Awardee shall become entitled under this Section 8(b) may be made in
Common Shares valued at fair market value on the Option surrender date, in cash,
or partly in Shares and partly in cash, as the Committee shall deem appropriate.

               (iii)  If the surrender of an Option is not approved by the
Committee, then the Awardee shall retain whatever rights he or she had under the
surrendered Option (or surrendered portion thereof) on the Option surrender date
and may exercise such rights at any time prior to the later of (A) five (5)
business days after the receipt of the rejection notice or (B) the last day on
which the Option is otherwise exercisable in accordance with the terms of the
instrument evidencing such Option, but in no event may such rights be exercised
more than ten (10) years after the date of the Option grant.

          (c)  Stand-Alone SARs.

               (i)  An Awardee may be granted a Stand-Alone SAR not tied to any
underlying Option under Section 6 of the Plan. The Stand-Alone SAR shall cover a
specified number of Common Shares and shall be exercisable upon such terms and
conditions as the Committee shall establish. Upon exercise of the Stand-Alone
SAR, the holder shall be entitled to receive a distribution from the Company in
an amount equal to the excess of (A) the aggregate fair market value (on the
exercise date) of the Common Shares underlying the exercised right over (B) the
aggregate base price in effect for those Shares.

               (ii)  The number of Common Shares underlying each Stand-Alone SAR
and the base price in effect for those Shares shall be determined by the
Committee at the time the Stand-Alone SAR is granted. In no event, however, may
the base price per Share be less than the fair market value per underlying
Common Share on the grant date.

               (iii)  The distribution with respect to an exercised Stand-Alone
SAR may be made in Common Shares valued at fair market value on the exercise
date, in cash, or partly in Shares and partly in cash, as the Committee shall
deem appropriate.

          (d)  The Common Shares underlying any SARs exercised under this
Section 8 shall not be available for subsequent issuance under the Plan.

     9.   Term of Plan.  The Plan shall become effective as of the Effective
Date. It shall continue in effect until terminated under Section 17 of the Plan.

     10.  Term of Award.  The term of each Award shall be no more than ten (10)
years from the date of grant. However, in the case of an Incentive Stock Option
granted to a Participant who, at the time the Option is granted, owns Shares
representing more than ten percent (10%) of the voting power of all classes of

 
shares of the Company or any Parent or Subsidiary, the term of the Option shall
be no more than five (5) years from the date of grant.

     11.  Exercise Price and Consideration.

          (a)  The per Share exercise price under each Award shall be such price
as is determined by the Board, subject to the following:

               (i)  In the case of an Incentive Stock Option

                    (A)  granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns shares representing more than ten percent
(10%) of the voting power of all classes of shares of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
fair market value per Share on the date of grant.

                    (B)  granted to any other Employee, the per Share exercise
price shall be no less than 100% of the fair market value per Share on the date
of grant.

               (ii)  Except for Conversion Options under Section 6(c), the per
Share exercise price under a Nonqualified Stock Option or SAR shall be no less
than seventy-five percent (75%) of the fair market value per Share on the date
of grant. Notwithstanding the foregoing (or any other provision of the Plan),
Options and SARs that are granted to Employees who are non-exempt for purposes
of the FLSA, shall satisfy the requirements for exclusion from regular rate of
pay for purposes of the FLSA and shall have an exercise price that is at least
eighty-five percent (85%) of the fair market value of the underlying Shares at
the time of grant; furthermore, such Options or SARs shall not be exercisable
within the six (6) month period immediately following the date of grant, except,
if so provided in the Award Agreement, in the event of the Awardee's death,
disability, or retirement, upon a change in corporate control of the Company, or
under such other circumstances as are permitted under the FLSA or rules and
regulations thereunder.

               (iii)  The maximum aggregate number of Shares underlying all
Nonqualified Stock Options and SARs with a per Share exercise price of less than
fair market value on any grant date that may be granted under this Plan is
25,000,000 Shares (increased, proportionately, in the event of any stock split
or stock dividend with respect to the Shares).

               (iv)  The maximum aggregate number of Shares underlying all Stock
Awards with a per Share price of less than fair market value on any grant date
that may be granted under this Plan is 25,000,000 Shares (increased,
proportionately, in the event of any stock split or stock dividend with respect
to the Shares).

          (b)  The fair market value per Share shall be the closing price per
share of the Common Share on the Nasdaq Stock Market ("Nasdaq") on the date of
grant. If the Shares cease to be listed on Nasdaq, the Board shall designate an
alternative method of determining the fair market value of the Shares.

          (c)  The consideration to be paid for the Shares to be issued upon
exercise of an Award, including the method of payment, shall be determined by
the Board at the time of grant and may consist of cash and/or check. Payment may
also be made by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale proceeds necessary to pay the exercise price. If the Awardee is
an officer of the Company within the meaning of Section 16 of the Exchange Act,
he may, in addition, be allowed to pay all or part of the purchase price with
Shares which, as of the exercise date, the officer has owned for six (6) months
or more. If the Awardee is a participant in the 1998 Microsoft Corporation Stock
Option Gain And Bonus Deferral Program, he may in addition be allowed to pay all
or part of the purchase price of any deferred Option with Shares. Shares used by
officers to pay the exercise price shall be valued at their fair market value on
the exercise date.

          (d)  Prior to issuance of the Shares upon exercise of an Award, the
Awardee shall pay any federal, state, and local income and employment tax

 
withholding obligations applicable to such Award. If an Awardee is an officer of
the Company within the meaning of Section 16 of the Exchange Act, he may elect
to pay such withholding tax obligations by having the Company withhold Shares
having a value equal to the amount required to be withheld. The value of the
Shares to be withheld shall equal the fair market value of the Shares on the day
the Award is exercised. The right of an officer to dispose of Shares to the
Company in satisfaction of withholding tax obligations shall be deemed to be
approved as part of the initial grant of an Award, unless thereafter rescinded,
and shall otherwise be made in compliance with Rule 16b-3 and other applicable
regulations.

     12.  Exercise of Award.

          (a)  Procedure for Exercise; Rights as a Shareholder. Any Award
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board at the time of grant, and as shall be permissible
under the terms of the Plan.

          An Award may not be exercised for a fraction of a Share.

          An Award shall be deemed to be exercised when written or electronic
notice of such exercise has been given to the Company in accordance with the
terms of the Award by the person entitled to exercise the Award and full payment
for the Shares with respect to which the Award is exercised has been received by
the Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 11(c) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the share
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Shares subject to
the Award, notwithstanding the exercise of the Award. The Company shall issue
(or cause to be issued) such share certificate promptly upon exercise of the
Award. In the event that the exercise of an Award is treated in part as the
exercise of an Incentive Stock Option and in part as the exercise of a
Nonqualified Stock Option pursuant to Section 6(a), the Company shall issue a
share certificate evidencing the Shares treated as acquired upon the exercise of
an Incentive Stock Option and a separate share certificate evidencing the Shares
treated as acquired upon the exercise of a Nonqualified Stock Option, and shall
identify each such certificate accordingly in its share transfer records. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the share certificate is issued, except as provided in
Section 14 of the Plan.

          Exercise of an Award in any manner and delivery of the Shares subject
to such Award shall result in a decrease in the number of Shares which
thereafter may be available, both for purposes of the Plan and for sale under
the Award, by the number of Shares as to which the Award is exercised.

          (b)  Termination of Status as a Participant.  In the event of
termination of an Awardee's Continuous Status as a Participant, such Awardee may
exercise his or her rights under any outstanding Awards to the extent
exercisable on the date of termination (but in no event later than the date of
expiration of the term of such Award as set forth in the Award Agreement). To
the extent that the Awardee was not entitled to exercise his or her rights under
such Awards at the date of such termination, or does not exercise such rights
within the time specified in the individual Award Agreements, the Awards shall
terminate.

          (c)  Disability of Awardee.  Notwithstanding the provisions of Section
12(b) above, in the event of termination of an Awardee's Continuous Status as a
Participant as a result of total and permanent disability (i.e., the inability
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
twelve (12) months), the Awardee may exercise the Award, but only to the extent
of the right to exercise that would have accrued had the Awardee remained in
Continuous Status as a Participant for a period of twelve (12) months after the
date on which the Participant ceased

 
performing services as a result of the total and permanent disability. Such
exercise must occur within eighteen (18) months (or such shorter time as is
specified in the grant) from the date on which the Participant ceased performing
services as a result of the total and permanent disability (but in no event
later than the date of expiration of the term of such Award as set forth in the
Award Agreement). To the extent that the Awardee was not entitled to exercise
such Award within the time specified herein, the Award shall terminate.

          (d)  Death of Awardee.  Notwithstanding the provisions of Section
12(b) above, in the event of the death of an Awardee:

               (i)  who is at the time of death a Participant, the Award may be
exercised, at any time within twelve (12) months following the date of death, by
the Awardee's estate or by a person who acquired the right to exercise the Award
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Awardee continued living and remained in Continuous
Status as a Participant twelve (12) months after the date of death; or

               (ii)  whose Award has not yet expired but whose Continuous Status
as a Participant terminated prior to the date of death, the Award may be
exercised, at any time within twelve (12) months following the date of death, by
the Awardee's estate or by a person who acquired the right to exercise the Award
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.

          (e)  Notwithstanding subsections (b), (c), and (d) above, the Board
shall have the authority to extend the expiration date of any outstanding option
in circumstances in which it deems such action to be appropriate (provided that
no such extension shall extend the term of an Award beyond the date on which the
Award would have expired if no termination of the Employee's Continuous Status
as a Participant had occurred).

     13.  Non-Transferability of Awards.  An Award may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Awardee, only by the Awardee; provided that the Board may permit
further transferability, on a general or specific basis, and may impose
conditions and limitations on any permitted transferability.

     14.  Adjustments to Shares Subject to the Plan.

          The number of Shares covered by each outstanding Award, the Maximum
Annual Employee Award and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan upon cancellation or expiration of an Award, as
well as the price per Share covered by each such outstanding Award, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
combination, or reclassification of the Shares, or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding, and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of any
class, or securities convertible into shares of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares subject to an Award.

          In the event of the proposed dissolution or liquidation of the
Company, the Award will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Award shall
terminate as of a date fixed by the Board and give each Awardee the right to
exercise an Award as to all or any part of the Shares subject to an Award,
including Shares as to which the Award would not otherwise be exercisable. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, each
Award shall be assumed or an equivalent award shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless such successor corporation does not agree to assume the Award or to
substitute an equivalent award,

 
in which case the Board shall, in lieu of such assumption or substitution,
provide for the Awardee to have the right to exercise the Award as to all of the
Shares subject to Awards, including Shares as to which the Award would not
otherwise be exercisable. If the Board makes an Award fully exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Board shall notify the Awardee that the Award shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Award will
terminate upon the expiration of such period.

     15.  Time of Granting Awards.  The date of grant of an Award shall, for all
purposes, be the date on which the Company completes the corporate action
relating to the grant of such Award and all conditions to the grant have been
satisfied, provided that conditions to the exercise of an Award shall not defer
the date of grant. Notice of a grant shall be given to each Participant to whom
an Award is so granted within a reasonable time after the determination has been
made.

     16.  Substitutions and Assumptions.  The Board shall have the right to
substitute or assume Awards in connection with mergers, reorganizations,
separations, or other transactions to which Section 424(a) of the Code applies,
provided such substitutions and assumptions are permitted by Section 424 of the
Code and the regulations promulgated thereunder. The number of Shares reserved
pursuant to Section 3 may be increased by the corresponding number of Awards
assumed and, in the case of a substitution, by the net increase in the number of
Shares subject to Awards before and after the substitution.

     17.  Amendment and Termination of the Plan.

          (a)  Amendment and Termination.  The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable
(including, but not limited to amendments which the Board deems appropriate to
enhance the Company's ability to claim deductions related to stock option
exercises); provided that any increase in the number of Shares subject to the
Plan, other than in connection with an adjustment under Section 14 of the Plan,
shall require approval of or ratification by the shareholders of the Company.

          (b)  Participants in Foreign Countries.  The Board shall have the
authority to adopt such modifications, procedures, and subplans as may be
necessary or desirable to comply with provisions of the laws of foreign
countries in which the Company or its Subsidiaries may operate to assure the
viability of the benefits from Awards granted to Participants performing
services in such countries and to meet the objectives of the Plan.

          (c)  Effect of Amendment or Termination.  Any such amendment or
termination of the Plan shall not affect Awards already granted and such Awards
shall remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Awardee and the Board,
which agreement must be in writing and signed by the Awardee and the Company.

     18.  Conditions Upon Issuance of Shares.  Shares shall not be issued
pursuant to the exercise of an Award unless the exercise of such Award and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

     19.  Reservation of Shares.  The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     20.  No Employment/Service Rights.  Nothing in the Plan shall confer upon
any Participant the right to an Award or to continue in service as an Employee
or Consultant for any period of specific duration, or interfere with or
otherwise restrict in any way the rights of the Company (or any Parent or
Subsidiary employing or retaining such person), or of any Participant or
Awardee, which rights are hereby

 
expressly reserved by each, to terminate such person's services at any time for
any reason, with or without cause.

     21.  Shareholder Approval.  The Plan, as amended, is subject to approval by
the shareholders of the Company at the Annual Meeting of Shareholders to be held
on November 9, 2000.