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                                                                    EXHIBIT 10.2

                               PROXIMA CORPORATION

                   AMENDED AND RESTATED 1986 STOCK OPTION PLAN


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

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

              (a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.

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

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

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

              (e) "Company" means Proxima Corporation, a California corporation.

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

              (g) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) any leave of absence approved by the Board, including sick
leave, military leave, or any other personal leave; provided, however, that for
purposes of Incentive Stock Options, such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (ii) in the case of transfers
between locations of the Company or between the Company, its Subsidiaries or its
successor.
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              (h) "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 to constitute
"employment" by the Company.

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

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

                  (i) If the Stock is listed on any established stock exchange
or a national market system including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such Stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange (or the exchange with the greatest volume of trading
in Stock) for the last market trading day prior to the time of determination, as
reported in the Wall Street Journal or such other source as the Administrator
deems reliable;

                  (ii) If the Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high and low asked prices for the Stock; or

                  (iii) In the absence of an established market for the Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator in accordance with Section 260.140.50 of the California
Corporations Code.

              (k) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

              (l) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.

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

              (n) "Optioned Stock" means the Stock subject to an Option.

              (o) "Optionee" means an Employee, Consultant or Outside Director
who receives an Option.

              (p) "Outside Director" shall mean a Director who is not an
Employee of the Company. 

              (o) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
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              (p) "Plan" means this Amended and Restated 1986 Stock Option Plan.

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

              (r) "Stock" means the Common Stock of the Company;

              (s) "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 12
of the Plan, the maximum aggregate number of shares of Stock which may be
optioned and sold under the Plan is 2,080,500. The shares may be authorized, but
unissued, or reacquired Stock.

           If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, 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 bodies with respect to different groups of Optionees.

                  (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.

                  (iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.

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

              (b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, 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 of the Stock, in
accordance with Section 2(j) of the Plan;
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                  (ii) to select the officers, Consultants and Employees to whom
Options may from time to time be granted hereunder;

                  (iii) to determine whether and to what extent Options are
granted hereunder;

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

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

                  (vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder (including, but not
limited to, the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Stock relating thereto, based in each case on such
factors as the Administrator shall determine, in its sole discretion);

                  (vii) to determine whether and under what circumstances an
Option may be bought-out for cash under subsection 9(f);

                  (ix) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral period); and

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

           5. Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.

           6. Eligibility.

              (a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. Options
may be granted to Outside Directors only in accordance with the provisions of
Section 11 of this Plan. An Employee, Consultant or Director who has been
granted an Option may, if he is otherwise eligible, be granted an additional
Option or Options.

              (b) Each Option shall be designated in a written or electronic
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, 
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notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.

              (c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.

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

           6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect until February 19, 1996 unless sooner terminated under
Section 14 of the Plan.

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

           8. Option Exercise Price and Consideration.

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

                  (i) In the case of an Incentive Stock Option

                      (A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the 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, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
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                  (ii) In the case of a Nonstatutory Stock Option

                      (A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.

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

              (b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other shares of the Company's capital stock
which (x) in the case of shares of the Company's capital stock acquired upon
exercise of an Option either have been owned by the Optionee for more than six
months on the date of surrender or were not acquired, directly or indirectly,
from the Company, 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, (5) authorization from the Company to retain from the total
number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the Option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, (9) or such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws as defined
in Section 4(a)(iii) above.

           9. Exercise of Option.

              (a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. An Option may not be exercised for a fraction of a Share.

                  An Option shall be deemed to be exercised, and the Optionee
deemed to be a shareholder of the shares being purchased upon exercise, when
written or electronic 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, as authorized by
the Board, consist of any consideration and method of payment allowable under
Section 8(b) of the Plan.
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                  Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

              (b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but only within ninety (90)
days (or such other period of time as is determined by the Board but in no event
less than thirty (30) days, with such determination in the case of an Incentive
Stock Option being made at the time of grant of the Option and not exceeding
ninety (90) days) after the date of such termination (but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), exercise his Option to the extent that Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.

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

              (d) Death of Optionee. In the event of the death of an Optionee,
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 date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.

              (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.

           10. Non-Transferability of Options. 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 distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
<PAGE>   8
           11. Grants to Outside Directors. The provisions set forth in this
Section 11 shall not be amended more than once every six months. All grants of
Options under this Section 11 shall be automatic and non-discretionary and shall
be made strictly in accordance with the following provisions:

              (a) No Discretion. No person shall have any discretion to select
which Outside Directors shall be granted Options or to determine the number of
shares to be covered by Options granted to Outside Directors; provided, however,
that nothing in this Plan shall be construed to prevent an Outside Director from
declining to receive an Option under this Plan.

              (b) Annual Option Grants. On the third business day following the
Company's public release of its annual results of operations during the term of
the Plan, each person who is then an Outside Director shall be granted an Option
(an "Annual Option") to purchase 5,000 shares of Common Stock.

                  (i) the term of the Annual Option shall be ten (10) years;

                  (ii) the Annual Option shall be exercisable only while the
Outside Director remains a Director or within such period of time after
termination of status as an Outside Director as the Annual Option agreement may
provide, consistent with Section 9(b);

                  (iii) the exercise price per share of Common Stock shall be
100% of the fair market value on the date of grant of the Annual Option (such
fair market value to be calculated as set forth in Section 8(b) hereof);

                  (iv) the Annual Option shall vest as follows: 20% of the
shares subject to the Annual Option be vested as of the date of grant and the
remaining 80% of the shares shall vest over the succeeding four years at the
rate of 1/1,460 of such shares for each day following the date of grant.

              (c) New Outside Director Options. Each person who becomes an
Outside Director after April 1, 1993 shall be granted an initial option (an
"Initial Option") on a one-time basis, to purchase 10,000 shares of Common Stock
on the date such person becomes a Director. The terms of the Initial Options
shall be identical to the terms of the Annual Options.

           12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option, 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 as of the date
that the amount of tax to be withheld is to be determined (the "Tax 
<PAGE>   9
Date"). 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.

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

           13. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of Shares
covered by each outstanding Option, and the number of Shares which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock (or Common Stock into which the
Common Stock is convertible) resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Stock, or any other
increase or decrease in the number of issued shares of 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"; and provided further, however, that
no such adjustment shall be made if, in connection with a stock split
consolidation or the like, a corresponding adjustment is made to the "Conversion
Price" of the Common Stock in the Company's Articles of Incorporation. 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 Stock subject to an Option.

               In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action. In the event of a merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the option or to substitute an equivalent option, the Company
shall notify the Optionee at least 15 days prior to such proposed action and the
Optionee shall be entitled to exercise the Option as to all shares subject to
the Option, whether or not such Option would otherwise be exercisable as to all
such shares. In such event, to the extent such Option is not exercised prior to
the closing of the Merger, the Option shall terminate as of the date of such
closing. For the purposes of this paragraph, the Option shall be considered
assumed if, following the merger, the option confers the right to purchase, for
each Share of Optioned Stock subject to the Option immediately prior to the
merger, the consideration (whether stock, cash, or other securities or property)
received in the merger by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were 
<PAGE>   10
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 was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation and the participant, 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.

           14. Time of Granting Options. Except with respect to options granted
to Outside Directors (which are governed by Section 11), the date of grant of an
Option shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option, or such other date as is determined by the
Board. Notice of the determination shall be given to each Employee or Consultant
to whom an Option is so granted 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 discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.

              (b) Effect of Amendment or Termination. 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, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

           16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option 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, 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.
<PAGE>   11
           17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

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

           18. Agreements. Options shall be evidenced by written or electronic
agreements in such form as the Board shall approve from time to time.

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

           20. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports and other information which are
provided to all shareholders of the Company. The Company shall not be required
to provide such information if the issuance of Options under the Plan is limited
to key employees whose duties in connection with the Company assure their access
to equivalent information.
<PAGE>   12
                               PROXIMA CORPORATION

                             STOCK OPTION AGREEMENT


           1. Grant of Option. Proxima Corporation, a California corporation
(the "Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") 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, definitions and provisions of the Company's 1986 Stock Plan (the
"Plan") which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option.

                     If designated an Incentive Stock Option, this Option is
intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code.

           2. Adjustments for Stock Splits, Recapitalizations.

           The Exercise Price and number of Shares subject to this Option (as
set forth on the Notice of Grant) shall be subject to adjustment as follows: If
the Company at any time (i) subdivides (by any stock split, stock dividend or
otherwise) the Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision will be proportionately reduced
and the number of Shares issuable shall be proportionately increased, and (ii)
if the Company at any time combines (by reverse stock split or otherwise) the
Common Stock into a smaller number of shares, the Exercise Price in effect
immediately prior to such combination will be proportionately increased and the
number of Shares issuable shall be proportionately decreased.

           (a) If at any time while this Option is outstanding there shall be
any reclassification or conversion of the Common Stock into another class of
securities (other than a subdivision or combination or shares provided for in
the preceding paragraph), the Optionee shall thereafter be entitled to receive,
during the term hereof and upon payment of the Exercise Price, the number of
shares of stock to which a holder of the Common Stock would have been entitled
upon such reclassification or conversion had the Optionee exercised this Option
immediately prior to such reclassification or conversion.

           3. Exercise of Option. This Option shall be exercisable during its
term in accordance with the Exercise Schedule set out in the Notice of Grant and
with the provisions of Section 9 of the Plan as follows:

                     (a) Right to Exercise.

                               (i) This Option may not be exercised for a
fraction of a share.


                                     -1-
<PAGE>   13
                               (ii) In the event of Optionee's death, disability
or other termination of employment, the exercisability of the Option is governed
by Sections 7, 8 and 9 below, subject to the limitation contained in subsection
2(i)(c).

                               (iii) In no event may this Option be exercised
after the Expiration Date of this Option as set forth in the Notice of Grant.

                     (b) Method of Exercise. This Option shall be exercisable by
execution and delivery of the Exercise Notice and Stock Purchase Agreement (the
"Exercise Notice") in the form attached as Exhibit A. Such written notice shall
be signed by the Optionee and shall be delivered in person or by certified mail
to the Secretary of the Company. The written notice shall be accompanied by
payment of the Exercise Price. This Option shall be deemed to be exercised upon
receipt by the Company of such written notice accompanied by the Exercise Price.

                     (c) Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, concurrently with the exercise of all or any portion
of this Option, deliver to the Company his Investment Representation Statement
in the form attached to the Exercise Notice.

           4. Method of Payment. Payment of the Exercise Price shall be by:

                     (i) cash; or

                     (ii) check; or

                     (iii) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and immediate sale
of the shares through a broker which provides for delivery to the Company from
the sale or loan proceeds of the exercise price; or

                     (iv) any combination of the foregoing methods of payment.

           5. Restrictions on Exercise. This Option may not be exercised if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including the
requirements of any stock exchange upon which the Shares may then be listed and
including any rule under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G") as promulgated by the Federal Reserve Board. As a condition to
the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.

           6. Termination of Relationship. In the event of termination of
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the 


                                     -2-
<PAGE>   14
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the date of such termination, or if
Optionee does not exercise this Option within the time specified herein, the
Option shall terminate.

           7. Disability of Optionee. Notwithstanding the provisions of Section
6 above, in the event of termination of an Optionee's consulting relationship or
Continuous Status as an Employee as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), Optionee may, but only within
twelve (12) months from the date of termination of employment (but in no event
later than the Expiration Date of this Option as set forth in the Notice of
Grant), exercise the Option to the extent otherwise so entitled at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.

           8. Death of Optionee. In the event of the death of Optionee during
the term of this Option and while an Employee or Consultant or within ninety
(90) days following termination of Optionee's employment/consultancy
relationship with the Company, this Option may be exercised at any time within
twelve (12) months following the date of death (but in no event later than the
Expiration Date), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee could exercise the Option at the date of death.

           9. 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 him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

           10. Term of Option. This Option may be exercised only prior to the
Expiration Date 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. The
limitations set out in Section 7 of the Plan regarding Options designated as
Incentive Stock Options and Options granted to more than ten percent (10%)
shareholders shall apply to this Option.

           11. Tax Consequences. Set forth below is a brief summary as of the
date of this Option of some of the federal tax consequences of exercise of this
Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE,
AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT
A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

           (a) Exercise of ISO. If this Option qualifies as an ISO, there will
be no regular federal income tax liability upon the exercise of the Option,
although the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price will be treated as an adjustment to the
alternative minimum tax for federal tax purposes and may subject the Optionee to
the alternative minimum tax in the year of exercise.



                                      -3-
<PAGE>   15
           (b) Exercise of Nonqualified Stock Option. If this Option does not
qualify as an ISO, there may be a regular federal income tax liability upon the
exercise of the Option. 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 Shares on the date of exercise over the
Exercise Price. If Optionee is an employee, the Company will be required to
withhold from Optionee's compensation or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.

           (c) Disposition of Shares. In the case of an NSO, if Shares are held
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. In the case
of an ISO, if Shares transferred pursuant to the Option are held for at least
one year after exercise and are disposed of at least two years after the Date of
Grant, any gain realized on disposition of the Shares will also be treated as
long-term capital gain for federal and income tax purposes. If Shares purchased
under an ISO are disposed of within such one-year period or within two years
after the Date of Grant, 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 fair market value of the Shares on the date of exercise
over the Exercise Price.

           (d) Notice of Disqualifying Disposition of ISO Shares. If this Option
is an ISO, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to this Option on or before the later of (1) the date two
years after the Date of Grant, or (2) the date one year after exercise of this
Option, the Optionee shall immediately notify the Company in writing of such
disposition. Optionee agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by the Optionee
from the early disposition by payment in cash or out of the current earnings
paid to the Optionee.

           OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS OR HER RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE HIS OR HER EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.


                                      -4-
<PAGE>   16
                                    EXHIBIT A

                  EXERCISE NOTICE AND STOCK PURCHASE AGREEMENT


Proxima Corporation
9440 Carroll Park Drive
San Diego, California  92121

Attention:  Secretary

           1. Exercise of Option. Effective as of today, __________, 19__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Proxima Corporation (the
"Company") under and pursuant to the Company's 1986 Stock Plan, as amended (the
"Plan") and the [ ] Incentive [ ] Nonqualified Stock Option Agreement dated
______________ (the "Option Agreement").

           2. Representations of Optionee.

                     (a) Optionee acknowledges that Optionee has received, read
and understood the Plan and the Option Agreement and agrees to abide by and be
bound by their terms and conditions.

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

           3. Rights as Shareholder. Subject to the terms and conditions of this
Agreement, Optionee shall have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Optionee delivers full
payment of the Exercise Price until such time as Optionee disposes of the
Shares.

           4. Successors and Assigns. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.

           5. Arbitration. Any dispute or claim arising out of or in connection
with this Agreement shall be settled by binding arbitration. Any such
arbitration shall be conducted in accordance with the Rules of Conciliation and
Arbitration of the American Arbitration 


                                     -1-
<PAGE>   17
Association and shall take place in San Diego, California. The arbitration shall
be conducted by one arbitrator; provided that if the parties cannot agree on a
single arbitrator, then the arbitration shall be conducted by a panel of three
arbitrators, one selected by each party and the third selected by the other two
arbitrators. The determination of the arbitrator(s) shall be final and binding
upon the parties.

           6. Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.

           7. Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.

           8. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.

           9. Delivery of Payment. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.

           10. Entire Agreement. The Plan, Notice of Grant/Option Agreement and,
if applicable, Investment Representation Statement are incorporated herein by
reference. This Agreement, the Plan and the Notice of Grant/Option Agreement
constitute the entire agreement of the parties and supersede in their entirety
all prior undertakings and agreements of the Company and Optionee with respect
to the subject matter hereof, and is governed by California law except for that
body of law pertaining to conflict of laws.

Submitted by:                             Accepted by:

OPTIONEE:                                 PROXIMA CORPORATION

                                          By: ___________________________
______________________________            Its: __________________________

Address:                                  Address:

______________________________            9440 Carroll Park Drive
______________________________            San Diego, California  92121


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