EXHIBIT 10.9






                             VODAVI TECHNOLOGY, INC.
               SECOND AMENDED AND RESTATED 1994 STOCK OPTION PLAN
                      (As amended through October 20, 1997)

                                    ARTICLE I
                                     General

         1.1 Purpose of Plan; Term

                  (a)  Adoption.  On December 29,  1994,  the Board of Directors
(the  "Board")  of  Vodavi  Technology,   Inc.,  a  Delaware   corporation  (the
"Company"),  adopted a stock  option plan to be known as the Vodavi  Technology,
Inc. Stock Option Plan (the "Original Plan"). The Original Plan was subsequently
approved the stockholders of the Company on July 12, 1995. On February 26, 1996,
the Board  adopted an amended and  restated  1994 Stock  Option Plan (the "First
Revised Plan") whereby the Automatic Grant Program was added,  additional shares
of Stock were authorized to be issued,  and certain other technical changes were
made. The stockholders of the company approved the First Revised Plan on May 24,
1996.  On October 20, 1997,  the Board adopted a newly amended and restated 1994
Stock Option Plan (the "Second Revised Plan") whereby certain  technical changes
were made. The Second Revised Plan does not require approval by the stockholders
of the  Company  and shall be  effective  as of the date of its  adoption by the
Board.  The Second  Revised Plan shall be known as the Vodavi  Technology,  Inc.
Second  Amended  and  Restated  1994  Stock  Option  Plan  (the  "Plan").   When
applicable,  the term "Plan" shall  include the  Original  Plan and/or the First
Revised Plan.

                  (b) Defined Terms. All initially capitalized terms used hereby
shall have the meaning set forth in Article V hereto.

                  (c)  General  Purpose.  The  Plan  shall be  divided  into two
programs: the Discretionary Grant Program and the Automatic Grant Program.

                           (i) Discretionary  Grant Program.  The purpose of the
Discretionary  Grant  Program is to further the interests of the Company and its
stockholders by encouraging  key persons  associated with the Company (or Parent
or Subsidiary  Corporations) to acquire shares of the Company's  Stock,  thereby
acquiring a  proprietary  interest in its  business  and an  increased  personal
interest  in  its  continued  success  and  progress.   Such  purpose  shall  be
accomplished by providing for the  discretionary  granting of options to acquire
the  Company's  Stock  ("Discretionary  Options"),  the direct  granting  of the
Company's  Stock ("Stock  Awards"),  the granting of stock  appreciation  rights
("SARs"),  or the granting of other cash awards ("Cash  Awards")  (Stock Awards,
SARs and Cash Awards shall be collectively  referred to herein as "Discretionary
Awards").

                           (ii)  Automatic  Grant  Program.  The  purpose of the
Automatic  Grant Program is to promote the interests of the Company by providing
non-employee  members  of the Board the  opportunity  to  acquire a  proprietary
interest,  or otherwise increase their proprietary  interest, in the Company and
to thereby  have an increased  personal  interest in its  continued  success and
progress.  Such purpose  shall be  accomplished  by providing  for the automatic
grant of options to acquire the Company's Stock ("Automatic Options").

                  (d) Character of Options.  Discretionary Options granted under
this Plan to  employees  of the Company (or Parent or  Subsidiary  Corporations)
that are intended to qualify as
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"incentive  stock  options"  as defined in Code  section 422  ("Incentive  Stock
Options") will be specified in the applicable stock option agreement.  All other
Options granted under this Plan will be nonqualified options.

                  (e) Rule 16b-3 Plan.  With  respect to persons  subject to the
reporting  requirements of the Securities Exchange Act of 1934 (the "1934 Act"),
the Plan is intended to comply with all applicable conditions of Rule 16b-3 (and
all  subsequent  revisions  thereof)  promulgated  under the 1934  Act.  In such
instance,  to  the  extent  any  provision  of  the  Plan  or  action  by a Plan
Administrator  fails to so  comply,  it shall be deemed  null and  void,  to the
extent  permitted  by law and deemed  advisable by such Plan  Administrator.  In
addition,  the Board may amend the Plan from time to time as it deems  necessary
in order to meet the  requirements  of any  amendments to Rule 16b-3 without the
consent of the shareholders of the Company.

                  (f)  Duration  of  Plan.  The  term of the  Plan  is 10  years
commencing  on the  date  of  adoption  of the  Original  Plan by the  Board  as
specified in Section  1.1(a)  hereof.  No Option or Award shall be granted under
the Plan unless  granted within 10 years of the adoption of the Original Plan by
the  Board,  but  Options  or  Awards  outstanding  on that  date  shall  not be
terminated or otherwise affected by virtue of the Plan's expiration.

         1.2 Stock and Maximum Number of Shares Subject to Plan.

                  (a)  Description  of Stock and Maximum Shares  Allocated.  The
shares of stock sub- ject to the  provisions  of the Plan and issuable  upon the
grant of Stock Awards or upon the exercise of SARs or Options  granted under the
Plan are shares of the Company's  common  stock,  $.001 par value per share (the
"Stock"),  which may be either unissued or treasury shares.  The Company may not
issue more than 850,000 shares of Stock pursuant to the Plan, unless the Plan is
amended as provided in Section  1.3 or the maximum  number of shares  subject to
the Plan is adjusted as provided in Section 4.1.

                  (b) Calculation of Available  Shares.  The number of shares of
Stock  available  under the Plan  shall be  reduced:  (i) by any shares of Stock
issued (including any shares of Stock withheld for tax withholding requirements)
upon exercise of an Option and (ii) by any shares of Stock issued (including any
shares of Stock withheld for tax withholding  requirements)  upon the grant of a
Stock Award or the exercise of an SAR.

                  (c)  Restoration  of Unpurchased  Shares.  If an Option or SAR
expires or  terminates  for any reason  prior to its exercise in full and before
the term of the Plan  expires,  the shares of Stock  subject  to, but not issued
under,  such Option or SAR shall,  without  further action or by or on behalf of
the Company, again be available under the Plan.

         1.3 Approval; Amendments.

                  (a)  Approval  by  Stockholders.  The First  Revised  Plan was
approved by the  stockholders  of the Company on May 24, 1996. The date on which
such  stockholder  approval  was  obtained  shall be  referred  to herein as the
"Effective Date."

                  (b) Commencement of Programs.  The Discretionary Grant Program
became  effective on December 29,  1994.  The  Automatic  Grant  Program  became
effective on the Effective Date.
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                  (c) Amendments to Plan.  The Board may,  without action on the
part of the Company's  stockholders,  make such  amendments  to,  changes in and
additions  to the  Plan  as it  may,  from  time  to  time,  deem  necessary  or
appropriate  and in the best interests of the Company;  provided,  the Board may
not, without the consent of the applicable  Optionholder,  take any action which
disqualifies  any  Discretionary  Option  previously  granted under the Plan for
treatment as an Incentive Stock Option or which adversely affects or impairs the
rights of the Optionholder of any  Discretionary  Option  outstanding  under the
Plan, and further  provided that,  except as provided in Article IV hereof,  the
Board may not, without the approval of the Company's stockholders,  (i) increase
the  aggregate  number of shares of Stock  subject to the Plan,  (ii) reduce the
exercise  price at which  Discretionary  Options may be granted or the  exercise
price at which any  outstanding  Discretionary  Option may be  exercised,  (iii)
extend  the term of the Plan,  (iv)  change  the class of  persons  eligible  to
receive  Discretionary  Options or  Discretionary  Awards under the Plan, or (v)
materially  increase  the  benefits  accruing  to  participants  under the Plan.
Notwithstanding the foregoing, Discretionary Options or Discretionary Awards may
be granted  under this Plan to purchase  shares of Stock in excess of the number
of shares then  available  for  issuance  under the Plan if (A) an  amendment to
increase the maximum number of shares  issuable under the Plan is adopted by the
Board prior to the initial grant of any such Option or Award and within one year
thereafter such amendment is approved by the Company's stockholders and (B) each
such  Discretionary  Option  or  Discretionary  Award  granted  does not  become
exercisable  or vested,  in whole or in part, at any time prior to the obtaining
of such stockholder approval.

                                   ARTICLE II
                           Discretionary Grant Program

         2.1 Participants; Administration.

                  (a) Eligibility and Participation.  Discretionary  Options and
Discretionary  Awards may be granted only to persons ("Eligible Persons") who at
the time of grant are (i) key personnel  (including  officers and  directors) of
the  Company  or Parent  or  Subsidiary  Corporations,  or (ii)  consultants  or
independent  contractors who provide valuable  services to the Company or Parent
or Subsidiary Corporations;  provided that (1) if a Senior Committee exists, the
members of that Senior Committee shall be ineligible, during their tenure on the
Senior Committee,  to be granted  Discretionary  Options or Discretionary Awards
under the Plan or to be granted  or awarded  equity  securities  of the  Company
pursuant to any other plan of the Company or its affiliates  except  pursuant to
the Automatic Grant Program or as otherwise  allowed under the 1934 Act, and (2)
Incentive Stock Options may only be granted to key personnel of the Company (and
its Parent or Subsidiary  Corporation) who are also employees of the Company (or
its Parent or Subsidiary  Corporation),  and (3) the maximum number of shares of
Stock  with  respect to which  Options or Awards may be granted to any  employee
during  the term of the Plan  shall not exceed 50 percent of the shares of Stock
covered by the Plan. A Plan Administrator shall have full authority to determine
which Eligible  Persons in its administered  group are to receive  Discretionary
Option  grants  under the Plan,  the number of shares to be covered by each such
grant,  whether or not the granted  Discretionary  Option is to be an  Incentive
Stock Option,  the time or times at which each such  Discretionary  Option is to
become exercisable,  and the maximum term for which the Discretionary  Option is
to be  outstanding.  A Plan  Administrator  shall  also have full  authority  to
determine  which  Eligible  Persons in such  group are to receive  Discretionary
Awards under the Discretionary Grant Program and the conditions relating to such
Discretionary Award.

                  (b) General  Administration.  The Eligible  Persons  under the
Discretionary  Grant Program shall be divided into two groups and there shall be
a separate administrator for each group. One
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group will be comprised of Eligible Persons that are Affiliates. For purposes of
this Plan,  the term  "Affiliates"  shall mean all  "officers"  (as that term is
defined in Rule  16a-1(f)  promulgated  under the 1934 Act) and directors of the
Company and all persons who own ten percent or more of the Company's  issued and
outstanding   equity  securities.   Initially,   the  power  to  administer  the
Discretionary Grant Program with respect to Eligible Persons that are Affiliates
shall be vested  with the Board.  At any time,  however,  the Board may vest the
power to administer the Discretionary Grant Program with respect to Persons that
are Affiliates  exclusively with a committee (the "Senior Committee")  comprised
of two or more Non-  Employee  Directors  who are  appointed  by the Board.  The
Senior Committee, in its sole discretion,  may require approval of the Board for
specific grants of Discretionary Options or Awards under the Discretionary Grant
Program.  The  administration  of all Eligible  Persons that are not  Affiliates
("Non-  Affiliates")  shall be vested  exclusively  with the  Board.  The Board,
however,  may at any time appoint a committee (the "Employee  Committee") of two
or more  persons  who are  members of the Board and  delegate  to such  Employee
Committee the power to administer the  Discretionary  Grant Program with respect
to the  Non-Affiliates.  In  addition,  the Board may  establish  an  additional
committee or  committees of persons who are members of the Board and delegate to
such other  committee or committees  the power to administer all or a portion of
the Discretionary Grant program with respect to all or a portion of the Eligible
Persons.  Members  of the  Senior  Committee,  Employee  Committee  or any other
committee allowed hereunder shall serve for such period of time as the Board may
determine  and shall be subject  to removal by the Board at any time.  The Board
may at any time  terminate  all or a  portion  of the  functions  of the  Senior
Committee,  the Employee Committee, or any other committee allowed hereunder and
reassume all or a portion of powers and authority  previously  delegated to such
committee.  The Board in its  discretion  may also  require  the  members of the
Senior  Committee,  the  Employee  Committee  or  any  other  committee  allowed
hereunder to be "outside  directors"  as that term is defined in any  applicable
regulations promulgated under Code section 162(m).

                  (c) Plan  Administrators.  The Board, the Employee  Committee,
Senior  Committee,  and/or any other committee allowed  hereunder,  whichever is
applicable,  shall be each  referred to herein as a "Plan  Administrator."  Each
Plan Administrator shall have the authority and discretion,  with respect to its
administered  group, to select which Eligible  Persons shall  participate in the
Discretionary  Grant Program,  to grant  Discretionary  Options or Discretionary
Awards  under the  Discretionary  Grant  Program,  to  establish  such rules and
regulations   as  they  may  deem   appropriate   with  respect  to  the  proper
administration   of  the   Discretionary   Grant   Program   and  to  make  such
determinations under, and issue such interpretations of, the Discretionary Grant
Program and any outstanding  Discretionary Option or Discretionary Award as they
may deem necessary or advisable.  Unless otherwise  required by law or specified
by the Board with  respect to any  committee,  decisions  among the members of a
Plan Administrator shall be by majority vote.  Decisions of a Plan Administrator
shall  be  final  and  binding  on all  parties  who  have  an  interest  in the
Discretionary  Grant  Program  or  any  outstanding   Discretionary   Option  or
Discretionary Award.
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<PAGE>
                  (d) Guidelines for Participation. In designating and selecting
Eligible Persons for  participation in the Discretionary  Grant Program,  a Plan
Administrator  shall consult with and give consideration to the  recommendations
and criticisms submitted by appropriate managerial and executive officers of the
Company.  A Plan  Administrator  also  shall  take into  account  the duties and
responsibilities  of the Eligible  Persons,  their past,  present and  potential
contributions  to the success of the  Company  and such other  factors as a Plan
Administrator  shall deem relevant in connection with  accomplishing the purpose
of the Plan.

         2.2 Terms and Conditions of Discretionary Options

                  (a) Allotment of Shares. A Plan Administrator  shall determine
the number of shares of Stock to be optioned from time to time and the number of
shares to be optioned to any Eligible Person (the "Optioned Shares").  The grant
of a Discretionary  Option to a person shall neither entitle such person to, nor
disqualify  such  person  from,  participation  in any other grant of Options or
Stock Awards under this Plan or any other stock option plan of the Company.

                  (b)  Exercise  Price.  Upon  the  grant  of any  Discretionary
Option,  a Plan  Administrator  shall specify the option price per share. If the
Discretionary  Option is intended to qualify as an Incentive  Stock Option under
the Code,  the  option  price per share may not be less than 100  percent of the
fair market value per share of the stock on the date the Discretionary Option is
granted (110 percent if the Discretionary Option is granted to a stockholder who
at the time the  Discretionary  Option is granted owns or is deemed to own stock
possessing  more than 10  percent  of the  total  combined  voting  power of all
classes of stock of the Company or of any Parent or Subsidiary Corporation). The
determination  of the fair market value of the Stock shall be made in accordance
with the valuation provisions of Section 4.5 hereof.

                  (c) Individual Stock Option Agreements.  Discretionary Options
granted under the Plan shall be evidenced by option  agreements in such form and
content as a Plan  Administrator  from time to time approves,  which  agreements
shall  substantially  comply  with and be  subject  to the  terms  of the  Plan,
including the terms and  conditions of this Section 2.2. As determined by a Plan
Administrator,  each option agreement shall state (i) the total number of shares
to which it  pertains,  (ii) the  exercise  price for the shares  covered by the
Option, (iii) the time at which the Options vest and become exercisable and (iv)
the Option's  scheduled  expiration date. The option agreements may contain such
other  provisions  or  conditions  as a Plan  Administrator  deems  necessary or
appropriate to effectuate the sense and purpose of the Plan, including covenants
by the  Optionholder not to compete and remedies for the Company in the event of
the breach of any such covenant.

                  (d) Option Period.  No Discretionary  Option granted under the
Plan that is intended to be an Incentive Stock Option shall be exercisable for a
period  in  excess of 10 years  from the date of its  grant  (five  years if the
Discretionary   Option  is  granted  to  a  shareholder  who  at  the  time  the
Discretionary  Option is granted owns or is deemed to own stock  possessing more
than 10 percent of the total  combined  voting  power of all classes of stock of
the Company or of any Parent or any Subsidiary Corporation),  subject to earlier
termination in the event of  termination  of employment,  retirement or death of
the Optionholder.  A Discretionary Option may be exercised in full or in part at
any time or from time to time  during  the term of the  Discretionary  Option or
provide  for its  exercise in stated  installments  at stated  times  during the
Option's term.
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<PAGE>
                  (e)  Vesting;  Limitations.  The time at which  Options may be
exercised  with respect to an  Optionholder  shall be in the  discretion of that
Optionholder's Plan Administrator.  Notwithstanding the foregoing, to the extent
a Discretionary  Option is intended to qualify as an Incentive Stock Option, the
aggregate fair market value  (determined  as of the respective  date or dates of
grant) of the Stock for which one or more  Options  granted to any person  under
this Plan (or any other  option plan of the Company or its Parent or  Subsidiary
Corporations)  may for the first time  become  exercisable  as  Incentive  Stock
Options  during any one  calendar  year  shall not  exceed  the sum of  $100,000
(referred to herein as the "$100,000 Limitation"). To the extent that any person
holds two or more  Options  which become  exercisable  for the first time in the
same  calendar  year,  the  foregoing  limitation  on the  exercisability  as an
Incentive  Stock Option shall be applied on the basis of the order in which such
Options are granted.

                  (f) No Fractional  Shares.  Options shall be exercisable  only
for whole  shares;  no  fractional  shares will be issuable upon exercise of any
Discretionary Option granted under the Plan.

                  (g) Method of Exercise. To exercise a Discretionary Option, an
Optionholder (or in the case of an exercise after an Optionholder's  death, such
Optionholder's  executor,  administrator,  heir or legatee,  as the case may be)
must take the following action:

                           (i)  execute  and  deliver  to the  Company a written
notice of exercise signed in writing by the person  exercising the Discretionary
Option  specifying  the  number  of shares of Stock  with  respect  to which the
Discretionary Option is being exercised;

                           (ii)  pay the  aggregate  Option  Price in one of the
alternate forms as set forth in Section 2.2(h) below; and

                           (iii)  furnish  appropriate  documentation  that  the
person or  persons  exercising  the  Discretionary  Option  (if  other  than the
Optionholder) has the right to exercise such Option.

As soon as practicable after the Exercise Date, the Company will mail or deliver
to or on behalf of the Optionholder (or any other person or persons exercising a
Discretionary Option under the Plan) a certificate or certificates  representing
the Stock acquired upon exercise of the Discretionary Option.

                  (h) Payment of Option Price.  The aggregate Option Price shall
be payable in one of the alternative forms specified below:

                           (i) Full payment in cash or check made payable to the
Company's order; or

                           (ii) Full  payment  in  shares of Stock  held for the
requisite period necessary to avoid a charge to the Company's  reported earnings
and  valued  at fair  market  value  on the  Exercise  Date  (as  determined  in
accordance with Section 4.5 hereof); or

                           (iii)  If  a  cashless   exercise  program  has  been
implemented by the Board,  full payment through a sale and remittance  procedure
pursuant  to which  the  Optionholder  (A)  shall  provide  irrevocable  written
instructions to a designated  brokerage firm to effect the immediate sale of the
Optioned  Shares  to be  purchased  and  remit to the  Company,  out of the sale
proceeds  available  on the  settlement  date,  sufficient  funds to  cover  the
aggregate exercise price payable for the Optioned Shares to be purchased and (B)
shall  concurrently  provide  written  directives  to the Company to deliver the
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<PAGE>
certificates for the Optioned Shares to be purchased  directly to such brokerage
firm in order to complete the sale transaction.

                  (i) Repurchase Right. The Plan  Administrator may, in its sole
discretion,  set forth other terms and conditions upon which the Company (or its
assigns)  shall  have the right to  repurchase  shares of Stock  acquired  by an
Optionholder  pursuant to a Discretionary  Option.  Any repurchase  right of the
Company shall be exercisable  by the Company (or its assignees)  upon such terms
and  conditions as the Plan  Administrator  may specify in the Stock  Repurchase
Agreement  evidencing  such  right.  The  Plan  Administrator  may  also  in its
discretion  establish  as a term  and  condition  of one or  more  Discretionary
Options  granted  under the Plan that the  Company  shall  have a right of first
refusal  with  respect  to  any  proposed  sale  or  other  disposition  by  the
Optionholder   of  any  shares  of  Stock  issued  upon  the  exercise  of  such
Discretionary  Options.  Any such right of first refusal shall be exercisable by
the Company (or its assigns) in  accordance  with the terms and  conditions  set
forth in the Stock Repurchase Agreement.

                  (j) Termination of Incentive Stock Options.

                           (i)  Termination  of  Service.  If  any  Optionholder
ceases  to be in  Service  to the  Company  for a reason  other  than  permanent
disability or death,  such  Optionholder  may,  within 90 days after the date of
termination  of  such  Service,  but  in no  event  after  the  Option's  stated
expiration  date,  exercise some or all of the Incentive  Stock Options that the
Optionholder  was  entitled to exercise on the date the  Optionholder's  Service
terminated;  provided,  that if the  Optionholder  is  discharged  for  Cause or
commits acts  detrimental  to the Company's  interests  after the Service of the
Optionholder  has  been  terminated,  then  the  Incentive  Stock  Options  will
thereafter be void for all purposes. "Cause" shall mean a termination of Service
based upon a finding by the applicable Plan Administrator that the Optionholder:
(i) has committed a felony involving  dishonesty,  fraud, theft or embezzlement;
(ii) after written notice from the Company has repeatedly failed or refused,  in
a material respect, to follow reasonable  policies or directives  established by
the Company;  (iii) after  written  notice from the Company,  has  willfully and
persistently  failed to  attend to  material  duties  or  obligations;  (iv) has
performed an act or failed to act,  which,  if he were prosecuted and convicted,
would  constitute  a theft of  money  or  property  of the  Company;  or (v) has
misrepresented or concealed a material fact for purposes of securing  employment
with the Company.  If any Optionholder ceases to be in Service to the Company by
reason of  permanent  disability  within the meaning of section  22(e)(3) of the
Code (as determined by the applicable Plan Administrator), the Optionholder will
have 12 months after the date of termination  of Service,  but in no event after
the stated  expiration date of the  Optionholder's  Incentive Stock Options,  to
exercise  Incentive Stock Options that the Optionholder was entitled to exercise
on the date the Optionholder's Service terminated as a result of the disability.

                           (ii) Death of Optionholder.  If an Optionholder  dies
while  in  the  Company's   Service,   any  Incentive  Stock  Options  that  the
Optionholder  was entitled to exercise on the date of death will be  exercisable
within six months  after  such date or until the stated  expiration  date of the
Optionholder's Incentive Stock Options, whichever occurs first, by the person or
persons ("successors") to whom the Optionholder's rights pass under a will or by
the laws of descent and  distribution.  As soon as practicable  after receipt by
the Company of the notice of exercise and of payment in full of the Option Price
as specified in Sections  2.2(g) and (h) hereof,  a certificate or  certificates
representing  the  Optioned  Shares  shall  be  registered  in the name or names
specified  by the  successors  in the written  notice of  exercise  and shall be
delivered to the successors.
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                  (k) Termination of Nonqualified Options. Any Options which are
not  Incentive   Stock  Options  and  which  are  exercisable  at  the  time  an
Optionholder ceases to be in Service to the Company shall remain exercisable for
such period of time  thereafter as determined by the Plan  Administrator  at the
time of grant and set forth in the documents  evidencing  such  Options.  In the
absence of any provision in the  documents  evidencing  such Option,  the Option
shall remain  exercisable (i) for a period of six months after  termination as a
result  of the  Optionholder's  death;  (ii) for a period  of 12  months  if the
Optionholder  ceases to be in  service  to the  Company  by reason of  permanent
disability  within the meaning of section 22(e)(3) of the Code); and (iii) for a
period of 90 days after  termination  for any other  reason;  provided,  that no
Option shall be  exercisable  after the Option's  stated  expiration  date,  and
provided  further,  that if the Optionholder is discharged for Cause (as defined
in Section  2.2(j)(i)) or commits acts  detrimental  to the Company's  interests
after the Service of the Optionholder has been terminated,  then the Option will
thereafter be void for all purposes.

                  (l) Other Plan Provisions Still Applicable. If a Discretionary
Option is exercised upon the  termination of Service or death of an Optionholder
under this Section 2.2, the other  provisions of the Plan will continue to apply
to such  exercise,  including  the  requirement  that  the  Optionholder  or its
successor may be required to enter into a Stock Repurchase Agreement.

                  (m) Definition of "Service". For purposes of this Plan, unless
it is evidenced  otherwise in the option  agreement with the  Optionholder,  the
Optionholder  is  deemed  to be in  "Service"  to the  Company  so  long as such
individual renders continuous services on a periodic basis to the Company (or to
any Parent or Subsidiary Corporation) in the capacity of an employee,  director,
or an  independent  consultant or advisor.  In the  discretion of the applicable
Plan  Administrator,   an  Optionholder  will  be  considered  to  be  rendering
continuous  services to the Company even if the type of services  change,  e.g.,
from employee to independent consultant.  The Optionholder will be considered to
be an  employee  for so long as such  individual  remains  in the  employ of the
Company or one or more of its Parent or Subsidiary Corporations.

         2.3 Terms and Conditions of Stock Awards

                  (a)  Eligibility.  All Eligible  Persons  shall be eligible to
receive Stock Awards.  The Plan  Administrator of each administered  group shall
determine  the number of shares of Stock to be awarded  from time to time to any
Eligible  Person in such group.  Except as provided  otherwise in this Plan, the
grant of a Stock Award to a person (a  "Grantee")  shall  neither  entitle  such
person to, nor disqualify such person from  participation in, any other grant of
options  or awards by the  Company,  whether  under this Plan or under any other
stock option or award plan of the Company.

                  (b) Award for Services Rendered. Stock Awards shall be granted
in recognition of an Eligible Person's  services to the Company.  The grantee of
any such Stock  Award  shall not be  required  to pay any  consideration  to the
Company upon  receipt of such Stock Award,  except as may be required to satisfy
any  applicable  corporate  law,  employment  tax and/or income tax  withholding
requirements.

                  (c) Conditions to Award.  All Stock Awards shall be subject to
such terms,  conditions,  restrictions,  or limitations  as the applicable  Plan
Administrator  deems appropriate,  including,  by way of illustration but not by
way of limitation,  restrictions on  transferability,  requirements of continued
employment,  individual performance or the financial performance of the Company,
or payment by the recipient of any applicable  employment or withholding  taxes.
Such Plan Administrator may
                                       8
<PAGE>
modify or accelerate the termination of the restrictions applicable to any Stock
Award under the circumstances as it deems appropriate.

                  (d) Award  Agreements.  A Plan  Administrator may require as a
condition to a Stock Award that the  recipient of such Stock Award enter into an
award agreement in such form and content as that Plan Administrator from time to
time approves.

         2.4 Terms and Conditions of SARs

                  (a)  Eligibility.  All Eligible  Persons  shall be eligible to
receive SARs. The Plan  Administrator of each administered group shall determine
the SARs to be awarded from time to time to any  Eligible  Person in such group.
The  grant of a SAR to a person  shall  neither  entitle  such  person  to,  nor
disqualify  such  person  from  participation  in, any other grant of options or
awards by the Company,  whether  under this Plan or under any other stock option
or award plan of the Company.

                  (b)  Award of SARs.  Concurrently  with or  subsequent  to the
grant of any  Discretionary  Option to purchase one or more shares of Stock, the
Plan  Administrator  may award to the Optionholder with respect to each share of
Stock  underlying  the  Discretionary  Option,  a  related  SAR  permitting  the
Optionholder to be paid any appreciation on that Stock in lieu of exercising the
Option. In addition, a Plan Administrator may award to any Eligible Person a SAR
permitting  the  Eligible  Person to be paid the  appreciation  on a  designated
number of shares of the Stock, whether or not such Shares are actually issued.

                  (c)  Conditions  to SAR.  All SARs  shall be  subject  to such
terms,   conditions,   restrictions   or  limitations  as  the  applicable  Plan
Administrator  deems appropriate,  including,  by way of illustration but not by
way of limitation,  restrictions on  transferability,  requirements of continued
employment,  individual  performance,  financial  performance of the Company, or
payment by the recipient of any applicable employment or withholding taxes. Such
Plan  Administrator may modify or accelerate the termination of the restrictions
applicable to any SAR under the circumstances as it deems appropriate.

                  (d) SAR  Agreements.  A Plan  Administrator  may  require as a
condition to the grant of a SAR that the  recipient of such SAR enter into a SAR
agreement in such form and content as that Plan  Administrator from time to time
approves.

                  (e)  Exercise.  An Eligible  Person who has been granted a SAR
may  exercise  such  SAR  subject  to  the  conditions  specified  by  the  Plan
Administrator in the SAR agreement.

                  (f)  Amount of  Payment.  The  amount of  payment to which the
grantee of a SAR shall be entitled  upon the exercise of each SAR shall be equal
to the amount, if any, by which the fair market value of the specified shares of
Stock on the exercise date exceeds the fair market value of the specified shares
of Stock on the date the Discretionary  Option related to the SAR was granted or
became  effective,  or, if the SAR is not related to any Option, on the date the
SAR was granted or became effective.

                  (g) Form of  Payment.  The SAR may be paid in  either  cash or
Stock, as determined in the discretion of the applicable Plan  Administrator and
set forth in the SAR agreement. If the payment is in Stock, the number of shares
to be paid to the participant  shall be determined by dividing the amount of the
payment  determined  pursuant to Section  2.4(f) by the fair  market  value of a
share of Stock on the
                                       9
<PAGE>
exercise  date of such SAR. As soon as  practical  after  exercise,  the Company
shall deliver to the SAR grantee a certificate or  certificates  for such shares
of Stock.

                  (h)   Termination  of  Employment;   Death.   Section  2.2(j),
applicable  to  Incentive  Stock  Options,  and Section  2.2(k),  applicable  to
nonqualified  Options,  shall  apply  equally to SARs issued in tandem with such
Options.  Section  2.2(k) shall apply to SARs that are not issued in tandem with
any Options.

         2.5 Other Cash Awards

                  (a) In General.  The Plan  Administrator of each  administered
group shall have the discretion to make other awards of cash to Eligible Persons
in such group ("Cash  Awards").  Such Cash Awards may relate to existing Options
or to the appreciation in the value of the Stock or other Company securities.

                  (b)  Conditions to Award.  All Cash Awards shall be subject to
such terms,  conditions,  restrictions  or limitations  as the  applicable  Plan
Administrator  deems  appropriate,  and such Plan Administrator may require as a
condition to such Cash Award that the recipient of such Cash Award enter into an
award agreement in such form and content as the Plan  Administrator from time to
time approves.

                                   ARTICLE III
                             Automatic Grant Program

         3.1 Eligible  Directors under the Automatic Grant Program.  The persons
eligible to participate in the Automatic Grant Program shall be limited to Board
members who are not  employed by the  Company,  whether or not such  persons are
Non-Employee Directors as defined herein ("Eligible Directors"). Persons who are
eligible  under the  Automatic  Grant  Program  may also be  eligible to receive
Discretionary  Options or  Discretionary  Awards under the  Discretionary  Grant
Program or option  grants or direct  stock  issuances  under  other plans of the
Company.

         3.2 Terms and Conditions of Automatic Option Grants.

                  (a)  Amount  and Date of Grant.  During the term of this Plan,
grants  of  Automatic   Options  shall  be  made  to  each   Eligible   Director
("Optionholder") as follows:

                           (i) Annual Grants. Each year on the Annual Grant Date
an  Automatic  Option to acquire  5,000 shares of Stock shall be granted to each
Eligible  Director  for so long as there  are  shares of Stock  available  under
Section 1.2 hereof.  The "Annual  Grant Date" shall be the date of the Company's
annual stockholders  meeting commencing as of the first annual meeting occurring
after the Effective  Date.  Any Eligible  Director that was granted an Automatic
Option under  Section  3.2(a)(ii)  hereof within 90 days of an Annual Grant Date
shall be  ineligible  to receive an  Automatic  Option  Grant  pursuant  to this
Section 3.2(a)(i) on such Annual Grant Date.

                           (ii)  Initial  New  Director  Grants.  On the Initial
Grant Date,  every new member of the Board who is an Eligible  Director  and has
not previously  received an Automatic Option grant under this Section 3.2(a)(ii)
shall be granted an  Automatic  Option to acquire  5,000  shares of Stock for so
long as there are  shares of Stock  available  under  Section  1.2  hereof.  The
"Initial Grant Date" shall
                                       10
<PAGE>
be the date that an  Eligible  Director  is first  appointed  or  elected to the
Board. Any Eligible Director that was previously  granted an Automatic Option on
the Effective Date pursuant to Section 3.2(a)(iii) hereof shall be ineligible to
receive an Automatic Option grant pursuant to this Section 3.2(a)(ii).

                           (iii)  Initial  Existing   Director  Grants.  On  the
commencement  date of the Automatic  Grant Program,  each Eligible  Director was
granted an Automatic Option to acquire 5,000 shares of Stock.

                  (b) Exercise Price. The exercise price per share of Stock (the
"Optioned  Shares") subject to each Automatic Option grant shall be equal to 100
percent  of the  fair  market  value  per  share  of the  Stock  on the date the
Automatic  Option was granted as  determined  in  accordance  with the valuation
provisions of Section 4.5 hereof (the "Option Price").

                  (c) Vesting. Each Automatic Option grant shall vest and become
exercisable  on the  earlier  of (i) the first  anniversary  of the date of such
grant or (ii) the day prior to the next  regularly  held  annual  meeting of the
Company's  stockholders.  Each  Automatic  Option  shall  only  vest and  become
exercisable if the  Optionholder  has not ceased serving as a Board member as of
such vesting date.

                  (d) Method of  Exercise.  In order to  exercise  an  Automatic
Option with respect to any vested Optioned  Shares,  an Optionholder  (or in the
case of an exercise after an Optionholder's death, such Optionholder's executor,
administrator,  heir or  legatee,  as the case may be) must  take the  following
action:

                           (i)  execute  and  deliver  to the  Company a written
notice of  exercise  signed in writing by the person  exercising  the  Automatic
Option  specifying  the  number  of shares of Stock  with  respect  to which the
Automatic Option is being exercised;

                           (ii)  pay the  aggregate  Option  Price in one of the
alternate forms as set forth in Section 3.2(e) below; and

                           (iii)  furnish  appropriate  documentation  that  the
person  or  persons   exercising  the  Automatic   Option  (if  other  than  the
Optionholder) has the right to exercise such Option.

As soon as  practicable  after the  Exercise  Date,  the  Company  shall mail or
deliver  to or on behalf of the  Optionholder  (or any other  person or  persons
exercising  the  Automatic  Option in  accordance  herewith)  a  certificate  or
certificates  representing  the Stock for which the  Automatic  Option  has been
exercised in  accordance  with the  provisions of this Plan. In no event may any
Automatic Option be exercised for any fractional shares.

                  (e) Payment of Option Price.  The aggregate Option Price shall
be payable in one of the alternative forms specified below:

                           (i) full payment in cash or check made payable to the
Company's order; or

                           (ii) full  payment  in  shares of Stock  held for the
requisite period necessary to avoid a charge to the Company's  reported earnings
and  valued  at fair  market  value  on the  Exercise  Date  (as  determined  in
accordance with Section 4.5 hereof); or
                                       11
<PAGE>
                           (iii)  if  a  cashless   exercise  program  has  been
implemented by the Board,  full payment through a sale and remittance  procedure
pursuant  to which  the  Optionholder  (A)  shall  provide  irrevocable  written
instructions to a designated  brokerage firm to effect the immediate sale of the
Optioned  Shares  to be  purchased  and  remit to the  Company,  out of the sale
proceeds  available  on the  settlement  date,  sufficient  funds to  cover  the
aggregate exercise price payable for the Optioned Shares to be purchased and (B)
shall  concurrently  provide  written  directives  to the Company to deliver the
certificates for the Optioned Shares to be purchased  directly to such brokerage
firm in order to complete the sale transaction.

                  (f) Term of Option.  Each Automatic Option shall expire on the
tenth  anniversary  of the date on  which an  Automatic  Option  grant  was made
("Expiration  Date").  Except  as  provided  in  Article  IV  hereof,  should an
Optionholder's  service as a Board member cease prior to the Expiration Date for
any reason while an Automatic Option remains  outstanding and unexercised,  then
the Automatic Option term shall immediately be modified and the Automatic Option
shall  terminate and cease to be  outstanding  in accordance  with the following
provisions:

                           (i) The Automatic Option shall immediately  terminate
and cease to be outstanding for any Optioned Shares which were not vested at the
time of the Optionholder's cessation of Board service.

                           (ii)  Should an  Optionholder  cease,  for any reason
other than death, to serve as a member of the Board, then the Optionholder shall
have 90 days measured from the date of such  cessation of Board service in which
to  exercise  the  Automatic  Options  which  vested  prior  to the time of such
cessation of Board service.  In no event,  however,  may any Automatic Option be
exercised after the Expiration Date of such Automatic Option.

                           (iii) Should an  Optionholder  die while serving as a
Board  member or within  90 days  after  cessation  of Board  service,  then the
personal  representative of the Optionholder's  estate (or the person or persons
to whom the Automatic Option is transferred  pursuant to the Optionholder's will
or in accordance with the laws of descent and distribution)  shall have a 90 day
period measured from the date of the  Optionholder's  cessation of Board service
in which to exercise  the  Automatic  Options  which vested prior to the time of
such cessation of Board service. In no event,  however, may any Automatic Option
be exercised after the Expiration Date of such Automatic Option.

                                   ARTICLE IV
                                  Miscellaneous

         4.1  Capital  Adjustments.  The  aggregate  number  of  shares of Stock
subject  to the Plan,  the  number of shares  of Stock  covered  by  outstanding
Options and Awards and the price per share stated in all outstanding Options and
Awards,  and the number of shares of Stock covered by unissued Automatic Options
shall be proportionately  adjusted for any increase or decrease in the number of
outstanding  shares of Stock of the  Company  resulting  from a  subdivision  or
consolidation  of shares or any other  capital  adjustment  or the  payment of a
stock  dividend  or any other  increase or decrease in the number of such shares
effected  without  the  Company's  receipt of  consideration  therefor in money,
services or property.

         4.2 Mergers,  Etc. If the Company is the surviving  corporation  in any
merger or consolidation (not including a Corporate  Transaction),  any Option or
Award  granted  under the Plan shall  pertain to and apply to the  securities to
which a holder of the number of shares of Stock subject to the
                                       12
<PAGE>
Option or Award would have been entitled  prior to the merger or  consolidation.
Except as provided in Section 4.3 hereof,  a dissolution  or  liquidation of the
Company shall cause every Option or Award outstanding hereunder to terminate.

         4.3 Corporate  Transaction.  In the event of stockholder  approval of a
Corporate  Transaction,  (a) all unvested Automatic Options shall  automatically
accelerate and immediately vest so that each outstanding Automatic Option shall,
one week prior to the specified  effective  date for the Corporate  Transaction,
become  fully  exercisable  for all of the  Optioned  Shares  and  (b) the  Plan
Administrator shall have the discretion and authority,  exercisable at any time,
to provide  for the  automatic  acceleration  of one or more of the  outstanding
Discretionary Options or Discretionary Awards granted by it under the Plan. Upon
the consummation of the Corporate Transaction,  all Options shall, to the extent
not previously exercised, terminate and cease to be outstanding.

         4.4 Change in Control.

                  (a)  Automatic  Grant  Program.  In the  event of a Change  in
Control,  all unvested  Automatic  Options shall  automatically  accelerate  and
immediately  vest so that each outstanding  Automatic Option shall,  immediately
prior to the effective date of such Change in Control,  become fully exercisable
for all of the Optioned Shares.  Thereafter,  each Automatic Option shall remain
exercisable until the Expiration Date of such Automatic Option.

                  (b) Discretionary  Grant Program.  In the event of a Change in
Control,  a  Plan  Administrator   shall  have  the  discretion  and  authority,
exercisable  at any time,  whether  before or after the  Change in  Control,  to
provide for the automatic acceleration of one or more outstanding  Discretionary
Options or Discretionary Awards granted by it under the Plan upon the occurrence
of such Change in Control. A Plan Administrator may also impose limitations upon
the  automatic  acceleration  of such  Options  or Awards to the extent it deems
appropriate.  Any Options or Awards  accelerated  upon a Change in Control  will
remain fully  exercisable  until the  expiration  or sooner  termination  of the
Option term.

                  (c) Incentive Stock Option Limits.  The  exercisability of any
Discretionary  Options which are intended to qualify as Incentive  Stock Options
and which are accelerated by the Plan Administrator in connection with a pending
Corporation Transaction or Change in Control shall, except as otherwise provided
in the discretion of the Plan Administrator and the Optionholder, remain subject
to the $100,000 Limitation and vest as quickly as possible without violating the
$100,000 Limitation.

         4.5 Calculation of Fair Market Value of Stock. The fair market value of
a share of Stock on any relevant date shall be determined in accordance with the
following provisions:

                  (a) If the  Stock is not at the time  listed  or  admitted  to
trading on any stock exchange but is traded in the over-the-counter  market, the
fair  market  value shall be the mean  between the highest bid and lowest  asked
prices (or, if such  information  is available,  the closing  selling price) per
share of Stock on the date in question in the  over-the-counter  market, as such
prices are reported by the National  Association of Securities  Dealers  through
its Nasdaq  system or any  successor  system.  If there are no reported  bid and
asked prices (or closing  selling  price) for the Stock on the date in question,
then the mean  between  the  highest  bid price and lowest  asked  price (or the
closing  selling  price) on the last  preceding  date for which such  quotations
exist shall be determinative of fair market value.
                                       13
<PAGE>
                  (b) If the Stock is at the time  listed or admitted to trading
on any stock  exchange,  then the fair market value shall be the closing selling
price  per  share  of  Stock  on the  date in  question  on the  stock  exchange
determined by the Board to be the primary market for the Stock, as such price is
officially  quoted in the composite tape of  transactions  on such exchange.  If
there is no reported  sale of 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.

                  (c) If the Stock at the time is neither listed nor admitted to
trading on any stock exchange nor traded in the  over-the-counter  market,  then
the fair market value shall be determined by the Board after taking into account
such  factors  as the  Board  shall  deem  appropriate,  including  one or  more
independent professional appraisals.

         4.6 Use of Proceeds. The proceeds received by the Company from the sale
of Stock pursuant to the exercise of Options or Awards hereunder,  if any, shall
be used for general corporate purposes.

         4.7  Cancellation of Options.  Each Plan  Administrator  shall have the
authority to effect,  at any time and from time to time, with the consent of the
affected Optionholders, the cancellation of any or all outstanding Discretionary
Options  granted  under  the  Plan by that  Plan  Administrator  and to grant in
substitution  therefore  new  Discretionary  Options under the Plan covering the
same or different  numbers of shares of Stock as long as such new  Discretionary
Options  have an  exercise  price per  share of Stock no less  than the  minimum
exercise price as set forth in Section 2.2(b) hereof on the new grant date.

         4.8 Regulatory Approvals.  The implementation of the Plan, the granting
of any Option or Award hereunder, and the issuance of Stock upon the exercise of
any such Option or Award shall be subject to the  procurement  by the Company of
all approvals and permits required by regulatory authorities having jurisdiction
over the Plan,  the  Options  or Awards  granted  under it and the Stock  issued
pursuant to it.

         4.9   Indemnification.   In   addition   to  such   other   rights   of
indemnification as they may have, the members of a Plan  Administrator  shall be
indemnified  and held  harmless by the Company,  to the extent  permitted  under
applicable law, for, from and against all costs and expenses reasonably incurred
by them in  connection  with any action,  legal  proceeding  to which any member
thereof may be a party by reason of any action taken, failure to act under or in
connection  with the Plan or any  rights  granted  thereunder  and  against  all
amounts paid by them in settlement  thereof or paid by them in satisfaction of a
judgment of any such action, suit or proceeding,  except a judgment based upon a
finding of bad faith.

         4.10 Plan Not Exclusive.  This Plan is not intended to be the exclusive
means by which the Company  may issue  options or warrants to acquire its Stock,
stock awards or any other type of award.  To the extent  permitted by applicable
law,  any such other  option,  warrants  or awards may be issued by the  Company
other than pursuant to this Plan without shareholder approval.

         4.11 Company  Rights.  The grants of Options shall in no way affect the
right of the Company 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.

         4.12 Rights of a Stockholder. An Optionholder shall not have any of the
rights of a stockholder  with respect to Optioned  Shares until such  individual
shall have exercised the Option and paid
                                       14
<PAGE>
the  Option  Price  for the  Optioned  Shares.  No  adjustment  will be made for
dividends or other rights for which the record date is prior to the date of such
exercise and full payment for the Optioned Shares.

         4.13  Assignment.  The right to acquire Stock or other assets under the
Plan  may  not  be  assigned,   encumbered  or  otherwise   transferred  by  any
Optionholder  except as  specifically  provided  herein.  Except as specifically
allowed by the Plan  Administrator  at the time of grant and as set forth in the
documents evidencing a Discretionary Option or Award, no Option or Award granted
under the Plan or any of the rights and  privileges  conferred  thereby shall be
assignable or  transferable  by an Optionholder or grantee other than by will or
the laws of  descent  and  distribution,  and  such  Option  or  Award  shall be
exercisable  during  the  Optionholder's  or  grantee's  lifetime  only  by  the
Optionholder  or grantee.  The provisions of the Plan shall inure to the benefit
of, and be binding  upon,  the Company and its  successors  or assigns,  and the
Optionholders,  the legal  representatives  of their respective  estates,  their
respective heirs or legatees and their permitted assignees.

         4.14 Securities Restrictions

                  (a)  Legend on  Certificates.  All  certificates  representing
shares of Stock issued under the Plan shall be endorsed with a legend reading as
follows:

                           The  shares  of  Common   Stock   evidenced  by  this
                           certificate  have been issued to the registered owner
                           in reliance upon written  representations  that these
                           shares  have been  purchased  solely for  investment.
                           These shares may not be sold, transferred or assigned
                           unless in the  opinion of the  Company  and its legal
                           counsel such sale, transfer or assignment will not be
                           in  violation  of  the  Securities  Act of  1933,  as
                           amended, and the rules and regulations thereunder.

                  (b) Private  Offering  for  Investment  Only.  The Options and
Awards are and shall be made  available  only to a limited number of present and
future key personnel and their  permitted  transferees who have knowledge of the
Company's  financial  condition,  management  and its  affairs.  The Plan is not
intended  to  provide  additional  capital  for the  Company,  but to  encourage
ownership  of Stock  among  the  Company's  key  personnel  or  their  permitted
transferees.  By the act of  accepting  an  Option  or Award,  each  grantee  or
permitted  transferee  agrees  (i) that,  any shares of Stock  acquired  will be
solely for investment and not with any intention to resell or redistribute those
shares and (ii) such intention  will be confirmed by an appropriate  certificate
at the time the Stock is acquired if requested  by the  Company.  The neglect or
failure to execute such a  certificate,  however,  shall not limit or negate the
foregoing agreement.

                  (c)  Registration   Statement.  If  a  Registration  Statement
covering  the  shares  of Stock  issuable  under  the Plan is  filed  under  the
Securities Act of 1933, as amended,  and is declared effective by the Securities
Exchange Commission,  the provisions of Sections 4.14(a) and (b) shall terminate
during  the period of time that such  Registration  Statement,  as  periodically
amended, remains effective.

         4.15     Tax Withholding.

                  (a) General.  The Company's  obligation to deliver Stock under
the Plan shall be subject to the satisfaction of all applicable  federal,  state
and local income tax withholding requirements.
                                       15
<PAGE>
                  (b)  Shares  to Pay for  Withholding.  The Board  may,  in its
discretion  and in accordance  with the  provisions of this Section  4.15(b) and
such  supplemental  rules as it may from time to time adopt,  provide any or all
Optionholders  or Grantees with the right to use shares of Stock in satisfaction
of all or part of the federal,  state and local income tax liabilities  incurred
by such  Optionholders  or  Grantees  in  connection  with the  receipt of Stock
("Taxes").  Such right may be  provided to any such  Optionholder  or Grantee in
either or both of the following formats:

                           (i) Stock Withholding. An Optionholder or Grantee may
be  provided  with the  election,  which may be subject to  approval by the Plan
Administrator,  to have the Company withhold, from the Stock otherwise issuable,
a portion of those shares of Stock with an aggregate  fair market value equal to
the percentage (not to exceed 100 percent) of the applicable Taxes designated by
the Optionholder or Grantee.

                           (ii)  Stock   Delivery.   The  Board   may,   in  its
discretion,  provide the Optionholder or Grantee with the election to deliver to
the Company,  at the time the Option is  exercised  or Stock is awarded,  one or
more shares of Stock previously acquired by such individual (other than pursuant
to the  transaction  triggering  the Taxes) with an aggregate  fair market value
equal to the  percentage  (not to exceed 100  percent) of the taxes  incurred in
connection  with  such  Option  exercise  or  Stock  Award   designated  by  the
Optionholder or Grantee.

         4.16  Governing  Law.  The Plan shall be governed by and all  questions
hereunder  shall be  determined  in  accordance  with  the laws of the  State of
Arizona.

                                    ARTICLE V
                                   Definitions

         The  following  capitalized  terms  used in this  Plan  shall  have the
meaning described below:

         "Affiliates" shall mean all "officers" (as that term is defined in Rule
16a-1(f)  promulgated  under the 1934 Act) and  directors of the Company and all
persons  who own ten  percent or more of the  Company's  issued and  outstanding
Stock.

         "Annual  Grant  Date"  shall  mean  the  date of the  Company's  annual
stockholder meeting.

         "Automatic  Grant Program" shall mean that program set forth in Article
III of this  Plan  pursuant  to which  non-employee  members  of the  Board  are
automatically granted Options upon certain events.

         "Automatic  Option Grant" shall mean those automatic option grants made
on the Annual Grant Date,  on the Initial  Grant Date,  and on the  commencement
date of the Automatic Grant Program.

         "Automatic  Options" shall mean those Options  granted  pursuant to the
Automatic Grant Program.

         "Awards" shall mean Discretionary Awards.

         "Board" shall mean the Board of Directors of the Company.
                                       16
<PAGE>
         "Cash Award"  shall mean an award to be paid in cash and granted  under
Section 2.5 hereunder.

         "Change in Control"  shall mean and include the following  transactions
or situations:

                  (i) A sale,  transfer,  or other  disposition  by the  Company
through a single  transaction or a series of  transactions  of securities of the
Company  representing  30 percent or more of the  combined  voting  power of the
Company's then  outstanding  securities to any "Unrelated  Person" or "Unrelated
Persons"  acting in concert with one another.  For purposes of this  definition,
the term  "Person"  shall mean and include any  individual,  partnership,  joint
venture, association, trust corporation, or other entity (including a "group" as
referred  to in  Section  13(d)(3)  of the  1934  Act).  For  purposes  of  this
definition,  the term "Unrelated Person" shall mean and include any Person other
than the Company,  a  wholly-owned  subsidiary  of the  Company,  or an employee
benefit plan of the Company.

                  (ii) A sale,  transfer,  or other disposition through a single
transaction  or a series  of  transactions  of all or  substantially  all of the
assets of the Company to an  Unrelated  Person or  Unrelated  Persons  acting in
concert with one another.

                  (iii) A change  in the  ownership  of the  Company  through  a
single transaction or a series of transactions such that any Unrelated Person or
Unrelated  Persons  acting in concert  with one another  become the  "Beneficial
Owner,"  directly or indirectly,  of securities of the Company  representing  at
least 30 percent of the combined voting power of the Company's then  outstanding
securities.  For purposes of this definition,  the term "Beneficial Owner" shall
have the same meaning as given to that term in Rule 13d-3  promulgated under the
1934 Act, provided that any pledgee of voting securities is not deemed to be the
Beneficial  Owner thereof prior to its acquisition of voting rights with respect
to such securities.

                  (iv) Any  consolidation  or merger of the Company with or into
an Unrelated  Person,  unless  immediately after the consolidation or merger the
holders  of  the  common  stock  of  the  Company   immediately   prior  to  the
consolidation or merger are the Beneficial Owners of securities of the surviving
corporation representing at least 50 percent of the combined voting power of the
surviving corporation's then outstanding securities.

                  (v) During any period of two years,  individuals  who,  at the
beginning  of such  period,  constituted  the Board of  Directors of the Company
cease,  for any reason,  to constitute at least a majority  thereof,  unless the
election or  nomination  for  election of each new  director was approved by the
vote of at least  two-thirds  of the  directors  then  still in office  who were
directors at the beginning of such period.

                  (vi) A change in control of the Company of a nature that would
be  required  to be  reported  in  response  to  Item  6(e) of  Schedule  14A of
Regulation 14A  promulgated  under the 1934 Act, or any successor  regulation of
similar  import,  regardless of whether the Company is subject to such reporting
requirement.

         Notwithstanding  any provision hereof to the contrary,  the filing of a
proceeding for the reorganization of the Company under Chapter 11 of the General
Bankruptcy Code or any successor or other statute of similar import shall not be
deemed to be a Change of Control for purposes of this Plan.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.
                                       17
<PAGE>
         "Company" shall mean Vodavi Technology, Inc., a Delaware corporation.

         "Corporate  Transaction"  shall mean (a) a merger or  consolidation  in
which the Company is not the  surviving  entity,  except for a  transaction  the
principal  purposes  of which is to change  the state in which  the  Company  is
incorporated;  (b)  the  sale,  transfer  of or  other  disposition  of  all  or
substantially  all of the assets of the  Company  and  complete  liquidation  or
dissolution  of the Company,  or (c) any reverse  merger in which the Company is
the surviving entity but in which the securities possessing more than 50 percent
of the total combined voting power of the Company's  outstanding  securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger.

         "Discretionary Award" shall mean a Stock Award, SAR or Cash Award under
the Discretionary Grant Program.

         "Discretionary  Grant  Program"  shall mean the  program  described  in
Article II of this Plan pursuant to which certain  Eligible  Persons are granted
Options or Awards in the discretion of the Plan Administrator.

         "Discretionary   Options"   shall  mean  options   granted   under  the
Discretionary Grant Program.

         "Effective  Date"  shall  mean May 24,  1996,  the date  that the First
Revised Plan was approved by the Company's stockholders.

         "Eligible  Directors"  shall mean,  with respect to the Automatic Grant
Program, those Board members who are not employed by the Company, whether or not
such members are Non-Employee Directors as defined herein.

         "Eligible  Persons"  shall mean (a) with  respect to the  Discretionary
Grant Program,  those persons who, at the time that the Discretionary  Option or
Discretionary  Award is granted,  are (i) key personnel  (including officers and
directors)  of the  Company  or  Parent  or  Subsidiary  Corporations,  or  (ii)
consultants  or independent  contractors  who provide  valuable  services to the
Company  or  Parent  or  Subsidiary  Corporations;  provided  that  if a  Senior
Committee  is formed  pursuant  to Section  2.1(b)  hereof,  the members of that
committee  shall not be included as "Eligible  Persons" under the  Discretionary
grant Program during their tenure on the Senior Committee;  and (b) with respect
to the Automatic Grant Program, the Eligible Directors.

         "Employee  Committee" shall mean that committee  appointed by the Board
to administer the Plan with respect to the  Non-Affiliates  and comprised of one
or more persons who are members of the Board.

         "Exercise  Date"  shall  be the  date on which  written  notice  of the
exercise  of an Option  and  payment  of the Option  Price is  delivered  to the
Company in accordance with the requirements of the Plan.

         "Expiration Date" shall be the 10-year anniversary of the date on which
an Automatic Option Grant was made.

         "Grantee" shall mean an Eligible  Person or Eligible  Director that has
received an Award.
                                       18
<PAGE>
         "Incentive  Stock  Option"  shall mean a  Discretionary  Option that is
intended to qualify as an "incentive stock option" under Code section 422.

         "Initial  Grant Date" shall mean the date that an Eligible  Director is
first appointed or elected to the Board.

         "Non-Affiliates" shall mean all persons who are not Affiliates.

         "Non-Employee  Directors" shall mean those directors of the Company who
satisfy the definition of  "Non-Employee  Directors"  under Rule  16b-3(b)(3)(i)
promulgated under the 1934 Act.

         "$100,000  Limitation" shall mean the limitation  pursuant to which the
aggregate fair market value  (determined  as of the respective  date or dates of
grant) of the Stock for which one or more  Options  granted to any person  under
this Plan (or any other  option plan of the Company or any Parent or  Subsidiary
Corporation)  may for the first time be exercisable  as Incentive  Stock Options
during any one calendar year shall not exceed the sum of $100,000.

         "Optionholder"  shall mean an Eligible  Person or Eligible  Director to
whom Options have been granted.

         "Optioned  Shares"  shall be those shares of Stock to be optioned  from
time to time to any Eligible Person or Eligible Directors.

         "Option  Price" shall mean (i) with respect to  Discretionary  Options,
the exercise price per share as specified by the Plan Administrator  pursuant to
Section 2.2(b) hereof, and (ii) with respect to Automatic Options,  the exercise
price per share as specified by Section 3.2(b) hereof.

         "Options" shall mean options to acquire Stock granted under the Plan.

         "Parent  Corporation"  shall mean any corporation in the unbroken chain
of corporations ending with the employer corporation, where, at each link of the
chain,  the  corporation  and the link  above  owns at least 50  percent  of the
combined  total voting power of all classes of the stock in the  corporation  in
the link below.

         "Plan" shall mean this stock option plan for Vodavi Technology, Inc.

         "Plan  Administrator"  shall  mean (a)  either  the  Board,  the Senior
Committee, or any other committee,  whichever is applicable, with respect to the
administration  of the  Discretionary  Grant Program as it relates to Affiliates
and (b)  either the  Board,  the  Employee  Committee,  or any other  committee,
whichever is applicable, with respect to the administration of the Discretionary
Grant Program as it relates to Non-Affiliates.

         "SAR" shall mean stock appreciation  rights granted pursuant to Section
2.4 hereof.

         "Senior Committee" shall mean that committee  appointed by the Board to
administer  the  Discretionary  Grant Program with respect to the Affiliates and
comprised of two or more Non-Employee Directors.
                                       19
<PAGE>
         "Service" shall have the meaning set forth in Section 2.2(n) hereof.

         "Stock"  shall mean shares of the  Company's  common  stock,  $.001 par
value per share, which may be unissued or treasury shares, as the Board may from
time to time determine.

         "Stock   Awards"   shall  mean  Stock   directly   granted   under  the
Discretionary Grant Program.

         "Subsidiary  Corporation"  shall mean any  corporation  in the unbroken
chain of  corporations  starting with the employer  corporation,  where, at each
link of the chain,  the  corporation and the link above owns at least 50 percent
of the combined voting power of all classes of stock in the corporation below.
                                       20
<PAGE>
         EXECUTED as of the 20th day of October, 1997.


                                                 VODAVI TECHNOLOGY, INC.


                                                 By:
                                                     ------------------------
                                                 Name: Glenn R. Fitchet
                                                 Its:  President


ATTESTED BY:


---------------------------
Secretary
                                       21