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                                                            Exhibit 10.41
                                TAB PRODUCTS CO.

                    1996 OUTSIDE DIRECTORS STOCK OPTION PLAN


     1.   ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

          1.1  ESTABLISHMENT.  The TAB Products Co. 1996 Outside Directors Stock
Option Plan (the "PLAN") is hereby established effective as of October 17, 1996,
the date on which the Plan was initially approved by the stockholders of the
Company (the "EFFECTIVE DATE").

          1.2  PURPOSE.  The purpose of the Plan is to advance the interests of
the Participating Company Group and its stockholders by providing an incentive
to attract and retain highly qualified persons to serve as Outside Directors of
the Company and by creating additional incentive for Outside Directors to
promote the growth and profitability of the Participating Company Group.

          1.3  TERM OF PLAN.  The Plan shall continue in effect until the
earlier of its termination by the Board or the date on which all of the shares
of Stock available for issuance under the Plan have been issued and all
restrictions on such shares under the terms of the Plan and the agreements
evidencing Options granted under the Plan have lapsed.

     2.   DEFINITIONS AND CONSTRUCTION.

          2.1  DEFINITIONS.  Whenever used herein, the following terms shall
have their respective meanings set forth below:

               (a)  "BOARD" means the Board of Directors of the Company.  If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).

               (b)  "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

               (c)  "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
Unless the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted herein, including, without
limitation, the power to amend or terminate the Plan at any time, subject to the
terms of the Plan and any applicable limitations imposed by law.


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               (d)  "COMPANY" means TAB Products Co., a Delaware corporation, or
any successor corporation thereto.

               (e)  "CONSULTANT" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.

               (f)  "DIRECTOR" means a member of the Board or the board of
directors of any other Participating Company.

               (g)  "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.

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

               (i)  "FAIR MARKET VALUE" means, as of any date, if there is then
a public market for the Stock, the closing price of the Stock (or the mean of
the closing bid and asked prices of the Stock if the Stock is so reported
instead) as reported on the American Stock Exchange (the "AMEX") or such other
national or regional securities exchange or market system constituting the
primary market for the Stock.  If the relevant date does not fall on a day on
which the Stock is trading on the AMEX or other national or regional securities
exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to the
relevant date.  If there is then no public market for the Stock, the Fair Market
Value on any relevant date shall be as determined by the Board without regard to
any restriction other than a restriction which, by its terms, will never lapse.


               (j)  "OPTION" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan.

               (k)  "OPTIONEE" means a person who has been granted one or more
Options.

               (l)  "OPTION AGREEMENT" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee.

               (m)  "OUTSIDE DIRECTOR" means a Director of the Company who is
not an Employee.


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               (n)  "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (o)  "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

               (p)  "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.

               (q)  "RETIREMENT" means the termination of an Optionee's Service
on or after the date on which the Optionee attains age seventy (70) for any
reason other than the Optionee's death or permanent and total disability within
the meaning of Section 22(e)(3) of the Code.

               (r)  "RULE 16b-3" means Rule 16b-3 as promulgated under the
Exchange Act, as amended from time to time, or any successor rule or regulation.

               (s)  "SERVICE" means the Optionee's service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant.  The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service.  The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the corporation for which the Optionee performs Service ceasing to be a
Participating Company.

               (t)  "STOCK" means the common stock, par value $0.01, of the
Company, as adjusted from time to time in accordance with Section 4.2.

               (u)  "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

          2.2  CONSTRUCTION.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan.  Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
use of the term "or" shall include the conjunctive as well as the disjunctive.


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     3.   ADMINISTRATION.

          3.1  ADMINISTRATION BY THE BOARD.  The Plan shall be administered by
the Board, including any duly appointed Committee of the Board.  All questions
of interpretation of the Plan or of any Option shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan or such Option.  Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, determination or election which is the responsibility
of or which is allocated to the Company herein, provided the officer has
apparent authority with respect to such matter, right, obligation, determination
or election.

          3.2  LIMITATIONS ON AUTHORITY OF THE BOARD.  Notwithstanding any other
provision herein to the contrary, the Board shall have no authority, discretion,
or power to select the Outside Directors who will receive Options, to set the
exercise price of the Options, to determine the number of shares of Stock to be
subject to an Option or the time at which an Option shall be granted, to
establish the duration of an Option, or to alter any other terms or conditions
specified in the Plan, except in the sense of administering the Plan subject to
the provisions of the Plan.

     4.   SHARES SUBJECT TO PLAN.

          4.1  MAXIMUM NUMBER OF SHARES ISSUABLE.  Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be one hundred fifty thousand (150,000) and
shall consist of authorized but unissued shares or reacquired shares of Stock or
any combination thereof.  If an outstanding Option for any reason expires or is
terminated or canceled or shares of Stock acquired, subject to repurchase, upon
the exercise of an Option are repurchased by the Company, the shares of Stock
allocable to the unexercised portion of such Option, or such repurchased shares
of Stock, shall again be available for issuance under the Plan.

          4.2  ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.  In the event of
any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification or similar change in the capital structure of the
Company, appropriate adjustments shall be made in the number and class of shares
subject to the Plan, to the "Initial Option" and "Annual Option" (as defined in
Section 6.1), and to any outstanding Options, and in the exercise price of any
outstanding Options.  If a majority of the shares which are of the same class as
the shares that are subject to outstanding Options are exchanged for, converted
into, or otherwise become (whether or not pursuant to an "Ownership Change
Event" as defined in Section 8.1) shares of another corporation (the "NEW
SHARES"), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares.  In the event of any such
amendment, the number of

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shares subject to, and the exercise price of, the outstanding Options shall be
adjusted in a fair and equitable manner as determined by the Board, in its sole
discretion.  Notwithstanding the foregoing, any fractional share resulting from
an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest
whole number, and in no event may the exercise price of any Option be decreased
to an amount less than the par value, if any, of the stock subject to the
Option.

     5.   ELIGIBILITY AND TYPE OF OPTIONS.

          5.1  PERSONS ELIGIBLE FOR OPTIONS.  An Option shall be granted only to
a person who, at the time of grant, is an Outside Director.

          5.2  OPTIONS AUTHORIZED.  Options shall be nonstatutory stock options;
that is, options which are not treated as incentive stock options within the
meaning of Section 422(b) of the Code.

     6.   TERMS AND CONDITIONS OF OPTIONS.  Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish.  Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:

          6.1  AUTOMATIC GRANT OF OPTIONS.  Subject to execution by an Outside
Director of the appropriate Option Agreement, Options shall be granted
automatically and without further action of the Board, as follows:

               (a)  INITIAL OPTION.  Each person who (i) is an Outside Director
on the Effective Date, or (ii) first becomes an Outside Director after the
Effective Date shall be granted an Option to purchase ten thousand (10,000)
shares of Stock on the Effective Date or the date of his or her initial election
or appointment, respectively (an "INITIAL OPTION").  Notwithstanding anything
herein to the contrary, a Director of the Company who previously did not qualify
as an Outside Director shall not receive an Initial Option in the event that
such Director subsequently becomes an Outside Director.

               (b)  ANNUAL OPTION.  Each Outside Director (including any
Director of the Company who previously did not qualify as an Outside Director
but who subsequently becomes an Outside Director) shall be granted, on the date
of each annual meeting of the stockholders of the Company (an "ANNUAL MEETING")
immediately following which such person remains an Outside Director, an Option
to purchase two thousand (2,000) shares of Stock (an "ANNUAL OPTION").
Notwithstanding the foregoing, an Outside Director who received an Initial
Option within six (6) months of the date of such Annual Meeting shall not
receive an Annual Option on such date.


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               (c)  RIGHT TO DECLINE OPTION.  Notwithstanding the foregoing, any
person may elect not to receive an Option by delivering written notice of such
election to the Board no later than the day prior to the date such Option would
otherwise be granted.  A person so declining an Option shall receive no payment
or other consideration in lieu of such declined Option.  A person who has
declined an Option may revoke such election by delivering written notice of such
revocation to the Board no later than the day prior to the date such Option
would be granted pursuant to Section 6.1(a) or (b), as the case may be.

          6.2  EXERCISE PRICE.  The exercise price per share of Stock subject to
an Option shall be the Fair Market Value of a share of Stock on the date the
Option is granted.

          6.3  EXERCISE PERIOD.  Each Option shall terminate and cease to be
exercisable on the date ten (10) years after the date of grant of the Option
unless earlier terminated pursuant to the terms of the Plan or the Option
Agreement.

          6.4  RIGHT TO EXERCISE OPTIONS.

               (a)  INITIAL OPTION.  Except as otherwise provided in the Plan or
in the Option Agreement, an Initial Option shall (i) first become exercisable on
the date which is one (1) year after the date on which the Initial Option was
granted (the "INITIAL OPTION VESTING DATE"); and (ii) be exercisable on and
after the Initial Option Vesting Date and prior to the termination thereof in an
amount equal to the number of shares of Stock initially subject to the Initial
Option multiplied by the Vested Ratio as set forth below, less the number of
shares previously acquired upon exercise thereof.  The Vested Ratio described in
the preceding sentence shall be determined as follows:

                                                            VESTED RATIO

               Prior to Initial Option Vesting Date              0

               On Initial Option Vesting Date,                   1/4
               provided the Optionee's Service
               is continuous from the date of grant
               of the Initial Option until the
               Initial Option Vesting Date

               PLUS

               For each full year of                             1/4
               of the Optionee's continuous
               Service from the Initial Option
               Vesting Date until the Vested


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               Ratio equals 1/1, an additional

               (b)  ANNUAL OPTION.  Except as otherwise provided in the Plan or
in the Option Agreement, an Annual Option shall become fully vested and
exercisable on the date immediately preceding the date of the first Annual
Meeting which occurs after the date of grant of the Annual Option (the "ANNUAL
OPTION VESTING DATE"), provided that the Optionee's Service is continuous from
the date of grant of the Annual Option until the Annual Option Vesting Date.
The Annual Option shall be exercisable on and after the Annual Option Vesting
Date and prior to the termination thereof in an amount equal to the number of
shares of Stock initially subject to the Annual Option, less the number of
shares previously acquired upon exercise thereof.

               (c)  RETIREMENT.  In addition to the foregoing, if an Optionee's
Service is terminated because of the Optionee's Retirement, any unexercisable or
unvested portion of such Optionee's outstanding Options shall become fully
exercisable and vested as of the date of the Optionee's Retirement.

          6.5  PAYMENT OF EXERCISE PRICE.

               (a)  FORMS OF CONSIDERATION AUTHORIZED.  Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value not less than the exercise price, (iii) by
the assignment of the proceeds of a sale or loan with respect to some or all of
the shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System) (a "CASHLESS EXERCISE"), or (iv) by any combination thereof.

               (b)  TENDER OF STOCK.  Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock unless such shares either have been owned by
the Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.

               (c)  CASHLESS EXERCISE.  The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise.


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          6.6  TAX WITHHOLDING.  The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value equal to all or any part of the federal,
state, local and foreign taxes, if any, required by law to be withheld by the
Participating Company Group with respect to such Option or the shares acquired
upon exercise thereof.  Alternatively or in addition, in its sole discretion,
the Company shall have the right to require the Optionee to make adequate
provision for any such tax withholding obligations of the Participating Company
Group arising in connection with the Option or the shares acquired upon exercise
thereof.  The Company shall have no obligation to deliver shares of Stock until
the Participating Company Group's tax withholding obligations have been
satisfied.

     7.   STANDARD FORM OF OPTION AGREEMENT.

          7.1  INITIAL OPTION.  Unless otherwise provided for by the Board at
the time an Initial Option is granted, each Initial Option shall comply with and
be subject to the terms and conditions set forth in the form of Nonstatutory
Stock Option Agreement for Outside Directors (Initial Option) adopted by the
Board concurrently with its adoption of the Plan and as amended from time to
time.

          7.2  ANNUAL OPTION.  Unless otherwise provided for by the Board at the
time an Annual Option is granted, each Annual Option shall comply with and be
subject to the terms and conditions set forth in the form of Nonstatutory Stock
Option Agreement for Outside Directors (Annual Option) adopted by the Board
concurrently with its adoption of the Plan and as amended from time to time.

          7.3  AUTHORITY TO VARY TERMS.  Subject to the limitations set forth in
Section 3.2, the Board shall have the authority from time to time to vary the
terms of any of the standard forms of Option Agreement described in this
Section 7 either in connection with the grant or amendment of an individual
Option or in connection with the authorization of a new standard form or forms;
provided, however, that the terms and conditions of any such new, revised or
amended standard form or forms of Option Agreement are not inconsistent with the
terms of the Plan.  Such authority shall include, but not by way of limitation,
the authority to grant Options which are immediately exercisable subject to the
Company's right to repurchase any unvested shares of Stock acquired by the
Optionee upon the exercise of an Option in the event such Optionee's Service is
terminated for any reason.  In no event, however, shall the Board be permitted
to vary the terms of any standard form of Option Agreement if such change would
cause the Plan to cease to comply with the definition, if any, of a "formula
plan" pursuant to Rule 16b-3 at any such time as any class of equity security of
the Company is registered pursuant to Section 12 of the Exchange Act.


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     8.   TRANSFER OF CONTROL.

          8.1  DEFINITIONS.

               (a)  An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:

                    (i)   the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;

                    (ii)  a merger or consolidation in which the Company is a
party;

                    (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or

                    (iv)  a liquidation or dissolution of the Company.

               (b)  A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be.  For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations.  The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

          8.2  EFFECT OF TRANSFER OF CONTROL ON OPTIONS.  In the event of a
Transfer of Control, any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the Transfer of Control.  The exercise or vesting
of any Option that was permissible solely by reason of this Section 8.2 shall be
conditioned upon the consummation of the Transfer of Control, and any shares so
acquired by an Optionee shall have the same rights as all other shares of the
same class.  In addition, the surviving, continuing, successor, or purchasing
corporation


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or parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"),
may either assume the Company's rights and obligations under outstanding Options
or substitute for outstanding Options substantially equivalent options for the
Acquiring Corporation's stock.  Any Options which are neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control shall terminate
and cease to be outstanding effective as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of an Option prior
to the Transfer of Control and any consideration received pursuant to the
Transfer of Control with respect to such shares shall continue to be subject to
all applicable provisions of the Option Agreement evidencing such Option except
as otherwise provided in such Option Agreement.  Furthermore, notwithstanding
the foregoing, if the corporation the stock of which is subject to the
outstanding Options immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting stock
is held by another corporation or by other corporations that are members of an
affiliated group within the meaning of Section 1504(a) of the Code without
regard to the provisions of Section 1504(b) of the Code, the outstanding Options
shall not terminate.

     9.   NONTRANSFERABILITY OF OPTIONS.  During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative.  No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.

     10.  INDEMNIFICATION.  In addition to such other rights of indemnification
as they may have as members of the Board or officers or employees of the
Participating Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board is
delegated shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and necessarily incurred in connection with
the defense of any 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 right
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel selected by
the Company) or paid by them in satisfaction of a judgment in any such action,
suit or proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such person is liable for gross
negligence, bad faith or intentional misconduct in duties; provided, however,
that within sixty (60) days after the institution of such action, suit or
proceeding, such person shall offer to the Company, in writing, the opportunity
at its own expense to handle and defend the same.


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     11.  RESERVATION AND REGISTRATION OF SHARES.  During the term of the Plan,
the Company shall at all times reserve and keep available the number of shares
of Stock as shall be sufficient to satisfy the requirements of the Plan.  To the
extent practicable, the Company shall take such action as necessary or
appropriate for compliance with the registration or qualification requirements
under the securities laws of the United States of America and any other
appropriate governmental authorities and the requirements of any stock exchange
or market system upon which the Stock may then be listed.  However, the
inability of the Company to obtain from any regulatory body having jurisdiction
the authority, if any, deemed by the Company's legal counsel to be necessary to
the lawful issuance and sale of any securities under the Plan shall relieve the
Company of any liability in respect of the failure to issue or sell such
securities as to which such requisite authority shall not have been obtained.

     12.  TERMINATION OR AMENDMENT OF PLAN.  The Board may terminate or amend
the Plan at any time.  However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
stockholders, there shall be (a) no increase in the total number of shares of
Stock that may be issued under the Plan (except by operation of the provisions
of Section 4.2), and (b) no expansion in the class of persons eligible to
receive Options.  In any event, no termination or amendment of the Plan may
adversely affect any then outstanding Option, or any unexercised portion
thereof, without the consent of the Optionee, unless such termination or
amendment is necessary to comply with any applicable law or government
regulation.

     IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
the foregoing TAB Products Co. 1996 Outside Directors Stock Option Plan was duly
adopted by the Board on April 18, 1996 and by the stockholders of the Company on
October 17, 1996.



                                                  ------------------------------
                                                  Secretary


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                                  PLAN HISTORY


April 18, 1996      Board adopts Plan, with an initial reserve of 150,000
                    shares.

October 17, 1996    Stockholders approve Plan, with an initial reserve of
                    150,000 shares.


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                                TAB PRODUCTS CO.

                       NONSTATUTORY STOCK OPTION AGREEMENT

                              FOR OUTSIDE DIRECTORS

                                (INITIAL OPTION)


     THIS NONSTATUTORY STOCK OPTION AGREEMENT FOR OUTSIDE DIRECTORS (INITIAL
OPTION) (the "OPTION AGREEMENT") is made and entered into as of ___________,
199_, by and between TAB Products Co. and ___________________________ (the
"OPTIONEE").

     The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION").

     1.   DEFINITIONS AND CONSTRUCTION.

          1.1  DEFINITIONS.  Whenever used herein, the following terms shall
have their respective meanings set forth below:

               (a)  "DATE OF OPTION GRANT" means _____________________, 199_.

               (b)  "NUMBER OF OPTION SHARES" means ten thousand (10,000) shares
of Stock, as adjusted from time to time pursuant to Section 9.

               (c)  "EXERCISE PRICE" means $ ____________ per share of Stock, as
adjusted from time to time pursuant to Section 9.

               (d)  "INITIAL VESTING DATE" means the date occurring one (1) year
after the Date of Option Grant.

               (e)  "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:

                                                                 Vested Ratio
                                                                 ------------
               Prior to Initial Vesting Date                          0


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<PAGE>

               On Initial Vesting Date,                               1/4
               provided the Optionee's Service
               is continuous from the Date of
               Option Grant until the Initial
               Vesting Date

               PLUS

               For each full year of the                              1/4
               Optionee's continuous Service
               from the Initial Vesting Date
               until the Vested Ratio equals
               1/1, an additional

               (f)  "OPTION EXPIRATION DATE" means the date ten (10) years after
the Date of Option Grant.

               (g)  "BOARD" means the Board of Directors of the Company.  If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" shall also mean such Committee(s).

               (h)  "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

               (i)  "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
Unless the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted in the Plan, including,
without limitation, the power to amend or terminate the Plan at any time,
subject to the terms of the Plan and any applicable limitations imposed by law.

               (j)  "COMPANY" means TAB Products Co., a Delaware corporation, or
any successor corporation thereto.

               (k)  "CONSULTANT" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.

               (l)  "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.

               (m)  "DISABILITY" means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code.


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               (n)  "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.

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

               (p)  "FAIR MARKET VALUE" means, as of any date, if there is then
a public market for the Stock, the closing price of the Stock (or the mean of
the closing bid and asked prices of the Stock if the Stock is so reported
instead) as reported on the American Stock Exchange (the "AMEX") or such other
national or regional securities exchange or market system constituting the
primary market for the Stock.  If the relevant date does not fall on a day on
which the Stock is trading on the AMEX or other national or regional securities
exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to the
relevant date.  If there is then no public market for the Stock, the Fair Market
Value on any relevant date shall be as determined by the Board without regard to
any restriction other than a restriction which, by its terms, will never lapse.

               (q)  "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (r)  "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

               (s)  "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.

               (t)  "PLAN" means the TAB Products Co. 1996 Outside Directors
Stock Option Plan.

               (u)  "RETIREMENT" means the termination of the Optionee's Service
on or after the date on which the Optionee attains age seventy (70) for any
reason other than the Optionee's death or Disability.

               (v)  "RULE 16b-3" means Rule 16b-3 as promulgated under the
Exchange Act, as amended from time to time, or any successor rule or regulation.

               (w)  "SECURITIES ACT" means the Securities Act of 1933, as
amended.


                                        3

<PAGE>

               (x)  "SERVICE" means the Optionee's service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant.  The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service.  The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the corporation for which the Optionee performs Service ceasing to be a
Participating Company.

               (y)  "STOCK" means the common stock, par value $0.01, of the
Company, as adjusted from time to time in accordance with Section 9.

               (z)  "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

          1.2  CONSTRUCTION.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement.  Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.

     2.   TAX STATUS OF THE OPTION.  This Option is intended to be a
nonstatutory stock option and shall not be treated as an incentive stock option
within the meaning of Section 422(b) of the Code.

     3.   ADMINISTRATION.  All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board.  All determinations by the Board shall be final and
binding upon all persons having an interest in the Option.  Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.

     4.   EXERCISE OF THE OPTION.

          4.1  RIGHT TO EXERCISE.

               (a)  Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Vesting Date and prior to the termination
of the Option (as provided in Section 6) in an amount not to exceed the Number
of Option Shares multiplied by the Vested Ratio less the number of shares
previously


                                        4

<PAGE>

acquired upon exercise of the Option.  In no event shall the Option be
exercisable for more shares than the Number of Option Shares.

               (b)  Notwithstanding the foregoing, in the event that the
adoption of the Plan or any amendment of the Plan affecting the Option is
subject to the approval of the Company's stockholders in order for the Plan or
the grant of the Option to comply with the requirements of Rule 16b-3, the
Option shall not be exercisable prior to such stockholder approval.

          4.2  METHOD OF EXERCISE.  Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement.  The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased.  The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.

          4.3  PAYMENT OF EXERCISE PRICE.

               (a)  FORMS OF CONSIDERATION AUTHORIZED.  Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value not less than the
aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in
Section 4.3(c), or (iv) by any combination of the foregoing.

               (b)  TENDER OF STOCK.  Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.  The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.

               (c)  CASHLESS EXERCISE.  A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of


                                        5

<PAGE>

the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System).  The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.

          4.4  TAX WITHHOLDING.  At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
agrees to make adequate provision for any sums required to satisfy the federal,
state, local and foreign tax withholding obligations of the Participating
Company Group, if any, which arise in connection with the Option, including,
without limitation, obligations arising upon (i) the exercise, in whole or in
part, of the Option, (ii) the transfer, in whole or in part, of any shares
acquired upon exercise of the Option, or (iii) the lapsing of any restriction
with respect to any shares acquired upon exercise of the Option.

          4.5  CERTIFICATE REGISTRATION.  Except in the event the Exercise Price
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, the heirs of the Optionee.

          4.6  RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.  The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities.  The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed.  In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act.  THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED.  To the extent practicable, the Company shall
take such action as necessary or appropriate for compliance with the
registration or qualification requirements under the securities laws of the
United States of America and any other appropriate governmental authorities and
the requirements of any stock exchange or market system upon which the Stock may
then be listed.  However, the inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed


                                        6

<PAGE>

by the Company's legal counsel to be necessary to the lawful issuance and sale
of any shares subject to the Option shall relieve the Company of any liability
in respect of the failure to issue or sell such shares as to which such
requisite authority shall not have been obtained.  As a condition to the
exercise of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.

          4.7  FRACTIONAL SHARES.  The Company shall not be required to issue
fractional shares upon the exercise of the Option.

     5.   NONTRANSFERABILITY OF THE OPTION.  The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution.  Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.

     6.   TERMINATION OF THE OPTION.  The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date,
(b) the last date for exercising the Option following termination of the
Optionee's Service as described in Section 7, or (c) a Transfer of Control to
the extent provided in Section 8.

     7.   EFFECT OF TERMINATION OF SERVICE.

          7.1  OPTION EXERCISABILITY.

               (a)  DISABILITY.  If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.

               (b)  DEATH.  If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months after


                                        7

<PAGE>

the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date.

               (c)  RETIREMENT.  If the Optionee's Service with the
Participating Company Group is terminated because of the Retirement of the
Optionee, (i) any unexercised portion of the Option shall become fully
exercisable and vested as of the date of the Optionee's Retirement, and (ii) the
Option, to the extent unexercised on the date on which the Optionee's Service
terminated, may be exercised by the Optionee at any time prior to the expiration
of twelve (12) months after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.

               (d)  OTHER TERMINATION OF SERVICE.  If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability, death or Retirement, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee within twelve (12) months after the
date on which the Optionee's Service terminated, but in any event no later than
the Option Expiration Date.

          7.2  EXTENSION IF EXERCISE PREVENTED BY LAW.  Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

          7.3  EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).  Notwithstanding
the foregoing, if a sale, within the applicable time periods set forth in
Section 7.1, of shares acquired upon the exercise of the Option would subject
the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.

     8.   OWNERSHIP CHANGE AND TRANSFER OF CONTROL.

          8.1  DEFINITIONS.

               (a)  An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:


                                        8

<PAGE>

                    (i)   the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;

                    (ii)  a merger or consolidation in which the Company is a
party;

                    (iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or

                    (iv)  a liquidation or dissolution of the Company.

               (b)  A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be.  For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations.  The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

          8.2  EFFECT OF TRANSFER OF CONTROL ON OPTION.  In the event of a
Transfer of Control, any unexercised portion of the Option shall be immediately
exercisable and vested in full as of the date ten (10) days prior to the date of
the Transfer of Control.  Any exercise of the Option that was permissible solely
by reason of this Section 8.2 shall be conditioned upon the consummation of the
Transfer of Control, and any shares so acquired by the Optionee shall have the
same rights as all other shares of the same class.  In addition, the surviving,
continuing, successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "ACQUIRING CORPORATION"), may either assume the
Company's rights and obligations under the Option or substitute for the Option a
substantially equivalent option for the Acquiring Corporation's stock.  The
Option shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares


                                        9

<PAGE>

acquired upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to such
shares shall continue to be subject to all applicable provisions of this Option
Agreement except as otherwise provided herein.  Furthermore, notwithstanding the
foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i)
constituting a Transfer of Control is the surviving or continuing corporation
and immediately after such Ownership Change Event less than fifty percent (50%)
of the total combined voting power of its voting stock is held by another
corporation or by other corporations that are members of an affiliated group
within the meaning of Section 1504(a) of the Code without regard to the
provisions of Section 1504(b) of the Code, the Option shall not terminate.

     9.   ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.  In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option.  If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares.  In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion.  Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded down to the nearest whole number, and in no event may the Exercise
Price be decreased to an amount less than the par value, if any, of the stock
subject to the Option.

     10.  RIGHTS AS A STOCKHOLDER.  The Optionee shall have no rights as a
stockholder with respect to any shares covered by the Option until the date of
the issuance of a certificate for the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company).  No adjustment shall be
made for dividends, distributions or other rights for which the record date is
prior to the date such certificate is issued, except as provided in Section 9.

     11.  LEGENDS.  The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement.  The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section.


                                       10

<PAGE>

     12.  BINDING EFFECT.  Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.

     13.  TERMINATION OR AMENDMENT.  The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation.  No
amendment or addition to this Option Agreement shall be effective unless in
writing.

     14.  INTEGRATED AGREEMENT.  This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein.  To the extent
contemplated herein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.

     15.  APPLICABLE LAW.  This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.


                                             TAB PRODUCTS CO.



                                             By:
                                                --------------------------------

                                             Title:
                                                   -----------------------------


                                       11

<PAGE>

     The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof.  The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.


                                             OPTIONEE



Date:
     -----------------------------------     -----------------------------------


                                       12

<PAGE>

                                TAB PRODUCTS CO.

                       NONSTATUTORY STOCK OPTION AGREEMENT

                              FOR OUTSIDE DIRECTORS

                                 (ANNUAL OPTION)


     THIS NONSTATUTORY STOCK OPTION AGREEMENT FOR OUTSIDE DIRECTORS (ANNUAL
OPTION) (the "OPTION AGREEMENT") is made and entered into as of ___________,
199_, by and between TAB Products Co. and ___________________________ (the
"OPTIONEE").

     The Company has granted to the Optionee an option to purchase certain
shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION").

     1.   DEFINITIONS AND CONSTRUCTION.

          1.1  DEFINITIONS.  Whenever used herein, the following terms shall
have their respective meanings set forth below:

               (a)  "DATE OF OPTION GRANT" means _____________________, 199_.

               (b)  "NUMBER OF OPTION SHARES" means two thousand  (2,000) shares
of Stock, as adjusted from time to time pursuant to Section 9.

               (c)  "EXERCISE PRICE" means $_____________ per share of Stock, as
adjusted from time to time pursuant to Section 9.

               (d)  "INITIAL VESTING DATE" means the date immediately preceding
the date of the first annual meeting of the Company's stockholders occurring
after the Date of Option Grant.

               (e)  "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:

                                                                 Vested Ratio
                                                                 ------------
               Prior to Initial Vesting Date                          0


                                        1

<PAGE>

               On Initial Vesting Date,                               1/1
               provided the Optionee's Service
               is continuous from the Date of
               Option Grant until the Initial
               Vesting Date

               (f)  "OPTION EXPIRATION DATE" means the date ten (10) years after
the Date of Option Grant.

               (g)  "BOARD" means the Board of Directors of the Company.  If one
or more Committees have been appointed by the Board to administer the Plan,
"Board" shall also mean such Committee(s).

               (h)  "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

               (i)  "COMMITTEE" means a committee of the Board duly appointed to
administer the Plan and having such powers as shall be specified by the Board.
Unless the powers of the Committee have been specifically limited, the Committee
shall have all of the powers of the Board granted in the Plan, including,
without limitation, the power to amend or terminate the Plan at any time,
subject to the terms of the Plan and any applicable limitations imposed by law.

               (j)  "COMPANY" means TAB Products Co., a Delaware corporation, or
any successor corporation thereto.

               (k)  "CONSULTANT" means any person, including an advisor, engaged
by a Participating Company to render services other than as an Employee or a
Director.

               (l)  "DIRECTOR" means a member of the Board or of the board of
directors of any other Participating Company.

               (m)  "DISABILITY" means the permanent and total disability of the
Optionee within the meaning of Section 22(e)(3) of the Code.

               (n)  "EMPLOYEE" means any person treated as an employee
(including an officer or a Director who is also treated as an employee) in the
records of a Participating Company; provided, however, that neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
employment for purposes of the Plan.

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


                                        2

<PAGE>

               (p)  "FAIR MARKET VALUE" means, as of any date, if there is then
a public market for the Stock, the closing price of the Stock (or the mean of
the closing bid and asked prices of the Stock if the Stock is so reported
instead) as reported on the American Stock Exchange (the "AMEX") or such other
national or regional securities exchange or market system constituting the
primary market for the Stock.  If the relevant date does not fall on a day on
which the Stock is trading on the AMEX or other national or regional securities
exchange or market system, the date on which the Fair Market Value shall be
established shall be the last day on which the Stock was so traded prior to the
relevant date.  If there is then no public market for the Stock, the Fair Market
Value on any relevant date shall be as determined by the Board without regard to
any restriction other than a restriction which, by its terms, will never lapse.

               (q)  "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (r)  "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

               (s)  "PARTICIPATING COMPANY GROUP" means, at any point in time,
all corporations collectively which are then Participating Companies.

               (t)  "PLAN" means the TAB Products Co. 1996 Outside Directors
Stock Option Plan.

               (u)  "RETIREMENT" means the termination of the Optionee's Service
on or after the date on which the Optionee attains age seventy (70) for any
reason other than the Optionee's death or Disability.

               (v)  "RULE 16b-3" means Rule 16b-3 as promulgated under the
Exchange Act, as amended from time to time, or any successor rule or regulation.

               (w)  "SECURITIES ACT" means the Securities Act of 1933, as
amended.

               (x)  "SERVICE" means the Optionee's service with the
Participating Company Group, whether in the capacity of an Employee, a Director
or a Consultant.  The Optionee's Service shall not be deemed to have terminated
merely because of a change in the capacity in which the Optionee renders Service
to the Participating Company Group or a change in the Participating Company for
which the Optionee renders such Service, provided that there is no interruption
or termination of the Optionee's Service.  The Optionee's Service shall be
deemed to have terminated either upon an actual termination of Service or upon
the


                                        3

<PAGE>

corporation for which the Optionee performs Service ceasing to be a
Participating Company.

               (y)  "STOCK" means the common stock, par value $0.01, of the
Company, as adjusted from time to time in accordance with Section 9.

               (z)  "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

          1.2  CONSTRUCTION.  Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement.  Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.

     2.   TAX STATUS OF THE OPTION.  This Option is intended to be a
nonstatutory stock option and shall not be treated as an incentive stock option
within the meaning of Section 422(b) of the Code.

     3.   ADMINISTRATION.  All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board.  All determinations by the Board shall be final and
binding upon all persons having an interest in the Option.  Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.

     4.   EXERCISE OF THE OPTION.

          4.1  RIGHT TO EXERCISE.

               (a)  Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Vesting Date and prior to the termination
of the Option (as provided in Section 6) in an amount not to exceed the Number
of Option Shares multiplied by the Vested Ratio less the number of shares
previously acquired upon exercise of the Option.  In no event shall the Option
be exercisable for more shares than the Number of Option Shares.

               (b)  Notwithstanding the foregoing, in the event that the
adoption of the Plan or any amendment of the Plan affecting the Option is
subject to the approval of the Company's stockholders in order for the Plan or
the grant of the Option to comply with the requirements of Rule 16b-3, the
Option shall not be exercisable prior to such stockholder approval.

                                        4

<PAGE>

          4.2  METHOD OF EXERCISE.  Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock for which the Option is being exercised and such
other representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement.  The written notice must be signed by the Optionee and must be
delivered in person, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in Section 6, accompanied by full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased.  The
Option shall be deemed to be exercised upon receipt by the Company of such
written notice and the aggregate Exercise Price.

          4.3  PAYMENT OF EXERCISE PRICE.

               (a)  FORMS OF CONSIDERATION AUTHORIZED.  Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock for which the Option is being exercised shall be made (i) in cash, by
check, or cash equivalent, (ii) by tender to the Company of whole shares of
Stock owned by the Optionee having a Fair Market Value not less than the
aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined in
Section 4.3(c), or (iv) by any combination of the foregoing.

               (b)  TENDER OF STOCK.  Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock.  The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.

               (c)  CASHLESS EXERCISE.  A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program or procedure approved by the Company
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System).  The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to decline to
approve or terminate any such program or procedure.

          4.4  TAX WITHHOLDING.  At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee

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<PAGE>

agrees to make adequate provision for any sums required to satisfy the federal,
state, local and foreign tax withholding obligations of the Participating
Company Group, if any, which arise in connection with the Option, including,
without limitation, obligations arising upon (i) the exercise, in whole or in
part, of the Option, (ii) the transfer, in whole or in part, of any shares
acquired upon exercise of the Option, or (iii) the lapsing of any restriction
with respect to any shares acquired upon exercise of the Option.

          4.5  CERTIFICATE REGISTRATION.  Except in the event the Exercise Price
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, the heirs of the Optionee.

          4.6  RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.  The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities.  The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed.  In addition, the Option
may not be exercised unless (i) a registration statement under the Securities
Act shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act.  THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED.  To the extent practicable, the Company shall
take such action as necessary or appropriate for compliance with the
registration or qualification requirements under the securities laws of the
United States of America and any other appropriate governmental authorities and
the requirements of any stock exchange or market system upon which the Stock may
then be listed.  However, the inability of the Company to obtain from any
regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained.  As a condition to the exercise of the
Option, the Company may require the Optionee to satisfy any qualifications that
may be necessary or appropriate, to evidence compliance with any applicable law
or regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.

                                        6

<PAGE>

          4.7  FRACTIONAL SHARES.  The Company shall not be required to issue
fractional shares upon the exercise of the Option.

     5.   NONTRANSFERABILITY OF THE OPTION.  The Option may be exercised during
the lifetime of the Optionee only by the Optionee or the Optionee's guardian or
legal representative and may not be assigned or transferred in any manner except
by will or by the laws of descent and distribution.  Following the death of the
Optionee, the Option, to the extent provided in Section 7, may be exercised by
the Optionee's legal representative or by any person empowered to do so under
the deceased Optionee's will or under the then applicable laws of descent and
distribution.

     6.   TERMINATION OF THE OPTION.  The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Expiration Date,
(b) the last date for exercising the Option following termination of the
Optionee's Service as described in Section 7, or (c) a Transfer of Control to
the extent provided in Section 8.

     7.   EFFECT OF TERMINATION OF SERVICE.

          7.1  OPTION EXERCISABILITY.

               (a)  DISABILITY.  If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of twelve (12) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.

               (b)  DEATH.  If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee's legal representative or
other person who acquired the right to exercise the Option by reason of the
Optionee's death at any time prior to the expiration of twelve (12) months after
the date on which the Optionee's Service terminated, but in any event no later
than the Option Expiration Date.

               (c)  RETIREMENT.  If the Optionee's Service with the
Participating Company Group is terminated because of the Retirement of the
Optionee, (i) any unexercised portion of the Option shall become fully
exercisable and vested as of the date of the Optionee's Retirement, and (ii) the
Option, to the extent unexercised on the date on which the Optionee's Service
terminated, may be exercised by the Optionee at any time prior to the expiration
of twelve (12)

                                        7

<PAGE>

months after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date.

               (d)  OTHER TERMINATION OF SERVICE.  If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability, death or Retirement, the Option, to the extent unexercised and
exercisable by the Optionee on the date on which the Optionee's Service
terminated, may be exercised by the Optionee within twelve (12) months after the
date on which the Optionee's Service terminated, but in any event no later than
the Option Expiration Date.

          7.2  EXTENSION IF EXERCISE PREVENTED BY LAW.  Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.

          7.3  EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).  Notwithstanding
the foregoing, if a sale, within the applicable time periods set forth in
Section 7.1, of shares acquired upon the exercise of the Option would subject
the Optionee to suit under Section 16(b) of the Exchange Act, the Option shall
remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which a sale of such shares by the Optionee would no
longer be subject to such suit, (ii) the one hundred and ninetieth (190th) day
after the Optionee's termination of Service, or (iii) the Option Expiration
Date.

     8.   OWNERSHIP CHANGE AND TRANSFER OF CONTROL.

          8.1  DEFINITIONS.

               (a)  An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred
if any of the following occurs with respect to the Company:

                    (i)  the direct or indirect sale or exchange in a single or
series of related transactions by the stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;

                    (ii) a merger or consolidation in which the Company is a
party;

                    (iii)     the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or

                    (iv) a liquidation or dissolution of the Company.

                                        8

<PAGE>

               (b)  A "TRANSFER OF CONTROL" shall mean an Ownership Change Event
or a series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the stockholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be.  For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations.  The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.

          8.2  EFFECT OF TRANSFER OF CONTROL ON OPTION.  In the event of a
Transfer of Control, any unexercised portion of the Option shall be immediately
exercisable and vested in full as of the date ten (10) days prior to the date of
the Transfer of Control.  Any exercise of the Option that was permissible solely
by reason of this Section 8.2 shall be conditioned upon the consummation of the
Transfer of Control, and any shares so acquired by the Optionee shall have the
same rights as all other shares of the same class.  In addition, the surviving,
continuing, successor, or purchasing corporation or parent corporation thereof,
as the case may be (the "ACQUIRING CORPORATION"), may either assume the
Company's rights and obligations under the Option or substitute for the Option a
substantially equivalent option for the Acquiring Corporation's stock.  The
Option shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of the Transfer of Control.
Notwithstanding the foregoing, shares acquired upon exercise of the Option prior
to the Transfer of Control and any consideration received pursuant to the
Transfer of Control with respect to such shares shall continue to be subject to
all applicable provisions of this Option Agreement except as otherwise provided
herein.  Furthermore, notwithstanding the foregoing, if the corporation the
stock of which is subject to the Option immediately prior to an Ownership Change
Event described in Section 8.1(a)(i) constituting a Transfer of Control is the
surviving or continuing corporation and immediately after such Ownership Change
Event less than fifty percent (50%) of the total combined voting power of its
voting stock is held by another corporation or by other corporations that are
members of an affiliated group within the meaning of Section 1504(a) of the Code
without regard to the provisions of Section 1504(b) of the Code, the Option
shall not terminate.

                                        9

<PAGE>

     9.   ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE.  In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option.  If a majority of the shares which are of
the same class as the shares that are subject to the Option are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event) shares of another corporation (the "NEW SHARES"), the Board may
unilaterally amend the Option to provide that the Option is exercisable for New
Shares.  In the event of any such amendment, the Number of Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion.  Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded down to the nearest whole number, and in no event may the Exercise
Price be decreased to an amount less than the par value, if any, of the stock
subject to the Option.

     10.  RIGHTS AS A STOCKHOLDER.  The Optionee shall have no rights as a
stockholder with respect to any shares covered by the Option until the date of
the issuance of a certificate for the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company).  No adjustment shall be
made for dividends, distributions or other rights for which the record date is
prior to the date such certificate is issued, except as provided in Section 9.

     11.  LEGENDS.  The Company may at any time place legends referencing any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement.  The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry out
the provisions of this Section.

     12.  BINDING EFFECT.  Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective heirs, executors, administrators,
successors and assigns.

     13.  TERMINATION OR AMENDMENT.  The Board may terminate or amend the Plan
or the Option at any time; provided, however, that no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation.  No
amendment or addition to this Option Agreement shall be effective unless in
writing.

<PAGE>

     14.  INTEGRATED AGREEMENT.  This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Participating Company Group with respect to such subject
matter other than those as set forth or provided for herein.  To the extent
contemplated herein, the provisions of this Option Agreement shall survive any
exercise of the Option and shall remain in full force and effect.

     15.  APPLICABLE LAW.  This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.


                                   TAB PRODUCTS CO.



                                   By:
                                      --------------------------------
                                   Title:
                                         -------------------------------

     The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement and hereby accepts the Option subject to all
of the terms and provisions thereof.  The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board upon
any questions arising under this Option Agreement.


                                   OPTIONEE



Date:
     -------------------------------    ------------------------------------

                                       11