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                                                                    EXHIBIT 10.4



                             XENONICS HOLDINGS, INC.

                             2003 STOCK OPTION PLAN

                                   ARTICLE 1.
                               GENERAL PROVISIONS

      1.1. PURPOSE OF THE PLAN

      This Stock Option Plan (the "Plan") is intended to promote the interests
of XENONICS HOLDINGS, INC., a Nevada corporation, (the "Corporation") by
providing eligible persons with the opportunity to acquire or increase their
proprietary interest in the Corporation as an incentive for them to remain in
the Service of the Corporation.

      Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.

      1.2. ADMINISTRATION OF THE PLAN

            a. Prior to the Section 12(g) Registration Date, the Plan shall be
administered by the Board or a committee of the Board.

            b. Beginning with the Section 12(g) Registration Date, the Primary
Committee shall have sole and exclusive authority to administer the Plan with
respect to Section 16 Insiders. Administration of the Plan with respect to all
other persons eligible under the Plan may, at the Board's discretion, be vested
in the Primary Committee or a Secondary Committee, or the Board may retain the
power to administer the Plan with respect to all such persons.

            c. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also terminate the functions of any
Secondary Committee at any time and reassume all powers and authority previously
delegated to such committee.

            d. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority to
establish such rules and regulations as it may deem appropriate for proper
administration of the Plan and to make such determinations under, and issue such
interpretations of, the provisions of the Plan and any outstanding options
thereunder as it may deem necessary or advisable. Decisions of the Plan
Administrator within the scope of its administrative functions under the Plan
shall be final and binding on all parties who have an interest in the Plan under
its jurisdiction or any option thereunder.

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            e. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee shall
accordingly be entitled to full indemnification and reimbursement as Board
members for their service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or omission made in good
faith with respect to the Plan or any option grants under the Plan.

            f. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority (subject to the
provisions of the Plan) to determine which eligible persons are to receive
option grants, the time or times when such option grants are to be made, the
number of shares to be covered by each such grant, the status of the granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each option is to become exercisable, the vesting schedule (if
any) applicable to the option shares, the acceleration of such vesting schedule,
the maximum term for which the option is to remain outstanding, whether the
option shares shall be subject to rights of repurchase and/or rights of first
refusal, and all other terms and conditions of the option grants.

      1.3. ELIGIBILITY

      The following persons shall be eligible to participate in the Plan:

            a. Employees, as to both Incentive and/or Non-Statutory Options,

            b. non-employee members of the Board or the board of directors of
any Parent or Subsidiary as to Non-Statutory Options, and

            c. consultants and other independent advisors who provide Services
to the Corporation or any Parent or Subsidiary, as to Non-Statutory Options.

      1.4. STOCK SUBJECT TO THE PLAN

            a. The stock issuable under the Plan shall be shares of authorized
but unissued Common Stock, including shares repurchased by the Corporation on
the open market. The maximum number of shares of Common Stock which may be
issued over the term of the Plan shall not exceed One Million Five Hundred
Thousand (1,500,000) shares, which number of shares may be changed from time to
time in accordance with Section 3.4 below.

            b. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent the options
expire or terminate for any reason prior to exercise in full. However, should
the Exercise Price be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option under the Plan, then the number of shares of Common Stock available
for issuance under the Plan shall be reduced by the gross number of shares for
which the option is exercised, and not by the net number of shares of Common
Stock issued to the holder of such option.

            c. Should any change be made to the Common Stock by reason of any
stock

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split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted options per calendar year, and (iii) the number and/or class of
securities and the Exercise Price in effect under each outstanding option in
order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding, and
conclusive.

                                   ARTICLE 2.
                              OPTION GRANT PROGRAM

      2.1. OPTION TERMS

      Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of Section 2.2
of the Plan, below.

            a. Exercise Price

                  (1) The Exercise Price shall be fixed by the Plan
Administrator but shall not be less than one hundred percent (100%) of the Fair
Market Value per share of Common Stock on the Grant Date.

                  (2) The Exercise Price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Article 3.1, and
the documents evidencing the option, be payable in one or more of the forms
specified below:

                        (a) cash or check made payable to the Corporation,

                        (b) shares of Common Stock held for the requisite period
            necessary to avoid a charge to the Corporation's earnings for
            financial reporting purposes and valued at Fair Market Value on the
            Exercise Date, or

                        (c) to the extent the option is exercised for vested
            shares, through a special sale and remittance procedure pursuant to
            which the Optionee shall concurrently provide irrevocable written
            instructions to (a) a Corporation-designated brokerage firm to
            effect the immediate sale of the Purchased Shares and remit to the
            Corporation, out of the sale proceeds available on the settlement
            date, sufficient funds to cover the aggregate Exercise Price payable
            for the Purchased Shares plus all applicable federal, state and
            local income and employment taxes required to be withheld by the
            Corporation by reason of such exercise and (b) the Corporation to
            deliver the certificates for the Purchased Shares directly to such
            brokerage firm in order to complete the sale.

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                  Except to the extent the sale and remittance procedure is
utilized, payment of the Exercise Price for the Purchased Shares must be made on
the Exercise Date.

            b. Exercise and Term of Options. Each option shall be exercisable at
such time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the Grant Date.

            c. Effect of Termination of Service

                  (1) The following provisions shall govern the exercise of any
options held by the Optionee at the time of cessation of Service:

                        (a) Any option outstanding at the time of the Optionee's
            cessation of Service for any reason except death, Permanent
            Disability or Misconduct shall remain exercisable for a three (3)
            month period thereafter, provided no option shall be exercisable
            after the Expiration Date.

                        (b) Any option outstanding at the time of the Optionee's
            cessation of Service due to death or Permanent Disability shall
            remain exercisable for a twelve (12) month period thereafter,
            provided no option shall be exercisable after the Expiration Date.
            Subject to the foregoing, any option exercisable in whole or in part
            by the Optionee at the time of death may be exercised subsequently
            by the personal representative of the Optionee's estate or by the
            person or persons to whom the option is transferred pursuant to the
            Optionee's will or in accordance with the laws of descent and
            distribution.

                        (c) Should the Optionee's Service be terminated for
            Misconduct, then all outstanding options held by the Optionee shall
            terminate immediately and cease to be outstanding.

                        (d) During the applicable post-Service exercise period,
            the option may not be exercised in the aggregate for more than the
            number of shares for which the option is exercisable on the date of
            the Optionee's cessation of Service; the option shall, immediately
            upon the Optionee's cessation of Service, terminate and cease to be
            outstanding to the extent the option is not otherwise at that time
            exercisable. Upon the expiration of the applicable exercise period
            or (if earlier) upon the Expiration Date, the option shall terminate
            and cease to be outstanding for any shares for which the option has
            not been exercised.

                  (2) The Plan Administrator shall have the discretion,
exercisable either at the time an option is granted or at any time while the
option remains outstanding, to:

                        (a) extend the period of time for which the option is to
            remain exercisable following the Optionee's cessation of Service
            from the period

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            otherwise in effect for that option to such greater period of time
            as the Plan Administrator shall deem appropriate, but in no event
            beyond the Expiration Date, and/or

                        (b) permit the option to be exercised, during the
            applicable post-Service exercise period, not only with respect to
            the number of shares of Common Stock for which such option is
            exercisable at the time of the Optionee's cessation of Service but
            also with respect to one or more additional shares that would have
            vested under the option had the Optionee continued in Service.

            d. Stockholder Rights. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the Exercise Price, and become a
holder of record of the Purchased Shares.

            e. Limited Transferability of Options. During the lifetime of the
Optionee, Incentive Options may be exercised only by the Optionee, and shall not
be assignable or transferable except by will or the laws of descent and
distribution following the Optionee's death. Non-Statutory Options may be
assigned or transferred in whole or in part only (i) during the Optionee's
lifetime if in connection with the Optionee's estate plan to one or more members
of the Optionee's immediate family (spouse and children) or to a trust
established exclusively for the benefit of one or more such immediate family
members, or (ii) by will or the laws of descent and distribution following the
Optionee's death. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.

      2.2. INCENTIVE OPTIONS

      The terms specified below shall apply to all Incentive Options. Except as
modified by the provisions of this Section 2.2, all the provisions of this Plan
shall apply to Incentive Options. Options specifically designated as
Non-Statutory Options when issued under the Plan shall not be subject to the
terms of this Section 2.2.

            a. Eligibility. Incentive Options may only be granted to Employees.

            b. Exercise Price. The Exercise Price shall not be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on the
Grant Date.

            c. Dollar Limitation. The aggregate Fair Market Value of the shares
of Common Stock (determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the Plan (or any other
option plan of the Corporation or any Parent or Subsidiary) may for the first
time become exercisable as Incentive Options during any one (1) calendar year
shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become

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exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as Incentive Options shall be
applied in the order in which such options are granted.

            d. 10% Stockholder. If an Employee to whom an Incentive Option is
granted is a 10% Stockholder, then the Exercise Price shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the Grant Date, and the option term shall not exceed five (5) years measured
from the Grant Date.

            e. Holding Period. Shares purchased pursuant to an option shall
cease to qualify for favorable tax treatment as Incentive -------------- Option
Shares if and to the extent Optionee disposes of such shares within two (2)
years of the Grant Date or within one (1) year of Optionee's purchase of said
shares.

      2.3. CORPORATE TRANSACTION/CHANGE IN CONTROL

            a. In the event of any Corporate Transaction, the Board of Directors
shall have the sole discretion to elect that each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The Board may exercise its discretion to accelerate the vesting of options
whether or not (i) such option is, in connection with the Corporate Transaction,
either to be assumed by the successor corporation or Parent thereof or to be
replaced with a comparable option to purchase shares of the capital stock of the
successor corporation or Parent thereof, (ii) such option is to be replaced with
a cash incentive program of the successor corporation which preserves the spread
existing on the unvested option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option, except to the extent that the acceleration of such
option is subject to other limitations imposed by the Plan Administrator at the
time of the option grant. The determination of option comparability under clause
(i) above shall be made by the Plan Administrator, whose determination shall be
final, binding and conclusive.

            b. In the event of any Corporate Transaction, the Board of Directors
shall have sole discretion to elect that all outstanding repurchase rights may
also be terminated automatically whether or not those repurchase rights are to
be assigned to the successor corporation (or Parent thereof) in connection with
such Corporate Transaction.

            c. The Plan Administrator's discretion under Sections 2.3.a. and b.
above shall be exercisable either at the time the option is granted or at any
time while the option remains outstanding, whether or not those options are to
be assumed or replaced (or those repurchase rights are to be assigned) in the
Corporate Transaction. The Plan Administrator shall also have the discretion to
grant options which do not accelerate whether or not such options are assumed
(and to provide for repurchase rights that do not terminate whether or not such
rights are assigned) in connection with a Corporate Transaction.

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            d. If the Board of Directors elects the automatic acceleration of
some or all of the outstanding options upon the occurrence of a Corporate
Transaction, all such outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) immediately following the consummation of the Corporate
Transaction.

            e. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities that would have been
issuable to the Optionee in consummation of such Corporate Transaction had the
option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction, (ii) the exercise price payable per share under each
outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same and (iii) the maximum number of securities
and/or class of securities for which any one person may be granted stock
options.

            f. The Plan Administrator shall have the discretion, exercisable at
the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of any options assumed or
replaced in a Corporate Transaction that do not otherwise accelerate at that
time (and the termination of any of the Corporation's outstanding repurchase
rights that do not otherwise terminate at the time of the Corporate Transaction)
in the event the Optionee's Service should subsequently terminate by reason of
an Involuntary Termination within eighteen (18) months following the effective
date of such Corporate Transaction. Any options so accelerated shall remain
exercisable for shares until the earlier of (i) the expiration of the option
term or (ii) the expiration of the one (1)-year period measured from the
effective date of the Involuntary Termination.

            g. The Plan Administrator shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights) upon the occurrence of a Change in Control or (ii) condition
any such option acceleration (and the termination of any outstanding repurchase
rights) upon the subsequent Involuntary Termination of the Optionee's Service
within a specified period (not to exceed eighteen (18) months) following the
effective date of such Change in Control. Any options accelerated in connection
with a Change in Control shall remain fully exercisable until the expiration or
sooner termination of the option term.

            h. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Non-Statutory Option under the federal tax laws.

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            i. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.

                                   ARTICLE 3.
                                  MISCELLANEOUS

      3.1. FINANCING

            a. The Plan Administrator may permit any Optionee to pay the option
Exercise Price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. Promissory notes may be authorized with or without security
or collateral. In all events, the maximum credit available to the Optionee may
not exceed the sum of (i) the aggregate option Exercise Price payable for the
Purchased Shares plus (ii) the amount of any federal, state and local income and
employment tax liability incurred by the Optionee in connection with the option
exercise.

            b. The Plan Administrator may, in its discretion, determine that one
or more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.

      3.2. TAX WITHHOLDING

            a. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options under the Plan shall be subject to the satisfaction
of all applicable federal, state and local income and employment tax withholding
requirements.

            b. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options under the Plan with the right to use shares of
Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options. Such right may be
provided to any such holder in either or both of the following formats:

                        (1) Stock Withholding: The election to have the
            Corporation withhold, from the shares of Common Stock otherwise
            issuable upon the exercise of such Non-Statutory Option, a portion
            of those shares with an aggregate Fair Market Value equal to the
            percentage of the Taxes (not to exceed one hundred percent (100%))
            designated by the holder.

                        (2) Stock Delivery: The election to deliver to the
            Corporation, at the time the Non-Statutory Option is exercised, one
            or more shares of Common Stock previously acquired by such holder
            (other than in connection with the option exercise triggering the
            Taxes) with an aggregate Fair Market Value equal to the percentage
            of the Taxes (not to exceed one hundred percent (100%)) designated
            by the holder.

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      3.3. EFFECTIVE DATE AND TERM OF THE PLAN

            a. The Plan shall become effective on the Plan Effective Date.
However, no shares shall be issued under the Plan pursuant to Incentive Options
until the Plan is approved by the Corporation's stockholders. If such
stockholder approval is not obtained within twelve (12) months after the Plan
Effective Date, then all Incentive Options previously granted under this Plan
shall automatically convert into Non-Statutory Options.

            b. The Plan shall terminate upon the earliest of (i) ten years from
the date of adoption, (ii) the date on which all shares available for issuance
under the Plan shall have been issued, or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan
termination, all outstanding options shall continue to have force and effect in
accordance with the provisions of the documents evidencing such options.

      3.4. AMENDMENT OF THE PLAN

            a. The Board shall have complete and exclusive power and authority
to amend or modify the Plan in any or all respects. However, no such amendment
or modification shall adversely affect any rights and obligations with respect
to options at the time outstanding under the Plan unless each affected Optionee
consents to such amendment or modification. In addition, amendments to the Plan
shall be subject to approval of the Corporation's stockholders to the extent
required by applicable laws or regulations.

            b. Options to purchase shares of Common Stock may be granted under
the Plan that are in each instance in excess of the number of shares then
available for issuance under the Plan, provided any excess shares actually
issued are held in escrow until there is obtained Board approval (and
shareholder approval if required by applicable laws or regulations) of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan.

      3.5. USE OF PROCEEDS

      Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.

      3.6. REGULATORY APPROVALS

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

            b. No shares of Common Stock shall be issued or delivered under the
Plan unless and until there shall have been compliance with all applicable
requirements of federal and state securities laws and all applicable listing
requirements of any stock exchange (or the Nasdaq

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market, if applicable) on which Common Stock is then listed for trading.

      3.7. NO EMPLOYMENT/SERVICE RIGHTS

      Nothing in the Plan shall confer upon the Optionee any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary
employing or retaining such person) or of the Optionee, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time for
any reason, with or without cause.

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                                    APPENDIX

            The following definitions shall be in effect under the Plan and the
Plan Documents:

      1. BOARD shall mean the Corporation's Board of Directors.

      2. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:

                        (i) the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation), of beneficial ownership (within the meaning of Rule
13d-3 of the 1934 Act) of securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders, which the Board does not recommend such stockholders to accept, or

                        (ii) a change in the composition of the Board over a
period of thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (A) have been Board
members continuously since the beginning of such period or (B) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (A) who were still in office
at the time the Board approved such election or nomination.

      3. CODE shall mean the Internal Revenue Code of 1986, as amended.

      4. COMMON STOCK shall mean the Corporation's common stock.

      5. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:

                        (i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or

                        (ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.

      6. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Plan.

      7. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.

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      8. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.

      9. EXERCISE PRICE shall mean the exercise price per share as specified in
the Stock Option Grant.

      10. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Stock Option Grant.

      11. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:

                        (i) If the Common Stock is traded at the time on the
Nasdaq National Market, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such quotation
exists.

                        (ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.

                        (iii) If the Common Stock is not listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair Market Value
shall be determined by the Plan Administrator after taking into account such
factors as the Plan Administrator shall deem appropriate.

                        (iv) For purposes of any option grants made on the
Underwriting Date, the Fair Market Value shall be deemed to be equal to the
price per share at which the Common Stock is sold in the initial public offering
pursuant to the Underwriting Agreement.

                        (v) In all instances the determination of Fair Market
Value shall be made in accordance with Regulation Sections 1.421-7(e)(2) and
20.2031-2(f)(2) as promulgated under Sections 421 and 2031 of the Code, as then
in effect.

      12. GRANT DATE shall mean the date on which the option is granted to
Optionee as specified in the Stock Option Grant.

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      13. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Code Section 422.

      14. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:

                        (i) such individual's involuntary dismissal or discharge
by the Corporation for reasons other than Misconduct, or

                        (ii) such individual's voluntary resignation following
(A) a change in his or her position with the Corporation which materially
reduces his or her level of responsibility, (B) a reduction in his or her level
of compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of such individual's place of employment by
more than fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's consent.

      15. MARKET STAND OFF shall mean the market stand off restriction on
disposition of the Purchased Shares as specified in Section D of the Stock
Option Exercise Notice and Purchase Agreement.

      16. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee, any unauthorized use or disclosure by such person
of confidential information or trade secrets of the Corporation (or any Parent
or Subsidiary), or any other intentional misconduct by such person adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or discharge of
any Optionee or other person in the Service of the Corporation (or any Parent or
Subsidiary).

      17. 1933 ACT shall mean the Securities Act of 1933, as amended.

      18. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.

      19. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.

      20. OPTIONEE shall mean any person to whom an option is granted under
Plan.

      21. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Stock Option Grant.

      22. OWNER shall mean Optionee and all subsequent holders of the Purchased
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.

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      23. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one or the other corporations
in such chain.

      24. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.

      25. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death, or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.

      26. PLAN ADMINISTRATOR shall mean the particular entity, whether the Board
or a committee of the Board, which is authorized to administer the Plan with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under the Plan with respect to the
persons under its jurisdiction.

      27. PLAN DOCUMENTS shall mean the Plan, the Stock Option Grant, and Stock
Option Exercise Notice and Purchase Agreement, collectively.

      28. PLAN EFFECTIVE DATE shall mean November 16, 1998, the date as of which
the Plan was adopted by the Board.

      29. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members (as defined in the regulations to Section 16 of the
1934 Act) appointed by the Board to administer the Plan with respect to Section
16 Insiders.

      30. PURCHASED SHARES shall mean the shares purchased upon exercise of the
Option.

      31. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other charge
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.

      32. REORGANIZATION shall mean any of the following transactions:

                        (i) a merger or consolidation in which the Corporation
is not the surviving entity;

                        (ii) a sale, transfer, or other disposition of all or
substantially all of the Corporation's assets;

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                        (iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting securities
are transferred in whole or in part to a person or persons different from the
persons holding those securities immediately prior to the merger; or

                        (iv) any transaction effected primarily to change the
state in which the Corporation is incorporated or to create a holding company
structure.

      33. SEC shall mean the Securities Exchange Commission.

      34. SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Plan with respect to eligible
persons other than Section 16 Insiders.

      35. SECTION 12(g) REGISTRATION DATE shall mean the date on which the
Common Stock is first registered under Section 12(g) of the 1934 Act.

      36. SECTION 16 INSIDER shall mean an officer or director of the
Corporation subject to the short-swing profit liabilities of Section 16 of the
1934 Act.

      37. SERVICE shall mean the performance of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant.

      38. STOCK EXCHANGE shall mean either the American Stock Exchange, the New
York Stock Exchange, or another regional stock exchange.

      39. STOCK OPTION EXERCISE NOTICE AND PURCHASE AGREEMENT shall mean the
agreement of said title in substantially the form of Exhibit A to the Stock
Option Grant, pursuant to which Optionee gives notice of his intent to exercise
the option and purchase Shares.

      40. STOCK OPTION GRANT shall mean the Stock Option Grant document,
pursuant to which Optionee has been informed of the basic terms of the option
granted under the Plan.

      41. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.

      42. TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options in connection
with the exercise of those options.

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      43. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).

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