INTERNATIONAL NETWORK SERVICES, PRE 14A, 1998-09-04

INTERNATIONAL NETWORK SERVICES
PRE 14A, 1998-09-04
MISCELLANEOUS BUSINESS SERVICES

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<PAGE>
UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )

Filed by the Registrant /X/
Filed by a Party other than the Registrant / /

Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12

INTERNATIONAL NETWORK SERVICES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
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[LOGO OF INTERNATIONAL NETWORKS SERVICES]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON OCTOBER 29, 1998

To the Shareholders:

Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of International Network Services (the "Company"), a California
corporation, will be held on Thursday, October 29, 1998 at 1:00 p.m., local
time, at the Company's headquarters at 1213 Innsbruck Drive, Sunnyvale,
California 94089, for the following purposes:

1. To elect directors to serve for the ensuing year and until their
successors are duly elected and qualified.

2. To approve an amendment to the Company's 1996 Stock Plan to (i) provide
for an automatic annual increase in the number of shares available for
issuance thereunder, beginning on July 1, 1999 and ending on July 1, 2003
and (ii) increase the number of shares that can be granted to any one
employee in any fiscal year from 500,000 shares to 2,000,000 shares.

3. To approve an amendment to the Company's 1996 Employee Stock Purchase
Plan to provide for an automatic annual increase in the number of shares
available for issuance thereunder, beginning on November 1, 1998.

4. To approve the adoption of the Company's Director Option Plan and the
reservation of 300,000 shares of the Company's Common Stock for issuance
thereunder.

5. To approve a change in the state of incorporation of the Company from
California to Delaware.

6. To approve an increase in the number of authorized shares of Common
Stock from 75,000,000 to 150,000,000 subject to the change in the
Company's state of incorporation, as proposed above.

7. To ratify the appointment of PricewaterhouseCoopers LLP as independent
accountants of the Company for the fiscal year ending June 30, 1999.

8. To transact such other business as may properly come before the meeting
or any adjournment thereof.

The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.

Only holders of record of the Company's Common Stock at the close of
business on September 14, 1998 are entitled to notice of and to vote at the
Annual Meeting.

All shareholders are cordially invited to attend the Annual Meeting in
person. However, to assure your representation at the Annual Meeting, you are
urged to mark, sign, date and return the enclosed proxy card as promptly as
possible in the postage-prepaid envelope enclosed for that purpose. Any
shareholder attending the Annual Meeting may vote in person even if he or she
has returned a proxy card.

By Order of the Board of Directors

KEVIN J. LAUGHLIN
VICE PRESIDENT, FINANCE,
CHIEF FINANCIAL OFFICER AND SECRETARY

Sunnyvale, California
September , 1998
IMPORTANT: WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO
COMPLETE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE PROVIDED.
<PAGE>
INTERNATIONAL NETWORK SERVICES
PROXY STATEMENT
FOR
1998 ANNUAL MEETING OF SHAREHOLDERS
PROCEDURAL MATTERS

GENERAL

The enclosed proxy is solicited on behalf of the Board of Directors of
International Network Services (the "Company"), a California corporation, for
use at the Company's Annual Meeting of Shareholders (the "Annual Meeting") to be
held on Thursday, October 29, 1998 at 1:00 p.m., local time, and at any
adjournment thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. The Annual Meeting will be held at the
Company's headquarters at 1213 Innsbruck Drive, Sunnyvale, California 94089, and
the telephone number at that location is (408) 542-0100.

This Proxy Statement and the enclosed proxy were mailed on or about
September , 1998, together with the Company's 1998 Annual Report to
Shareholders, to all shareholders entitled to vote at the Annual Meeting.

RECORD DATE

Only holders of record of the Company's common stock, no par value (the
"Common Stock"), at the close of business on September 14, 1998 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting. As of the
Record Date, shares of the Company's Common Stock were outstanding and the
Company had shareholders of record. For information regarding security
ownership by management and by the beneficial owners of more than 5% of the
Company's Common Stock, see "Security Ownership of Certain Beneficial Owners and
Management."

PROXIES; REVOCABILITY OF PROXIES

All shares entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting, and not revoked, will be voted at the
Annual Meeting in accordance with the instructions indicated on those proxies.
If no instructions are indicated on a properly executed proxy, the shares
represented by that proxy will be voted as recommended by the Board of
Directors. If any other matters are properly presented for consideration at the
Annual Meeting, the persons named in the enclosed proxy and acting thereunder
will have discretion to vote on those matters in accordance with their best
judgment. The Company does not currently anticipate that any other matters will
be raised at the Annual Meeting.

A shareholder may revoke any proxy given pursuant to this solicitation at
any time before it is voted by delivering to the Company's Corporate Secretary a
written notice of revocation or a duly executed proxy bearing a date later than
that of the previously submitted proxy, or by attending the Annual Meeting and
voting in person.

VOTING AND SOLICITATION

Each shareholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Shareholders do not have the right
to cumulate their votes in the election of directors.

The cost of soliciting proxies will be borne by the Company. The Company has
retained the services of ChaseMellon Shareholder Services to assist in the
solicitation of proxies for the annual meeting. The estimated cost of such
services is $6,500, plus reimbursement of reasonable out-of-pocket expenses. In
addition, the Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their reasonable expenses in
forwarding solicitation materials to such beneficial owners. Proxies may also be
solicited by certain of the Company's directors, officers, and employees,
without additional compensation, personally or by telephone, telegram, letter or
facsimile.
<PAGE>
QUORUM; ABSTENTIONS; BROKER NON-VOTES

In the election of directors, the six nominees receiving the highest number
of affirmative votes shall be elected. Each of Proposals 5 and 6 must be
approved by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock. Proposals 2, 3, 4 and 7 and must be approved by the
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock present in person or represented by proxy and entitled to vote on
the subject matter. The presence at the Annual Meeting, either in person or by
proxy, of the holders of a majority of the outstanding shares of Common Stock
entitled to vote shall constitute a quorum for the transaction of business.
Abstentions and shares held by brokers that are present but are not voted
because the brokers were prohibited from exercising discretionary authority
("broker non-votes") will be counted for the purpose of determining if a quorum
is present. For purposes of determining the number of shares voting on a
particular proposal, abstentions are counted as shares voting, whereas broker
non-votes are not counted as shares voting.

PROCEDURE FOR SUBMITTING SHAREHOLDER PROPOSALS

Any proposal of a shareholder of the Company which is intended to be
presented by such shareholder at the Company's 1999 Annual Meeting of
Shareholders must be received by the Company no later than May , 1999 in order
for such proposal to be considered for inclusion in the Company's proxy
statement and form of proxy relating to such meeting.

In addition, under the provisions of each of the Bylaws of INS California
and the Bylaws of INS Delaware, for business to be properly brought before an
annual meeting by a shareholder, the shareholder must have given timely notice
thereof in writing to the Secretary of the Company. To be timely for the
Company's 1999 annual meeting of shareholders, notice of any such proposed
business must be submitted to the Secretary of the Company (i) under the
provisions of the Bylaws of INS Delaware, no later than , 1999, and
(ii) under the provisions of the Bylaws of INS California, no later than
, 1999.

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PROPOSAL NO. 1
ELECTION OF DIRECTORS

NOMINEES

A board of six directors is to be elected at the Annual Meeting. Unless
otherwise instructed, the proxy holders will vote the proxies received by them
for the Company's six nominees named below, all of whom are presently directors
of the Company. In the event that any nominee of the Company is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. It is not expected that any nominee will be
unable or will decline to serve as a director. The term of office of each person
elected as a director will continue until the next Annual Meeting of
shareholders or until a successor has been duly elected and qualified. The
authorized number of directors is seven, and there will be a vacancy on the
Board.

The name and certain information regarding each nominee are set forth below.
There are no family relationships among directors or executive officers of the
Company.

<TABLE>
<CAPTION>
NAME AGE(1) POSITION WITH THE COMPANY
- --------------------------------------------------- ----------- -----------------------------------------------------
<S> <C> <C>
Donald K. McKinney................................. 49 Chairman of the Board

John L. Drew....................................... 42 President, Chief Executive Officer and Director

Douglas C. Allred.................................. 47 Director

Vernon R. Anderson................................. 67 Director

David Carlick...................................... 48 Director

Lawrence G. Finch.................................. 64 Director
</TABLE>

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

(1) As of September 14, 1998

DONALD K. MCKINNEY. Mr. McKinney, the founder of the Company, served as
President and Director from the Company's inception in August 1991 until January
1996 and Chief Executive Officer from August 1991 until July 1998. Mr. McKinney
has served as Chairman of the Board since January 1996. Mr. McKinney served as
the Vice President of Sales and Marketing of Electronics for Imaging, Inc., a
provider of hardware and software products for the digital color imaging market,
from May 1989 to February 1991. Mr. McKinney has also served in various sales,
management and consulting positions at Sequoia Capital, Silicon Graphics, Inc.,
Chromatics and IBM. Mr. McKinney is also on the Board of Directors of C-Cube
Microsystems and several privately held companies.

JOHN L. DREW. Mr. Drew served as Vice President of Operations from June
1994 to January 1996 and as President and Chief Operating Officer from February
1996 to July 1998. Mr. Drew has served as President and Chief Executive Officer
since July 1998. Mr. Drew is also a Director of the Company. Prior to joining
the Company, Mr. Drew was Vice President and General Manager for the Network
Enable Division of Unisys Corporation from April 1991 to June 1994. Mr. Drew
also served in other finance, marketing and management positions for Unisys
Corporation from July 1984 to March 1991.

DOUGLAS C. ALLRED. Mr. Allred has served as a member of the Company's Board
of Directors since January 1997. Mr. Allred has served as Senior Vice President,
Customer Advocacy World Wide Systems, Support and Services since November 1996
at Cisco Systems, Inc. a provider of networking equipment, where he is
responsible for customer support services including technical support services,
customer service and field support for Cisco's customers and partners worldwide.
He is also responsible for Cisco's internal information and network services.
Mr. Allred held the position of Vice President, Customer

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Advocacy from August 1991 to November 1996. Prior to joining Cisco, Mr. Allred
was Vice President of Oracle's worldwide support group. Earlier, he was Vice
President of Information Systems at a division of General Electric.

VERNON R. ANDERSON. Mr. Anderson has served as a member of the Company's
Board of Directors since April 1992 and served as Chairman of the Board from
April 1992 to January 1996. Mr. Anderson has been a private investor and
management advisor since January 1994. Mr. Anderson was the President, Chief
Executive Officer and Vice Chairman of Axel Johnson, Inc., a diversified
industrial company, from March 1988 to October 1989, and Vice Chairman from
October 1989 to December 1993. Mr. Anderson was a founder, President and Chief
Executive Officer of Silicon Graphics, Inc., Collagen Corporation and Vidar
Corporation.

DAVID CARLICK. Mr. Carlick has served as a member of the Board of Directors
since April 1992. Mr. Carlick was the founder of Carlick Advertising in 1981,
which merged with Poppe Tyson in 1993, and was an Executive Vice President and
Director of Poppe Tyson from 1993 to March 1997. From April 1997 to September
1997, Mr. Carlick was President, Media Services, of PowerAgent. Since September
1997, Mr. Carlick has served as Senior Advisor to VantagePoint Venture Partners.
Mr. Carlick is on the Board of Directors of several privately held companies.

LAWRENCE G. FINCH. Mr. Finch has served as a member of the Board of
Directors since June 1993. Mr. Finch has been a partner of Sigma Partners since
1989. Mr. Finch is on the Board of Directors of Splash Technology Inc. and
several privately held companies.

BOARD MEETINGS AND COMMITTEES

The Board of Directors held a total of 5 meetings (including regularly
scheduled and special meetings) during fiscal 1998 and also took certain actions
by written consent. No incumbent director during the last fiscal year attended
fewer than 75% of the aggregate of (i) the total number of meetings of the Board
of Directors while they served on the Board, and (ii) the total number of
meetings held by all committees on which he served, except Mr. Allred who
attended 40% of the Board meetings.

The Board of Directors of the Company has two standing committees: an Audit
Committee and a Compensation Committee. The Company has no nominating committee
or a committee performing a similar function.

The Audit Committee, which currently consists of Messrs. Anderson, Carlick
and Finch, is responsible for (i) recommending engagement of the Company's
independent accountants, (ii) approving the services performed by such
accountants, (iii) consulting with such accountants and reviewing with them the
results of their examination, (iv) reviewing and approving any material
accounting policy changes affecting the Company's operating results, (v)
reviewing the Company's control procedures and personnel, and (vi) reviewing and
evaluating the Company's accounting principles and its system of internal
accounting controls. The Audit Committee held 4 meetings during fiscal 1998.

The Compensation Committee, which currently consists of Messrs. Anderson and
Carlick, is responsible for (i) reviewing and approving the compensation and
benefits for the Company's executive officers, (ii) administering the Company's
stock plans and (iii) making recommendations to the Board of Directors regarding
such matters. The Compensation Committee held 2 meetings during fiscal 1998 and
also took certain actions by written consent.

DIRECTOR COMPENSATION

Members of the Company's Board of Directors do not receive compensation for
their services as directors. Directors are eligible to receive stock option
grants to purchase Common Stock under the Company's 1996 Stock Plan. In May
1998, Mr. Finch received an option to purchase 5,000 shares of

4
<PAGE>
Common Stock, and in August 1998, Messrs. Anderson and Carlick each received an
option to purchase 5,000 shares of Common Stock. The options vest monthly over a
50 month period.

In addition, all directors are reimbursed for expenses incurred in attending
Board meetings.

REQUIRED VOTE

The six nominees receiving the highest number of affirmative votes of the
outstanding shares of Common Stock present or represented and entitled to be
voted for them shall be elected as directors. Abstentions and broker non-votes
are counted for purposes of determining the presence or absence of a quorum for
the transaction of business, but have no other legal effect under California
law. The proxies cannot be voted for a greater number of persons than six.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" RE-ELECTION OF MESSRS. MCKINNEY, DREW, ALLRED, ANDERSON, CARLICK AND
FINCH.

5
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PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO THE COMPANY'S 1996 STOCK PLAN

GENERAL

The Company's 1996 Stock Plan was adopted by the Board of Directors in July
1996 and approved by the shareholders in August 1996 and provides for the
granting to employees (including employee directors and officers) of the Company
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and for the granting of
nonstatutory stock options and stock purchase rights to employees and
consultants of the Company. A total of 5,500,000 shares of Common Stock has been
reserved for issuance under the 1996 Stock Plan. As of September 14, 1998, a
total of shares remained available for future grant under the 1996 Stock
Plan.

Section 162(m) of the Code limits the deductibility of compensation paid to
certain executive officers of the Company. To maximize the Company's deduction
attributable to options granted to such persons, the 1996 Stock Plan provides
that no employee may be granted, in any fiscal year, options and stock purchase
rights to purchase more than 500,000 shares of Common Stock not including
options to purchase up to 500,000 shares of Common Stock granted in connection
with initial service. The Company's Board of Directors, subject to shareholder
approval, has adopted an amendment to the 1996 Stock Plan to increase the number
of shares that can be granted to any one employee in any fiscal year from
500,000 shares to 2,000,000 shares.

PROPOSAL

In July 1998, the Board of Directors adopted, subject to shareholder
approval, an amendment to the 1996 Stock Plan to: (i) provide for an automatic
annual increase in the number of shares available for issuance thereunder on
July 1 of each year, beginning on July 1, 1999 and ending on July 1, 2003, by an
amount equal to the lesser of (a) 2.5 percent of the number of shares of Common
Stock outstanding on the last day of each preceding fiscal year, (b) 3,750,000
shares of Common Stock or (c) a lesser amount determined by the Board; and (ii)
increase the number of shares that can be granted to any one employee in any
fiscal year from 500,000 shares to 2,000,000 shares. These amendments will
enable the Company to continue to grant options to eligible employees and
consultants under the terms and conditions of the 1996 Stock Plan.

The Board of Directors believes that the approval of the amendments to the
1996 Stock Plan is in the best interests of the Company and its shareholders, as
the availability of an adequate number of shares for issuance under the 1996
Stock Plan and the ability to grant stock options is an important factor in
attracting, motivating and retaining qualified personnel essential to the
success of the Company.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by proxy and entitled to vote
on the subject matter is required to approve the amendment to the 1996 Stock
Plan. Abstentions will be counted as shares entitled to vote whereas broker
non-votes will not be counted.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE AMENDMENT TO THE 1996 STOCK PLAN.

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SUMMARY OF 1996 STOCK PLAN

The following summary of the 1996 Stock Plan is qualified in its entirety by
the specific language of the 1996 Stock Plan, a copy of which is available to
any shareholder upon written request to the Corporate Secretary.

PURPOSE. The purposes of the 1996 Stock Plan are to attract and retain the
best available personnel for positions of substantial responsibility, to provide
additional incentive to employees, directors and consultants of the Company and
to promote the success of the Company's business.

ADMINISTRATION. The 1996 Stock Plan may be administered by the Board or a
committee of the Board (the "Administrator"), which committee is required to be
constituted to comply with Section 16(b) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and applicable laws. Subject to the other
provisions of the 1996 Stock Plan, the Administrator has the power to determine
the employees, directors and consultants to whom options and stock purchase
rights may be granted, the number of shares subject to the option or stock
purchase right and the exercisability thereof. The Administrator also has the
power to institute an option exchange program whereby outstanding options are
surrendered in exchange for options with a lower exercise price.

ELIGIBILITY; LIMITATIONS. The 1996 Stock Plan provides that nonstatutory
stock options may be granted to employees, directors and consultants. Incentive
stock options may be granted only to employees. An optionee 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.

TERMS AND CONDITIONS OF OPTIONS. Each option granted under the 1996 Stock
Plan is evidenced by a written stock option agreement between the optionee and
the Company and is subject to the following terms and conditions:

(a) EXERCISE PRICE. The Administrator determines the exercise price of
options to purchase shares of Common Stock at the time the options are
granted. However, the exercise price of an incentive stock option must not
be less than 100% (110% if issued to any person possessing more than 10% of
the voting power of all classes of stock of the Company (a "10%
Shareholder")) of the fair market value of the Common Stock on the date the
option is granted. For so long as the Company's Common Stock is traded on
The Nasdaq National Market, the fair market value of a share of Common Stock
will be the closing sales price for such stock (or the closing bid if no
sales were reported) on the date of grant (or if such date is not a market
trading day, the most recent last trading day prior to the date of grant) as
quoted on such system.

(b) EXERCISE OF THE OPTION. Each stock option agreement will specify
the term of the option and the date when the option is to become
exercisable. The terms of such vesting are to be determined by the
Administrator. Options granted under the 1996 Stock Plan to date generally
become exercisable over 50 months at a rate of 24 percent of the shares
subject to the options at the end of 12 months from the date of grant and
the remaining shares vest at the rate of two percent per month over the next
38 months and have a ten-year term. The maximum term of an option granted to
a 10% Shareholder is five years. An option is exercised by giving notice of
exercise to the Company, specifying the number of full shares of Common
Stock to be purchased and by tendering full payment of the purchase price to
the Company.

(c) FORM OF CONSIDERATION. The consideration to be paid for the shares
of Common Stock issued upon exercise of an option shall be determined by the
Administrator. Such form of consideration may vary for each option, and may
consist entirely of cash, check, promissory note, other shares of the
Company's Common Stock, any combination thereof, or any other legally
permissible form of consideration as may be provided in the stock option
agreement.

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(d) TERMINATION OF EMPLOYMENT. In the event an optionee's continuous
status as an employee, director or consultant terminates for any reason
(other than upon the optionee's death or disability), the optionee may
exercise his or her option within such period of time as is specified in
such optionee's stock option agreement but only to the extent that the
optionee was entitled to exercise the option at the date of such termination
(but in no event later than the expiration of the term of such option as set
forth in the stock option agreement). Options granted under the 1996 Stock
Plan to date have generally provided that optionees may exercise their
options within three months from the date of termination of employment
(other than for death or disability).

(e) DISABILITY. In the event an optionee's continuous status as an
employee, director or consultant terminates as a result of permanent and
total disability (as defined in Section 22(e)(3) of the Code), the optionee
may exercise his or her option, but only within twelve months from the date
of such termination, and only to the extent that the optionee was entitled
to exercise it at the date of such termination (but in no event later than
the expiration of the term of such option as set forth in the stock option
agreement).

(f) DEATH. In the event of an optionee's death, the optionee's estate
or a person who acquired the right to exercise the deceased optionee's
option by bequest or inheritance may exercise the option, but only within
twelve months following the date of death, and only to the extent that the
optionee was entitled to exercise it at the date of death (but in no event
later than the expiration of the term of such option as set forth in the
stock option agreement).

(g) TERM OF OPTIONS. The term of each option is the term stated in the
stock option agreement; provided, however, that the term may not exceed ten
years from the date of grant. In the case of an incentive stock option
granted to a 10% Shareholder, the term may not exceed 5 years from the date
of grant. No option may be exercised by any person after the expiration of
its term.

(h) NONTRANSFERABILITY OF OPTIONS. Unless determined otherwise by the
Administrator, an option is nontransferable by the optionee, other than by
will or the laws of descent and distribution, and is exercisable during the
optionee's lifetime only by the optionee. In the event of the optionee's
death, options may be exercised by a person who acquires the right to
exercise the option by bequest or inheritance.

(i) VALUE LIMITATION. If the aggregate fair market value (as determined
on date of grant) of all shares of Common Stock subject to an optionee's
incentive stock option which are exercisable for the first time during any
calendar year exceeds $100,000, the excess options shall be treated as
nonstatutory options.

(j) OTHER PROVISIONS. The stock option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1996 Stock Plan
as may be determined by the Administrator.

STOCK PURCHASE RIGHTS. A stock purchase right gives the purchaser a period
from the date of grant to purchase Common Stock. A stock purchase right is
accepted by the execution of a restricted stock purchase agreement between the
Company and the purchaser, accompanied by the payment of the purchase price for
the shares. Unless the Administrator determines otherwise, the restricted stock
purchase agreement shall give the Company a repurchase option exercisable upon
the voluntary or involuntary termination of the purchaser's employment or
consulting relationship with the Company for any reason (including death and
disability). The purchase price for any shares repurchased by the Company shall
be the original price paid by the purchaser. The repurchase option lapses at a
rate determined by the Administrator. A stock purchase right is nontransferable
other than by will or the laws of descent and distribution, and may be
exercisable during the optionee's lifetime only by the optionee.

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an appropriate adjustment shall be made by the Board in the following: (i) the
number of shares of Common Stock subject to the 1996 Stock Plan, (ii) the number
and class of shares of stock subject to any option or stock purchase right
outstanding under the 1996 Stock Plan, (iii) and the exercise price of any such
outstanding option or stock purchase right. The determination of the Board as to
which adjustments shall be made shall be conclusive. In the event of a proposed
dissolution or liquidation of the Company, the Board will notify the holders of
options or stock purchase rights as soon as practicable prior to such action and
all outstanding options and stock purchase rights will terminate immediately
prior to the consummation of such proposed action.

Notwithstanding the above, in the event of a merger of the Company with or
into another corporation or the sale of substantially all of the assets of the
Company, the 1996 Stock Plan requires that each outstanding option and stock
purchase right be assumed or an equivalent option or stock purchase right be
substituted by the successor corporation; provided, however, if such successor
or purchaser refuses to assume or substitute the then outstanding options or
stock purchase rights, the 1996 Stock Plan provides for the full acceleration of
the exercisability of all outstanding options and stock purchase rights for a
period of 15 days from the date of notice of acceleration to the holder and all
options or stock purchase rights will terminate upon the expiration of such
period.

AMENDMENT AND TERMINATION OF THE 1996 STOCK PLAN. The Board may at any time
amend, alter, suspend or terminate the 1996 Stock Plan. The Company shall obtain
shareholder approval of any amendment to the 1996 Stock Plan in such a manner
and to such a degree as is necessary and desirable to comply with Rule 16b-3
under the Exchange Act and Sections 162(m) and 422 of the Code (or any other
applicable law or regulation, including the requirements of any exchange or
quotation system on which the Common Stock is traded). Any amendment or
termination of the 1996 Stock Plan shall not affect options already granted and
such options shall remain in full force and effect as if the 1996 Stock Plan had
not been amended or terminated, unless mutually agreed otherwise between the
optionee and the Company, which agreement must be in writing and signed by the
optionee and the Company. In any event, the 1996 Stock Plan shall terminate in
July 2006. Any options outstanding under the 1996 Stock Plan at the time of its
termination shall remain outstanding until they expire by their terms.

FEDERAL INCOME TAX CONSEQUENCES

INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after the exercise of the option, any
gain or loss is treated as long-term capital gain or loss. If these holding
periods are not satisfied, the optionee recognizes ordinary income at the time
of disposition equal to the difference between the exercise price and lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. Long-term capital gains are grouped and netted by holding
periods. Net capital gains on assets held for more than twelve months is
currently taxed at a maximum federal rate of 20%. Capital losses are allowed in
full against capital gains and up to $3,000 against other income. A different
rule for measuring ordinary income upon such a premature disposition may apply
if the optionee is also an officer, director, or 10% Stockholder of the Company.
The Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee.

NONSTATUTORY STOCK OPTIONS. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the

9
<PAGE>
ordinary income recognized by the optionee. Upon a disposition of such shares by
the optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as provided above, is
treated as long-term or short-term capital gain or loss, depending on the
holding period. Net capital gains on assets held for more than twelve months is
currently taxed at a maximum federal rate of 20%. Capital losses are allowed in
full against capital gains and up to $3,000 against other income.

STOCK PURCHASE RIGHTS. Stock purchase rights will generally be taxed in the
same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the exercise of a stock purchase right. At the time of
purchase, restricted stock is subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code. As a result, the purchaser will
not recognize ordinary income at the time of purchase. Instead, the purchaser
will recognize ordinary income on the dates when the stock ceases to be subject
to a substantial risk of forfeiture. The stock will generally cease to be
subject to a substantial risk of forfeiture when it is no longer subject to the
Company's right to repurchase the stock upon the purchaser's termination of
employment with the Company. At such times, the purchaser will recognize
ordinary income measured as the difference between the purchase price and the
fair market value of the stock on the date the stock is no longer subject to a
substantial risk of forfeiture.

The purchaser may accelerate to the date of purchase his or her recognition
of ordinary income, if any, and the beginning of any capital gain holding period
by timely filing an election pursuant to Section 83(b) of the Code. In such
event, the ordinary income recognized, if any, is measured as the difference
between the purchase price and the fair market value of the stock on the date of
purchase, and the capital gain holding period commences on such date. The
ordinary income recognized by a purchaser who is an employee will be subject to
tax withholding by the Company. Different rules may apply if the purchaser is
also an officer, director, or 10% Shareholder of the Company.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES, HOLDERS OF STOCK PURCHASE RIGHTS, AND THE COMPANY WITH RESPECT
TO THE GRANT AND EXERCISE OF OPTIONS AND STOCK PURCHASE RIGHTS UNDER THE 1996
STOCK PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT DISCUSS THE TAX
CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
EMPLOYEE OR CONSULTANT MAY RESIDE.

1998 NONSTATUTORY STOCK OPTION PLAN

In April 1998, the Board of Directors adopted the 1998 Nonstatutory Stock
Option Plan. A total of 2,000,000 shares of Common Stock has been reserved for
issuance under the 1998 Nonstatutory Stock Option Plan, and as of September 14,
1998, a total of shares remained eligible for future grant. The 1998
Nonstatutory Stock Option Plan provides for grants to employees and consultants
of the Company.

PARTICIPATION IN THE 1996 STOCK PLAN

The grant of options under the 1996 Stock Plan to employees, including the
Named Officers (as defined under "Executive Officers and Compensation"), is
subject to the discretion of the Administrator. As of the date of this proxy
statement, there has been no determination by the Administrator with respect to
future awards under the 1996 Stock Plan. Accordingly, future awards are not
determinable. The following table sets forth information with respect to the
grant of options pursuant to the 1996 Stock Plan to the Named Officers, to all
current executive officers as a group, to all current directors who are not
executive officers as a group and to all other employees as a group during the
last fiscal year. Subject to shareholder approval, the Company granted an option
to Mr. Drew to purchase a number of shares

10
<PAGE>
greater than the current limitation under Section 162(m) of the Code in July
1998. For a more detailed discussion of executive compensation, see "Executive
Officers and Compensation."

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES EXERCISE PRICE
UNDERLYING OPTIONS ($ PER
NAME OF INDIVIDUAL AND POSITION GRANTED SHARE)(1)
- ----------------------------------------------------------------------------- ------------------ ---------------
<S> <C> <C>
Donald K. McKinney........................................................... 500,000 $ 26.44
Chairman of the Board

John L. Drew................................................................. 500,000 20.00
President, Chief Executive Officer and Director

Kevin J. Laughlin............................................................ 125,000 26.41
Vice President, Finance, Chief Financial Officer and Secretary

All current executive officers as a group (3 persons)........................ 1,125,000 23.57

All current directors who are not executive officers as a group.............. 5,000 30.97

All other employees as a group............................................... 2,803,100 21.69
</TABLE>

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

(1) Represents a weighted average per share exercise price.

11
<PAGE>
PROPOSAL NO. 3
AMENDMENT TO 1996 EMPLOYEE STOCK PURCHASE PLAN

GENERAL

The 1996 Employee Stock Purchase Plan was adopted by the Board of Directors
in July 1996 and approved by the Company's shareholders in August 1996. The 1996
Employee Stock Purchase Plan, which is intended to qualify under Section 423 of
the Code, permits eligible employees to purchase the Company's Common Stock
through payroll deductions at a price equal to 85% of the lower of the fair
market value of the Common Stock on the last trading day prior to the first day
of each 24-month offering period or the last day of the applicable six-month
purchase period. The Company has reserved a total of 1,200,000 shares of Common
Stock for issuance under the 1996 Employee Stock Purchase Plan, and as of
September 14, 1998, shares remained available for future issuances.

PROPOSAL

In July 1998, the Board of Directors adopted, subject to shareholder
approval, an amendment to the 1996 Employee Stock Purchase Plan to provide for
an automatic annual increase in the number of shares available for issuance
thereunder by an amount equal to the lesser of (a) 2.0 percent of the shares of
Common Stock outstanding on the last day of each preceding fiscal year, (b)
3,000,000 shares of Common Stock or (c) a lesser amount determined by the Board,
beginning on November 1, 1998.

The Board of Directors believes that the approval of the amendment to the
1996 Employee Stock Purchase Plan is in the best interests of the Company and
its shareholders, as the availability of an adequate number of shares for
issuance under the 1996 Employee Stock Purchase Plan and the ability of
employees to participate in the 1996 Employee Stock Purchase Plan are important
factors in attracting, motivating and retaining qualified personnel essential to
the success of the Company.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by proxy and entitled to vote
on the subject matter is required to approve the amendment to the 1996 Employee
Stock Purchase Plan. Abstentions will be counted as shares entitled to vote
whereas broker non-votes will not be counted.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE AMENDMENT TO THE 1996 EMPLOYEE STOCK PURCHASE PLAN.

SUMMARY OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN

The following summary of the 1996 Employee Stock Purchase Plan is qualified
in its entirety by the specific language of the 1996 Employee Stock Purchase
Plan, a copy of which is available to any shareholder upon written request to
the Secretary of the Company.

PURPOSE. The purposes of the 1996 Employee Stock Purchase Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to employees of the Company and
to promote the success of the Company's business.

ADMINISTRATION. The 1996 Employee Stock Purchase Plan may be administered
by the Board of Directors or a committee of the Board of Directors.

ELIGIBILITY; LIMITATIONS. The 1996 Employee Stock Purchase Plan provides
that employees are eligible to participate if they are customarily employed by
the Company or any designated subsidiary for at least 20 hours per week and for
more than five months in any calendar year.

12
<PAGE>
TERMS AND CONDITIONS OF SUBSCRIPTION. Participation under the 1996 Employee
Stock Purchase Plan is evidenced by a written subscription agreement between the
employee and the Company and is subject to the following terms and conditions of
the 1996 Employee Stock Purchase Plan:

(a) PURCHASE PRICE AND METHOD. Employees who participate in the 1996
Employee Stock Purchase Plan purchase the Company's Common Stock through
payroll deductions of up to 15% of their eligible compensation, up to a
maximum number of shares per purchase period of 2,000 shares. The employee's
right to purchase stock may accrue at a rate that does not exceed $25,000 of
stock per calendar year. Generally, the price of Common Stock purchased
under the 1996 Employee Stock Purchase Plan is 85% of the lower of the fair
market value of the Common Stock on the last trading day prior to the first
day of each 24-month offering period and the last day of the applicable
six-month purchase period. To the extent the fair market value of the Common
Stock on any exercise date in an offering period is lower than the fair
market value of the Common Stock on the first day of the offering period,
then all participants in such offering period will be automatically
withdrawn from such offering period immediately after the exercise of their
options on such exercise date and automatically re-enrolled in the
immediately following offering period as of the first day thereof.

(b) OFFERING PERIODS. Offering periods last 24 months and commence on
the first trading day on or after May 1 and November 1 of each year and
terminate on the last trading day in the periods ending 24 months later.
Each 24-month offering period consists of four purchase periods of
approximately six months duration. The first offering period, however,
commenced on September 18, 1996, the date on which the Company's
registration statement on Form S-1 was declared effective, and will end on
the last trading day on or before October 31, 1998. Special offering periods
that end on the same date as the first offering period began on November 29,
1996 and February 14, 1997. The Board of Directors generally may change the
duration of offering periods, without shareholder approval.

(c) WITHDRAWAL; TERMINATION OF EMPLOYMENT. If an employee decides to
terminate his or her participation in the 1996 Employee Stock Purchase Plan,
he or she must withdraw all the payroll deductions credited to his or her
purchase account, and such funds will be returned to him or her. Upon the
termination of employment for any reason, all payroll deductions will
likewise be returned to the (former) employee.

(d) DEATH. A participating employee may designate who is to receive any
shares and cash, if any, from the participant's account under the 1996
Employee Stock Purchase Plan in the event of such participant's death
subsequent to exercising a purchase option but prior to delivery of the
share of Common Stock.

(e) NONTRANSFERABILITY. Rights granted under the 1996 Employee Stock
Purchase Plan are not transferable by a participant other than by will, the
laws of descent and distribution, or as otherwise provided under the plan,
and the Company may treat any prohibited attempt to transfer as an election
to withdraw.

(f) OTHER PROVISIONS. The subscription agreement may contain such other
terms, provisions and conditions not inconsistent with the 1996 Employee
Stock Purchase Plan as may be determined by the Administrator.

ADJUSTMENT UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS. In the
event of changes in the outstanding Common Stock of the Company by reason of any
stock splits, reverse stock splits, stock dividends, combinations,
reclassifications or other similar change in the capital structure of the
Company, an appropriate adjustment shall be made by the Board in the following:
(i) the number of shares of Common Stock subject to the 1996 Employee Stock
Purchase Plan and (ii) the number and class of shares of stock subject to any
purchase right outstanding under the 1996 Employee Stock Purchase Plan. The
determination of the Board of Directors as to which adjustments shall be made
shall be conclusive. In the event of a proposed dissolution or liquidation of
the Company, the offering periods shall terminate

13
<PAGE>
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Company's Board. Notwithstanding the above, in the event of a
merger of the Company with or into another corporation or the sale of
substantially all of the assets of the Company, any purchase period then in
progress shall be shortened by setting a new exercise date and any offering
period then in progress shall end on the new exercise date.

AMENDMENT AND TERMINATION OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN. The
Board may at any time amend or terminate the 1996 Employee Stock Purchase Plan.
The Company shall obtain shareholder approval of any amendment to the 1996
Employee Stock Purchase Plan in such a manner and to such a degree as is
necessary and desirable to comply with Rule 16b-3 under the Exchange Act and 423
of the Code (or any other applicable law or regulation, including the
requirements of any exchange or quotation system on which the Common Stock is
traded). In general, any amendment or termination of the 1996 Employee Stock
Purchase Plan may not adversely affect options already granted. In any event,
the 1996 Employee Stock Purchase Plan shall terminate in July 2006.

FEDERAL INCOME TAX CONSEQUENCES

No income will be taxable to a participant until the shares purchased under
the 1996 Employee Stock Purchase Plan are sold or otherwise disposed of. Upon
sale or other disposition of the shares, the participant will generally be
subject to tax and the amount of the tax will depend upon the holding period. If
the shares are sold or otherwise disposed of more than two (2) years from the
first day of the offering period or more than one (1) year from the date of
transfer of the stock to the participant (the "Statutory Holding Periods"), then
the participant will recognize ordinary income measured as the lesser of (i) the
excess of the fair market value of the shares at the time of such sale or
disposition over the purchase price, or (ii) an amount equal to 15% of the fair
market value of the shares as of the first day of the offering period. Any
additional gain will be treated as long-term capital gain. Net capital gains on
assets held for more than twelve months are currently taxed at a maximum federal
rate of 20%. Capital losses are allowed in full against capital gains and up to
$3,000 against other income. If the shares are sold or otherwise disposed of
before the expiration of the Statutory Holding Periods, the participant will
recognize ordinary income generally measured as the excess of the fair market
value of the shares on the date the shares are purchased over the purchase
price. Any additional gain or loss on such sale or disposition will be long-term
or short-term capital gain or loss, depending on the holding periods. The
Company is not entitled to a deduction for amounts taxed as ordinary income or
capital gain to a participant except to the extent of ordinary income is
recognized by participants upon a sale or disposition of shares prior to the
expiration of the Statutory Holding Periods described above.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON THE PARTICIPANT AND THE COMPANY WITH RESPECT TO THE SHARES PURCHASED UNDER
THE PURCHASE PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE
TAX CONSEQUENCES OF A PARTICIPANT'S DEATH OR THE PROVISIONS OF THE INCOME TAX
LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY
RESIDE.

14
<PAGE>
PARTICIPATION IN THE 1996 EMPLOYEE STOCK PURCHASE PLAN

The following table sets forth information with respect to participation by
the Named Officers, all current executive officers as a group and all other
employees as a group during the last fiscal year.

<TABLE>
<CAPTION>
NUMBER OF PURCHASED PRICE
SECURITIES ($ PER
NAME OF INDIVIDUAL AND POSITION PURCHASED SHARE)(1)
- ------------------------------------------------------------------------------------- ----------- ---------------
<S> <C> <C>
Donald K. McKinney................................................................... -- --
Chairman of the Board

John L. Drew......................................................................... -- --
President, Chief Executive Officer and Director

Kevin J. Laughlin.................................................................... 1,688 $ 13.60
President, Finance, Chief Financial Officer and Secretary

All current executive officers as a group (3 persons)................................ 1,688 13.60

All other employees as a group....................................................... 417,679 14.42
</TABLE>

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

(1) Represents a weighted average per share purchase price.

15
<PAGE>
PROPOSAL NO. 4
APPROVAL OF ADOPTION OF THE DIRECTOR OPTION PLAN

PROPOSAL

In August, 1998, the Board of Directors adopted the Director Option Plan
(the "Director Plan") and reserved 300,000 shares of Common Stock for issuance
thereunder subject to shareholder approval. As of September 14, 1998, no options
to purchase stock had been granted pursuant to the Director Plan.

The Board of Directors believes that the approval of the adoption of the
Director Plan is in the best interest of the Company and its shareholders, as
the Director Plan is an important factor to continue attracting, motivating, and
retaining qualified directors essential to the success of the Company.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock present in person or represented by proxy and entitled to vote
on the subject matter is required to approve the adoption of the Director Plan.
Abstentions will be counted as shares entitled to vote whereas broker non-votes
will not be counted.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE APPROVAL OF THE COMPANY'S DIRECTOR OPTION PLAN.

SUMMARY OF THE DIRECTOR PLAN

The following summary of the Director Plan is qualified in its entirety by
the specific language of the Director Plan, a copy of which is available to any
shareholder upon written request to the Corporate Secretary.

PURPOSE. The purpose of the Director Plan is to attract and retain the best
available personnel for positions for service as non-employee directors of the
Company, to provide additional incentive to the non-employee directors of the
Company and to encourage their continued service on the Board of Directors.

ADMINISTRATION. The Director Plan provides for the automatic grant of a
nonstatutory stock option covering 30,000 shares to each person who first
becomes a non-employee director on or after the effective date of the Director
Plan and on each third anniversary thereof so long as the director remains a
non-employee director (subject to the term of the Director Plan). In additional,
individuals who are non-employee directors as of the effective date of the
Director Plan will receive an option for 30,000 shares at the annual meeting of
shareholders in the year 2000 and on each third anniversary thereof so long as
the director remains a non-employee director (subject to the term of the
Director Plan).

ELIGIBILITY; LIMITATIONS. Only non-employee directors of the Company and
any parent or subsidiary of the Company are eligible to receive nonstatutory
stock options.

TERMS AND CONDITIONS OF OPTIONS. Each option is evidenced by a director
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:

(a) EXERCISE PRICE. The exercise price of options granted under the
Director Plan is 100% of the fair market value per share of the Common
Stock, generally determined with reference to the closing sale price for
Common Stock (or the closing bid if no sales were reported) on the last
market trading day prior to the date the option is granted.

(b) EXERCISE OF OPTION; FORM OF CONSIDERATION. The shares subject to
the Option shall become exercisable as to one-thirty-sixth of the Option
shares per month, provided the person continues to serve as a director on
such dates. The means of payment for shares issued upon exercise of an
option

16
<PAGE>
is specified in each option agreement. The Director Plan permits payment to
be made by cash, check, other shares of Common Stock of the Company (with
some restrictions), cashless exercises or any combination thereof.

(c) TERM OF OPTION. The term the option shall be ten (10) years from
the date of grant. No option may be exercised after the expiration of its
term.

(d) TERMINATION OF STATUS AS A DIRECTOR. If an optionee's status as a
director terminates for any reason (other than death or disability), then
all options held by the optionee under the Director Plan expire on the
earlier of (i) three months following termination or (ii) the expiration
date of such option. To the extent the option is exercisable at the time of
such termination, the optionee may exercise all or part of his or her option
at any time before the option expires.

(e) DEATH OR DISABILITY. If an optionee's status as a director
terminates as a result of death or disability, then all options held by such
optionee under the Director Plan expire on the earlier of (i) 12 months from
the date of such termination or (ii) the expiration date of such option. The
optionee (or the optionee's estate or the person who acquires the right to
exercise the option by bequest or inheritance), may exercise all or part of
the option at any time before such expiration to the extent that the option
was exercisable at the time of such termination.

(g) NONTRANSFERABILITY OF OPTIONS. Options granted under the Director
Plan are not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by
the optionee.

(h) OTHER PROVISIONS. The director option agreement may contain other
terms, provisions and conditions not inconsistent with the Director Plan as
may be determined by the Administrator.

ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Director Plan, the number and class of shares of stock subject to
any option outstanding under the Director Plan, and the exercise price of any
such outstanding option.

In the event of a liquidation or dissolution, any unexercised options will
terminate.

In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option may be assumed or an equivalent option
substituted for by the successor corporation. If an option is assumed or
substituted for by the successor corporation, it shall continue to vest as
provided in the Director Plan. However, if a non-employee director's status as a
director of the Company or the successor corporation, as applicable, is
terminated other than as a result of the director's death or disability, each
option granted to such non-employee director shall become fully vested and
exercisable. If the successor corporation does not agree to assume or substitute
for the option, each option shall become fully vested and exercisable for a
period of thirty days from the date the Board notifies the optionee of the
option's full exercisability, after which period the option shall terminate.

AMENDMENT AND TERMINATION OF THE DIRECTOR PLAN. The Board may amend, alter,
suspend or terminate the Director Plan, or any part thereof, at any time and for
any reason. However, the Company shall obtain shareholder approval for any
amendment to the Director Plan to the extent necessary to comply with applicable
laws. No such action by the Board or shareholders may alter or impair any option
previously granted under the Director Plan without the written consent of the
optionee. Unless terminated earlier, the Director Plan shall terminate ten years
from the date of its approval by the shareholders or the Board of the Company,
whichever is earlier.

17
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES

An optionee does not recognize any taxable income at the time he or she is
granted a nonstatutory stock option. Upon exercise, the optionee recognizes
taxable income generally measured by the excess of the then fair market value of
the shares over the exercise price. Any taxable income recognized in connection
with an option exercise by an employee of the Company is subject to tax
withholding by the Company. The Company is entitled to a deduction in the same
amount as the ordinary income recognized by the optionee. Upon a disposition of
such shares by the optionee, any difference between the sale price and the
optionee's exercise price, to the extent not recognized as taxable income as
provided above, is treated as long-term or short-term capital gain or loss,
depending on the holding period. Net capital gains on assets held for more than
twelve months is currently taxed at a maximum federal rate of 20%. Capital
losses are allowed in full against capital gains and up to $3,000 against other
income.

THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE DIRECTOR OPTION PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE DIRECTOR'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
DIRECTOR MAY RESIDE.

18
<PAGE>
PROPOSAL NO. 5
REINCORPORATION IN DELAWARE

PROPOSAL

For the reasons set forth below, the Board of Directors believes that it is
in the best interests of the Company and its shareholders to change the state of
incorporation of the Company from California to Delaware (the "Reincorporation
Proposal" or the "Proposed Reincorporation"). SHAREHOLDERS ARE URGED TO READ
CAREFULLY THIS SECTION OF THE PROXY STATEMENT, INCLUDING THE RELATED EXHIBITS
REFERENCED BELOW AND ATTACHED HERETO, BEFORE VOTING ON THE REINCORPORATION
PROPOSAL. Throughout this Proxy Statement, the term "INS California" or the
"Company" refers to International Network Services, the existing California
corporation, and the term "INS Delaware" refers to the new Delaware corporation,
a wholly-owned subsidiary of INS California, which is the proposed successor to
INS California in the Proposed Reincorporation.

As discussed below, the principal reasons for the Proposed Reincorporation
are the greater flexibility of Delaware corporate law and the substantial body
of case law interpreting that law. The Company believes that its shareholders
will benefit from the well established principles of corporate governance that
Delaware law affords. The proposed Delaware Certificate of Incorporation and
Bylaws are substantially similar to those currently in effect for INS
California, with the exception that the ability of shareholders holding 10% of
the outstanding stock to call a special meeting will be eliminated. The
Reincorporation Proposal is not being proposed in order to prevent an
unsolicited takeover attempt, nor was it in response to any present attempt
known to the Board of Directors to acquire control of the Company, obtain
representation on the Board of Directors or take any action that would
materially affect the governance of the Company.

The Reincorporation Proposal will be effected by merging INS California into
INS Delaware (the "Merger"). Upon completion of the Merger, INS California, as a
corporate entity, will cease to exist and INS Delaware will continue to operate
the business of the Company under its current name, International Network
Services.

Pursuant to the Agreement and Plan of Merger, in substantially the form
attached hereto as Appendix A (the "Merger Agreement"), each outstanding share
of INS California Common Stock, no par value per share, will be automatically
converted into one share of INS Delaware Common Stock, par value $0.001 per
share, upon the effective date of the Merger. Each stock certificate
representing issued and outstanding shares of INS California Common Stock will
continue to represent the same number of shares of Common Stock of INS Delaware.
IT WILL NOT BE NECESSARY FOR SHAREHOLDERS TO EXCHANGE THEIR EXISTING STOCK
CERTIFICATES FOR STOCK CERTIFICATES OF INS DELAWARE. However, shareholders may
exchange their certificates if they so choose. The Common Stock of INS
California is listed for trading on The Nasdaq National Market and, after the
Merger, INS Delaware's Common Stock will continue to be traded on The Nasdaq
National Market without interruption, under the same symbol ("INSS") as the
shares of INS California Common Stock are currently traded.

Under California law, the affirmative vote of a majority of the outstanding
shares of Common Stock of INS California is required for approval of the Merger
Agreement and the other terms of the Proposed Reincorporation. See "Required
Vote." The Proposed Reincorporation has been approved by the Company's Board of
Directors. If approved by the shareholders, it is anticipated that the Merger
will become effective as soon as practicable (the "Effective Date") following
the Annual Meeting. However, pursuant to the Merger Agreement, the Merger may be
abandoned or the Merger Agreement may be amended by the Board of Directors
(except that the principal terms may not be amended without shareholder
approval) either before or after shareholder approval has been obtained and
prior to the Effective Date if, in the opinion of the Board of Directors of the
Company, circumstances arise which make it inadvisable to proceed. Shareholders
of INS California will have no appraisal rights with respect to the Merger.

19
<PAGE>
The discussion set forth below is qualified in its entirety by reference to
the Merger Agreement, the Certificate of Incorporation of INS Delaware, the
Bylaws of INS Delaware and the Indemnification Agreement, copies of which are
attached hereto as Appendices A, B, C, and D, respectively.

APPROVAL BY SHAREHOLDERS OF THE PROPOSED REINCORPORATION WILL CONSTITUTE
APPROVAL OF THE MERGER AGREEMENT, THE CERTIFICATE OF INCORPORATION, THE BYLAWS
AND INDEMNIFICATION AGREEMENT OF INS DELAWARE AND ALL PROVISIONS THEREOF.

REQUIRED VOTE

Approval of the Reincorporation Proposal, which will also constitute
approval of (i) the Merger Agreement, the Certificate of Incorporation and the
Bylaws of INS Delaware, (ii) the assumption of INS California's employee benefit
plans and stock option and employee stock purchase plans by INS Delaware and
(iii) adoption of the Company's new indemnification agreements with its
directors, officers and other agents, will require the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock. The effect of
an abstention or a broker non-vote is the same as that of a vote against the
Reincorporation Proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSED REINCORPORATION. THE EFFECT OF AN ABSTENTION OR A BROKER NON-VOTE IS
THE SAME AS THAT OF A VOTE AGAINST THE REINCORPORATION PROPOSAL.

PRINCIPAL REASONS FOR THE PROPOSED REINCORPORATION

As the Company plans for the future, the Board of Directors and management
believe that it is essential to be able to draw upon well established principles
of corporate governance in making legal and business decisions. The prominence
and predictability of Delaware corporate law provide a reliable foundation on
which the Company's governance decisions can be based, and the Company believes
that shareholders will benefit from the responsiveness of Delaware corporate law
to their needs and to those of the corporation they own.

PROMINENCE, PREDICTABILITY AND FLEXIBILITY OF DELAWARE LAW. For many years
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal and
business needs of corporations organized under its laws. Many corporations have
chosen Delaware initially as a state of incorporation or have subsequently
changed corporate domicile to Delaware in a manner similar to that proposed by
the Company. Because of Delaware's prominence as the state of incorporation for
many major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. The Delaware courts have developed considerable
expertise in dealing with corporate issues, and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to corporate legal affairs.

INCREASED ABILITY TO ATTRACT AND RETAIN QUALIFIED DIRECTORS. Both
California and Delaware law permit a corporation to include a provision in its
certificate of incorporation which reduces or limits the monetary liability of
directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and money
required to respond to such claims and to defend such litigation can be
substantial. It is the Company's desire to reduce these risks to its directors
and officers and to limit situations in which monetary damages can be recovered
against directors so that the Company may continue to attract and retain
qualified directors who otherwise might be unwilling to serve because of the
risks involved. The Company believes that, in general, Delaware law provides
greater protection to directors than California law and that Delaware case law

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regarding a corporation's ability to limit director liability is more developed
and provides more guidance than California law.

CALIFORNIA PROPOSITION 211. In November 1996, Proposition 211 was rejected
by the California electorate. Proposition 211 would have severely limited the
ability of California companies to indemnify their directors and officers. While
Proposition 211 was defeated, similar initiatives or legislation containing
similar provisions may be proposed in California in the future. As a result, the
Company believes that the more favorable corporate environment afforded by
Delaware will enable it to compete more effectively with other public companies
in attracting new directors.

WELL ESTABLISHED PRINCIPLES OF CORPORATE GOVERNANCE. There is substantial
judicial precedent in the Delaware courts as to the legal principles applicable
to measures that may be taken by a corporation and as to the conduct of the
Board of Directors such as under the business judgment rule and other standards.
The Company believes that its shareholders will benefit from the well
established principles of corporate governance that Delaware law affords.

NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE BENEFIT
PLANS OR LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY

The Reincorporation Proposal will effect only a change in the legal domicile
of the Company and certain other changes of a legal nature which are described
in this Proxy Statement. The Proposed Reincorporation will NOT result in any
change in the name, business, management, fiscal year, assets or liabilities or
location of the principal facilities of the Company. The six directors who will
be elected at the Annual Meeting of Shareholders will become the directors of
INS Delaware. All employee benefit, stock option and employee stock purchase
plans of INS California will be assumed and continued by INS Delaware, and each
option or right issued pursuant to such plans will automatically be converted
into an option or right to purchase the same number of shares of INS Delaware
Common Stock, at the same price per share, upon the same terms, and subject to
the same conditions. Shareholders should note that approval of the
Reincorporation Proposal will also constitute approval of the assumption of
these plans by INS Delaware. Other employee benefit arrangements of INS
California will also be continued by INS Delaware upon the terms and subject to
the conditions currently in effect. As noted above, after the merger the shares
of Common Stock of INS Delaware will continue to be traded, without
interruption, on the same exchange (The Nasdaq National Market) and under the
same symbol ("INSS") as the shares of Common Stock of INS California are
currently traded. The Company believes that the Proposed Reincorporation will
not affect any of its material contracts with any third parties and that INS
California's rights and obligations under such material contractual arrangements
will continue and be assumed by INS Delaware.

ANTITAKEOVER IMPLICATIONS

Delaware, like many other states, permits a corporation to adopt a number of
measures designed to reduce a corporation's vulnerability to unsolicited
takeover attempts through amendment of the corporate charter or bylaws or
otherwise. The Reincorporation Proposal is NOT being proposed in order to
prevent such a change in control nor is it in response to any present attempt
known to the Board of Directors to acquire control of the Company or to obtain
representation on the Board of Directors.

In the discharge of its fiduciary obligations to its shareholders, the Board
of Directors has evaluated the Company's vulnerability to potential unsolicited
bidders. In the course of such evaluation, the Board of Directors of the Company
has considered or may consider in the future certain defensive strategies
designed to enhance the Board's ability to negotiate with an unsolicited bidder.
These strategies include, but are not limited to, the adoption of a shareholder
rights plan and the designation and issuance of preferred stock, the rights and
preferences of which are determined by the Board of Directors. Although these
measures may be implemented under California law, there is substantial judicial
precedent in the

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Delaware courts as to the legal principles applicable to such defensive measures
and as to the conduct of the Board of Directors under the business judgment rule
with respect to unsolicited takeover attempts.

Certain effects of the Reincorporation Proposal may be considered to have
antitakeover implications. Section 203 of the Delaware General Corporation Law,
from which INS Delaware does not intend to opt out, restricts certain "business
combinations" with "interested stockholders" for three years following the date
that a person becomes an interested stockholder, unless the Board of Directors
approves the business combination. See "Significant Differences Between the
Corporation Laws of California and Delaware-- Stockholder Approval of Certain
Business Combinations".

The Board of Directors believes that unsolicited takeover attempts may be
unfair or disadvantageous to the Company and its shareholders because, among
other reasons: (i) a non-negotiated takeover bid may be timed to take advantage
of temporarily depressed stock prices; (ii) a non-negotiated takeover bid may be
designed to foreclose or minimize the possibility of more favorable competing
bids or alternative transactions; (iii) a non-negotiated takeover bid may
involve the acquisition of only a controlling interest in the corporation's
stock, without affording all shareholders the opportunity to receive the same
economic benefits; and (iv) certain of the Company's contractual arrangements
provide that they may not be assigned pursuant to a transaction which results in
a "change of control" of the Company without the prior written consent of the
licensor or other contracting party.

By contrast, in a transaction in which a potential acquiror must negotiate
with an independent Board of Directors, the Board can and should take account of
the underlying and long-term values of the Company's business, the possibilities
for alternative transactions on more favorable terms, possible advantages from a
tax-free reorganization, anticipated favorable developments in the Company's
business not yet reflected in the stock price and equality of treatment of all
shareholders.

Despite the belief of the Board of Directors as to the benefits to
shareholders of the Reincorporation Proposal, it may be disadvantageous to the
extent that it has the effect of discouraging a future takeover attempt which is
not approved by the Board of Directors, but which a majority of the shareholders
may deem to be in their best interests or in which shareholders may receive a
substantial premium for their shares over the then current market value or over
their cost basis in such shares. As a result of such effects of the
Reincorporation Proposal, shareholders who might wish to participate in an
unsolicited tender offer may not have an opportunity to do so. In addition, to
the extent that provisions of Delaware law enable the Board of Directors to
resist a takeover or a change in control of the Company, such provisions could
make it more difficult to change the existing Board of Directors and management.

THE CHARTERS AND BYLAWS OF INS CALIFORNIA AND INS DELAWARE

The provisions of the INS Delaware Certificate of Incorporation and Bylaws
are similar to those of the INS California Articles of Incorporation and Bylaws
in many respects. However, the Reincorporation Proposal includes the
implementation of certain provisions in the INS Delaware Certificate of
Incorporation and Bylaws which alter the rights of shareholders and the powers
of management and which reduce shareholder participation in important corporate
decisions. These provisions have antitakeover implications and are described in
detail below. Approval by shareholders of the Proposed Reincorporation will
constitute an approval of the inclusion in the INS Delaware Certificate of
Incorporation and Bylaws of each of the provisions described below. In addition
certain other changes altering the rights of shareholders and powers of
management could be implemented in the future by amendment of its Certificate of
Incorporation or Bylaws. For a discussion of such changes, see "Significant
Differences Between the Corporation Laws of California and Delaware." This
discussion of the Certificate of Incorporation and Bylaws of INS Delaware is
qualified by reference to Appendices B and C hereto, respectively.

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$0.001 per share, and 5,000,000 shares of Preferred Stock, par value $0.001 per
share. Like INS California's Articles of Incorporation, INS Delaware's
Certificate of Incorporation provides that the Board of Directors is entitled to
determine the powers, preferences and rights, and the qualifications,
limitations or restrictions, of the authorized and unissued Preferred Stock.

MONETARY LIABILITY OF DIRECTORS. The Articles of Incorporation of INS
California and the Certificate of Incorporation of INS Delaware both provide for
the elimination of personal monetary liability of directors to the fullest
extent permissible under the law of the respective states. For a more detailed
explanation of the foregoing, see "Significant Differences Between the
Corporation Laws of California and Delaware-- Indemnification and Limitation of
Liability." A copy of the form of INS Delaware Indemnification Agreement is
attached hereto as Appendix D.

CUMULATIVE VOTING FOR DIRECTORS. The INS Articles of Incorporation and the
INS Delaware Certificate of Incorporation do not provide for cumulative voting
rights. Cumulative voting provides that each share of stock normally having one
vote is entitled to a number of votes equal to the number of directors to be
elected. A shareholder may then cast all such votes for a single candidate or
may allocate them among as many candidates as the shareholder may choose.

POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS. Under California law and INS
California's Bylaws, a special meeting of shareholders may be called by the
Board of Directors, the Chairman of the Board, the President, the holders of
shares entitled to cast not less than 10% of the votes at such meeting and such
additional persons as are authorized by the Articles of Incorporation or the
Bylaws. Under Delaware law, a special meeting of stockholders may be called by
the Board of Directors or any other person authorized to do so in the
certificate of incorporation or the bylaws. The Bylaws of INS Delaware authorize
the Board of Directors, the Chairman of the Board or the President to call a
special meeting of stockholders. Therefore, holders of 10% or more of the voting
shares of the Company will no longer be able to call a special meeting of
stockholders. The Company believes this change is warranted as a prudent
corporate governance measure to prevent an inappropriately small number of
shareholders from prematurely forcing shareholder consideration of a proposal
over the opposition of the Board of Directors by calling a special shareholders'
meeting before (i) the time that the Board believes such consideration to be
appropriate or (ii) the next annual meeting (provided that the holders meet the
notice requirements for consideration of a proposal). Such special meetings
would involve substantial expense and diversion of Board and management time
which the Company believes to be inappropriate for an enterprise the size of the
Company. Aside from the foregoing, no other change is contemplated in the
procedures to call a special shareholders' meeting, although in the future the
Board of Directors could amend the Bylaws of INS Delaware without stockholder
approval.

FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under California law, any
vacancy on the Board of Directors other than one created by removal of a
director may be filled by the Board. If the number of directors is less than a
quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors
at a meeting held pursuant to notice or waivers of notice or by a sole remaining
director. A vacancy created by removal of a director may be filled by the Board
only if so authorized by a Corporation's Articles of Incorporation or by a Bylaw
approved by the corporation's shareholders. INS California's Articles of
Incorporation and Bylaws do not permit directors to fill vacancies created by
removal of a director. Under Delaware law, vacancies and newly created
directorships may be filled by a majority of the directors then in office (even
though less than a quorum) or by a sole remaining director, unless otherwise
provided in the Certificate of Incorporation or Bylaws (or unless the
Certificate of Incorporation directs that a particular class of stock is to
elect such director(s), in which case a majority of the directors elected by
such class, or a sole remaining director so elected, shall fill such vacancy or
newly created directorship). The Bylaws of INS Delaware provide, consistent with
the Bylaws of INS California, that any vacancy created by the removal of a
director by the stockholders of INS Delaware may be filled only by the
stockholders. Following the Proposed

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Reincorporation, the Board of Directors of INS Delaware could, although it has
no current intention to do so, amend the Bylaws to provide that directors may
fill any vacancy created by removal of directors by the stockholders.

NOMINATIONS OF DIRECTOR CANDIDATES AND INTRODUCTION OF BUSINESS AT
SHAREHOLDER MEETINGS. The Bylaws of INS Delaware include an advance notice
procedure similar to that included in the Bylaws of INS California with regard
to the nomination, other than by or at the direction of the Board or Directors,
of candidates for election as directors (the "Nomination Procedure") and with
regard to certain matters to be brought before an annual meeting or special
meeting of shareholders (the "Business Procedure").

The Nomination Procedure provides that only persons nominated by or at the
direction of the Board of Directors or by a shareholder who has given timely
written notice to the Secretary of the Company prior to the meeting will be
eligible for election as directors. The Business Procedure provides that at an
annual or special meeting, and subject to any other applicable requirements,
only such business may be conducted as has been brought before the meeting by or
at the direction of the Board of Directors or by a shareholder who has given
timely written notice to the Secretary of the Company of such shareholder's
intention to bring such business before the meeting. In all cases, to be timely,
notice must be received by the Company not fewer than 120 days prior to the
meeting. Under INS California's Bylaws, a Business Procedure notice is timely if
received by the Secretary of the Company not fewer than 90 days prior to the
meeting.

Under the Nomination Procedure, a shareholder's notice to the Company must
contain certain information about the nominee, including name, address, the
consent to be nominated and such other information as would be required to be
included in a proxy statement soliciting proxies for the election of the
proposed nominee, and certain information about the shareholder proposing to
nominate that person, including name, address, a representation that the
shareholder is a holder of record of stock entitled to vote at the meeting and a
description of all arrangements or understandings between the shareholder and
each nominee. Under the Business Procedure, notice relating to the conduct of
business at a meeting other than the nomination of directors must contain
certain information about the business and about the shareholder who proposes to
bring the business before the meeting. If the chairman or other officer
presiding at the meeting determines that a person was not nominated in
accordance with the Nomination Procedure, such person will not be eligible for
election as a director, or if he or she determines that other business was not
properly brought before such meeting in accordance with the Business Procedure,
such business will not be conducted at such meeting. Nothing in the Nomination
Procedure or the Business Procedure will preclude discussion by any shareholder
of any nomination or business properly made or brought before an annual or
special meeting in accordance with the above-described procedures.

By requiring advance notice of nominations by shareholders, the Nomination
Procedure affords the Board of Directors an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the Board, to inform the shareholders about such qualifications. By
requiring advance notice of proposed business, the Business Procedure provides
the Board with an opportunity to inform shareholders of any business proposed to
be conducted at a meeting and the Board's position on any such proposal,
enabling shareholders to better determine whether they desire to attend the
meeting or grant a proxy to the Board of Directors as to the disposition of such
business. Although the INS Delaware Bylaws like the INS California Bylaws do not
give the Board any power to approve or disapprove shareholder nominations for
the election of directors or any other business desired by shareholders to be
conducted at a meeting, the INS Delaware Bylaws, like the INS California Bylaws,
may have the effect of precluding a nomination for the election of directors or
of precluding any other business at a particular meeting if the proper
procedures are not followed. In addition, the procedures may discourage or deter
a third party from conducting a solicitation of proxies to elect its own slate
of directors or otherwise attempting to obtain control of the Company, even if
the conduct of such business or such attempt might be deemed to be beneficial to
the Company and its shareholders.

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SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE

The following provides a summary of the major substantive differences
between the Corporation Laws of California and Delaware. It is not an exhaustive
description of all differences between the two states' laws.

STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS

DELAWARE. Under Section 203 of the Delaware General Corporation Law, a
Delaware corporation is prohibited from engaging in a "business combination"
with an "interested stockholder" for three years following the date that such
person or entity becomes an interested stockholder. With certain exceptions, an
interested stockholder is a person or entity who or which owns, individually or
with or through certain other persons or entities, fifteen percent (15%) or more
of the corporation's outstanding voting stock (including any rights to acquire
stock pursuant to an option, warrant, agreement, arrangement or understanding,
or upon the exercise of conversion or exchange rights, and stock with respect to
which the person has voting rights only). The three-year moratorium imposed by
Section 203 on business combinations of Section 203 does not apply if (i) prior
to the date on which such stockholder becomes an interested stockholder the
Board of Directors of the subject corporation approves either the business
combination or the transaction that resulted in the person or entity becoming an
interested stockholder; (ii) upon consummation of the transaction that made him
or her an interested stockholder, the interested stockholder owns at least
eighty-five percent (85%) of the corporation's voting stock outstanding at the
time the transaction commenced (excluding from the 85% calculation shares owned
by directors who are also officers of the subject corporation and shares held by
employee stock plans that do not give employee participants the right to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the date such person or entity becomes an interested stockholder, the
Board approves the business combination and it is also approved at a stockholder
meeting by sixty-six and two-thirds percent (66 2/3%) of the outstanding voting
stock not owned by the interested stockholder. Although a Delaware corporation
to which Section 203 applies may elect not to be governed by Section 203, the
Board of Directors of the Company intends that the Company be governed by
Section 203. The Company believes that most Delaware corporations have availed
themselves of this statute and have not opted out of Section 203.

The Company believes that Section 203 will encourage any potential acquiror
to negotiate with the Company's Board of Directors. Section 203 also might have
the effect of limiting the ability of a potential acquiror to make a two-tiered
bid for INS Delaware in which all stockholders would not be treated equally.
Shareholders should note, however, that the application of Section 203 to INS
Delaware will confer upon the Board the power to reject a proposed business
combination in certain circumstances, even though a potential acquiror may be
offering a substantial premium for INS Delaware's shares over the then-current
market price. Section 203 would also discourage certain potential acquirors
unwilling to comply with its provisions.

CALIFORNIA. California law requires that holders of common stock receive
common stock in a merger of the corporation with the holder of more than fifty
percent (50%) but less than ninety percent (90%) of the target's common stock or
its affiliate unless all of the target company's shareholders consent to the
transaction. This provision of California law may have the effect of making a
"cash-out" merger by a majority shareholder more difficult to accomplish.
Although Delaware law does not parallel California law in this respect, under
some circumstances Section 203 does provide similar protection to stockholders
against coercive two-tiered bids for a corporation in which the stockholders are
not treated equally.

CLASSIFIED BOARD OF DIRECTORS

A classified board is one on which a certain number, but not all, of the
directors are elected on a rotating basis each year.

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DELAWARE. Delaware law permits, but does not require, a classified Board of
Directors, pursuant to which the directors can be divided into as many as three
classes with staggered terms of office, with only one class of directors
standing for election each year. The INS Delaware Certificate of Incorporation
and Bylaws do not provide for a classified board, and the adoption of a
classified Board of Directors in the future would require stockholder approval.

CALIFORNIA. Under California law, a corporation generally may provide for a
classified board of directors by adopting amendments to its Charter or bylaws,
which amendments must be approved by the shareholders. The INS California
Articles of Incorporation and Bylaws do not currently provide for a classified
board.

REMOVAL OF DIRECTORS

DELAWARE. Under Delaware law, any director or the entire Board of Directors
of a corporation that does not have a classified Board of Directors or
cumulative voting may be removed with or without cause with the approval of a
majority of the outstanding shares entitled to vote at an election of directors.
In the case of a Delaware corporation having cumulative voting, if less than the
entire Board is to be removed, a director may not be removed without cause if
the number of shares voted against such removal would be sufficient to elect the
director under cumulative voting. A director of a Delaware corporation with a
classified board may be removed only for cause, unless the certificate of
incorporation otherwise provides.

CALIFORNIA. Under California law, any director or the entire Board of
Directors may be removed, with or without cause, with the approval of a majority
of the outstanding shares entitled to vote; however, no individual director may
be removed (unless the entire Board is removed) if the number of votes cast
against such removal would be sufficient to elect the director under cumulative
voting. INS California's Articles of Incorporation do not provide for a
classified board of directors or for cumulative voting.

INDEMNIFICATION AND LIMITATION OF LIABILITY

California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit, with certain exceptions, a corporation to adopt charter
provisions eliminating the liability of a director to the corporation or its
shareholders for monetary damages for breach of the director's fiduciary duty.
There are nonetheless certain differences between the laws of the two states
respecting indemnification and limitation of liability which are summarized
below.

DELAWARE. The INS Delaware Certificate of Incorporation would eliminate the
liability of directors to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director to the fullest extent
permissible under Delaware law, as such law exists currently and as it may be
amended in the future. Under Delaware law, such provision may not eliminate or
limit director monetary liability for: (a) breaches of the director's duty of
loyalty to the corporation or its stockholders; (b) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law; (c)
the payment of unlawful dividends or unlawful stock repurchases or redemptions;
or (d) transactions in which the director received an improper personal benefit.
Such limitation of liability provisions also may not limit a director's
liability for violation of, or otherwise relieve the Company or its directors
from the necessity of complying with federal or state securities laws, or affect
the availability of nonmonetary remedies such as injunctive relief or
rescission.

CALIFORNIA. The INS California Articles of Incorporation eliminate the
liability of directors to the corporation to the fullest extent permissible
under California law, as such law exists currently and as it may be amended in
the future. California law does not permit the elimination of monetary liability
where such liability is based on: (a) intentional misconduct or knowing and
culpable violation of law; (b) acts or omissions that a director believes to be
contrary to the best interests of the corporation or its shareholders

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or that involve the absence of good faith on the part of the director; (c)
receipt of an improper personal benefit; (d) acts or omissions that show
reckless disregard for the director's duty to the corporation or its
shareholders, where the director in the ordinary course of performing a
director's duties should be aware of a risk of serious injury to the corporation
or its shareholders; (e) acts or omissions that constitute an unexcused pattern
of inattention that amounts to an abdication of the director's duty to the
corporation and its shareholders; (f) transactions between the corporation and a
director who has a material financial interest in such transaction; and (g)
liability for improper distributions, loans or guarantees.

INDEMNIFICATION COMPARED AND CONTRASTED. California law requires
indemnification when the individual has defended successfully the action on the
merits while Delaware law requires indemnification whether there has been a
successful or unsuccessful defense on the merits or otherwise. Delaware law
generally permits indemnification of expenses, including attorneys' fees,
actually and reasonably incurred in the defense or settlement of a derivative or
third-party action, provided there is a determination by a majority vote of a
disinterested quorum of the directors, by independent legal counsel or by a
majority vote of a quorum of the stockholders that the person seeking
indemnification acted in good faith and in a manner reasonably believed to be in
best interests of the corporation. Without court approval, however, no
indemnification may be made in respect of any derivative action in which such
person is adjudged liable for negligence or misconduct in the performance of his
or her duty to the corporation. Delaware law requires indemnification of
expenses when the individual being indemnified has successfully defended any
action, claim, issue or matter therein, on the merits or otherwise.

Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and California law, if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.

California law permits a California corporation to provide rights to
indemnification beyond those provided therein to the extent such additional
indemnification is authorized in the corporation's Articles of Incorporation.
Thus, if so authorized, rights to indemnification may be provided pursuant to
agreements or bylaw provisions which make mandatory the permissive
indemnification provided by California law. INS California's Articles of
Incorporation permit indemnification beyond that expressly mandated by
California law and limit director monetary liability to the extent permitted by
California law.

Delaware law also permits a Delaware corporation to provide indemnification
in excess of that provided by statute. By contrast to California law, Delaware
law does not require authorizing provisions in the certificate of incorporation
and does not contain express prohibitions on indemnification in certain
circumstances. Limitations on indemnification may be imposed by a court,
however, based on principles of public policy.

INSPECTION OF SHAREHOLDER LIST

Both California and Delaware law allow any shareholder to inspect the
shareholder list for a purpose reasonably related to such person's interest as a
shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholder list by persons holding an
aggregate of five percent (5%) or more of the corporation's voting shares, or
shareholders holding an aggregate of one percent (1%) or more of such shares who
have contested the election of directors. Delaware law also provides for
inspection rights as to a list of stockholders entitled to vote at a meeting
within a ten day period preceding a stockholders' meeting for any purpose
germane to the meeting. However, Delaware law contains no provisions comparable
to the absolute right of inspection provided by California law to certain
shareholders.

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DIVIDENDS AND REPURCHASES OF SHARES

California law dispenses with the concepts of par value of shares as well as
statutory definitions of capital, surplus and the like. The concepts of par
value, capital and surplus exist under Delaware law.

DELAWARE. Delaware law permits a corporation to declare and pay dividends
out of surplus or, if there is no surplus, out of net profits for the fiscal
year in which the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, Delaware law generally
provides that a corporation may redeem or repurchase its shares only if the
capital of the corporation is not impaired and such redemption or repurchase
would not impair the capital of the corporation.

CALIFORNIA. Under California law, a corporation may not make any
distribution to its shareholders unless either: (i) the corporation's retained
earnings immediately prior to the proposed distribution equal or exceed the
amount of the proposed distribution; or (ii) immediately after giving effect to
such distribution, the corporation's assets (exclusive of goodwill, capitalized
research and development expenses and deferred charges) would be at least equal
to 1 1/4 times its liabilities (not including deferred taxes, deferred income
and other deferred credits), and the corporation's current assets would be at
least equal to its current liabilities (or 1 1/4 times its current liabilities
if the average pre-tax and pre-interest expense earnings for the preceding two
fiscal years were less than the average interest expense for such years). Such
tests are applied to California corporations on a consolidated basis.

SHAREHOLDER VOTING

Both California and Delaware law generally require that a majority of the
shareholders of both acquiring and target corporations approve statutory
mergers.

DELAWARE. Delaware law does not require a stockholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if: (a) the merger agreement does not amend the
existing certificate of incorporation; (b) each share of stock of the surviving
corporation outstanding immediately before the effective date of the merger is
an identical outstanding share after the merger and; (c) either no shares of
common stock of the surviving corporation and no shares, securities or
obligations convertible into such stock are to be issued or delivered under the
plan of merger, or the authorized unissued shares or shares of common stock of
the surviving corporation to be issued or delivered under the plan of merger
plus those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed twenty
percent (20%) of the shares of common stock of such constituent corporation
outstanding immediately prior to the effective date of the merger.

CALIFORNIA. California law contains a similar exception to its voting
requirements for reorganizations where shareholders or the corporation itself,
or both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than 83.3% (or five-sixths)
of the voting power of the surviving or acquiring corporation or its parent
entity.

APPRAISAL RIGHTS

Under both California and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction.

28
<PAGE>
DELAWARE. Under Delaware law, such fair market value is determined
exclusive of any element of value arising from the accomplishment or expectation
of the merger or consolidation, and such appraisal rights are not available: (a)
with respect to the sale, lease or exchange of all or substantially all of the
assets of a corporation; (b) with respect to a merger or consolidation by a
corporation the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such stockholders
receive only shares of the surviving corporation or shares of any other
corporation that are either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of fractional shares of
such corporations; or (c) to stockholders of a corporation surviving a merger if
no vote of the stockholders of the surviving corporation is required to approve
the merger under Delaware law.

CALIFORNIA. The limitations on the availability of appraisal rights under
California law are different from those under Delaware law. Shareholders of a
California corporation whose shares are listed on a national securities exchange
generally do not have such appraisal rights unless the holders of at least five
percent (5%) of the class of outstanding shares claim the right or the
corporation or any law restricts the transfer of such shares. Appraisal rights
are also unavailable if the shareholders of a corporation or the corporation
itself, or both, immediately prior to the reorganization will own immediately
after the reorganization equity securities constituting more than 83.3% (or
five-sixths) of the voting power of the surviving or acquiring corporation or
its parent entity. California law generally affords appraisal rights in sale of
asset reorganizations.

DISSOLUTION

Under California law, shareholders holding fifty percent (50%) or more of
the total voting power may authorize a corporation's dissolution, with or
without the approval of the corporation's Board of Directors, and this right may
not be modified by the articles of incorporation. Under Delaware law, unless the
Board of Directors approves the proposal to dissolve, the dissolution must be
unanimously approved by all the stockholders entitled to vote thereon. Only if
the dissolution is initially approved by the Board of Directors may the
dissolution be approved by a simple majority of the outstanding shares of the
corporation's stock entitled to vote. In the event of such a board-initiated
dissolution, Delaware law allows a Delaware corporation to include in its
certificate of incorporation a supermajority (greater than a simple majority)
voting requirement in connection with dissolutions. INS Delaware's Certificate
of Incorporation contains no such supermajority voting requirement.

INTERESTED DIRECTOR TRANSACTIONS

Under both California and Delaware law, certain contracts or transactions in
which one or more of a corporation's directors has an interest are not void or
voidable because of such interest, provided that certain conditions, such as
obtaining the required approval and fulfilling the requirements of good faith
and full disclosure, are met. With certain minor exceptions, the conditions are
similar under California and Delaware law.

SHAREHOLDER DERIVATIVE SUITS

California law provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met. Under Delaware
law, a stockholder may bring a derivative action on behalf of the corporation
only if the stockholder was a stockholder of the corporation at the time of the
transaction in question or if his or her stock thereafter devolved upon him or
her by operation of law. California law also provides that the corporation or
the defendant in a derivative suit may make a motion to the court for an order
requiring the plaintiff shareholder to furnish a security bond. Delaware does
not have a similar bonding requirement.

29
<PAGE>
APPLICATION OF THE GENERAL CORPORATION LAW OF CALIFORNIA TO DELAWARE
CORPORATIONS

Under Section 2115 of the California General Corporation Law, certain
foreign corporations (i.e., corporations not organized under California law)
which have significant contacts with California are subject to a number of key
provisions of the California General Corporation Law. However, an exemption from
Section 2115 is provided for corporations whose shares are listed on a major
national securities exchange or whose shares are (a) qualified as a "national
market security" on The Nasdaq Stock Market and (b) whose shares are held by at
least 800 shareholders. Following the Proposed Reincorporation, the Common Stock
of INS Delaware will continue to be traded on The Nasdaq National Market, and it
is expected that the INS Delaware's shares shall be held by at least 800
stockholders; accordingly, it is expected that INS Delaware will be exempt from
Section 2115.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a discussion of certain federal income tax considerations
that may be relevant to holders of INS California Common Stock who receive INS
Delaware Common Stock in exchange for their INS California Common Stock as a
result of the Proposed Reincorporation. This discussion is based on the Internal
Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices in effect on the date of this Proxy
Statement. The discussion does not address all of the tax consequences of the
Proposed Reincorporation that may be relevant to particular INS California
shareholders, such as dealers in securities, or those INS California
shareholders who acquired their shares upon the exercise of stock options, nor
does it address the tax consequences to holders of options or warrants to
acquire INS California Common Stock. Furthermore, no foreign, state, or local
tax considerations are addressed herein. IN VIEW OF THE VARYING NATURE OF SUCH
TAX CONSEQUENCES, EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE PROPOSED REINCORPORATION,
INCLUDING THE APPLICABILITY OF FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS.

The Proposed Reincorporation is expected to qualify as a reorganization
within the meaning of Section 368(a) of the Code, with the following tax
consequences:

(a) No gain or loss should be recognized by holders of INS California Common
Stock upon receipt of INS Delaware Common Stock pursuant to the Proposed
Reincorporation;

(b) The aggregate tax basis of the INS Delaware Common Stock received by
each shareholder in the Proposed Reincorporation should be equal to the
aggregate tax basis of the INS California Common Stock surrendered in
exchange therefor; and

(c) The holding period of the INS Delaware Common Stock received by each
shareholder of INS California should include the period for which such
shareholder held the INS California Common Stock surrendered in exchange
therefor, provided that such INS California Common Stock was held by the
shareholder as a capital asset at the time of the Proposed
Reincorporation.

The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") with respect to the federal income tax consequences of the Proposed
Reincorporation under the Code. A successful IRS challenge to the reorganization
status of the Proposed Reincorporation (in consequence of a failure to satisfy
the "continuity of interest" requirement or otherwise) would result in a
shareholder recognizing gain or loss with respect to each share of INS
California Common Stock exchanged in the Proposed Reincorporation equal to the
difference between the shareholder's basis in such share and the fair market
value, as of the time of the Proposed Reincorporation, of the INS Delaware
Common Stock received in exchange therefor. In such event, a shareholder's
aggregate basis in the shares of INS Delaware Common Stock received in the
exchange would equal their fair market value on such date, and the shareholder's
holding period for such shares would not include the period during which the
shareholder held INS

30
<PAGE>
California Common Stock. Even if the Proposed Reincorporation qualifies as a
reorganization under the Code, a shareholder would recognize gain to the extent
the shareholder received (actually or constructively) consideration other than
INS Delaware Common Stock in exchange for the shareholder's INS California
Common Stock.

State, local or foreign income tax consequences to shareholders may vary
from the federal tax consequences described above.

The Company should not recognize gain or loss for federal income tax
purposes as a result of the Proposed Reincorporation, and INS Delaware should
succeed, without adjustment, to the federal income tax attributes of INS
California.

31
<PAGE>
PROPOSAL NO. 6
INCREASE IN THE NUMBER OF AUTHORIZED SHARES

PROPOSAL

The Articles of Incorporation of INS California currently authorize the
Company to issue up to 75,000,000 shares of Common Stock and 5,000,000 shares of
Preferred Stock. The Certificate of Incorporation of INS Delaware authorizes INS
Delaware to issue up to 150,000,000 shares of Common Stock and 5,000,000 shares
of Preferred Stock. As of September 14, 1998, shares of Common Stock
were outstanding and an additional shares were reserved for issuance
upon the exercise of options granted under the Company's stock option plans and
exercise of awards under the Company's employee stock purchase plan. The Board
of Directors has no immediate plans to issue a significant number of additional
shares of Common Stock. However, the larger number of authorized shares of
Common Stock provided for in the INS Delaware Certificate of Incorporation will
provide the Company the certainty and flexibility to undertake various types of
transactions, including stock splits (in the form of stock dividends),
financings, increases in the shares reserved for issuance pursuant to
stock-based employee benefit, or other corporate transactions not yet
determined.

The increase in the authorized number of Common Stock will be available for
issuance without further action by shareholders except as required by law or
applicable requirements of The Nasdaq Stock Market or such successor markets on
which the Common Stock may be traded.

The Board of Directors may use such additional authorized shares to
discourage persons from attempting to gain control of the Company without prior
negotiation with the Board of Directors. For example, additional shares could be
used to dilute the voting power of shares then outstanding or issued to persons
who would support the Board of Directors in opposing a hostile takeover bid or
solicitation in opposition to management. Management is not currently aware of
any effort to obtain control of the Company by means of a merger, tender offer,
proxy solicitation in opposition or otherwise.

REQUIRED VOTE

The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock is required to approve this proposal. The effect of an
abstention or a broker non-vote is the same as that of a vote against the
proposed increase in the number of authorized shares. If this proposal is not
approved by the shareholders but the shareholders approve the Reincorporation
Proposal, the Company will reset the authorized shares of Common Stock of INS
Delaware to 75,000,000, as currently authorized for INS California, and then
complete the Proposed Reincorporation. IF THE REINCORPORATION PROPOSAL IS NOT
APPROVED, THE COMPANY WILL NOT SEEK SHAREHOLDER APPROVAL OF THE INCREASE IN ITS
AUTHORIZED SHARES AT THIS TIME.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO SET THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF INS
DELAWARE AT 150,000,000 IN CONNECTION WITH THE REINCORPORATION PROPOSAL. THE
EFFECT OF AN ABSTENTION OR A BROKER NON-VOTE IS THE SAME AS THAT OF A VOTE
AGAINST THE PROPOSAL TO INCREASE THE NUMBER OF AUTHORIZED SHARES.

32
<PAGE>
PROPOSAL NO. 7
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors has selected PricewaterhouseCoopers, independent
certified public accountants, to audit the financial statements of the Company
for the fiscal year ending June 30, 1999. PricewaterhouseCoopers has audited the
Company's financial statements since the Company's inception. A representative
of PricewaterhouseCoopers is expected to be present at the meeting, will have
the opportunity to make a statement, and is expected to be available to respond
to appropriate questions.

REQUIRED VOTE

The Board of Directors has conditioned its appointment of the Company's
independent accountants upon the receipt of the affirmative vote of a majority
of the shares of Common Stock present in person or represented by proxy, and
voting at the Annual Meeting. Abstentions and broker non-votes are counted for
purposes of determining the presence or absence of a quorum for the transaction
of business but have no other legal effect under California law. In the event
that the shareholders do not approve the selection of PricewaterhouseCoopers,
the appointment of the independent accountants will be reconsidered by the Board
of Directors.
RECOMMENDATION: THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT ACCOUNTANTS.

33
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of Common Stock of
the Company as of September 14, 1998 for the following: (i) each person or
entity who is known by the Company to own beneficially 5% or more of the
outstanding shares of the Company's Common Stock; (ii) each of the Company's
directors; (iii) each of the executive officers named in the Summary
Compensation Table; and (iii) all directors and executive officers of the
Company as a group.

<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OF TOTAL(1)
- ---------------------------------------------------------------------------------------- ------------ -----------
<S> <C> <C>
Donald K. McKinney(2)................................................................... 10,581,813
c/o International Network Services
1213 Innsbruck Drive
Sunnyvale, CA 94089

Cisco Systems, Inc.(3).................................................................. 2,581,612
Douglas C. Allred
170 West Tasmin Drive
San Jose, CA 95134

John L. Drew(4)......................................................................... 686,722

Vernon R. Anderson(5)................................................................... 408,942

Kevin J. Laughlin(6).................................................................... 255,084

Lawrence G. Finch(7).................................................................... 170,733

David Carlick(8)........................................................................ 65,100

All executive officers and directors as a group (7 persons)(9).......................... 14,750,006
</TABLE>

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

* Represents beneficial ownership of less than 1% of the outstanding shares of
the Company's Common Stock.

1. Based on shares outstanding as of September 14, 1998. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. In computing the number of shares beneficially owned by
a person and the percentage ownership of that person, shares of Common Stock
subject to options held by that person that are currently exercisable or
exercisable within 60 days of September 14, 1998 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purpose of
computing the percentage ownership of each other person. Except as indicated
in the footnotes to this table and pursuant to applicable community property
laws, each shareholder named in the table has sole voting and investment
power with respect to the shares set forth opposite such shareholder's name.

2. Includes 10,580,280 shares held by the McKinney Family Trust, of which Mr.
McKinney is a trustee. Of these shares, 120,000 shares were subject to a
repurchase option in favor of the Company as of September 14, 1998.

3. Mr. Allred, a director of the Company, is Senior Vice President, Customer
Advocacy World Wide Systems, Support, Services at Cisco. Mr. Allred
disclaims beneficial ownership of such shares.

4. Includes 85,000 shares subject to a repurchase option in favor of the
Company as of September 14, 1998. Also includes 140,000 shares subject to
options held by Mr. Drew that are exercisable within 60 days of September
14, 1998.

34
<PAGE>
5. Includes 402,442 shares held by the Vernon R. & Lysbeth W. Anderson Family
Trust of which Mr. Anderson is a trustee. Also includes 6,500 shares subject
to options held by Mr. Anderson that are exercisable within 60 days of
September 14, 1998.

6. Includes 23,000 shares subject to a repurchase option in favor of the
Company as of September 14, 1998. Also includes 32,000 shares subject to
options that are exercisable within 60 days of September 14, 1998.

7. Also includes 8,500 shares subject to options held by Mr. Finch that are
exercisable within 60 days of September 14, 1998.

8. Includes 3,000 shares subject to a repurchase option in favor of the Company
as of September 14, 1998. Also includes 5,100 shares subject to options that
are exercisable within 60 days of September 14, 1998.

9. Includes 231,000 shares subject to a repurchase option in favor of the
Company as of September 14, 1998. Also includes 192,100 shares subject to
options that are exercisable within 60 days of September 14, 1998.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act of 1934 ("Section 16(a)") requires the
Company's executive officers, directors and persons who own more than ten
percent of the Company's Common Stock to file initial reports of ownership on
Form 3 and changes in ownership on Form 4 or Form 5 with the SEC and the
National Association of Securities Dealers, Inc. Such executive officers,
directors and ten-percent shareholders are also required by SEC rules to furnish
the Company with copies of all such forms that they file.

Based solely on its review of the copies of such forms received by the
Company and written representations from certain reporting persons that all
required Forms 5 have been filed, the Company believes that during fiscal 1998
all Section 16(a) filing requirements applicable to its executive officers,
directors and ten-percent shareholders were complied with.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Company's Compensation Committee is currently composed of Messrs.
Anderson and Carlick. No interlocking relationship exists between any member of
the Company's Board of Directors or Compensation Committee and any member of the
Board of Directors or compensation committee of any other company, nor has any
such interlocking relationship existed in the past. No member of the
Compensation Committee is or was formerly an officer or an employee of the
Company.

35
<PAGE>
EXECUTIVE OFFICERS AND COMPENSATION

EXECUTIVE OFFICERS OF THE COMPANY

The executive officers of the Company as of September 14, 1998 were Donald
K. McKinney, John L. Drew and Kevin J. Laughlin. For background information on
Mr. McKinney and Mr. Drew, please see "Election of Directors--Nominees." Mr.
Laughlin joined the Company in August 1993 as Director of Finance and Secretary,
became Vice President of Finance in August 1994, and became Chief Financial
Officer in July 1996. Mr. Laughlin was Controller of Electronics for Imaging,
Inc., a provider of hardware and software products for the digital color imaging
market, from November 1989 to July 1993. Mr. Laughlin also served as an
Accounting Manager of Oracle Corporation and in various positions at Ernst &
Young. Mr. Laughlin is 37 years old.

SUMMARY COMPENSATION TABLE

The following table shows, as to the Chief Executive Officer and the
Company's other executive officers whose salary plus bonus exceeded $100,000
during the last fiscal year (the "Named Officers"), information concerning
compensation earned for services to the Company in all capacities during the
last three fiscal years.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
FISCAL ---------------------- UNDERLYING
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($) BONUS($) OPTIONS(#)
- ------------------------------------------------------------------ ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Donald K. McKinney................................................ 1998 $ 260,000 $ 130,000 500,000
Chairman of the Board 1997 245,000 105,000 0
1996 200,000 60,000 600,000

John L. Drew...................................................... 1998 260,000 130,000 500,000
President, Chief Executive Officer and Director 1997 245,000 105,000 0
1996 200,000 60,000 250,000

Kevin J. Laughlin................................................. 1998 148,560 62,616 125,000
Vice President, Finance, Chief Financial Officer 1997 148,000 37,500 0
and Secretary 1996 118,077 24,000 50,000
</TABLE>

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

(1) Mr. McKinney was Chief Executive Officer until July 1998 at which time Mr.
Drew was appointed Chief Executive Officer.

36
<PAGE>
The following table sets forth for each of the Named Officers certain
information concerning stock options granted during fiscal 1998.

<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1998
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
---------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(4)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(1) FISCAL 1998(2) ($/SHARE) DATE(3) 5%($) 10%($)
- ------------------------------- ----------- ------------------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Donald K. McKinney............. 500,000 10.53% $ 26.44 02/09/08 8,313,200 21,067,283
John L. Drew................... 500,000 10.53% 20.00 08/15/07 6,288,946 15,937,424
Kevin J. Laughlin.............. 100,000 2.11% 23.19 07/03/07 1,458,281 3,695,570
25,000 0.53% 34.00 06/17/08 534,560 1,354,681
</TABLE>

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

(1) These options were granted pursuant to the Company's 1996 Stock Plan. A
total of 24% of the options vest upon completion of 12 months of service
with the Company, and the remaining shares vest at the rate of two percent
per month over the next 38 months of service.

(2) The Company granted options for 4,749,100 shares of Common Stock to
employees in fiscal 1998.

(3) Options may terminate before their expiration dates if the optionee's status
as an employee or consultant is terminated or upon the optionee's death or
disability.

(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of the Company's future
Common Stock prices.

The following table sets forth for each of the Named Officers certain
information concerning options exercised during fiscal 1998 and the number of
shares subject to both exercisable and unexercisable stock options as of fiscal
year-end. The table also sets forth information with respect to the value of
Stock Options held by such individuals as of June 28, 1998 (the Company's fiscal
year-end).

AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END ($)(1)
ACQUIRED ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------ ----------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John L. Drew........................ -- -- -- 500,000 -- 9,687,500
Kevin Laughlin...................... -- -- -- 125,000 -- 1,753,075
Donald McKinney -- -- -- 500,000 -- 6,468,750
</TABLE>

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

(1) These values have been calculated based on the closing price of the
Company's Common Stock on The Nasdaq National Market on June 29, 1998 of
$39.375 per share minus the exercise price.

EMPLOYEE CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS

The Company currently has no employment contracts with any of the Company's
Named Officers. The Company has, however, adopted an executive management group
change-of-control plan in July 1998, and, accordingly, has entered into
"change-of-control" agreements with each of the Named Officers. Pursuant to
these agreements, in the event of a change-of-control of the Company, the
vesting schedule of any options or restricted stock (the "Unvested Awards") that
each such officer holds shall accelerate and a portion of such Unvested Awards
shall vest in full. In addition, each such officer is eligible to receive, in
the event that his employment is terminated within one year following a
change-of-control of the

37
<PAGE>
Company, other than for cause (as defined), death, disability (as defined), or
resignation other than for good reason (as defined), an amount equal to 100% of
his annual compensation, continuation of health benefits for twelve months
thereafter, and the remaining portion of Unvested Awards held by such officer
shall vest in full. For purposes hereof, "annual compensation" means annual
salary and incentive compensation. A "change-of-control" is defined to include
the following events (i) any person (as defined in the Securities Exchange Act
of 1934) becomes the beneficial owner, directly or indirectly, of 50% or more of
the outstanding voting securities, (ii) a merger or acquisition of the Company
resulting in a 50% or greater change in the total voting power of the Company
immediately following such transaction, (iii) certain changes in the majority
composition of the Board of Directors during a twenty-four month period not
initiated by the Board of Directors or (iv) the sale or disposition of at least
75% of the Company's assets.

CERTAIN TRANSACTIONS

In fiscal 1998, the Company recognized revenue of $7,341,312 from services
provided to or on behalf of Cisco, which beneficially owns more than 5% of the
Company's outstanding Common Stock. Mr. Allred, a director of the Company, is
the Senior Vice President, Customer Advocacy, Worldwide Systems, Support,
Services at Cisco.

The Company made loans to certain of its executive officers related to the
exercise of stock options. The notes are collateralized by the underlying stock
and the stock is subject to a right of repurchase by the Company in the event of
termination. As of June 28, 1998, the amounts outstanding for principal and
interest on these loans were $175,815 and $61,484 for Messrs. McKinney and
Carlick, respectively. In December 1997, Mr. Drew repaid $142,192 to complete
payment of the principal and accrued interest on a prior loan.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
the Company and its officers, directors and principal shareholders and their
affiliates will be approved by a majority of the Board of Directors, including a
majority of the disinterested directors of the Board of Directors, and will be
on terms no less favorable to the Company than could be obtained from
unaffiliated third parties.

As part of the executive management group change-of-control plan adopted in
July 1998, the Company entered into individual change-of-control agreements with
each of its Named Officers. See "Employee Contracts and Change-In-Control
Arrangements."

38
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS

The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing the compensation and benefits for the Company's
executive officers, as well as supervising and making recommendations to the
Board on compensation matters generally. The Committee also administers the
Company's stock plans.

COMPENSATION PHILOSOPHY

The Committee's compensation philosophy is to attract and retain key
personnel through the payment of competitive base salaries and to encourage and
reward performance through incentive compensation and stock ownership. The
Compensation Committee's objectives are to:

- ensure that there is an appropriate relationship between executive
compensation and the creation of shareholder value;

- ensure that the total compensation program will motivate, retain and
attract executives of outstanding abilities; and

- ensure that current cash and equity incentive opportunities are
competitive with comparable companies.

The Company currently intends to take the necessary steps to conform its
compensation practices to comply with the $1 million compensation deduction cap
under Section 162(m) of the Internal Revenue Code.

ELEMENTS OF COMPENSATION

Compensation for executive officers includes both cash and equity elements.

Cash compensation consists of (i) base salary which is determined on the
basis of the level of responsibility, expertise and experience of the executive
officer, taking into account competitive conditions in the industry and (ii)
cash bonuses based on achievement of corporate goals including revenue and
profitability targets.

Ownership of the Company's Common Stock is a key element of executive
compensation. Executive officers and other employees of the Company are eligible
to participate in the 1996 Stock Plan (the "Option Plan") and the 1996 Employee
Stock Purchase Plan (the "Purchase Plan"). The Option Plan permits the Board of
Directors or the Committee to grant stock options to employees on such terms as
the Board or the Committee may determine. The Committee has the sole authority
to grant stock options to executive officers of the Company and is currently
administering stock option grants to all employees. In determining the size of a
stock option grant to a new executive officer or other employee, the Committee
takes into account equity participation by comparable employees within the
Company, external competitive circumstances and other relevant factors.
Additional options may be granted to current executive officers and employees to
reward exceptional performance or to provide additional unvested equity
incentives. These options typically vest over a 50-month period and thus require
the employee's continuing service to the Company. The Purchase Plan permits
employees to acquire Common Stock of the Company through payroll deductions and
promotes broad-based equity participation throughout the Company. The Committee
believes that such stock plans align the interests of the employees with the
long-term interests of the shareholders.

The Company also maintains a 401(k) Plan to provide retirement benefits
through tax deferred salary deductions for all its employees. The Company did
not contribute to the 401(k) Plan in fiscal year 1998.

39
<PAGE>
FISCAL 1998 EXECUTIVE COMPENSATION

Executive compensation for fiscal 1998 included base salary and cash bonuses
based upon achievement of corporate goals and individual performance goals.
Executive officers, like other employees, were eligible for option grants under
the Option Plan and to participate in the Purchase Plan.

COMPENSATION OF THE CHIEF EXECUTIVE OFFICER

Donald K. McKinney founded the Company in 1991 and served as Chief Executive
Officer until July 1998. In fiscal year 1998, Mr. McKinney earned $260,000 in
salary and $130,000 in bonus awards. Mr. McKinney's salary and bonus were based
upon the same factors considered for each executive officer, as previously
described. Mr. McKinney was also granted options to purchase 500,000 shares of
the Company's Common Stock.

THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
Vernon R. Anderson
David Carlick

40
<PAGE>
STOCK PRICE PERFORMANCE GRAPH

The following graph compares the cumulative total return to shareholders on
the Company's Common Stock with the cumulative total return of the Nasdaq Stock
Market Index-U.S. and the H&Q Technology Index. The graph assumes that $100 was
invested on September 18, 1996 (the date of the Company's initial public
offering) in the Company's Common Stock, the Nasdaq Stock Market Index-U.S. and
the H&Q Technology Index, including reinvestment of dividends. No dividends have
been paid or declared on the Company's Common Stock. Note that historic stock
price performance is not necessarily indicative of future stock price
performance.

COMPARISON OF CUMULATIVE TOTAL RETURN BETWEEN
COMPANY, H&Q TECHNOLOGY INDEX AND NASDAQ
COMPOSITE FROM SEPTEMBER 18, 1996 TO JUNE 26, 1998

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
INS NASDAQ COMPOSITE H&Q TECHNOLOGY INDEX
<S> <C> <C> <C>
9/18/96 $100.0 $100.0 $100.0
6/27/97 $150.0 $119.5 $125.0
6/26/98 $246.1 $157.8 $159.4
</TABLE>

<TABLE>
<CAPTION>
9/18/96 6/27/97 6/26/98
--------- --------- ---------
<S> <C> <C> <C>
INS.................................................................................. $ 100.0 $ 150.0 $ 246.1
NASDAQ COMPOSITE..................................................................... 100.0 119.5 157.8
H&Q TECHNOLOGY INDEX................................................................. 100.0 125.0 159.4
</TABLE>

41
<PAGE>
OTHER MATTERS

The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Company may recommend.

It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to execute and
return, at your earliest convenience, the accompanying proxy card in the
envelope which has been enclosed.

THE BOARD OF DIRECTORS

Sunnyvale, California
September , 1998

42
<PAGE>
APPENDIX A

AGREEMENT AND PLAN OF MERGER
OF INTERNATIONAL NETWORK SERVICES, INC.
(A DELAWARE CORPORATION)
AND
INTERNATIONAL NETWORK SERVICES
(A CALIFORNIA CORPORATION)

THIS AGREEMENT AND PLAN OF MERGER dated as of , 1998 (the
"AGREEMENT") is between International Network Services, Inc., a Delaware
corporation ("INS DELAWARE") and International Network Services, a California
corporation ("INS CALIFORNIA"). INS Delaware and INS California are sometimes
referred to herein as the "CONSTITUENT CORPORATIONS."

R E C I T A L S

A. INS Delaware is a corporation duly organized and existing under the laws
of the State of Delaware and has an authorized capital of 155,000,000 shares,
150,000,000 of which are designated "COMMON STOCK," par value $0.001 per share,
and 5,000,000 of which are designated "PREFERRED STOCK," par value $0.001 per
share. The Preferred Stock of INS Delaware is undesignated as to series, rights,
preferences, privileges or restrictions. As of , 1998, 100 shares of
Common Stock were issued and outstanding, all of which were held by INS
California, and no shares of Preferred Stock were issued and outstanding.

B. INS California is a corporation duly organized and existing under the
laws of the State of California and has an authorized capital of 155,000,000
shares, 150,000,000 of which are designated "COMMON STOCK," no par value, and
5,000,000 of which are designated "PREFERRED STOCK," par value, no par value.
The Preferred Stock of INS California is undesignated as to series, rights,
preferences, privileges or restrictions. As of , shares
of Common Stock and no shares of Preferred Stock were issued and outstanding.

C. The Board of Directors of INS California has determined that, for the
purpose of effecting the reincorporation of INS California in the State of
Delaware, it is advisable and in the best interests of INS California and its
shareholders that INS California merge with and into INS Delaware upon the terms
and conditions herein provided.

D. The respective Boards of Directors of INS Delaware and INS California
have approved this Agreement and have directed that this Agreement be submitted
to a vote of their respective sole stockholder and shareholders and executed by
the undersigned officers.

NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, INS Delaware and INS California hereby agree, subject to the terms
and conditions hereinafter set forth, as follows:

I. MERGER

1.1 MERGER. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law, INS
California shall be merged with and into INS Delaware (the "MERGER"), the
separate existence of INS California shall cease and INS Delaware shall survive
the Merger and shall continue to be governed by the laws of the State of
Delaware, and INS Delaware shall be, and is herein sometimes referred to as, the
"SURVIVING CORPORATION." The name of the Surviving Corporation shall be
International Network Services.

1
<PAGE>
1.2 FILING AND EFFECTIVENESS. The Merger shall become effective when the
following actions shall have been completed:

(a) This Agreement and Merger shall have been adopted and approved by
the stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California
General Corporation Law;

(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof; and

(c) An executed Certificate of Merger or an executed, acknowledged and
certified counterpart of this Agreement meeting the requirements of the
Delaware General Corporation Law shall have been filed with the Secretary of
State of the State of Delaware.

The date and time when the Merger shall become effective, as aforesaid, is
herein called the "EFFECTIVE DATE OF THE MERGER."

1.3 EFFECT OF THE MERGER. Upon the Effective Date of the Merger, the
separate existence of INS California shall cease and INS Delaware, as the
Surviving Corporation, (i) shall continue to possess all of its assets, rights,
powers and property as constituted immediately prior to the Effective Date of
the Merger, (ii) shall be subject to all actions previously taken by its and INS
California's Board of Directors, (iii) shall succeed, without other transfer, to
all of the assets, rights, powers and property of INS California in the manner
more fully set forth in Section 259 of the Delaware General Corporation Law,
(iv) shall continue to be subject to all of the debts, liabilities and
obligations of INS Delaware as constituted immediately prior to the Effective
Date of the Merger, and (v) shall succeed, without other transfer, to all of the
debts, liabilities and obligations of INS California in the same manner as if
INS Delaware had itself incurred them, all as more fully provided under the
appli-cable provisions of the Delaware General Corporation Law and the
California General Corporation Law.

II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS

2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of INS
Delaware as in effect immediately prior to the Effective Date of the Merger
shall continue in full force and effect as the Certificate of Incorporation of
the Surviving Corporation until duly amended in accordance with the provisions
thereof and applicable law except that the First Article is to be amended in its
entirety to read as follows: "The name of the Corporation is International
Network Services (the "Corporation")."

2.2 BYLAWS. The Bylaws of INS Delaware as in effect immediately prior to
the Effective Date of the Merger shall continue in full force and effect as the
Bylaws of the Surviving Corporation until duly amended in accordance with the
provisions thereof and applicable law.

2.3 DIRECTORS AND OFFICERS. The directors and officers of INS California
immediately prior to the Effective Date of the Merger shall be the directors and
officers of the Surviving Corporation until their successors shall have been
duly elected and qualified or until as otherwise provided by law, or the
Certificate of Incorporation of the Surviving Corporation or the Bylaws of the
Surviving Corporation.

III. MANNER OF CONVERSION OF STOCK

3.1 INS CALIFORNIA COMMON STOCK. Upon the Effective Date of the Merger,
each share of INS California Common Stock issued and outstanding immediately
prior thereto shall, by virtue of the Merger and without any action by the
Constituent Corporations, the holder of such shares or any other person, be
converted into and exchanged for one (1) fully paid and nonassessable share of
Common Stock, par value $0.001 per share, of the Surviving Corporation.

2
<PAGE>
3.2 INS CALIFORNIA OPTIONS, STOCK PURCHASE RIGHTS AND CONVERTIBLE
SECURITIES.

(a) Upon the Effective Date of the Merger, the Surviving Corporation
shall assume and continue the stock option plans and all other employee
benefit plans of INS California. Each outstanding and unexercised option or
other right to purchase or security convertible into INS California Common
Stock shall become an option or right to purchase or a security convertible
into the Surviving Corporation's Common Stock on the basis of one share of
the Surviving Corporation's Common Stock for each share of INS California
Common Stock issuable pursuant to any such option, stock purchase right or
convertible security, on the same terms and conditions and at an exercise
price per share equal to the exercise price applicable to any such INS
California option, stock purchase right or convertible security at the
Effective Date of the Merger. There are no options, purchase rights for or
securities convertible into Preferred Stock of INS California.

(b) A number of shares of the Surviving Corporation's Common Stock shall
be reserved for issuance upon the exercise of options, stock purchase rights
and convertible securities equal to the number of shares of INS California
Common Stock so reserved immediately prior to the Effective Date of the
Merger.

3.3 INS DELAWARE COMMON STOCK. Upon the Effective Date of the Merger, each
share of Common Stock, par value $0.001 per share, of INS Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by INS Delaware, the holder of such shares or any other person, be
canceled and returned to the status of authorized but unissued shares.

3.4 EXCHANGE OF CERTIFICATES. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of INS California
Common Stock may, at such stockholder's option, surrender the same for
cancellation to ChaseMellon Shareholder Services, as exchange agent (the
"EXCHANGE AGENT"), and each such holder shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of shares of the
Surviving Corporation's Common Stock into which the surrendered shares were
converted as herein provided. Unless and until so surrendered, each outstanding
certificate theretofore representing shares of INS California Common Stock shall
be deemed for all purposes to represent the number of shares of the Surviving
Corporation's Common Stock into which such shares of INS California Common Stock
were converted in the Merger.

The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any shares of stock represented by such outstanding
certificate shall, until such certificate shall have been surrendered for
transfer or conversion or otherwise accounted for to the Surviving Corporation
or the Exchange Agent, have and be entitled to exercise any voting and other
rights with respect to and to receive dividends and other distributions upon the
shares of Common Stock of the Surviving Corporation represented by such
outstanding certificate as provided above.

Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of INS California so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.

If any certificate for shares of INS Delaware stock is to be issued in a
name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of issuance thereof that the certificate
so surrendered shall be properly endorsed and otherwise in proper form for
transfer, that such transfer otherwise be proper and comply with applicable
securities laws and that the person requesting such transfer pay to INS Delaware
or the Exchange Agent any transfer or other taxes payable by reason of issuance
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of INS Delaware
that such tax has been paid or is not payable.

3
<PAGE>
IV. GENERAL

4.1 COVENANTS OF INS DELAWARE. INS Delaware covenants and agrees that it
will, on or before the Effective Date of the Merger:

(a) Qualify to do business as a foreign corporation in the State of
California and in connection therewith appoint an agent for service of
process as required under the provisions of Section 2105 of the California
General Corporation Law;

(b) File any and all documents with the California Franchise Tax Board
necessary for the assumption by INS Delaware of all of the franchise tax
liabilities of INS California;

(c) File an executed counterpart of this Agreement meeting the
requirements of the California General Corporation Law with the Secretary of
State of the State of California; and

(d) Take such other actions as may be required by the California General
Corporation Law.

4.2 FURTHER ASSURANCES. From time to time, as and when required by INS
Delaware or by its successors or assigns, there shall be executed and delivered
on behalf of INS California such deeds and other instruments, and there shall be
taken or caused to be taken by INS Delaware and INS California such further and
other actions as shall be appropriate or necessary in order to vest or perfect
in or conform of record or otherwise by INS Delaware the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers,
franchises and authority of INS California and otherwise to carry out the
purposes of this Agreement, and the officers and directors of INS Delaware are
fully authorized in the name and on behalf of INS California or otherwise to
take any and all such action and to execute and deliver any and all such deeds
and other instruments.

4.3 ABANDONMENT. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either INS California or of INS
Delaware, or of both, notwithstanding the approval of this Agreement by the
shareholders of INS California or by the sole stockholder of INS Delaware, or by
both.

4.4 AMENDMENT. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement with the
Secretaries of State of the States of Delaware and California, provided that an
amendment made subsequent to the adoption of this Agreement by the stockholders
of either Constituent Corporation shall not, unless approved by the stockholders
as required by law: (a) alter or change the amount or kind of shares,
securities, cash, property and/or rights to be received in exchange for or on
conversion of all or any of the shares of any class or series thereof of such
Constituent Corporation; (b) alter or change any term of the Certificate of
Incorporation of the Surviving Corporation to be effected by the Merger; or (c)
alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class or series
of capital stock of any Constituent Corporation.

4.5 REGISTERED OFFICE. The registered office of the Surviving Corporation
in the State of Delaware is [1209 Orange Street, Wilmington, Delaware 19801,
County of New Castle and The Corporation Trust Company] is the registered agent
of the Surviving Corporation at such address.

4.6 AGREEMENT. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 1213 Innsbruck
Drive, Sunnyvale, California 94089 and copies thereof will be furnished to any
stockholder of either Constituent Corporation, upon request and without cost.

4.7 GOVERNING LAW. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.

4
<PAGE>
4.8 COUNTERPARTS. In order to facilitate the filing and recording of this
Agreement, the same may be executed in any number of counterparts, each of which
shall be deemed to be an original and all of which together shall constitute one
and the same instrument.

IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of International Network Services, Inc., a
Delaware corporation, and International Network Services, a California
corporation, is hereby executed on behalf of each of such two corporations and
attested by their respective officers thereunto duly authorized.

INTERNATIONAL NETWORK SERVICES, INC.
a Delaware corporation

By:
-----------------------------------------
John L. Drew
President and Chief Executive Officer

By:
-----------------------------------------
Kevin J. Laughlin
Secretary

INTERNATIONAL NETWORK SERVICES
a California corporation

By:
-----------------------------------------
John L. Drew
President and Chief Executive Officer

By:
-----------------------------------------
Kevin J. Laughlin
Secretary

5
<PAGE>
INTERNATIONAL NETWORK SERVICES
(A CALIFORNIA CORPORATION)

OFFICERS' CERTIFICATE

John L. Drew and Kevin J. Laughlin certify that:

1. They are the President and the Secretary, respectively, of International
Network Services, a corporation organized under the laws of the State of
California.

2. The corporation has authorized two classes of stock, designated "COMMON
STOCK" and "PREFERRED STOCK," respectively. There are authorized 150,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock. The Preferred
Stock is undesignated as to series, rights, preferences or restrictions.

3. There were shares of Common Stock and no shares of
Preferred Stock outstanding as of the record date (the "RECORD DATE") and
entitled to vote at the shareholders' meeting at which the Agreement and Plan of
Merger (the "MERGER AGREEMENT") attached hereto was approved.

4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of a number of shares of each class of stock which
equaled or exceeded the vote required.

5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of Common Stock outstanding as of the Record Date, voting as
a single class.

6. John L. Drew and Kevin J. Laughlin further declare under penalty of
perjury under the laws of the State of California that they have read the
foregoing certificate and know the contents thereof and that the same is true of
their own knowledge.

Executed in Sunnyvale, California on , 1998.

------------------------------------------
John L. Drew,
President and Chief Executive Officer

------------------------------------------
Kevin J. Laughlin, Secretary

6
<PAGE>
INTERNATIONAL NETWORK SERVICES, INC.
(A DELAWARE CORPORATION)

OFFICERS' CERTIFICATE

John L. Drew and Kevin J. Laughlin certify that:

1. They are the President and the Secretary, respectively, of International
Network Services, Inc., a corporation organized under the laws of the State of
Delaware.

3. There are 100 shares of Common Stock outstanding and entitled to vote on
the Agreement and Plan of Merger (the "MERGER AGREEMENT") attached hereto. There
are no shares of Preferred Stock outstanding.

4. The principal terms of the Merger Agreement were approved by the Board
of Directors and by the vote of 100% of the shares outstanding and entitled to
vote on the Merger Agreement.

5. The percentage vote required was more than 50% of the votes entitled to
be cast by holders of outstanding shares of Common Stock.

6. John L. Drew and Kevin J. Laughlin further declare under penalty of
perjury under the laws of the State of Delaware that they have read the
foregoing certificate and know the contents thereof and that the same is true of
their own knowledge.

Executed in Sunnyvale, California on , 1998.

------------------------------------------
John L. Drew,
President and Chief Executive Officer

------------------------------------------
Kevin J. Laughlin, Secretary

7
<PAGE>
APPENDIX B

CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL NETWORK SERVICES, INC.

FIRST: The name of the corporation is International Network Services, Inc.
(the "Corporation").

SECOND: The address of the Corporation's registered office in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.

FOURTH: The Corporation is authorized to issue two classes of stock to be
designated, respectively, Common Stock and Preferred Stock. The total number of
shares of all classes of stock which the Corporation has authority to issue is
one hundred and fifty-five million (155,000,000), consisting of one hundred and
fifty million (150,000,000) shares of Common Stock, $0.001 par value per share
(the "Common Stock"), and five million (5,000,000) shares of Preferred Stock,
$0.001 par value per share (the "Preferred Stock").

The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized subject to limitations prescribed by
law, to fix by resolution or resolutions the designations, powers, preferences
and rights, and the qualifications, limitations or restrictions thereof, of each
such series of Preferred Stock, including without limitation authority to fix by
resolution or resolutions, the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, and liquidation preferences of any
wholly unissued series of Preferred Stock, and the number of shares constituting
any such series and the designation thereof, or any of the foregoing.

The Board of Directors is further authorized to increase (but not above the
total number of authorized shares of the class) or decrease (but not below the
number of shares of any such series then outstanding) the number of shares of
any series, the number of which was fixed by it, subsequent to the issue of
shares of such series then outstanding, subject to the powers, preferences and
rights, and the qualifications, limitations and restrictions thereof stated in
the resolution of the Board of Directors originally fixing the number of shares
of such series. If the number of shares of any series is so decreased, then the
shares constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of shares of such
series.

FIFTH: The name and mailing address of the incorporator are as follows:

Susan H. Thornton
International Network Service
1213 Innsbruck Drive
Sunnyvale, CA 94089

SIXTH: The Corporation is to have perpetual existence.

SEVENTH: The election of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.

EIGHTH: No action shall be taken by the stockholders of the Corporation
except at an annual or special meeting of the stockholders called in accordance
with the Bylaws and no action shall be taken by the stockholders by written
consent.
<PAGE>
NINTH: In furtherance and not in limitation of the powers conferred by the
laws of the State of Delaware, the Board of Directors is expressly authorized to
adopt, alter, amend or repeal the Bylaws of the Corporation.

TENTH: To the fullest extent permitted by the General Corporation Law of
the State of Delaware as the same exists or may hereafter be amended, no
director of the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.

The Corporation may indemnify to the fullest extent permitted by law any
person made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that he,
his testator or intestate is or was a director, officer, employee or agent of
the Corporation or any predecessor of the Corporation or serves or served at any
other enterprise as a director, officer, employee or agent at the request of the
Corporation or any predecessor to the Corporation.

Neither any amendment nor repeal of this Article, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article,
shall eliminate or reduce the effect of this Article, in respect of any matter
occurring, or any action or proceeding accruing or arising or that, but for this
Article, would accrue or arise, prior to such amendment, repeal or adoption of
an inconsistent provision.

TWELFTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of the State of Delaware)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Bylaws of the Corporation.

THIRTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by the laws of the State of Delaware, and all
rights conferred herein are granted subject to this reservation.

The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is his act and deed and that the facts stated
herein are true.

Dated: , 1998 ------------------------------------------
Susan H. Thornton

2
<PAGE>
APPENDIX C

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

BYLAWS
OF
INTERNATIONAL NETWORK SERVICES, INC.

- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>

<CAPTION>
ARTICLE I--CORPORATE OFFICES..................................................................................
<S> <C> <C>
1
1.1 REGISTERED OFFICE........................................................................ 1
1.2 OTHER OFFICES............................................................................ 1
<CAPTION>
ARTICLE II--MEETINGS OF STOCKHOLDERS..........................................................................
<S> <C> <C>
1
2.1 PLACE OF MEETINGS........................................................................ 1
2.2 ANNUAL MEETING........................................................................... 1
2.3 SPECIAL MEETING.......................................................................... 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS......................................................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............................................. 3
2.6 QUORUM................................................................................... 3
2.7 ADJOURNED MEETING; NOTICE................................................................ 3
2.8 VOTING................................................................................... 3
2.9 WAIVER OF NOTICE......................................................................... 3
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................................. 4
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.............................. 4
2.12 PROXIES.................................................................................. 4
2.13 INSPECTORS OF ELECTION................................................................... 4
<CAPTION>
ARTICLE III--DIRECTORS........................................................................................
<S> <C> <C>
5
3.1 POWERS................................................................................... 5
3.2 NUMBER OF DIRECTORS...................................................................... 5
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS................................................. 5
3.4 RESIGNATION AND VACANCIES................................................................ 5
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................................................. 6
3.6 FIRST MEETINGS........................................................................... 6
3.7 REGULAR MEETINGS......................................................................... 6
3.8 SPECIAL MEETINGS; NOTICE................................................................. 6
3.9 QUORUM................................................................................... 7
3.10 WAIVER OF NOTICE......................................................................... 7
3.11 ADJOURNED MEETING; NOTICE................................................................ 7
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........................................ 7
3.13 FEES AND COMPENSATION OF DIRECTORS....................................................... 7
3.14 APPROVAL OF LOANS TO OFFICERS............................................................ 7
3.15 REMOVAL OF DIRECTORS..................................................................... 8
<CAPTION>
ARTICLE IV--COMMITTEES........................................................................................
<S> <C> <C>
8
4.1 COMMITTEES OF DIRECTORS.................................................................. 8
4.2 COMMITTEE MINUTES........................................................................ 8
4.3 MEETINGS AND ACTION OF COMMITTEES........................................................ 8
<CAPTION>
ARTICLE V--OFFICERS...........................................................................................
<S> <C> <C>
9
5.1 OFFICERS................................................................................. 9
5.2 THE CHAIRMAN OF THE BOARD................................................................ 9
5.3 THE CHIEF EXECUTIVE OFFICER.............................................................. 9
5.4 THE PRESIDENT............................................................................ 9
5.5 VICE-PRESIDENTS.......................................................................... 10
5.6 THE SECRETARY............................................................................ 10
5.7 THE CHIEF FINANCIAL OFFICER.............................................................. 10
5.8 THE CONTROLLER........................................................................... 10
</TABLE>

i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
ARTICLE VI--INDEMNITY.........................................................................................
<S> <C> <C>
11
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................................................ 11
6.2 INDEMNIFICATION OF OTHERS................................................................ 11
6.3 INSURANCE................................................................................ 11
6.4 EXPENSES................................................................................. 11
6.5 NON-EXCLUSIVITY OF RIGHTS................................................................ 12
6.6 SURVIVAL OF RIGHTS....................................................................... 12
6.7 AMENDMENTS............................................................................... 12
<CAPTION>
ARTICLE VII--RECORDS AND REPORTS..............................................................................
<S> <C> <C>
12
7.1 MAINTENANCE AND INSPECTION OF RECORDS.................................................... 12
7.2 INSPECTION BY DIRECTORS.................................................................. 13
7.3 VOTING OF STOCKS OWNED BY THE CORPORATION................................................ 13
<CAPTION>
ARTICLE VIII--GENERAL MATTERS.................................................................................
<S> <C> <C>
13
8.1 CHECKS; DRAFTS; EVIDENCE OF INDEBTEDNESS................................................. 13
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS......................................... 13
8.3 STOCK CERTIFICATES....................................................................... 13
8.4 SPECIAL DESIGNATION ON CERTIFICATES...................................................... 14
8.5 LOST CERTIFICATES........................................................................ 14
8.6 CONSTRUCTION; DEFINITIONS................................................................ 14
<CAPTION>
ARTICLE IX--AMENDMENTS........................................................................................
<S> <C> <C>
14
</TABLE>

ii
<PAGE>
BYLAWS
OF
INTERNATIONAL NETWORK SERVICES, INC.
ARTICLE I
CORPORATE OFFICES

1.1 REGISTERED OFFICE. The registered office of the corporation shall be
fixed in the certificate of incorporation of the corporation.

1.2 OTHER OFFICES. The board of directors may at any time establish other
offices at any place or places where the corporation is qualified to do
business.

ARTICLE II
MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS. Meetings of stockholders shall be held at any
place, within or outside the State of Delaware, designated by the board of
direc-tors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.

2.2 ANNUAL MEETING.

(a) The annual meeting of stockholders shall be held each year on a date
and at a time designated by the board of directors. At the annual meeting,
directors shall be elected and any other proper business may be transacted.

(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (B) otherwise properly brought before
the meeting by or at the direction of the board of directors, or (C)
otherwise properly brought before the meeting by a stockholder. For business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the corporation
not less than one hundred twenty (120) calendar days in advance of the date
specified in the corporation's proxy statement released to stockholders in
connection with the previous year's annual meeting of stockholders;
provided, however, that in the event that no annual meeting was held in the
previous year or the date of the annual meeting has been changed by more
than thirty (30) days from the date contemplated at the time of the previous
year's proxy statement, notice by the stockholder to be timely must be so
received not later than the close of business on the later of one hundred
twenty (120) calendar days in advance of such annual meeting or ten (10)
calendar days following the date on which public announcement of the date of
the meeting is first made. A stockholder's notice to the secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at
the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the
class and number of shares of the corporation which are beneficially owned
by the stockholder, (iv) any material interest of the stockholder in such
business, and (v) any other information that is required to be provided by
the stockholder pursuant to Regulation 14A under the Securities

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Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as a
proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934
Act. Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at any annual meeting except in accordance with the
procedures set forth in this paragraph (b). The chairman of the annual
meeting shall, if the facts warrant, determine and declare at the meeting
that business was not properly brought before the meeting and in accordance
with the provisions of this paragraph (b), and, if he should so determine,
he shall so declare at the meeting that any such business not properly
brought before the meeting shall not be transacted.

(c) Only persons who are nominated in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction
of the board of directors or by any stockholder of the corporation entitled
to vote in the election of directors at the meeting who complies with the
notice procedures set forth in this paragraph (c). Such nominations, other
than those made by or at the direction of the board of directors, shall be
made pursuant to timely notice in writing to the secretary of the
corporation in accordance with the provisions of paragraph (b) of this
Section 2.2. Such stockholder's notice shall set forth (i) as to each
person, if any, whom the stockholder proposes to nominate for election or
re-election as a director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nominations
are to be made by the stockholder, and (E) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
elections of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 2.2. At the request of the board of
directors, any person nominated by a stockholder for election as a director
shall furnish to the secretary of the corporation that information required
to be set forth in the stockholder's notice of nomination which pertains to
the nominee. No person shall be eligible for election as a director of the
corporation unless nominated in accordance with the procedures set forth in
this paragraph (c). The chairman of the meeting shall, if the facts
warrants, determine and declare at the meeting that a nomination was not
made in accordance with the procedures prescribed by these Bylaws, and if he
should so determine, he shall so declare at the meeting, and the defective
nomination shall be disregarded.

2.3 SPECIAL MEETING. Special meetings of stockholders for any purpose or
purposes may be called at any time by the chairman of the board (if there be
such an officer appointed), by the president or by the board of directors, but,
except as otherwise provided in Section 3.4(c) of these bylaws, such special
meetings may not be called by any other person or persons. Only such business
shall be considered at a special meeting or stockholders' meeting as shall have
been stated in the notice for such meeting.

2.4 NOTICE OF STOCKHOLDERS' MEETINGS. All notices of meetings with
stockholders shall be in writing and shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting to each stockholder entitled to
vote at such meeting. The notice shall specify the place, date, and hour of the
meeting and (i) in the case of a special meeting, the purpose or purposes for
which the meeting is called (no business other than that specified in the notice
may be transacted) or (ii) in the case of the annual meeting, those matters
which the board of directors, at the time of giving the notice, intends to
present for action by the stockholders (but any matter properly brought before
the meeting may be presented at the meeting for such action). The

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notice of any meeting at which directors are to be elected shall include the
name of any nominee or nominees who, at the time of the notice, the board
intends to present for election.

2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE. Notice of any meeting of
stockholders shall be given either personally or by mail, telecopy, telegram or
other electronic or wireless means. Notices not personally delivered shall be
sent charges prepaid and shall be addressed to the stockholder at the address of
that stockholder appearing on the books of the corporation or given by the
stockholder to the corporation for the purpose of notice. Notice shall be deemed
to have been give at the time when delivered personally or deposited in the mail
or sent by telecopy, telegram or other electronic or wireless means.

An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice or report.

2.6 QUORUM. The holders of a majority in voting power of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as other-wise provided by statute or by the
certificate of incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (i) the chairman of
the meeting or (ii) the holders of a majority of the shares represented at the
meeting and entitled to vote thereat, present in person or represented by proxy,
shall have power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present or represented. At
such adjourned meeting at which a quorum is present or represented, any business
may be transacted that might have been transacted at the meeting as originally
noticed.

The stockholders present or represented by proxy at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.

2.7 ADJOURNED MEETING; NOTICE. When a meeting is adjourned to another time
or place, unless these bylaws otherwise require, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting the corporation may
transact any business that might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.

2.8 VOTING. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).

Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder. Any holders of shares entitled to vote on any matter
may vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, other than elections to
office, but, if the stockholder fails to specify the number of shares such
stockholder is voting affirmatively, it will be conclusively presumed that the
stockholder's approving vote is with respect to all shares such stockholder is
entitled to vote.

2.9 WAIVER OF NOTICE. Whenever notice is required to be given under any
provision of the General Corporation Law of Delaware or of the certificate of
incorporation or these bylaws, a written waiver thereof, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the

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beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.

2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. The
stockholders of the corporation may not take any action by written consent
without a meeting. Any such action must be taken at a duly called annual or
special meeting.

2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS. In order
that the corporation may determine the stockholders entitled to notice of or to
vote at any meeting of stockholders or to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) nor less than
ten (10) days prior to the date of such meeting, nor more than sixty (60) days
prior to any other action.

If the board of directors does not so fix a record date:

(a) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held.

(b) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting
unless the board of directors fixes a new record date for the adjourned meeting,
but the board of directors shall fix a new record date if the meeting is
adjourned for more than thirty (30) days from the date set for the original
meeting.

2.12 PROXIES. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by a
written proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revoca-bility of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.

2.13 INSPECTORS OF ELECTION. Before any meeting of stockholders, the board
of directors shall appoint an inspector or inspectors of election to act at the
meeting or its adjournment. The number of inspectors shall be either one (1) or
three (3). If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairman of the meeting may, and upon the request of
any stockholder or a stockholder's proxy shall, appoint a person to fill that
vacancy.

Such inspectors shall:

(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of
quorum, and the authenticity, validity, and effect of proxies;

(b) receive votes or ballots;

(d) count and tabulate all votes;

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(e) determine when the polls shall close;

(f) determine the result; and

(g) do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.

The inspectors of election shall perform their duties impartially, in good
faith, to the best of their ability and as expeditiously as is practical. If
there are three (3) inspectors of election, the decision, act or certificate of
a majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate may be the inspectors of election is prima facie
evidence of the facts stated therein.

ARTICLE III
DIRECTORS

3.1 POWERS. Subject to the provisions of the General Corporation Law of
Delaware and any limitations in the certificate of incorporation or these bylaws
relating to action required to be approved by the stockholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.

3.2 NUMBER OF DIRECTORS. The number of directors of the corporation shall
be not less than five (5) nor more than nine (9). The exact number of directors
shall be seven (7) until changed, within the limits specified above, by a bylaw
amending this Section 3.2, duly adopted by the board of directors or by the
stockholders. The indefinite number of directors may be changed, or a definite
number may be fixed without provision for an indefinite number, by a duly
adopted amendment to the certificate of incorporation or by an amendment to this
bylaw duly adopted by the vote of a majority of the stock issued and outstanding
and entitled to vote or by resolution of a majority of the board of directors.

No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.

3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS. Except as provided in
Section 3.4 of these bylaws, directors shall be elected at each annual meeting
of stockholders to hold office until the next annual meeting (but if any such
annual meeting is not held or the directors are not elected thereat, the
directors may be elected at any special meeting of stockholders held for that
purpose). Each director, including a director elected to fill a vacancy, shall
hold office until the expiration of the term for which elected and until a
successor has been elected and qualified or until his earlier resignation or
removal.

Elections of directors need not be by written ballot.

3.4 RESIGNATION AND VACANCIES.

(a) Any director may resign effective upon giving written notice to the
chairman of the board (if there be such an officer appointed), the
president, the secretary or the board of directors of the corporation unless
the notice specifies a later time for the effectiveness of such resignation.
When one or more directors so resigns and the resignation is effective at a
future date, unless otherwise provided in the certificate of incorporation,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office as provided in this
section in the filling of other vacancies.

Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.

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(b) Unless otherwise provided in the certificate of incorporation or
these bylaws:

(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum,
or by a sole remaining director.

(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled by a
majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected.

(c) If at any time, by reason of death or resignation or other cause,
the corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of
stockholders in accordance with the provisions of the certificate of
incorporation or these bylaws, or may apply to the Court of Chancery for a
decree summarily ordering an election as provided in Section 211 of the
General Corporation Law of Delaware.

(d) If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority
of the whole board (as constituted immediately prior to any such increase),
then the Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten (10) percent of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors
then in office as aforesaid, which election shall be governed by the
provisions of Section 211 of the General Corporation Law of Delaware as far
as applicable.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE. Regular meetings of the
board of directors may be held at any place within or outside the State of
Delaware that has been designated from time to time by resolution of the board.
In the absence of such a designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board may
be held at any place within or outside the State of Delaware that has been
designated in the notice of the meeting or, if not stated in the notice or if
there is no notice, at the principal executive office of the corporation.

Any meeting of the board, regular or special, may be held by conference
telephone or similar communication equipment, so long as all directors
participating in the meeting can hear one another; and all such participating
directors shall be deemed to be present in person at the meeting.

3.6 FIRST MEETINGS. The board of directors shall hold a regular meeting
immediately after the meeting of stockholders at which it is elected and at the
place where such meeting is held, or at such other place as shall be fixed by
the board of directors, for the purpose of organization, election of officers of
the corporation and the transaction of other business. Notice of such meeting is
hereby dispensed with.

3.7 REGULAR MEETINGS. Regular meetings of the board of directors may be
held without notice at such time and at such place as shall from time to time be
determined by the board.

3.8 SPECIAL MEETINGS; NOTICE. Special meetings of the board of directors
for any purpose or purposes may be called at any time by the chairman of the
board, the president, any vice president, the secretary or any two (2)
directors.

Notice of the time and place of special meetings shall be delivered to each
director personally or by telephone (including a voice messaging system or other
system or technology designed to record and communicate messages), telegram,
facsimile, electronic mail or other electronic means. Alternatively, notice may
be sent by first-class mail, charges prepaid, addressed to each director at that
director's address

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as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone (including a voice messaging system or other system or technology
designed to record and communicate messages), telegram, facsimile, electronic
mail or other electronic means, it shall be delivered at least forty-eight (48)
hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose or the place of the meeting, if the meeting is to be held at
the principal executive office of the corporation.

3.9 QUORUM. At all meetings of the board of directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute, or by the certificate of
incorporation or in these bylaws. If a quorum is not present at any meeting of
the board of directors, then the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.

A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.

3.10 WAIVER OF NOTICE. Notice of a meeting need not be given to any
director (i) who signs a waiver of notice, or consent to holding the meeting or
the approval of the minutes thereof whether before or after the meeting, or (ii)
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such waivers, consents
and approvals shall be filed with the corporate records or made part of the
minutes of the meeting. A waiver of notice need not specify the purpose of any
regular or special meeting of the board of directors.

3.11 ADJOURNED MEETING; NOTICE. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting of the board to
another time and place.

Notice of the time and place of holding an adjourned meeting of the board
need not be given unless the meeting is adjourned for more than twenty-four (24)
hours. If the meeting is adjourned for more than twenty-four (24) hours, then
notice of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.8 of these
bylaws, to the directors who were not present at the time of the adjournment.

3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken by the board of directors may be taken without
a meeting, provided that all members of the board individually or collectively
consent in writing to that action. Such written consent or consents shall be
filed with the minutes of the proceedings of the board of directors. Such action
by written consent shall have the same force and effect as a unanimous vote of
such directors.

3.13 FEES AND COMPENSATION OF DIRECTORS. Directors and members of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board of Directors.

3.14 APPROVAL OF LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the cor-poration or of its subsidiary, including any officer or employee who
is a director of the corporation or its subsidiary, whenever, in the judgment of
the directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest and may be unsecured, or secured in such manner as the board of
direc-tors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.

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3.15 REMOVAL OF DIRECTORS. Unless otherwise restricted by statute, by the
certificate of incorporation or by these bylaws, any director or the entire
board of directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors;
provided, however, that, if and so long as stockholders of the corporation are
entitled to cumulative voting, if less than the entire board is to be removed,
no director may be removed without cause if the votes cast against his removal
would be sufficient to elect him if then cumulatively voted at an election of
the entire board of directors, pursuant to Delaware General Corporation Law
Section 141(k)(2).

No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.

ARTICLE IV
COMMITTEES

4.1 COMMITTEES OF DIRECTORS. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate one (1)
or more committees, each consisting of two or more directors, to serve at the
pleasure of the board. The board may designate one (1) or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the authorized number
of directors. Any committee, to the extent provided in the resolution of the
board, shall have and may exercise all the powers and authority of the board,
but no such committee shall have the power or authority to (i) amend the
certificate of incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the board of directors as provided in Section 151(a) of the
General Corporation Law of Delaware, fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corpo-ration or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), (ii) adopt an agreement of merger or consolidation under Sec-tions
251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution or (v) amend the
bylaws of the corporation; and, unless the board resolution establishing the
committee, the bylaws or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of Delaware.

4.2 COMMITTEE MINUTES. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.

4.3 MEETINGS AND ACTION OF COMMITTEES. Meetings and actions of committees
shall be governed by, and held and taken in accordance with, the provisions of
Article III of these bylaws, Section 3.5 (place of meetings and meetings by
telephone), Section 3.7 (regular meetings), Section 3.8 (special meetings and
notice), Section 3.9 (quorum), Section 3.10 (waiver of notice), Section 3.11
(adjourned meeting and notice), and Section 3.12 (action without a meeting),
with such changes in the context of those bylaws as are necessary to substitute
the com-mittee and its members for the board of directors and its members;
provided, however, that the time of regular meetings of committees may also be
called by resolution of the board of directors and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.

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ARTICLE V
OFFICERS

5.1 OFFICERS. The officers of the corporation shall consist of the chief
executive officer, the president, the secretary and the chief financial officer,
and each of them shall be appointed by the board of directors. The corporation
may also have a chairman of the board, one or more vice-presidents, a
controller, one or more assistant secretaries, and such other officers as may be
appointed by the board of directors, or with authorization from the board of
directors by the president. The order of the seniority of the vice-presidents
shall be in the order of their nomination, unless otherwise determined by the
board of directors. Any two or more of such offices may be held by the same
person. The board of directors may appoint, and may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall have such authority and perform such duties as are provided
in these bylaws or as the board of directors may from time to time determine.

All officers of the corporation shall hold office from the date appointed to
the date of the next succeeding regular meeting of the board of directors
following the meeting of shareholders at which the board of directors is
elected, and until their successors are elected; provided that, subject to the
rights, if any, of an officer under any contract of employment, all officers, as
well as any other employee or agent of the corporation, may be removed at any
time at the pleasure of the board of directors, or, except in the case of an
officer chosen by the board of directors, by any officer upon whom such power of
removal may be conferred by the board of directors, and upon the removal,
resignation, death or incapacity of any officer, the board of directors or the
president, in cases where he or she has been vested by the board of directors
with power to appoint, may declare such office vacant and fill such vacancy.
Nothing in these bylaws shall be construed as creating any kind of contractual
right to employment with the corporation.

Any officer may resign at any time by giving written notice to the board of
directors, the president, or the secretary of the corporation, without
prejudice, however, to the rights, if any, of the corporation under any contract
to which such officer is a party. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.

The salary and other compensation of the officers shall be fixed from time
to time by resolution of or in the manner determined by the board of directors.

5.2 THE CHAIRMAN OF THE BOARD. The chairman of the board (if there be such
an officer appointed) shall, when present, preside at all meetings of the board
of directors and shall perform all the duties commonly incident to that office.
The chairman of the board shall have authority to execute in the name of the
corporation bonds, contracts, deeds, leases and other written instruments to be
executed by the corporation (except where by law the signature of the president
is required), and shall perform such other duties as the board of directors may
from time to time determine.

5.3 THE CHIEF EXECUTIVE OFFICER. Subject to such supervisory powers, if
any, as may be given by the board of directors to the chairman of the board, if
there be such an officer, the chief executive officer of the corporation shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the chief executive officer of a corporation, and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws.

5.4 THE PRESIDENT. The president of the corporation shall exercise and
perform such powers and duties as may from time to time be assigned to him by
the board of directors or as may be prescribed by these bylaws. The president
shall have authority to execute in the name of the corporation bonds,

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contracts, deeds, leases and other written instruments to be executed by the
corporation. In the absence of the chief executive officer, he shall preside at
all meetings of the shareholders and, in the absence or nonexistence of a
chairman of the board or the chief executive officer, at all meetings of the
board of directors and shall perform such other duties as the board of directors
may from time to time determine.

5.5 VICE-PRESIDENTS. The vice-presidents (if there be such officers
appointed), in the order of their seniority (unless otherwise established by the
board of directors), may assume and perform the duties of the president in the
absence or disability of the president or whenever the office of the president
is vacant. The vice-presidents shall have such titles, perform such other
duties, and have such other powers as the board of directors, the president or
these bylaws may designate from time to time.

5.6 THE SECRETARY. The secretary shall record or cause to be recorded, and
shall keep or cause to be kept, at the principal executive office and such other
place as the board of directors may order, a book of minutes of actions taken at
all meetings of directors and committees thereof and of shareholders, with the
time and place of holding, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive
office or at the office of the corporation's transfer agent, a share register or
a duplicate share register in a form capable of being converted into written
form, showing the names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all the meetings
of the shareholders and of the board of directors and committees thereof
required by these bylaws or by law to be given, and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
by these bylaws.

The president may direct any assistant secretary to assume and perform the
duties of the secretary in the absence or disability of the secretary, and each
assistant secretary shall perform such other duties and have such other powers
as the board of directors or the president may designate from time to time.

5.7 THE CHIEF FINANCIAL OFFICER. The chief financial officer shall keep
and maintain, or cause to be kept and maintained, adequate and correct accounts
of the properties and business transactions of the corporation. The books of
account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. The chief financial officer shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the chief executive officer, president and directors, whenever they
request it, an account of all of the chief financial officer's transactions as
chief financial officer and of the financial condition of the corporation, and
shall have such other powers and perform such other duties as may be prescribed
by the board of directors or these bylaws.

5.8 THE CONTROLLER. The controller (if there be such an officer appointed)
shall be responsible for the establishment and maintenance of accounting and
other systems required to control and account for the assets of the corporation
and provide safeguards therefor, and to collect information required for
management purposes, and shall perform such other duties and have such other
powers as the board of directors or the president may designate from time to
time. The president may direct any assistant controller to assume and perform
the duties of the controller, in the absence or disability of the controller,
and each assistant controller shall perform such other duties and have such
other powers as the board of directors, the chairman of the board (if there be
such an officer appointed) or the president may designate from time to time.

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ARTICLE VI
INDEMNITY

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS. The corporation shall, to
the maximum extent and in the manner permitted by the General Corporation Law of
Delaware, indemnify each of its directors and officers against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation;
provided, however, that the corporation may modify the extent of such
indemnification by individual contracts with its directors and executive
officers and, provided, further, that the corporation shall not be required to
indemnify any director or officer in connection with any proceeding (or part
thereof) initiated by such person unless (i) such indemnification is expressly
required to be made by law, (ii) the proceeding was authorized in advance by the
board of directors of the corporation, (iii) such indemnification is provided by
the corporation, in its sole discretion, pursuant to the powers vested in the
corporation under the General Corporation Law of Delaware or (iv) such
indemnification is required to be made pursuant to an individual contract. For
purposes of this Section 6.1, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.

6.2 INDEMNIFICATION OF OTHERS. The corporation shall have the power, to
the maximum extent and in the manner permitted by the General Corporation Law of
Delaware, to indemnify each of its employees and agents (other than directors
and officers) against expenses (including attorneys' fees), judgments, fines,
settlements and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.2 and 6.4, an
"employee" or "agent" of the corporation (other than a director or officer)
includes any person (i) who is or was an employee or agent of the corporation,
(ii) who is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.

6.3 INSURANCE. The corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.

6.4 EXPENSES. The corporation shall advance to 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, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding, upon receipt of an
undertaking by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this bylaw or otherwise; provided, however, that the corporation shall not be
required to advance expenses to any director or officer in connection with any
proceeding (or part thereof) initiated by such person unless the proceeding was
authorized in advance by the board of directors of the corporation.

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The corporation may advance to 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, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was an employee or agent (other than
directors or officers) of the corporation prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
employee or agent (other than directors or officers) in connection with such
proceeding, upon receipt of an undertaking by or on behalf of such person to
repay said amounts if it should be determined ultimately that such person is not
entitled to be indemnified under this bylaw or otherwise; provided, however,
that the corporation shall not advance expenses to any employee or agent (other
than directors or officers) in connection with any proceeding (or part thereof)
initiated by such person unless the proceeding was authorized in advance by the
board of directors of the corporation.

Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 6.5, no advance shall be made by the corporation to an employee, agent
or officer of the corporation (except by reason of the fact that such person is
or was a director of the corporation in which event this paragraph shall not
apply) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably and promptly
made (i) by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to the proceeding, or (ii) if such quorum is not
obtainable, or, even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, that the facts known
to the decision-making party at the time such determination is made demonstrate
clearly and convincingly that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation.

6.5 NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by this
bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the certificate of
incorporation, bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the General Corporation Law of Delaware.

6.6 SURVIVAL OF RIGHTS. The rights conferred on any person by this bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.

6.7 AMENDMENTS. Any repeal or modification of this bylaw shall only be
prospective and shall not affect the rights under this bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.

ARTICLE VII
RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS. The corporation shall, either
at its principal executive office or at such place or places as designated by
the board of directors, keep a record of its stockholders listing their names
and addresses and the number and class of shares held by each stockholder, a
copy of these bylaws as amended to date, accounting books and other records.

Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stock-holder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The

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demand under oath shall be directed to the corporation at its registered office
in Delaware or at its principal place of business.

The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.

7.2 INSPECTION BY DIRECTORS. Any director shall have the right to examine
the corporation's stock ledger, a list of its stockholders, and its other books
and records for a purpose reasonably related to his or her position as a
director. The Court of Chancery is hereby vested with the exclusive jurisdiction
to determine whether a director is entitled to the inspection sought. The Court
may summarily order the corporation to permit the director to inspect any and
all books and records, the stock ledger, and the stock list and to make copies
or extracts therefrom. The Court may, in its discretion, prescribe any
limitations or conditions with reference to the inspection, or award such other
and further relief as the Court may deem just and proper.

7.3 VOTING OF STOCKS OWNED BY THE CORPORATION. All stock of other
corporations owned or held by the corporation for itself, or for other parties
in any capacity, shall be voted, and all proxies with respect thereto shall be
executed, by the person authorized to do so by resolution of the Board of
Directors, or in the absence of such authorization, by the Chairman of the Board
(if there be such an officer appointed), the Chief Executive Officer, the
President or any Vice-President, or by any other person authorized to do so by
the Chairman of the Board, the President or any Vice President.

ARTICLE VIII
GENERAL MATTERS

8.1 CHECKS; DRAFTS; EVIDENCE OF INDEBTEDNESS. From time to time, the board
of directors shall determine by resolution which person or persons may sign or
endorse all checks, drafts, other orders for payment of money, notes or other
evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
instruments.

8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS. In its discretion,
the board of directors may determine the method and designate the signatory
officer or officers or other person or persons, to execute any corporate
instrument or document, or to sign the corporate name without limitation, except
where otherwise provided by law, and such execution or signature shall be
binding upon the corporation. Unless so authorized or ratified by the board of
directors or within the agency power of an officer, agent or employee , no
officer, agent or employee shall have any power or authority to bind the
corporation by any contract or engagement or to pledge its credit or to render
it liable for any purpose or for any amount.

8.3 STOCK CERTIFICATES. Every holder of shares in the corporation shall be
entitled to have a certificate signed in the name of the corporation by the
chairman of the board (if there be such officer appointed) or the president or a
vice-president and by the chief financial officer or the secretary or any
assistant secretary, certifying the number of shares and the class or series of
shares owned by the shareholder. Any of the signatures on the certificate may be
a facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.

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The corporation may issue the whole or any part of its shares as partly paid
and subject to call for the remainder of the consid-eration to be paid therefor.
Upon the face or back of each stock certificate issued to represent any such
partly paid shares, upon the books and records of the corporation in the case of
uncertifi-cated partly paid shares, the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the corpora-tion shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.

Any such certificate shall also contain such legends or other statements as
may be required by the Corporate Securities Law of 1968, federal or other state
securities laws, and any agreement between the corporation and the issuee of the
certificate.

Certificates for shares may be issued prior to full payment, under such
restrictions and for such purposes as the board of directors or these bylaws may
provide; provided, however, that the certificate issued to represent any such
partly paid shares shall state on the face thereof the total amount of the
consideration to be paid therefor, the amount remaining unpaid and the terms of
payment.

8.4 SPECIAL DESIGNATION ON CERTIFICATES. If the corporation is authorized
to issue more than one class of stock or more than one series of any class, then
the powers, the designations, the preferences, and the relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights shall be set forth in full or summarized on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock; provided, however, that, except as otherwise provided in Section 202
of the General Corporation Law of Delaware, in lieu of the foregoing
requirements there may be set forth on the face or back of the certificate that
the corporation shall issue to represent such class or series of stock a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.

8.5 LOST CERTIFICATES. No new certificate for shares shall be issued in
lieu of an old certificate unless the latter is surrendered and canceled at the
same time; provided, however, that a new certificate will be issued without the
surrender and cancellation of the old certificate if (1) the old certificate is
lost, apparently destroyed or wrongfully taken; (2) the request for the issuance
of the new certificate is made within a reasonable time after the owner of the
old certificate has notice of its loss, destruction, or theft; (3) the request
for the issuance of a new certificate is made prior to the receipt of notice by
the corporation that the old certificate has been acquired by a bona fide
purchaser; (4) the owner of the old certificate files a sufficient indemnity
bond with or provides other adequate security to the corporation; and (5) the
owner satisfies any other reasonable requirement imposed by the corporation.

8.6 CONSTRUCTION; DEFINITIONS. Unless the context requires otherwise, the
general provisions, rules of construction, and definitions in the General
Corporation Law of Delaware shall govern the construction of these bylaws.
Without limiting the generality of this provision, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.

ARTICLE IX
AMENDMENTS

The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.

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APPENDIX D

INTERNATIONAL NETWORK SERVICES
INDEMNIFICATION AGREEMENT

This Indemnification Agreement ("AGREEMENT") is effective as of ,
1998 by and between International Network Services, a Delaware corporation (the
"COMPANY"), and FIELD(1), ("INDEMNITEE").

WHEREAS, effective as of the date hereof, International Network Services, a
California corporation, is reincorporating into Delaware;

WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;

WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;

WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the sig-nificant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;

WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and

WHEREAS, in connection with the Company's reincorporation, the Company and
Indemnitee desire to continue to have in place the additional protection
provided by an indemnification agreement to provide indemnification and
advancement of expenses to the Indemnitee to the maximum extent permitted by
Delaware law;

WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;

NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.

1. CERTAIN DEFINITIONS.

(a) "Change in Control" shall mean, and shall be deemed to have occurred
if, on or after the date of this Agreement, (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) (the "EXCHANGE ACT"), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in
such capacity or a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than 50% of the total voting
power represented by the Company's then outstanding Voting Securities (as
defined below), (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote
of at least two thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute a majority thereof, (iii) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation other

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than a merger or consolidation which would result in the Voting Securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting
Securities of the surviving entity) at least 80% of the total voting power
represented by the Voting Securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in
one transaction or a series of related transactions) all or substantially
all of the Company's assets.

(b) "Claim" shall mean with respect to a Covered Event (as defined
below): any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative
or other.

(c) References to the "Company" shall include, in addition to
International Network Services, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger to which
International Network Services (or any of its wholly-owned subsidiaries) is
a party which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, employees, agents or
fiduciaries, so that if Indemnitee is or was a director, officer, employee,
agent or fiduciary of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, Indemnitee shall
stand in the same position under the provisions of this Agreement with
respect to the resulting or surviving corporation as Indemnitee would have
with respect to such constituent corporation if its separate existence had
continued.

(d) "Covered Event" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or
fiduciary of the Company, or any subsidiary of the Company, or is or was
serving at the request of the Company as a director, officer, employee,
agent or fiduciary of another corporation, partnership, joint venture, trust
or other enterprise, or by reason of any action or inaction on the part of
Indemnitee while serving in such capacity.

(e) "Expenses" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection
with investigating, defending, being a witness in or participating in
(including on appeal), or preparing to defend, to be a witness in or to
participate in, any action, suit, proceeding, alternative dispute resolution
mechanism, hearing, inquiry or investigation), judgments, fines, penalties
and amounts paid in settlement (if such settlement is approved in advance by
the Company, which approval shall not be unreasonably withheld), actually
and reasonably incurred, of any Claim and any federal, state, local or
foreign taxes imposed on the Indemnitee as a result of the actual or deemed
receipt of any payments under this Agreement.

(f) "Expense Advance" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in
any action, suit, proceeding or alternative dispute resolution mechanism,
hearing, inquiry or investigation which constitutes a Claim.

(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d)
hereof, who shall not have otherwise performed services for the Company or
Indemnitee within the last three years (other than with respect to matters
concerning the rights of Indemnitee under this Agreement, or of other
indemnitees under similar indemnity agreements).

(h) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to
"serving at the request of the Company" shall include any service as a
director, officer, employee, agent or fiduciary of the Company which imposes
duties on, or involves services by, such

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director, officer, employee, agent or fiduciary with respect to an employee
benefit plan, its participants or its beneficiaries; and if Indemnitee acted
in good faith and in a manner Indemnitee reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan,
Indemnitee shall be deemed to have acted in a manner "not opposed to the
best interests of the Company" as referred to in this Agreement.

(i) "Reviewing Party" shall mean, subject to the provisions of Section
2(d), any person or body appointed by the Board of Directors in accordance
with applicable law to review the Company's obligations hereunder and under
applicable law, which may include a member or members of the Company's Board
of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking
indemnification.

(j) "Section" refers to a section of this Agreement unless otherwise
indicated.

(k) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.

2. INDEMNIFICATION.

(a) INDEMNIFICATION OF EXPENSES. Subject to the provisions of Section
2(b) below, the Company shall indemnify Indemnitee for Expenses to the
fullest extent permitted by law if Indemnitee was or is or becomes a party
to or witness or other participant in, or is threatened to be made a party
to or witness or other participant in, any Claim (whether by reason of or
arising in part out of a Covered Event), including all interest, assessments
and other charges paid or payable in connection with or in respect of such
Expenses.

(b) REVIEW OF INDEMNIFICATION OBLIGATIONS. Notwithstanding the
foregoing, in the event any Reviewing Party shall have determined (in a
written opinion, in any case in which Independent Legal Counsel is the
Reviewing Party) that Indemnitee is not entitled to be indemni-fied
hereunder under applicable law, (i) the Company shall have no further
obligation under Section 2(a) to make any payments to Indemnitee not made
prior to such determination by such Reviewing Party, and (ii) the Company
shall be entitled to be reimbursed by Indemnitee (who hereby agrees to
reimburse the Company) for all Expenses theretofore paid in indemnifying
Indemnitee; PROVIDED, HOWEVER, that if Indemnitee has commenced or
thereafter commences legal proceedings in a court of competent jurisdiction
to secure a determination that Indemnitee is entitled to be indemnified
hereunder under applicable law, any determination made by any Reviewing
Party that Indemnitee is not entitled to be indemnified hereunder under
applicable law shall not be binding and Indemnitee shall not be required to
reimburse the Company for any Expenses theretofore paid in indemnifying
Indemnitee until a final judicial determination is made with respect thereto
(as to which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expenses shall be
unsecured and no interest shall be charged thereon.

(c) INDEMNITEE RIGHTS ON UNFAVORABLE DETERMINATION; BINDING EFFECT. If
any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation seeking an initial
determination by the court or challenging any such determination by such
Reviewing Party or any aspect thereof, including the legal or factual bases
therefor, and, subject to the provisions of Section 14, the Company hereby
consents to service of process and to appear in any such proceeding. Absent
such litigation, any determination by any Reviewing Party shall be
conclusive and binding on the Company and Indemnitee.

(d) SELECTION OF REVIEWING PARTY; CHANGE IN CONTROL. If there has not
been a Change in Control, any Reviewing Party shall be selected by the Board
of Directors, and if there has been such a Change in Control (other than a
Change in Control which has been approved by a majority of the Company's
Board of Directors who were directors immediately prior to such Change in
Control), any Reviewing

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<PAGE>
Party with respect to all matters thereafter arising concerning the rights
of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's certificate of incorporation or
bylaws as now or hereafter in effect, or under any other applicable law, if
desired by Indemnitee, shall be Independent Legal Counsel selected by
Indemnitee and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what
extent Indemnitee would be entitled to be indemnified hereunder under
applicable law and the Company agrees to abide by such opinion. The Company
agrees to pay the reasonable fees of the Independent Legal Counsel referred
to above and to indemnify fully such counsel against any and all expenses
(including attorneys' fees), claims, liabilities and damages arising out of
or relating to this Agreement or its engagement pursuant hereto.
Notwithstanding any other provision of this Agreement, the Company shall not
be required to pay Expenses of more than one Independent Legal Counsel in
connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or
all other Indemnitees unless (i) the employment of separate counsel by one
or more Indemnitees has been previously authorized by the Company in
writing, or (ii) an Indemnitee shall have provided to the Company a written
statement that such Indemnitee has reasonably concluded that there may be a
conflict of interest between such Indemnitee and the other Indemnitees with
respect to the matters arising under this Agreement.

(e) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other provision
of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including,
without limitation, the dismissal of an action without prejudice, in defense
of any Claim, Indemnitee shall be indemnified against all Expenses incurred
by Indemnitee in connection therewith.

3. EXPENSE ADVANCES.

(a) OBLIGATION TO MAKE EXPENSE ADVANCES. The Company shall make
Expense Advances to Indemnitee upon receipt of a written undertaking by or
on behalf of the Indemnitee to repay such amounts if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified therefore
by the Company.

(b) FORM OF UNDERTAKING. Any obligation to repay any Expense Advances
hereunder pursuant to a written undertaking by the Indemnitee shall be
unsecured and no interest shall be charged thereon.

(c) DETERMINATION OF REASONABLE EXPENSE ADVANCES. The parties agree
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all
Expenses included in such Expense Advance that are certified by affidavit of
Indemnitee's counsel as being reasonable shall be presumed conclusively to
be reasonable.

4. PROCEDURES FOR INDEMNIFICATION AND EXPENSE ADVANCES.

(a) TIMING OF PAYMENTS. All payments of Expenses (including without
limitation Expense Advances) by the Company to the Indemnitee pursuant to
this Agreement shall be made to the fullest extent permitted by law as soon
as practicable after written demand by Indemnitee therefor is presented to
the Company, but in no event later than forty-five (45) business days after
such written demand by Indemnitee is presented to the Company, except in the
case of Expense Advances, which shall be made no later than forty-five (45)
business days after such written demand by Indemnitee is presented to the
Company.

(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a condition
precedent to Indemnitee's right to be indemnified or Indemnitee's right to
receive Expense Advances under this Agreement, give the Company notice in
writing as soon as practicable of any Claim made against Indemnitee for
which indemnification will or could be sought under this Agreement. Notice
to the

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<PAGE>
Company shall be directed to the Chief Executive Officer of the Company at
the address shown on the signature page of this Agreement (or such other
address as the Company shall designate in writing to Indemnitee). In
addition, Indemnitee shall give the Company such information and cooperation
as it may reasonably require and as shall be within Indemnitee's power.

(c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this Agreement,
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of NOLO CONTENDERE, or
its equivalent, shall not create a presumption that Indemnitee did not meet
any particular standard of conduct or have any particular belief or that a
court has determined that indemnification is not permitted by this Agreement
or applicable law. In addition, neither the failure of any Reviewing Party
to have made a determination as to whether Indemnitee has met any particular
standard of conduct or had any particular belief, nor an actual
determination by any Reviewing Party that Indemnitee has not met such
standard of conduct or did not have such belief, prior to the commencement
of legal proceedings by Indemnitee to secure a judicial determination that
Indemnitee should be indemnified under this Agreement or applicable law,
shall be a defense to Indemnitee's claim or create a presumption that
Indemnitee has not met any particular standard of conduct or did not have
any particular belief. In connection with any determination by any Reviewing
Party or otherwise as to whether the Indemnitee is entitled to be
indemnified hereunder the burden of proof shall be on the Company to
establish that Indemnitee is not so entitled.

(d) NOTICE TO INSURERS. If, at the time of the receipt by the Company
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall
give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The
Company shall thereafter take all necessary or desirable action to cause
such insurers to pay, on behalf of the Indemnitee, all amounts payable as a
result of such Claim in accordance with the terms of such policies.

(e) SELECTION OF COUNSEL. In the event the Company shall be obligated
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee (which approval shall not be unreasonably withheld) upon the
delivery to Indemnitee of written notice of the Company's election to do so.
After delivery of such notice, approval of such counsel by Indemnitee and
the retention of such counsel by the Company, the Company will not be liable
to Indemnitee under this Agreement for any fees or expenses of separate
counsel subsequently retained by or on behalf of Indemnitee with respect to
the same Claim; PROVIDED, HOWEVER, that, (i) Indemnitee shall have the right
to employ Indemnitee's separate counsel in any such Claim at Indemnitee's
expense and (ii) if (A) the employment of separate counsel by Indemnitee has
been previously authorized by the Company, (B) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the
Company shall not continue to retain such counsel to defend such Claim, then
the fees and expenses of Indemnitee's separate counsel shall be Expenses for
which Indemnitee may receive indemnification or Expense Advances hereunder.

5. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.

(a) SCOPE. The Company hereby agrees to indemnify the Indemnitee to
the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of
this Agreement, the Company's certificate of incorporation, the Company's
bylaws or by statute. In the event of any change after the date of this
Agreement in any applicable law, statute or rule which expands the right of
a Delaware corporation to indemnify a member of its board of directors or an
officer, employee, agent or fiduciary, it is the intent of the parties
hereto that Indem-nitee shall enjoy by this Agreement the greater benefits
afforded by such change. In the event of any change in any applicable law,
statute or rule which narrows the right of a Delaware corporation to
indemnify a member of its board of directors or an officer, employee, agent
or fiduciary, such change,

5
<PAGE>
to the extent not otherwise required by such law, statute or rule to be
applied to this Agreement, shall have no effect on this Agreement or the
parties' rights and obligations hereunder except as set forth in Section
10(a) hereof.

(b) NONEXCLUSIVITY. The indemnification and the payment of Expense
Advances provided by this Agreement shall be in addition to any rights to
which Indemnitee may be entitled under the Company's certificate of
incorporation, its bylaws, any other agreement, any vote of stockholders or
disinterested directors, the General Corporation Law of the State of
Delaware, or otherwise. The indemnification and the payment of Expense
Advances provided under this Agreement shall continue as to Indemnitee for
any action taken or not taken while serving in an indemnified capacity even
though subsequent thereto Indemnitee may have ceased to serve in such
capacity.

6. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.

7. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.

8. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge that
in certain instances, federal law or applicable public policy may prohibit the
Company from indemnifying its direc-tors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.

9. LIABILITY INSURANCE. To the extent the Company maintains liability
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.

10. EXCEPTIONS. Notwithstanding any other provision of this Agreement, the
Company shall not be obligated pursuant to the terms of this Agreement:

(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for Expenses
resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law, PROVIDED, HOWEVER, that notwithstanding any limitation set forth in
this Section 10(a) regarding the Company's obligation to provide
indemnification, Indemnitee shall be entitled under Section 3 to receive
Expense Advances hereunder with respect to any such Claim unless and until a
court having jurisdiction over the Claim shall have made a final judicial
determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that Indemnitee has engaged in acts, omissions or
transactions for which Indemnitee is prohibited from receiving
indemnification under this Agreement or applicable law.

(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or make Expense
Advances to Indemnitee with respect to Claims initiated or brought
voluntarily by Indemnitee and not by way of defense, counterclaim or
crossclaim, except (i) with respect to actions or proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other agreement or insurance policy or under the Company's certificate of
incorporation or bylaws now or hereafter in effect relating to Claims for
Covered Events, (ii) in specific cases if the Board of Directors has
approved the initiation

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<PAGE>
or bringing of such Claim, or (iii) as otherwise required under Section 145
of the Delaware General Corporation Law, regardless of whether Indemnitee
ultimately is determined to be entitled to such indemnification, or
insurance recovery, as the case may be.

(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any Expenses
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each
of the material assertions made by the Indemnitee as a basis for such action
was not made in good faith or was frivolous, or (ii) by or in the name of
the Company to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each
of the material defenses asserted by Indemnitee in such action was made in
bad faith or was frivolous.

(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee
of securities in violation of Section 16(b) of the Securities Exchange Act
of 1934, as amended, or any similar successor statute; PROVIDED, HOWEVER,
that notwithstanding any limitation set forth in this Section 10(d)
regarding the Company's obligation to provide indemnification, Indemnitee
shall be entitled under Section 3 to receive Expense Advances hereunder with
respect to any such Claim unless and until a court having jurisdiction over
the Claim shall have made a final judicial determination (as to which all
rights of appeal therefrom have been exhausted or lapsed) that Indemnitee
has violated said statute.

11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.

12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consoli-dation or otherwise) to all, substantially all, or a substantial part,
of the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such suc-cession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.

13. EXPENSES INCURRED IN ACTION RELATING TO ENFORCEMENT OR
INTERPRETATION. In the event that any action is instituted by Indemnitee under
this Agreement or under any liability insurance policies maintained by the
Company to enforce or interpret any of the terms hereof or thereof, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee with
respect to such action (including without limitation attorneys' fees),
regardless of whether Indemnitee is ultimately successful in such action, unless
as a part of such action a court having jurisdiction over such action makes a
final judicial determination (as to which all rights of appeal therefrom have
been exhausted or lapsed) that each of the material assertions made by
Indemnitee as a basis for such action was not made in good faith or was
frivolous; provided, however, that until such final judicial determination is
made, Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee in defense of such action
(including without limitation costs and expenses incurred with respect to
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action a court having jurisdiction over such action makes a final
judicial determination (as to which all rights of appeal therefrom have been
exhausted or lapsed) that each of the material defenses asserted by Indemnitee
in such action was made in bad faith or was frivolous; provided,

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<PAGE>
however, that until such final judicial determination is made, Indemnitee shall
be entitled under Section 3 to receive payment of Expense Advances hereunder
with respect to such action.

14. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.

15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.

16. SEVERABILITY. The provisions of this Agreement shall be severable in
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.

17. CHOICE OF LAW. This Agreement, and all rights, remedies, liabilities,
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.

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

19. AMENDMENT AND TERMINATION. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.

20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.

21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.

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

INTERNATIONAL NETWORK SERVICES

By:
-------------------------

Print Name:
-------------------------

Title:
-------------------------

1213 Innsbruck Drive
Sunnyvale, California
Address: 94089

AGREED TO AND ACCEPTED INDEMNITEE:

------------------------------------------
FIELD(1)

Address:
-------------------------------------

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

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<PAGE>

INTERNATIONAL NETWORK SERVICES
1996 STOCK PLAN
(AMENDED AND RESTATED ____________, 1998)

1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:

- to attract and retain the best available personnel for
positions of substantial responsibility,

- to provide additional incentive to Employees,
Directors and Consultants, and

- to promote the success of the Company's business.

Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options, as determined by the Administrator
at the time of grant. Stock Purchase Rights may also be granted
under the Plan.

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

(a) "ADMINISTRATOR" means the Board or any of its
Committees as shall be administering the Plan, in accordance with
Section 4 of the Plan.

(b) "APPLICABLE LAWS" means the requirements relating to
the administration of stock option plans under U. S. state
corporate laws, U.S. federal and state securities laws, the Code,
any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or
jurisdiction where Options or Stock Purchase Rights are, or will
be, granted under the Plan.

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

(e) "COMMITTEE" means a committee of Directors appointed
by the Board in accordance with Section 4 of the Plan.

(f) "COMMON STOCK" means the Common Stock of the Company.

(g) "COMPANY" means International Network Services, a
California corporation.

(h) "CONSULTANT" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services
and who is compensated for such services.

(i) "DIRECTOR" means a member of the Board.

<PAGE>

(j) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.

(k) "EMPLOYEE" means any person, including Section 16(b)
Officers and Directors, employed by the Company or any Parent or
Subsidiary of the Company. A Service Provider shall not cease to
be an Employee in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration
of a leave of absence approved by the Company is not so guaranteed,
on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's
fee by the Company shall be sufficient to constitute "employment"
by the Company.

(l) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.

(m) "FAIR MARKET VALUE" means, as of any date, the value
of Common Stock determined as follows:

(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market
of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system on the date of
determination (or if such date is not a market trading day, the
most recent prior market trading day), as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems
reliable;

(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported,
the Fair Market Value of a Share of Common Stock shall be the mean
between the high bid and low asked prices for the Common Stock on
the date of determination (or if such date is not a market trading
day, the most recent prior market trading day), as reported in THE
WALL STREET JOURNAL or such other source as the Administrator deems
reliable;

(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good
faith by the Administrator.

(n) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder.

(o) "NONSTATUTORY STOCK OPTION" means an Option not
intended to qualify as an Incentive Stock Option.

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<PAGE>

(p) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or
Stock Purchase Right grant. The Notice of Grant is part of the
Option Agreement.

(q) "SECTION 16(b) OFFICER" means a person who is an
officer of the Company within the meaning of Section 16(b) of the
Exchange Act and the rules and regulations promulgated thereunder.

(r) "OPTION" means a stock option granted pursuant to the
Plan.

(s) "OPTION AGREEMENT" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the
terms and conditions of the Plan.

(t) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding options are surrendered in exchange for options with a
lower exercise price.

(u) "OPTIONED STOCK" means the Common Stock subject to an
Option or Stock Purchase Right.

(v) "OPTIONEE" means the holder of an outstanding Option
or Stock Purchase Right granted under the Plan.

(w) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(x) "PLAN" means this 1996 Stock Plan.

(y) "RESTRICTED STOCK" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under
Section 11 below.

(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
agreement between the Company and the Optionee evidencing the terms
and restrictions applying to stock purchased under a Stock Purchase
Right. The Restricted Stock Purchase Agreement is subject to the
terms and conditions of the Plan and the Notice of Grant.

(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange
Act or any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the Plan.

(bb) "SECTION 16(b)" means Section 16(b) of the
Securities Exchange Act of 1934, as amended.

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<PAGE>

(cc) "SERVICE PROVIDER" means an Employee, Director or
Consultant.

(dd) "SHARE" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.

(ee) "STOCK PURCHASE RIGHT" means the right to purchase
Common Stock pursuant to Section 11 of the Plan, as evidenced by a
Notice of Grant.

(ff) "SUBSIDIARY" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of
the Code.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares that
may be optioned and sold under the Plan is 5,500,000 Shares, plus
(i) any unused Shares, (ii) any forfeited Shares, and (iii) annual
increases on July 1 of each year, beginning on July 1, 1999 and
ending on July 1, 2003, equal to the lesser of (a) 2.5 percent of
the Shares of Common Stock outstanding on the last day of each
preceding fiscal year, (b) 3,750,000 Shares or (c) a lesser
amount determined by the Board. For purposes of this Section 3,
(i) "unused Shares" means Shares reserved for issuance but not
covered by grants under the Amended and Restated 1992 Flexible
Stock Incentive Plan of the Company (the "1992 Plan") (which 1992
Plan shall be terminated as of the effective date of the Plan), and
(ii) "forfeited Shares" means any Shares covered by grants under
the 1992 Plan that are not issued to participants or that are
returned to the Company upon forfeiture of such Shares.

If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is
surrendered pursuant to an Option Exchange Program, the unpurchased
Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated);
PROVIDED, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted
Stock are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under
the Plan.

4. ADMINISTRATION OF THE PLAN.

(a) PROCEDURE.

(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different
groups of Service Providers.

(ii) SECTION 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options
granted hereunder as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more "outside directors"
within the meaning of Section 162(m) of the Code.

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<PAGE>

(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the Plan shall
be administered by the Board or a Committee of two or more
"non-employee directors" within the meaning of Rule 16b-3.

(iv) OTHER ADMINISTRATION. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a
Committee, which Committee shall be constituted to satisfy
Applicable Laws.

(b) POWERS OF THE ADMINISTRATOR. Subject to the provi-
sions of the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:

(i) to determine the Fair Market Value;

(ii) to select the Service Providers to whom
Options and Stock Purchase Rights may be granted hereunder;

(iii) to determine the number of shares of
Common Stock to be covered by each Option and Stock Purchase Right
granted hereunder;

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

(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock
Purchase Right granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the
shares of Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall
determine;

(vi) to institute an Option Exchange Program;

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

(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations
relating to sub-plans established for the purpose of qualifying for
preferred tax treatment under foreign tax laws;

(ix) to modify or amend each Option or Stock
Purchase Right (subject to Section 15(c) of the Plan), including
the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided
for in the Plan;

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<PAGE>

(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the
Shares to be issued upon exercise of an Option or Stock Purchase
Right that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by
an Optionee to have Shares withheld for this purpose shall be made
in such form and under such conditions as the Administrator may
deem necessary or advisable;

(xi) to authorize any person to execute on
behalf of the Company any instrument required to effect the grant
of an Option or Stock Purchase Right previously granted by the
Administrator;

(xii) to make all other determinations deemed
necessary or advisable for administering the Plan.

(c) EFFECT OF ADMINISTRATOR'S DECISION. The
Administrator's decisions, determinations and interpretations shall
be final and binding on all Optionees and any other holders of
Options or Stock Purchase Rights.

5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock
Options may be granted only to Employees.

6. LIMITATIONS.

(a) Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all
plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were
granted. The Fair Market Value of the Shares shall be determined
as of the time the Option with respect to such Shares is granted.

(b) Neither the Plan nor any Option or Stock Purchase
Right shall confer upon an Optionee any right with respect to
continuing the Optionee's relationship as a Service Provider with
the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.

(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 2,000,000
Shares.

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<PAGE>
(ii) In connection with his or her initial service,
a Service Provider may be granted Options to purchase up to an
additional 500,000 Shares which shall not count against the limit
set forth in subsection (i) above.

(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 13.

(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the
cancelled Option will be counted against the limits set forth in
subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.

7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan
shall become effective upon its adoption by the Board. It shall
continue in effect for a term of ten (10) years unless terminated
earlier under Section 15 of the Plan.

8. TERM OF OPTION. The term of each Option shall be stated in
the Option Agreement. In the case of an Incentive Stock Option,
the term shall be ten (10) years from the date of grant or such
shorter term as may be provided in the Option Agreement. Moreover,
in the case of an Incentive Stock Option granted to an Optionee
who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the
date of grant or such shorter term as may be provided in the Option
Agreement.

9. OPTION EXERCISE PRICE AND CONSIDERATION.

(a) EXERCISE PRICE. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be
determined by the Administrator, subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the 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 Employee other than an
Employee described in paragraph (A) immediately above, 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, the
per Share exercise price shall be determined by the Administrator.
In the case of a Nonstatutory Stock Option intended to

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<PAGE>

qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.

(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of Fair
Market Value on the date of grant pursuant to a merger or other
corporate transaction.

(b) WAITING PERIOD AND EXERCISE DATES. At the time an
Option is granted, the Administrator shall fix the period within
which the Option may be exercised and shall determine any con-
ditions which must be satisfied before the Option may be exercised.

(c) FORM OF CONSIDERATION. The Administrator shall
determine the acceptable form of consideration for exercising an
Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:

(i) cash;

(ii) check;

(iii) promissory note;

(iv) other Shares which (A) 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, and
(B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option
shall be exercised;

(v) consideration received by the Company under a
formal cashless exercise program adopted by the Company in
connection with the Plan;

(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to
the Optionee's participation in any Company-sponsored deferred
compensation program or arrangement;

(vii) any combination of the foregoing methods
of payment; or

(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable
Laws.

10. EXERCISE OF OPTIONS.

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<PAGE>

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any
Option granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such conditions as
determined by the Administrator and set forth in the Option
Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave
of absence. An Option may not be exercised for a fraction of a
Share.

An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in
accordance with the Option Agreement) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist
of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name
of the Optionee and his or her spouse. Until the Shares are issued
(as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the
record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.

Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.

(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If
an Optionee ceases to be a Service Provider, other than upon the
Optionee's death or Disability, the Optionee may exercise his or
her Option within such period of time as is specified in the Option
Agreement to the extent that he or she is entitled to exercise it
on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of
the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.

(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the
Optionee may exercise his or her Option at any time within twelve
(12) months from the date of termination, but only to the extent
that the Optionee is entitled to exercise it on the date of
termination (and in no event later than the expiration of the term
of the Option as set forth in the Option Agreement). If, on the
date of termination, the Optionee is not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option

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<PAGE>

within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.

(d) DEATH OF OPTIONEE. If an Optionee dies while a
Service Provider, the Option may be exercised at any time within
twelve (12) months following the date of death (but in no event
later than the expiration of the term of such Option as set forth
in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee would have
been entitled to exercise the Option on the date of death. If, at
the time of death, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion
of the Option shall immediately revert to the Plan. The Option may
be exercised by the executor or administrator of the Optionee's
estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

(e) 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.

11. STOCK PURCHASE RIGHTS.

(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards
granted under the Plan and/or cash awards made outside of the Plan.
After the Administrator determines that it will offer Stock
Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including
the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the
offeree must accept such offer. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.

(b) REPURCHASE OPTION. Unless the Administrator deter-
mines otherwise, the Restricted Stock Purchase Agreement shall
grant the Company a repurchase option exercisable upon the volun-
tary or involuntary termination of the purchaser's service with the
Company for any reason (including death or Disability). The pur-
chase price for Shares repurchased pursuant to the Restricted Stock
purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company. The repurchase option shall lapse at
a rate determined by the Administrator.

(c) OTHER PROVISIONS. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Admin-
istrator in its sole discretion.

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<PAGE>

(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 13 of the Plan.

12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.
Unless determined otherwise by the Administrator, an Option or
Stock Purchase Right may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Purchase
Right transferable, such Option or Stock Purchase Right shall
contain such additional terms and conditions as the Administrator
deems appropriate.

13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
MERGER OR ASSET SALE.

(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 and Stock Purchase
Right, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options
or Stock Purchase Rights have yet been granted or which 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 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
Administrator shall notify each Optionee as soon as practicable
prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have
the right to exercise his or her Option until ten (10) days prior
to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not
otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares
purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated.
To the extent it has not been

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<PAGE>

previously exercised, an Option or Stock Purchase Right will
terminate immediately prior to the consummation of such
proposed action.

(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each outstanding
Option and Stock Purchase Right shall be assumed or an equivalent
option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for
the Option or Stock Purchase Right, the Optionee shall fully vest
in and have the right to exercise the Option or Stock Purchase
Right as to all of the Optioned Stock, including Shares as to which
it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of
assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be
fully vested and exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of
assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets is not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of
the Option or Stock Purchase Right, for each Share of Optioned
Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in
fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.

14. DATE OF GRANT. The date of grant of an Option or Stock
Purchase Right shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option or Stock
Purchase Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to
each Optionee within a reasonable time after the date of such
grant.

15. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.

(b) SHAREHOLDER APPROVAL. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary
and desirable to comply with Applicable Laws.

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<PAGE>

(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between
the Optionee and the Administrator, which agreement must be in
writing and signed by the Optionee and the Company.

16. CONDITIONS UPON ISSUANCE OF SHARES.

(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant
to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance
and delivery of such Shares shall comply with Applicable Laws and
shall be further subject to the approval of counsel for the Company
with respect to such compliance.

(b) INVESTMENT REPRESENTATIONS. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may
require the person exercising such Option or Stock Purchase Right
to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is
required.

17. INABILITY TO OBTAIN AUTHORITY. The inability of the
Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.

18. 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.

19. SHAREHOLDER APPROVAL. The Plan shall be subject to
approval by the shareholders of the Company within twelve (12)
months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the manner and to the degree required
under Applicable Laws.

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<PAGE>

INTERNATIONAL NETWORK SERVICES

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Option Agreement.

I. NOTICE OF STOCK OPTION GRANT

[Optionee's Name and Address]

You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:

Grant Number _________________________

Date of Grant _________________________

Vesting Commencement Date _________________________

Exercise Price per Share $________________________

Total Number of Shares Granted _________________________

Total Exercise Price $_________________________

Type of Option: ___ Incentive Stock Option

___ Nonstatutory Stock Option

Term/Expiration Date: _________________________

VESTING SCHEDULE:

This Option may be exercised, in whole or in part, in
accordance with the following schedule:

[24% of the Shares subject to the Option shall vest twelve
months after the Vesting Commencement Date, and 2% of the Shares
subject to the Option shall vest each month thereafter, subject to
the Optionee continuing to be a Service Provider on such dates].

<PAGE>
TERMINATION PERIOD:

This Option may be exercised for _____ [days/months] after
Optionee ceases to be a Service Provider. Upon the death or
Disability of the Optionee, this Option may be exercised for such
longer period as provided in the Plan. In no event shall this
Option be exercised later than the Term/Expiration Date as provided
above.

II. AGREEMENT

1. GRANT OF OPTION. The Plan Administrator of the Company
hereby grants to the Optionee named in the Notice of Grant attached
as Part I of this Agreement (the "Optionee") an option (the
"Option") to purchase the number of Shares, as set forth in the
Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference.
Subject to Section 15(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of
the Plan shall prevail.

If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive
Stock Option under Section 422 of the Code. However, if this
Option is intended to be an Incentive Stock Option, to the extent
that it exceeds the $100,000 rule of Code Section 422(d) it shall
be treated as a Nonstatutory Stock Option ("NSO").

2. EXERCISE OF OPTION.

(a) RIGHT TO EXERCISE. This Option is exercisable during
its term in accordance with the Vesting Schedule set out in the
Notice of Grant and the applicable provisions of the Plan and this
Option Agreement.

(b) METHOD OF EXERCISE. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A
(the "Exercise Notice"), which shall state the election to exercise
the Option, the number of Shares in respect of which the Option is
being exercised (the "Exercised Shares"), and such other
representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall
be completed by the Optionee and delivered to the secretary of the
Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This
Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such
aggregate Exercise Price.

No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable
Laws. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised
Shares.

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<PAGE>

3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the
election of the Optionee:

(a) cash;

(b) check;

(c) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with
the Plan;

(d) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been owned by the
Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the
aggregate Exercise Price of the Exercised Shares; or

(e) with the Administrator's consent, delivery of
Optionee's promissory note (the "Note") in the form attached hereto
as Exhibit C, in the amount of the aggregate Exercise Price of the
Exercised Shares together with the execution and delivery by the
Optionee of the Security Agreement attached hereto as Exhibit B.
The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase,
and shall be secured by a pledge of the Shares purchased by the
Note pursuant to the Security Agreement.

4. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of
Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

5. TERM OF OPTION. This Option may be exercised only within
the term set out in the Notice of Grant, and may be exercised
during such term only in accordance with the Plan and the terms of
this Option Agreement.

6. TAX CONSEQUENCES. Some of the federal tax consequences
relating to this Option, as of the date of this Option, are set
forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF
THE SHARES.

(a) EXERCISING THE OPTION.

(i) NONSTATUTORY STOCK OPTION. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The
Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any,
of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If

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<PAGE>

the Optionee is an Employee or a former Employee, the Company will
be required to withhold from his or her compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise,
and may refuse to honor the exercise and refuse to deliver Shares
if such withholding amounts are not delivered at the time of
exercise.

(ii) INCENTIVE STOCK OPTION. If this Option
qualifies as an ISO, the Optionee will have no regular federal
income tax liability upon its exercise, although the excess, if
any, of the Fair Market Value of the Exercised Shares on the date
of exercise over their aggregate Exercise Price will be treated as
an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in
the year of exercise. In the event that the Optionee ceases to be
an Employee but remains a Service Provider, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to
qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.

(b) DISPOSITION OF SHARES.

(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax
purposes.

(ii) ISO. If the Optionee holds ISO Shares for
at least one year after exercise and two years after the grant
date, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes.
If the Optionee disposes of ISO Shares within one year after
exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the
lesser of (A) the difference between the Fair Market Value of the
Shares acquired on the date of exercise and the aggregate Exercise
Price, or (B) the difference between the sale price of such Shares
and the aggregate Exercise Price. Any additional gain will be
taxed as capital gain, short-term or long-term depending on the
period that the ISO Shares were held.

(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to an ISO on or before the later of (i) two years
after the grant date, or (ii) one year after the exercise date, the
Optionee shall immediately notify the Company in writing of such
disposition. The Optionee agrees that he or she may be subject to
income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in
cash or out of the current earnings paid to the Optionee.

7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute
the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior
undertakings and agreements of the

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<PAGE>

Company and Optionee with respect to the subject matter hereof, and
may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement
is governed by the internal substantive laws, but not the choice of
law rules, of California.

8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES
AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING
SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER
AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP
AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

By your signature and the signature of the Company's
representative below, you and the Company agree that this Option is
granted under and governed by the terms and conditions of the Plan
and this Option Agreement. Optionee has reviewed the Plan and this
Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and
Option Agreement. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Option
Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.

OPTIONEE: INTERNATIONAL NETWORK SERVICES

___________________________________ ______________________________________
Signature By

____________________________________ ______________________________________
Print Name Title

____________________________________
Residence Address

____________________________________

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<PAGE>
CONSENT OF SPOUSE

The undersigned spouse of Optionee has read and hereby approves
the terms and conditions of the Plan and this Option Agreement. In
consideration of the Company's granting his or her spouse the right
to purchase Shares as set forth in the Plan and this Option
Agreement, the undersigned hereby agrees to be irrevocably bound by
the terms and conditions of the Plan and this Option Agreement and
further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's
spouse as attorney-in-fact for the undersigned with respect to any
amendment or exercise of rights under the Plan or this Option
Agreement.

_______________________________________
Spouse of Optionee

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<PAGE>

EXHIBIT A

1996 STOCK PLAN

EXERCISE NOTICE

International Network Services
650 Castro Street, Suite 260
Mountain View, CA 94041

Attention: Corporate Secretary

1. EXERCISE OF OPTION. Effective as of today,
________________, 199__, the undersigned ("Purchaser") hereby
elects to purchase ______________ shares (the "Shares") of the
Common Stock of International Network Services (the "Company")
under and pursuant to the 1996 Stock Plan (the "Plan") and the
Stock Option Agreement dated , 19___ (the "Option
Agreement"). The purchase price for the Shares shall be $
, as required by the Option Agreement.

2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the
Company the full purchase price for the Shares.

3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option
Agreement and agrees to abide by and be bound by their terms and
conditions.

4. RIGHTS AS SHAREHOLDER. 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 Shares, no right
to vote or receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Shares so acquired shall be issued to
the Optionee as soon as practicable after 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 of issuance, except as pro-
vided in Section 13 of the Plan.

5. TAX CONSULTATION. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase
or disposition of the Shares. Purchaser represents that Purchaser
has consulted with any tax consultants Purchaser deems advisable in
connection with the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.

6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option
Agreement are incorporated herein by reference. This Agreement,
the Plan and the Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements
of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing

<PAGE>

signed by the Company and Purchaser. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of California.

Submitted by: Accepted by:

PURCHASER: INTERNATIONAL NETWORK SERVICES

__________________________________ _____________________________________
Signature By

__________________________________ _____________________________________
Print Name Its

ADDRESS: ADDRESS:

_________________________________ 650 Castro Street, Suite 260
Mountain View, CA 94041
_________________________________

_____________________________________
Date Received

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<PAGE>
INTERNATIONAL NETWORK SERVICES

1996 EMPLOYEE STOCK PURCHASE PLAN
(AMENDED AND RESTATED , 1998)

The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of International Network Services.

1. PURPOSE. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is
the intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as
amended. The provisions of the Plan, accordingly, shall be construed so as
to extend and limit participation in a manner consistent with the
requirements of that section of the Code.

2. DEFINITIONS.

(a) "BOARD" shall mean the Board of Directors of the Company.

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

(d) "COMPANY" shall mean International Network Services and any
Designated Subsidiary of the Company.

(e) "COMPENSATION" shall mean all base straight-time gross
earnings, payments for overtime, shift premiums, commissions, and performance
bonuses (other than referral and "spot" bonuses).

(f) "DESIGNATED SUBSIDIARIES" shall mean the Subsidiaries which
have been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.

(g) "EMPLOYEE" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at
least twenty (20) hours per week and more than five (5) months in any
calendar year. For purposes of the Plan, the employment relationship shall
be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be deemed
to have terminated on the 91st day of such leave.

(h) "ENROLLMENT DATE" shall mean the first day of each Offering
Period or Special Offering Period.

<PAGE>

(i) "EXERCISE DATE" shall mean the last day of each Purchase
Period.

(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:

(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Administrator deems reliable;

(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock
for the day of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board deems reliable;

(3) For the purposes of the Enrollment Date under the first
Offering Period under the Plan, the Fair Market Value of the Common Stock
shall be the price to public as set forth in the final prospectus included
within the Registration Statement on form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Common Stock; or

(4) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.

(k) "OFFERING PERIOD" shall mean a period of approximately
twenty-four (24) months during which an option granted pursuant to the Plan
may be exercised, commencing on the first Trading Day on or after May 1 or
November 1 of each year and terminating on the last Trading Day in the period
ending twenty-four months later. The first Offering Period shall commence on
the date on which the Company's registration statement on Form S-1 is
declared effective by the Securities and Exchange Commission and shall
terminate on the last Trading Day on or before October 31, 1998. The
duration and timing of Offering Periods may be changed pursuant to Section 4
of this Plan. As used herein, "Offering Period" shall also mean "Special
Offering Period," where applicable.

(l) "PLAN" shall mean this Employee Stock Purchase Plan.

(m) "PURCHASE PRICE" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the last Trading Day prior to the
Enrollment Date or such Fair Market Value on the Exercise Date, whichever is
lower. With respect to the first Offering Period and the Special Offering
Periods, the Purchase Price shall be 85% of the Fair Market Value of a share
of Common Stock on the Enrollment Date or on the Exercise Date, whichever is
lower.

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<PAGE>

(n) "PURCHASE PERIOD" shall mean the approximately six-month
period commencing after one Exercise Date and ending with the next Exercise
Date. The first Purchase Period of any Offering Period shall commence on the
Enrollment Date and end on the next Exercise Date. The first Purchase Period
of the first Offering Period shall commence on the Enrollment Date and shall
end on the last trading day on or before April 30, 1997.

(o) "RESERVES" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but not yet placed under option.

(p) "SPECIAL OFFERING PERIOD" shall mean one of two Offering
Periods that commence on November 29, 1996 and February 14, 1997. The
Special Offering Periods shall be coterminous with the First Offering Period
and shall end on the last Trading Day on or before October 31, 1998. The
first Purchase Period of each Special Offering Period shall commence on the
applicable Enrollment Date and shall end on the last Trading Day on or before
April 30, 1997.

(q) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.

(r) "TRADING DAY" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.

3. ELIGIBILITY.

(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.

(b) Any provisions of the Plan to the contrary notwithstanding,
no Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock representing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares
at the time such option is granted) for each calendar year in which such
option is outstanding at any time.

4. OFFERING PERIODS. Generally, the Plan shall be implemented by
consecutive, overlapping Offering Periods with a new Offering Period
commencing on the first Trading Day on

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<PAGE>

or after May 1 and November 1 each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance
with Section 19 hereof. The first Offering Period shall commence on the
effective date of the initial public offering of the Company's Common Stock
that is filed with the Securities and Exchange Commission and shall end on
the last Trading Day on or before October 31, 1998. The Special Offering
Periods shall commence on the first Trading Day on or after November 29, 1996
and February 14, 1997, and shall end on the last Trading Day on or before
October 31, 1998. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.

5. PARTICIPATION.

(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement provided by the Company authorizing
payroll deductions and filing it with the Company's payroll office prior to
the applicable Enrollment Date.

(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll
in the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.

6. PAYROLL DEDUCTIONS.

(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay
day during the Offering Period in an amount not exceeding fifteen percent
(15%) of the Compensation which he or she receives on each pay day during the
Offering Period.

(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into
such account.

(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may decrease the rate of his or her
payroll deductions one time during a Purchase Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. In addition, a participant may increase or decrease his or
her deduction rate upon the commencement of a Purchase Period. The change in
rate shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10
hereof.

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<PAGE>

(d) Notwithstanding the foregoing, a participant's payroll
deductions may be decreased to zero percent (0%) at any time during an
Purchase Period to the extent necessary to comply with Section 423(b)(8) of
the Code and Section 3(b) hereof. Payroll deductions shall recommence at the
rate provided in such participant's subscription agreement at the beginning
of the first Purchase Period during which an employee's participation shall
so comply, unless terminated by the participant as provided in Section 10
hereof.

(e) At the time the option is exercised, in whole or in part, or
at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, the Company may, but shall not be obligated to, withhold from
the participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to
make available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by the Employee.

7. GRANT OF OPTION. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted
an option to purchase on each Exercise Date during such Offering Period (at
the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price. During a
six-month Purchase Period an Employee shall in no event be permitted to
purchase more than the lesser of 2,000 shares or such number of shares as may
be determined by the Plan administrator; provided, however, that such limit
shall be adjusted proportionately in the case of a Purchase Period longer
than six months. The number of shares that may be purchased shall also be
subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless
the participant has withdrawn pursuant to Section 10 hereof. The option
shall expire on the last day of the Offering Period.

8. EXERCISE OF OPTION. Unless a participant withdraws from the Plan
as provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the maximum
number of full shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares shall be purchased;
any payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be retained in the participant's
account for the subsequent Purchase Period or Offering Period, subject to
earlier withdrawal by the participant as provided in Section 10 hereof. Any
other monies left over in a participant's account after the Exercise Date
shall be returned to the participant. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by him
or her.

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<PAGE>

9. DELIVERY. As promptly as practicable after each Exercise Date, the
shares purchased upon exercise of an option shall be credited to an account
in the participant's name with a brokerage firm selected by the Company to
hold the shares in its street name.

10. WITHDRAWAL; TERMINATION OF EMPLOYMENT.

(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any time by completing a notice
of withdrawal provided by the Company and filing it with the Company's
payroll office. All of the participant's payroll deductions credited to his
or her account shall be paid to such participant promptly after receipt of
notice of withdrawal and such participant's option for the Offering Period
shall be automatically terminated, and no further payroll deductions for the
purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers
to the Company a new subscription agreement.

(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, he or she shall be deemed to have
elected to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or
her death, to the person or persons entitled thereto under Section 14 hereof,
and such participant's option shall be automatically terminated.

(c) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from
which the participant withdraws.

11. INTEREST. No interest shall accrue on the payroll deductions of a
participant in the Plan.

12. STOCK.

(a) Subject to Section 18, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 1,200,000 shares, plus an annual increase to be added on November 1
of each year equal to the lesser of (i) 2.0 percent of the Shares of Common
Stock outstanding on the last day of each preceding fiscal year, (ii)
3,000,000 Shares or (iii) a lesser amount determined by the Board. If, on a
given Exercise Date, the number of shares with respect to which options are
to be exercised exceeds the number of shares then available under the Plan,
the Company shall make a pro rata allocation of the shares

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<PAGE>

remaining available for purchase in as uniform a manner as shall be
practicable and as it shall determine to be equitable.

(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan shall
be registered in the name of the participant or in the name of the
participant and his or her spouse.

13. ADMINISTRATION.

(a) ADMINISTRATIVE BODY. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority
to construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan.
Every finding, decision and determination made by the Board or its committee
shall, to the full extent permitted by law, be final and binding upon all
parties.

14. DESIGNATION OF BENEFICIARY.

(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.

(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company
shall deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its discretion,
may deliver such shares and/or cash to the spouse or to any one or more
dependents or relatives of the participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company
may designate.

15. TRANSFERABILITY. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option
or to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any
such attempt

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<PAGE>

at assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds
from an Offering Period in accordance with Section 10 hereof.

16. USE OF FUNDS. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose,
and the Company shall not be obligated to segregate such payroll deductions.

17. REPORTS. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to
participating Employees at least annually, which statements shall set forth
the amounts of payroll deductions, the Purchase Price, the number of shares
purchased and the remaining cash balance, if any.

18. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
LIQUIDATION, MERGER OR ASSET SALE.

(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the Reserves, as well as the price per share
and the number of shares of Common Stock covered by each option under the
Plan which has not yet been exercised, 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 or reclassification of the Common Stock, or any other increase
or decrease in the number of 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.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods shall
terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board.

(c) MERGER OR ASSET SALE. 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, any Purchase Periods then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the
Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date,
that the Exercise Date for the participant's option has been changed to the
New Exercise Date and that the participant's option shall be exercised
automatically on the New

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<PAGE>

Exercise Date, unless prior to such date the participant has withdrawn from
the Offering Period as provided in Section 10 hereof.

19. AMENDMENT OR TERMINATION.

(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is in
the best interests of the Company and its shareholders. Except as provided
in Section 18 hereof, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any participant.
To the extent necessary to comply under Section 423 of the Code (or any
successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a
manner and to such a degree as required.

(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during an
Offering Period, establish the exchange ratio applicable to amounts withheld
in a currency other than U.S. dollars, permit payroll withholding in excess
of the amount designated by a participant in order to adjust for delays or
mistakes in the Company's processing of properly completed withholding
elections, establish reasonable waiting and adjustment periods and/or
accounting and crediting procedures to ensure that amounts applied toward the
purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such
other limitations or procedures as the Board (or its committee) determines in
its sole discretion advisable which are consistent with the Plan.

20. NOTICES. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the
location, or by the person, designated by the Company for the receipt
thereof.

21. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.

- 9 -
<PAGE>

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 any of the aforementioned applicable provisions of law.

22. 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. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19 hereof.

23. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent
permitted by any applicable laws, regulations or stock exchange rules, if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering
Period is lower than the Fair Market Value of the Common Stock on the
Enrollment Date of such Offering Period, then all participants in such
Offering Period shall be automatically withdrawn from such Offering Period
immediately after the exercise of their option on such Exercise Date and
automatically re-enrolled in the immediately following Offering Period as of
the first day thereof.

- 10 -

<PAGE>

INTERNATIONAL NETWORK SERVICES

1998 DIRECTOR OPTION PLAN

1. PURPOSES OF THE PLAN. The purposes of this 1998 Director Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and
to encourage their continued service on the Board.

All options granted hereunder shall be nonstatutory stock options.

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

(a) "BOARD" means the Board of Directors of the Company.

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

(d) "COMPANY" means International Network Services, a California
corporation.

(e) "DIRECTOR" means a member of the Board.

(f) "DISABILITY" means total and permanent disability as defined
in section 22(e)(3) of the Code.

(g) "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.

(h) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

(i) "FAIR MARKET VALUE" means, as of any date, the value of Common
Stock determined as follows:

(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
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;

<PAGE>

to the time of determination, as reported in THE WALL STREET JOURNAL or such
other source as the Board 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 Board.

(j) "INSIDE DIRECTOR" means a Director who is an Employee.

(k) "OPTION" means a stock option granted pursuant to the Plan.

(l) "OPTIONED STOCK" means the Common Stock subject to an Option.

(m) "OPTIONEE" means a Director who holds an Option.

(n) "OUTSIDE DIRECTOR" means a Director who is not an Employee.

(o) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(p) "PLAN" means this 1998 Director Option Plan.

(q) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.

(r) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code
of 1986.

3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 300,000 Shares (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.

If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares that were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not
be returned to the Plan and shall not become available for future
distribution under the Plan.

4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.

(a) PROCEDURE FOR GRANTS. All grants of Options to Outside
Directors under this Plan shall be automatic and nondiscretionary and shall
be made strictly in accordance with the following provisions:

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<PAGE>

(i) No person shall have any discretion to select which
Outside Directors shall be granted Options or, subject to Section 10, to
determine the number of Shares to be covered by Options.

(ii) Each person who first becomes an Outside Director on or
after the effective date of this Plan, whether through election by the
shareholders of the Company or appointment by the Board to fill a vacancy,
shall be automatically granted an Option to purchase 30,000 Shares on the
date on which such person first becomes an Outside Director and on each third
anniversary thereof during the term of this Plan so long as he or she
continues to serve as an Outside Director. In addition, those individuals who
are Outside Directors as of the effective date of this Plan shall be granted
an Option to purchase 30,000 Shares on the date of the Company's annual
meeting of shareholders in the year 2000 and on each third anniversary
thereof during the term of this Plan so long as he or she continues to serve
as an Outside Director.

(iii) Notwithstanding the provisions of subsection (ii)
hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 16 hereof shall
be conditioned upon obtaining such shareholder approval of the Plan in
accordance with Section 16 hereof.

(iv) The terms of an Option granted hereunder shall be as
follows:

(A) The Option term shall be ten (10) years from the
date of grant (subject to Section 8).

(B) The Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.

(D) Subject to Sections 8 and 10 hereof, the Option
shall become exercisable as to one-thirty-sixth (1/36) of the Shares subject
to the Option at the end of each month following its date of grant.

(v) In the event that any Option granted under the Plan
would cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool, then
the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants shall
be made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the shareholders to
increase the number of Shares that may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.

5. ELIGIBILITY. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.

- 3 -
<PAGE>

The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights that the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.

6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in Section 16 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 11 of the
Plan.

7. FORM OF CONSIDERATION. The consideration to be paid for the Shares
to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) 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 (6) months on the date of surrender, and (y) have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be exercised, (iv)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, or (v) any
combination of the foregoing methods of payment.

8. EXERCISE OF OPTION.

(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable
until shareholder approval of the Plan in accordance with Section 16 hereof
has been obtained.

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 person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of
payment allowable under Section 7 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, notwithstanding
the exercise of the Option. A share certificate for the number of Shares so
acquired shall be issued to the Optionee as soon as practicable after
exercise of the Option. No adjustment shall 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 10 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.

- 4 -
<PAGE>

(b) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. Subject to
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or Disability), the Optionee may
exercise his or her Option, but only within three (3) months following the
date of such termination, and only to the extent that the Optionee was
entitled to exercise it on the date of such termination (but in no event
later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of such
termination, and to the extent that the Optionee does not exercise such
Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.

(c) DISABILITY OF OPTIONEE. In the event Optionee's status as a
Director terminates as a result of Disability, the Optionee may exercise his
or her Option, but only within twelve (12) months following the date of such
termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termina-tion (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was
not entitled to exercise an Option on the date of termination, or if he or
she does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.

(d) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve
(12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event
later than the expiration of its ten (10)-year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of death, and to
the extent that the Optionee's estate or a person who acquired the right to
exercise such Option does not exercise such Option (to the extent otherwise
so entitled) within the time specified herein, the Option shall terminate.

9. NON-TRANSFERABILITY OF OPTIONS. Except as may otherwise be
specified by the Board or a committee of the Board, the Option 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 dis-tribution and may
be exercised, during the lifetime of the Optionee, only by the Optionee.

10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
MERGER OR ASSET SALE.

(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares that have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
that have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, and the number of Shares issuable pursuant to the automatic grant
provisions of Section 4 hereof shall be proportionately adjusted for any
increase or decrease in the number of issued Shares resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification
of the Common Stock, or any other increase or decrease in the number of
issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Except as expressly provided herein, no issuance by the
Company of

- 5 -
<PAGE>

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 subject to an Option.

(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.

(c) MERGER OR ASSET SALE. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or equivalent
options may be substituted by the successor corporation or a Parent or
Subsidiary thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee
serves as a Director or a director of the Successor Corporation. Following
such assumption or substitution, if the Optionee's status as a Director or
director of the Successor Corporation, as applicable, terminates other than
as a result of the Director's death or Disability, the Option or option shall
become fully exercisable, including as to Shares for which it would not
otherwise be exercisable. Thereafter, the Option or option shall remain
exercisable in accordance with Sections 8(b) through (d) above.

If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested
and exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the
Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and upon the expiration of such period the Option shall
terminate.

For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the
right to purchase or receive, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger
or sale of assets by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares). If such consideration received in the merger or
sale of assets is not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of the Option,
for each Share of Optioned Stock subject to the Option, to be solely common
stock of the successor corporation or its Parent equal in fair market value
to the per share consideration received by holders of Common Stock in the
merger or sale of assets.

11. AMENDMENT AND TERMINATION OF THE PLAN.

(a) AMENDMENT AND TERMINATION. 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.

- 6 -
<PAGE>

In addition, to the extent necessary and desirable to comply with any
applicable law, regulation or stock exchange rule, 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. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.

12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date determined in accordance with Section 4 hereof.

13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option 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, state securities laws, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

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 any of the aforementioned relevant provisions of law.

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.

14. 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.

15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

16. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan
is adopted. Such shareholder approval shall be obtained in the degree and
manner required under applicable state and federal law and any stock exchange
rules.

- 7 -
<PAGE>

P R O X Y

INTERNATIONAL NETWORK SERVICES
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned shareholder of International Network Services, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated _______________, 1998, and
hereby appoints John L. Drew and Kevin J. Laughlin, and each of them,
proxies, with full power of substitution, to represent the undersigned and to
vote as designated on the reverse side, all shares of Common Stock of
International Network Services that the undersigned is entitled to vote at
the Annual Meeting of Shareholders of International Network Services to
be held on October 29, 1998 at 1:00 p.m., local time, at the Company's
headquarters at 1213 Innsbruck Drive, Sunnyvale, CA 94089, or another
location, and at any adjournment or adjournments thereof.

THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
"FOR" EACH OF THE PROPOSALS ON THE REVERSE SIDE HEREOF AND "FOR" SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXIES DEEM ADVISABLE.

CONTINUED AND TO BE SIGNED ON REVERSE SIDE

SEE REVERSE
SIDE

- -------------------------------------------------------------------------------
FOLD AND DETACH HERE

<PAGE>
Please mark
votes as in
this example [X]

A VOTE FOR THE FOLLOWING PROPOSALS IS RECOMMENDED BY THE BOARD OF DIRECTORS.

<TABLE>

<S> <C> <C> <C>
FOR WITHHELD
ALL FROM ALL
1. Election of six directors. NOMINEES NOMINEES
/ / / /
Nominees: Donald K. McKinney, John L. Drew, Douglas C. Allred,
Vernon R. Anderson, David Carlick and Lawrence G. Finch.

/ / _______________________________________
For all nominees except as noted above.

2. Proposal to amend the Company's 1996 Stock Plan. FOR AGAINST ABSTAIN
/ / / / / /

3. Proposal to amend the Company's 1996 Employee Stock FOR AGAINST ABSTAIN
Purchase Plan. / / / / / /

4. Proposal to adopt the Director Option Plan. FOR AGAINST ABSTAIN
/ / / / / /

5. Proposal to change the state of incorporation FOR AGAINST ABSTAIN
of the Company from California to Delaware. / / / / / /

6. Proposal to increase the authorized number of shares of Common FOR AGAINST ABSTAIN
Stock, subject to the approval of proposal five. / / / / / /

7. Proposal to ratify PricewaterhouseCoopers LLP as FOR AGAINST ABSTAIN
independent accountants. / / / / / /

8. In their discretion, the Proxies are authorized to vote upon such other business FOR AGAINST
which may properly come before the meeting or any adjournments thereof. / / / /

</TABLE>

Please sign exactly as your name appears on your stock certificate. If the
stock is held by joint tenants or as community property, both should sign.
Executors, administrators, trustees, guardians, attorneys and corporate
officers should give their titles.

Signature _____________________________ Date _____________________________

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FOLD AND DETACH HERE