SYNERON MEDICAL LTD.

                            2004 STOCK INCENTIVE PLAN


     1.  PURPOSES OF THE PLAN.  The Plan is intended to provide an  incentive to
retain,  in the  employ of the  Company  and its  Related  Entities,  persons of
training,  experience,  and ability,  to attract new Employees,  Directors,  and
Consultants which the Board shall decide their services are considered  valuable
to the Company, to encourage the sense of proprietorship of such persons, and to
stimulate the active  interest of such persons in the  development and financial
success of the Company by providing them with  opportunities  to purchase shares
in the Company, pursuant to the Plan.

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

          (a) "ADMINISTRATOR" means the Board or any of the Committees appointed
to administer the Plan.

          (b)  "APPLICABLE  LAWS" means the legal  requirements  relating to the
administration of stock incentive plans, if any, under applicable  provisions of
United States,  Israeli and Canadian tax and securities laws,  Israeli Companies
Law, the Code,  the rules of any applicable  stock  exchange or national  market
system,  and the  rules of any  jurisdiction  applicable  to Awards  granted  to
residents therein.

          (c) "ASSUMED"  means that pursuant to a Corporate  Transaction  either
(i) the Award is  expressly  affirmed  by the  Company  or (ii) the  contractual
obligations  represented  by the Award are expressly  assumed (and not simply by
operation of law) by the successor  entity or its Parent in connection  with the
Corporate  Transaction  with  appropriate  adjustments to the number and type of
securities  of the successor  entity or its Parent  subject to the Award and the
exercise or purchase  price  thereof which at least  preserves the  compensation
element  of the  Award  existing  at the time of the  Corporate  Transaction  as
determined in accordance with the instruments evidencing the agreement to assume
the Award.

          (d) "AWARD" means the grant of an Option,  Restricted  Stock, or other
right or benefit under the Plan.

          (e) "AWARD AGREEMENT" means the written agreement evidencing the grant
of an Award  executed by the Company and the Grantee,  including any  amendments
thereto.

          (f) "BOARD" means the Board of Directors of the Company.

          (g) "CAUSE" means, with respect to the termination by the Company,  or
a Related Entity of the Grantee's  Continuous Service,  that such termination is
for  "Cause"  as such term is  expressly  defined  in a  then-effective  written
agreement between the Grantee and the Company, or such Related Entity, or in the
absence of such then-effective written agreement and definition, shall mean: (i)
conviction of any felony involving moral turpitude or affecting the Company or a
Related  Entity;  (ii) any refusal to carry out a  reasonable  directive  of the
chief executive officer,



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the Board or the Optionee's  direct  supervisor,  which involves the business of
the  Company or a Related  Entity and was capable of being  lawfully  performed;
(iii) embezzlement of funds of the Company or a Related Entity;  (iv) any breach
of the Optionee's fiduciary duties or duties of care of the Company or a Related
Entity;  including without limitation disclosure of confidential  information of
the Company or a Related Entity; and (v) any conduct (other than conduct in good
faith)  reasonably  determined by the Board to be materially  detrimental to the
Company or a Related Entity.

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

          (i)  "COMMITTEE"  means  any  committee  appointed  by  the  Board  to
administer the Plan.

          (j)  "COMPANY"  means Syneron  Medical  Ltd., a corporation  organized
under the laws of the State of Israel.

          (k)  "CONSULTANT"  means  any  person  (other  than an  Employee  or a
Director, solely with respect to rendering services in such person's capacity as
a  Director)  who is engaged  by the  Company  or any  Related  Entity to render
consulting or advisory services to the Company or such Related Entity.

          (l)  "CONTINUOUS  SERVICE" means that the provision of services to the
Company or a Related Entity in any capacity of Employee, Director or Consultant,
is not  interrupted  or terminated.  Continuous  Service shall not be considered
interrupted  in the case of (i) any approved  leave of absence,  (ii)  transfers
among the Company,  any Related  Entity,  or any  successor,  in any capacity of
Employee,  Director or Consultant,  or (iii) any change in status as long as the
individual  remains  in the  service of the  Company or a Related  Entity in any
capacity of Employee,  Director or Consultant  (except as otherwise  provided in
the Award  Agreement).  An approved  leave of absence  shall include sick leave,
military leave,  or any other  authorized  personal leave.  For purposes of each
Incentive Stock Option granted under the Plan, if such leave exceeds ninety (90)
days,  and  reemployment  upon  expiration  of such leave is not  guaranteed  by
statute or  contract,  then the  Incentive  Stock  Option  shall be treated as a
Non-Qualified Stock Option on the day three (3) months and one (1) day following
the expiration of such ninety (90) day period.

          (m) "CORPORATE TRANSACTION" means any of the following transactions:

               (i) a merger or  consolidation  in which the  Company  is not the
surviving entity,  except for a transaction the principal purpose of which is to
change the jurisdiction in which the Company is incorporated;

               (ii)  the  sale,   transfer  or  other   disposition  of  all  or
substantially  all of the assets of the Company  (including the capital stock of
the Company's subsidiary corporations);

               (iii) the complete liquidation or dissolution of the Company;

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               (iv) any  reverse  merger in which the  Company is the  surviving
entity but in which  securities  possessing more than fifty percent (50%) 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; or

               (v)  acquisition by any person or related group of persons (other
than the Company or by a Company-sponsored  employee benefit plan) of beneficial
ownership  (within the meaning of Rule 13d-3 of the Exchange  Act) of securities
possessing  more than fifty percent (50%) of the total combined  voting power of
the Company's outstanding securities.

          (n)  "DIRECTOR"  means a member of the Board or the board of directors
of or any Related Entity.

          (o)  "DISABILITY"  means as  defined  under the  long-term  disability
policy of the  Company  or the  Related  Entity to which  the  Grantee  provides
services  regardless  of whether the Grantee is covered by such  policy.  If the
Company or the Related  Entity to which the Grantee  provides  service  does not
have a long-term disability plan in place,  "Disability" means that a Grantee is
unable to carry out the  responsibilities  and functions of the position held by
the  Grantee  by  reason  of  any  medically  determinable  physical  or  mental
impairment.  A Grantee  will not be  considered  to have  incurred a  Disability
unless he or she furnishes  proof of such  impairment  sufficient to satisfy the
Administrator in its discretion.

          (p) "EMPLOYEE" means any person, including an Officer or Director, who
is an employee of the Company or any Related Entity. The payment of a director's
fee by the Company or a Related  Entity shall not be  sufficient  to  constitute
"employment" by the Company.

          (q)  "EXCHANGE  ACT" means the  Securities  Exchange  Act of 1934,  as
amended.

          (r)  "FAIR  MARKET  VALUE"  means,  as of any  date,  the value of the
Ordinary Shares determined as follows:

               (i) If the Shares are listed on any established stock exchange or
a national  market system,  including  without  limitation  the Nasdaq  National
Market system,  or the Nasdaq  SmallCap  Market of the Nasdaq Stock Market,  the
Fair  Market  Value  shall be the  closing  sales  price for such Shares (or the
closing bid, if no sales were reported), as quoted on such exchange or system on
the date of determination, as reported in the Wall Street Journal, or such other
source as the Board deems reliable;

               (ii)  If  the  Shares  are  regularly   quoted  by  a  recognized
securities  dealer but selling  prices are not  reported,  the Fair Market Value
shall be the mean  between  the high bid and low asked  prices for the Shares on
the date of determination, or;

               (iii) In the absence of an established market for the Shares, the
Fair  Market  Value   thereof   shall  be   determined  in  good  faith  by  the
Administrator.

          (s) "GRANTEE"  means an Employee,  Director or Consultant who receives
an Award under the Plan.

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          (t) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.

          (u) "ISRAELI  COMPANIES LAW" means the Israeli  Companies Law 1999, as
amended or replaced from time to time.

          (v)  "NON-QUALIFIED  STOCK  OPTION"  means an Option not  intended  to
qualify as an Incentive Stock Option.

          (w)  "OFFICER"  means a person who is an  officer of the  Company or a
Related  Entity  within the  meaning of Section 16 of the  Exchange  Act and the
rules and regulations promulgated thereunder.

          (x) "OPTION" means an option to purchase  Shares  pursuant to an Award
Agreement granted under the Plan.

          (y) "ORDINARY SHARES" means the ordinary shares par value NIS 0.01 per
share of the Company.

          (z) "PARENT"  means a "parent  corporation,"  whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          (aa) "PLAN" means this 2004 Stock Incentive Plan.

          (bb) "POST-TERMINATION  EXERCISE PERIOD" means the period specified in
the Award  Agreement (or if not  mentioned  therein - as specified in this Plan)
commencing on the date of termination  (other than termination by the Company or
any Related Entity for Cause) of the Grantee's Continuous Service.

          (cc)  "RELATED  ENTITY"  means any Parent or Subsidiary of the Company
and any business, corporation,  partnership,  limited liability company or other
entity in which the Company or a Parent or a Subsidiary  of the Company  holds a
substantial ownership interest, directly or indirectly.

          (dd)  "REPLACED"  means that pursuant to a Corporate  Transaction  the
Award is replaced with a comparable  stock award or a cash incentive  program of
the Company,  the successor  entity (if  applicable) or Parent of either of them
which at least preserves the compensation  element of such Award existing at the
time  of the  Corporate  Transaction  and  provides  for  subsequent  payout  in
accordance with the same (or a more favorable)  vesting  schedule  applicable to
such  Award.  The  determination  of  Award  comparability  shall be made by the
Administrator and its determination shall be final, binding and conclusive.

          (ee)  "RESTRICTED  STOCK"  means  Shares  issued under the Plan to the
Grantee for such  consideration,  if any,  and subject to such  restrictions  on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.

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<PAGE>

          (ff) "RULE 16B-3" means Rule 16b-3  promulgated under the Exchange Act
or any successor thereto.

          (gg) "SHARE" means a share of the Ordinary Shares.

          (hh)  "SUBSIDIARY"  means a "subsidiary  corporation,"  whether now or
hereafter existing, as defined in Section 424(f) of the Code.

     3. STOCK SUBJECT TO THE PLAN.

          (a)  Subject to the  provisions  of Section  10,  below,  the  maximum
aggregate number of Shares which may be issued pursuant to all Awards (including
Incentive  Stock  Options) is 1,000,000  Shares,  plus an annual  increase to be
added on the first business day of each calendar year beginning in 2005 equal to
the lesser of (y) three percent (3%) of the number of Shares  outstanding  as of
such date, or (z) a lesser number of Shares  determined by the Board. The Shares
to be issued pursuant to Awards may be authorized,  but unissued,  or reacquired
Ordinary Shares.

          (b) Any Shares  covered by an Award (or portion of an Award)  which is
forfeited,  canceled or expires (whether  voluntarily or involuntarily) shall be
deemed not to have been issued for purposes of determining the maximum aggregate
number of Shares which may be issued under the Plan.  Shares that  actually have
been  issued  under the Plan  pursuant  to an Award shall not be returned to the
Plan and shall not become  available for future issuance under the Plan,  except
that if unvested  Shares are  forfeited,  or  repurchased  by the Company at the
lower of their original purchase price or their Fair Market Value at the time of
repurchase,  such Shares shall become available for future grant under the Plan.
To the  extent  not  prohibited  by  Section  422(b)(1)  of the  Code  (and  the
corresponding  regulations  thereunder),  the listing requirements of The Nasdaq
National Market (or other  established  stock exchange or national market system
on which the Common Stock is traded) and  Applicable  Law, any Shares covered by
an Award which are  surrendered (i) in payment of the Award exercise or purchase
price or (ii) in  satisfaction of tax  withholding  obligations  incident to the
exercise  of an Award  shall be deemed not to have been  issued for  purposes of
determining  the maximum  number of Shares  which may be issued  pursuant to all
Awards under the Plan, unless otherwise determined by the Administrator.

     4. ADMINISTRATION OF THE PLAN.

          (a) PLAN ADMINISTRATOR.

               (i) ADMINISTRATION  WITH RESPECT TO DIRECTORS AND OFFICERS.  With
respect to grants of Awards to Directors or Employees  who are also  Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee  designated by the Board,  which  Committee  shall be constituted in
such a manner as to satisfy  the  Applicable  Laws and to permit such grants and
related  transactions  under the Plan to be  exempt  from  Section  16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its  designated  capacity until  otherwise  directed by the
Board.

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<PAGE>

               (ii)   ADMINISTRATION  WITH  RESPECT  TO  CONSULTANTS  AND  OTHER
EMPLOYEES.  With respect to grants of Awards to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee  designated by the Board, which Committee shall
be  constituted  in such a  manner  as to  satisfy  the  Applicable  Laws.  Once
appointed,  such Committee  shall  continue to serve in its designated  capacity
until  otherwise  directed  by the Board.  The Board may  authorize  one or more
Officers  to grant  such  Awards  and may  limit  such  authority  as the  Board
determines from time to time.

               (iii) ADMINISTRATION  ERRORS. In the event an Award is granted in
a manner  inconsistent  with the provisions of this  subsection  (a), such Award
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.

          (b) POWERS OF THE  ADMINISTRATOR.  Subject to Applicable  Laws and the
provisions of the Plan  (including  any other powers given to the  Administrator
hereunder),  and except as otherwise  provided by the Board,  the  Administrator
shall have the authority, in its discretion:

               (i) to select the  Employees,  Directors and  Consultants to whom
Awards may be granted from time to time hereunder;

               (ii) to determine  whether and to what extent  Awards are granted
hereunder;

               (iii) to  determine  the  number of Shares or the amount of other
consideration to be covered by each Award granted hereunder;

               (iv) to approve forms of Award Agreements for use under the Plan;

               (v) to determine  the terms and  conditions  of any Award granted
hereunder;

               (vi) to amend the terms of any  outstanding  Award  granted under
the Plan,  provided  that (A) any  amendment  that  would  adversely  affect the
Grantee's  rights  under an  outstanding  Award  shall not be made  without  the
Grantee's written consent, (B) the reduction of the exercise price of any Option
awarded  under  the Plan  shall  be  subject  to  stockholder  approval  and (C)
canceling  an Option at a time when its exercise  price  exceeds the Fair Market
Value of the  underlying  Shares,  in exchange  for another  Option,  Restricted
Stock,  or other  Award  shall be subject to  stockholder  approval,  unless the
cancellation and exchange occurs in connection with a Corporate Transaction;

               (vii) to construe and interpret the terms of the Plan and Awards,
including without  limitation,  any notice of award or Award Agreement,  granted
pursuant to the Plan;

               (viii)  to  establish  additional  terms,  conditions,  rules  or
procedures, to accommodate the rules or laws of applicable foreign jurisdictions
and to afford Grantees favorable  treatment under such rules or laws;  provided,
however,  that no Award  shall be  granted


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under any such additional terms,  conditions,  rules or procedures with terms or
conditions which are inconsistent with the provisions of the Plan; and

               (ix) to take such other action,  not inconsistent  with the terms
of the Plan, as the Administrator deems appropriate.

          (c)   INDEMNIFICATION.   In   addition   to  such   other   rights  of
indemnification  as they may have as  members  of the  Board or as  Officers  or
Employees  of the  Company  or a Related  Entity,  members  of the Board and any
Officers or  Employees of the Company or a Related  Entity to whom  authority to
act for the  Board,  the  Administrator  or the  Company is  delegated  shall be
defended  and  indemnified  by the Company to the extent  permitted by law on an
after-tax  basis against all reasonable  expenses,  including  attorneys'  fees,
actually and  necessarily  incurred in connection with the defense of any claim,
investigation,  action,  suit or  proceeding,  or in connection  with any appeal
therein,  to which  they or any of them may be a party by reason  of any  action
taken or  failure  to act under or in  connection  with the  Plan,  or any Award
granted  hereunder,  and against all amounts paid by them in settlement  thereof
(provided  such  settlement  is  approved  by the  Company)  or  paid by them in
satisfaction  of a judgment in any such claim,  investigation,  action,  suit or
proceeding,  except in  relation  to matters as to which it shall be adjudged in
such claim, investigation, action, suit or proceeding that such person is liable
for gross negligence,  bad faith or intentional misconduct;  provided,  however,
that within thirty (30) days after the institution of such claim, investigation,
action, suit or proceeding,  such person shall offer to the Company, in writing,
the opportunity at the Company's expense to defend the same.

     5. ELIGIBILITY. Awards other than Incentive Stock Options may be granted to
Employees,  Directors and  Consultants.  Incentive  Stock Options may be granted
only to Employees of the Company or a Parent or a Subsidiary of the Company.  An
Employee, Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards. Awards may be granted to such Employees,
Directors  or  Consultants  who are  residing  in foreign  jurisdictions  as the
Administrator may determine from time to time.

     6. TERMS AND CONDITIONS OF AWARDS.

          (a) TYPE OF AWARDS.  The Administrator is authorized under the Plan to
award any type of arrangement to an Employee, Director or Consultant that is not
inconsistent  with the  provisions of the Plan and that by its terms involves or
might involve the issuance of (i) Shares, (ii) an Option or similar right with a
fixed or variable  price related to the Fair Market Value of the Shares and with
an  exercise  or  conversion  privilege  related  to the  passage  of time,  the
occurrence of one or more events, or the satisfaction of performance criteria or
other  conditions,  or (iii) any other  security with the value derived from the
value of the Shares. Such awards include,  without limitation,  Options or sales
or bonuses of Restricted Stock, and an Award may consist of one such security or
benefit, or two (2) or more of them in any combination or alternative.

          (b) DESIGNATION OF AWARD.  Each Award shall be designated in the Award
Agreement. In the case of an Option, the Option shall be designated as either an
Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding
such  designation,  to the


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extent  that the  aggregate  Fair  Market  Value of Shares  subject  to  Options
designated as Incentive  Stock Options  which become  exercisable  for the first
time by a Grantee  during any  calendar  year (under all plans of the Company or
any Parent or Subsidiary of the Company) exceeds $100,000,  such excess Options,
to the  extent  of  the  Shares  covered  thereby  in  excess  of the  foregoing
limitation,  shall be treated as Non-Qualified Stock Options.  For this purpose,
Incentive  Stock  Options shall be taken into account in the order in which they
were granted,  and the Fair Market Value of the Shares shall be determined as of
the grant date of the relevant Option.

          (c)  CONDITIONS  OF  AWARD.  Subject  to the  terms of the  Plan,  the
Administrator  shall  determine the  provisions,  terms,  and conditions of each
Award  including,  but not limited to, the Award  vesting  schedule,  repurchase
provisions,  rights of first  refusal,  forfeiture  provisions,  form of payment
(cash,  Shares, or other  consideration)  upon settlement of the Award,  payment
contingencies,  and  satisfaction of any performance  criteria.  The performance
criteria  established  by the  Administrator  may be  based  on any one  of,  or
combination of, increase in share price,  earnings per share,  total stockholder
return, return on equity, return on assets, return on investment,  net operating
income,   cash  flow,  revenue,   economic  value  added,   personal  management
objectives,  or other  measure of  performance  selected  by the  Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.

          (d) ACQUISITIONS AND OTHER  TRANSACTIONS.  The Administrator may issue
Awards under the Plan in settlement, assumption or substitution for, outstanding
awards or obligations to grant future awards in connection with the Company or a
Related Entity  acquiring  another  entity,  an interest in another entity or an
additional interest in a Related Entity whether by merger, stock purchase, asset
purchase or other form of transaction.

          (e) DEFERRAL OF AWARD PAYMENT.  The Administrator may establish one or
more programs  under the Plan to permit  selected  Grantees the  opportunity  to
elect to defer receipt of consideration upon exercise of an Award,  satisfaction
of performance  criteria,  or other event that absent the election would entitle
the  Grantee to payment  or  receipt of Shares or other  consideration  under an
Award (but only to the extent that such deferral programs would not result in an
accounting    compensation   charge   unless   otherwise   determined   by   the
Administrator).  The  Administrator may establish the election  procedures,  the
timing of such  elections,  the  mechanisms  for  payments  of,  and  accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred,  and such  other  terms,  conditions,  rules and  procedures  that the
Administrator  deems  advisable  for the  administration  of any  such  deferral
program.

          (f) SEPARATE  PROGRAMS.  The  Administrator  may establish one or more
separate programs under the Plan for the purpose of issuing  particular forms of
Awards to one or more  classes  of  Grantees  on such  terms and  conditions  as
determined by the Administrator from time to time.

          (g) EARLY EXERCISE.  The Award Agreement may, but need not,  include a
provision whereby the Grantee may elect at any time while an Employee,  Director
or  Consultant to exercise any part or all of the Award prior to full vesting of
the Award. Any unvested Shares received


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pursuant to such  exercise may be subject to a repurchase  right in favor of the
Company  or a  Related  Entity  or to any other  restriction  the  Administrator
determines to be appropriate.

          (h) TERM OF AWARD.  The term of each Award shall be the term stated in
the Award Agreement,  provided,  however,  that the term of an Award shall be no
more than seven (7) years from the date of grant thereof.  However,  in the case
of an Incentive Stock Option granted to a Grantee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all  classes  of stock of the  Company  or any  Parent or  Subsidiary  of the
Company, the term of the Incentive Stock Option shall be five (5) years from the
date of grant  thereof  or such  shorter  term as may be  provided  in the Award
Agreement.

          (i)  TRANSFERABILITY  OF AWARDS.  Incentive  Stock  Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other  than  by  will  or by the  laws of  descent  or  distribution  and may be
exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards
shall be  transferable  (i) by will and by the laws of descent and  distribution
and (ii)  during the  lifetime of the  Grantee,  to the extent and in the manner
authorized by the Administrator.  Notwithstanding the foregoing, the Grantee may
designate one or more  beneficiaries  of the Grantee's Award in the event of the
Grantee's death on a beneficiary designation form provided by the Administrator.

          (j) TIME OF GRANTING  AWARDS.  The date of grant of an Award shall for
all purposes be the date on which the  Administrator  makes the determination to
grant such  Award,  or such other date as is  determined  by the  Administrator.
Notice of the grant determination  shall be given to each Employee,  Director or
Consultant  to whom an Award is so granted  within a  reasonable  time after the
date of such grant.

     7. AWARD EXERCISE OR PURCHASE PRICE, CONSIDERATION AND TAXES.

          (a) EXERCISE OR PURCHASE  PRICE.  The exercise or purchase  price,  if
any, for an Award shall be as follows:

               (i) In the case of an Incentive Stock Option:

                    (A) granted to an Employee  who, at the time of the grant of
such Incentive Stock Option owns stock  representing more than ten percent (10%)
of the  voting  power of all  classes  of stock of the  Company or any Parent or
Subsidiary of the Company,  the per Share  exercise price shall be not less than
one hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant; or

                    (B) granted to any Employee other than an Employee described
in the preceding paragraph,  the per Share exercise price shall be not less than
one hundred  percent  (100%) of the Fair  Market  Value per Share on the date of
grant.

               (ii) In the case of a Non-Qualified  Stock Option,  the per Share
exercise  price  shall be not less than  eighty-five  percent  (85%) of the Fair
Market Value per Share on the date of grant.

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<PAGE>

               (iii) In the case of other Awards, such price as is determined by
the Administrator.

               (iv)  Notwithstanding  the  foregoing  provisions of this Section
7(a),  in the case of an Award  issued  pursuant  to Section  6(d),  above,  the
exercise or purchase price for the Award shall be determined in accordance  with
the principles of Section 424(a) of the Code.

          (b) CONSIDERATION. Subject to Applicable Laws, the consideration to be
paid for the Shares to be issued upon exercise or purchase of an Award including
the method of payment,  shall be  determined by the  Administrator  (and, in the
case of an Incentive Stock Option, shall be determined at the time of grant). In
addition to any other types of consideration  the  Administrator  may determine,
the  Administrator  is authorized to accept as  consideration  for Shares issued
under the Plan the following:

               (i) cash;

               (ii) check;

               (iii) surrender of Shares or delivery of a properly executed form
of  attestation  of ownership of Shares as the  Administrator  may require which
have a Fair Market Value on the date of surrender  or  attestation  equal to the
aggregate  exercise  price  of the  Shares  as to  which  said  Award  shall  be
exercised,  provided,  however, that Shares acquired under the Plan or any other
equity  compensation plan or agreement of the Company must have been held by the
Grantee for a period of more than six (6) months (and not used for another Award
exercise by attestation during such period);

               (iv) with  respect to Options,  payment  through a  broker-dealer
sale and  remittance  procedure  pursuant to which the Grantee (A) shall provide
written  instructions  to a Company  designated  brokerage  firm to  effect  the
immediate  sale of some or all of the purchased  Shares and remit to the Company
sufficient funds to cover the aggregate exercise price payable for the purchased
Shares and (B) shall  provide  written  directives to the Company to deliver the
certificates  for the purchased  Shares directly to such brokerage firm in order
to complete the sale transaction; or

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

The  Administrator  may at any time or from time to time,  by  adoption of or by
amendment  to the  standard  forms  of  Award  Agreement  described  in  Section
4(b)(iv),  or by  other  means,  grant  Awards  which do not  permit  all of the
foregoing forms of  consideration  to be used in payment for the Shares or which
otherwise restrict one or more forms of consideration.

          (c) TAXES.  No Shares shall be delivered under the Plan to any Grantee
or other  person  until  such  Grantee  or other  person  has made  arrangements
acceptable to the  Administrator  for the satisfaction of any foreign,  federal,
state,  or local income and employment tax withholding  obligations,  including,
without  limitation,  obligations  incident  to the  receipt  of  Shares  or the
disqualifying  disposition of Shares  received on exercise of an Incentive Stock


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<PAGE>

Option.  Upon  exercise of an Award the Company  shall  withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.

     8. EXERCISE OF AWARD.

          (a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.

               (i) Any Award  granted  hereunder  shall be  exercisable  at such
times and under such  conditions as determined  by the  Administrator  under the
terms of the Plan and specified in the Award Agreement.

               (ii) An Award shall be deemed to be exercised when written notice
of such exercise has been given to the Company in  accordance  with the terms of
the Award by the person  entitled to exercise the Award and full payment for the
Shares with respect to which the Award is  exercised,  including,  to the extent
selected,  use of the  broker-dealer  sale and  remittance  procedure to pay the
purchase price as provided in Section 7(b)(iv).

          (b) EXERCISE OF AWARD FOLLOWING  TERMINATION OF CONTINUOUS SERVICE. In
the event of termination of a Grantee's  Continuous Service for any reason other
than  Disability or death (but not in the event of a Grantee's  change of status
from Employee to Consultant or from  Consultant to Employee),  such Grantee may,
but only during the Post-Termination Exercise Period (but in no event later than
the  expiration  date of the  term of  such  Award  as set  forth  in the  Award
Agreement),  exercise the portion of the Grantee's  Award that was vested at the
date of such  termination or such other portion of the Grantee's Award as may be
determined by the Administrator.  The Grantee's Award Agreement may provide that
upon  the  termination  of the  Grantee's  Continuous  Service  for  Cause,  the
Grantee's  right to exercise  the Award shall  terminate  concurrently  with the
termination of Grantee's  Continuous Service. In the event of a Grantee's change
of status from  Employee to  Consultant,  an Employee's  Incentive  Stock Option
shall convert automatically to a Non-Qualified Stock Option on the day three (3)
months  and one day  following  such  change of status.  To the extent  that the
Grantee's Award was unvested at the date of termination,  or if the Grantee does
not   exercise   the  vested   portion  of  the   Grantee's   Award  within  the
Post-Termination Exercise Period, the Award shall terminate.

          (c) DISABILITY OF GRANTEE.  In the event of termination of a Grantee's
Continuous  Service as a result of his or her Disability,  such Grantee may, but
only within twelve (12) months from the date of such termination (or such longer
or shorter period as specified in the Award Agreement but in no event later than
the  expiration  date of the  term of  such  Award  as set  forth  in the  Award
Agreement),  exercise the portion of the Grantee's  Award that was vested at the
date of such termination;  provided,  however,  that if such Disability is not a
"disability"  as such term is defined in Section  22(e)(3)  of the Code,  in the
case  of  an  Incentive   Stock  Option  such   Incentive   Stock  Option  shall
automatically  convert  to a  Non-Qualified  Stock  Option  on the day three (3)
months and one day following such termination.  To the extent that the Grantee's
Award was unvested at the date of  termination,  or if Grantee does not exercise
the vested portion of the Grantee's Award within the time specified herein,  the
Award shall terminate.

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<PAGE>

          (d) DEATH OF GRANTEE.  In the event of a termination  of the Grantee's
Continuous Service as a result of his or her death, or in the event of the death
of the Grantee during the Post-Termination  Exercise Period or during the twelve
(12) month period following the Grantee's termination of Continuous Service as a
result of his or her Disability,  the Grantee's  estate or a person who acquired
the right to  exercise  the Award by bequest or  inheritance  may  exercise  the
portion of the  Grantee's  Award that was vested as of the date of  termination,
within  twelve  (12)  months  from the date of death (or such  longer or shorter
period  as  specified  in the Award  Agreement  but in no event  later  than the
expiration  of the term of such Award as set forth in the Award  Agreement).  To
the extent that, at the time of death,  the Grantee's Award was unvested,  or if
the Grantee's estate or a person who acquired the right to exercise the Award by
bequest or  inheritance  does not exercise the vested  portion of the  Grantee's
Award within the time specified herein, the Award shall terminate.

          (e)  EXTENSION  IF  EXERCISE  PREVENTED  BY LAW.  Notwithstanding  the
foregoing,  if the exercise of an Award within the  applicable  time periods set
forth in this Section 8 is prevented by the  provisions of Section 9 below,  the
Award shall remain exercisable until one (1) month after the date the Grantee is
notified by the Company that the Award is exercisable, but in any event no later
than  the  expiration  of the  term of such  Award  as set  forth  in the  Award
Agreement.

          (f)  POST  TERMINATION  FORFEITURE.   The  reason  of  termination  of
Continuous  Service  notwithstanding,  if during the  Post-Termination  Exercise
Period,    the   Grantee   breaches   the    confidentiality,    non-competition
non-solicitation,  non-use or assignment of intellectual  property  undertakings
binding upon such Grantee,  the Company shall have the right (only to the extent
specifically  set forth in the Grantee's Award Agreement) to effect a forfeiture
of all of the Grantee's then outstanding Awards (whether vested or non-vested).

     9. CONDITIONS UPON ISSUANCE OF SHARES.

          (a) Shares  shall not be issued  pursuant to the  exercise of an Award
unless the  exercise of such Award and the  issuance and delivery of such Shares
pursuant  thereto shall comply with all  Applicable  Laws,  and shall be further
subject  to the  approval  of  counsel  for the  Company  with  respect  to such
compliance.

          (b) As a  condition  to the  exercise  of an Award,  the  Company  may
require the person exercising such Award to represent and warrant at the time of
any such exercise that the Shares are being  purchased  only for  investment and
without  any  present  intention  to sell or  distribute  such Shares if, in the
opinion of counsel for the  Company,  such a  representation  is required by any
Applicable Laws.

     10.  ADJUSTMENTS  UPON CHANGES IN  CAPITALIZATION.  Subject to any required
action by the stockholders of the Company,  the number of Shares covered by each
outstanding  Award,  and the  number of Shares  which have been  authorized  for
issuance under the Plan but as to which no Awards have yet been granted or which
have been  returned to the Plan,  the  exercise  or purchase  price of each such
outstanding Award, as well as any other terms that the Administrator  determines
require  adjustment  shall be  proportionately  adjusted for (i) any increase or
decrease in the number of issued Shares  resulting  from a stock split,  reverse
stock split, stock dividend,


                                       12
<PAGE>

combination or reclassification of the Shares, or similar transaction  affecting
the Shares,  (ii) any other  increase or decrease in the number of issued Shares
effected  without  receipt  of  consideration  by the  Company,  or (iii) as the
Administrator  may  determine  in its  discretion,  any other  transaction  with
respect to Common Stock including a corporate merger, consolidation, acquisition
of property or stock,  separation (including a spin-off or other distribution of
stock or property), reorganization, liquidation (whether partial or complete) or
any similar  transaction;  provided,  however that conversion of any convertible
securities  of the Company  shall not be deemed to have been  "effected  without
receipt of  consideration."  Such adjustment shall be made by the  Administrator
and its  determination  shall be final,  binding and  conclusive.  Except as the
Administrator  determines,  no issuance by the Company of shares of stock of any
class,  or  securities  convertible  into  shares of stock of any  class,  shall
affect,  and no  adjustment  by reason hereof shall be made with respect to, the
number or price of Shares subject to an Award.

     11. CORPORATE TRANSACTIONS.

          (a)  TERMINATION  OF AWARD TO EXTENT NOT ASSUMED.  Effective  upon the
consummation of a Corporate  Transaction,  all outstanding Awards under the Plan
shall terminate. However, all such Awards shall not terminate to the extent they
are Assumed in connection with the Corporate Transaction.

          (b)  ACCELERATION  OF AWARD  UPON  CORPORATE  TRANSACTION.  Except  as
provided otherwise in an individual Award Agreement, in the event of a Corporate
Transaction, for the portion of each Award that is neither Assumed nor Replaced,
such  portion  of  the  Award  shall  automatically   become  fully  vested  and
exercisable and be released from any repurchase or forfeiture rights (other than
repurchase rights exercisable at Fair Market Value) for all of the Shares at the
time  represented  by  such  portion  of the  Award,  immediately  prior  to the
specified  effective  date of such  Corporate  Transaction,  provided  that  the
Grantee's  Continuous Service has not terminated prior to such date. The portion
of the Award that is not Assumed shall  terminate  under  subsection (a) of this
Section  11 to the  extent  not  exercised  prior  to the  consummation  of such
Corporate Transaction.

          (c) EFFECT OF ACCELERATION ON INCENTIVE STOCK OPTIONS.  The portion of
any Incentive Stock Option  accelerated under this Section 11 in connection with
a Corporate  Transaction  shall remain  exercisable as an Incentive Stock Option
under the Code only to the  extent the  $100,000  dollar  limitation  of Section
422(d) of the Code is not  exceeded.  To the extent  such dollar  limitation  is
exceeded,  the accelerated excess portion of such Option shall be exercisable as
a Non-Qualified Stock Option.

     12.  EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become  effective upon
the  earlier  to occur of its  adoption  by the  Board  or its  approval  by the
stockholders of the Company.  It shall continue in effect for a term of ten (10)
years unless sooner  terminated.  Subject to Section 17, below,  and  Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.

                                       13
<PAGE>

     13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.

          (a) The Board may at any time amend,  suspend or  terminate  the Plan;
provided,  however, that no such amendment shall be made without the approval of
the Company's stockholders to the extent such approval is required by Applicable
Laws,  or if such  amendment  would  change  any of the  provisions  of  Section
4(b)(vi) or this Section 13(a).

          (b) No Award may be granted during any suspension of the Plan or after
termination of the Plan.

          (c) Any amendment,  suspension or  termination of the Plan  (including
termination of the Plan under Section 12, above) shall not affect Awards already
granted,  and such Awards  shall  remain in full force and effect as if the Plan
had not been amended, suspended or terminated,  unless mutually agreed otherwise
between the Grantee and the  Administrator,  which  agreement must be in writing
and signed by the Grantee and the Company.

     14. RESERVATION OF SHARES.

          (a) The  Company,  during  the  term of the  Plan,  will at all  times
reserve  and keep  available  such  number of Shares as shall be  sufficient  to
satisfy the requirements of the Plan.

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

     15.  NO  EFFECT ON TERMS OF  EMPLOYMENT/CONSULTING  RELATIONSHIP.  The Plan
shall not  confer  upon any  Grantee  any right with  respect  to the  Grantee's
Continuous  Service,  nor shall it interfere in any way with his or her right or
the Company's right to terminate the Grantee's  Continuous  Service at any time,
with or without  Cause,  and with or without  notice.  The Company's  ability to
terminate  the  employment  of a Grantee  who is  employed  at will is in no way
affected by its  determination  that the Grantee's  Continuous  Service has been
terminated for Cause for the purposes of this Plan.

     16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS. Except as specifically
provided  in a  retirement  or other  benefit  plan of the  Company or a Related
Entity,  Awards  shall not be deemed  compensation  for  purposes  of  computing
benefits or contributions  under any retirement plan of the Company or a Related
Entity,  and shall not affect any benefits  under any other  benefit plan of any
kind or any benefit plan subsequently instituted under which the availability or
amount  of  benefits  is  related  to level of  compensation.  The Plan is not a
"Retirement  Plan" or  "Welfare  Plan"  under  the  Employee  Retirement  Income
Security Act of 1974, as amended.

     17.  STOCKHOLDER  APPROVAL.  The grant of Incentive Stock Options under the
Plan shall be subject to approval  by the  stockholders  of the  Company  within
twelve  (12)  months  before  or after  the date the Plan is  adopted  excluding
Incentive Stock Options issued in substitution  for outstanding  Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder


                                       14
<PAGE>

approval shall be obtained in the degree and manner  required  under  Applicable
Laws. The  Administrator  may grant Incentive Stock Options under the Plan prior
to approval by the  stockholders,  but until such approval is obtained,  no such
Incentive  Stock  Option  shall be  exercisable.  In the event that  stockholder
approval is not obtained within the twelve (12) month period provided above, all
Incentive Stock Options  previously  granted under the Plan shall be exercisable
as Non-Qualified Stock Options.







                                       15