MENLO ACQUISITION CORPORATION
                             1999 STOCK OPTION PLAN


         1.  Purpose.  The purpose of this Menlo  Acquisition  Corporation  1999
Stock  Option  Plan (the  "Plan")  is to  further  the long term  stability  and
financial success of Menlo Acquisition Corporation (the "Company") by attracting
and  retaining  key  employees  and  obtaining  the  services of  directors  and
consultants  through the use of stock incentives.  It is believed that ownership
of Company Stock will  stimulate the efforts of those  employees,  directors and
consultants  upon whose judgment and interest the Company is and will be largely
dependent for the successful  conduct of its business.  It is also believed that
Incentive Awards granted to such employees under this Plan will strengthen their
desire to remain with the Company and will further the  identification  of those
employees'  and directors'  interests with those of the Company's  shareholders.
The Plan is intended to conform to the  provisions  of  Securities  and Exchange
Commission Rule 16b-3.

         2.  Definitions.  As used in the Plan,  the  following  terms  have the
meanings indicated:

                  (a)      "Act" means the Securities Exchange Act of 1934, as
         amended.

                  (b)      "Applicable  Withholding Taxes" means the aggregate
         amount of federal,  state and local income and payroll  taxes that the
         Company is  required  to  withhold  in  connection   with  any
        exercise of a Nonstatutory Stock Option by an employee.

                  (c)      "Board" means the board of directors of the Company.

                  (d)      "Change of Control" means:

                                       1
<PAGE>

                           (i)  The   acquisition   by  a  Group  of  Beneficial
                  Ownership  of 20% or more of the Stock or the Voting  Power of
                  the  Company,   but  excluding  for  this  purpose:   (A)  any
                  acquisition by the Company (or a  subsidiary),  or an employee
                  benefit plan of the Company;  or (B) any acquisition of Common
                  Stock of the Company by  management  employees of the Company.
                  "Group"  means  any  individual,  entity or group  within  the
                  meaning  of  Section   13(d)(3)   or   14(d)(2)  of  the  Act,
                  "Beneficial   Ownership"   has  the   meaning  in  Rule  13d-3
                  promulgated  under the Act, "Stock" means the then outstanding
                  shares of common stock,  and "Voting Power" means the combined
                  voting power of the outstanding voting securities  entitled to
                  vote generally in the election of directors.

                           (ii)  Individuals  who constitute the Board as of the
                  date of this Plan (the "Incumbent  Board") cease to constitute
                  at least a majority of the Board,  provided  that any director
                  whose  nomination  was approved by a majority of the Incumbent
                  Board  shall be  considered  a member of the  Incumbent  Board
                  unless such  individual's  initial  assumption of office is in
                  connection with an actual or threatened  election  contest (as
                  such  terms  are  used  in  Rule  14a-11  of  Regulation   14A
                  promulgated under the Act).

                           (iii) Approval by the  shareholders of the Company of
                  a reorganization,  merger or  consolidation,  in each case, in
                  which the owners of more than 50% of the Stock or Voting Power
                  of the Company do not, following such  reorganization,  merger
                  or  consolidation,  beneficially  own, directly or indirectly,
                  more than 50% of the Stock or Voting Power of the  corporation
                  resulting from such reorganization, merger or consolidation.

                           (iv) A complete  liquidation  or  dissolution  of the
                  Company  or of  its  sale  or  other  disposition  of  all  or
                  substantially all of the assets of the Company.

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

                  (f) "Committee" means the committee  appointed by the Board as
described under Section 12.

                  (g) "Company" means Menlo Acquisition Corporation,  a Delaware
corporation.

                  (h) "Company  Stock" means Common Stock,  $.0001 par value, of
         the Company.  If the par value of the Company  Stock is changed,  or in
         the event of a change  in the  capital  structure  of the  Company  (as
         provided in Section 11), the shares  resulting from such a change shall
         be deemed to be Company Stock within the meaning of the Plan.

                  (i) "Date of Grant" means the date on which an Incentive Award
is granted by the Committee.

                  (j) "Disability" or "Disabled" means, as to an Incentive Stock
         Option, a Disability within the meaning of Code section 22(e)(3). As to
         all other Incentive  Awards,  the Committee  shall determine  whether a
         Disability exists and such determination shall be conclusive.

                  (k) "Fair Market  Value" means as of the Date of Grant (or, if
         there were no trades on the Date of Grant,  the last  preceding  day on
         which Company Stock is traded) (i) if the Company Stock is traded on an
         exchange the average of the highest and lowest  registered sales prices
         of the Company  Stock at which it is traded on such day on the exchange
         on which it generally  has the  greatest  trading  volume,  (ii) if the
         Company  Stock is traded on the  over-the-counter  market,  the average
         between the lowest bid and highest asked prices as reported by The Wall
         Street  Journal,  or (iii) if shares of Common  Stock are not traded on
         any exchange or over-the-counter market, the fair market value shall be
         determined by the Committee using any reasonable method in good faith.

                  (l)  "Incentive  Award" means,  collectively,  the award of an
         Nonstatutory Stock Option or Incentive Stock Option under the Plan.

                  (m) "Incentive  Stock Option" means an Option intended to meet
         the  requirements  of, and qualify  for  favorable  federal  income tax
         treatment under, Code section 422.

                                       2
<PAGE>


                  (n) "Non-Employee Director" means a member of the Board who is
         not an employee of the Company, a Parent or a Subsidiary.

                  (o) "Nonstatutory  Stock Option" means an Option that does not
         meet the  requirements  of Code  section  422,  or, even if meeting the
         requirements  of Code  section  422, is not intended to be an Incentive
         Stock Option and is so designated.

                  (p) "Option"  means a right to purchase  Company Stock granted
         under the Plan, at a price determined in accordance with the Plan.

                  (q) "Parent" means, with respect to any corporation,  a parent
         of that corporation within the meaning of Code section 424(e).

                  (r)   "Participant"   means  any  employee,   consultant,   or
         Non-Employee Director who receives an Incentive Award under the Plan.

                  (s)  "Rule  16b-3"  means  Rule  16b-3 of the  Securities  and
         Exchange Commission  promulgated under the Act. A reference in the Plan
         to Rule 16b-3 shall include a reference to any  corresponding  rule (or
         number redesignation) of any amendments to Rule 16b-3 enacted after the
         effective date of the Plan's adoption.

                  (t) "Subsidiary"  means,  with respect to any  corporation,  a
         subsidiary  of that  corporation  within the  meaning  of Code  section
         424(f).

                  (u) "10%  Shareholder"  means a person who owns,  directly  or
         indirectly, stock possessing more than 10% of the total combined voting
         power  of all  classes  of  stock  of the  Company  or  any  Parent  or
         Subsidiary  of the  Company.  Indirect  ownership  of  stock  shall  be
         determined in accordance with Code section 424(d).

         3.  General.  Incentive  Awards under the Plan may be either  Incentive
Stock Options or Nonstatutory Stock Options.

         4.  Stock.  Subject to Section 11 of the Plan,  there shall be reserved
for issuance  under the Plan an aggregate  of 525,000  shares of Company  Stock,
which shall be authorized,  but unissued shares.  Shares allocable to Options or
portions  thereof  granted  under the Plan that  expire or  otherwise  terminate
unexercised  may again be subjected to an  Incentive  Award under the Plan.  The
Committee is expressly  authorized  to make an Incentive  Award to a Participant
conditioned  upon the surrender for  cancellation  of an option granted under an
existing  Incentive Award. For purposes of determining the number of shares that
are available for Incentive Awards under the Plan, such number shall include the
number of shares  surrendered  by an  optionee  or  retained  by the  Company in
payment of  Applicable  Withholding  Taxes.  No more than 200,000  shares may be
allocated to the Incentive Awards that are granted to any individual Participant
during any single calendar year.

         5.       Eligibility.

                  (a) All  present  and  future  employees  of the  Company  and
individuals  who are  consultants to the Company (or any Parent or Subsidiary of

                                       3
<PAGE>

the Company,  whether now existing or  hereafter  created or acquired)  shall be
eligible to receive  Incentive  Awards under the Plan. The Committee  shall have
the power and complete discretion, as provided in Section 12, to select eligible
employees to receive  Incentive  Awards and to determine  for each  employee the
terms and  conditions,  the  nature of the award and the  number of shares to be
allocated  to  each  employee  as part of  each  Incentive  Award.  Non-Employee
Directors are eligible to receive  Incentive  Awards in accordance  with Section
13.

                  (b) The grant of an  Incentive  Award shall not  obligate  the
Company or any Parent or  Subsidiary  of the  Company to pay a  Participant  any
particular amount of remuneration, to continue the employment of the Participant
after  the  grant  or to make  further  grants  to the  Participant  at any time
thereafter.

         6.       Stock Options.

                  (a)  Whenever  the  Committee  deems it  appropriate  to grant
Options,  notice shall be given to the Participant  stating the number of shares
for which Options are granted,  the Option price per share,  whether the Options
are Incentive Stock Options or Nonstatutory Stock Options, and the conditions to
which the grant and exercise of the Options are subject.  This notice, when duly
accepted in writing by the  Participant,  shall become a stock option  agreement
between the Company and the Participant.

                  (b) The exercise  price of shares of Company  Stock covered by
an  Incentive  Stock Option shall be not less than 100% of the Fair Market Value
of such shares on the Date of Grant;  provided that if an Incentive Stock Option
is granted to a Participant who, at the time of the grant, is a 10% Shareholder,
then the  exercise  price of the shares  covered by the  Incentive  Stock Option
shall be not less than 110% of the Fair Market  Value of such shares on the Date
of Grant.

                  (c) The  exercise  price of shares  covered by a  Nonstatutory
Stock Option shall be not less than 100% of the Fair Market Value of such shares
on the Date of Grant.

                  (d) Options may be exercised in whole or in part at such times
as  may be  specified  by  the  Committee  in  the  Participant's  stock  option
agreement;  provided that, the exercise  provisions for Incentive  Stock Options
shall in all events not be more liberal than the following provisions:

                  (i) No Incentive Stock Option may be exercised after ten years
                  (or, in the case of an Incentive Stock Option granted to a 10%
                  Shareholder, five years) from the Date of Grant.

                  (ii)  An  Incentive  Stock  Option  by  its  terms,  shall  be
                  exercisable  in any calendar  year only to the extent that the
                  aggregate Fair Market Value  (determined at the Date of Grant)
                  of the Company  Stock with  respect to which  Incentive  Stock
                  Options are exercisable for the first time during the calendar
                  year  does not  exceed  $100,000  (the  "Limitation  Amount").
                  Incentive  Stock Options  granted under the Plan and all other
                  plans of the  Company  and any  Parent  or  Subsidiary  of the
                  Company  shall  be  aggregated  for  purposes  of  determining
                  whether the Limitation Amount has been exceeded. The Board may

                                       4
<PAGE>

                  impose such conditions as it deems appropriate on an Incentive
                  Stock Option to ensure that the foregoing requirement is met.

                  (iii) If Incentive Stock Options that first become exercisable
                  in a calendar year exceed the  Limitation  Amount,  the excess
                  Options will be treated as  Nonstatutory  Stock Options to the
                  extent  permitted  by  law.  If  an  Option  designated  as an
                  Incentive  Stock  Options  otherwise  fails to  qualify  as an
                  incentive  stock  option  under the Code,  the Option shall be
                  treated as a Nonstatutory Stock Option.

                  (e) The Committee may, in its  discretion,  grant Options that
by  their   terms   become   fully   exercisable   upon  a  Change  of  Control,
notwithstanding   other  conditions  on   exercisability  in  the  stock  option
agreement.

         7.       Method of Exercise of Options.

                  (a) Options may be exercised by the Participant giving written
notice of the  exercise  to the  Company,  stating  the  number  of  shares  the
Participant  has  elected  to  purchase  under  the  Option.  In the case of the
purchase of shares  under an Option,  such  notice  shall be  effective  only if
accompanied by the exercise price in full in cash;  provided,  however,  that if
the terms of an Option so permit,  the Participant may (i) deliver,  or cause to
be withheld  from the Option  shares,  shares of Company  Stock (valued at their
Fair Market Value on the date of exercise) in satisfaction of all or any part of
the exercise price,  (ii) deliver a properly  executed  exercise notice together
with  irrevocable  instructions to a broker to deliver  promptly to the Company,
from the sale or loan  proceeds  with respect to the sale of Company  Stock or a
loan secured by Company  Stock,  the amount  necessary to pay the exercise price
and,  if required  by the  Committee,  Applicable  Withholding  Taxes,  or (iii)
deliver an interest bearing promissory note, payable to the Company,  in payment
of all or part of the exercise  price  together  with such  collateral as may be
required by the  Committee at the time of exercise.  The interest rate under any
such promissory note shall be established by the Committee and shall be at least
equal to the  minimum  interest  rate  required  at the  time to  avoid  imputed
interest under the Code.

                  (b) The  Company  may  place on any  certificate  representing
Company Stock issued upon the exercise of an Option any legend deemed  desirable
by the Company's  counsel to comply with federal or state  securities  laws, and
the  Company may require a customary  written  indication  of the  Participant's
investment  intent.  Until  the  Participant  has  made  any  required  payment,
including any Applicable Withholding Taxes, and has had issued a certificate for
the shares of Company Stock  acquired,  he or she shall  possess no  shareholder
rights with respect to the shares.

                  (c)  Each  Participant  shall  agree  as a  condition  of  the
exercise of an Option to pay to the Company,  or make arrangements  satisfactory
to the Company regarding the payment to the Company of,  Applicable  Withholding
Taxes.  Until such  amount  has been paid or  arrangements  satisfactory  to the
Company have been made, no stock  certificate  shall be issued upon the exercise
of an Option.

                  (d) As an  alternative to making a cash payment to the Company
to satisfy  Applicable  Withholding  Taxes, if the Option agreement so provides,

                                       5
<PAGE>


the  Participant  may,  subject to the provisions set forth below,  elect to (i)
deliver  shares of already owned  Company Stock or (ii) have the Company  retain
that  number of shares of Company  Stock that would  satisfy  all or a specified
portion of the  Applicable  Withholding  Taxes.  The  Committee  shall have sole
discretion to approve or disapprove any such election.

                  (e) Notwithstanding  anything herein to the contrary,  Options
shall  always be  granted  and  exercised  in such a manner as to conform to the
provisions of Rule 16b-3.

         8. Nontransferability of Options.  Nonstatutory Stock Options shall not
be  transferable  except to the extent  specifically  provided in the  Incentive
Award. Incentive Stock Options, by their terms, shall not be transferable except
by will or by the laws of descent  and  distribution  and shall be  exercisable,
during the Participant's lifetime, only by the Participant.

         9.  Effective  Date of the Plan. The effective date of the Plan is July
21, 1999.  The Plan shall be submitted  to the  shareholders  of the Company for
approval.  Until (i) the Plan has been approved by the  Company's  shareholders,
and (ii) the  requirements  of any applicable  Federal or State  securities laws
have been met, no Incentive Stock Option shall be exercisable.

         10. Termination,  Modification, Change. If not sooner terminated by the
Board,  this  Plan  shall  terminate  at the  close  of  business  on the  tenth
anniversary of the effective  date. No Incentive  Awards shall be made under the
Plan after its  termination.  The Board may  terminate the Plan or may amend the
Plan in such respects as it shall deem  advisable;  provided that, if and to the
extent  required by the Code,  no change shall be made that  increases the total
number of shares of Company  Stock  reserved for issuance  pursuant to Incentive
Awards  granted  under the Plan  (except  pursuant  to Section  11),  materially
modifies the  requirements as to eligibility for  participation  in the Plan, or
materially  increases  the  benefits  accruing to  Participants  under the Plan,
unless  such  change  is  authorized  by  the   shareholders   of  the  Company.
Notwithstanding  the foregoing,  the Board may  unilaterally  amend the Plan and
Incentive  Awards as it deems  appropriate to cause  Incentive  Stock Options to
meet the requirements of the Code and regulations thereunder. Except as provided
in the preceding  sentence,  a  termination  or amendment of the Plan shall not,
without the consent of the Participant,  adversely affect a Participant's rights
under an Incentive Award previously granted to him or her.

         11.      Change in Capital Structure.

                  (a)  In  the  event  of  a  stock  dividend,  stock  split  or
combination  of shares,  recapitalization  or merger in which the Company is the
surviving corporation or other change in the Company's capital stock (including,
but not limited  to, the  creation or  issuance  to  shareholders  generally  of
rights,  options or warrants for the purchase of common stock or preferred stock
of the  Company),  the number and kind of shares of stock or  securities  of the
Company  to be  subject to the Plan and to  Options  then  outstanding  or to be
granted  thereunder,  the maximum  number of shares or  securities  which may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons.  If the adjustment would produce  fractional shares with respect
to any unexercised Option, the Committee may adjust  appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.

                                       6
<PAGE>


                  (b) If the Company is a party to an initial public offering, a
consolidation or a merger in which the Company is not the surviving corporation,
a  transaction  that  results in the  acquisition  of  substantially  all of the
Company's  outstanding stock by a single person or entity, or a sale or transfer
of  substantially  all of the  Company's  assets,  the  Committee  may take such
actions with respect to  outstanding  Incentive  Awards as the  Committee  deems
appropriate.

                  (c) Notwithstanding  anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes.

         12.  Administration  of the Plan. The Plan shall be administered by the
Committee,  which shall  consist of not less than two members of the Board,  who
shall be appointed by the Board.  Subject to paragraph (d) below,  the Committee
shall be the  Compensation  Committee  unless the Board  shall  appoint  another
Committee to administer the Plan. The Committee shall have general  authority to
impose any limitation or condition upon an Incentive  Award the Committee  deems
appropriate to achieve the  objectives of the Incentive  Award and the Plan and,
without  limitation  and in addition to powers set forth  elsewhere in the Plan,
shall have the following specific authority:

                  (a) The Committee shall have the power and complete discretion
         to determine  (i) which  eligible  employees  shall  receive  Incentive
         Awards  and the  nature of each  Incentive  Award,  (ii) the  number of
         shares of Company Stock to be covered by each  Incentive  Award,  (iii)
         whether Options shall be Incentive Stock Options or Nonstatutory  Stock
         Options,  (iv) the Fair Market Value of Company Stock,  (v) the time or
         times  when an  Incentive  Award  shall be  granted,  (vi)  whether  an
         Incentive  Award shall become  vested over a period of time and when it
         shall be fully  vested,  (vii) when  Options may be  exercised,  (viii)
         whether a Disability  exists,  (ix) the manner in which payment will be
         made upon the  exercise  of  Options,  (x)  conditions  relating to the
         length of time before  disposition  of Company Stock  received upon the
         exercise  of  Options  is   permitted,   (xi)   whether  to  approve  a
         Participant's  election (A) to deliver  shares of already owned Company
         Stock  to  satisfy  Applicable  Withholding  Taxes  or (B) to have  the
         Company  withhold  from the shares to be issued upon the  exercise of a
         Nonstatutory  Stock  Option the number of shares  necessary  to satisfy
         Applicable  Withholding Taxes, (xii) notice provisions  relating to the
         sale  of  Company  Stock  acquired  under  the  Plan,  and  (xiii)  any
         additional requirements relating to Incentive Awards that the Committee
         deems  appropriate.  Notwithstanding  the  foregoing,  no "tandem stock
         options"  (where two stock options are issued together and the exercise
         of one option  affects the right to exercise  the other  option) may be
         issued in connection with Incentive Stock Options.  The Committee shall
         have the  power to amend  the  terms of  previously  granted  Incentive
         Awards so long as the terms as amended are consistent with the terms of
         the Plan and provided that the consent of the  Participant  is obtained
         with respect to any amendment  that would be detrimental to him or her,
         except that such consent will not be required if such  amendment is for
         the purpose of complying with Rule 16b-3 or any requirement of the Code
         applicable to the Incentive Award.

                  (b) The Committee may adopt rules and regulations for carrying
         out the Plan. The  interpretation  and construction of any provision of

                                       7
<PAGE>

         the Plan by the Committee shall be final and conclusive.  The Committee
         may consult with counsel,  who may be counsel to the Company, and shall
         not incur any  liability for any action taken in good faith in reliance
         upon the advice of counsel.

                  (c)  A  majority  of  the  members  of  the  Committee   shall
         constitute a quorum, and all actions of the Committee shall be taken by
         a majority of the members present. Any action may be taken by a written
         instrument signed by all of the members,  and any action so taken shall
         be fully effective as if it had been taken at a meeting.

                  (d) The Board from time to time may appoint members previously
         appointed and may fill vacancies, however caused, in the Committee.

         13. Grants to Non-Employee Directors.  All provisions of the Plan shall
apply to the grant of  Incentive  Awards to  Non-Employee  Directors,  except as
provided in this section. All Incentive Awards to Non-Employee Directors will be
Nonstatutory  Stock Options.  The exercise price of a Nonstatutory  Stock Option
for a  Non-Employee  Director may not be less than 100% of the Fair Market Value
of the Company Stock on the Date of Grant.  With respect to Incentive  Awards to
Non-Employee  Directors,  the  Board  will  have  all  of the  authority  of the
Committee  under  the  Plan.  The  Board  may  delegate  its  authority  to  the
Compensation Committee or another committee of the Board that is composed solely
of Non-Employee Directors.  The provisions for payment of Applicable Withholding
Taxes will not apply to Incentive Awards to Non-Employee Directors.

         14. Notice. All notices and other communications  required or permitted
to be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered  personally or mailed first class,  postage prepaid,  as
follows  (a) if to  the  Company  - at its  principal  business  address  to the
attention of the Treasurer;  (b) if to any  Participant - at the last address of
the  Participant   known  to  the  sender  at  the  time  the  notice  or  other
communication is sent.

         15.  Interpretation.  The terms of this Plan are subject to all present
and future  regulations  and rulings of the  Secretary of the Treasury or his or
her delegate  relating to the qualification of Incentive Stock Options under the
Code. If any provision of the Plan conflicts with any such regulation or ruling,
then that provision of the Plan shall be void and of no effect.
The terms of this Plan shall be governed by the laws of the State of Delaware.

         IN WITNESS  WHEREOF,  the  Company  has caused this Plan to be executed
this ____ day of __________________, ________.

                                              MENLO ACQUISITION CORPORATION.


By: ________________________
      President
                                       8