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                                  EXHIBIT 10.4

                                    SBE, INC.

                       1998 NON-OFFICER STOCK OPTION PLAN

               ADOPTED BY THE BOARD OF DIRECTORS ON JUNE 15, 1998
                             AMENDED ON MAY 23, 2000
                             AMENDED ON MAY 22, 2001
                             AMENDED ON MAY 21, 2002
                            AMENDED ON JULY 30, 2002


1.   PURPOSES.

     (a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options are
the non-officer Employees and Consultants of the Company and its Affiliates.

     (b)  AVAILABLE  OPTIONS.  The  purpose of the Plan is to provide a means by
which eligible recipients of Options may be given an opportunity to benefit from
increases  in value of the Common  Stock  through the  granting of  Nonstatutory
Stock Options.

     (c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain the
services  of the group of persons  eligible  to receive  Options,  to secure and
retain the services of new members of this group and to provide  incentives  for
such  persons to exert  maximum  efforts  for the success of the Company and its
Affiliates.

2.   DEFINITIONS.

     (a) "AFFILIATE" means any parent  corporation or subsidiary  corporation of
the Company,  whether now or hereafter  existing,  as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

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

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

     (d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c).

     (e) "Common Stock" means the common stock of the Company.

     (f) "COMPANY" means SBE, Inc., a Delaware corporation.

     (g)  "Consultant"  means any person,  including an advisor,  engaged by the
Company or an Affiliate  to render  consulting  or advisory  services and who is
compensated  for such services,  provided that the term  "Consultant"  shall not
include a Director.

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     (h)  "CONTINUOUS  SERVICE" means that the  Optionholder's  service with the
Company or an Affiliate,  whether as an Employee, Director or Consultant, is not
interrupted or terminated.  The  Optionholder's  Continuous Service shall not be
deemed to have  terminated  merely  because of a change in the capacity in which
the Optionholder  renders service to the Company or an Affiliate as an Employee,
Consultant  or  Director  or a change in the entity  for which the  Optionholder
renders such service,  provided that there is no  interruption or termination of
the Optionholder's  Continuous Service.  For example, a change in status from an
Employee of the Company to a  Consultant  of an  Affiliate  or a Director of the
Company will not constitute an interruption of Continuous Service.  The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party,  including sick leave,  military
leave or any other personal leave.

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

     (j)  "DISABILITY"  means the  inability  of a person,  in the  opinion of a
qualified  physician  acceptable to the Company,  to perform the major duties of
that person's  position with the Company or an Affiliate of the Company  because
of the sickness or injury of the person.

     (k)  "EMPLOYEE"  means any person  employed by the Company or an Affiliate.
Mere service as a Director or payment of a  director's  fee by the Company or an
Affiliate  shall not be sufficient to constitute  "employment" by the Company or
an Affiliate.

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

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

          (1) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market System or the Nasdaq SmallCap  Market,  the
Fair Market  Value of a share of Common  Stock shall be the closing  sales price
for such stock (or the closing bid, if no sales were reported) as quoted on such
exchange  or market  (or the  exchange  or market  with the  greatest  volume of
trading in the Common Stock) on the last market  trading day prior to the day of
determination,  as reported in The Wall Street  Journal or such other  source as
the Board deems reliable.

          (2) In the  absence of such  markets  for the Common  Stock,  the Fair
Market  Value shall be  determined  in good faith by the Board and to the extent
that the Company is subject to Section  260.140.50  on the date a Stock Award is
granted, in a manner consistent with Section 260.140.50.

     (n) "NONSTATUTORY  STOCK OPTION" means an Option not intended to qualify as
an incentive  stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

     (o)  "OFFICER"  means a person who is an officer of the Company  within the
meaning  of  Section  16 of the  Exchange  Act and  the  rules  and  regulations
promulgated  thereunder,  and each other  person  who is an  officer  within the
meaning of Rule  4460(i)(1) of the National  Association of Securities  Dealers,


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Inc. Manual or such other similar rule, regulation or requirement  applicable to
the Company in connection with the listing of the Common Stock for trading on an
established stock exchange or other market.

     (p) "OPTION"  means a  Nonstatutory  Stock Option  granted  pursuant to the
Plan.

     (q) "Option Agreement" means a written agreement between the Company and an
Optionholder  evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (r) "OPTIONEE"  means a person to whom an Option is granted pursuant to the
Plan.

     (s)  "OPTIONHOLDER"  means a person who holds an outstanding Option granted
under the Plan,  including (as  applicable)  the Optionee's  estate,  person who
acquired the right to exercise the Option by bequest or  inheritance,  or person
designated  to  exercise  the  option  upon the  Optionee's  death  pursuant  to
subsection 6(d).

     (t) "PARTICIPANT"  means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable,  such other person who holds an outstanding Stock
Award.

     (u) "PLAN" means this SBE, Inc. 1998 Non-Officer Stock Option Plan.

     (v)  "SECTION  260.140.41"  means  Section  260.140.41  of  Title 10 of the
California Code of Regulations.

     (w)  "SECTION  260.140.45"  means  Section  260.140.45  of  Title 10 of the
California Code of Regulations.

     (x)  "SECTION  260.140.50"  means  Section  260.140.50  of  Title 10 of the
California Code of Regulations.

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

     (z) "STOCK  AWARD"  means any right  granted  under the Plan,  including an
Option, a stock bonus and a right to acquire restricted stock.

     (aa) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock  possessing  more than ten percent
(10%) of the total combined  voting power of all classes of stock of the Company
or of any of its Affiliates.

3.   ADMINISTRATION.

     (a)  ADMINISTRATION BY BOARD. The Board will administer the Plan unless and
until  the  Board  delegates  administration  to a  Committee,  as  provided  in
subsection 3(c).

     (b) POWERS OF BOARD. The board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:

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          (1) To determine from time to time which of the persons eligible under
the Plan shall be granted  Options;  when and how each Option  shall be granted;
the provisions of each Option  granted (which need not be identical),  including
the time or times when a person shall be permitted to receive stock  pursuant to
an Option;  and the number of shares  with  respect to which an Option  shall be
granted to each such person.

          (2) To construe and interpret  the Plan and Options  granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board,  in the exercise of this power,  may correct any defect,  omission or
inconsistency  in the Plan or in any  Option  Agreement,  in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.

          (3) To amend the Plan or an Option as provided in Section 11.

          (4) Generally, to exercise such powers and to perform such acts as the
Board deems  necessary or expedient to promote the best interests of the Company
which are not in conflict with the provisions of the Plan.

     (c) DELEGATION TO COMMITTEE.  The Board may delegate  administration of the
Plan to a Committee or Committees  of one or more members of the Board,  and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated.  If  administration  is delegated to a Committee,  the Committee
shall  have,  in  connection  with the  administration  of the Plan,  the powers
theretofore  possessed  by the  Board,  including  the  power to  delegate  to a
subcommittee  any of the  administrative  powers the  Committee is authorized to
exercise (and  references  in this Plan to the Board shall  thereafter be to the
Committee  or  subcommittee),   subject,  however,  to  such  resolutions,   not
inconsistent  with the  provisions  of the Plan,  as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.

4.   SHARES SUBJECT TO THE PLAN.

     (a) SHARE  RESERVE.  Subject to the  provisions  of Section 10  relating to
adjustments  upon changes in stock and subject to Section 4(d) below,  the stock
that may be issued  pursuant to Options  shall not exceed in the  aggregate  six
hundred fifty thousand (650,000) shares of Common Stock.

     (b) REVERSION OF SHARES TO THE SHARE  RESERVE.  If any Option shall for any
reason expire or otherwise  terminate,  in whole or in part, without having been
exercised in full,  the stock not acquired under such Option shall revert to and
again become available for issuance under the Plan. If any Common Stock acquired
pursuant to the exercise of an Option shall for any reason be repurchased by the
Company under an unvested share  repurchase  option provided under the Plan, the
stock  repurchased by the Company under such repurchase  option shall not revert
to and again become available for issuance under the Plan.

     (c) SOURCE OF SHARES.  The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.

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     (d)  Notwithstanding  Section 4(a), if at the time of each grant of a Stock
Award  under the Plan the  Company is subject to Section  260.140.45,  the total
number of securities  issuable upon exercise of all outstanding  options and the
total number of shares provided for under this Plan and any other stock bonus or
similar  plan or  agreement  of the  Company  shall not  exceed  30% of the then
outstanding  capital  stock of the Company (as  measured as set forth in Section
260.140.45),  unless  stockholder  approval has been obtained in compliance with
Section  260.140.45  to exceed 30%, in which case the limit shall be such higher
percentage as approved by the stockholders.

5.   ELIGIBILITY.

     Options may be granted only to Employees or Consultants who are not, at the
time of such grants, (i) Directors or (ii) Officers.

6.   OPTION PROVISIONS.

     Each  Option  shall be in such  form  and  shall  contain  such  terms  and
conditions  as the Board  shall deem  appropriate.  The  provisions  of separate
Options  need  not  be  identical,   but  each  Option  shall  include  (through
incorporation of provisions  hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

     (a) TERM. No Option shall be  exercisable  after the expiration of ten (10)
years from the date it was granted,  or such longer or shorter  period as may be
provided in the Option Agreement.

     (b) EXERCISE  PRICE.  The  exercise  price of each Option shall be not less
than eighty-five  percent (85%) of the Fair Market Value of the stock subject to
the Option on the date the Option is  granted;  provided,  however,  that to the
extent that the Company is subject to Section  260.140.41 on the date the Option
is granted,  a Ten Percent  Stockholder shall not be granted a Option unless the
exercise  price of such Option is at least (i) one hundred ten percent (110%) of
the Fair  Market  Value of the  Common  Stock on the date of grant or (ii)  such
lower  percentage  of the Fair Market  Value of the Common  Stock on the date of
grant as is  permitted  by  Section  260.140.41  at the time of the grant of the
Option.

     (c)  CONSIDERATION.  The purchase  price of stock  acquired  pursuant to an
Option  shall be paid,  to the  extent  permitted  by  applicable  statutes  and
regulations,  either (i) in cash at the time the Option is  exercised or (ii) at
the  discretion of the Board,  by delivery to the Company of other Common Stock,
according to a deferred payment or other arrangement (which may include, without
limiting the  generality of the  foregoing,  the use of other Common Stock) with
the  Optionholder  or in any  other  form of  legal  consideration  that  may be
acceptable to the Board; provided, however, that at any time that the Company is
incorporated in Delaware,  payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.

     In  the  case  of any  deferred  payment  arrangement,  interest  shall  be
compounded  at least  annually  and  shall be  charged  at the  minimum  rate of
interest  necessary to avoid the  treatment as  interest,  under any  applicable
provisions of the Code, of any amounts other than amounts  stated to be interest
under the deferred payment arrangement.

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     (d) TRANSFERABILITY.  An Option shall not be transferable except by will or
by the laws of descent  and  distribution  and shall be  exercisable  during the
lifetime of the Optionee  only by the  Optionee.  Notwithstanding  the foregoing
provisions of this  subsection  6(d),  the Optionee  may, by delivering  written
notice to the Company, in a form satisfactory to the Company,  designate a third
party  who,  in the  event of the death of the  Optionee,  shall  thereafter  be
entitled to exercise the Option.

     (e) VESTING  GENERALLY.  The total number of shares of Common Stock subject
to an Option  may,  but need  not,  vest and  therefore  become  exercisable  in
periodic  installments  which  may,  but need not,  be equal.  The Option may be
subject to such other terms and  conditions  on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem  appropriate.  The vesting  provisions of individual  Options may vary. The
provisions  of  this  subsection  6(e)  are  subject  to any  Option  provisions
governing  the minimum  number of shares as to which an Option may be exercised,
including the following Section 6(f).

     (f) MINIMUM  VESTING.  Notwithstanding  the foregoing  Section 6(e), to the
extent  that the  Company is subject to the  following  restrictions  on vesting
under Section 260.140.41(f) at the time of the grant of the Option, then:

          (1) Options granted to an Employee who is not an Officer,  Director or
Consultant  shall  provide for  vesting of the total  number of shares of Common
Stock at a rate of at least  twenty  percent  (20%) per year over five (5) years
from the date the Option was granted,  subject to reasonable  conditions such as
continued employment; and

          (2) Options granted to Officers,  Directors or Consultants may be made
fully   exercisable,   subject  to  reasonable   conditions  such  as  continued
employment, at any time or during any period established by the Company.

     (g)  TERMINATION  OF  CONTINUOUS   SERVICE.  In  the  event  an  Optionee's
Continuous   Service  terminates  (other  than  upon  the  Optionee's  death  or
Disability), the Optionholder may exercise his or her Option (to the extent that
the  Optionholder was entitled to exercise it as of the date of termination) but
only  within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's  Continuous  Service (or such
longer or shorter period specified in the Option Agreement, which period, to the
extent that the Company is subject to Section  260.140.41 at the time the Option
is granted,  shall not be less than thirty (30) days unless such  termination is
for cause), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after such termination, the Optionholder does not exercise
his or her Option within the time specified in the Option Agreement,  the Option
shall terminate.

     (h) EXTENSION OF TERMINATION  DATE. An Optionee's Option Agreement may also
provide  that if the exercise of the Option  following  the  termination  of the
Optionee's   Continuous  Service  (other  than  upon  the  Optionee's  death  or
Disability)  would be  prohibited  at any time solely  because  the  issuance of
shares would violate the  registration  requirements  under the Securities  Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the  termination  of the  Optionee's  Continuous  Service


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during  which the  exercise  of the  Option  would not be in  violation  of such
registration requirements.

     (i) DISABILITY OF OPTIONEE.  In the event an Optionee's  Continuous Service
terminates  as a result  of the  Optionee's  Disability,  the  Optionholder  may
exercise his or her Option (to the extent that the  Optionholder was entitled to
exercise it as of the date of such termination),  but only within such period of
time ending on the earlier of (i) the date  twelve  (12) months  following  such
termination (or such longer or shorter period specified in the Option Agreement,
which period, to the extent that the Company is subject to Section 260.140.41 at
the time the Option is  granted,  shall not be less than six (6) months) or (ii)
the  expiration of the term of the Option as set forth in the Option  Agreement.
If,  after  termination,  the  Optionholder  does not exercise his or her Option
within the time specified herein, the Option shall terminate.

     (j) DEATH OF OPTIONEE.  In the event (i) an Optionee's  Continuous  Service
terminates as a result of the Optionee's  death or (ii) the Optionee dies within
the period (if any) specified in the Option  Agreement  after the termination of
the Optionee's Continuous Service for a reason other than death, then the Option
may be exercised  (to the extent the  Optionholder  was entitled to exercise the
Option as of the date of death) by the  Optionholder  but only within the period
ending on the earlier of (1) the date twelve (12) months  following  the date of
death (or such longer or shorter period specified in the Option Agreement, which
period,  to the extent that the Company is subject to Section  260.140.41 at the
time the Option is  granted,  shall not be less than six (6)  months) or (2) the
expiration of the term of such Option as set forth in the Option Agreement.  If,
after death, the Option is not exercised within the time specified  herein,  the
Option shall terminate.

     (k) EARLY  EXERCISE.  The Option  may,  but need not,  include a  provision
whereby the Optionholder may elect at any time before the Optionee's  Continuous
Service  terminates  to exercise  the Option as to any part or all of the shares
subject to the Option  prior to the full  vesting of the  Option.  Any  unvested
shares so purchased  may be subject to an unvested  share  repurchase  option in
favor of the  Company or to any other  restriction  the Board  determines  to be
appropriate.

7.   COVENANTS OF THE COMPANY.

     (a)  AVAILABILITY OF SHARES.  During the terms of the Options,  the Company
shall keep  available at all times the number of shares of Common Stock required
to satisfy such Options.

     (b) SECURITIES LAW  COMPLIANCE.  The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable  pursuant to any such Option.  If, after reasonable
efforts, the Company is unable to obtain from any such regulatory  commission or
agency the  authority  which  counsel for the Company  deems  necessary  for the
lawful  issuance and sale of stock under the Plan, the Company shall be relieved
from any  liability  for  failure to issue and sell stock upon  exercise of such
Options unless and until such authority is obtained.

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8.   USE OF PROCEEDS FROM STOCK.

     Proceeds  from the sale of  stock  pursuant  to  Options  shall  constitute
general funds of the Company.

9.   MISCELLANEOUS.

     (a) ACCELERATION OF  EXERCISABILITY  AND VESTING.  The Board shall have the
power to  accelerate  the time at which an Option may first be  exercised or the
time during which an Option or any part thereof will vest in accordance with the
Plan,  notwithstanding the provisions in the Option stating the time at which it
may first be exercised or the time during which it will vest.

     (b) STOCKHOLDER  RIGHTS.  No Optionholder  shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.

     (c) NO  EMPLOYMENT  OR OTHER  SERVICE  RIGHTS.  Nothing  in the Plan or any
instrument  executed or Option  granted  pursuant  thereto shall confer upon any
Optionee  or  Optionholder  any right to  continue  to serve the  Company  or an
Affiliate  in the  capacity  in effect at the time the Option was granted (or to
serve  the  Company  in any other  capacity)  or shall  affect  the right of the
Company or an Affiliate to terminate  (i) the  employment of an Employee with or
without  notice and with or without  cause or (ii) the  service of a  Consultant
pursuant  to the terms of such  Consultant's  agreement  with the  Company or an
Affiliate.

     (d) INVESTMENT  ASSURANCES.  The Company may require an Optionholder,  as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances  satisfactory to the Company as to the  Optionholder's  knowledge and
experience  in  financial  and  business  matters  and/or to employ a  purchaser
representative  reasonably  satisfactory to the Company who is knowledgeable and
experienced  in financial and business  matters and that he or she is capable of
evaluating, alone or together with the purchaser representative,  the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company  stating that the  Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements,  and
any assurances given pursuant to such requirements,  shall be inoperative if (1)
the issuance of the shares upon the exercise or  acquisition  of stock under the
Option  has  been  registered  under  a then  currently  effective  registration
statement  under the Securities Act or (2) as to any particular  requirement,  a
determination  is made by counsel for the Company that such requirement need not
be met in the  circumstances  under the then  applicable  securities  laws.  The
Company  may,  upon  advice of counsel to the  Company,  place  legends on stock
certificates   issued  under  the  Plan  as  such  counsel  deems  necessary  or
appropriate in order to comply with applicable securities laws,  including,  but
not limited to, legends restricting the transfer of the stock.

     (e)  WITHHOLDING  OBLIGATIONS.  To the extent  provided  by the terms of an
Option Agreement,  the Optionholder may satisfy any federal,  state or local tax
withholding obligation relating to the exercise or acquisition of stock under an
Option by any of the  following  means (in  addition to the  Company's  right to


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withhold from any compensation  paid to the Optionholder by the Company) or by a
combination of such means:  (i) tendering a cash payment;  (ii)  authorizing the
Company  to  withhold  shares  from the  shares of the  Common  Stock  otherwise
issuable to the Optionholder as a result of the exercise or acquisition of stock
under the Option; provided, however, that no shares of common stock are withheld
with a value  exceeding the minimum amount of tax required to be withheld by law
(or such lower amount as may be necessary to avoid variable  award  accounting);
or (iii) delivering to the Company owned and  unencumbered  shares of the Common
Stock.

     (f)  REPRICING  OF  OPTIONS.  The  Board or the  Committee  shall  have the
authority to effect,  at any time and from time to time (i) the repricing of any
outstanding Options under the Plan,  provided,  however,  that to the extent the
Company is subject to Section  260.140.41 at the time of any repricing,  the new
exercise  price of the  repriced  outstanding  Options  shall  not be less  than
eighty-five  percent (85%) of the Fair Market Value, except that the price shall
be 110% of the  Fair  Market  Value in the  case of a Ten  Percent  Stockholder,
and/or (ii) with the consent of the affected Optionholders,  the cancellation of
any outstanding  Options and the grant in  substitution  therefor of new Options
under the Plan covering the same or different numbers of shares of Common Stock,
but having an exercise price per share not less than  eighty-five  percent (85%)
of the Fair Market Value; provided, however, that to the extent that the Company
is subject to Section  260.140.41 at the time of the grant of any new Options, a
Ten Percent  Stockholder shall not be granted a Nonstatutory Stock Option unless
the exercise price of such Option is at least (i) one hundred ten percent (110%)
of the Fair Market  Value of the common  stock on the date of grant or (ii) such
lower  percentage  of the Fair Market  Value of the common  stock on the date of
grant as is  permitted  by  Section  260.140.41  at the time of the grant of the
Option.

     (g)  INFORMATION  OBLIGATION.  To the extent that the Company is subject to
Section 260.140.46 of Title 10 of the California Code of Regulations at the time
a Stock Award is granted,  the Company  shall  deliver  financial  statements to
Participants  at least  annually.  This  Section  10(g)  shall  not apply to key
Employees  whose  duties in  connection  with the Company  assure them access to
equivalent information.

     (h)  Repurchase  Limitation.  The terms of any  repurchase  option shall be
specified in the Stock Award,  and the  repurchase  price may be either the Fair
Market  Value of the  shares  of  Common  Stock on the  date of  termination  of
employment or their original  purchase  price. To the extent that the Company is
subject to Section  260.140.41 at the time a Stock Award is made, any repurchase
option  contained  in a Stock  Award  granted to a person who is not an Officer,
Director or Consultant shall be upon the terms described below:

          (1) FAIR MARKET VALUE. If the repurchase  option gives the Company the
right to repurchase the shares of Common Stock upon termination of employment at
not  less  than the  Fair  Market  Value of the  shares  of  Common  Stock to be
purchased on the date of termination of Continuous  Service,  then (i) the right
to repurchase  shall be exercised  for cash or  cancellation  of purchase  money
indebtedness  for  the  shares  of  Common  Stock  within  ninety  (90)  days of
termination  of  Continuous  Service  (or in the case of shares of Common  Stock
issued upon  exercise of Stock  Awards  after such date of  termination,  within
ninety (90) days after the date of the exercise) or such longer period as may be
agreed to by the Company  and the  Participant  (for  example,  for  purposes of


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satisfying  the  requirements  of  Section  1202(c)(3)  of  the  Code  regarding
"qualified  small business stock") and (ii) the right terminates when the shares
of Common Stock become publicly traded.

          (2)  ORIGINAL  PURCHASE  PRICE.  If the  repurchase  option  gives the
Company the right to repurchase  the shares of Common Stock upon  termination of
Continuous  Service  at their  original  purchase  price,  then (x) the right to
repurchase  at the original  purchase  price shall lapse at the rate of at least
twenty  percent (20%) of the shares of Common Stock per year over five (5) years
from the date the Stock Award is granted  (without respect to the date the Stock
Award was exercised or became exercisable) and (y) the right to repurchase shall
be exercised for cash or  cancellation  of purchase money  indebtedness  for the
shares of Common  Stock within  ninety (90) days of  termination  of  Continuous
Service  (or in the case of shares of  Common  Stock  issued  upon  exercise  of
Options after such date of  termination,  within ninety (90) days after the date
of the  exercise)  or such longer  period as may be agreed to by the Company and
the  Participant  (for example,  for purposes of satisfying the  requirements of
Section 1202(c)(3) of the Code regarding "qualified small business stock").

10.  ADJUSTMENTS UPON CHANGES IN STOCK.

     (a) CAPITALIZATION  ADJUSTMENTS. If any change is made in the stock subject
to the Plan, or subject to any Option,  without the receipt of  consideration by
the Company (through merger,  consolidation,  reorganization,  recapitalization,
reincorporation,  stock  dividend,  dividend in property other than cash,  stock
split,  liquidating dividend,  combination of shares, exchange of shares, change
in  corporate  structure  or other  transaction  not  involving  the  receipt of
consideration by the Company),  the Plan will be  appropriately  adjusted in the
class(es)  and  maximum  number of  securities  subject to the Plan  pursuant to
subsection 4(a), and the outstanding  Options will be appropriately  adjusted in
the class(es)  and number of securities  and price per share of stock subject to
such  outstanding  Options.  Such  adjustments  shall be made by the Board,  the
determination of which shall be final,  binding and conclusive.  (The conversion
of any  convertible  securities  of  the  Company  shall  not  be  treated  as a
transaction "without receipt of consideration" by the Company.)

     (b) CHANGE IN CONTROL.  In the event of: (1) a dissolution,  liquidation or
sale  of  substantially  all of the  assets  of the  Company;  (2) a  merger  or
consolidation  in which the Company is not the surviving  corporation;  or (3) a
reverse merger in which the Company is the surviving  corporation but the shares
of the Company's common stock outstanding  immediately  preceding the merger are
converted  by virtue of the merger into other  property,  whether in the form of
securities,  cash or otherwise,  then to the extent permitted by applicable law:
(i) any surviving  corporation  shall assume any Options  outstanding  under the
Plan or shall substitute  similar Options for those  outstanding under the Plan,
or (ii) such Options shall  continue in full force and effect.  In the event any
surviving  corporation  refuses  to  assume  or  continue  such  Options,  or to
substitute  similar  options for those  outstanding  under the Plan,  then, with
respect to Options  held by  persons  then  performing  services  as  Employees,
Directors  or  Consultants,  the time during which such Options may be exercised
shall be accelerated  and the Options  terminated if not exercised prior to such
event.

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11.  AMENDMENT OF THE PLAN AND OPTIONS.

     (a) AMENDMENT OF PLAN.  The Board at any time,  and from time to time,  may
amend the Plan.

     (b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit any
amendment to the Plan for stockholder approval.

     (c) NO  IMPAIRMENT  OF  RIGHTS.  Rights  under any  Option  granted  before
amendment of the Plan shall not be impaired by any  amendment of the Plan unless
(i)  the  Company  requests  the  consent  of  the  Optionholder  and  (ii)  the
Optionholder consents in writing.

     (d) AMENDMENT OF OPTIONS. The Board at any time, and from time to time, may
amend the terms of any one or more Options;  provided,  however, that the rights
under any Option  shall not be  impaired  by any such  amendment  unless (i) the
Company  requests  the  consent of the  Optionholder  and (ii) the  Optionholder
consents in writing.

12.  TERMINATION OR SUSPENSION OF THE PLAN.

     (a) PLAN TERM.  The Board may  suspend or  terminate  the Plan at any time.
Unless sooner  terminated,  the Plan shall  terminate on the date ten (10) years
from the date of adoption by the Board. No Options may be granted under the Plan
while the Plan is suspended or after it is terminated.

     (b) NO  IMPAIRMENT  OF  RIGHTS.  Rights  and  obligations  under any Option
granted  while the Plan is in effect  shall not be  impaired  by  suspension  or
termination of the Plan, except with the written consent of the Optionholder.

13.  EFFECTIVE DATE OF PLAN.

     The Plan shall become effective on the date it is adopted by the Board



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