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                          SEEQ TECHNOLOGY INCORPORATED

                   1989 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN

                          (As Amended January 13, 1998)




                                    ARTICLE I

                               GENERAL PROVISIONS

PURPOSES OF THE PLAN

         This 1989 Nonemployee Director Stock Option Plan (the "Plan") is
intended to promote the interests of SEEQ Technology Incorporated, a Delaware
corporation (the "Corporation"), by offering nonemployee members of the Board of
Directors the opportunity to participate in a special stock option program
designed to provide them with significant incentives to remain in the service of
the Corporation.

ELIGIBILITY

         A. Each nonemployee member of the Corporation's Board of Directors (the
"Board") shall be eligible to receive automatic option grants pursuant to the
provisions of Article II below.

         B. Except for the automatic option grants to be made pursuant to the
provisions of Article II below, nonemployee Board members shall not be eligible
to receive any additional option grants or stock issuances under this Plan or
any other stock plan of the Corporation or its Parent or Subsidiary
corporations.

STOCK SUBJECT TO THE PLAN

         A. The stock issuable under the Plan shall be shares of the
Corporation's common stock ("Common Stock"). Such shares may be made available
from authorized but unissued shares of Common Stock or shares of Common Stock
reacquired by the Corporation. The aggregate number of issuable shares shall not
exceed 300,000 shares, subject to adjustment from time to time in accordance
with subparagraph D below.

         B. Should an option expire or terminate for any reason prior to
exercise in full, the shares subject to the portion of the option not so
exercised shall be available for subsequent option grants under this Plan. In
the event that shares issued under the Plan are reacquired by the Company
pursuant to any forfeiture provision, or right of repurchase , such shares shall
again be available for subsequent option grants under the Plan. Shares subject
to any option canceled in accordance with the automatic cancellation provisions
of the Plan and all share issuances under the Plan shall reduce on a
share-for-share basis the number of shares of 


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Common Stock available for subsequent option grants under the Plan. In addition,
should the exercise price of any outstanding option under the Plan be paid
through the delivery of existing shares of Common Stock, the number of shares of
Common Stock available for subsequent option grants under the Plan shall not be
reduced by the gross number of shares of Common Stock for which the option is
exercised, but by the net number of shares actually issued to the option holder.

         C. Should the total number of shares at the time available for grant
under the Plan not be sufficient for the automatic grants to be made at that
particular time to the nonemployee Board members, then the available shares
shall be allocated proportionately among all the automatic grants to be made at
that time.

         D. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock split, stock dividend, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments will be
made to (i) the aggregate number and/or class of shares of Common Stock
available for issuance under the Plan, (ii) the number of shares of Common Stock
to be made the subject of each subsequent automatic grant and (iii) the number
and/or class of shares of Common Stock purchasable under each outstanding option
and the exercise price payable per share in order to prevent the dilution or
enlargement of benefits thereunder.

VALUATION

         For purposes of establishing the option price and for all other
valuation purposes under the Plan, the Fair Market Value per share of the Common
Stock on any relevant date shall be determined in accordance with the following
rules:

         A. If the Common Stock is not at the time listed or admitted to trading
on any national securities exchange but is traded on the Nasdaq National Market,
then the fair market value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the National
Association of Securities Dealers, Inc. on the Nasdaq National Market. If there
is no reported closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for which
such quotation exists shall be determinative of fair market value.

         B. If the Common Stock is at the time listed or admitted to trading on
any national securities exchange, then the fair market value shall be the
closing selling price per share of Common Stock on the date in question on the
securities exchange serving as the primary market for the Common Stock as such
price is officially quoted on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then the fair market
value shall be the closing selling price on the exchange on the last preceding
date for which such quotation exists.

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PARENT AND SUBSIDIARY CORPORATIONS

         A. A corporation shall be deemed to be a Parent of the Corporation if
it is one of the corporations (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation, provided each such corporation
(other than the Corporation) owns, at the time of determination, stock
possessing fifty (50) percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.

         B. A corporation shall be deemed to be a Subsidiary of the Corporation
if it is one of the corporations (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation in the unbroken chain) owns, at the
time of determination, stock possessing fifty (50) percent or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain. For purposes of the Corporate Transaction provisions of the Plan,
the term "Subsidiary" shall also include any partnership, joint venture or other
business entity of which the Corporation owns, directly or indirectly through
another subsidiary corporation, more than a fifty percent (50%) interest in
voting power, capital or profits.

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                                   ARTICLE II

                             AUTOMATIC GRANT PROGRAM

GRANT DATES

         A. Each individual who was serving as a nonemployee member of the Board
on November 8, 1989 was automatically awarded, on such date, a nonstatutory
option to purchase 20,000 shares of Common Stock. Commencing with the 1991
Annual Meeting and continuing in effect for each subsequent Annual Meeting of
the Corporation's stockholders, each individual who is at the time reelected as
a nonemployee member of the Board shall receive an additional grant under the
Plan for 10,000 shares. An individual who is first elected or appointed as a
nonemployee Board member at any time after the 1990 Annual Meeting shall receive
his/her initial automatic grant for 20,000 shares at the time of his/her initial
election or appointment to the Board and shall be eligible for subsequent 10,000
share grants commencing with the second Annual Meeting following the date of
his/her initial election or appointment as a nonemployee Board member.

         B. In no event shall any nonemployee Board member be eligible to
receive an initial 20,000-share option grant or any 10,000-share annual option
grants under the Plan if such individual has been appointed or elected to the
Board pursuant to any contractual or other right or arrangement.

TERMS AND CONDITIONS OF GRANT

         Each option granted in accordance with the automatic grant provisions
of this Article II shall be evidenced by an instrument in the form of the
prototype non-statutory stock option agreement and restricted stock purchase
agreement attached to the Plan as Exhibits A and B. Accordingly, each such
automatic grant shall be subject to the following terms and conditions:

               1.   Option Price.

         The option price per share shall be one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the automatic grant date.

               2.   Term and Exercisability of Options.

                    (a) Each option granted on or after March 10, 1998 under the
initial automatic grant shall become exercisable in twenty-four (24) equal
monthly installments from the date of the Annual Stockholder Meeting at which it
is granted. Each option granted on or after March 10, 1998 under the annual
automatic grant shall become exercisable in twelve (12) equal monthly
installments from the date of the Annual Stockholders Meeting at which it is
granted. The option shall thereafter remain so exercisable until the expiration
or sooner termination of the option term.

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                    (b) Upon the non-employee Board member's cessation of Board
service for reason of death or permanent disability, all of the automatic
options granted shall become fully exercisable. For all relevant purposes under
this Article II, disability shall mean the optionee's inability, by reason of
any physical or mental injury or illness expected to result in death or to be of
continuous duration of twelve (12) consecutive months or more, to perform
his/her normal and usual duties as a Board member.

                    (c) Each granted option shall have a maximum term of ten
(10) years measured from the automatic grant date.

               3.   Exercise of Option.

         Upon exercise of the option, the option price for the purchased shares
shall become immediately payable in one of the alternate forms specified below:

                    (a) cash or cash equivalents (such as a personal check
payable to the Corporation's order); or

                    (b) shares of Common Stock held by the optionee for the
requisite period necessary to avoid a charge to the Corporation's reported
earnings and valued at Fair Market Value on the date of exercise; or

                    (c) full payment through a special sale and remittance
procedure pursuant to which the Optionee is to provide irrevocable written
instructions (i) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, an amount sufficient to cover
the aggregate option price payable for the purchased shares and (ii) to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale transaction; or

                    (d) any combination of the foregoing so long as the total
payment equals the aggregate option price for the purchased shares.

               4.   Nontransferability.

         During the lifetime of the optionee, the option, together with any
stock appreciation right pertaining to such option, shall be exercisable only by
the optionee and shall not be assignable or transferable by the optionee other
than a transfer of the option by will or by the laws of descent and distribution
following the optionee's death.

               5.   Effect of Termination of Board Membership.

                    (a) Should an optionee cease to be a member of the Board for
any reason (other than death) prior to the expiration of one or more automatic
grants under this Article II, then each such grant shall remain exercisable, for
any shares of Common Stock for which the option is exercisable or in which the
optionee is vested at the time of cessation of 


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Board membership, for a three (3) month period following the date of such
cessation of Board membership.

                    (b) Should an optionee cease to be a member of the Board by
reason of optionee's death, then any outstanding automatic grant held by the
optionee at the time of death may be subsequently exercised, for any or all of
the option shares, by the personal representative of the optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
optionee's will or in accordance with the laws of descent and distribution. Any
such exercise must, however, occur within twelve (12) months after the date of
the optionee's death.

                    (c) In no event shall any automatic option grant remain
exercisable after the specified expiration date of the ten (10)-year option
term. Upon the expiration of the applicable exercise period specified in
subparagraphs a and b above or (if earlier) upon the expiration of the ten (10)
year option term, the option shall terminate and cease to be exercisable.

               6.   Stockholder Rights.

         An option holder shall have none of the rights of a stockholder with
respect to any shares covered by the automatic grant until such individual shall
have exercised the option, paid the option price and been issued a stock
certificate for the purchased shares.

CORPORATE TRANSACTION

         In the event of one or more of the following transactions ("Corporate
Transaction"):

               1. a merger or acquisition in which the Corporation is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State of the Corporation's incorporation;

               2. the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation to any entity other than a
Subsidiary of the Corporation; or

               3. any reverse merger in which the Corporation is the surviving
entity but in which fifty (50) percent or more of the Corporation's outstanding
voting stock is transferred to holders different from those who held the stock
immediately prior to such merger;

         then each automatic option grant at the time outstanding under this
Article II Program and not otherwise at the time fully exercisable shall
automatically accelerate and become immediately exercisable for any or all of
the shares subject to the option, and any unvested shares at that time
outstanding under the Plan or otherwise issuable pursuant to outstanding option
grants under the Plan will immediately vest in full. Immediately following the
consummation of such Corporate Transaction, all outstanding options under this
Article II 


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shall terminate and cease to be exercisable, except to the extent assumed by the
successor corporation (or its parent company).

CHANGE IN CONTROL

         A. In the event there should occur a Change in Control (as defined
below), then each automatic option grant at the time outstanding under the Plan
and not otherwise at the time fully exercisable shall automatically accelerate
and become fully exercisable for any or all of the shares at the time subject to
such option, and any unvested shares at that time outstanding under the Plan or
otherwise issuable pursuant to outstanding option grants under the Plan will
immediately vest in full.

         B. In addition, each option which has been outstanding for at least six
months will be automatically canceled on the tenth business day following the
Change in Control, in exchange for a cash payment from the Corporation equal to
the excess of (i) the fair market value on the date of cancellation of the
shares of Common Stock for which the canceled option is at the time exercisable,
whether or not such shares are otherwise at the time vested, over (ii) the
option price payable for such shares. For purposes of determining the amount
payable to an optionee upon cancellation of the option, the fair market value of
the shares for which the canceled option is exercisable will be deemed to be
equal to the greater of the Fair Market Value per share on the date of
cancellation or, if applicable, the highest reported price per share paid by the
tender offeror in effecting the Change in Control.

         C. A Change in Control shall be deemed to occur should (i) a person or
related group of persons, other than the Corporation or a person that directly
or indirectly controls, is controlled by, or is under common control with the
Corporation, acquire twenty-five percent (25%) or more of the outstanding Common
Stock pursuant to a tender or exchange offer which the Board does not recommend
the stockholders to accept or should (ii) a change in the composition of the
Board occur such that the individuals elected to the Board at the last
stockholder meeting at which there is not a contested election subsequently
cease to comprise a majority of the Board by reason of a contested election for
Board membership.

RESERVATION OF RIGHTS

         The automatic grants in effect under this Article II shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

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                                   ARTICLE III

                            MISCELLANEOUS PROVISIONS

AMENDMENT OF THE PLAN

         The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever; provided, however,
that in no event shall any amendments or modifications be made to the Plan which
(i) alter rights and obligations with respect to options at the time outstanding
under the Plan without the optionee's consent, or (ii) require stockholder
approval without obtaining stockholder approval to the extent required by law
for any such amendments.

EFFECTIVE DATE AND TERM OF PLAN

         A. The Plan became effective on the date of its adoption by the Board.
The Plan was amended on January 13, 1998 to increase the number of shares
issuable, to simplify the vesting schedules, to extend the term, and to delete
obsolete provisions. The amendment was approved by the stockholders at the 1998
Annual Meeting.

         B. The Plan shall terminate upon the earliest to occur of (i) January
12, 2008, (ii) the date on which all shares available for issuance under the
Plan shall have been issued pursuant to the exercise of the automatic grants
made hereunder or (iii) the date on which all outstanding options are cashed out
in connection with the Change in Control provisions of the Plan. If the date of
termination is determined under clause (i) or (ii) above, then any option grants
or unvested shares outstanding on such date shall not be affected by the
termination of the Plan and shall continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants or
issuances.

CASH PROCEEDS

         Any cash proceeds received by the Corporation from the sale of shares
pursuant to the automatic grants made under the Plan shall be used for general
corporate purposes.

REGULATORY APPROVALS

         The implementation of the Plan, the granting of any option hereunder,
and the issuance of Common Stock upon the exercise of any such option shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the options granted
under it and the Common Stock issued pursuant to it.

NO IMPAIRMENT OF RIGHTS

         Nothing in this Plan or any automatic grant made pursuant to the Plan
shall be construed or interpreted so as to affect adversely or otherwise impair
the Corporation's right to 


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remove any Optionee from service on the Board at any time in accordance with the
provisions of applicable law.

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                                   ARTICLE IV

                         SPECIAL ONE-TIME OPTION GRANTS

SPECIAL GRANTS

         On the date of the 1996 Annual Stockholders Meeting, a special one-time
option grant shall be made to the following nonemployee Board members: an option
grant for 40,000 shares of Common Stock to the Corporation's Chairman of the
Board, Mr. Alan V. Gregory, and an option for 10,000 shares of Common Stock to
the other eligible nonemployee Board member who has not been appointed to the
Board pursuant to any contractual or other right or arrangement, Mr. Charles C.
Harwood. These special one-time grants were approved by the stockholders at the
1996 Annual Meeting.

TERMS AND CONDITIONS OF SPECIAL GRANT

         Each option granted in accordance with the provisions of this Article
IV shall be subject to the following terms and conditions and shall be evidenced
by a stock option agreement incorporating such terms and conditions:

               1.   Option Price.

         The option price per share shall be one hundred percent (100%) of the
Fair Market Value per share of Common Stock on the grant date.

               2.   Term and Exercisability of Options.

                    (a) Each option shall become exercisable for any or all of
the option shares upon the optionee's completion of six (6) months of Board
service measured from the grant date.

                    (b) Each option shall have a maximum term of ten (10) years
measured from the grant date.

               3. Repurchase Rights.

         Any unvested shares of Common Stock purchased upon the exercise of an
Article IV grant shall be subject to repurchase by the Corporation, at the
original option price paid per share, upon the optionee's cessation of Board
membership for any reason other than death or disability prior to his completion
of one (1) year of Board service measured from the grant date.

               4. Nontransferability.

         During the lifetime of the optionee, the option, together with any
stock appreciation right pertaining to such option, shall be exercisable only by
the optionee and shall 


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not be assignable or transferable by the optionee other than a transfer of the
option by will or by the laws of descent and distribution following the
optionee's death.

               5. Remaining Terms and Provisions.

         All the remaining terms and provisions of the special one-time option
grants to be made pursuant to this Article IV shall be the same as those in
effect for the automatic option grants made pursuant to the Article II Program.


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