STAMPS COM INC, S-8, 2000-03-30

STAMPS COM INC
S-8, 2000-03-30
CATALOG & MAIL-ORDER HOUSES

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<PAGE>

As filed with the Securities and Exchange Commission on March 30, 2000

Registration No. 333-____________
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

-----------------------

FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933

-----------------------

STAMPS.COM INC.
(Exact name of registrant as specified in its charter)

Delaware 770454966
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)

3420 Ocean Park Boulevard, Suite 1040
Santa Monica, California 90405
(Address of principal executive offices) (Zip Code)

------------------------

1999 STOCK INCENTIVE PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
ISHIP.COM, INC. AMENDED AND RESTATED 1997 STOCK PLAN
(Full title of the Plans)

-----------------------

Mr. John M. Payne
Chief Executive Officer
Stamps.com Inc.
3420 Ocean Park Boulevard, Suite 1040
Santa Monica, California 90405
(Name and address of agent for service)
(310) 581-7200
(Telephone number, including area code, of agent for service)

------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Amount to be Offering Price Aggregate Amount of
Title of Securities to be Registered Registered(1) per Share Offering Price Registration Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 Stock Incentive Plan 3,729,551 shares $25.69 $95,812,165.19(2) $25,294.41
- --------------------------------------
Common Stock, $0.001 par value

1999 Employee Stock Purchase Plan 409,850 shares $25.69(2) $10,529,046.50(2) $2,779.67
- --------------------------------------
Common Stock, $0.001 par value

iShip.com, Inc. Amended and Restated 966,522 shares $ 5.67(3) $5,480,179.74(3) $1,446.77
1997 Stock Plan
- --------------------------------------
Common Stock, $0.001 par value
Aggregate Registration Fee: $29,520.85
</TABLE>

(1) This Registration Statement shall also cover any additional shares of Common
Stock which become issuable under the 1999 Stock Incentive Plan, 1999
Employee Stock Purchase Plan and the iShip.com, Inc. Amended and Restated
1997 Stock Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
Registrant's receipt of consideration which results in an increase in the
number of the outstanding shares of Registrant's Common Stock.

(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of Registrant's Common Stock on March 27,
2000, as reported by the Nasdaq National Market.

(3) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average exercise
price per share.
<PAGE>

PART II

Information Required in the Registration Statement

Item 3. Incorporation of Documents by Reference
---------------------------------------

Stamps.com Inc. (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "Commission"):

(a) The Registrant's Annual Report on Form 10-K for the year ending
December 31, 1999 filed with the Commission on March 29, 2000;

(b) The Registrant's Registration Statement on Form 8-A12G filed with the
Commission on June 17, 1999, in which are described the terms, rights
and provisions applicable to the Corporation's outstanding Common
Stock.

All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which de-registers all securities
then remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.

Item 4. Description of Securities
--------------------------

Not Applicable.

Item 5. Interests of Named Experts and Counsel
--------------------------------------

Not Applicable.

Item 6. Indemnification of Directors and Officers
-----------------------------------------

Section 145 of the Delaware law empowers a corporation to indemnify
its directors and officers and to purchase insurance with respect to liability
arising out of their capacity or status as directors and officers, but this
statutory provision does not eliminate or limit the liability of a director:

. for any breach of the director's duty of loyalty to the corporation
or its stockholders;
. for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
. arising under Section 174 of the Delaware law; or
. for any transaction from which the director derived an improper
personal benefit.

The Delaware law provides further that the indemnification permitted
thereunder shall not be deemed exclusive of any other rights to which the
directors and officers may be entitled under the corporation's bylaws, or by
reason of any agreement, a vote of stockholders or otherwise. The Registrant's
certificate of

II-1
<PAGE>

incorporation provides that the Registrant indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding by reason of the fact that the person is or
was a director or officer, or is or was serving at the Registrant's request as a
director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, against expenses, judgements, fines
and amounts paid in settlement actually and reasonably incurred by the person in
the action, suit or proceeding.

The Registrant has entered into indemnification agreements with its
directors and executive officers containing provisions that may require the
Registrant, among other things, to indemnify its directors and officers against
liabilities that may arise by reason of their status or service as directors or
officers other than liabilities arising from willful misconduct of a culpable
nature, to advance their expenses incurred as a result of any proceeding against
them as to which they could be indemnified, and to obtain directors' and
officers' liability insurance if maintained for other directors or officers.

Item 7. Exemption from Registration Claimed
-----------------------------------

Not Applicable.

Item 8. Exhibits
--------
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<C> <S>
4 Instruments Defining the Rights of Stockholders. Reference is made to Registrant's
Registration Statement No. 000-26427 on Form 8-A12G, together with any exhibits thereto,
which are incorporated herein by reference pursuant to Item 3(b) to this Registration
Statement.
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Moss Adams, LLP, Independent Public Accountants.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 1999 Stock Incentive Plan.
99.2 1999 Employee Stock Purchase Plan.
99.3 iShip.com, Inc. Amended and Restated 1997 Stock Plan.
99.4 Form of Assumption Agreement.
</TABLE>

Item 9. Undertakings

A. The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement: (i) to include any prospectus required by
Section 10(a)(3) of the 1933 Act, as amended (the "1933 Act"), (ii) to reflect
in the prospectus any facts or events arising after the effective date of this
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement; provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those clauses is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2) that
for the purpose of determining any liability under the 1933 Act each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof; and (3) to
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the 1999
Stock Incentive Plan, 1999 Employee Stock Purchase Plan and the iShip.com, Inc.
Amended and Restated 1997 Stock Plan.

B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d)

II-2
<PAGE>

of the 1934 Act that is incorporated by reference into this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers or controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6 or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

II-3
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Santa Monica, State of California on
this 29th day of March, 2000.

STAMPS.COM, INC.

By: /s/ John M. Payne
-----------------------
John M. Payne
Chief Executive Officer

POWER OF ATTORNEY
-----------------

KNOW ALL PERSONS BY THESE PRESENTS:

That the undersigned officers and directors of Stamps.com Inc., a
Delaware corporation, do hereby constitute and appoint John M. Payne, and John
W. LaValle, and each of them, the lawful attorneys-in-fact and agents with full
power and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents, and any one of them, determine may
be necessary or advisable or required to enable said corporation to comply with
the Securities Act of 1933, as amended, and any rules or regulations or
requirements of the Securities and Exchange Commission in connection with this
Registration Statement. Without limiting the generality of the foregoing power
and authority, the powers granted include the power and authority to sign the
names of the undersigned officers and directors in the capacities indicated
below to this Registration Statement, to any and all amendments, both pre-
effective and post-effective, and supplements to this Registration Statement,
and to any and all instruments or documents filed as part of or in conjunction
with this Registration Statement or amendments or supplements thereof, and each
of the undersigned hereby ratifies and confirms that all said attorneys and
agents, or any one of them, shall do or cause to be done by virtue hereof. This
Power of Attorney may be signed in several counterparts.

IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.

Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------ ------------------------------------------------- --------------
<S> <C> <C>
/s/ John M. Payne Chairman of the Board and Chief Executive Officer March 29, 2000
- ------------------------------------ (Principal Executive Officer)
John M. Payne

/s/ Loren E. Smith President, Chief Operating Officer and Director March 29, 2000
- ------------------------------------
Loren E. Smith
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------ ------------------------------------------------- --------------
<S> <C> <C>
/s/ John W. LaValle Chief Financial Officer and Executive Vice March 29, 2000
- ------------------------------------ President (Principal Financial Officer)
John W. LaValle

/s/ Candelario J. Andalon Controller (Principal Accounting Officer) March 29, 2000
- ------------------------------------
Candelario J. Andalon

/s/ Mohan P. Ananda Director March 29, 2000
- ------------------------------------
Mohan P. Ananda

/s/ David C. Bohnett Director March 29, 2000
- ------------------------------------
David C. Bohnett

/s/ Jeffrey J. Brown Director March 29, 2000
- ------------------------------------
Jeffrey J. Brown

/s/ Thomas H. Bruggere Director March 29, 2000
- ------------------------------------
Thomas H. Bruggere

/s/ Thomas N. Clancy Director March 29, 2000
- ------------------------------------
Thomas N. Clancy

/s/ G. Bradford Jones Director March 29, 2000
- ------------------------------------
G. Bradford Jones

/s/ Marvin Runyon Director March 29, 2000
- ------------------------------------
Marvin Runyon

/s/ John A. Duffy Director March 29, 2000
- ------------------------------------
John A. Duffy

/s/ Stephen M. Teglovic Director March 29, 2000
- ------------------------------------
Stephen M. Teglovic
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------ ------------------------------------------------- --------------
<S> <C> <C>
/s/ Carolyn M. Ticknor Director March 29, 2000
- ------------------------------------
Carolyn M. Ticknor
</TABLE>

II-6
<PAGE>

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

EXHIBITS

FORM S-8

UNDER

SECURITIES ACT OF 1933

STAMPS.COM INC.

<PAGE>

EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<C> <S>
4 Instruments Defining the Rights of Stockholders. Reference is made to Registrant's
Registration Statement No. 000-26427 on Form 8-A12G, together with any exhibits thereto,
which are incorporated herein by reference pursuant to Item 3(b) to this Registration
Statement.
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.2 Consent of Moss Adams, LLP, Independent Public Accountants.
23.3 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration Statement.
99.1 1999 Stock Incentive Plan.
99.2 1999 Employee Stock Purchase Plan.
99.3 iShip.com, Inc. Amended and Restated 1997 Stock Plan.
99.4 Form of Assumption Agreement.
</TABLE>

<PAGE>

EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP

March 29, 2000

Stamps.com Inc.
3420 Ocean Park Boulevard, Suite 1040
Santa Monica, California 90405

Re: Stamps.com Inc.- Registration Statement for Offering of an
Aggregate of 5,105,923 Shares of Common Stock
----------------------------------------------------------

Dear Ladies and Gentlemen:

We have acted as counsel to Stamps.com Inc., a Delaware corporation
(the "Company"), in connection with the registration on Form S-8 (the
"Registration Statement") under the Securities Act of 1933, as amended, of an
aggregate of an additional 5,105,923 shares of the Company's common stock (the
"Shares") (i) an increase of 3,729,551 Shares for issuance under the 1999 Stock
Incentive Plan, (ii) an increase of 409,850 Shares for issuance under the 1999
Employee Stock Purchase Plan, (iii) 966,522 Shares reserved for issuance under
and the iShip.com, Inc. Amended and Restated 1997 Stock Plan (collectively the
"Plans").

This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.

We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment of the
1999 Stock Incentive Plan and the 1999 Employee Stock Purchase Plan and the
assumption of the iShip.com, Inc. Amended and Restated 1997 Stock Plan. Based
on such review, we are of the opinion that, if, as and when the Shares have been
issued and sold (and the consideration therefor received) pursuant to a) the
provisions of option agreements duly authorized under the Plans and in
accordance with the Registration Statement, or b) duly authorized direct stock
issuances effected in accordance with the 1999 Stock Incentive Plan and the
Registration Statement, such Shares will be duly authorized, legally issued,
fully paid and nonassessable.

We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.

This opinion letter is rendered as of the date first written above and
we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plans or the Shares.

Very truly yours,

/s/ Brobeck, Phleger & Harrison LLP
BROBECK, PHLEGER & HARRISON LLP

<PAGE>

EXHIBIT 23.1
OPINION AND CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 19, 2000,
included in Stamps.com Inc.'s Form 10-K for the year ended December 31, 1999 and
to all references to our Firm included in this registration statement.

ARTHUR ANDERSON LLP
INDEPENDENT PUBLIC ACCOUNTANTS

Los Angeles, California
March 29, 2000

<PAGE>

EXHIBIT 23.2
OPINION AND CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the incorporation by
reference in this Form S-8 registration statement of Stamps.com Inc. of our
report dated March 12, 1999 on the financial statements of iShip.com, Inc.
included in Stamps.com Inc.'s Form S-1 registration statement (No. 333-90115)
and the Stamps.com 8-K/A dated December 28, 1999 and our report dated March 15,
2000 on the financial statements of iShip.com, Inc. included in the Stamps.com
10-K for the year ending December 31, 1999.

MOSS ADAMS, LLP
INDEPENDENT PUBLIC ACCOUNTANTS

Seattle, Washington
March 29, 2000

<PAGE>

EXHIBIT 99.1

1999 Stock Incentive Plan
<PAGE>

STAMPS.COM INC.
1999 STOCK INCENTIVE PLAN
-------------------------

(AMENDED AND RESTATED AS OF MARCH 7, 2000)

ARTICLE ONE

GENERAL PROVISIONS
------------------

I. PURPOSE OF THE PLAN

This 1999 Stock Incentive Plan is intended to promote the interests of
Stamps.com Inc., a Delaware corporation, by providing eligible persons in the
Corporation's service with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in such service.

Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

II. STRUCTURE OF THE PLAN

A. The Plan shall be divided into five separate equity programs:

- the Discretionary Option Grant Program under which eligible
employees may, at the discretion of the Plan Administrator, be granted options
to purchase shares of Common Stock,

- the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested each year in
special option grants,

- the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary),

- the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at designated
intervals over their period of continued Board service, and
<PAGE>

- the Director Fee Option Grant Program under which non-employee
Board members may elect to have all or any portion of their annual retainer fee
otherwise payable in cash applied to a special stock option grant.

B. The provisions of Articles One and Seven shall apply to all equity programs
under the Plan and shall govern the interests of all persons under the Plan.

III. ADMINISTRATION OF THE PLAN

A. The Primary Committee shall have sole and exclusive authority to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Board's discretion, be vested in the Primary
Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of the Primary
Committee must be authorized by a disinterested majority of the Board.

B. Members of the Primary Committee or any Secondary Committee shall serve for
such period of time as the Board may determine and may be removed by the Board
at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.

C. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.

D. The Primary Committee shall have the sole and exclusive authority to
determine which Section 16 Insiders and other highly compensated Employees shall
be eligible for participation in the Salary Investment Option Grant Program for
one or more calendar years. However, all option grants under the Salary
Investment Option Grant Program shall be made in accordance with the express
terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.

E. Service on the Primary Committee or the Secondary Committee shall constitute
service as a Board member, and members of each such committee shall accordingly
be entitled to full indemnification and reimbursement as Board members for their
service on such committee. No member of the Primary Committee or the Secondary
Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option grants or stock issuances under the Plan.

2.
<PAGE>

F. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.

G. Administration of the Automatic Option Grant and Director Fee Option Grant
Programs shall be self-executing in accordance with the terms of those programs,
and no Plan Administrator shall exercise any discretionary functions with
respect to any option grants or stock issuances made under those programs.

IV. ELIGIBILITY

A. The persons eligible to participate in the Discretionary Option Grant and
Stock Issuance Programs are as follows:

(i) Employees,

(ii) non-employee members of the Board or the board of directors of any Parent
or Subsidiary, and

(iii) consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary).

B. Only Employees who are Section 16 Insiders or other highly compensated
individuals shall be eligible to participate in the Salary Investment Option
Grant Program.

C. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine, (i) with respect
to the option grants under the Discretionary Option Grant Program, which
eligible persons are to receive such grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive such
issuances, the time or times when the issuances are to be made, the number of
shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration for such shares.

D. The Plan Administrator shall have the absolute discretion either to grant
options in accordance with the Discretionary Option Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.

3.
<PAGE>

E. The individuals who shall be eligible to participate in the Automatic Option
Grant Program shall be limited to (i) those individuals who first become non-
employee Board members on or after the Underwriting Date, whether through
appointment by the Board or election by the Corporation's stockholders, and (ii)
those individuals who continue to serve as non-employee Board members at one or
more Annual Stockholders Meetings held after the Underwriting Date. A non-
employee Board member who has previously been in the employ of the Corporation
(or any Parent or Subsidiary) shall not be eligible to receive an option grant
under the Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program while he or she continues to
serve as a non-employee Board member.

F. All non-employee Board members shall be eligible to participate in the
Director Fee Option Grant Program.

V. STOCK SUBJECT TO THE PLAN

A. The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock, including shares repurchased by the Corporation on
the open market. The number of shares of Common Stock initially reserved for
issuance over the term of the Plan shall not exceed 11,019,551 shares. Such
reserve shall consist of: (i) the 7,290,000 shares of Common Stock initially
reserved for issuance under the Plan, including the shares subject to
outstanding options incorporated from that Predecessor Plan, and (ii) an
additional increase of 2,500,000 shares authorized by the Board in October 22,
1999 and approved by the stockholders at the Special Stockholders Meeting held
on March 7, 2000, and (iii) 1,229,551 shares added to the reserve in the
automatic share increase that occurred January 4, 2000.

B. The number of shares of Common Stock available for issuance under the Plan
shall automatically increase on the first trading day of January each calendar
year during the term of the Plan, beginning with calendar year 2000, by an
amount equal to three percent (3%) of the total number of shares of Common Stock
outstanding on the last trading day in December of the immediately preceding
calendar year, but in no event shall any such annual increase exceed 1,564,715
shares.

C. No one person participating in the Plan may receive options, separately
exercisable stock appreciation rights and direct stock issuances for more than
1,125,000 shares of Common Stock in the aggregate per calendar year.

D. Shares of Common Stock subject to outstanding options (including options
incorporated into this Plan from the Predecessor Plan) shall be available for
subsequent issuance under the Plan to the extent (i) those options expire or
terminate for any reason prior to exercise in full or (ii) the options are
cancelled in accordance with the cancellation-regrant provisions of Article Two.
Unvested shares issued under the Plan and subsequently cancelled or repurchased
by the Corporation at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of

4.
<PAGE>

Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such option or stock
issuance. Shares of Common Stock underlying one or more stock appreciation
rights exercised under Section IV of Article Two, Section III of Article Three,
Section II of Article Five or Section III of Article Six of the Plan shall not
be available for subsequent issuance under the Plan.

E. If any change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made by
the Plan Administrator to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities for
which any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year,
(iii) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing non-
employee Board members, (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan,
(v) the number and/or class of securities and price per share in effect under
each outstanding option incorporated into this Plan from the Predecessor Plan
and (vi) the maximum number and/or class of securities by which the share
reserve is to increase automatically each calendar year pursuant to the
provisions of Section V.B of this Article One. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.

5.
<PAGE>

ARTICLE TWO

DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------

I. OPTION TERMS

Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
--------
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.

A. Exercise Price.
--------------

1. The exercise price per share shall be fixed by the Plan Administrator but
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the option grant date.

2. The exercise price shall become immediately due upon exercise of the option
and shall, subject to the provisions of Section I of Article Seven and the
documents evidencing the option, be payable in one or more of the forms
specified below:

(i) cash or check made payable to the Corporation,

(ii) shares of Common Stock held for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date, or

(iii) to the extent the option is exercised for vested shares, through a
special sale and remittance procedure pursuant to which the Optionee shall
concurrently provide irrevocable instructions to (a) a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and remit to
the Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.

Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

B. Exercise and Term of Options. Each option shall be exercisable at such time
----------------------------
or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.

6.
<PAGE>

C. Effect of Termination of Service.
--------------------------------

1. The following provisions shall govern the exercise of any options held by
the Optionee at the time of cessation of Service or death:

(i) Any option outstanding at the time of the Optionee's cessation of Service
for any reason shall remain exercisable for such period of time thereafter
as shall be determined by the Plan Administrator and set forth in the
documents evidencing the option, but no such option shall be exercisable
after the expiration of the option term.

(ii) Any option held by the Optionee at the time of death and exercisable in
whole or in part at that time may be subsequently exercised by the
personal representative of the Optionee's estate or by the person or
persons to whom the option is transferred pursuant to the Optionee's will
or in accordance with the laws of inheritance or by the Optionee's
designated beneficiary or beneficiaries of that option.

(iii) Should the Optionee's Service be terminated for Misconduct or should
Optionee otherwise engage in Misconduct while one or more of his or her
options under this Article Two are outstanding, then all those options
shall terminate immediately and cease to be outstanding.

(iv) During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for
which the option is exercisable on the date of the Optionee's cessation of
Service. Upon the expiration of the applicable exercise period or (if
earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.

2. The Plan Administrator shall have complete discretion, exercisable either at
the time an option is granted or at any time while the option remains
outstanding, to:

(i) extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service from the limited exercise
period otherwise in effect for that option to such greater period of time
as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term, and/or

(ii) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of
Common Stock for which such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested had the
Optionee continued in Service.

7.
<PAGE>

D. Stockholder Rights. The holder of an option shall have no stockholder
------------------
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.

E. Repurchase Rights. The Plan Administrator shall have the discretion to
-----------------
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.

F. Limited Transferability of Options. During the lifetime of the Optionee,
----------------------------------
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. However, a Non-Statutory Option may, in
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. Notwithstanding the foregoing, the Optionee may also
designate one or more persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Two, and those options shall, in
accordance with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the transferred options
subject to all the terms and conditions of the applicable agreement evidencing
each such transferred option, including (without limitation) the limited time
period during which the option may be exercised following the Optionee's death.

II. INCENTIVE OPTIONS

The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to Incentive
Options. Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to the terms of this Section II.
---

A. Eligibility. Incentive Options may only be granted to Employees.
-----------

B. Dollar Limitation. The aggregate Fair Market Value of the shares of Common
-----------------
Stock (determined as of the respective date or dates of grant) for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000).

8.
<PAGE>

To the extent the Employee holds two (2) or more such options which become
exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.

C. 10% Stockholder. If any Employee to whom an Incentive Option is granted is
---------------
a 10% Stockholder, then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. In the event of any Corporate Transaction, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all the
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully vested shares of Common Stock. However,
an outstanding option shall not become exercisable on such an accelerated basis
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, to be assumed by the successor corporation (or parent thereof) or
(ii) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing at the time of the
Corporate Transaction on any shares for which the option is not otherwise at
that time exercisable and provides for subsequent payout in accordance with the
same exercise/vesting schedule applicable to those option shares or (iii) the
acceleration of such option is subject to other limitations imposed by the Plan
Administrator at the time of the option grant.

B. All outstanding repurchase rights shall automatically terminate, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction, except to the extent: (i)
those repurchase rights are to be assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction or (ii) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.

C. Immediately following the consummation of the Corporate Transaction, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof).

D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i) the
exercise price payable per share under each outstanding option, provided the
--------
aggregate exercise price payable for such securities shall remain the same, (ii)
the maximum number and/or class of securities available for issuance over the
remaining term of the Plan and

9.
<PAGE>

(iii) the maximum number and/or class of securities for which any one person may
be granted stock options, separately exercisable stock appreciation rights and
direct stock issuances under the Plan per calendar year and (iv) the maximum
number and/or class of securities by which the share reserve is to increase
automatically each calendar year.

E. The Plan Administrator shall have the discretionary authority to structure
one or more outstanding options under the Discretionary Option Grant Program so
that those options shall, immediately prior to the effect date of such
Corporate Transaction, become exercisable for all the shares of Common Stock at
the time subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock, whether or not those options are
to be assumed in the Corporate Transaction. In addition, the Plan Administrator
shall have the discretionary authority to structure one or more of the
Corporation's repurchase rights under the Discretionary Option Grant Program so
that those rights shall not be assignable in connection with such Corporate
Transaction and shall accordingly terminate upon the consummation of such
Corporate Transaction, and the shares subject to those terminated rights shall
thereupon vest in full.

F. The Plan Administrator shall have full power and authority to structure one
or more outstanding options under the Discretionary Option Grant Program so that
those options shall become exercisable for all the shares of Common Stock at
the time subject to those options in the event the Optionee's Service is
subsequently terminated by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those options are assumed and do not
otherwise accelerate. Any options so accelerated shall remain exercisable for
fully vested shares until the earlier of (i) the expiration of the option term
-------
or (ii) the expiration of the one (1) year period measured from the effective
date of the Involuntary Termination. In addition, the Plan Administrator may
structure one or more of the Corporation's repurchase rights so that those
rights shall immediately terminate with respect to any shares held by the
Optionee at the time of his or her Involuntary Termination, and the shares
subject to those terminated repurchase rights shall accordingly vest in full at
that time.

G. The Plan Administrator shall have the discretionary authority to structure
one or more outstanding options under the Discretionary Option Grant Program so
that those options shall, immediately prior to the effect date of a Change in
Control, become exercisable for all the shares of Common Stock at the time
subject to those options and may be exercised for any or all of those shares as
fully vested shares of Common Stock. In addition, the Plan Administrator shall
have the discretionary authority to structure one or more of the Corporation's
repurchase rights under the Discretionary Option Grant Program so that those
rights shall terminate automatically upon the consummation of such Change in
Control, and the shares subject to those terminated rights shall thereupon vest
in full. Alternatively, the Plan Administrator may condition the automatic
acceleration of one or more outstanding options under the Discretionary Option
Grant Program and the termination of one or more of the Corporation's
outstanding repurchase rights under such program upon the subsequent termination
of the Optionee's Service by reason of an Involuntary Termination within a

10.
<PAGE>

designated period (not to exceed eighteen (18) months) following the effective
date of such Change in Control. Each option so accelerated shall remain
exercisable for fully vested shares until the earlier of (i) the expiration of
-------
the option term or (ii) the expiration of the one (1) year period measured from
the effective date of Optionee's cessation of Service.

H. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.

I. The outstanding options shall in no way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.

IV. CANCELLATION AND REGRANT OF OPTIONS

The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new grant date.

V. STOCK APPRECIATION RIGHTS

A. The Plan Administrator shall have full power and authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.

B. The following terms shall govern the grant and exercise of tandem stock
appreciation rights:

(i) One or more Optionees may be granted the right, exercisable upon such terms
as the Plan Administrator may establish, to elect between the exercise of
the underlying option for shares of Common Stock and the surrender of that
option in exchange for a distribution from the Corporation 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 Optionee is at the time vested
under the surrendered option (or surrendered portion thereof) over (b) the
aggregate exercise price payable for such shares.

(ii) No such option surrender shall be effective unless it is approved by the
Plan Administrator, either at the time of the actual option surrender or at
any earlier time. If the surrender is so approved, then the distribution
to which the Optionee shall be entitled may be made in shares of Common
Stock valued at Fair Market Value on the option surrender date, in cash, or
partly in shares and partly in cash, as the Plan Administrator shall in its
sole discretion deem appropriate.

11.
<PAGE>

(iii) If the surrender of an option is not approved by the Plan Administrator,
then the Optionee shall retain whatever rights the Optionee 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 documents evidencing such option, but in
no event may such rights be exercised more than ten (10) years after the
option grant date.

C. The following terms shall govern the grant and exercise of limited stock
appreciation rights:

(i) One or more Section 16 Insiders may be granted limited stock appreciation
rights with respect to their outstanding options.

(ii) Upon the occurrence of a Hostile Take-Over, each individual holding one or
more options with such a limited stock appreciation right shall have the
unconditional right (exercisable for a thirty (30)-day period following
such Hostile Take-Over) to surrender each such option to the Corporation.
In return for the surrendered option, the Optionee shall receive a cash
distribution from the Corporation in an amount equal to the excess of (A)
the Take-Over Price of the shares of Common Stock at the time subject to
such option (whether or not the Optionee is otherwise at the time vested
in those shares) over (B) the aggregate exercise price payable for those
shares. Such cash distribution shall be paid within five (5) days
following the option surrender date.

(iii) At the time such limited stock appreciation right is granted, the Plan
Administrator shall pre-approve any subsequent exercise of that right in
accordance with the terms of this Paragraph C. Accordingly, no further
approval of the Plan Administrator or the Board shall be required at the
time of the actual option surrender and cash distribution.

12.
<PAGE>

ARTICLE THREE

SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------

I. OPTION GRANTS

The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Investment
Option Grant Program is to be in effect and to select the Section 16 Insiders
and other highly compensated Employees eligible to participate in the Salary
Investment Option Grant Program for such calendar year or years. Each selected
individual who elects to participate in the Salary Investment Option Grant
Program must, prior to the start of each calendar year of participation, file
with the Plan Administrator (or its designate) an irrevocable authorization
directing the Corporation to reduce his or her base salary for that calendar
year by an amount not less than Ten Thousand Dollars ($10,000.00) nor more than
Fifty Thousand Dollars ($50,000.00). Each individual who files such a timely
authorization shall automatically be granted an option under the Salary
Investment Grant Program on the first trading day in January of the calendar
year for which the salary reduction is to be in effect.

II. OPTION TERMS

Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
--------
that each such document shall comply with the terms specified below.

A. Exercise Price.
--------------
1. The exercise price per share shall be thirty-three and one-third percent
(33-1/3%) of the Fair Market Value per share of Common Stock on the option grant
date.

2. The exercise price shall become immediately due upon exercise of the option
and shall be payable in one or more of the alternative forms authorized under
the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.

B. Number of Option Shares. The number of shares of Common Stock subject to
-----------------------
the option shall be determined pursuant to the following formula (rounded down
to the nearest whole number):

X = A / (B x 66-2/3%), where

X is the number of option shares,

A is the dollar amount of the reduction in the Optionee's base
salary for the calendar year to be in effect pursuant to this program,
and

13.
<PAGE>

B is the Fair Market Value per share of Common Stock on the
option grant date.

C. Exercise and Term of Options. The option shall become exercisable in a
----------------------------
series of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar year for which the
salary reduction is in effect. Each option shall have a maximum term of ten
(10) years measured from the option grant date.

D. Effect of Termination of Service. Should the Optionee cease Service for any
--------------------------------
reason while holding one or more options under this Article Three, then each
such option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
- -------
expiration of the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under
this Article Three, then each such option may be exercised, for any or all of
the shares for which the option is exercisable at the time of the Optionee's
cessation of Service (less any shares subsequently purchased by Optionee prior
to death), by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the Optionee's
will or the laws of inheritance or by the designated beneficiary or
beneficiaries of such option. Such right of exercise shall lapse, and the
option shall terminate, upon the earlier of (i) the expiration of the ten (10)-
-------
year option term or (ii) the three (3)-year period measured from the date of the
Optionee's cessation of Service. However, the option shall, immediately upon
the Optionee's cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.

III. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. Each such outstanding option shall
terminate immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such Corporate
Transaction. Any option so assumed and shall remain exercisable for the fully-
vested shares until the earlier of (i) the expiration of the ten (10)-year
-------
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.

B. In the event of a Change in Control while the Optionee remains in Service,
each outstanding option held by such Optionee under this Salary Investment
Option Grant Program shall automatically accelerate so that each such option
shall immediately become exercisable for all the shares of Common Stock at the
time subject to such option and may be exercised for any or all of those shares
as fully-vested shares of Common Stock.

14.
<PAGE>

The option shall remain so exercisable until the earliest to occur of (i) the
--------
expiration of the ten (10)-year option term, (ii) the expiration of the three
(3)-year period measured from the date of the Optionee's cessation of Service,
(iii) the termination of the option in connection with a Corporate Transaction
or (iv) the surrender of the option in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each outstanding option
granted him or her under the Salary Investment Option Grant Program. The
Optionee shall in return be entitled to a cash distribution from the Corporation
in an amount equal to the excess of (i) the Take-Over Price of the shares of
Common Stock at the time subject to the surrendered option (whether or not the
option is otherwise at the time exercisable for those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. The Primary Committee shall, at the time the option with such
limited stock appreciation right is granted under the Salary Investment Option
Grant Program, pre-approve any subsequent exercise of that right in accordance
with the terms of this Paragraph C. Accordingly, no further approval of the
Primary Committee or the Board shall be required at the time of the actual
option surrender and cash distribution.

D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.

E. The grant of options under the Salary Investment Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

IV. REMAINING TERMS

The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

15.
<PAGE>

ARTICLE FOUR

STOCK ISSUANCE PROGRAM
----------------------

I. STOCK ISSUANCE TERMS

Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option grants.
Each such stock issuance shall be evidenced by a Stock Issuance Agreement which
complies with the terms specified below. Shares of Common Stock may also be
issued under the Stock Issuance Program pursuant to share right awards which
entitle the recipients to receive those shares upon the attainment of designated
performance goals.

A. Purchase Price.
--------------

1. The purchase price per share shall be fixed by the Plan Administrator, but
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the issuance date.

2. Subject to the provisions of Section I of Article Seven, shares of Common
Stock may be issued under the Stock Issuance Program for any of the following
items of consideration which the Plan Administrator may deem appropriate in each
individual instance:

(i) cash or check made payable to the Corporation, or

(ii) past services rendered to the Corporation (or any Parent or Subsidiary).

B. Vesting Provisions.
------------------

1. Shares of Common Stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant's period
of Service or upon attainment of specified performance objectives. The elements
of the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program shall be determined by the Plan Administrator
and incorporated into the Stock Issuance Agreement. Shares of Common Stock may
also be issued under the Stock Issuance Program pursuant to share right awards
which entitle the recipients to receive those shares upon the attainment of
designated performance goals.

2. Any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) which the Participant may have
the right to receive with respect to the Participant's unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or

16.
<PAGE>

other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued subject to (i) the same
vesting requirements applicable to the Participant's unvested shares of Common
Stock and (ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.

3. The Participant shall have full stockholder rights with respect to any
shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.

4. Should the Participant cease to remain in Service while holding one or more
unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant's purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.

5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant's Service or the non-
attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.

6. Outstanding share right awards under the Stock Issuance Program shall
automatically terminate, and no shares of Common Stock shall actually be issued
in satisfaction of those awards, if the performance goals established for such
awards are not attained. The Plan Administrator, however, shall have the
discretionary authority to issue shares of Common Stock under one or more
outstanding share right awards as to which the designated performance goals have
not been attained.

II. CORPORATE TRANSACTION/CHANGE IN CONTROL

A. All of the Corporation's outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent (i) those repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed in the Stock Issuance Agreement.

B. The Plan Administrator shall have the discretionary authority to structure
one or more of the Corporation's repurchase rights under the Stock Issuance
Program so that

17.
<PAGE>

those rights shall automatically terminate in whole or in part, and the shares
of Common Stock subject to those terminated rights shall immediately vest, in
the event the Participant's Service should subsequently terminate by reason of
an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Corporate Transaction in which
those repurchase rights are assigned to the successor corporation (or parent
thereof).

C. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any Change
in Control.

III. SHARE ESCROW/LEGENDS

Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.

18.
<PAGE>

ARTICLE FIVE

AUTOMATIC OPTION GRANT PROGRAM
------------------------------

I. OPTION TERMS

A. Grant Dates. Option grants shall be made on the dates specified below:
-----------

1. Each individual who is first elected or appointed as a non-employee Board
member at any time on or after the Underwriting Date shall automatically be
granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase 10,000 shares of Common Stock, provided that individual has
not previously been in the employ of the Corporation or any Parent or
Subsidiary.

2. On the date of each Annual Stockholders Meeting held after the Underwriting
Date, each individual who is to continue to serve as an Eligible Director,
whether or not that individual is standing for re-election to the Board at that
particular Annual Meeting, shall automatically be granted a Non-Statutory Option
to purchase 2,500 shares of Common Stock, provided such individual has served as
a non-employee Board member for at least six (6) months. There shall be no
limit on the number of such 2,500-share option grants any one Eligible Director
may receive over his or her period of Board service, and non-employee Board
members who have previously been in the employ of the Corporation (or any Parent
or Subsidiary) or who have otherwise received one or more stock option grants
from the Corporation prior to the Underwriting Date shall be eligible to receive
one or more such annual option grants over their period of continued Board
service.

B. Exercise Price.
--------------

1. The exercise price per share shall be equal to one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.

2. The exercise price shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.

C. Option Term. Each option shall have a term of ten (10) years measured from
-----------
the option grant date.

D. Exercise and Vesting of Options. Each option shall be immediately
-------------------------------
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each initial 10,000 share grant shall vest,
and the Corporation's repurchase right shall lapse, in a series of thirty-six
(36) successive equal monthly installments upon the Optionee's completion of
each month of Board

19.
<PAGE>

service over the thirty-six (36)-month period measured from the option grant
date. Each annual 2,500 share automatic option shall be fully-vested when
granted.

E. Limited Transferability of Options. Each option under this Article Five
----------------------------------
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.

F. Termination of Board Service. The following provisions shall govern the
----------------------------
exercise of any options held by the Optionee at the time the Optionee ceases to
serve as a Board member:

(i) The Optionee (or, in the event of Optionee's death, the personal
representative of the Optionee's estate or the person or persons to whom
the option is transferred pursuant to the Optionee's will or the laws of
inheritance or the designated beneficiary or beneficiaries of such option)
shall have a twelve (12)-month period following the date of such cessation
of Board service in which to exercise each such option.

(ii) During the twelve (12)-month exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares of
Common Stock for which the option is exercisable at the time of the
Optionee's cessation of Board service.

(iii) Should the Optionee cease to serve as a Board member by reason of death or
Permanent Disability, then all shares at the time subject to the option
shall immediately vest so that such option may, during the twelve (12)-
month exercise period following such cessation of Board service, be
exercised for all or any portion of those shares as fully-vested shares of
Common Stock.

20.
<PAGE>

(iv) In no event shall the option remain exercisable after the expiration of the
option term. Upon the expiration of the twelve (12)-month exercise period
or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Board service for any reason other than death
or Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.

II. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction, the shares of Common Stock at the
time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).

B. In connection with any Change in Control, the shares of Common Stock at the
time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the effective date of the Change in Control, become exercisable for all of the
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. Each
such option shall remain exercisable for such fully-vested option shares until
the expiration or sooner termination of the option term or the surrender of the
option in connection with a Hostile Take-Over.

C. All outstanding repurchase rights shall automatically terminate, and the
shares of Common Stock subject to those terminated rights shall immediately vest
in full, in the event of any Corporate Transaction or Change in Control.

D. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each of his or her
outstanding automatic option grants. The Optionee shall in return be entitled
to a cash distribution from the Corporation in an amount equal to the excess of
(i) the Take-Over Price of the shares of Common Stock at the time subject to
each surrendered option (whether or not the Optionee is otherwise at the time
vested in those shares) over (ii) the aggregate exercise price payable for such
shares. Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Board
or any Plan Administrator shall be required at the time of the actual option
surrender and cash distribution.

21.
<PAGE>

E. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
--------
securities shall remain the same.

F. The grant of options under the Automatic Option Grant Program shall in no
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

III. REMAINING TERMS

The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.

22.
<PAGE>

ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
---------------------------------

I. OPTION GRANTS

The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years for which the Director Fee Option Grant
Program is to be in effect. For each such calendar year the program is in
effect, each non-employee Board member may elect to apply all or any portion of
the annual retainer fee otherwise payable in cash for his or her service on the
Board for that year to the acquisition of a special option grant under this
Director Fee Option Grant Program. Such election must be filed with the
Corporation's Chief Financial Officer prior to first day of the calendar year
for which the annual retainer fee which is the subject of that election is
otherwise payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director Fee Option
Grant Program on the first trading day in January in the calendar year for which
the annual retainer fee which is the subject of that election would otherwise be
payable in cash.

II. OPTION TERMS

Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.

A. Exercise Price.
--------------

1. The exercise price per share shall be thirty-three and one-third percent
(33-1/3%) of the Fair Market Value per share of Common Stock on the option grant
date.

X = A / (B x 66-2/3%), where

X is the number of option shares,

A is the portion of the annual retainer fee subject to the non-
employee Board member's election, and

23.
<PAGE>

B is the Fair Market Value per share of Common Stock on the
option grant date.

C. Exercise and Term of Options. The option shall become exercisable in a
----------------------------
series of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Board service during the calendar year in
which the option is granted. Each option shall have a maximum term of ten (10)
years measured from the option grant date.

D. Limited Transferability of Options. Each option under this Article Six may,
----------------------------------
in connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Six, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.

E. Termination of Board Service. Should the Optionee cease Board service for
----------------------------
any reason (other than death or Permanent Disability) while holding one or more
options under this Director Fee Option Grant Program, then each such option
shall remain exercisable, for any or all of the shares for which the option is
exercisable at the time of such cessation of Board service, until the earlier of
-------
(i) the expiration of the ten (10)-year option term or (ii) the expiration of
the three (3)-year period measured from the date of such cessation of Board
service. However, each option held by the Optionee under this Director Fee
Option Grant Program at the time of his or her cessation of Board service shall
immediately terminate and cease to remain outstanding with respect to any and
all shares of Common Stock for which the option is not otherwise at that time
exercisable.

F. Death or Permanent Disability. Should the Optionee's service as a Board
-----------------------------
member cease by reason of death or Permanent Disability, then each option held
by such Optionee under this Director Fee Option Grant Program shall immediately
become exercisable for all the shares of Common Stock at the time subject to
that option, and the option may be exercised for any or all of those shares as
fully-vested shares until the earlier of (i) the expiration of the ten (10)-year
-------
option term or (ii) the expiration of the three (3)-year period measured from
the date of such cessation of Board service. In the event of the Optionee's
death while holding such option, the option may be exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or the laws of inheritance
or by the designated beneficiary or beneficiaries of such option.

24.
<PAGE>

Should the Optionee die after cessation of Board service but while
holding one or more options under this Director Fee Option Grant Program, then
each such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's cessation of Board service
(less any shares subsequently purchased by Optionee prior to death), by the
personal representative of the Optionee's estate or by the person or persons to
whom the option is transferred pursuant to the Optionee's will or the laws of
inheritance or by the designated beneficiary or beneficiaries of such option.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the three
- -------
(3)-year period measured from the date of the Optionee's cessation of Board
service.

III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

A. In the event of any Corporate Transaction while the Optionee remains a Board
member, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become exercisable for all the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. Each such outstanding option shall terminate
immediately following the Corporate Transaction, except to the extent assumed by
the successor corporation (or parent thereof) in such Corporate Transaction.
Any option so assumed and shall remain exercisable for the fully-vested shares
until the earlier of (i) the expiration of the ten (10)-year option term or (ii)
-------
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service.

B. In the event of a Change in Control while the Optionee remains in Service,
each outstanding option held by such Optionee under this Director Fee Option
Grant Program shall automatically accelerate so that each such option shall
immediately become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully-vested shares of Common Stock. The option shall remain so exercisable
until the earliest to occur of (i) the expiration of the ten (10)-year option
--------
term, (ii) the expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Board service, (iii) the termination of the option
in connection with a Corporate Transaction or (iv) the surrender of the option
in connection with a Hostile Take-Over.

C. Upon the occurrence of a Hostile Take-Over, the Optionee shall have a thirty
(30)-day period in which to surrender to the Corporation each outstanding option
granted him or her under the Director Fee Option Grant Program. The Optionee
shall in return be entitled to a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the shares of Common
Stock at the time subject to each surrendered option (whether or not the
optionee is otherwise at the time exercisable for those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator
shall be required at the time of the actual option surrender and cash
distribution.

25.
<PAGE>

D. The grant of options under the Director Fee Option Grant Program shall in no
way affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

IV. REMAINING TERMS

The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.

26.
<PAGE>

ARTICLE SEVEN

MISCELLANEOUS
-------------

I. FINANCING

The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest
rate and the terms of repayment) shall be established by the Plan Administrator
in its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee or
the Participant in connection with the option exercise or share purchase.

II. TAX WITHHOLDING

A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.

B. The Plan Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan (other
than the options granted or the shares issued under the Automatic Option Grant
or Director Fee Option Grant Program) with the right to use shares of Common
Stock in satisfaction of all or part of the Withholding Taxes to which such
holders may become subject in connection with the exercise of their options or
the vesting of their shares. Such right may be provided to any such holder in
either or both of the following formats:

Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by the holder.

Stock Delivery: The election to deliver to the Corporation, at the
--------------
time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Withholding
Taxes) with an aggregate Fair Market Value equal to the percentage of the
Withholding Taxes (not to exceed one hundred percent (100%)) designated by the
holder.

27.
<PAGE>

III. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan became effective immediately on the Plan Effective Date. However,
the Salary Investment Option Grant Program and the Director Fee Option Grant
Program shall not be implemented until such time as the Primary Committee may
deem appropriate. Options may be granted under the Discretionary Option Grant
at any time on or after the Plan Effective Date, and the initial option grants
under the Automatic Option Grant Program were made on the Plan Effective Date to
any non-employee Board members who were eligible for such grants at that time.
Stockholder approval of the Plan was obtained within twelve (12) months after
the Plan Effective Date.

B. The Plan was amended by the Board on October 22, 1999 in order to increase
the number of shares of Common Stock reserved for issuance under the Plan by
additional Two Million Five Hundred Thousand (2,500,000) shares from Seven
Million Two Hundred Ninety Thousand (7,290,000) to Nine Million Two Hundred
Ninety Thousand (9,290,000) shares. The amendment (the "October 1999 Amendment")
received stockholder approval at a Special Stockholders Meeting held on March 7,
2000.

C. The Plan shall serve as the successor to the Predecessor Plan, and no
further option grants or direct stock issuances shall be made under the
Predecessor Plan after the Plan Effective Date. All options outstanding under
the Predecessor Plan on the Plan Effective Date were incorporated into the Plan
at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition of
shares of Common Stock.

D. One or more provisions of the Plan, including (without limitation) the
option/vesting acceleration provisions of Article Two relating to Corporate
Transactions and Changes in Control, may, in the Plan Administrator's
discretion, be extended to one or more options incorporated from the Predecessor
Plan which do not otherwise contain such provisions.

E. The Plan shall terminate upon the earliest to occur of (i) June 30, 2009,
--------
(ii) the date on which all shares available for issuance under the Plan shall
have been issued as fully-vested shares or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Should the Plan
terminate on June 30, 2009, then all option grants and unvested stock issuances
outstanding at that time shall continue to have force and effect in accordance
with the provisions of the documents evidencing such grants or issuances.

28.
<PAGE>

IV. AMENDMENT OF THE PLAN

A. The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.

B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained stockholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such stockholder approval is not obtained
within twelve (12) months after the date the first such excess issuances are
made, then (i) any unexercised options granted on the basis of such excess
shares shall terminate and cease to be outstanding and (ii) the Corporation
shall promptly refund to the Optionees and the Participants the exercise or
purchase price paid for any excess shares issued under the Plan and held in
escrow, together with interest (at the applicable Short Term Federal Rate) for
the period the shares were held in escrow, and such shares shall thereupon be
automatically cancelled and cease to be outstanding.

V. USE OF PROCEEDS

Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.

VI. REGULATORY APPROVALS

A. The implementation of the Plan, the granting of any stock option under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
granted option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.

B. No shares of Common Stock or other assets shall be issued or delivered under
the Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of any
stock exchange (or the Nasdaq National Market, if applicable) on which Common
Stock is then listed for trading.

29.
<PAGE>

VII. NO EMPLOYMENT/SERVICE RIGHTS

Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.

30.
<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Plan:

A. Automatic Option Grant Program shall mean the automatic option grant program
------------------------------
in effect under Article Five of the Plan.

B. Board shall mean the Corporation's Board of Directors.
-----

C. Change in Control shall mean a change in ownership or control of the
-----------------
Corporation effected through either of the following transactions:

(i) the acquisition, directly or indirectly by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders, or

(ii) a change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members
ceases, by reason of one or more contested elections for Board membership,
to be comprised of individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have been elected or
nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in
office at the time the Board approved such election or nomination.

D. Code shall mean the Internal Revenue Code of 1986, as amended.
----

E. Common Stock shall mean the Corporation's common stock.
------------

F. Corporate Transaction shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:

(i) a merger or consolidation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or

(ii) the sale, transfer or other disposition of all or substantially all of the
Corporation's assets in complete liquidation or dissolution of the
Corporation.

A-1.
<PAGE>

G. Corporation shall mean Stamps.com Inc., a Delaware corporation, and any
-----------
corporate successor to all or substantially all of the assets or voting stock of
Stamps.com Inc.. which shall by appropriate action adopt the Plan.

H. Director Fee Option Grant Program shall mean the special stock option grant
---------------------------------
in effect for non-employee Board members under Article Six of the Plan.

I. Discretionary Option Grant Program shall mean the discretionary option grant
----------------------------------
program in effect under Article Two of the Plan.

J. Eligible Director shall mean a non-employee Board member eligible to
-----------------
participate in the Automatic Option Grant or Director Fee Option Grant Program
in accordance with the eligibility provisions of Articles One, Five and Six.

K. Employee shall mean an individual who is in the employ of the Corporation
--------
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method of
performance.

L. Exercise Date shall mean the date on which the Corporation shall have
-------------
received written notice of the option exercise.

M. Fair Market Value per share of Common Stock on any relevant date shall be
-----------------
determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the
National Association of Securities Dealers on the Nasdaq National Market.
If there is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price on
the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common
Stock on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price
is officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock on the
date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

(iii) For purposes of any option grants made on the Underwriting Date, the Fair
Market Value shall be deemed to be equal to the price per share at which
the Common Stock is to be sold in the initial public offering pursuant to
the Underwriting Agreement.

A-2.

<PAGE>

N. Hostile Take-Over shall mean the acquisition, directly or indirectly, by any
-----------------
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to accept.

O. Incentive Option shall mean an option which satisfies the requirements of
----------------
Code Section 422.

P. Involuntary Termination shall mean the termination of the Service of any
-----------------------
individual which occurs by reason of:

(i) such individual's involuntary dismissal or discharge by the Corporation for
reasons other than Misconduct, or

(ii) such individual's voluntary resignation following (A) a change in his or
her position with the Corporation which materially reduces his or her
duties and responsibilities or the level of management to which he or she
reports, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and target bonus under any corporate-
performance based bonus or incentive programs) by more than fifteen percent
(15%) or (C) a relocation of such individual's place of employment by more
than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.

Q. Misconduct shall mean the commission of any act of fraud, embezzlement or
----------
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee, Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).

R. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
--------

S. Non-Statutory Option shall mean an option not intended to satisfy the
--------------------
requirements of Code Section 422.

T. Optionee shall mean any person to whom an option is granted under the
--------
Discretionary Option Grant, Salary Investment Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.

A-3.
<PAGE>

U. Parent shall mean any corporation (other than the Corporation) in an
------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing 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.

V. Participant shall mean any person who is issued shares of Common Stock under
-----------
the Stock Issuance Program.

W. Permanent Disability or Permanently Disabled shall mean the inability of the
--------------------------------------------
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant and Director Fee
Option Grant Programs, Permanent Disability or Permanently Disabled shall mean
the inability of the non-employee Board member to perform his or her usual
duties as a Board member by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.

X. Plan shall mean the Corporation's 1999 Stock Incentive Plan, as set forth in
----
this document.

Y. Plan Administrator shall mean the particular entity, whether the Primary
------------------
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

Z. Plan Effective Date shall mean the date the Plan shall become effective and
-------------------
shall be coincident with the Underwriting Date.

AA. Predecessor Plan shall mean the Corporation's 1998 Stock Plan in effect
----------------
immediately prior to the Plan Effective Date hereunder.

BB. Primary Committee shall mean the committee of two (2) or more non-employee
-----------------
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders and to
administer the Salary Investment Option Grant Program solely with respect to the
selection of the eligible individuals who may participate in such program.

CC. Salary Investment Option Grant Program shall mean the salary investment
--------------------------------------
option grant program in effect under Article Three of the Plan.

DD. Secondary Committee shall mean a committee of one or more Board members
-------------------
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.

A-4.
<PAGE>

EE. Section 16 Insider shall mean an officer or director of the Corporation
------------------
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.

FF. Service shall mean the performance of services for the Corporation (or any
-------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant or stock issuance.

GG. Stock Exchange shall mean either the American Stock Exchange or the New
--------------
York Stock Exchange.

HH. Stock Issuance Agreement shall mean the agreement entered into by the
------------------------
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.

II. Stock Issuance Program shall mean the stock issuance program in effect
----------------------
under Article Four of the Plan.

JJ. Subsidiary shall mean any corporation (other than the Corporation) in an
----------
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing 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.

KK. Take-Over Price shall mean the greater of (i) the Fair Market Value per
--------------- -------
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile Take-
Over. However, if the surrendered option is an Incentive Option, the Take-Over
Price shall not exceed the clause (i) price per share.

LL. 10% Stockholder shall mean the owner of stock (as determined under Code
---------------
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).

MM. Underwriting Agreement shall mean the agreement between the Corporation and
----------------------
the underwriter or underwriters managing the initial public offering of the
Common Stock.

NN. Underwriting Date shall mean the date on which the Underwriting Agreement
-----------------
is executed and priced in connection with an initial public offering of the
Common Stock.

OO. Withholding Taxes shall mean the Federal, state and local income and
-----------------
employment withholding taxes to which the holder of Non-Statutory Options or
unvested shares of Common Stock may become subject in connection with the
exercise of those options or the vesting of those shares.

A-5.

<PAGE>

EXHIBIT 99.2

1999 Employee Stock Purchase Plan
<PAGE>

STAMPS.COM INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------

(As Amended and Restated on February 9, 2000)

I. PURPOSE OF THE PLAN

This Employee Stock Purchase Plan is intended to promote the interests
of Stamps.com Inc., a Delaware corporation, by providing eligible employees
with the opportunity to acquire a proprietary interest in the Corporation
through participation in a payroll-deduction based employee stock purchase plan
designed to qualify under Section 423 of the Code.

Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.

II. ADMINISTRATION OF THE PLAN

The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.

III. STOCK SUBJECT TO PLAN

A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The number of shares of Common Stock initially
reserved for issuance over the term of the Plan shall be limited to 300,000
shares.

B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of January each
calendar year during the term of the Plan, beginning with calendar year 2000, by
an amount equal to one percent (1%) of the total number of shares of Common
Stock outstanding on the last trading day in December of the immediately
preceding calendar year, but in no event shall any such annual increase exceed
521,571 shares.

C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and class of securities issuable under
the Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable in total by all Participants on any one Purchase Date,
(iv) the maximum
<PAGE>

number and/or class of securities by which the share reserve is to increase
automatically each calendar year pursuant to the provisions of Section III.B of
this Article One and (v) the number and class of securities and the price per
share in effect under each outstanding purchase right in order to prevent the
dilution or enlargement of benefits thereunder.

IV. OFFERING PERIODS

A. Shares of Common Stock shall be offered for purchase under the
Plan through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.

B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such offering period. However, the initial offering period shall
commence at the Effective Time and terminate on the last business day in July
2001. The next offering period shall commence on the first business day in
August 2001, and subsequent offering periods shall commence as designated by the
Plan Administrator.

C. Each offering period shall be comprised of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in February to the last business day in July each year and from the
first business day in August each year to the last business day in January in
the following year. However, the first Purchase Interval in effect under the
initial offering period shall commence at the Effective Time and terminate on
January 31, 2000.

D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new
offering period shall have a duration of twenty (24) months, unless a shorter
duration is established by the Plan Administrator within five (5) business days
following the start date of that offering period.

V. ELIGIBILITY

A. Each individual who is an Eligible Employee on the start date of
any offering period under the Plan may enter that offering period on such start
date or on any subsequent Semi-Annual Entry Date within that offering period,
provided he or she remains an Eligible Employee.

B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Semi-Annual Entry Date within that offering period on which he or she
is an Eligible Employee.

2.
<PAGE>

C. The date an individual enters an offering period shall be
designated his or her Entry Date for purposes of that offering period.

D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.

VI. PAYROLL DEDUCTIONS

A. The payroll deduction authorized by the Participant for purposes
of acquiring shares of Common Stock during an offering period may be any
multiple of one percent (1%) of the Cash Earnings paid to the Participant during
each Purchase Interval within that offering period, up to a maximum of fifteen
percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:

(i) The Participant may, at any time during the offering period,
reduce his or her rate of payroll deduction to become effective as soon as
possible after filing the appropriate form with the Plan Administrator.
The Participant may not, however, effect more than one (1) such reduction
per Purchase Interval.

(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the fifteen percent
(15%) maximum) shall become effective on the start date of the first
Purchase Interval following the filing of such form.

B. Payroll deductions shall begin on the first pay day
administratively feasible following the Participant's Entry Date into the
offering period and shall (unless sooner terminated by the Participant) continue
through the pay day ending with or immediately prior to the last day of that
offering period. The amounts so collected shall be credited to the
Participant's book account under the Plan, but no interest shall be paid on the
balance from time to time outstanding in such account. The amounts collected
from the Participant shall not be required to be held in any segregated account
or trust fund and may be commingled with the general assets of the Corporation
and used for general corporate purposes.

C. Payroll deductions shall automatically cease upon the termination
of the Participant's purchase right in accordance with the provisions of the
Plan.

D. The Participant's acquisition of Common Stock under the Plan on
any Purchase Date shall neither limit nor require the Participant's acquisition
of Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.

3.
<PAGE>

VII. PURCHASE RIGHTS

A. Grant of Purchase Right. A Participant shall be granted a
-----------------------
separate purchase right for each offering period in which he or she
participates. The purchase right shall be granted on the Participant's Entry
Date into the offering period and shall provide the Participant with the right
to purchase shares of Common Stock, in a series of successive installments over
the remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.

Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.

B. Exercise of the Purchase Right. Each purchase right shall be
------------------------------
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.

C. Purchase Price. The purchase price per share at which Common
--------------
Stock will be purchased on the Participant's behalf on each Purchase Date within
the offering period shall be equal to eighty-five percent (85%) of the lower of
-----
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.

D. Number of Purchasable Shares. The number of shares of Common
----------------------------
Stock purchasable by a Participant on each Purchase Date during the offering
period shall be the number of whole shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Interval ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed 1,200 shares, subject to periodic adjustments in the event of certain
changes in the Corporation's capitalization. In addition, the maximum number of
shares of Common Stock purchasable in total by all Participants on any one
Purchase Date shall not exceed 75,000 shares, subject to periodic adjustments in
the event of certain changes in the Corporation's capitalization. However, the
Plan Administrator shall have the discretionary authority, exercisable prior to
the start of any offering period under the Plan, to increase or decrease the
limitations to be in effect for the number of shares purchasable per Participant
and in total by all Participants on each Purchase Date during that offering
period.

4.
<PAGE>

E. Excess Payroll Deductions. Any payroll deductions not applied to
-------------------------
the purchase of shares of Common Stock on any Purchase Date because they are
not sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitations on the maximum number of shares purchasable per Participant or in
total by all Participants on the Purchase Date shall be promptly refunded.

F. Termination of Purchase Right. The following provisions shall
-----------------------------
govern the termination of outstanding purchase rights:

(i) A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan Administrator
(or its designate), and no further payroll deductions shall be collected
from the Participant with respect to the terminated purchase right. Any
payroll deductions collected during the Purchase Interval in which such
termination occurs shall, at the Participant's election, be immediately
refunded or held for the purchase of shares on the next Purchase Date. If
no such election is made at the time such purchase right is terminated,
then the payroll deductions collected with respect to the terminated right
shall be refunded as soon as possible.

(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the offering period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must re-
enroll in the Plan (by making a timely filing of the prescribed enrollment
forms) on or before his or her scheduled Entry Date into that offering
period.

(iii) Should the Participant cease to remain an Eligible
Employee for any reason (including death, disability or change in status)
while his or her purchase right remains outstanding, then that purchase
right shall immediately terminate, and all of the Participant's payroll
deductions for the Purchase Interval in which the purchase right so
terminates shall be immediately refunded. However, should the Participant
cease to remain in active service by reason of an approved unpaid leave of
absence, then the Participant shall have the right, exercisable up until
the last business day of the Purchase Interval in which such leave
commences, to (a) withdraw all the payroll deductions collected to date on
his or her behalf for that Purchase Interval or (b) have such funds held
for the purchase of shares on his or her behalf on the next scheduled
Purchase Date. In no event, however, shall any further payroll deductions
be collected on the Participant's behalf during such leave. Upon the
Participant's return to active service (x) within ninety (90) days
following the commencement of such leave or (y) prior to the expiration of
any longer period for which such Participant's right to reemployment with
the Corporation is guaranteed by statute or contract, his or her payroll
deductions under the Plan shall automatically resume at the rate in

5.
<PAGE>

effect at the time the leave began, unless the Participant withdraws from
the Plan prior to his or her return. An individual who returns to active
employment following a leave of absence which exceeds in duration the
applicable (x) or (y) time period will be treated as a new Employee for
purposes of subsequent participation in the Plan and must accordingly re-
enroll in the Plan (by making a timely filing of the prescribed enrollment
forms) on or before his or her scheduled Entry Date into the offering
period.

G. Change in Control. Each outstanding purchase right shall
-----------------
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
-----
Stock on the Participant's Entry Date into the offering period in which such
Change in Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in total
by all Participants.

The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.

H. Proration of Purchase Rights. Should the total number of shares
----------------------------
of Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.

I. Assignability. The purchase right shall be exercisable only by
-------------
the Participant and shall not be assignable or transferable by the Participant.

J. Stockholder Rights. A Participant shall have no stockholder
------------------
rights with respect to the shares subject to his or her outstanding purchase
right until the shares are purchased on the Participant's behalf in accordance
with the provisions of the Plan and the Participant has become a holder of
record of the purchased shares.

VIII. ACCRUAL LIMITATIONS

A. No Participant shall be entitled to accrue rights to acquire
Common Stock pursuant to any purchase right outstanding under this Plan if and
to the extent such accrual, when aggregated with (i) rights to purchase Common
Stock accrued under any other purchase right granted under this Plan and (ii)
similar rights accrued under other employee stock purchase plans

6.
<PAGE>

(within the meaning of Code Section 423) of the Corporation or any Corporate
Affiliate, would otherwise permit such Participant to purchase more than Twenty-
Five Thousand Dollars ($25,000.00) worth of stock of the Corporation or any
Corporate Affiliate (determined on the basis of the Fair Market Value per share
on the date or dates such rights are granted) for each calendar year such rights
are at any time outstanding.

B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:

(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each successive
Purchase Date during the offering period on which such right remains
outstanding.

(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock under
one or more other purchase rights at a rate equal to Twenty-Five Thousand
Dollars ($25,000.00) worth of Common Stock (determined on the basis of the
Fair Market Value per share on the date or dates of grant) for each
calendar year such rights were at any time outstanding.

C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.

D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.

IX. EFFECTIVE DATE AND TERM OF THE PLAN

A. The Plan was adopted by the Board on June 3, 1999 and shall become
effective at the Effective Time, provided no purchase rights granted under the
--------
Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the stockholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such stockholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which the Plan is adopted by the Board, the Plan shall terminate and
have no further force or effect, and all sums collected from Participants during
the initial offering period hereunder shall be refunded.

7.
<PAGE>

B. Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the last business day in July 2009, (ii) the date on
--------
which all shares available for issuance under the Plan shall have been sold
pursuant to purchase rights exercised under the Plan or (iii) the date on which
all purchase rights are exercised in connection with a Corporate Transaction.
No further purchase rights shall be granted or exercised, and no further payroll
deductions shall be collected, under the Plan following such termination.

X. AMENDMENT OF THE PLAN

A. The Board may alter, amend, suspend or terminate the Plan at any
time to become effective immediately following the close of any Purchase
Interval. However, the Plan may be amended or terminated immediately upon Board
action, if and to the extent necessary to assure that the Corporation will not
recognize, for financial reporting purposes, any compensation expense in
connection with the shares of Common Stock offered for purchase under the Plan,
should the financial accounting rules applicable to the Plan at the Effective
Time be subsequently revised so as to require the Corporation to recognize
compensation expense in the absence of such amendment or termination.

B. In no event may the Board effect any of the following amendments
or revisions to the Plan without the approval of the Corporation's stockholders:
(i) increase the number of shares of Common Stock issuable under the Plan,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) alter the purchase price formula so as to
reduce the purchase price payable for the shares of Common Stock purchasable
under the Plan or (iii) modify the eligibility requirements for participation in
the Plan.

C. The Plan was amended and restated by the Board on February 9, 2000
in order to establish March 1, 2000 as a special Semi-Annual Entry Date in
calendar year 2000 for the offering period which commenced on June 24, 1999 upon
the execution of the Underwriting Agreement for the initial public offering of
the Common Stock.

XI. GENERAL PROVISIONS

A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.

B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.

C. The provisions of the Plan shall be governed by the laws of the
State of California without resort to that State's conflict-of-laws rules.

8.
<PAGE>

Schedule A
----------

Corporations Participating in
Employee Stock Purchase Plan
As of the Effective Time
------------------------

Stamps.com Inc.

<PAGE>

APPENDIX
--------

The following definitions shall be in effect under the Plan:

A. Board shall mean the Corporation's Board of Directors.
-----

B. Cash Earnings shall mean the (i) regular base salary paid to a
-------------
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, profit-sharing distributions and
other incentive-type payments received during such period. Such Cash Earnings
shall be calculated before deduction of (A) any income or employment tax
withholdings or (B) any and all contributions made by the Participant to any
Code Section 401(k) salary deferral plan or Code Section 125 cafeteria benefit
program now or hereafter established by the Corporation or any Corporate
Affiliate. However, Cash Earnings shall not include any contributions made on
the Participant's behalf by the Corporation or any Corporate Affiliate to any
employee benefit or welfare plan now or hereafter established (other than Code
Section 401(k) or Code Section 125 contributions deducted from such Cash
Earnings).

C. Change in Control shall mean a change in ownership of the
-----------------
Corporation pursuant to any of the following transactions:

(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or

(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation
or dissolution of the Corporation, or

(iii) the acquisition, directly or indirectly by an person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by or is under common
control with the Corporation) of beneficial ownership (within the meaning
of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly
to the Corporation's stockholders.

C. Code shall mean the Internal Revenue Code of 1986, as amended.
----

D. Common Stock shall mean the Corporation's common stock.
------------

A-1.
<PAGE>

E. Corporate Affiliate shall mean any parent or subsidiary
-------------------
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.

G. Corporation shall mean Stamps.com Inc., a Delaware corporation,
-----------
and any corporate successor to all or substantially all of the assets or voting
stock of Stamps.com Inc., which shall by appropriate action adopt the Plan.

H. Effective Time shall mean the time at which the Underwriting
--------------
Agreement is executed and the Common Stock priced for the initial public
offering of the Common Stock. Any Corporate Affiliate which becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its employee-Participants.

I. Eligible Employee shall mean any person who is employed by a
-----------------
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).

J. Entry Date shall mean the date an Eligible Employee first
----------
commences participation in the offering period in effect under the Plan. The
earliest Entry Date under the Plan shall be the Effective Time.

K. Fair Market Value per share of Common Stock on any relevant date
-----------------
shall be determined in accordance with the following provisions:

(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.

(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price per
share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.

(iii) For purposes of the initial offering period which begins
at the Effective Time, the Fair Market Value shall be deemed to be equal to
the price per share at which the Common Stock is sold in the initial public
offering pursuant to the Underwriting Agreement.

A-2.
<PAGE>

L. 1933 Act shall mean the Securities Act of 1933, as amended.
--------

M. Participant shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.

N. Participating Corporation shall mean the Corporation and such
-------------------------
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.

O. Plan shall mean the Corporation's 1999 Employee Stock Purchase
----
Plan, as set forth in this document.

P. Plan Administrator shall mean the committee of two (2) or more
------------------
Board members appointed by the Board to administer the Plan.

Q. Purchase Date shall mean the last business day of each Purchase
-------------
Interval. The initial Purchase Date shall be January 31, 2000.

R. Purchase Interval shall mean each successive six (6)-month period
-----------------
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.

S. Semi-Annual Entry Date shall mean the first business day in
----------------------
February and August each year which an Eligible Employee may first enter an
offering period. However, for the initial offering period under the Plan which
began on June 24, 1999 upon the execution of the Underwriting Agreement and the
pricing of the Common Stock for the initial public offering of such Common
Stock, there shall be a special Semi-Annual Entry Date in calendar year 2000,
and that Semi-Annual Entry Date shall be March 1, 2000.

T. Stock Exchange shall mean either the American Stock Exchange or
--------------
the New York Stock Exchange.

U. Underwriting Agreement shall mean the agreement between the
----------------------
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

A-3.

<PAGE>

EXHIBIT 99.3

iShip.com, Inc. Amended and Restated 1997 Stock Plan
<PAGE>

ISHIP.COM, INC.

AMENDED AND RESTATED 1997 STOCK PLAN

1. Purposes of the Plan. The purposes of this Amended and Restated 1997
--------------------
Stock Plan are to attract and retain the best available personnel for positions
of substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder. 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 appointed
-------------
pursuant to Section 4 of the Plan.

(b) "Board" means the Board of Directors of the Company.
-----

(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.

(e) "Common Stock" means the Common Stock of the Company.
------------

(f) "Company" means iShip.com, Inc., a Washington corporation.
-------

(g) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.

(h) "Continuous Status as an Employee or Consultant" means the absence
----------------------------------------------
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Administrator, provided that such leave
is for a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
in the case of transfers between locations of the Company or between the
Company, its Subsidiaries or their respective successors. For purposes of this
Plan, a change in status from an Employee to a Consultant or from a Consultant
<PAGE>

to an Employee will not constitute an interruption of Continuous Status as an
Employee or Consultant.

(i) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.

(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.

(k) "Fair Market Value" means, as of any date, the fair market 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 National Market of the
National Association of Securities Dealers, Inc. Automated Quotation ("Nasdaq")
------
System, 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 system or
exchange, or the exchange with the greatest volume of trading in Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable;

(ii) If the Common Stock is quoted on the Nasdaq System (but not on
the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time 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 thereof shall be determined in good faith by the
Administrator.

(l) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.

(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.

(n) "Option" means a stock option granted pursuant to the Plan.
------

(o) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.

-2-
<PAGE>

(p) "Optionee" means an Employee or Consultant who receives an Option
--------
or a Stock Purchase Right.

(q) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.

(r) "Plan" means this Amended and Restated 1997 Stock Plan.
----

(s) "Reporting Person" means an officer, director, or greater than ten
----------------
percent shareholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.

(t) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 10 below.

(u) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.

(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.

(w) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.

(x) "Stock Purchase Right" means the right to purchase Common Stock
--------------------
pursuant to Section 10 below.

(y) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.

3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 6,160,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
In addition, any Shares of Common Stock which are retained by the Company upon
exercise of an Option or Stock Purchase Right in order to satisfy the exercise
or purchase price for such Option or Stock Purchase Right or any withholding
taxes due with respect to such exercise shall be treated as not issued and shall
continue to be available under the Plan. Shares repurchased by the Company
pursuant to any repurchase right which the Company may have shall not be
available for future grant under the Plan.

-3-
<PAGE>

4. Administration of the Plan.
--------------------------

(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.

(b) Plan Procedure After the Date, if any, Upon Which the Company
-------------------------------------------------------------
Becomes Subject to the Exchange Act.
- -----------------------------------

(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
grants under the Plan may be made by different bodies with respect to directors,
non-director officers and Employees or Consultants who are not Reporting
Persons.

(ii) Administration With Respect to Reporting Persons. With respect
------------------------------------------------
to grants of Options or Stock Purchase Rights to Employees who are Reporting
Persons, such grants shall be made by (A) the Board if the Board may make grants
to Reporting Persons under the Plan in compliance with Rule 16b-3, or (B) a
committee designated by the Board to make such grants under the Plan, which
committee shall be constituted in such a manner as to permit grants under the
Plan to comply with Rule 16b-3. Once appointed, such committee shall continue
to serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the committee and thereafter directly make grants to Reporting
Persons under the Plan, all to the extent permitted by Rule 16b-3.

(iii) Administration With Respect to Consultants and Other Employees.
---------------------------------------------------------------
With respect to grants of Options or Stock Purchase Rights to Employees or
Consultants who are not Reporting Persons, the Plan shall be administered by (A)
the Board or (B) a committee designated by the Board, which committee shall be
constituted in such a manner as to satisfy the legal requirements relating to
the administration of incentive stock option plans, if any, of the Code and of
any applicable Stock Exchange (the "Applicable Laws"). Once appointed, such
---------------
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.

(c) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:

(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;

-4-
<PAGE>

(ii) to select the Consultants and Employees to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;

(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;

(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;

(v) to approve forms of agreement for use under the Plan;

(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted hereunder;

(vii) to determine whether and under what circumstances an Option may
be settled in cash under Section 9(f) instead of Common Stock;

(viii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered by such
Option shall have declined since the date the Option was granted;

(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights; and

(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan; and

(xi) in order to fulfill the purposes of the Plan and without amending
the Plan, to modify grants of Options or Stock Purchase Rights to participants
who are foreign nationals or employed outside of the United States in order to
recognize differences in local law, tax policies or customs.

(d) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
holders of Options or Stock Purchase Rights.

5. Eligibility.
-----------

(a) Recipients of Grants. Nonstatutory Stock Options and Stock
--------------------
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has
been granted an Option or Stock Purchase Right may, if he or she is otherwise
eligible, be granted additional Options or Stock Purchase Rights.

(b) Type of Option. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However,

-5-
<PAGE>

notwithstanding such designations, to the extent that the aggregate Fair Market
Value of Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be taken into
account in the order in which they were granted, and the Fair Market Value of
the Shares subject to an Incentive Stock Option shall be determined as of the
date of the grant of such Option.

(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with such Optionee's right or the Company's right
to terminate his or her employment or consulting relationship at any time, with
or without cause.

6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.

7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the 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 Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.

8. Option Exercise Price and Consideration.
---------------------------------------

(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board and
set forth in the applicable agreement, but shall be subject to the following:

(i) In the case of an Incentive Stock Option that is:

(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, 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 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) In the case of a Nonstatutory Stock Option that is:

-6-
<PAGE>

(A) granted to a person who, at the time of the grant of
such Option, 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 per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.

(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.

(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.

9. Exercise of Option.
------------------

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, and reflected in the written option
agreement, which may include vesting requirements and/or performance criteria
with respect to the Company and/or the Optionee; provided that such Option shall
become exercisable at the rate of at least twenty percent (20%) per year over
five (5) years from the date the Option is granted. In the event that any of the
Shares issued upon exercise of an Option should be subject to a right of
repurchase in the Company's favor, such repurchase right shall lapse at the rate
of at least twenty percent (20%) per year over five (5) years from the date the
Option is granted.

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

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the

-7-
<PAGE>

person entitled to exercise the Option and the Company has received full payment
for the Shares with respect to which the Option is exercised. Full payment may,
as authorized by the Board, consist of any consideration and method of payment
allowable under Section 8(b) 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 stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, not withstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be 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 Employment or Consulting Relationship. Subject to
----------------------------------------------------
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.

(i) Notwithstanding Section 9(b) above, in the event of termination of
an Optionee's Continuous Status as an Employee or Consultant as a result of his
or her total and permanent disability (within the meaning of Section 22(e)(3) of
the Code), Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination. To
the extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.

(ii) In the event of termination of an Optionee's Continuous Status as
an Employee or Consultant as a result of a disability which does not fall within
the meaning of total and permanent disability (as set forth in Section 22(e)(3)
of the Code), Optionee may, but only within six (6) months from the date of such
termination (but in no event later than the

-8-
<PAGE>

expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. However, to the extent that such Optionee fails
to exercise an Option which is an Incentive Stock Option ("ISO") (within the
---
meaning of Section 422 of the Code) within three (3) months of the date of such
termination, the Option will not qualify for ISO treatment under the Code. To
the extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within six months (6) from the date of termination, the Option shall
terminate.

(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option, or within thirty (30) days following termination of
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised, at any time within six (6) months following the date of death (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
of the right to exercise that had accrued at the date of death or, if earlier,
the date of termination of Optionee's Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.

(e) Rule 16b-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.

(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

10. 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 of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of the offer, or, in the case of
a person owning 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 price shall not be less than one hundred percent (100%) of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the

-9-
<PAGE>

Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."

(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 employment 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 purchase 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 such rate as the
Administrator may determine, but at a minimum rate of 20% per year.

(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. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.

(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder 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 12
of the Plan.

11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of Shares
previously acquired from the Company, have been owned by the Optionee for more
than six months on the date of surrender, and (ii) have a fair market value on
the date of surrender equal to or less than Optionee's marginal tax rate times
the ordinary income recognized, or (d) by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option, or the Shares to be
issued in connection with the Stock Purchase Right, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, 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
(the "Tax Date").
--------

Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.

-10-
<PAGE>

All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:

(a) the election must be made on or prior to the applicable Tax Date;

(b) once made, the election shall be irrevocable as to the particular
Shares of the Option or Stock Purchase Right as to which the election is made;
and

In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.

12. Adjustments Upon Changes in Capitalization, Merger or Certain Other
-------------------------------------------------------------------
Transactions.
- ------------

(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
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 stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.

(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.

-11-
<PAGE>

(i) 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, or other change in control (a "Change in Control"), the
exercisability of each outstanding Option shall automatically be accelerated
completely so that one hundred percent (100%) of the number of shares of Common
Stock covered by such Option shall be fully vested upon the consummation of the
Change in Control; provided, however, that each outstanding Option shall
automatically be accelerated by only one-third (1/3) of the number of shares of
Common Stock covered by such Option that are unvested at the consummation of the
Change in Control if and to the extent: (A) such Option is either to be assumed
by the successor corporation at the consummation of the Change of Control or be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation at the consummation of the Change in Control, or (B) such
Option is to be replaced by a comparable cash incentive program of the successor
corporation based on the value of the Option at the time of the consummation of
the Change in Control, or (C) the acceleration of such Option is subject to
other limitations imposed by the Administrator at the time of grant.

(ii) With respect to executive officers, the exercisability of each
outstanding Option held by such executive officer shall be accelerated
completely so that one hundred percent (100%) of the number of shares of Common
Stock covered by such Option are fully vested if such executive officer is
terminated by the acquiring corporation within twelve (12) months after the
consummation of a Change in Control.

(iii) The Administrator shall have the authority, in the
Administrator's sole discretion, to provide for the automatic acceleration of
any outstanding Option upon the occurrence of a Change in Control, but only to
the extent that such acceleration does not interfere with any "pooling of
interests" accounting treatment used in connection with the Change in Control.

(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.

13. Non-Transferability of Options and Stock Purchase Rights. Options and
--------------------------------------------------------
Stock Purchase Rights 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 or purchased during the lifetime of
the Optionee or Stock Purchase Rights Holder only by the Optionee or Stock
Purchase Rights Holder.

14. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the

-12-
<PAGE>

grant date shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.

15. Amendment and Termination of the Plan.
-------------------------------------

(a) Authority to Amend or Terminate. The Board may at any time amend,
-------------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of any Stock Exchange), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.

(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.

16. Conditions Upon Issuance of Shares. 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 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. As a condition to the exercise of an
Option, the Company may require the person exercising such Option 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 by law.

17. 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. 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.

18. Agreements. Options and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.

19. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under

-13-
<PAGE>

applicable state and federal law and the rules of any Stock Exchange upon which
the Common Stock is listed. All Options and Stock Purchase Rights issued under
the Plan shall become void in the event such approval is not obtained.

20. Information and Documents to Optionees and Purchasers. The Company
-----------------------------------------------------
shall provide financial statements at least annually to each Optionee and to
each individual who acquired Shares pursuant to the Plan, during the period such
Optionee or purchaser has one or more Options or Stock Purchase Rights
outstanding, and in the case of an individual who acquired Shares pursuant to
the Plan, during the period such individual owns such Shares. The Company shall
not be required to provide such information if the issuance of Options or Stock
Purchase Rights under the Plan is limited to key employees whose duties in
connection with the Company assure their access to equivalent information. In
addition, at the time of issuance of any securities under the Plan, the Company
shall provide to the Optionee or the Purchaser a copy of the Plan and any
agreement(s) pursuant to which securities under the Plan are issued.

-14-

<PAGE>

EXHIBIT 99.4
STAMPS.COM INC.

STOCK OPTION ASSUMPTION AGREEMENT
ISHIP.COM, INC. CORPORATION
AMENDED AND RESTATED 1997 STOCK PLAN

Optionee:

STOCK OPTION ASSUMPTION AGREEMENT effective as of the 7th day of March 200
by Stamps.com Inc., a Delaware corporation ("Stamps.com").

WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of iShip.com, Inc., A
Delaware corporation ("Iship.com"), which were granted to Optionee under the
iShip.com Amended and Restated 1997 Stock Plan (the "Plan").

WHEREAS, each outstanding iShip.com option is evidenced by a Stock option
Agreement, with any shares purchased under such options to be subject to the
terms and conditions of a Stock Purchase Agreement. Such Stock Option Agreement
and Stock Purchase Agreement shall be collectively referred to herein as the
"Option Agreement."

WHEREAS, iShip.com has been acquired by Stamps.com through the merger of
iShip.com with Stamps.com (the "Merger") pursuant to the Agreement and Plan of
Reorganization, by and between Stamps.com and iShip.com (the "Merger
Agreement").

WHEREAS, the provisions of the Merger Agreement require the obligations of
iShip.com under each outstanding option under the Plan to be assumed by
Stamps.com at the consummation of the Merger, and the holder of each such
outstanding option to be issued an agreement evidencing the assumption of such
option.

WHEREAS, pursuant to the provisions of the Merger Agreement, the exchange
ratio (the "Exchange Ratio") in effect for the Merger is 0.22545936 of a share
of Stamps.com Common Stock, par value $0.001 par value per share ("Stamps.com
Stock"), for each outstanding share of iShip.com common stock ("iShip.com
Stock").

WHEREAS, the purpose of the Agreement is to evidence the assumption by
Stamps.com of the outstanding options held by Optionee at the time of the
consummation of the Merger (the "Effective Time") and to reflect certain
adjustments to Optionee's outstanding options which have become necessary in
connection with their assumption by Stamps.com.

NOW, THEREFORE, it is hereby agreed as follows:

1. The number of shares of iShip.com Stock subject to the options held by
Optionee immediately prior to the Effective Time (the "iShip.com Options") and
the exercise price payable per share are set forth below. Stamps.com hereby
assumes, as of the Effective Time, all the duties and obligations of iShip.com
under each of the iShip.com Options. In
<PAGE>

connection with such assumption, the number of shares of Stamps.com Stock
purchasable under each iShip.com Option hereby assumed and the exercise price
payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of Stamps.com Stock subject to each iShip.com
Option hereby assumed shall be as specified for that option below, and the
adjusted exercise price payable per share of Stamps.com Stock under the assumed
iShip.com Option shall also be indicated for that option below.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
ISHIP.COM STOCK OPTIONS STAMPS ASSUMED OPTIONS
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
# of Shares of Exercise Price # of Shares of Adjusted Exercise
iShip.com Common per Share Stamps.com Price per Share
Stock Common Stock
- -------------------------------------------------------------------------------------------------
iShip.com Shares $iShip.com Price Stamps.com Shares $Stamps.com Price
- -------------------------------------------------------------------------------------------------
</TABLE>

2. The intent of the foregoing adjustments to each assumed iShip.com
Option is to assure that the spread between the aggregate fair market value of
the shares of Stamps.com Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the consummation of the Merger, be substantially the same as
(and in no event greater than) than the spread which existed, immediately prior
to the Merger, between the then aggregate fair market value of the iShip.com
Stock subject to the iShip.com Option and the aggregate exercise price in effect
at such time under the Option Agreement. Such adjustments are also intended to
preserve, immediately after the Merger, on a per share basis, the same ratio of
exercise price per option share to fair market value per share which existed
under the iShip.com Option immediately prior to the Merger.

3. The following provisions shall govern each iShip.com Option hereby
assumed by Stamps.com:

(a) Unless the context otherwise requires, all references in the Option
Agreement and, if applicable, in the Plan (as incorporated into such Option
Agreement) shall be adjusted as follows: (I) all references to the
"Company" shall mean Stamps.com, (ii) all references to "Share" shall mean
shares of Stamps.com Stock, (iii) all references to "Common Stock" shall
mean Stamps.com Stock, (iv) all references to the "Board" shall mean the
Board of Directors of Stamps.com and (v) all references to the "Committee"
shall mean the Compensation Committee of the Stamps.com Board of Directors.

(b) The grant date and the expiration date of each assumed iShip.com
Option and all other provisions which govern either the exercise or the
termination of the assumed iShip.com Option shall remain the same as set
forth in the Option Agreement applicable to that option, and the provisions
of the Plan and the Option Agreement shall accordingly govern and control
Optionee's rights to purchase Stamps.com Stock under the assumed iShip.com
Option.

2
<PAGE>

(c) Pursuant to the terms of the Options Agreement and the Plan, none
of the iShip.com Options assumed by Stamps.com hereunder shall vest as to
any shares on an accelerated basis in connection with the Merger.
Accordingly, each assumed iShip.com Option shall continue to vest and
become exercisable for the unvested shares of Stamps.com Stock subject to
that option in accordance with the same installment vesting schedule in
effect for that option, pursuant to the provisions of the applicable Option
Agreement, immediately prior to the Effective Time; provided, however, that
the number of shares subject to each such installment shall be adjusted to
reflect the Exchange Ratio.

(d) Any unvested shares of Stamps.com Stock acquired upon the exercise
of the assumed iShip.com Options shall remain subject to a right of
repurchase, exercisable by Stamps.com (as the successor of iShip.com) at
the adjusted exercise price paid per share, upon Optionee's termination of
service with Stamps.com. The terms and provisions governing the exercise of
such repurchase right shall be as set forth in the Option Agreement
applicable to the assumed iShip.com Option under which those unvested
shares are acquired.

(e) For purposes of applying any and all provisions of the Option
Agreement and/or the Plan relating to Optionee's status as an employee or a
consultant of iShip.com, Optionee shall be deemed to continue in such
status as an employee or a consultant for so long as Optionee renders
services as an employee or a consultant to Stamps.com or any present or
future majority-owned Stamps.com subsidiary. Accordingly, the provisions of
the Option Agreements governing the termination of the assumed iShip.com
Options or the exercise of Stamps.com's repurchase rights with respect to
any unvested Stamps.com Stock purchased under such options and unvested at
the time of Optionee's cessation of service as an employee or a consultant
of iShip.com shall hereafter be applied on the basis of Optionee's
cessation of employee or consultant status with Stamps.com and its
majority-owned subsidiaries. Each assumed iShip.com Option shall
accordingly terminate, within the designated time period in effect under
the Option Agreement for that option, following such cessation of service
as an employee or a consultant of Stamps.com and its majority-owned
subsidiaries.

(f) The adjusted exercise price payable for the Stamps.com Stock
subject to each assumed iShip.com Option shall be payable in any of the
forms authorized under the Option Agreement applicable to that option. For
purposes of determining the holding period of any shares of Stamps.com
Stock delivered in payment of such adjusted exercise price, the period for
which such shares were held as iShip.com Stock prior to the Merger shall be
taken into account.

3
<PAGE>

(g) In order to exercise each assumed iShip.com Option, Optionee must
deliver to Stamps.com a written notice of exercise in which the number of
shares of Stamps.com Stock to be purchased thereunder must be indicated.
The exercise notice must be accompanied by payment of the adjusted exercise
price payable for the purchased shares of Stamps.com Stock and should be
delivered to Stamps.com as the following address:

Stamps.com Inc.
3420 Ocean Park Boulevard, Suite 1040
Santa Monica, California 90405
Attention: Stock Plan Administration

4. Except to the extent specifically modified by this Option Assumption
Agreement, all of the terms and conditions of each Option Agreement as in effect
immediately prior to the Merger shall continue in full force and effect and
shall not in any way be amended, revised or otherwise affected by this Stock
Option Assumption Agreement.

IN WITNESS WHEREOF, Stamps.com, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the ___ day of March 2000.

STAMPS.COM INC.

By: _________________________

Title: ______________________

ACKNOWLEDGEMENT

The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her iShip.com Options hereby assumed by Stamps.com are
as set forth in the Option Agreement, the Plan, as applicable, and such Stock
Option Assumption Agreement.

________________________________________
OPTIONEE

DATED: _____________, 2000