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                                                                    EXHIBIT 10.4

                          1998 STOCK INCENTIVE PLAN OF

                          NETLOJIX COMMUNICATIONS, INC.
                        (AS AMENDED ON JANUARY 10, 2000)

ARTICLE 1.                          INTRODUCTION

         The Plan was adopted by the Board on March 10, 1998, subject to
approval by the Company's stockholders. The purpose of the Plan is to promote
the long-term success of the Company and the creation of stockholder value by
(a) encouraging Employees, Outside Directors and Consultants to focus on
critical long-range objectives, (b) encouraging the attraction and retention of
Employees, Outside Directors and Consultants with exceptional qualifications and
(c) linking Employees, Outside Directors and Consultants directly to stockholder
interests through increased stock ownership. The Plan seeks to achieve this
purpose by providing for Awards in the form of Restricted Shares, Stock Units,
Options (which may constitute incentive stock options or nonstatutory stock
options) or stock appreciation rights.

         The Plan shall be governed by, and construed in accordance with, the
laws of the State of Delaware (except their choice-of-law provisions).

ARTICLE 2.                     ADMINISTRATION

         2.1 Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board. In addition, the composition
of the Committee shall satisfy:

                  (a) Such requirements as the Securities and Exchange
Commission may establish for administrators acting under plans intended to
qualify for exemption under Rule 16b-3 (or its successor) under the Exchange
Act; and

                  (b) Such requirements as the Internal Revenue Service may
establish for outside directors acting under plans intended to qualify for
exemption under section 162(m)(4)(C) of the Code.

         The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who need not
satisfy the foregoing requirements, who may administer the Plan with respect to
Employees and Consultants who are not considered officers or directors of the
Company under section 16 of the Exchange Act, may grant Awards under the Plan to
such Employees and Consultants and may determine all terms of such Awards.


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         2.2 COMMITTEE RESPONSIBILITIES. The Committee shall (a) select the
Employees, Outside Directors and Consultants who are to receive Awards under the
Plan, (b) determine the type, number, vesting requirements and other features
and conditions of such Awards, (c) interpret the Plan and (d) make all other
decisions relating to the operation of the Plan. The Committee may adopt such
rules or guidelines as it deems appropriate to implement the Plan. The
Committee's determinations under the Plan shall be final and binding on all
persons.

ARTICLE 3.          SHARES AVAILABLE FOR GRANTS.


         3.1 BASIC LIMITATION. Common Shares issued pursuant to the Plan may be
authorized but unissued shares or treasury shares. The aggregate number of
Restricted Shares, Stock Units, Options and SARs awarded under the Plan shall
not exceed 3,000,000. The limitation of this Section 3.1 shall be subject to
adjustment pursuant to Article 10.

         3.2 ADDITIONAL SHARES. If Stock Units, Options or SARs are forfeited
or if Options or SARs terminate for any other reason before being exercised,
then the corresponding Common Shares shall again become available for Awards
under the Plan. If Stock Units are settled, then only the number of Common
Shares (if any) actually issued in settlement of such Stock Units shall reduce
the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If SARs are exercised, then only the number
of Common Shares (if any) actually issued in settlement of such SARs shall
reduce the number available under Section 3.1 and the balance shall again become
available for Awards under the Plan. If Restricted Shares are forfeited, then
such Shares shall not become available for subsequent Awards under the Plan.

         3.3 DIVIDEND EQUIVALENTS. Any dividend equivalents distributed under
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.

ARTICLE 4.                     ELIGIBILITY

         4.1 GENERAL RULES. Only Employees, Outside Directors and Consultants
shall be eligible for designation as Participants by the Committee.

         4.2 INCENTIVE STOCK OPTIONS. Only Employees shall be eligible for the
grant of ISOs. In addition, an Employee who owns more than 10% of the total
combined voting power of all classes of outstanding stock of the Company or any
of its Parents or Subsidiaries shall not be eligible for the grant of an ISO
unless the requirements set forth in section 422(c)(6) of the Code are
satisfied.


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ARTICLE 5.                     OPTIONS

         5.1 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms of the Plan and
may be subject to any other terms that are not inconsistent with the Plan. The
Stock Option Agreement shall specify whether the Option is an ISO or an NSO. The
provisions of the various Stock Option Agreements entered into under the Plan
need not be identical. Options may be granted in consideration of a cash payment
or in consideration of a reduction in the Optionee's other compensation.

         5.2 NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Common Shares subject to the Option and shall provide for the
adjustment of such number in accordance with Article 10. Options granted to any
Optionee in a single calendar year shall in no event cover more than 500,000
Common Shares, subject to adjustment in accordance with Article 10.

         5.3 EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price; provided that the Exercise Price under an ISO shall in no event
be less than 100% of the Fair Market Value of a Common Share on the date of
grant and the Exercise Price under an NSO shall in no event be less than the par
value of the Common Shares subject to such NSO. In the case of an NSO, a Stock
Option Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the NSO is outstanding.

         5.4 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed 10 years from the date of grant. A
Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service. Options may be awarded in combination
with SARs, and such an Award may provide that the Options will not be
exercisable unless the related SARs are forfeited. NSOs may also be awarded in
combination with Restricted Shares or Stock Units, and such an Award may provide
that the NSOs will not be exercisable unless the related Restricted Shares or
Stock Units are forfeited.

         5.5 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become fully
exercisable as to all Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company.

         5.6 MODIFICATION OR ASSUMPTION OF OPTIONS.. Within the limitations of
the Plan, the Committee may modify, extend or assume outstanding options or may
accept the cancellation of outstanding options (whether granted by the Company
or by another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different


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exercise price. The foregoing notwithstanding, no modification of an Option
shall, without the consent of the Optionee, alter or impair his or her rights or
obligations under such Option.

ARTICLE 6.                     PAYMENT FOR OPTION SHARES

         6.1 GENERAL RULE. The entire Exercise Price of Common Shares issued
upon exercise of Options shall be payable in cash at the time when such Common
Shares are purchased, except as follows:

                  (a) In the case of an ISO granted under the Plan, payment
shall be made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment may be
made in any form(s) described in this Article 6.

                  (b) In the case of an NSO, the Committee may at any time
accept payment in any form(s) described in this Article 6.

         6.2 EXERCISE/SALE. To the extent that this Section 6.2 is applicable,
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell
Common Shares and to deliver all or part of the sales proceeds to the Company in
payment of all or part of the Exercise Price and any withholding taxes.

         6.3 EXERCISE/PLEDGE. To the extent that this Section 6.3 is
applicable, payment may be made by the delivery (on a form prescribed by the
Company) of an irrevocable direction to pledge Common Shares to a securities
broker or lender approved by the Company, as security for a loan, and to deliver
all or part of the loan proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.

         6.4 PROMISSORY NOTE. To the extent that this Section 6.4 is
applicable, payment may be made with a full-recourse promissory note; provided
that the par value of the Common Shares shall be paid in cash.

         6.5 OTHER FORMS OF PAYMENT. To the extent that this Section 6.5 is
applicable, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.

ARTICLE 7.                     STOCK APPRECIATION RIGHTS

         7.1 SAR AGREEMENT. Each grant of an SAR under the Plan shall be
evidenced by an SAR Agreement between the Optionee and the Company. Such SAR
shall be subject to all applicable terms of the Plan and may be subject to any
other terms that are not inconsistent with the Plan. The provisions of the
various SAR Agreements entered into under the Plan need not be identical. SARs
may be granted in consideration of a reduction in the Optionee's other
compensation.


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         7.2 NUMBER OF SHARES. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Article 10. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than 500,000 Common
Shares, subject to adjustment in accordance with Article 10.

         7.3 EXERCISE PRICE. Each SAR Agreement shall specify the Exercise
Price. An SAR Agreement may specify an Exercise Price that varies in accordance
with a predetermined formula while the SAR is outstanding.

         7.4 EXERCISABILITY AND TERM. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. An SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may
also be awarded in combination with Options, Restricted Shares or Stock Units,
and such an Award may provide that the SARs will not be exercisable unless the
related Options, Restricted Shares or Stock Units are forfeited. An SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. An SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.

         7.5 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the
time of granting an SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company.

         7.6 EXERCISE OF SARS. If, on the date when an SAR expires, the
Exercise Price under such SAR is less than the Fair Market Value on such date
but any portion of such SAR has not been exercised or surrendered, then such SAR
shall automatically be deemed to be exercised as of such date with respect to
such portion. Upon exercise of an SAR, the Optionee (or any person having the
right to exercise the SAR after his or her death) shall receive from the Company
(a) Common Shares, (b) cash or (c) a combination of Common Shares and cash, as
the Committee shall determine. The amount of cash and/or the Fair Market Value
of Common Shares received upon exercise of SARs shall, in the aggregate, be
equal to the amount by which the Fair Market Value (on the date of surrender) of
the Common Shares subject to the SARs exceeds the Exercise Price.

         7.7 MODIFICATION OR ASSUMPTION OF SARS. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of an SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.


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ARTICLE 8.                     RESTRICTED SHARES AND STOCK UNITS.

         8.1 TIME, AMOUNT AND FORM OF AWARDS. Awards under the Plan may be
granted in the form of Restricted Shares, in the form of Stock Units, or in any
combination of both. Restricted Shares or Stock Units may also be awarded in
combination with NSOs or SARs, and such an Award may provide that the Restricted
Shares or Stock Units will be forfeited in the event that the related NSOs or
SARs are exercised.

         8.2 PAYMENT FOR AWARDS. To the extent that an Award is granted in the
form of newly issued Restricted Shares, the Award recipient, as a condition to
the grant of such Award, shall be required to pay the Company in cash an amount
equal to the par value of such Restricted Shares. To the extent that an Award is
granted in the form of Restricted Shares from the Company's treasury or in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.

         8.3 VESTING CONDITIONS. Each Award of Restricted Shares or Stock Units
shall become vested, in full or in installments, upon satisfaction of the
conditions specified in the Stock Award Agreement. A Stock Award Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of making an Award or thereafter, that such Award shall become fully vested
in the event that a Change in Control occurs with respect to the Company.

         8.4 FORM AND TIME OF SETTLEMENT OF STOCK UNITS. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Article 10.

         8.5 DEATH OF RECIPIENT. Any Stock Units Award that becomes payable
after the recipient's death shall be distributed to the recipient's beneficiary
or beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.


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         8.6 CREDITORS' RIGHTS. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Award Agreement.

ARTICLE 9.                     VOTING AND DIVIDEND RIGHTS

         9.1 RESTRICTED SHARES. The holders of Restricted Shares awarded under
the Plan shall have the same voting, dividend and other rights as the Company's
other stockholders. A Stock Award Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid. Such additional Restricted Shares shall not reduce the
number of Common Shares available under Article 3.

         9.2 STOCK UNITS. The holders of Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Stock Unit awarded under the Plan
may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of Common Shares, or in a combination of both. Prior to distribution, any
dividend equivalents which are not paid shall be subject to the same conditions
and restrictions as the Stock Units to which they attach.

ARTICLE 10.                    PROTECTION AGAINST DILUTION.

         10.1 ADJUSTMENTS. In the event of a subdivision of the outstanding
Common Shares, a declaration of a dividend payable in Common Shares, a
declaration of a dividend payable in a form other than Common Shares in an
amount that has a material effect on the price of Common Shares, a combination
or consolidation of the outstanding Common Shares (by reclassification or
otherwise) into a lesser number of Common Shares, a recapitalization, a spin-off
or a similar occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of (a) the number of Options,
SARs, Restricted Shares and Stock Units available for future Awards under
Article 3, (b) the limitations set forth in Section 3.1 (c) the number of Stock
Units included in any prior Award which has not yet been settled, (d) the number
of Common Shares covered by each outstanding Option and SAR or (e) the Exercise
Price under each outstanding Option and SAR. Except as provided in this Article
10, a Participant shall have no rights by reason of any issue by the Company of
stock of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of any
stock dividend or any other increase or decrease in the number of shares of
stock of any class.


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         10.2 REORGANIZATIONS. In the event that the Company is a party to a
merger or other reorganization, outstanding Options, SARs, Restricted Shares and
Stock Units shall be subject to the agreement of merger or reorganization. Such
agreement may provide, without limitation, for the assumption of outstanding
Awards by the surviving corporation or its parent, for their continuation by the
Company (if the Company is a surviving corporation), for accelerated vesting and
accelerated expiration, or for settlement in cash.

ARTICLE 11.                    AWARDS UNDER OTHER PLANS

         The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Article 3.

ARTICLE 12.                    PAYMENT OF DIRECTOR'S FEES IN SECURITIES.

         12.1 EFFECTIVE DATE. No provision of this Article 12 shall be
effective unless and until the Board has determined to implement such provision.

         12.2 ELECTIONS TO RECEIVE NSOS, RESTRICTED SHARES OR STOCK UNITS. An
Outside Director may elect to receive his or her annual retainer payments and
meeting fees from the Company in the form of cash, NSOs, Restricted Shares,
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Article 12 shall be filed with the Company on the prescribed form.

         12.3 NUMBER AND TERMS OF NSOS, RESTRICTED SHARES OR STOCK UNITS. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.

ARTICLE 13.                    LIMITATION ON RIGHTS

         13.1 RETENTION RIGHTS. Neither the Plan nor any Award granted under the
Plan shall be deemed to give any individual a right to remain an Employee,
Outside Director or Consultant of the Company, a Parent or a Subsidiary. The
Company and its Parents and Subsidiaries reserve the right to terminate the
service of any Employee, Outside Director or Consultant at any time, with or
without cause, subject to applicable laws, the Company's certificate of
incorporation and by-laws and a written employment agreement (if any).

         13.2 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Common Shares covered by his or her Award prior to the time when a stock
certificate for such Common Shares is issued or, in the case of an


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Option, the time when he or she becomes entitled to receive such Common Shares
by filing a notice of exercise and paying the Exercise Price. No adjustment
shall be made for cash dividends or other rights for which the record date is
prior to such time, except as expressly provided in Articles 8, 9 and 10.

         13.3 REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Common Shares under the
Plan shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Common Shares pursuant
to any Award prior to the satisfaction of all legal requirements relating to the
issuance of such Common Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.

ARTICLE 14.                    LIMITATION ON PAYMENTS

         14.1 BASIC RULE. Any provision of the Plan to the contrary
notwithstanding, in the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company under the Plan to or for the benefit of a Participant (a "Payment")
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount; provided that the Committee, at the time of
making an Award under this Plan or at any time thereafter, may specify in
writing that such Award shall not be so reduced and shall not be subject to this
Article 14. For purposes of this Article 14, the "Reduced Amount" shall be the
amount, expressed as a present value, which maximizes the aggregate present
value of the Payments without causing any Payment to be nondeductible by the
Company because of section 280G of the Code.

         14.2 REDUCTION OF PAYMENTS. If the Auditors determine that any Payment
would be nondeductible by the Company because of section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Article 14, present
value shall be determined in accordance with section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Article 14 shall be binding upon
the Company and the Participant and shall be made within 60 days of the date
when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts


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as are then due to him or her under the Plan and shall promptly pay or transfer
to or for the benefit of the Participant in the future such amounts as become
due to him or her under the Plan.

         14.3 OVERPAYMENTS AND UNDERPAYMENTS. As a result of uncertainty in the
application of section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company which should not have been made (an "Overpayment") or that
additional Payments which will not have been made by the Company could have been
made (an "Underpayment"), consistent in each case with the calculation of the
Reduced Amount hereunder. In the event that the Auditors, based upon the
assertion of a deficiency by the Internal Revenue Service against the Company or
the Participant which the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount which is subject to taxation under section 4999 of
the Code. In the event that the Auditors determine that an Underpayment has
occurred, such Underpayment shall promptly be paid or transferred by the Company
to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in section 7872(f)(2) of the Code.

         14.4 RELATED CORPORATIONS. For purposes of this Article 14, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with section 280G(d)(5) of the Code.

ARTICLE 15.                    WITHHOLDING TAXES

         15.1 GENERAL. To the extent required by applicable federal, state,
local or foreign law, a Participant or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any withholding
tax obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.

         15.2 SHARE WITHHOLDING. The Committee may permit a Participant to
satisfy his or her statutory withholding requirements by having the Company
withhold all or a portion of any Common Shares that otherwise would be issued to
him or her or by surrendering all or a portion of any Common Shares that he or
she previously acquired. Such Common Shares shall be valued at their Fair Market
Value on the date when taxes otherwise would be withheld in cash.

ARTICLE 16.                    FUTURE OF THE PLAN.

         16.1 TERM OF THE PLAN. The Plan, as set forth herein, was adopted on
March 10, 1998, and shall become effective on such date, subject to the approval
of the stockholders of the Company. The Plan shall remain in effect until it is
terminated under Section 16.2, except that no ISOs shall be granted after March
10, 2008.


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         16.2 AMENDMENT OR TERMINATION. The Board may, at any time and for any
reason, amend or terminate the Plan. An amendment of the Plan shall be subject
to the approval of the Company's stockholders only to the extent required by
applicable laws, regulations or rules. No Awards shall be granted under the Plan
after the termination thereof. The termination of the Plan, or any amendment
thereof, shall not affect any Award previously granted under the Plan.

ARTICLE 17.                    DEFINITIONS.

         17.1 "AWARD" means any award of an Option, an SAR, a Restricted Share
or a Stock Unit under the Plan.

         17.2 "BOARD" means the Company's Board of Directors, as constituted
from time to time.

         17.3 "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:

                  (a) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other reorganization;

                  (b) A change in the composition of the Board, as a result of
which fewer than one-half of the incumbent directors are directors who either:

                           (A)      Had been directors of the Company 24 months
prior to such change; or

                           (B) Were elected, or nominated for election, to the
Board with the affirmative votes of at least a majority of the directors who had
been directors of the Company 24 months prior to such change and who were still
in office at the time of the election or nomination; or

                  (c) Any "person" (as such term is used in sections 13(d) and
14(d) of the Exchange Act) by the acquisition or aggregation of securities is or
becomes the beneficial owner, directly or indirectly, of securities of the
Company representing 50% or more of the combined voting power of the Company's
then outstanding securities ordinarily (and apart from rights accruing under
special circumstances) having the right to vote at elections of directors (the
"Base Capital Stock"); except that any change in the relative beneficial
ownership of the Company's securities by any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base Capital Stock,
and any decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or indirectly,
such person's beneficial ownership of any securities of the Company.


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         The term "Change in Control" shall not include a transaction, the sole
purpose of which is to change the state of the Company's incorporation.

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

         17.5     "COMMITTEE" means a committee of the Board, as described in
Article 2.

         17.6     "COMMON SHARE" means one share of the common stock of the
Company.

         17.7     "COMPANY" means NetLojix Communications, Inc., a Delaware
corporation.

         17.8     "CONSULTANT" means a consultant or adviser who provides bona
fide services to the Company, a Parent or a Subsidiary as an independent
contractor. Service as a Consultant shall be considered employment for all
purposes of the Plan, except as provided in Section 4.2.

         17.9     "EMPLOYEE" means a common-law employee of the Company, a
Parent or a Subsidiary.

         17.10    "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         17.11    "EXERCISE PRICE," in the case of an Option, means the amount
for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of an SAR, means an amount, as specified in the applicable SAR Agreement,
which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.

         17.12    "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee as follows:

                  (a) If the Common Shares were traded over-the-counter on the
date in question but were not traded on the Nasdaq system or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the mean between the
last reported representative bid and asked prices quoted for such date by the
principal automated inter-dealer quotation system on which the Common Shares are
quoted or, if the Common Shares are not quoted on any such system, by the "Pink
Sheets" published by the National Quotation Bureau, Inc.;

                  (b) If the Common Shares were traded over-the-counter on the
date in question and were traded on the Nasdaq system or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the last-transaction
price quoted for such date by the Nasdaq system or the Nasdaq National Market
System;

                  (c) If the Common Shares were traded on a stock exchange on
the date in question, then the Fair Market Value shall be equal to the closing
price reported by the applicable composite transactions report for such date;
and


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<PAGE>

                  (d) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good faith on such
basis as it deems appropriate.

Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the Western Edition of THE WALL STREET
JOURNAL. Such determination shall be conclusive and binding on all persons.

         17.13    "ISO" means an incentive stock option described in section
422(b) of the Code.

         17.14    "NSO" means a stock option not described in sections 422 or
423 of the Code.

         17.15    "OPTION" means an ISO or NSO granted under the Plan and
entitling the holder to purchase one Common Share.

         17.16    "OPTIONEE" means an individual or estate who holds an Option
or SAR.

         17.17    "OUTSIDE DIRECTOR" shall mean a member of the Board who is not
an Employee. Service as an Outside Director shall be considered employment for
all purposes of the Plan, except as provided in Section 4.2.

         17.18    "PARENT" means 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 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent
on a date after the adoption of the Plan shall be considered a Parent
commencing as of such date.

         17.19    "PARTICIPANT" means an individual or estate who holds an
Award.

         17.20    "PLAN" means this 1998 Stock Incentive Plan of NetLojix
Communications, Inc., as amended from time to time.

         17.21    "RESTRICTED SHARE" means a Common Share awarded under the
Plan.

         17.22    "SAR" means a stock appreciation right granted under the Plan.

         17.23    "SAR AGREEMENT" means the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.

         17.24    "STOCK AWARD AGREEMENT" means the agreement between the
Company and the recipient of a Restricted Share or Stock Unit which contains the
terms, conditions and restrictions pertaining to such Restricted Share or Stock
Unit.

         17.25    "STOCK OPTION AGREEMENT" means the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.


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<PAGE>

         17.26    "STOCK UNIT" means a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.

         17.27    "SUBSIDIARY" means 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 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.

ARTICLE 18.                    EXECUTION.

         To record the adoption of the Plan by the Board, the Company has caused
its duly authorized officer to affix the corporate name and seal hereto.

                          NETLOJIX COMMUNICATIONS, INC.

                          By         /s/ ANTHONY E. PAPA
                            --------------------------------------
                                    Anthony E. Papa,  Chairman
                                    and Chief Executive Officer


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