<PAGE>
 
                                                                   EXHIBIT 10.13
 
                              PLANAR SYSTEMS, INC.

                           1996 STOCK INCENTIVE PLAN


     1.   Purposes of the Plan.  The purposes of this Stock Incentive Plan are
          --------------------                                                
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.

     Options granted hereunder may be either "incentive stock options," as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"nonqualified stock options," at the discretion of the Board and as reflected in
the terms of the written option agreement.  In addition, shares of the Company's
Common Stock may be Sold hereunder independent of any Option grant.

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

          (a) "Administrator" shall mean the Board or any of its Committees as
               -------------                                                  
shall be administering the Plan, in accordance with Section 4.(a) of the Plan.

          (b) "Board" shall mean the Board of Directors of the Company.
               -----                                                   

          (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
               ----                                                           

          (d) "Committee" shall mean a committee appointed by the Board in
               ---------                                                  
accordance with Section 0 of the Plan.

          (e) "Common Stock" shall mean the Common Stock of the Company.
               ------------                                             

          (f) "Company" shall mean Planar Systems, Inc., an Oregon corporation.
               -------                                                         

          (g) "Consultant" shall mean any person who is engaged by the Company
               ----------                                                     
or any Parent or Subsidiary to render consulting services and is compensated for
such consulting services and any Director of the Company whether compensated for
such services or not.

          (h) "Continuous Status as an Employee or Consultant" shall mean the
               ----------------------------------------------                
absence of any interruption or termination of service as an Employee or
Consultant.  Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) any sick leave, military leave, or
any other leave of absence approved by the Company ; provided, however, that for
purposes of Incentive Stock Options, any such leave is for a period of not more
than ninety days or reemployment upon the expiration of such leave is guaranteed
by contract or statute, provided, further, that on the ninety-first day of such
leave (where re-employment is not guaranteed by contract or statute) the
Optionee's Incentive Stock Option shall automatically convert to a Nonqualified
Stock Option; or (ii) 

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transfers between locations of the Company or between the Company, its Parent,
its Subsidiaries or its successor.

          (i) "Director" shall mean a member of the Board.
               --------                                   

          (j) "Disability" shall mean total and permanent disability as defined
               ----------                                                      
in Section 22(e)(3) of the Code.

          (k) "Employee" shall mean any person, including Officers and
               --------                                               
Directors, employed by the Company or any Parent or Subsidiary.  Neither the
payment of a director's fee by the Company nor service as a Director shall be
sufficient to constitute "employment" by the Company.

          (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
               ------------                                                    
amended.

          (m) "Incentive Stock Option" shall mean an Option intended to qualify
               ----------------------                                          
as an incentive stock option within the meaning of Section 422 of the Code.

          (n) "Nonqualified Stock Option" shall mean an Option not intended to
               -------------------------                                      
qualify as an incentive stock option within the meaning of Section 422 of the
Code.

          (o) "Notice of Grant" shall mean a written notice evidencing certain
               ---------------                                                
terms and conditions of an individual Option grant.  The Notice of Grant is part
of the Option Agreement.

          (p) "Officer" shall mean 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.

          (q) "Option" shall mean a stock option granted pursuant to the Plan.
               ------                                                         

          (r) "Option Agreement" shall mean a written agreement between the
               ----------------                                            
Company and an Optionee evidencing the terms and conditions of an individual
Option grant.  The Option Agreement is subject to the terms and conditions of
the Plan.

          (s) "Optioned Stock" shall mean the Common Stock subject to an Option.
               --------------                                                   

          (t) "Optionee" shall mean an Employee or Consultant who receives an
               --------                                                      
Option.

          (u) "Parent" shall mean a "parent corporation," whether now or
               ------                                                   
hereafter existing, as defined in Section 424(e) of the Code.


          (v) "Plan" shall mean this 1996 Stock Incentive Plan.
               ----                                            

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          (w) "Rule 16b-3"  shall mean Rule 16b-3 of the Exchange Act or any
               ----------                                                   
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.

          (x) "Sale" or "Sold" shall include, with respect to the sale of Shares
               ----      ----                                                   
under the Plan, the sale of Shares for consideration in the form of cash or
notes, as well as a grant of Shares for consideration in the form of past or
future services.

          (y) "Share" shall mean a share of the Common Stock, as adjusted in
               -----                                                        
accordance with Section 0 of the Plan.

          (z) "Subsidiary" shall mean a "subsidiary corporation," whether now or
               ----------                                                       
hereafter existing, as defined in Section 424(f) of the Code.

     3.   Stock Subject to the Plan.  Subject to the provisions of Section 0
          -------------------------                                           
of the Plan, the maximum aggregate number of Shares which may be optioned and/or
Sold under the Plan is 1,200,000 shares of Common Stock.  The Shares may be
authorized, but unissued, or reacquired Common Stock.

     If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
Option grants and/or Sales under the Plan; provided, however, that Shares that
have actually been issued under the Plan shall not be returned to the Plan and
shall not become available for future distribution under the Plan.

     4.   Administration of the Plan.
          -------------------------- 

          (a)  Procedure.
               --------- 

          (i)  Multiple Administrative Bodies.  If permitted by Rule 16b-3, the
               ------------------------------                                  
Plan may be administered by different bodies with respect to Directors, Officers
who are not Directors, and Employees who are neither Directors nor Officers.

          (ii)  Administration With Respect to Directors and Officers Subject to
                ----------------------------------------------------------------
Section 16(b).  With respect to Option grants made to Employees who are also
-------------                                                               
Officers or Directors subject to Section 16(b) of the Exchange Act, the Plan
shall be administered by (A) the Board, if the Board may administer the Plan in
compliance with the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3, or (B) a Committee designated by the Board
to administer the Plan, which Committee shall be constituted to comply with the
rules, if any, governing a plan intended to qualify as a discretionary plan
under Rule 16b-3. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional members,
remove members (with or

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without cause) and substitute new members, fill vacancies (however caused),
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3.  With respect to persons
subject to Section 16 of the Exchange Act, transactions under the Plan are
intended to comply with all applicable conditions of Rule 16b-3.  To the extent
any provision of the Plan or action by the Administrator fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Administrator.

          (iii)  Administration With Respect to Other Persons.  With respect to
                 --------------------------------------------                  
Option grants made to Employees or Consultants who are neither Directors nor
Officers of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee designated by the Board, which Committee shall be constituted to
satisfy the legal requirements relating to the administration of stock option
plans under applicable corporate and securities laws and the Code.  Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board.  The Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the legal requirements relating to the administration of stock
option plans under state corporate and securities laws and the Code.

          (b) Powers of the Administrator.  Subject to the provisions of the
              ---------------------------                                   
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:

               (i) to grant Incentive Stock Options in accordance with Section
422 of the Code, or Nonqualified Stock Options;

               (ii) to authorize Sales of Shares of Common Stock hereunder;

               (iii) to determine, upon review of relevant information and in
accordance with Section 0 of the Plan, the fair market value of the Common
Stock;

               (iv) to determine the exercise/purchase price per Share of
Options to be granted or Shares to be Sold, which exercise/purchase price shall
be determined in accordance with Section 0 of the Plan;

               (v) to determine the Employees or Consultants to whom, and the
time or times at which, Options shall be granted and the number of Shares to be
represented by each Option;

               (vi) to determine the Employees or Consultants to whom, and the
time or times at which, Shares shall be Sold and the number of Shares to be
Sold;

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               (vii) to interpret the Plan;

               (viii) to prescribe, amend and rescind rules and regulations
relating to the Plan;

               (ix) to determine the terms and provisions of each Option granted
(which need not be identical) and, with the consent of the holder thereof,
modify or amend each Option;

               (x) to determine the terms and provisions of each Sale of Shares
(which need not be identical) and, with the consent of the purchaser thereof,
modify or amend each Sale;

               (xi) to accelerate or defer (with the consent of the Optionee)
the exercise date of any Option;

               (xii) to accelerate or defer (with the consent of the Optionee or
purchaser of Shares) the vesting restrictions applicable to Shares Sold under
the Plan or pursuant to Options granted under the Plan;

               (xiii) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an Option or Sale of
Shares previously granted or authorized by the Board;

               (xiv) to determine the restrictions on transfer, vesting
restrictions, repurchase rights, or other restrictions applicable to Shares
issued under the Plan;

               (xv) to effect, at any time and from time to time, with the
consent of the affected Optionees, the cancellation of any or all outstanding
Options under the Plan and to grant in substitution therefor new Options under
the Plan covering the same or different numbers of Shares, but having an Option
price per Share consistent with the provisions of Section 0 of this Plan as of
the date of the new Option grant;

               (xvi) to establish, on a case-by-case basis, different terms and
conditions pertaining to exercise or vesting rights upon termination of
employment, whether at the time of an Option grant or Sale of Shares, or
thereafter;

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

               (xviii) to reduce the exercise price of any Option to the then
current fair market value if the fair market value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;

               (xix) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(f) instead of Common Stock; and

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               (xx) to make all other determinations deemed necessary or
advisable for the administration of the Plan.

          (c) Effect of Administrator's Decision.  All decisions, determinations
              ----------------------------------                                
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options granted under the Plan or Shares
Sold under the Plan.

     5.   Eligibility.
          ----------- 

          (a) Persons Eligible.  Options may be granted and/or Shares Sold only
              ----------------                                                 
to Employees and Consultants.  Incentive Stock Options may be granted only to
Employees.  An Employee or Consultant who has been granted an Option or Sold
Shares may, if he or she is otherwise eligible, be granted an additional Option
or Options or Sold additional Shares.

          (b) ISO Limitation.  To the extent that the aggregate fair market
              --------------                                               
value: (i) of Shares subject to an Optionee's Incentive Stock Options granted by
the Company, any Parent or Subsidiary, which (ii) become exercisable for the
first time during any calendar year (under all plans of the Company or any
Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonqualified Stock Options.  For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the fair market value of the Shares shall be determined as of the time of grant.

          (c) Section 0 Limitations.  Section 0 of the Plan shall apply only
              ----------------------                                          
to an Incentive Stock Option evidenced by an Option Agreement which sets forth
the intention of the Company and the Optionee that such Option shall qualify as
an Incentive Stock Option.  Section 0 of the Plan shall not apply to any Option
evidenced by a Option Agreement which sets forth the intention of the Company
and the Optionee that such Option shall be a Nonqualified Stock Option.

          (d) No Right to Continued Employment.  The Plan shall not confer upon
              --------------------------------                                 
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his employment or consulting
relationship at any time, with or without cause.

          (e) Other Limitations.  The following limitations shall apply to
              -----------------                                           
grants of Options to Employees:

               (i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 200,000 Shares.

               (ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 200,000 Shares
which shall not count 

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against the limit set forth in subsection (i) above.

          (iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.

          (iv) If an Option is canceled in the same fiscal year of the Company
in which it was granted (other than in connection with a transaction described
in Section 11, the canceled Option shall be counted against the limits set forth
in subsections (i) and (ii)) above.  For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.

     6.   Term of Plan.  The Plan shall become effective upon the earlier to
          ------------                                                      
occur of its adoption by the Board or its approval by the stockholders of the
Company as described in Section 0 of the Plan.  It shall continue in effect
for a term of ten (10) years, unless sooner terminated under Section 0 of the
Plan.
 
     7.   Term of Option.  The term of each Option shall be stated in the Notice
          --------------                                                        
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant.  However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant
thereof or such shorter term as may be provided in the Notice of Grant.

     8.   Exercise/Purchase Price and Consideration.
          ----------------------------------------- 

          (a) Exercise/Purchase Price.  The per-Share exercise/purchase price
              -----------------------                                        
for the Shares to be issued pursuant to exercise of an Option or a Sale shall be
such price as is determined by the Administrator, but shall be subject to the
following:

               (i) In the case of an Incentive Stock Option

                   (A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than one hundred ten
percent (110%) of the fair market value per Share on the date of the grant.

                   (B) granted to any other Employee, the per Share exercise
price shall be no less than one hundred percent (100%) of the fair market value
per Share on the date of grant.

              (ii) In the case of a Nonqualified Stock Option or Sale, the per
Share exercise/purchase price shall be determined by the Administrator.

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              (iii) Any determination to establish an Option exercise price or
effect a Sale of Common Stock at less than fair market value on the date of the
Option grant or authorization of Sale shall be accompanied by an express finding
by the Administrator specifying that the sale is in the best interest of the
Company, and specifying both the fair market value and the Option exercise price
or Sale price of the Common Stock.

          (b) Fair Market Value.  The fair market value per Share shall be
              -----------------                                           
determined by the Administrator in its discretion; provided, however, that where
there is a public market for the Common Stock, the fair market value per Share
shall be the closing price of the Common Stock (or the closing bid if no sales
were reported) for the last market trading day prior to the date of grant of the
Option or authorization of Sale or other determination, as reported in The Wall
                                                                       --------
Street Journal (or, if not so reported, as otherwise reported by the National
--------------                                                               
Association of Securities Dealers Automated Quotation (NASDAQ) System) or, in
the event the Common Stock is listed on a stock exchange, the fair market value
per Share shall be the closing price on such exchange for the last market
trading day prior to the date of grant of the Option or authorization of Sale or
other determination, as reported in The Wall Street Journal.
                                    ----------------------- 

          (c) Consideration.  The consideration to be paid for the Shares to be
              -------------                                                    
issued upon exercise of an Option or pursuant to a Sale, including the method of
payment, shall be determined by the Administrator.  In the case of an Incentive
Stock Option, the Administrator shall determine the acceptable form of
consideration at the time of grant.  Such consideration may consist of:

               (i)  cash;

               (ii) check;

               (iii) transfer to the Company of Shares which

                    (A)  in the case of Shares acquired upon exercise of an
Option, have been owned by the Optionee for more than six months on the date of
surrender, and

                    (B)  have a fair market value on the date of surrender equal
to the aggregate exercise price of the Shares to be acquired;

          (iv) delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price;

          (v) delivery of instructions to the Company to withhold from the
Shares that would otherwise be issued on the exercise that number of Shares
having a fair market value at the time of such exercise equal to the Option
exercise price;

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          (vi) such other consideration and method of payment for the issuance
of Shares to the extent permitted by legal requirements relating to the
administration of stock option plans and issuances of capital stock under
applicable corporate and securities laws and the Code; or

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

     If the fair market value of the number of whole Shares transferred or the
number of whole Shares surrendered is less than the total exercise price of the
Option, the shortfall must be made up in cash or by check.  Notwithstanding the
foregoing provisions of this Section 8.(c), the consideration for Shares to be
issued pursuant to a Sale may not include, in whole or in part, the
consideration set forth in subsections (iii), (iv) or (v) above.

     9.   Exercise of Option.
          ------------------ 

          (a) Procedure for Exercise; Rights as a Stockholder.  Any Option
              -----------------------------------------------             
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan.

          An Option may not be exercised for a fraction of a Share.

          An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company.  Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under the Option Agreement and
Section 0 of the Plan.  Each Optionee who exercises an Option shall, upon
notification of the amount due (if any) and prior to or concurrent with delivery
of the certificate representing the Shares, pay to the Company amounts necessary
to satisfy applicable federal, state and local tax withholding requirements.  An
Optionee must also provide a duly executed copy of any stock transfer agreement
then in effect and determined to be applicable by the Administrator.  Until the
issuance (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a stockholder shall exist with respect to the Optioned Stock
represented by such stock certificate, notwithstanding the exercise of the
Option.  No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 0 of the Plan.

          Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.

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          (b) Termination of Employment or Consulting Relationship.  In the
              ----------------------------------------------------         
event that an Optionee's Continuous Status as an Employee or Consultant
terminates (other than upon the Optionee's death or Disability), the Optionee
may exercise his or her Option, but only within such period of time as is
determined by the Administrator, and only to the extent that the Optionee was
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Notice of Grant).
In the case of an Incentive Stock Option, the Administrator shall determine such
period of time (in no event to exceed three (3) months from the date of
termination) when the Option is granted.  If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option with the
time specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

          (c) Disability of Optionee.  In the event that an Optionee's
              ----------------------                                  
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant).  If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.

          (d) Death of Optionee.  In the event of the death of an Optionee, the
              -----------------                                                
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death.  If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan.  If, after death, the Optionee's
estate or a person who acquired the right to exercise the Option by bequest or
inheritance does not exercise the Option within the time specified herein, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.

          (e) Rule 16b-3.  Options granted to persons subject to Section 16(b)
              ----------                                                      
of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.

          (f) Buyout Provisions.  The Administrator may at any time offer to buy
              -----------------                                                 
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time

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that such offer is made.

     10.  Nontransferability of Options.  Except as otherwise specifically
          -----------------------------                                   
provided in the Option Agreement, an Option may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will, or by
the laws of descent and distribution, and may be exercised during the lifetime
of the Optionee only by the Optionee or, if incapacitated, by his or her legal
guardian or legal representative.

     11.  Adjustments Upon Changes in Capitalization or Merger.
          ---------------------------------------------------- 

          (a)  Changes in Capitalization: Subject to any required action by the
               -------------------------                                       
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or Sales made or which have been returned to the Plan upon cancellation
or expiration of an Option, as well as the price per share of Common Stock
covered by each such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration."  Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive.  Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.

          (b)  Dissolution or Liquidation.  In the event of the proposed
               --------------------------                               
dissolution or liquidation of the Company, each outstanding Option will
terminate immediately prior to the consummation of such proposed action, unless
otherwise provided by the Administrator.  The Administrator may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.

          (c)  Merger or Asset Sale.  In the event of a proposed sale of all or
               --------------------                                            
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a Parent
or Subsidiary of such successor corporation, unless the Administrator
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Administrator makes an Option
fully exercisable in lieu of assumption or substitution in the event of a merger
or sale of assets, the Administrator shall

11 - 1996 STOCK INCENTIVE PLAN
<PAGE>
 
notify the Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice or such shorter period as the
Administrator may specify in the notice, and the Option will terminate upon the
expiration of such period. For the purposes of this paragraph, the Option shall
be considered assumed if, following the merger or sale of assets, the Option
confers the right to purchase, for each Share of Optioned Stock subject to the
Option immediately prior to the merger or sale of assets, the consideration
(whether stock, cash, or other securities or property) received in the merger or
sale of assets by holders of Common Stock for each Share held on the effective
date of the transaction (and if holders were offered a choice of consideration,
the type of consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the merger or
sale of assets was not solely common stock of the successor corporation or its
Parent, the Administrator may, with the consent of the successor corporation and
the Optionee, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock subject to the Option, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.

     12.  Time of Granting Options.  The date of grant of an Option shall, for
          ------------------------                                            
all purposes, be the date on which the Administrator makes the determination
granting such Option.  Notice of the determination shall be given to each
Optionee within a reasonable time after the date of such grant.

     13.  Amendment and Termination of the Plan.
          ------------------------------------- 

          (a) Amendment and Termination.  The Board may amend or terminate the
              -------------------------                                       
Plan from time to time in such respects as the Board may deem advisable.

          (b)  Stockholder Approval.  The Company shall obtain stockholder
               --------------------                                       
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted).  Such stockholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.

          (c)  Effect of Amendment or Termination.  Any such amendment or
               ----------------------------------                        
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by the Optionee
and the Company.

     14.  Conditions Upon Issuance of Shares.  Shares shall not be issued
          ----------------------------------                             
pursuant to the exercise of an Option or a Sale unless the exercise of such
Option or consummation of the Sale and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as

12 - 1996 STOCK INCENTIVE PLAN
<PAGE>
 
amended, applicable state securities laws, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
(including NASDAQ) upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

     15.  Reservation of Shares.  The Company, during the term of this Plan,
          ---------------------                                             
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

     16.  Liability of Company.
          -------------------- 

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

          As a condition to the exercise of an Option or a Sale, the Company may
require the person exercising such Option or to whom Shares are being Sold to
represent and warrant at the time of any such exercise or Sale that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.

          (b)  Grants Exceeding Allotted Shares.  If the Optioned Stock covered
               --------------------------------                                
by an Option exceeds, as of the date of grant, the number of Shares which may be
issued under the Plan without additional stockholder approval, such Option shall
be void with respect to such excess Optioned Stock, unless stockholder approval
of an amendment sufficiently increasing the number of Shares subject to the Plan
is timely obtained in accordance with Section 13 of the Plan.

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

13 - 1996 STOCK INCENTIVE PLAN