NETFLIX, INC.
 
                                 2002 STOCK PLAN
 
                            Adopted February 27, 2002
 
     1.   Purposes of the Plan. The purposes of this 2002 Stock Plan are:
          --------------------
 
          .    to attract and retain the best available personnel for positions
               of substantial responsibility,
 
          .    to provide additional incentive to Employees, Directors and
               Consultants, and
 
          .    to promote the success of the Company's business.
 
          Options  granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the  time of
grant. Stock Purchase Rights may also be granted under the Plan.
 
     2.   Definitions. As used herein, the following definitions shall apply:
          -----------
 
          (a)  "Administrator"  means the Board or any of its Committees as
                -------------
shall be administering the Plan, in accordance with Section 4.
 
          (b)  "Applicable Laws" means the requirements relating to the
                ---------------
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
 
          (c)  "Board" means the Board of Directors of the Company.
                -----
 
          (d)  "Change in Control" means the occurrence of any of the following
                -----------------
events:
 
               (i)   Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act), directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the total voting power represented
by the Company's then outstanding voting securities; or
 
               (ii)  The consummation of the sale or disposition by the Company
of all or substantially all of the Company's assets;
 
               (iii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the directors are
Incumbent Directors. "Incumbent Directors" means directors who either (A) are
Directors as of the effective date of the Plan, or (B) are elected, or nominated
for election, to the Board with the affirmative votes of at least
 
<PAGE>
 
a majority of the Incumbent Directors at the time of such election or nomination
(but will not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or
 
               (iv) The consummation of a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or its parent) at least
fifty percent (50%) of the total voting power represented by the voting
securities of the Company or such surviving entity or its parent outstanding
immediately after such merger or consolidation.
 
          (e) "Code" means the Internal Revenue Code of 1986, as amended. Any
               ----
reference to a section of the Code herein shall be a reference to any successor
or amended section of the Code.
 
          (f) "Committee" means a committee appointed by the Board in accordance
               ---------
with Section 4 of the Plan.
 
          (g) "Common Stock" means the common stock of the Company.
               ------------
 
          (h) "Company" means Netflix, Inc., a Delaware corporation.
               -------
 
          (i) "Consultant" means any natural person, including an advisor,
               ----------
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
 
          (j) "Director" means a member of the Board.
               --------
 
          (k) "Disability" means total and permanent disability as defined in
               ----------
Section 22(e)(3) of the Code.
 
          (l) "Employee" means any person, including officers and Directors,
               --------
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
 
          (m) "Exchange Act" means the Securities Exchange Act of 1934, as
               ------------
amended.
 
          (n) "Exercise Price" means the price at which a Share may be purchased
               --------------
by an Optionee pursuant to the exercise of an Option or Stock Purchase Right.
 
          (o) "Fair Market Value" means, as of any date, the value of Common
               -----------------
Stock determined as follows:
 
              (i)   If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
 
                                       -2-
 
<PAGE>
 
on the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable;
 
               (ii)  If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share shall be the mean between the high bid and low asked prices for the
Common Stock on the day of determination, as reported in The Wall Street Journal
or such other source as the Administrator deems reliable; or
 
               (iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
 
          (p)  "Incentive Stock Option" means an Option intended to qualify as
                ----------------------
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
 
          (q)  "Nonstatutory Stock Option" means an Option not intended to
                -------------------------
qualify as an Incentive Stock Option.
 
          (r)  "Notice of Grant" means a written or electronic notice evidencing
                ---------------
certain terms and conditions of an individual Option or Stock Purchase Right
grant. The Notice of Grant is part of the Option Agreement.
 
          (s)  "Option" means a stock option granted pursuant to the Plan.
                ------
 
          (t)  "Option Agreement" means an agreement between the Company and an
                ----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
 
          (u)  "Option Exchange Program" means a program whereby outstanding
                -----------------------
Options are surrendered in exchange for Options with a lower Exercise Price.
 
          (v)  "Optioned Stock" means the Common Stock subject to an Option or
                --------------
Stock Purchase Right.
 
          (w)  "Optionee" means the holder of an outstanding Option or Stock
                --------
Purchase Right granted under the Plan.
 
          (x)  "Parent" means a "parent corporation," whether now or hereafter
                ------
existing, as defined in Section 424(e) of the Code.
 
          (y)  "Plan" means this 2002 Stock Plan.
                ----
 
          (z)  "Registration Date" means the effective date of the first
                -----------------
registration statement which is filed by the Company and declared effective
pursuant to Section 12(g) of the Exchange Act, with respect to any class of the
Company's securities.
 
          (aa) "Restricted Stock" means Shares acquired pursuant to a grant of
                ----------------
Stock Purchase Rights under Section 12 of the Plan.
 
                                       -3-
 
<PAGE>
 
          (bb) "Restricted Stock Purchase Agreement" means a written agreement
                -----------------------------------
between the Company and the Optionee evidencing the terms and restrictions
applying to stock purchased under a Stock Purchase Right. The Restricted Stock
Purchase Agreement is subject to the terms and conditions of the Plan and the
Notice of Grant.
 
          (cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
                ----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
 
          (dd) "Section 16(b)" means Section 16(b) of the Exchange Act.
                -------------
 
          (ee) "Service Provider" means an Employee, Director or Consultant.
                ----------------
 
          (ff) "Share" means a share of the Common Stock, as adjusted in
                -----
accordance with Section 14.
 
          (gg) "Stock Purchase Right" means the right to purchase Common Stock
                --------------------
pursuant to Section 12, as evidenced by a Notice of Grant.
 
          (hh) "Subsidiary" means a "subsidiary corporation", whether now or
                ----------
hereafter existing, as defined in Section 424(f) of the Code.
 
     3.   Stock Subject to the Plan. The maximum aggregate number of Shares that
          -------------------------
may be optioned and sold under the Plan consists of (a) the 2,000,000 Shares
initially reserved for issuance under the Plan, (b) any Shares which have been
reserved but not issued under the Company's 1997 Stock Plan (the "1997 Plan"),
as of the Registration Date, and (c) an annual increase to be added on the first
day of the Company's fiscal year beginning in fiscal year 2003, equal to the
lesser of (i) 3,000,000 shares, (ii) 5% of the outstanding shares on such date
or (iii) an amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
 
     If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full, or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
             --------  -------
the Plan, whether upon exercise of an Option or Right, shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if unvested Shares are repurchased by the Company at their original
purchase price or, if less than their original purchase price, their fair market
value, such Shares shall become available for future grant under the Plan.
 
     4.   Administration of the Plan.
          --------------------------
 
          (a)  Procedure.
               ---------
 
               (i)  Multiple Administrative Bodies.  Different Committees with
                    ------------------------------
respect to different groups of Service Providers may administer the Plan.
 
               (ii) Section 162(m).  To the extent that the Administrator
                    -------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the
 
                                       -4-
 
<PAGE>
 
meaning of Section 162(m) of the Code, the Plan shall be administered by a
Committee of two or more "outside directors" within the meaning of Section
162(m) of the Code.
 
               (iii)  Rule 16b-3. To the extent desirable to qualify
                      ----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
 
               (iv)   Other Administration. Other than as provided above, the
                      --------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
 
          (b)  Powers of the Administrator. Subject to the provisions of the
               ---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
 
               (i)    to determine the Fair Market Value;
 
               (ii)   to select the Service Providers to whom Options and Stock
Purchase Rights may be granted hereunder;
 
               (iii)  to determine the number of Shares to be covered by each
Option and Stock Purchase Right granted hereunder;
 
               (iv)   to approve forms of agreement for use under the Plan;
 
               (v)    to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Option or Stock Purchase Right granted
hereunder. Such terms and conditions include, but are not limited to, the
Exercise Price, the time or times when Options or Stock Purchase Rights may be
exercised (which may be based on performance criteria), any vesting acceleration
or waiver of forfeiture restrictions, and any restriction or limitation
regarding any Option or Stock Purchase Right or the Shares relating thereto,
based in each case on such factors as the Administrator, in its sole discretion,
shall determine;
 
               (vi)   to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
 
               (vii)  to institute an Option Exchange Program;
 
               (viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
 
               (ix)   to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of satisfying applicable foreign laws;
 
                                       -5-
 
<PAGE>
 
             (x)    to modify or amend each Option or Stock Purchase Right
(subject to Section 16(c) of the Plan), including the discretionary authority to
extend the post-termination exercisability period of Options longer than is
otherwise provided for in the Plan;
 
             (xi)   to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the minimum amount required to be withheld. The Fair Market Value
of the Shares to be withheld shall be determined on the date that the amount of
tax to be withheld is to be determined. All elections by an Optionee to have
Shares withheld for this purpose shall be made in such form and under such
conditions as the Administrator may deem necessary or advisable;
 
             (xii)  to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option or Stock Purchase Right
previously granted by the Administrator;
 
             (xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
 
         (c) Effect of Administrator's Decision. The Administrator's decisions,
             ----------------------------------
determinations and interpretations shall be final and binding on all persons and
shall be given the maximum deference permitted by law.
 
     5.  Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
         -----------
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
 
     6.  Limitations.
         -----------
 
         (a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
 
         (b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
 
         (c) The following limitations shall apply to grants of Options:
 
             (i) No Service Provider shall be granted, in any fiscal year of the
Company, Options to purchase more than 1,500,000 Shares.
 
                                       -6-
 
<PAGE>
 
             (ii)  In connection with his or her initial service as an Employee,
a Service Provider may be granted Options to purchase up to an additional
500,000 Shares, which shall not count against the limit set forth in subsection
(i) above.
 
             (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change described in Section 14(a).
 
             (iv)  If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 14), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
Exercise Price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
 
     7.  Term of Plan. Subject to Section 20, the Plan shall become effective
         ------------
upon its adoption by the Board. It shall continue in effect for a term of ten
(10) years unless terminated earlier under Section 16.
 
     8.  Term of Option. The term of each Option shall be stated in the Option
         --------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
 
     9.  Option Exercise Price and Consideration.
         ---------------------------------------
 
         (a) Exercise Price. The Exercise Price for the Shares to be issued
             --------------
pursuant to exercise of an Option shall be determined by the Administrator, s
ubject to the following:
 
             (i)   In the case of an Incentive Stock Option
 
                   (A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the Exercise Price shall be no less than 110% of the Fair Market
Value per Share on the date of grant.
 
                   (B) granted to any Employee other than an Employee described
in paragraph (A) immediately above, the Exercise Price shall be no less than
100% of the Fair Market Value per Share on the date of grant.
 
             (ii)  In the case of a Nonstatutory Stock Option, the Exercise
Price shall be determined by the Administrator. In the case of a Nonstatutory
Stock Option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the Exercise Price shall be no less than
100% of the Fair Market Value per Share on the date of grant.
 
                                       -7-
 
<PAGE>
 
             (iii) Notwithstanding the foregoing, Options may be granted with an
Exercise Price of less than 100% of the Fair Market Value per Share on the date
of grant pursuant to a merger or other corporate transaction.
 
         (b) Waiting Period and Exercise Dates. At the time an Option is
             ---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
 
         (c) Form of Consideration. The Administrator shall determine the
             ---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
 
             (i)    cash;
 
             (ii)   check;
 
             (iii)  promissory note;
 
             (iv)   other Shares which, in the case of Shares acquired from the
Company, (A) have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised;
 
             (v)    consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
 
             (vi)   a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
 
             (vii)  any combination of the foregoing methods of payment; or
 
             (viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
 
     10. Exercise of Option.
         ------------------
 
         (a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
             -----------------------------------------------
hereunder shall be exercisable according to the terms of the Plan and at such
times and under such conditions as determined by the Administrator and set forth
in the Option Agreement. An Option may not be exercised for a fraction of a
Share.
 
             An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of
 
                                       -8-
 
<PAGE>
 
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 14.
 
             Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
 
         (b) Termination of Relationship as a Service Provider. If an Optionee
             -------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
 
         (c) Disability of Optionee. If an Optionee ceases to be a Service
             ----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
 
         (d) Death of Optionee. If an Optionee dies while a Service Provider,
             -----------------
the Option may be exercised following the Optionee's death within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of death (but in no event may the option be exercised later
than the expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's designated beneficiary, provided such beneficiary
has been designated prior to Optionee's death in a form acceptable to the
Administrator. If no such beneficiary has been designated by the Optionee, then
such Option may be exercised by the personal representative of the Optionee's
estate or by the person(s) to whom the Option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following Optionee's death. If, at the time
of death, Optionee is not vested as to his or her entire
 
                                       -9-
 
<PAGE>
 
Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
 
     11. Leaves of Absence. Unless the Administrator provides otherwise, vesting
         -----------------
of Options and Stock Purchase Rights granted hereunder shall be suspended during
any unpaid leave of absence. A Service Provider shall not cease to be an
Employee in the case of (i) any leave of absence approved by the Company or (ii)
transfers between locations of the Company or between the Company, its Parent,
or any Subsidiary. For purposes of Incentive Stock Options, no such leave may
exceed ninety days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, then three (3) months
following the 91st day of such leave any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option.
 
     12. Stock Purchase Rights.
         ---------------------
 
         (a) Rights to Purchase. Stock Purchase Rights may be issued either
             ------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer. The offer shall be
accepted by execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
 
         (b) Repurchase Option. Unless the Administrator determines otherwise,
             -----------------
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
 
         (c) Other Provisions. The Restricted Stock Purchase Agreement shall
             ----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
 
         (d) Rights as a Stockholder. Once the Stock Purchase Right is
             -----------------------
exercised, the purchaser shall have the rights equivalent to those of a
stockholder, and shall be a stockholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
 
     13. Transferability of Options and Stock Purchase Rights. Unless determined
         ----------------------------------------------------
otherwise by the Administrator, an Option or Stock Purchase Right may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent
 
                                      -10-
 
<PAGE>
 
or distribution and may be exercised, during the lifetime of the Optionee, only
by the Optionee. If the Administrator makes an Option or Stock Purchase Right
transferable, such Option or Stock Purchase Right shall contain such additional
terms and conditions as the Administrator deems appropriate.
 
     14. Adjustments, Dissolution or Liquidation or Change in Control.
         ------------------------------------------------------------
 
         (a) Adjustments. In the event that any dividend or other distribution
             -----------
(whether in the form of cash, Shares, other securities, or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Shares or other securities of the Company, or other change in the corporate
structure of the Company affecting the Shares such that an adjustment is
determined by the Administrator (in its sole discretion) to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Administrator shall, in
such manner as it may deem equitable, adjust the number and class of Shares
which may be delivered under the Plan, the number, class, and price of Shares
covered by each outstanding Option and Stock Purchase Right, and the numerical
Share limits of Sections 3 and 6.
 
         (b) Dissolution or Liquidation. In the event of the proposed
             --------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. To the extent it has not been previously exercised, an Option or
Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.
 
         (c) Change in Control. In the event of a Change in Control, each
             -----------------
outstanding Option and Stock Purchase Right shall be assumed or an equivalent
option or right substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the Option or Stock Purchase
Right, the Optionee shall fully vest in and have the right to exercise the
Option or Stock Purchase Right as to all of the Optioned Stock, including Shares
as to which it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu of assumption
or substitution in the event of a Change in Control, the Administrator shall
notify the Optionee in writing or electronically that the Option or Stock
Purchase Right shall be fully vested and exercisable (subject to the
consummation of the Change of Control) for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Purchase Right shall terminate
upon the expiration of such period.
 
             For the purposes of this subsection (c), the Option or Stock
Purchase Right shall be considered assumed if, following the Change in Control,
the option or right confers the right to purchase or receive, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the Change in Control, the consideration (whether stock, cash, or other
securities or property) received in the Change in Control by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however, that
                                                         --------  -------
if such consideration received in the Change in Control is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the
 
                                      -11-
 
<PAGE>
 
Option or Stock Purchase Right, for each Share of Optioned Stock subject to the
Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in Control.
 
     15. Date of Grant. The date of grant of an Option or Stock Purchase Right
         -------------
shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
 
     16. Amendment and Termination of the Plan.
         -------------------------------------
 
         (a) Amendment and Termination. The Administrator may at any time amend,
             -------------------------
alter, suspend or terminate the Plan.
 
         (b) Stockholder Approval. The Company shall obtain stockholder approval
             --------------------
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
 
         (c) Effect of Amendment or Termination. No amendment, alteration,
             ----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
 
     17. Conditions Upon Issuance of Shares.
         ----------------------------------
 
         (a) Legal Compliance. Shares shall not be issued pursuant to the
             ----------------
exercise of an Option or Stock Purchase Right unless the exercise of such Option
or Stock Purchase Right and the issuance and delivery of such Shares shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
 
         (b) Investment Representations. As a condition to the exercise of an
             --------------------------
Option or Stock Purchase Right, the Company may require the person exercising
such Option or Stock Purchase Right to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required.
 
     18. Inability to Obtain Authority. The inability of the Company to obtain
         -----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
 
     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.
 
                                      -12-
 
<PAGE>
 
     20. Stockholder Approval. The Plan shall be subject to approval by the
         --------------------
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
 
     21. Withholding. The Company's obligation to deliver Shares pursuant to any
         -----------
Options or Stock Purchase Rights granted under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income and employment
tax withholding requirements.
 
                                      -13-
 
</TEXT>
</DOCUMENT>