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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

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Title of each class of securities to which transaction applies:

(2)

Aggregate number of securities to which transaction applies:

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which filing fee is calculated and state how it was determined):

(4)

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(5)

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Fee paid previously with preliminary materials.

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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)

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(3)

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(4)

Date Filed:

De	ar Shareholder:

Very truly yours,

R.Douglas Armstrong, Ph.D.

President and Chief Executive Officer

Chairman, Board of Directors

Dear Shareholder:

	1.		To elect two Class I directors, each to hold office for a three-year term and until their respective successors are duly elected and qualified. Management has nominated the following persons for election at the meeting: Fabrizio Bonanni and Alan M. Wright.
	2.		To consider and vote upon a proposal to adopt the 2001 Stock Option Plan with an initial reserve of 2,100,000 shares.
	3.		To consider a proposal to amend the Articles of Incorporation to increase the number of shares of authorized common stock to an amount up to 150,000,000 shares.
	4.		To ratify the appointment of PricewaterhouseCoopers LLP as Aastrom’s independent public accountants for the fiscal year ending June 30, 2002.
	5.		To transact such other business as may properly come before the meeting.

By order of the Board of Directors,

R. DOUGLAS ARMSTRONG, Ph.D.

President and Chief Executive Officer

Chairman, Board of Directors

An	n Arbor, Michigan

Oc	tober 10, 2001

IMPORTANT: Please fill in, date, sign and promptly mail the enclosed proxy card in the accompanying postpaid envelope to assure that your shares are represented at the meeting. If you attend the meeting, you may choose to vote in person even if you have previously sent in your proxy card.

Nominees for election at the 2001 Annual Meeting of Shareholders

Directors Continuing In Office

---

*

Represents less than 1% of the outstanding shares of Aastrom’s common stock.

(1)

Except as indicated in the footnotes to this table, the persons named in the table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws, where applicable.

(2)

Unless otherwise provided, the address for each beneficial owner is 24 Frank Lloyd Wright Drive Ann Arbor, MI 48105.

(3)

Calculated on the basis of 42,052,128 shares of common stock outstanding as of August 31, 2001, except that shares of common stock underlying options exercisable within 60 days of August 31, 2001 are deemed to be outstanding for purposes of calculating ownership of securities of the holders of such options.

(4)

Includes 2,614,386 shares issuable upon exercise of warrants held by RGC International Investors, LDC purchased on February 29, 2000 that are exercisable until February 28, 2003.

(5)

Includes 442,000 shares issuable upon exercise of options held by Dr. Armstrong that are exercisable within the 60-day period following August 31, 2001. Also includes 366,173 shares held in trusts in which Dr. Armstrong is a co-trustee; Dr. Armstrong disclaims beneficial ownership of all such shares except to the extent of his pecuniary interest therein.

(6)

Includes 218,000 shares issuable upon exercise of options held by Mr. Simpson that are exercisable within the 60-day period following August 31, 2001.

(7)

Includes 69,833 shares issuable upon exercise of options held by Mr. Hampson that are exercisable within the 60-day period following August 31, 2001.

(8)

Includes 62,955 shares issuable upon exercise of options held by Mr. Husel that are exercisable within the 60-day period following August 31, 2001.

(9)

Includes 24,167 shares issuable upon exercise of options held by Ms. Campbell that are exercisable within the 60-day period following August 31, 2001. Also includes 1,842 shares of common stock held collectively

by Enterprise Management, Inc. and Enterprise Ventures, Limited Partnership, which Ms. Campbell is an executive officer or partner of. Ms. Campbell disclaims beneficial ownership of all such shares except to the extent of her pecuniary interest therein.

(10)

Includes 19,167 shares issuable upon exercise of options held by Mr. Taylor that are exercisable within the 60-day period following August 31, 2001.

(11)

Includes 19,167 shares issuable upon exercise of options held by Mr. Staubitz that are exercisable within the 60-day period following August 31, 2001.

(12)

Includes 5,000 shares issuable upon exercise of options held by Dr. Bonanni that are exercisable within the 60-day period following August 31, 2001.

(13)

Includes 5,000 shares issuable upon exercise of options held by Mr. Wright that are exercisable within the 60-day period following August 31, 2001.

(14)

Includes 865,289 shares issuable upon exercise of options that are exercisable within the 60-day period following August 31, 2001.

---

(1)

Consists of vacation pay.

(2)

Mr. Simpson has subsequently resigned as Chief Financial Officer. The Company has an interim Chief Financial Officer and is in the process of recruiting a permanent replacement.

(3)

Mr. Hampson was promoted to Vice President in June 2000.

---

(1)

Potential gains are net of exercise price, but before taxes associated with exercise. These amounts represent certain assumed rates of appreciation only, in accordance with the Securities and Exchange Commission’s rules. Actual gains, if any, on stock option exercises are dependent on the future performance of the common stock, overall market conditions and the optionholders continued employment through the vesting period. The amounts reflected in this table may not necessarily be achieved.

(2)

Each of these options was granted under Aastrom’s Amended and Restated 1992 Incentive and Non-Qualified Stock Option Plan (Option Plan) at an exercise price equal to the fair market value of the common stock on the date of grant. Stock options held by Dr. Armstrong, Mr. Simpson and Mr. Hampson are fully vested pursuant to executive Pay to Stay Severance Agreement executed with such executives in October 1999. Mr. Husel’s stock option vests ratably through December 2002, subject to continued employment with Aastrom. See “—Severance and Change of Control Arrangements.”

---

(1)

The value of “in-the-money” stock options represents the difference between the exercise price of such options and the fair market value of $1.44 per share of common stock as of June 29, 2001, the closing price of the common stock reported on the Nasdaq National Market on such date.

AU

DIT COMMITTEE

Ma

ry L. Campbell

Jos

eph A. Taylor

Ala

n M. Wright

---

(1)

Assumes that $100.00 was invested on February 4, 1997 in Aastrom’s common stock and each index, and that all dividends were reinvested. No cash dividends have been declared on Aastrom’s common stock. Shareholder returns over the indicated period should not be considered indicative of future shareholder returns.

By

Order of the Board of Directors

R.

DOUGLAS ARMSTRONG, Ph.D.

Pre

sident and Chief Executive Officer

Ch

airman, Board of Directors

Oc	tober 10, 2001

•

Serve as an independent and objective party to monitor the Company’s financial reporting process and internal control systems.

•

Review and appraise the audit efforts and independence of the Company’s auditors.

•

Provide an open avenue of communication among the outside auditors, financial and senior management, and the Board.

•

is an employee of the Company or its affiliates and has been employed by the Company or its affiliates within the past three years;

•

is a member of the immediate family of an executive officer of the Company or its affiliates who currently serves in that role or did so during the past three years;

•

has accepted more than $60,000 in compensation from the Company during the previous fiscal year (excluding compensation and the related benefits for Board service), retirement plan benefits or non-discretionary compensation;

•

has been a partner, controlling shareholder or an executive officer of any for-profit business to which the Company made, or from which it received, payments (other than those which arise solely from investments in the Company’s securities) that exceed 5% of the Company’s consolidated gross revenues for that year, or $200,000, whichever is more, in any of the past three years; and

•

is an executive of another corporation on whose Compensation Committee any of the Company’s current executives serves.

1.

Review and reassess the Charter’s adequacy as conditions dictate, but a least annually.

2.

Review the organization’s annual audited financial statements and at the Committee’s discretion, any reports or other financial information submitted to any governmental body, or the public, including any certification, report, opinion, or review rendered by the outside auditors.

3.

Review the regular Management Letter prepared by the outside auditors and management’s response.

4.

Review related party transactions for potential conflicts of interests.

5.

Review the financial statements with financial management and the outside auditors prior to the filing of the Company’s Form 10-K and prior to filing the Company’s Form 10-Qs to the extent considered necessary by the Committee and Board. These reviews should include a discussion of the outside auditor’s judgment of the quality of the Company’s accounting and any uncorrected misstatements as a result of the auditor’s quarterly review.

6.

Maintain written minutes of its meetings, which minutes will be filed with the minutes of the meetings of the Board. The Committee will also record its summaries of recommendations to the Board in written form that will be incorporated as part of the minutes of the Board meeting at which those recommendations are presented.

1.

Recommend to the Board the selection of the outside auditors, considering independence and effectiveness.

2.

Obtain from the outside auditors a formal written statement delineating all relationships between the auditor and the Company, and discuss with the auditor any disclosed relationships or services that may impact auditor objectivity and independence (consistent with Independence Standards Board Standard No. 1).

3.

Take, or recommending that the Board take, appropriate action to oversee the independence of the outside auditor.

4.

Review the performance of the outside auditors and approve any proposed discharge of the outside auditors when circumstances warrant.

5.

Periodically consult with the outside auditors out of the presence of management about internal controls and the accuracy of the Company’s financial statements.

6.

Take appropriate steps to affirm, and reaffirm if required, the outside auditor’s ultimate accountability to the Board of Directors and the Audit Committee, as representatives of the shareholders.

1.

In consultation with the outside auditors, review the integrity of the Company’s financial reporting processes, both internal and external.

2.

Consider the outside auditors’ judgments about the quality and appropriateness of the Company’s accounting principles as applied in its financial reporting.

3.

Consider and approve, if appropriate, changes to the Company’s auditing and accounting principles and practices as suggested by the outside auditors or management.

1.

Review with management and the outside auditors any significant judgments made in management’s preparation of the financial statements and the view of each as to appropriateness of such judgments.

2.

Review with management and the outside auditors any significant difficulties encountered during the course of the audit, including any restrictions on the scope of work or access to required information.

3.

Review any significant disagreement among management and the outside auditors in connection with the preparation of the financial statements.

4.

Review with the outside auditors and management the extent to which changes or improvements in financial or accounting practices, as approved by the Committee, have been implemented.

5.

Provide oversight and review the Company’s asset management policies, including an annual review of the Company’s investment policies and performance for cash and short-term investments.

1.

Ensure that management has set an appropriate corporate “tone” for quality financial reporting, sound business practices and ethical behavior.

2.

Ensure that management has the proper review system in place to ensure that the Company’s financial statements, reports and other financial information disseminated to governmental organizations and the public satisfy legal requirements.

3.

Review management’s monitoring of compliance with the Foreign Corrupt Practices Act.

4.

Review, with the Company’s counsel, legal compliance matters including corporate securities trading policies.

5.

Review, with the Company’s counsel, any legal matter that could have a significant impact on the Company’s financial statements.

6.

Perform any other activities consistent with this Charter, the Company’s Bylaws and governing law, as the Committee or the Board deems necessary or appropriate.

7.

If necessary, initiate special investigations, and if appropriate, hire special counsel or experts to assist the Committee.

Signature(s)

Date:

                            AASTROM BIOSCIENCES, INC.
                             2001 STOCK OPTION PLAN


    1.  ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
        ---------------------------------------

        1.1 Establishment. The Aastrom Biosciences, Inc. 2001 Stock Option Plan
(the "Plan") is hereby established effective as of November 14, 2001 (the
"Effective Date").

        1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its stockholders by providing an incentive to
attract and retain persons performing services for the Participating Company
Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.

        1.3 Term of Plan. The Plan shall continue in effect until the earlier of
its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, all Incentive Stock Options shall
be granted, if at all, within ten (10) years from the earlier of the date the
Plan is adopted by the Board or the date the Plan is duly approved by the
stockholders of the Company.

    2.  DEFINITIONS AND CONSTRUCTION.
        ----------------------------

        2.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:

            (a) "Board" means the Board of Directors of the Company. If one or
more Committees have been appointed by the Board to administer the Plan, "Board"
also means such Committee(s).

            (b) "Code" means the Internal Revenue Code of 1986, as amended, and
any applicable regulations promulgated thereunder.

            (c) "Committee" means the Compensation Committee or other committee
of the Board duly appointed to administer the Plan and having such powers as
shall be specified by the Board. Unless the powers of the Committee have been
specifically limited, the Committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to amend or terminate
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law.

            (d) "Company" means Aastrom Biosciences, Inc., a Michigan
corporation, or any successor corporation thereto.

            (e) "Consultant" means a person engaged to provide consulting or
advisory services (other than as an Employee or a Director) to a Participating
Company.


                                       1



            (f) "Director" means a member of the Board or of the board of
directors of any other Participating Company.

            (g) "Disability" means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code.

            (h) "Employee" means any person treated as an employee (including an
Officer or a Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual's employment or termination of employment,
as the case may be. For purposes of an individual's rights, if any, under the
Plan as of the time of the Company's determination, all such determinations by
the Company shall be final, binding and conclusive, notwithstanding that the
Company or any court of law or governmental agency subsequently makes a contrary
determination.

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

            (j) "Fair Market Value" means, as of any date, the value of a share
of Stock determined as follows:

                (i) If, on such date, the Stock is listed on a national or
regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be the closing price of a share of Stock (or the mean of the
closing bid and asked prices of a share of Stock if the Stock is so quoted
instead) as quoted on the Nasdaq National Market, The Nasdaq SmallCap Market or
such other national or regional securities exchange or market system
constituting the primary market for the Stock, as reported in The Wall Street
Journal or such other source as the Company deems reliable. If the relevant date
does not fall on a day on which the Stock has traded on such securities exchange
or market system, the date on which the Fair Market Value shall be established
shall be the last day on which the Stock was so traded prior to the relevant
date.

                (ii) If, on such date, the Stock is not listed on a national or
regional securities exchange or market system, the Fair Market Value of a share
of Stock shall be as determined by the Board in good faith without regard to any
restriction other than a restriction which, by its terms, will never lapse.

            (k) "Incentive Stock Option" means an Option intended to be (as set
forth in the Option Agreement) and which qualifies as an incentive stock option
within the meaning of Section 422(b) of the Code.


                                       2



            (l) "Insider" means an Officer, a Director of the Company or other
person whose transactions in Stock are subject to Section 16 of the Exchange
Act.

            (m) "Nonemployee Director" means a Director of the Company who is
not an employee.

            (n) "Nonemployee Director Option" means a right to purchase Stock
(subject to adjustment as provided in Section 4.2) granted to a Nonemployee
Director pursuant to the terms and conditions of Section 7. Nonemployee Director
Options shall be Nonstatutory Stock Options.

            (o) "Nonstatutory Stock Option" means an Option not intended to be
(as set forth in the Option Agreement) or which does not qualify as an Incentive
Stock Option.

            (p) "Officer" means any person designated by the Board as an officer
of the Company.

            (q) "Option" means a right to purchase Stock (subject to adjustment
as provided in Section 4.2) pursuant to the terms and conditions of the Plan. An
option may be either an Incentive Stock Option or a Nonstatutory Stock Option.

            (r) "Option Agreement" means a written agreement between the Company
and an Optionee setting forth the terms, conditions and restriction of the
Option granted to the Optionee and any shares acquired upon the exercise
thereof. An Option Agreement may consist of a form of "Notice of Grant of Stock
Option" and a form of "Stock Option Agreement" incorporated therein by
reference, or such other form or forms as the Board may approve from time to
time.

            (s) "Optionee" means a person who has been granted one or more
Options.

            (t) "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

            (u) "Participating Company" means the Company or any Parent
Corporation or Subsidiary Corporation.

            (v) "Participating Company Group" means, at any point in time, all
corporations collectively which are then Participating Companies.

            (w) "Rule 16b-3" means Rule 16b-3 under the Exchange Act, as amended
from time to time, or any successor rule or regulation.

            (x) "Section 162(m)" means Section 162(m) of the Code.

            (y) "Securities Act" means the Securities Act of 1933, as amended.


                                       3



            (z) "Service" means the Optionee's employment or service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant. The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service. Furthermore, the Optionee's Service
with the Participating Company Group shall not be deemed to have terminated if
the Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company; provided, however, that if any such leave
exceeds ninety (90) days, on the ninety-first (91st) day of such leave the
Optionee's Service shall be deemed to have terminated unless the Optionee's
right to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Optionee's Option
Agreement. The Optionee's Service shall be deemed to have terminated either upon
an actual termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.

            (aa) "Stock" means the common stock of the Company, as adjusted from
time to time in accordance with Section 4.2.

            (bb) "Subsidiary Corporation" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

            (cc) "Ten Percent Owner Optionee" means an Optionee who, at the time
an Option is granted to the Optionee, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.

        2.2  Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not intended to be exclusive, unless the context clearly
requires otherwise.

    3.  ADMINISTRATION.
        --------------

        3.1  Administration by the Board. The Plan shall be administered by the
Board. All questions of interpretation of the Plan or of any Option shall be
determined by the Board, and such determinations shall be final and binding upon
all persons having an interest in the Plan or such Option.

        3.2  Authority of Officers. Any Officer shall have the authority to act
on behalf of the Company with respect to any matter, right, obligation,
determination or election


                                       4



which is the responsibility of or which is allocated to the Company herein,
provided the Officer has apparent authority with respect to such matter, right,
obligation, determination or election.

        3.3 Powers of the Board. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its discretion:

            (a) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;

            (b) to designate Options as Incentive Stock Options or Nonstatutory
Stock Options;

            (c) to determine the Fair Market Value of shares of Stock or other
property;

            (d) to determine the terms, conditions and restrictions applicable
to each Option (which need not be identical) and any shares acquired upon the
exercise thereof, including, without limitation, (i) the exercise price of the
Option, (ii) the method of payment for shares purchased upon the exercise of the
Option, (iii) the method for satisfaction of any tax withholding obligation
arising in connection with the Option or such shares, including by the
withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of Service with the
Participating Company Group on any of the foregoing, and (vii) all other terms,
conditions and restrictions applicable to the Option or such shares not
inconsistent with the terms of the Plan;

            (e) to approve one or more forms of Option Agreement;

            (f) to amend, modify, extend, cancel or renew any Option or to waive
any restrictions or conditions applicable to any Option or any shares acquired
upon the exercise thereof;

            (g) to accelerate, continue, extend or defer the exercisability of
any Option or the vesting of any shares acquired upon the exercise thereof,
including with respect to the period following an Optionee's termination of
Service with the Participating Company Group;

            (h) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt supplements to, or alternative versions of,
the Plan, including, without limitation, as the Board deems necessary or
desirable to comply with the laws of, or to accommodate the tax policy or custom
of, foreign jurisdictions whose citizens may be granted Options; and


                                       5



            (i) to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.

        3.4 Administration with Respect to Insiders. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.

        3.5 Committee Complying with Section 162(m). If the Company is a
"publicly held corporation" within the meaning of Section 162(m), the Board may
establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Option which might reasonably be anticipated
to result in the payment of employee remuneration that would otherwise exceed
the limit on employee remuneration deductible for income tax purposes pursuant
to Section 162(m).

        3.6 Indemnification. In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board or the
Company is delegated shall be indemnified by the Company against all reasonable
expenses, including attorneys' fees, actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan, or
any right granted hereunder, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to matters as to which it
shall be adjudged in such action, suit or proceeding that such person is liable
for gross negligence, bad faith or intentional misconduct in duties; provided,
however, that within sixty (60) days after the institution of such action, suit
or proceeding, such person shall offer to the Company, in writing, the
opportunity at its own expense to handle and defend the same.

    4.  SHARES SUBJECT TO PLAN.
        ----------------------

        4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided
in Section 4.2, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be two million one hundred thousand (2,100,000) and
shall consist of authorized but unissued or reacquired shares of Stock or any
combination thereof. If an outstanding Option for any reason expires or is
terminated or canceled or if shares of Stock are acquired upon the exercise of
an Option subject to a Company repurchase option and are repurchased by the
Company at the Optionee's exercise or purchase price, the shares of Stock
allocable to the unexercised portion of such Option or such repurchased shares
of Stock shall again be available for issuance under the Plan. However, except
as adjusted pursuant to Section 4.2, in no event shall more than two million one
hundred thousand (2,100,000) shares of


                                       6



Stock be available for issuance pursuant to the exercise of Incentive Stock
Options (the "ISO Share Issuance Limit").

        4.2 Adjustments for Changes in Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options, in the ISO Share Issuance Limit set
forth in Section 4.1, in the Section 162(m) Grant Limit set forth in Section
5.4, in the automatic Nonemployee Director Option grant provisions set forth in
Section 7.1 and in the exercise price per share of any outstanding Options. If a
majority of the shares which are of the same class as the shares that are
subject to outstanding Options are exchanged for, converted into, or otherwise
become (whether or not pursuant to an Ownership Change Event, as defined in
Section 9.1) shares of another corporation (the "New Shares"), the Board may
unilaterally amend the outstanding Options to provide that such Options are
exercisable for New Shares. In the event of any such amendment, the number of
shares subject to, and the exercise price per share of, the outstanding Options
shall be adjusted in a fair and equitable manner as determined by the Board, in
its discretion. Notwithstanding the foregoing, any fractional share resulting
from an adjustment pursuant to this Section 4.2 shall be rounded down to the
nearest whole number, and in no event may the exercise price of any Option be
decreased to an amount less than the par value, if any, of the stock subject to
the Option. The adjustments determined by the Board pursuant to this Section 4.2
shall be final, binding and conclusive.

    5.  ELIGIBILITY AND OPTION LIMITATIONS.
        ----------------------------------

        5.1 Persons Eligible for Options. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees," "Consultants" and "Directors" shall include prospective Employees,
prospective Consultants and prospective Directors to whom Options are granted in
connection with written offers of an employment or other service relationship
with the Participating Company Group. Eligible persons may be granted more than
one (1) Option. However, eligibility in accordance with this Section shall not
entitle any person to be granted an Option, or, having been granted an Option,
to be granted an additional Option.

        5.2 Option Grant Restrictions. Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences Service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1. Nonemployee Director Options shall be granted only to a person who
at the time of grant is a Nonemployee Director.

        5.3 Fair Market Value Limitation. To the extent that options designated
as Incentive Stock Options (granted under all stock option plans of the
Participating Company Group, including the Plan) become exercisable by an
Optionee for the first time during any calendar year for stock having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portions
of such options which exceed such amount shall be treated as


                                       7



Nonstatutory Stock Options. For purposes of this Section 5.3, options designated
as Incentive Stock Options shall be taken into account in the order in which
they were granted, and the Fair Market Value of stock shall be determined as of
the time the option with respect to such stock is granted. If the Code is
amended to provide for a lower limitation from that set forth in this Section
5.3, such different limitation shall be deemed incorporated herein effective as
of the date and with respect to such Options as required or permitted by such
amendment to the Code. If an Option is treated as an Incentive Stock Option in
part and as a Nonstatutory Stock Option in part by reason of the limitation set
forth in this Section 5.3, the Optionee may designate which portion of such
Option the Optionee is exercising. In the absence of such designation, the
Optionee shall be deemed to have exercised the Incentive Stock Option portion of
the Option first. Separate certificates representing each such portion shall be
issued upon the exercise of the Option.

        5.4 Section 162(m) Grant Limit. Subject to adjustment as provided in
Section 4.2, no Employee or prospective Employee shall be granted one or more
Options within any fiscal year of the Company which in the aggregate are for the
purchase of more than five hundred thousand (500,000) shares (the "Section
162(m) Grant Limit"). An Option which is canceled in the same fiscal year of the
Company in which it was granted shall continue to be counted against the Section
162(m) Grant Limit for such period.

    6.  TERMS AND CONDITIONS OF OPTIONS.
        -------------------------------

        Options shall be evidenced by Option Agreements specifying the number of
shares of Stock covered thereby, in such form as the Board shall from time to
time establish. No Option or purported Option shall be a valid and binding
obligation of the Company unless evidenced by a fully executed Option Agreement.
Option Agreements may incorporate all or any of the terms of the Plan by
reference and , except as otherwise provided in Section 7 with respect to
Nonemployee Director Options, shall comply with and be subject to the following
terms and conditions:

        6.1 Exercise Price. The exercise price for each Option shall be
established in the discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.

        6.2 Exercisability and Term of Options. Options shall be exercisable at
such time or times, or upon such event or events, and subject to such terms,
conditions, performance criteria and restrictions as shall be determined by the
Board and set forth in the


                                       8



Option Agreement evidencing such Option; provided, however, that (a) no Option
shall be exercisable after the expiration of ten (10) years after the effective
date of grant of such Option, (b) no Incentive Stock Option granted to a Ten
Percent Owner Optionee shall be exercisable after the expiration of five (5)
years after the effective date of grant of such Option, and (c) no Option
granted to a prospective Employee, prospective Consultant or prospective
Director may become exercisable prior to the date on which such person commences
Service with a Participating Company. Subject to the foregoing, unless otherwise
specified by the Board in the grant of an Option, any Option granted hereunder
shall terminate ten (10) years after the effective date of grant of the Option,
unless earlier terminated in accordance with its provisions. In addition, unless
otherwise specified by the Board, shares subject to any Option granted hereunder
shall vest, subject to the Optionee's continued Service, as follows: 1/4 of the
shares subject to the Option will vest one (1) year after the vesting
commencement date, and thereafter, 1/16 of the shares subject to the Option will
vest for each full three (3) months of Service.

        6.3 Payment of Exercise Price.

            (a) Forms of Consideration Authorized. Except as otherwise provided
below, payment of the exercise price for the number of shares of Stock being
purchased pursuant to any Option shall be made (i) in cash, by check or cash
equivalent, (ii) by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Optionee having a Fair Market Value not less than
the exercise price, (iii) by delivery of a properly executed notice together
with irrevocable instructions to a broker providing for the assignment to the
Company of the proceeds of a sale or loan with respect to some or all of the
shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "Cashless Exercise"), (iv) by such other consideration as may be
approved by the Board from time to time to the extent permitted by applicable
law, or (v) by any combination thereof. The Board may at any time or from time
to time, by approval of or by amendment to the standard forms of Option
Agreement described in Section 8, or by other means, grant Options which do not
permit all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of consideration.

            (b) Limitations on Forms of Consideration.

                (i) Tender of Stock. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company, or attestation to the ownership,
of shares of Stock to the extent such tender or attestation would constitute a
violation of the provisions of any law, regulation or agreement restricting the
redemption of the Company's stock. Unless otherwise provided by the Board, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months (and not used for another Option exercise
by attestation during such period) or were not acquired, directly or indirectly,
from the Company.

                (ii) Cashless Exercise. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or


                                       9



terminate any program or procedures for the exercise of Options by means of a
Cashless Exercise.

        6.4 Tax Withholding. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its discretion, the Company shall have the right to require the
Optionee, through payroll withholding, cash payment or otherwise, including by
means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Fair
Market Value of any shares of Stock withheld or tendered to satisfy any such tax
withholding obligations shall not exceed the amount determined by the applicable
statutory withholding rates. The Company shall have no obligation to deliver
shares of Stock or to release shares of Stock from an escrow established
pursuant to the Option Agreement until the Participating Company Group's tax
withholding obligations have been satisfied by the Optionee.

        6.5 Effect of Termination of Service.

            (a) Option Exercisability. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the Board
in the grant of an Option and set forth in the Option Agreement, an Option shall
be exercisable after an Optionee's termination of Service only during the
applicable time period determined in accordance with this Section 6.5 and
thereafter shall terminate:

                (i) Disability. If the Optionee's Service terminates because of
the Disability of the Optionee, the Option, to the extent unexercised and
exercisable on the date on which the Optionee's Service terminated, may be
exercised by the Optionee (or the Optionee's guardian or legal representative)
at any time prior to the expiration of twelve (12) months (or such longer period
of time as determined by the Board, in its discretion) after the date on which
the Optionee's Service terminated, but in any event no later than the date of
expiration of the Option's term as set forth in the Option Agreement evidencing
such Option (the "Option Expiration Date").

                (ii) Death. If the Optionee's Service terminates because of the
death of the Optionee, the Option, to the extent unexercised and exercisable on
the date on which the Optionee's Service terminated, may be exercised by the
Optionee's legal representative or other person who acquired the right to
exercise the Option by reason of the Optionee's death at any time prior to the
expiration of twelve (12) months (or such longer period of time as determined by
the Board, in its discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.

                (iii) Other Termination of Service. If the Optionee's Service
terminates for any reason, except Disability or death, the Option, to the extent
unexercised and


                                       10



exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee at any time prior to the expiration
of three (3) months (or such longer period of time as determined by the Board,
in its discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.

            (b) Extension if Exercise Prevented by Law. Notwithstanding the
foregoing, if the exercise of an Option within the applicable time periods set
forth in Section 6.5(a) is prevented by the provisions of Section 12 below, the
Option shall remain exercisable until three (3) months (or such longer period of
time as determined by the Board, in its discretion) after the date the Optionee
is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

            (c) Extension if Optionee Subject to Section 16(b). Notwithstanding
the foregoing, if a sale within the applicable time periods set forth in Section
6.5(a) of shares acquired upon the exercise of the Option would subject the
Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.

    7.  TERMS AND CONDITIONS OF NONEMPLOYEE DIRECTOR OPTIONS.
        ----------------------------------------------------

        Nonemployee Director Options shall be evidenced by Option Agreements
specifying the number of shares of Stock covered thereby, in such form as the
Board shall from time to time establish. Such Option Agreements may incorporate
all or any of the terms of the Plan by reference and shall comply with and be
subject to the following terms and conditions:

        7.1 Automatic Grant. Subject to execution by a Nonemployee Director of
an appropriate Option Agreement, Nonemployee Director Options shall be granted
automatically and without further action of the Board, as follows:

            (a) Initial Option. Each person who first becomes a Nonemployee
Director after the Effective Date shall be granted on the date he or she first
becomes a Nonemployee Director a Nonemployee Director Option to purchase ten
thousand (10,000) shares of Stock (an "Initial Option"). Notwithstanding
anything herein to the contrary, an Initial Option shall not be granted to a
Director who previously did not qualify as a Nonemployee Director but
subsequently becomes a Nonemployee Director as a result of the termination of
his or her status as an Employee.

            (b) Annual Option. Each Nonemployee Director (including any Director
who previously did not qualify as a Nonemployee Director but who subsequently
becomes a Nonemployee Director) shall be granted on the date immediately
following each annual meeting of the stockholders of the Company which occurs on
or after the Effective Date (an "Annual Meeting") an Option to purchase ten
thousand (10,000) shares of Stock (an "Annual Option"). Notwithstanding the
foregoing, a Nonemployee Director who received an Initial Option on, or within a
period of six (6) months prior to, the date of an Annual Meeting


                                       11



shall not be granted an Annual Option pursuant to this Section with respect to
the same Annual Meeting.

            (c) Right to Decline Nonemployee Director Option. Notwithstanding
the foregoing, any person may elect not to receive a Nonemployee Director Option
by delivering written notice of such election to the Board no later than the day
prior to the date such Nonemployee Director Option would otherwise be granted. A
person so declining a Nonemployee Director Option shall receive no payment or
other consideration in lieu of such declined Nonemployee Director Option. A
person who has declined a Nonemployee Director Option may revoke such election
by delivering written notice of such revocation to the Board no later than the
day prior to the date such Nonemployee Director Option would be granted pursuant
to Section 7.1(a) or (b), as the case may be.

        7.2 Exercise Price. The exercise price per share of Stock subject to a
Nonemployee Director Option shall be the Fair Market Value of a share of Stock
on the date of grant of the Nonemployee Director Option.

        7.3 Exercisability and Term of Nonemployee Director Options.

            (a) Exercisability. Except as otherwise provided in the Plan or in
the Option Agreement evidencing such Option, a Nonemployee Director Option shall
vest and become exercisable in twelve (12) substantially equal monthly
installments following the date of grant, provided that the Optionee's Service
has not terminated prior to the relevant date. In addition, any unexercisable or
unvested portion of a Nonemployee Director Option will become vested and
exercisable in full as of the date ten (10) days prior to the date of a Change
in Control which occurs prior to the termination of the Optionee's Service. Any
vesting or exercise of the Option that was permitted solely by reason of the
preceding sentence shall be conditioned upon the consummation of the Change in
Control.

            (b) Term. Each Nonemployee Director Option shall terminate and cease
to be exercisable on the date ten (10) years after the date of grant of such
Nonemployee Director Option, unless earlier terminated pursuant to the terms of
the Plan or the Option Agreement. In the event of the Optionee's termination of
Service, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's legal representative, guardian or other person who acquired the
right to exercise the Option by reason of the Optionee's death) at any time
prior to the expiration of six (6) months after the date on which the Optionee's
Service terminated (twelve (12) months if such termination was due to death or
Disability), but in any event no later than the Option Expiration Date. In
addition, the post-termination exercise periods described in the preceding
sentence shall be extended in accordance with Section 6.5(b) and (c), if
applicable.


                                       12



    8.  STANDARD FORMS OF OPTION AGREEMENT.
        ----------------------------------

        8.1 Option Agreement. Unless otherwise provided by the Board at the time
the Option is granted, an Option shall comply with and be subject to the terms
and conditions set forth in the form of Option Agreement approved by the Board
concurrently with its adoption of the Plan and as amended from time to time.

        8.2 Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of any standard form of Option Agreement
described in this Section either in connection with the grant or amendment of an
individual Option or in connection with the authorization of a new standard form
or forms; provided, however, that the terms and conditions of any such new,
revised or amended standard form or forms of Option Agreement are not
inconsistent with the terms of the Plan.

    9.  CHANGE IN CONTROL.
        -----------------

        9.1 Definitions.

            (a) An "Ownership Change Event" shall be deemed to have occurred if
any of the following occurs with respect to the Company: (i) the direct or
indirect sale or exchange in a single or series of related transactions by the
Stockholders of the Company of more than fifty percent (50%) of the voting stock
of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets
of the Company; or (iv) a liquidation or dissolution of the Company.

            (b) A "Change in Control" shall mean an Ownership Change Event or a
series of related Ownership Change Events (collectively, a "Transaction")
wherein the Stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting securities of the Company or, in the case of a Transaction
described in Section 9.1(a)(iii), the corporation or other business entity to
which the assets of the Company were transferred (the "Transferee"), as the case
may be. For purposes of the preceding sentence, indirect beneficial ownership
shall include, without limitation, an interest resulting from ownership of the
voting securities of one or more corporations or other business entities which
own the Company or the Transferee, as the case may be, either directly or
through one or more subsidiary corporations or other business entities. The
Board shall have the right to determine whether multiple sales or exchanges of
the voting securities of the Company or multiple Ownership Change Events are
related, and its determination shall be final, binding and conclusive.

        9.2 Effect of Change in Control on Options. In the event of a Change in
Control, the surviving, continuing, successor, or purchasing corporation or
other business entity or parent thereof, as the case may be (the "Acquiring
Corporation"), may, without the consent of the Optionee, either assume the
Company's rights and obligations under outstanding Options


                                       13



or substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock. Except as otherwise provided in an Option
Agreement, in the event the Acquiring Corporation elects not to assume the
Company's rights or obligations under the Option or substitute for the Option in
connection with the Change in Control, and provided that the Optionee's Service
has not terminated prior to such date, any unexercised portion of the Option
shall be immediately exercisable and vested in full as of ten (10) days prior to
the date of the Change in Control. Any vesting or exercise of the Option that
was permissible solely by reason of this Section 9.2 shall be conditioned upon
the consummation of the Change in Control. Any Options which are neither assumed
or substituted for by the Acquiring Corporation in connection with the Change in
Control nor exercised as of the date of the Change in Control shall terminate
and cease to be outstanding effective as of the date of the Change in Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Change in Control and any consideration received pursuant to the Change
in Control with respect to such shares shall continue to be subject to all
applicable provisions of the Option Agreement evidencing such Option except as
otherwise provided in such Option Agreement. Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the outstanding
Options immediately prior to an Ownership Change Event described in Section
9.1(a)(i) constituting a Change in Control is the surviving or continuing
corporation and immediately after such Ownership Change Event less than fifty
percent (50%) of the total combined voting power of its voting stock is held by
another corporation or by other corporations that are members of an affiliated
group within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the outstanding Options shall not
terminate unless the Board otherwise provides in its discretion.

    10. PROVISION OF INFORMATION.
        ------------------------

        Each Optionee shall be given access to information concerning the
company equivalent to that information generally made available to the Company's
common stockholders.

    11. TRANSFERABILITY OF OPTIONS.
        --------------------------

        During the lifetime of the Optionee, an Option shall be exercisable only
by the Optionee or the Optionee's guardian or legal representative. No Option
shall be assignable or transferable by the Optionee, except by will or by the
laws of the descent and distribution. Notwithstanding the foregoing, to the
extent permitted by the Board, in its discretion, and set forth in the Option
Agreement evidencing such Option, a Nonstatutory Stock Option shall be
assignable or transferable subject to the applicable limitations, if any,
described in the General Instructions to Form S-8 Registration Statement under
the Securities Act.

    12. COMPLIANCE WITH SECURITIES LAW.
        ------------------------------

        The grant of Options and the issuance of shares of Stock upon exercise
of Options shall be subject to compliance with all applicable requirements of
federal, state and foreign law with respect to such securities. Options may not
be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations or the requirements of any stock exchange or market system


                                       14



upon which the Stock may then be listed. In addition, no Option may be exercised
unless (a) a registration statement under the Securities Act shall at the time
of exercise of the Option be in effect with respect to the shares issuable upon
exercise of the Option or (b) in the opinion of legal counsel to the Company,
the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the
Securities Act. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company's legal 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.
As a condition to the exercise of any Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.

    13. TERMINATION OR AMENDMENT OF PLAN.
        --------------------------------

        The Board may terminate or amend the Plan at any time. However, subject
to changes in applicable law, regulations or rules that would permit otherwise,
without the approval of the Company's stockholders, there shall be (a) no
increase in the maximum aggregate number of shares of Stock that may be issued
under the Plan (except by operation of the provisions of Section 4.2), (b) no
change in the class of persons eligible to receive Incentive Stock Options, and
(c) no other amendment of the Plan that would require approval of the Company's
Stockholders under any applicable law, regulation or rule. No termination or
amendment of the Plan shall affect any then outstanding Option unless expressly
provided by the Board. In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Option without the consent of the
Optionee, unless such termination or amendment is required to enable an Option
designated as an Incentive Stock Option to qualify as an Incentive Stock Option
or is necessary to comply with any applicable law, regulation or rule.


                                       15



                                  PLAN HISTORY

September 12, 2001        Board adopts Plan, with an initial reserve of
                          2,100,000 shares.

November 14, 2001         Stockholders approve Plan, with an initial reserve of
                          2,100,000 shares.