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                                                                  EXHIBIT 10.4

                            ELGAR HOLDINGS, INC.
                          1998 Stock Option Plan
                           Amended and Restated
                                  as of 
                              March 24, 1999


1.  PURPOSE.  This Stock Option Plan (the "Plan") is intended as an incentive 
to encourage stock ownership by officers and directors and executive and 
professional employees of Elgar Holdings, Inc. (the "Company") and its Parent 
and Subsidiary corporations so that they may acquire or increase their 
equity interest in the success of the Company and its Parents and 
Subsidiaries, and to encourage them to remain in the service of the Company 
or of its Parents or Subsidiaries. Each option granted under this Plan will 
be designated as either an "Incentive Stock Option" or a "Nonqualified Stock 
Option." It is intended that each option designated as an Incentive Stock 
Option granted under this Plan will qualify as an incentive stock option 
within the meaning of Section 422(b) of the Code.

2.  DEFINITIONS

    2.1   "Board of Directors" means the board of directors of the Company.

    2.2   "Change in Control" shall mean the happening of any of the following:

    2.2.1  any person who is not a stockholder of the Company or of any 
Parent on the date of adoption of this Plan (or group of such persons acting 
in concert) acquires, during any period of twelve consecutive calendar 
months, stock of the Company or of a Parent representing a majority of the 
voting power of all stock of the Company or any Parent having the right to 
vote for the election of directors;

   2.2.2   the stockholders of the Company approve a merger or consolidation 
of the Company with any other corporation, other than (i) 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) more than eighty percent (80%) of the combined voting power 
of the voting securities of the Company or such surviving entity outstanding 
immediately after such merger or consolidation or (ii) a merger or 
consolidation effected to implement a Recapitalization of the Company;

    2.2.3  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 all or substantially all of the Company's assets or any 
transaction having a similar effect; or 

    2.2.4  if the Company enters into an agreement with an unrelated party 
for the sale of all or substantially all of the assets or outstanding stock 
of a Subsidiary (or a transaction having a similar effect), or any other 
event occurs by reason of which a Subsidiary ceases to be a Subsidiary of

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the Company, a Change in Control shall be deemed to have occurred with 
respect to those Employees who are then employed by such Subsidiary.

    2.3    "Change in Control Date" shall mean the earliest date on which one 
of the events described in the definition of "Change in Control" occurs, as 
determined by the Board of Directors, in its sole discretion, provided that, 
if Section 2.2.4 of the definition of "Change of Control" applies, the Change 
in Control Date shall be deemed to be the date of the agreement, provided 
that the transaction does close.

    2.4    "Change in Control Price" shall mean the highest fair market 
value, or the highest price paid or offered in  any bona fide transaction 
related to a Change in Control of the Company, at any time during the sixty 
(60) days preceding the Change in Control Date.

    2.5    "Code" means the Internal Revenue Code of 1986, as amended.

    2.6    "Company" means Elgar Holdings, Inc., a Delaware corporation.

    2.7    "Employee" means any bona fide full or part time common law 
employee of the Company or of any Parent or Subsidiary of the Company.

    2.8    "Incentive Stock Option" means an Option granted pursuant to this 
Plan intended to qualify and designated as an incentive stock option within 
the meaning of Section 422 of the Code.

    2.9    "Nonqualified Stock Option" means any Option granted pursuant to 
this Plan other than an Incentive Stock Option.

    2.10   "Option" or "Stock Option"  means any stock option granted pursuant 
to this Plan.

    2.11   "Optionee" means any individual to whom an Option is granted 
pursuant to this Plan.

    2.12   "Parent" means, at the time of granting any Option, any 
corporation (other than the Company) in an unbroken chain of corporations 
ending with the Company if each of the corporations other than the Company 
owns stock possessing fifty percent (50%) or more of the total combined 
voting power of all classes of stock in one of the other corporations in such 
chain.

    2.13   "Plan" means the Elgar Holdings, Inc. 1998 Stock Option Plan.

    2.14   "Recapitalization" means any reorganization, merger or other 
subdivision, consolidation, recapitalization, reclassification, stock split, 
combination of shares, issuance of warrants, stock dividend or similar event 
with respect to or affecting the common stock of the Company, par value one 
cent ($.01) per share.

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    2.15   "Stock Option Committee" means the committee appointed to 
administer the Plan pursuant to Article 7 herein, if such committee is 
appointed.

    2.16   "Subsidiary" means, at the time of granting any Option, any 
corporation (other than the Company) in an unbroken chain of corporations 
beginning with the Company if each of the corporations other than the last 
corporation in the unbroken chain owns stock possessing fifty percent (50%) 
or more of the total combined voting power of all classes of stock in one of 
the other corporations in such chain.

    2.17   "Ten Percent Shareholder" means any person who owns (or is 
considered by reason of Section 425(d) of the Code to own) stock possessing 
more than ten percent (10%) of the total combined voting power of all classes 
of stock of the Company or of any Parent or Subsidiary of the Company.

3.  ELIGIBILITY.  The persons who shall be eligible to receive Options shall 
be such officers, directors and executive and professional employees of the 
Company or its Parent or Subsidiary corporations as the Board of Directors 
shall select from time to time. An Optionee may hold more than one Option, 
but only on the terms and subject to the restrictions hereafter set forth.

4.  STOCK.  The stock subject to the Options shall be shares of the Company's 
authorized but unissued or reacquired common stock, par value one cent ($.01) 
per share, hereafter sometimes called Stock. The aggregate number of shares 
which may be issued under Options shall not exceed four hundred eighty nine 
thousand seven hundred and sixty three (489,763) shares of Stock. The 
limitation established by the preceding sentence shall be subject to 
adjustment as provided in Section 5.12 of the Plan.  If any outstanding 
Option for any reason expires or is terminated, the shares of Stock allocable 
to the unexercised portion of such Option may again be subjected to an Option 
under the Plan.

5.  TERMS AND CONDITIONS

    5.1  Option Agreement.  Stock Options granted pursuant to the Plan shall 
be authorized by the Board of Directors and shall be evidenced by agreements 
in such form as the Board of Directors shall from time to time approve, which 
agreements shall comply with and be subject to the terms and conditions set 
forth in this Article 5. The agreements shall not impose upon the Company or 
its Parents or Subsidiaries any obligation to retain the Optionee in their 
employ for any period.

    5.2  Number of Shares.  Each Option shall state the number of shares of 
Stock to which it pertains.

    5.3  Option Price.  Each Option shall state the option price, which in 
the case of an Incentive Stock Option shall be not less than (i) one hundred 
percent (100%) of the fair market value of the shares of Stock on the date of 
the granting of the Option if the Optionee is not a Ten Percent Shareholder, 
or (ii) one hundred ten percent (110%) of the fair market value of the shares 
of Stock on the date of the granting of the Option if the Optionee is a Ten 
Percent Shareholder. The fair market value of the shares of Stock shall be 
determined pursuant to Section 7.2.

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    5.4  Medium and Time of Payment.  The option price shall be payable upon 
the exercise of the Option and may be paid in cash or by good check. At the 
sole option of the Company, if approved by the Board of Directors, a portion 
of the purchase price may be paid by delivery of shares of Stock previously 
owned by the Optionee, duly endorsed for transfer to the Company, with a fair 
market value (as determined by the Board of Directors) on the date of 
delivery equal to the option price, or by delivery of a recourse promissory 
note bearing interest at such rate, on such other terms and in form and with 
security satisfactory to the Company, or any combination of the foregoing 
approved by the Board of Directors. Exercise of an Option shall not be 
effective until the Company has received written notice of exercise, 
specifying the number of whole and fractional shares of Stock to be 
purchased, accompanied by payment in full of the aggregate option price of 
the number of shares purchased.

    5.5  Term of Options.  Each Option, by its terms, shall not be 
exercisable after the expiration of ten years from the date the Option is 
granted, provided, however, that any Incentive Stock Option granted to a Ten 
Percent Shareholder, by its terms, shall not be exercisable after the 
expiration of five years from the date the Option is granted. Any Option may 
provide that it will expire within a shorter period than the maximum 
permitted hereby.

    5.6  Installments.  Each Option shall be exercisable on such dates and in 
such amounts (subject to the other provisions hereof) as shall be determined 
by the Board of Directors. It is not required that each Option have the same 
installment provisions. In its sole discretion, the Board of Directors may 
accelerate the exercise date of part or all of any Option.

    5.7  Transferability.  Each Option, by its terms, shall not be 
transferable by the individual to whom granted otherwise than by will or the 
laws of descent and distribution, and shall be exercisable, during the 
Optionee's lifetime, only by the Optionee.

    5.8  Limits on Exercise.  Each Option shall be subject to the requirement 
that, if at any time the Board of Directors, in its discretion, shall 
determine that the listing, registration, or qualification of the shares 
subject to such Option upon any securities exchange or under any state or 
federal law, or the consent or approval of any government regulatory body, is 
necessary or desirable as a condition of, or in connection with, the granting 
of such Option, or the issue or purchase of shares thereunder, such Option 
may not be exercised in whole or in part unless such listing, registration, 
qualification, consent or approval shall have been effected or obtained free 
of any conditions not acceptable to the Board of Directors.

    5.9  Limit on Options.  An Option shall not be an Incentive Stock Option 
to the extent that the aggregate fair market value of stock with respect to 
which such Option is exercisable for the first time by any individual during 
any calendar year (taking into account all Incentive Stock Options 
simultaneously or previously granted under all stock option plans of the 
Company and its Parents and Subsidiaries) exceeds One Hundred Thousand 
Dollars ($100,000).

    5.10  Termination of Employment.  Each Option by its terms shall not be 
exercisable after thirty (30) days after the termination of employment of 
the individual to whom the Option was granted, unless such termination was a 
result of the death or disability of the employee, and

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may provide that it shall not be exercisable after the date of termination of 
employment of the individual to whom the Option was granted.

    5.11  Expiration of Plan.  No Option shall be granted under this Plan more 
than ten years from the date on which this Plan was adopted or approved by 
the stockholders of the Company, whichever is earlier. No Option granted 
under this Plan shall be valid unless the Plan is approved by the 
stockholders of the Company within twelve (12) months before or after its 
adoption by the Board of Directors.

    5.12  Recapitalization.  Upon any Recapitalization, the Board of Directors 
shall make an appropriate and equitable adjustment in the number and kind of 
securities with respect to which rights may be granted under this Plan and 
the price at which such securities may be purchased, and an appropriate and 
equitable adjustment in the number and kind of securities that may be 
purchased under each outstanding Option and the price at which shares may be 
purchased under each such Option.

    The grant of an Option pursuant to the Plan shall not affect in any way 
the right or power of the Company to make or authorize any adjustments, 
recapitalizations, reorganizations, or other changes in the Company's capital 
structure or business, any merger or consolidation, any issuance of bonds, 
debentures, preferred shares or common shares, the dissolution or liquidation 
of the Company, any sale or transfer of all or any part of the Company's 
assets or business, or any other act, whether or not similar to the events 
described above.

    5.13  Rights as a Stockholder.  An Optionee or a transferee of an Option 
shall have no rights as a stockholder with respect to any shares covered by 
the Option until the date of the issuance of a stock certificate for such 
shares. No adjustment shall be made for dividends (ordinary or 
extraordinary, whether in cash, securities or other property) or 
distributions or other rights for which the record date is prior to the date 
such stock certificate is issued, except as provided in Section 5.12 hereof.

    5.14  Modification, Extension and Renewal of Options.  Subject to the 
terms and conditions and within the limitations of the Plan, the Board of 
Directors may modify, extend or renew outstanding Options granted under the 
Plan, or accept the surrender of outstanding Options (to the extent not 
theretofore exercised) and authorize the granting of new Options in 
substitution therefor (to the extent not theretofore exercised).
Notwithstanding the foregoing, no modification of an Option shall, without 
the consent of the Optionee, alter or impair any rights or obligations under 
any Option theretofore granted under the Plan.

    5.15  Investment Purpose.  Each Option under the Plan shall be granted on 
the condition that the purchases of stock thereunder shall be for investment 
purposes, and not with a view to resale or distribution unless the stock 
subject to such Option is registered under the Securities Act of 1933, as 
amended, and any applicable state securities laws, or a resale of such stock 
without such registration would otherwise be permissible. Each person 
exercising an Option must represent that such condition is fulfilled, unless 
in the opinion of counsel for the Company such condition is not required 
under the Securities Act of 1933 or any other applicable law, regulation, or 
rule of any governmental agency.

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    5.16  Withholding Taxes.  Whenever under the Plan shares are to be issued 
or cash is to be paid in satisfaction of Options, the Company shall have the 
right to require the recipient to remit to the Company an amount sufficient 
to satisfy federal, state and local withholding tax requirements prior to the 
delivery of any certificate or certificates for such shares or payment of 
such cash.

    5.17  Termination of Options.  Each Option, by its terms, shall reserve to 
the Company the right to terminate the Option, in connection with a Change in 
Control for a payment in cash equal to the difference between the exercise 
price for the shares of Stock subject to the Option and the Change in Control 
Price of such Stock.

    5.18  Other Provisions.  The Option agreements authorized under the Plan 
shall contain such other provisions, including, without limitation, such 
rights of redemption, purchase and first refusal, and such other restrictions 
upon the exercise of Options or the transfer of the Stock issued upon 
exercise, as the Board of Directors of the Company shall deem advisable. Any 
Incentive Stock Option agreement shall contain such limitations and 
restrictions upon the exercise of the Option as shall be necessary in order 
that such Option will be an "Incentive Stock Option" as defined in Section 
422 of the Code.

6.  EXERCISE OF OPTIONS

    6.1  Stock Transfer Books.  Notwithstanding any other provision of this 
Plan or of any Option, no stock shall be issued by the Company while its 
stock transfer books are closed.

    6.2  Securities Laws.  Notwithstanding any other provision of this Plan 
or of any Option, no Option shall be exercisable, and no stock shall be 
issued upon the exercise of any Option, if such exercise or such issuance of 
stock would result in any violation of law or the imposition on the Company 
of a requirement that it commence filing periodic reports under the 
Securities Exchange Act of 1934 or any similar provision of law.

7.  ADMINISTRATION

    7.1  Administration by Board of Directors .  The Plan shall be 
administered by the Board of Directors. The interpretation and construction 
by the Board of Directors of any provisions of the Plan or of any Option 
granted under it shall be final. The Board of Directors shall have the 
authority to appoint a Stock Option Committee to assume the duties and 
responsibilities of administering the Plan. The Stock Option Committee, if 
such be established by the Board of Directors, shall be composed of no less 
than three (3) persons (who shall be members of the Board of Directors), each 
of whom shall be a "disinterested person" as defined herein, and such Stock 
Option Committee shall have the same power, authority and rights in the 
administration of the Plan as the Board of Directors. No director shall be 
liable for any action or determination made in good faith with respect to 
the Plan or any Option granted under it.

    The Board of Directors shall determine from time to time the persons who 
shall receive Options hereunder; provided, however, Options may be granted 
hereunder only to persons who, at the

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time of the grant thereof, are officers, directors or key employees of the 
Company and its Parents and Subsidiaries, except as otherwise provided in 
this Plan; provided, further, that any decision to award Options hereunder to 
any person or the determination of the maximum number of shares of Stock (as 
hereinafter defined) which may be subject to Options granted to any such 
director, employee or officer shall be made by either (i) the Board of 
Directors, all of the directors of which and all of the directors acting in 
such matter shall be disinterested persons as defined herein, or (ii) the 
Stock Option Committee appointed by the Board of Directors pursuant to this 
section. For purposes of this Plan, "disinterested person" shall mean a 
director who is not, during the one year prior to service as an administrator 
of the Pl

    7.2  Determination of Fair Market Value.  For the purpose of granting 
Incentive Stock Options, the Board of Directors shall determine the fair 
market value of the Stock of the Company as follows:

         7.2.1  If the Company's Stock is traded on any recognized stock 
exchange or exchanges, such fair market value shall be deemed to be the 
highest closing price of the Stock on such stock exchange or exchanges on the 
day the Option is granted or if no sale of the Company's Stock shall have 
been made on any stock exchange on that day, on the next preceding day on 
which there was a sale of such stock.

         7.2.2  During such time as the Stock is not listed on an established 
exchange, but is actively traded on the over-the-counter market, the fair 
market value per share shall be the mean between dealer "bid" and "ask" 
prices of the Stock in the over-the-counter market on the day the Option is 
granted, as reported by the National Association of Securities Dealers, Inc.

         7.2.3  During such time as the Company's Stock is neither listed on 
any recognized exchange nor actively traded over-the-counter, the fair market 
value shall be determined in good faith by the Board of Directors. In making 
such determination, the Board of Directors may (but shall not be required to) 
rely on the opinions of one or more qualified, independent appraisers.

    7.3  Indemnification.  In addition to such other rights of 
indemnification as they may have as directors or as members of the Stock 
Option Committee, the members of the Board of Directors shall be indemnified 
by the Company against the 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 Option 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 Board or Stock 
Option Committee member is liable for negligence or misconduct in the 
performance of his duties; provided that within sixty (60) days after

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institution of any such action, suit or proceeding a Board or Stock Option 
Committee member shall in writing offer the Company the opportunity, at its 
own expense, to handle and defend the same.

8.  AMENDMENT AND TERMINATION

    8.1  Amendment.  The Board of Directors of the Company may, insofar as 
permitted by law, from time to time, with respect to any shares at the time 
not subject to Options, suspend or discontinue the Plan or revise or amend it 
in any respect whatsoever except that, without approval of the stockholders, 
no such revision or amendment shall change the number of shares subject to 
the Plan, change the designation of the class of employees eligible to 
receive Options or decrease the price at which Incentive Stock Options may be 
granted, materially increase the benefits accruing to participants under the 
Plan, materially increase the number of securities which may be issued under 
the Plan, or materially modify the requirements as to eligibility for 
participation in the Plan.

9.  MISCELLANEOUS

    9.1  Governing Law.  This Plan shall be governed by, and construed in 
accordance with, the laws of the State of Delaware. 

    9.2  Construction.  In the event any parts of this Plan are found to be 
void, the remaining provisions of this Plan shall nevertheless be binding 
with the same effect as though the void parts were deleted.

    9.3  Application of Funds.  The proceeds received by the Company from the 
sale of Stock pursuant to Options will be used for general corporate purposes.

    9.4  No Obligation to Exercise Option.  The grant of an Option shall 
impose no obligation upon the Optionee to exercise such Option.

    9.5  Approval of Stockholders.  The Plan shall take effect immediately 
upon adoption by the Board of Directors. However, if this Plan is not 
approved by the stockholders of the Company within the period beginning 
twelve (12) months before and ending twelve (12) months after the date the 
Plan is adopted by the Board of Directors, no Options granted hereunder shall 
constitute Incentive Stock Options.

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