AMDAHL CORPORATION
                            1994 STOCK INCENTIVE PLAN
                      (As Amended through November 1, 1996)


                                   ARTICLE ONE
                                     GENERAL

I.       PURPOSE OF THE PLAN

     A. This 1994 Stock  Incentive  Plan (the "Plan") is intended to promote the
interests of Amdahl Corporation, a Delaware corporation (the "Corporation"),  by
providing  (i) key employees  (including  officers) of the  Corporation  (or its
subsidiary  corporations)  who are responsible  for the  management,  growth and
financial success of the Corporation (or its subsidiary corporations);  (ii) the
non-employee  members of the  Corporation's  Board of  Directors or the board of
directors of any subsidiary  corporation;  and (iii) those consultants and other
independent contractors who provide valuable services to the Corporation (or its
subsidiary corporations) with the opportunity to acquire a proprietary interest,
or otherwise  increase  their  proprietary  interest,  in the  Corporation as an
incentive  for  them  to  remain  in the  service  of the  Corporation  (or  its
subsidiary corporations).

     B.  The  Plan  became  effective  upon its  approval  by the  Corporation's
stockholders at the 1994 Annual Meeting held on May 5, 1994. Such date is hereby
designated as the Effective Date of the Plan.

     C.  This  Plan  shall  serve as the  successor  to the  Corporation's  four
previous  stock  programs - the Stock Option Plan (1971),  the Stock Option Plan
(1974), the Non-Qualified Stock Option Plan (1982) and the Restricted Stock Plan
(collectively,  the "Predecessor  Plans"), and no further option grants or stock
issuances  shall be made under the  Predecessor  Plans after the Effective Date.
All options  outstanding  under the  Predecessor  Plans and all unvested  shares
issued  thereunder as of such Effective Date shall  immediately be  incorporated
into this Plan and treated as outstanding options and share issuances under this
Plan. However,  each outstanding option and share issuance so incorporated shall
continue  to be  governed  solely by the  express  terms and  conditions  of the
instrument  evidencing such option grant or share issuance,  and no provision of
this  Plan  shall be  deemed  to  affect  or  otherwise  modify  the  rights  or
obligations of the holders of such incorporated  options or share issuances with
respect to their  acquisition of shares of the  Corporation's  common stock, par
value of $.05 per share, thereunder.

II.      DEFINITIONS

         For purposes of the Plan, the following definitions shall be in effect:

     1934 Act: the Securities and Exchange Act of 1934, as amended.

     Award:  the written  notification  provided by the Plan  Administrator to a
Participant in

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the Stock Issuance  Program that shares of common stock are to be issued to such
individual  upon the  attainment  of one or more of the  performance  objectives
specified in Article Six.

     Board: the Corporation's Board of Directors.

     Change in  Control:  a change in  ownership  or control of the  Corporation
effected through any of the following transactions:

                  - a direct  acquisition  by any  person (or  related  group of
         persons) of beneficial  ownership  (within the meaning of Rule 13d-3 of
         the 1934 Act) of securities  possessing  more than ten percent (10%) of
         the  total  combined  voting  power  of the  Corporation's  outstanding
         securities;

                  - the direct or indirect  acquisition by any person or related
         group of persons,  whether by tender or exchange offer made directly to
         the Corporation's  stockholders,  private purchases from one or more of
         the  Corporation's  stockholders,  open market  purchases  or any other
         transaction,   of  additional   securities  of  the  Corporation  which
         increases the beneficial ownership (within the meaning of Rule 13d-3 of
         the 1934 Act) of the  total  securities  holdings  of such  person  (or
         related group of persons) to a level of securities possessing more than
         fifty  percent  (50%)  of  the  total  combined  voting  power  of  the
         Corporation's outstanding securities; or

                  - the direct or indirect  acquisition by any person or related
         group of persons,  whether by tender or exchange offer made directly to
         the Corporation's  stockholders,  private purchases from one or more of
         the  Corporation's  stockholders,  open market  purchases  or any other
         transaction,  of beneficial ownership (within the meaning of Rule 13d-3
         of the 1934 Act) of securities of the Corporation possessing sufficient
         voting  power in the  aggregate  to elect an  absolute  majority of the
         Board (rounded up to the next whole number).

     Code: the Internal Revenue Code of 1986, as amended.

     Committee:  a committee of two (2) or more non-employee Directors appointed
by the Board.

     Corporate   Transaction:   any   of  the   following   stockholder-approved
transactions to which the Corporation is a party:

                  - a merger or  consolidation  in which the  Corporation is not
         the surviving entity, except for a transaction the principal purpose of
         which is to change the state in which the Corporation is incorporated;

               - the sale, transfer or other disposition of all or substantially
          all of the  assets  of the  Corporation  in  complete  liquidation  or
          dissolution of the Corporation; or

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                  - any reverse merger in which the Corporation is the surviving
         entity but in which securities possessing more than fifty percent (50%)
         of the total  combined  voting power of the  Corporation's  outstanding
         securities are transferred to a person or persons  different from those
         who held such securities immediately prior to such merger.

     Director: a member of the Board of Directors of Amdahl Corporation.

     Employee:  an individual  who performs  services while in the employ of the
Corporation or one or more Subsidiaries, subject to the control and direction of
the employer  entity not only as to the work to be performed  but also as to the
manner and method of performance.

     Exercise Date: the date on which the Corporation shall have received notice
of the option exercise.

     Fair Market Value:  the mean between the highest and lowest  selling prices
per share of common stock on the date in question on the  principal  exchange on
which the common stock is then listed or admitted to trading,  as the prices are
officially  quoted by the composite tape of  transactions  on such exchange.  If
there are no reported  sales of the common stock on the date in  question,  then
the Fair Market Value shall be the mean  between the highest and lowest  selling
prices on the last previous date for which quotations exist.

     Hostile  Take-Over:  the direct or  indirect  acquisition  by any person or
related group of persons of securities  possessing more than fifty percent (50%)
of the total combined voting power of the Corporation's  outstanding  securities
pursuant  to a tender or  exchange  offer  made  directly  to the  Corporation's
stockholders which the Board does not recommend such stockholders to accept.

     Incentive  Option:  a stock option which satisfies the requirements of Code
Section 422.

     Involuntary Termination:  the termination of the Service of any Optionee or
Participant which occurs by reason of:

               - such  individual's  involuntary  dismissal  or discharge by the
          Corporation for reasons other than Misconduct; or

               - such individual's  voluntary resignation following (A) a change
          in his or her position with the Corporation  which materially  reduces
          his or her  level of  responsibility,  (B) a  reduction  in his or her
          level of compensation  (including base salary, fringe benefits and any
          non-discretionary  and  objective-standard  incentive payment or bonus
          award) by more  than five  percent  (5%) or (C) a  relocation  of such
          individual's  place of  employment  by more  than  fifty  (50)  miles,
          provided and only if such change,  reduction or relocation is effected
          by the Corporation without the individual's consent.

     Misconduct:  the commission of any act of fraud, embezzlement or dishonesty
by the Optionee or  Participant,  any  unauthorized  use or  disclosure  by such
individual of confidential

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information  or trade secrets of the  Corporation  or its  Subsidiaries,  or any
other intentional misconduct by such individual adversely affecting the business
or affairs of the  Corporation in a material  manner.  The foregoing  definition
shall not be  deemed  to be  inclusive  of all the acts or  omissions  which the
Corporation  or any  Subsidiary  may  consider as grounds for the  dismissal  or
discharge of any Optionee, Participant or other individual in the Service of the
Corporation.

     Newly Issued  Shares:  shares of common stock drawn from the  Corporation's
authorized but unissued shares of common stock.

     Non-Statutory  Option: a stock option not intended to meet the requirements
of Code Section 422.

     Optionee:  any person to whom an option is granted under the  Discretionary
Option Grant, Automatic Option Grant or Salary Reduction Grant Program in effect
under the Plan.

     Participant:  any person who  receives a direct  issuance  of common  stock
under the Stock Issuance Program in effect under the Plan.

     Permanent Disability or Permanently Disabled: the inability of the Optionee
or the  Participant to engage in any substantial  gainful  activity by reason of
any medically  determinable  physical or mental impairment expected to result in
death or to be of  continuous  duration of twelve (12) months or more.  However,
solely for  purposes  of the  Automatic  Option  Grant  Program in effect  under
Article Three and the Stock Fee Program in effect under Article Four,  Permanent
Disability or  Permanently  Disabled shall mean the inability of the Optionee to
perform  his or her  normal  duties as a  Director  by  reason of any  medically
determinable  physical or mental impairment expected to result in death or to be
of continuous duration of twelve (12) months or more.

     Plan Administrator: the committee of two (2) or more non-employee Directors
appointed by the Board to administer the Discretionary  Option Grant, the Salary
Reduction and the Stock Issuance Programs.

     Service:  the provision of services on a periodic basis to the  Corporation
or any Subsidiary in the capacity of an Employee, a non-employee director of the
Board or an independent  consultant or advisor,  except to the extent  otherwise
specifically   provided  in  the  applicable  stock  option  or  stock  issuance
agreement.

     Subsidiary:  each  corporation  (other than the Corporation) in an unbroken
chain  of  corporations  beginning  with the  Corporation,  provided  each  such
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the  determination,  stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in any other  corporation in
such  chain.  For  purposes  of the  grant of  Non-Statutory  Options  and stock
appreciation rights under the Discretionary  Option Grant Program,  the grant of
Non-Statutory  Options under the Salary Reduction Grant Program and direct stock
issuances  under the Stock  Issuance  Program,  the term  Subsidiary  shall also
include any partnership, joint venture or other

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business entity in which the Corporation  owns,  directly or indirectly  through
one or more  Subsidiaries,  a fifty percent  (50%) or greater  capital or profit
interest.

     Take-Over  Price:  the greater  of: (i) the Fair Market  Value per share of
common  stock  on the date the  option  is  surrendered  to the  Corporation  in
connection  with a Hostile  Take-Over;  or (ii) the highest  reported  price per
share of common  stock paid by the  tender  offeror in  effecting  such  Hostile
Take-Over.  However,  if the  surrendered  option is an  Incentive  Option,  the
Take-Over Price shall not exceed the clause (i) price per share.

     Treasury  Shares:  shares of common stock reacquired by the Corporation and
held as treasury shares.


III.     STRUCTURE OF THE PLAN

     A. Stock Programs. The Plan shall be divided into five separate components:

                  - The Discretionary Option Grant Program, under which eligible
         individuals  may,  at the  discretion  of the  Plan  Administrator,  be
         granted  options to purchase  shares of common stock in accordance with
         the provisions of Article Two;

                  - The Automatic Option Grant Program, under which non-employee
         Directors shall automatically receive special option grants at periodic
         intervals  to purchase  shares of common stock in  accordance  with the
         provisions of Article Three;

                  -  The  Stock  Fee  Program,   under  which  the  non-employee
         Directors may elect to apply all or a portion of their annual  retainer
         fee to the acquisition of shares of common stock in accordance with the
         provisions of Article Four;

                  - The Salary  Reduction  Grant  Program,  under which eligible
         individuals  may,  pursuant to the provisions of Article Five, elect to
         have a portion of their  base  salary  reduced  each year in return for
         options to purchase  shares of common  stock at an  aggregate  discount
         from the Fair Market Value of the option shares on the grant date equal
         to the salary reduction amount; and

                  - The Stock Issuance Program, under which eligible individuals
         may,  pursuant to the  provisions  of Article Six, be issued  shares of
         common  stock  directly:  (i)  through the  immediate  purchase of such
         shares at a price less than, equal to or greater than their Fair Market
         Value at the time of issuance;  (ii) as a bonus tied to the performance
         of services or the  attainment  of  financial or other  objectives;  or
         (iii) pursuant to the  individual's  election to receive such shares in
         lieu of base salary.

     B. General Provisions.  Unless the context clearly indicates otherwise, the
provisions  of Articles  One and Seven shall apply to the  Discretionary  Option
Grant,  Automatic Option Grant, Salary Reduction Grant, Stock Issuance and Stock
Fee Programs and shall accordingly govern the

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interests of all individuals under the Plan.

IV.      ADMINISTRATION OF THE PLAN

         A. The Committee shall have sole and exclusive  authority to administer
the  Discretionary  Option  Grant,  Salary  Reduction  Grant and Stock  Issuance
Programs.  Members of the Committee shall serve for such period as the Board may
determine and shall be subject to removal by the Board at any time.

         B. The Plan Administrator shall have full power and discretion (subject
to the express  provisions of the Plan) to establish such rules and  regulations
as it may deem appropriate for the proper  administration  of the  Discretionary
Option Grant,  Salary  Reduction  Grant and Stock Issuance  Programs and to make
such determinations  under, and issue such interpretations of, the provisions of
each  such  program  and  any  outstanding  option  grants  or  stock  issuances
thereunder  as it may  deem  necessary  or  advisable.  Decisions  of  the  Plan
Administrator  shall be final and binding on all parties who have an interest in
the Discretionary Option Grant, Salary Reduction Grant or Stock Issuance Program
or any outstanding option or stock issuance thereunder.

         C. Service on the Committee shall constitute service as a Director, and
members of the Committee shall  accordingly be entitled to full  indemnification
and reimbursement as Directors for their service on the Committee.  No member of
the  Committee  shall be liable for any act or omission  made in good faith with
respect to the Plan or any option granted or shares issued under the Plan.

         D.  Administration  of the  Automatic  Option  Grant  and the Stock Fee
Programs  shall be  self-executing  in  accordance  with the  express  terms and
conditions of Articles Three and Four, respectively,  and the Plan Administrator
shall not exercise any discretionary functions with respect to the option grants
or stock issuances made pursuant to such programs.


V.       ELIGIBILITY

     A. The persons  eligible to participate in the  Discretionary  Option Grant
Program under Article Two, the Salary Reduction Grant Program under Article Five
and the Stock Issuance Program under Article Six are as follows:

          -  officers  and  other  key  employees  of the  Corporation  (or  its
     Subsidiaries)  who render  services  which  contribute  to the  management,
     growth and financial  success of the Corporation (or its  Subsidiaries);  

          - non-employee Directors; and

          - those  consultants  or other  independent  contractors  who  provide
     valuable services to the Corporation (or its Subsidiaries).

     B.  Non-employee  Directors  shall also be eligible to  participate  in the
Automatic Option

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Grant Program under Article Three and the Stock Fee Program under Article Four.

         C. The Plan Administrator  shall have full authority to determine:  (i)
with  respect to grants  made under the  Discretionary  Option  Grant and Salary
Reduction Grant Programs, which eligible individuals are to receive such grants,
the number of shares to be covered by each such grant, the status of any granted
option as either an  Incentive  Option or a  Non-Statutory  Option,  the time or
times at which each granted option is to become exercisable and the maximum term
for which the  option  may remain  outstanding;  and (ii) with  respect to stock
issuances under the Stock Issuance Program, which eligible individuals are to be
selected for  participation,  the number of shares to be issued to each selected
individual,  the vesting schedule (if any) to be applicable to the issued shares
and the consideration to be paid for such shares.


VI.      STOCK SUBJECT TO THE PLAN

         A. Shares of common  stock shall be available  for  issuance  under the
Plan and shall be drawn from either the  Corporation's  authorized  but unissued
shares of common  stock or from  reacquired  shares of common  stock,  including
shares  repurchased by the Corporation on the open market.  The number of shares
of common stock reserved for issuance over the term of the Plan shall  initially
be fixed at  14,300,000  shares,  subject  to  adjustment  from  time to time in
accordance with the provisions of this Section VI. Such authorized share reserve
shall be  comprised  of: (i) the number of shares  which  remain  available  for
issuance under the  Predecessor  Plans as of the Effective  Date,  including the
shares subject to the outstanding  options  incorporated  into this Plan and any
other shares which would have been  available for future option grants under the
Predecessor  Plans  (estimated to be 12,900,000  shares in the aggregate);  plus
(ii) an additional  increase of 1,400,000  shares of common stock. To the extent
one or more  outstanding  options  under the  Predecessor  Plans which have been
incorporated  into this Plan are  subsequently  exercised,  the number of shares
issued  with  respect to each such option  shall  reduce,  on a  share-for-share
basis, the number of shares available for issuance under this Plan.

     B. The number of shares of common stock  available  for issuance  under the
Plan shall be subject to a series of automatic  increases effected in accordance
with the following provisions:

                           - The number of shares of common stock  available for
         issuance  under  the Plan  shall  automatically  increase  on the first
         trading day of each of the 1995,  1996 and 1997  calendar  year,  by an
         amount  equal  to one  percent  (1%)  of the  shares  of  common  stock
         outstanding on December 31 of the immediately  preceding calendar year;
         provided, however that each such one percent (1%) annual increase shall
         be subject to  reduction  to the extent  necessary  so that the maximum
         number of shares of common stock available  immediately  thereafter for
         future  option grants and direct stock  issuances  under the Plan shall
         not exceed 5,000,000 shares, subject to adjustment from time to time in
         accordance  with  the  provisions  of  this  Section  VI.  None  of the
         additional  shares resulting from such annual increases may be made the
         subject of Incentive Options granted under the Plan;

                           -        The number of shares available for issuance 
         under the Plan shall

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         automatically  increase  on the  date of the 1997  Annual  Stockholders
         Meeting by an amount  equal to two percent  (2%) of the total number of
         shares of common stock outstanding on the immediately preceding trading
         day; and

                           - The number of shares  available for issuance  under
         the Plan shall automatically  increase on the first trading day of each
         calendar year during the remaining term of the Plan, beginning with the
         1998  calendar  year,  by an amount equal to three  percent (3%) of the
         shares of common stock  outstanding  on December 31 of the  immediately
         preceding  calendar  year.  Each such  automatic  increase to the share
         reserve under the Plan shall,  however,  be subject to reduction to the
         extent  necessary to assure that the maximum number of shares of common
         stock  available for future  option  grants and direct stock  issuances
         under the Plan  immediately  after each such increase  shall not exceed
         6,000,000 shares, subject to adjustment from time to time in accordance
         with the provisions of this Section VI. None of the  additional  shares
         resulting  from  such  annual  increases  may be made  the  subject  of
         Incentive Options granted under the Plan.

         C. From and after the  Effective  Date,  the total  number of shares of
common  stock  for  which any one  individual  participating  in the Plan may be
granted  stock  options  or  concurrently  or  independently  exercisable  stock
appreciation  rights and may receive direct stock  issuances shall be limited to
2,000,000 shares in the aggregate over the term of the Plan, subject to periodic
adjustment for certain changes in the Company's  capital structure in accordance
with the provisions of this Section VI.

         D. Should one or more  outstanding  options under this Plan  (including
outstanding  options under the Predecessor  Plans  incorporated  into this Plan)
expire or  terminate  for any reason  prior to exercise in full  (including  any
option  cancelled in  accordance  with the  cancellation-regrant  provisions  of
Section  IV of Article  Two),  then the  shares  subject to the  portion of each
option not so exercised  shall be available for  subsequent  issuance  under the
Plan.  Shares  issued  under the Plan  which are  subject  to the  Corporation's
repurchase  rights,  or  restricted,  that are  subsequently  repurchased by the
Corporation, at the original exercise or issue price paid per share, pursuant to
the  Corporation's  repurchase  rights under the Plan shall be added back to the
number of shares of common stock  reserved for issuance under the Plan and shall
accordingly be available for reissuance  through one or more  subsequent  option
grants or direct stock  issuances  under the Plan.  Shares  subject to any stock
appreciation  rights  exercised  under  the  Plan  shall  not be  available  for
subsequent issuance under the Plan. In addition, should the exercise price of an
outstanding  option under the Plan (including any option  incorporated  from the
Predecessor  Plans) be paid with  shares  of  common  stock or should  shares of
common stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the  withholding  taxes incurred in connection with the exercise
of an outstanding option under the Plan or the vesting of a share issuance under
the Plan, then the number of shares of common stock available for issuance under
the Plan shall be reduced by the gross  number of shares for which the option is
exercised or which vest under the share  issuance,  and not by the net number of
shares of common  stock  actually  issued to the holder of such  option or share
issuance.

     E. Should any change be made to the common stock issuable under the Plan by
reason

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of any stock split,  stock  dividend,  recapitalization,  combination of shares,
exchange of shares or other change  affecting the outstanding  common stock as a
class  without the  Corporation's  receipt of  consideration,  then  appropriate
adjustments  shall be made to: (i) the maximum number and/or class of securities
issuable under the Plan; (ii) the limit on the number and/or class of securities
which are allowed to remain  available for future option grants and direct stock
issuances in connection  with each automatic  three percent (3%) increase to the
share reserve effected  annually under the Plan; (iii) the maximum number and/or
class of securities for which any one individual  participating  in the Plan may
be granted  stock  options,  concurrently  or  independently  exercisable  stock
appreciation rights and direct stock issuances in the aggregate over the term of
the Plan; (iv) the number and/or class of securities for which automatic  option
grants  are  to be  subsequently  made  to  each  newly  elected  or  continuing
non-employee  Director  under the Automatic  Option Grant  Program;  and (v) the
number  and/or  class of  securities  and price per share in effect  under  each
option and stock  appreciation  right outstanding under the Plan (including each
option incorporated into this Plan from the Predecessor Plans). Such adjustments
to the  outstanding  options are to be effected in a manner which shall preclude
the  enlargement  or dilution of rights and  benefits  under such  options.  The
adjustments  determined by the Plan  Administrator  shall be final,  binding and
conclusive.

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                                   ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM


I.       TERMS AND CONDITIONS OF OPTIONS

         Options  granted  pursuant to the  Discretionary  Option Grant  Program
shall be  authorized  by action of the Plan  Administrator  and may, at the Plan
Administrator's   discretion,  be  either  Incentive  Options  or  Non-Statutory
Options.  Individuals  who are not Employees may only be granted Non-  Statutory
Options.  Each granted  option shall be evidenced by one or more  instruments in
the form approved by the Plan Administrator;  provided,  however, that each such
instrument  shall comply with the terms and  conditions  specified  below.  Each
instrument  evidencing an Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this Article Two.

         A.       Exercise Price.

                  1. The  exercise  price per share under this Article Two shall
be fixed by the Plan Administrator in accordance with the following provisions:

                         (i) The  exercise  price  per  share  of  common  stock
         subject  to an  Incentive  Option  shall in no  event be less  than one
         hundred percent (100%) of the Fair Market Value of such common stock on
         the grant date; and

                        (ii)  The  exercise  price  per  share of  common  stock
         subject to a Non-  Statutory  Option shall be the amount  determined by
         the Plan Administrator at the time of grant and may be less than, equal
         to or greater  than the Fair Market  Value of such common  stock on the
         grant date.

                  2.  The  exercise  price  shall  become  immediately  due upon
exercise of the option and,  subject to the  provisions  of Section I of Article
Seven and the instrument  evidencing  the grant,  shall be payable in one of the
alternative forms specified below:

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

                           (ii) full  payment in shares of common stock held for
         the requisite period  necessary to avoid a charge to the  Corporation's
         earnings  for  financial  reporting  purposes and valued at Fair Market
         Value on the Exercise Date;

                           (iii)  full  payment  in a  combination  of shares of
         common stock held for the requisite  period necessary to avoid a charge
         to the  Corporation's  earnings for  financial  reporting  purposes and
         valued at Fair Market Value on the Exercise Date and cash or check made
         payable to the Corporation's order; or


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                           (iv) to the extent the option is exercised for vested
         shares,  full  payment  through  a  broker-dealer  sale and  remittance
         procedure  pursuant to which the  Optionee  shall  provide  irrevocable
         instructions: (a) to a Corporation-designated  brokerage firm to effect
         the  immediate   sale  of  the  purchased   shares  and  remit  to  the
         Corporation, out of the sale proceeds available on the settlement date,
         sufficient funds to cover the aggregate  exercise price payable for the
         purchased  shares plus all applicable  federal,  state and local income
         and  employment  taxes  required to be withheld by the  Corporation  in
         connection  with such purchase;  and (b) to the  Corporation to deliver
         the  certificates  for the purchased  shares directly to such brokerage
         firm in order to complete the sale  transaction  (the  "Immediate  Sale
         Program").

         B. Term and Exercise of Options. Each option granted under this Article
Two shall be exercisable at such time or times,  during such period and for such
number of shares as shall be determined by the Plan  Administrator and set forth
in the instrument  evidencing such option.  No Incentive Option shall,  however,
have a maximum term in excess of ten (10) years,  and no Non-  Statutory  Option
shall have a maximum term in excess of fifteen (15) years.  An Incentive  Option
shall be exercisable  only by the Optionee  during his or her lifetime and shall
not be assignable or  transferable  except for a transfer of the option effected
by will or by the laws of descent  and  distribution  following  the  Optionee's
death.  Non-Statutory Options may be granted under the Plan which are assignable
or  transferable in whole or in part by the Optionee during his or her lifetime,
subject to such restrictions or limitations as the Plan Administrator may impose
at the time of grant.

         C.       Termination of Service.

                  1. Should an Optionee cease Service for any reason  (including
death or Permanent  Disability)  while holding one or more  outstanding  options
under this Article Two,  then none of those  options shall (except to the extent
otherwise  provided pursuant to subparagraph I.C.7 below) remain exercisable for
more than a thirty-six  (36)-month  period (or such shorter period determined by
the Plan  Administrator  and set forth in the  instrument  evidencing the grant)
measured from the date of such cessation of Service.

                  2. Any option held by the Optionee  under this Article Two and
exercisable  in  whole  or in  part  on the  date  of his  or her  death  may be
subsequently  exercised by the personal  representative of the Optionee's estate
or by the person or persons to whom the option is  transferred  pursuant  to the
Optionee's  will or in  accordance  with the laws of descent  and  distribution.
However,  the right to exercise such option shall lapse upon the earlier of: (i)
the third  anniversary  of the date of the  Optionee's  death  (or such  shorter
period  determined  by the Plan  Administrator  and set forth in the  instrument
evidencing the grant); or (ii) the specified expiration date of the option term.
Accordingly,  upon  the  occurrence  of the  earlier  event,  the  option  shall
terminate and cease to remain outstanding.

                 3. Under no  circumstances  shall any such option be 
exercisable  after the specified expiration date of the option term.

                  4.       During the applicable post-Service exercise period, 
the option may not be

March 20, 1997
                                       11


<PAGE>



exercised in the  aggregate for more than the number of shares (if any) in which
the Optionee is vested at the time of his or her cessation of Service.  Upon the
expiration of the limited post-Service  exercise period or (if earlier) upon the
specified  expiration  date of the option term, each such option shall terminate
and cease to remain  outstanding with respect to any vested shares for which the
option has not otherwise been exercised. However, each outstanding option shall,
immediately  upon the  Optionee's  cessation of Service,  terminate and cease to
remain  outstanding  with  respect  to any  shares  for which the  option is not
otherwise at that time  exercisable or in which the Optionee is not otherwise at
that time vested.

                  5. Should the Optionee's Service be terminated for Misconduct,
all  outstanding  options  held by the  Optionee  under this  Article  Two shall
terminate immediately and cease to remain outstanding.

                  6. The Plan  Administrator  shall  have  complete  discretion,
exercisable  either at the time the  option is  granted or at any time while the
option remains  outstanding,  to permit one or more options held by the Optionee
under this  Article  Two to be  exercised,  during  the  limited  post-  Service
exercise period  applicable under this Section I.C, not only with respect to the
number  of  vested  shares  of  common  stock  for  which  each  such  option is
exercisable  at the time of the  Optionee's  cessation  of Service but also with
respect  to one or more  subsequent  installments  for  which the  option  would
otherwise have become  exercisable or in which the Optionee would otherwise have
vested had such cessation of Service not occurred.

                  7. The Plan Administrator shall have full power and authority,
exercisable  either at the time the  option is  granted or at any time while the
option remains outstanding, to extend the period of time for which the option is
to remain  exercisable  following the  Optionee's  cessation of Service or death
from the limited period in effect under  subparagraphs  I.C.1 and I.C.2 above to
such greater period of time as the Plan Administrator shall deem appropriate. In
no event,  however,  shall  such  option  be  exercisable  after  the  specified
expiration date of the option term.

     D.  Stockholder  Rights.  An  Optionee  shall  have none of the rights of a
stockholder  with respect to any option shares until such individual  shall have
exercised the option and paid the exercise price for the purchased shares.

     E.  Repurchase  Rights.  The  shares of common  stock  acquired  under this
Article Two may be subject to repurchase by the  Corporation in accordance  with
the following provisions:

                  1. The Plan  Administrator  shall have the discretion to grant
options  which are  exercisable  for unvested  shares of common stock under this
Article Two. Should the Optionee cease Service while holding any unvested shares
purchased  under  such  options,  then the  Corporation  shall have the right to
repurchase  any or all of those  unvested  shares at the exercise price paid per
share.  The terms and  conditions  upon which  such  repurchase  right  shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting  schedule for the  purchased  shares) shall be  established  by the Plan
Administrator and set forth in the instrument evidencing such repurchase right;


March 20, 1997
                                       12


<PAGE>



                  2.  All of the  Corporation's  outstanding  repurchase  rights
under this Article Two shall automatically  terminate, and all shares subject to
such terminated  rights shall immediately vest in full, upon the occurrence of a
Corporate  Transaction,  except to the extent:  (i) any such repurchase right is
expressly  assigned  to  the  successor   corporation  (or  parent  thereof)  in
connection with the Corporate  Transaction;  or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued; and

                  3.  The  Plan  Administrator   shall  have  the  discretionary
authority,  exercisable  either  before or after  the  Optionee's  cessation  of
Service, to cancel the Corporation's  outstanding repurchase rights with respect
to one or more  shares  purchased  or  purchasable  by the  Optionee  under this
Article  Two and  thereby  accelerate  the vesting of such shares in whole or in
part at any time.


II.      INCENTIVE OPTIONS

         The terms and  conditions  specified  below shall be  applicable to all
Incentive Options granted under this Article Two.  Incentive Options may only be
granted  to  individuals  who are  Employees.  Options  which  are  specifically
designated  as  Non-Statutory  Options  when issued  under the Plan shall not be
subject to such terms and conditions.

         A. Dollar Limitation. The aggregate Fair Market Value (determined as of
the respective date or dates of grant) of the common stock for which one or more
options granted to any Employee under this Plan (or any other option plan of the
Corporation or its  Subsidiaries)  may for the first time become  exercisable as
incentive  stock options under the federal tax laws during any one calendar year
shall not exceed the sum of One  Hundred  Thousand  Dollars  ($100,000).  To the
extent the Employee holds two (2) or more such options which become  exercisable
for the first time in the same calendar  year,  the foregoing  limitation on the
exercisability  of such options as incentive stock options under the federal tax
laws  shall be  applied  on the basis of the  order in which  such  options  are
granted.  Should  the number of shares of common  stock for which any  Incentive
Option first becomes  exercisable in any calendar year exceed the applicable One
Hundred Thousand Dollar ($100,000) limitation,  then the option may nevertheless
be  exercised  in that  calendar  year for the  excess  number  of  shares  as a
Non-Statutory Option under the federal tax laws.

         B. 10%  Stockholder.  If any individual to whom an Incentive  Option is
granted is the owner of stock (as  determined  under Section 424(d) of the Code)
possessing ten percent (10%) or more of the total  combined  voting power of all
classes of stock of the  Corporation  or any one of its  Subsidiaries,  then the
exercise  price per share shall not be less than one hundred ten percent  (110%)
of the Fair  Market  Value per share of common  stock on the grant  date and the
option term shall not exceed five (5) years measured from the grant date.

                  Except as modified by the preceding provisions of this Section
II, the  provisions  of Articles One, Two and Seven shall apply to all Incentive
Options granted hereunder.


March 20, 1997
                                       13
<PAGE>

III.     CORPORATE TRANSACTIONS/CHANGES IN CONTROL/HOSTILE TAKE-OVER

         A. In the event of any Corporate  Transaction,  each option which is at
the time outstanding  under this Article Two shall  automatically  accelerate so
that each such option shall,  immediately prior to the specified  effective date
for such Corporate  Transaction,  become fully  exercisable  with respect to the
total  number of shares of common  stock at the time  subject to such option and
may be exercised for all or any portion of such shares.  However, an outstanding
option under this Article Two shall not so accelerate if and to the extent:  (i)
such  option is, in  connection  with the  Corporate  Transaction,  either to be
assumed by the successor  corporation or parent thereof or to be replaced with a
comparable  option to  purchase  shares of the  capital  stock of the  successor
corporation  or parent  thereof;  (ii) such option is to be replaced with a cash
incentive program of the successor corporation which preserves the option spread
existing at the time of the Corporate  Transaction  and provides for  subsequent
payout in accordance with the same vesting  schedule  applicable to such option;
or (iii) the acceleration of such option is subject to other limitations imposed
by the Plan  Administrator at the time of the option grant. The determination of
option  comparability  under  clause  (i)  above  shall  be  made  by  the  Plan
Administrator, and its determination shall be final, binding and conclusive.

         B. The Plan  Administrator  shall  have  the  discretionary  authority,
exercisable  either at the time the  option is  granted or at any time while the
option remains outstanding,  to provide for the automatic acceleration of one or
more  outstanding  options  under  this  Article  Two upon the  occurrence  of a
Corporate  Transaction,  whether  or not  those  options  are to be  assumed  or
replaced  in the  Corporate  Transaction,  or  alternatively  to provide for the
subsequent  acceleration of any outstanding options under this Article Two which
do not otherwise accelerate at the time of the Corporate Transaction, should the
Optionee's Service terminate through an Involuntary  Termination effected within
a designated period following the effective date of such Corporate  Transaction.
The  Plan  Administrator  shall  also  have the  authority  to  provide  for the
immediate termination of any of the Corporation's  outstanding repurchase rights
under  this  Article  Two which do not  otherwise  terminate  at the time of the
Corporate Transaction, upon the subsequent termination of the Optionee's Service
through an Involuntary Termination effected within a designated period following
the effective date of such Corporate Transaction.

         C. Immediately following the consummation of the Corporate Transaction,
all  outstanding  options  under this Article Two shall  terminate  and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.

         D. Each  outstanding  option  under this Article Two that is assumed in
connection with the Corporate  Transaction or is otherwise to continue in effect
shall be appropriately  adjusted,  immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction,  had
such  person   exercised  the  option   immediately   prior  to  such  Corporate
Transaction.  Appropriate  adjustments  shall also be made to the exercise price
payable  per share,  provided  the  aggregate  exercise  price  payable for such
securities  shall  remain  the  same.  In  addition,  the  class  and  number of
securities  available  for issuance  under the Plan on both an aggregate and per
individual basis following the consummation of the Corporate  Transaction  shall
be appropriately adjusted.


March 20, 1997
                                       14


<PAGE>



         E. The Plan  Administrator  shall  have  the  discretionary  authority,
exercisable  either at the time the  option is  granted or at any time while the
option remains outstanding,  to provide for the automatic acceleration of one or
more  outstanding  options under this Article Two (and the termination of one or
more of the Corporation's  outstanding repurchase rights under this Article Two)
upon the  occurrence  of a Change in  Control  or  Hostile  Take-Over.  The Plan
Administrator  shall also have full power and  authority to  condition  any such
option  acceleration (and the termination of any outstanding  repurchase rights)
upon the subsequent termination of the Optionee's Service through an Involuntary
Termination  effected within a specified  period following the Change in Control
or Hostile Take-Over.

         F. Any options  accelerated in connection with the Change in Control or
Hostile Take- Over shall remain fully exercisable until the expiration or sooner
termination  of the option term or the  surrender  of such option in  accordance
with Section V of this Article Two.

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

         H. The portion of any Incentive Option  accelerated  under this Section
III in  connection  with a Corporate  Transaction,  Change in Control or Hostile
Take-Over  shall  remain  exercisable  as an  incentive  stock  option under the
federal  tax laws only to the  extent  the  dollar  limitation  of Section II of
Article Two is not exceeded.  To the extent such dollar  limitation is exceeded,
the  accelerated  portion of such option shall be exercisable as a non-statutory
option under the federal tax laws.

IV.      CANCELLATION AND REGRANT OF OPTIONS

         The Plan Administrator  shall have the sole and exclusive  authority to
effect,  at any time and from time to time,  with the  consent  of the  affected
Optionees, the cancellation of any or all outstanding options under this Article
Two (including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution  new options under the Plan covering the
same or different  numbers of shares of common stock but with an exercise  price
per share based upon the Fair Market  Value of the common stock on the new grant
date.

V.       STOCK APPRECIATION RIGHTS

         A.  The  Plan  Administrator  shall  have  full  power  and  authority,
exercisable  in its sole  discretion,  to grant to selected  Optionees  or other
individuals  eligible to receive  option grants under the  Discretionary  Option
Grant Program stock appreciation rights.

     B. Four types of stock appreciation rights shall be authorized for issuance
under  the  Plan:  (i)  Tandem  Stock  Appreciation  Rights  ("Tandem  Rights"),
Concurrent Stock Appreciation  Rights ("Concurrent  Rights"),  Independent Stock
Appreciation Rights ("Independent Rights") and Limited Stock Appreciation Rights
("Limited Rights").

March 20, 1997
                                       15


<PAGE>



     C. The following  terms and conditions  shall govern the grant and exercise
of Tandem Rights under this Article Two.

                1. One or more Optionees may be granted the Tandem Right,  
exercisable upon such terms and  conditions as the Plan  Administrator  may  
establish,  to elect between the  exercise of the  underlying  Article Two stock
option for shares of common stock and the  surrender  of that option in exchange
for a  distribution from the  Corporation  in an amount  equal to the excess of:
(i) the Fair Market Value  (on the  option  surrender  date) of the  number  of 
shares in which the Optionee is at the time vested under the surrendered  option
(or surrendered portion thereof) over; (ii) the aggregate exercise price payable
for such vested shares;

                2.       No such option surrender shall be effective unless  it 
is approved by the Plan Administrator. If the surrender is so approved, then the
distribution to which the Optionee shall accordingly  become entitled under this
Section V may be made in shares of common stock  valued at Fair Market  Value on
the option  surrender date, in cash, or partly in shares and partly in cash, as 
the Plan Administrator shall in its sole discretion deem appropriate; and

                3.       If the surrender of an option is  rejected by the Plan 
Administrator, then the Optionee shall retain whatever  rights the Optionee had 
under the  surrendered option (or  surrendered  portion  thereof) on the option 
surrender date and may exercise  such  rights at any time prior to the later of:
(i) five (5)  business days after the receipt of the  rejection notice;  or (ii)
the last day on which the option is otherwise  exercisable  in  accordance  with
the  terms of the  instrument  evidencing such option, but in no event may such 
rights be exercised more than ten (10) years after the date of the option grant.

     D. The following  terms and conditions  shall govern the grant and exercise
of Concurrent Rights under this Article Two:

                  1. One or more  Optionees may be granted,  upon such terms and
conditions as the Plan  Administrator  may establish,  the  Concurrent  Right to
automatically  receive an appreciation  distribution from the Corporation at the
same time the  underlying  stock option under this Article Two is exercised  for
the shares of common  stock  subject to such right.  Accordingly,  the  Optionee
shall, upon exercise of the option,  receive both the purchased shares of common
stock and the appreciation distribution payable on the covered shares;

                   2.       The amount of the distribution payable upon exercise
of the  Concurrent Right shall not exceed an amount equal to the excess of: (i) 
the Fair Market Value (on the  option  exercise  date) of the  number  of shares
for which the option is exercised over; (ii) the  aggregate  exercise price
payable for such shares under that option; and

                    3.       The distribution to which the Optionee shall become
entitled under this Section V may be made in shares  of common stock  valued  at
Fair  Market  Value on the option  exercise  date,  in cash, or partly in shares
and partly in cash, as the Plan Administrator shall in its sole discretion deem 
appropriate.

March 20, 1997
                                       16


<PAGE>



     E. The following  terms and conditions  shall govern the grant and exercise
of Independent Rights under this Article Two:

                 1.       One or more individuals eligible to participate in the
Discretionary Option Grant Program may be granted an Independent  Right not tied
to any  underlying  Article Two stock  option.  The Independent  Right shall be 
exercisable upon such  terms and  conditions as the Plan  Administrator  may 
establish and shall  entitle the  holder to  receive a  distribution  from the 
Corporation in an amount equal to the excess of: (i) the aggregate  Fair Market 
Value (on the exercise date of such right) of the shares of common stock subject
to the exercised  right over;  (ii) the aggregate base price in effect for those
shares;

                  2.       The number of shares subject to the Independent Right
and the base price in effect for those shares shall be  determined  by the Plan 
Administrator  in its  sole   discretion at the time the  Independent  Right is 
granted.  The base price may be less than,  equal to or  greater than the  Fair 
Market Value (on the grant date of the right) of the shares subject to that 
right; and

                  3.       The distribution to which the holder of the 
Independent  Right shall become entitled  under this  Section V may  be made in 
shares of common  stock valued at Fair  Market  Value on the  exercise  date of 
such right,  in cash,  or partly in shares  and  partly  in  cash,  as the  Plan
Administrator  shall  in its  sole discretion deem appropriate.

     F. The following  terms and conditions  shall govern the grant and exercise
of Limited Rights under this Article Two:

                  1. One or more  officers  of the  Corporation  subject  to the
short-swing profit  restrictions of the federal securities laws may, in the Plan
Administrator's sole discretion, be granted Limited Rights with respect to their
outstanding options under this Article Two;

                  2.  Upon the  occurrence  of a  Hostile  Take-Over,  each such
officer  holding one or more  options  with such a Limited  Right shall have the
unconditional  right  (exercisable  for a thirty (30)-day period  following such
Hostile  Take-Over)  to surrender  each such option to the  Corporation,  to the
extent the option is at the time  exercisable  for fully vested shares of common
stock. The officer shall in return be entitled to a cash  distribution  from the
Corporation in an amount equal to the excess of: (i) the Take-Over  Price of the
vested shares of common stock at the time subject to each surrendered option (or
surrendered  portion of such option)  over;  (ii) the aggregate  exercise  price
payable for such vested shares. Such cash distribution shall be made within five
(5) days following the option surrender date; and

                    3.   The Plan Administrator shall  pre-approve, at the time 
the Limited Right is granted,  the subsequent  exercise of that right in 
accordance with the terms of the grant and the  provisions  of this Section V.F 
of Article Two. No additional approval of the Plan Administrator or the Board 
shall be required at the time of the actual option surrender and cash 
distribution.  Any unsurrendered portion of the option  shall continue to remain
outstanding  and become  exercisable  in accordance with the terms of the 
instrument evidencing such grant.

March 20, 1997
                                       17


<PAGE>



     G. The  shares of common  stock  subject  to any stock  appreciation  right
exercised  under this Section V shall not be available for  subsequent  issuance
under the Plan.

March 20, 1997
                                       18


<PAGE>



                                  ARTICLE THREE

                         AUTOMATIC OPTION GRANT PROGRAM


I.       ELIGIBILITY

         A. Eligible  Optionees.  The individuals  eligible to receive automatic
option grants  pursuant to the provisions of this Article Three shall be limited
to: (i) those individuals who are first elected as non-employee Directors at the
1994  Annual  Meeting  of  Stockholders;  (ii) those  individuals  who are first
elected or appointed  as  non-employee  Directors  after the date of such Annual
Meeting,   whether  through   appointment  by  the  Board  or  election  by  the
Corporation's  stockholders;  and (iii) those  individuals who are re-elected to
serve as  non-employee  Directors  at one or more  Annual  Stockholder  Meetings
beginning with the 1994 Annual Meeting.  Any non-employee  Director  eligible to
participate  in the  Automatic  Option Grant  Program  pursuant to the foregoing
criteria  shall be designated an Eligible  Director for purposes of this Article
Three.

II.      TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

     A. Grant  Dates.  Options  shall be granted  under  this  Article  Three as
follows:

                  1.  Each  individual  who  is  first  elected  as an  Eligible
Director at the 1994  Annual  Meeting of  Stockholders  shall  automatically  be
granted on the date of such Annual Meeting a Non-  Statutory  Option to purchase
5,000  shares of common  stock  upon the terms and  conditions  of this  Article
Three;

                  2. Each  individual  who first  becomes an  Eligible  Director
after the date of the 1994  Annual  Meeting  of  Stockholders,  whether  through
election by the  Corporation's  stockholders or appointment by the Board,  shall
automatically be granted, at the time of such initial election or appointment, a
Non-Statutory Option to purchase 5,000 shares of common stock upon the terms and
conditions of this Article Three; and

                  3.  On the  date  of  each  Annual  Meeting  of  Stockholders,
beginning  with the 1994 Annual  Meeting,  each  individual  who is at that time
re-elected  as  a  non-employee   Director  shall  automatically  be  granted  a
Non-Statutory Option to purchase an additional 5,000 shares of common stock upon
the terms and  conditions of this Article  Three,  provided such  individual has
served as a Director for at least twelve (12) months.

     B. No Limitation. There shall be no limit on the number of such 5,000-share
annual  option  grants any one  Eligible  Director  may receive  over his or her
period of Board  service.  The number of shares for which the  automatic  option
grants are to be made to newly elected or continuing Eligible Directors shall be
subject to periodic adjustment pursuant to the applicable  provisions of Section
VI.E. of Article One.

March 20, 1997
                                       19


<PAGE>



     C.  Exercise  Price.  The exercise  price per share of common stock of each
automatic  option  grant  made under this  Article  Three  shall be equal to one
hundred percent (100%) of the Fair Market Value per share of common stock on the
automatic grant date.

         D.  Payment.  The  exercise  price  shall  be  payable  in  any  of the
alternative  forms  authorized under Section I.A.2 of Article Two. To the extent
the option is exercised for any unvested  shares,  the Optionee must execute and
deliver to the Corporation a stock purchase  agreement for those unvested shares
which provides the  Corporation  with the right to  repurchase,  at the exercise
price paid per share,  any  unvested  shares held by the Optionee at the time of
cessation  of Board  service  and which  precludes  the sale,  transfer or other
disposition  of the  purchased  shares at any time  while  those  shares  remain
subject to the Corporation's repurchase right.

         E. Option Term.  Each  automatic  grant made under this  Article  Three
prior to the 1995 Annual  Stockholders  Meeting shall have a maximum term of ten
(10) years measured from the automatic  grant date. Each automatic grant made at
the 1995  Annual  Stockholders  Meeting  or at any time  after  the date of that
Annual Meeting shall have a maximum term of fifteen (15) years measured from the
automatic grant date.

         F.  Exercisability/Vesting.  Each automatic  grant shall be immediately
exercisable for any or all of the option shares.  However,  any shares purchased
under the option  shall be  subject to  repurchase  by the  Corporation,  at the
exercise price paid per share,  upon the  Optionee's  cessation of Board service
prior to vesting in those shares.  The shares  subject to the initial  automatic
grant made to each non-employee  Director upon his or her initial appointment or
election to the Board shall vest, and the  Corporation's  repurchase right shall
lapse, in two (2) equal and successive  annual  installments over the Optionee's
period of continued  service as a Director,  with the first such  installment to
vest upon Optionee's  completion of one (1) year of Board service  measured from
the automatic grant date. The shares subject to each additional  automatic grant
made to the  non-employee  Director upon his or her  re-election to the Board at
one or more  Annual  Stockholder  Meetings  shall  vest,  and the  Corporation's
repurchase right shall lapse, in two (2) successive equal  installments over the
Optionee's  period of  continued  service  as a  Director,  with the first  such
installment to vest upon  Optionee's  continuation  in Board service through the
day  immediately  preceding  the date of the first Annual  Stockholders  Meeting
following the grant date of the option and with the second such  installment  to
vest upon  Optionee's  continuation in Board service through the day immediately
preceding the date of the second Annual Stockholders Meeting following the grant
date of the option.

                  Vesting of the option shares shall be subject to  acceleration
as provided in Section  II.H.3,  Section  II.H.4 and Section III of this Article
Three. In no event shall any additional  option shares vest after the Optionee's
cessation of Board  service,  except as otherwise  provided  pursuant to Section
II.H.3 or Section II.H.4 of this Article Three.

     G.  Transferability.  During the lifetime of the  Optionee,  the  automatic
option grant,  together with the limited stock  appreciation right pertaining to
such  option,  shall  be  exercisable  only by the  Optionee  and  shall  not be
assignable or transferable except for:

March 20, 1997
                                       20


<PAGE>



                         (i)        a transfer of the option effected by will 
         or by the laws of descent and distribution following the Optionee's 
         death; or

                        (ii) a transfer  of the option  (granted on or after the
         1997  Annual  Meeting  of  Stockholders)   effected  during  Optionee's
         lifetime  for  estate  planning  purposes  to a  member  of  his or her
         immediate family or to a trust  established for one or more such family
         members.

         H.       Termination of Board Service.

                  1.  Except as  otherwise  provided in  subparagraph  2, 3 or 4
below,  should the  Optionee  cease to serve as a Director  for any reason while
holding one or more automatic option grants under this Article Three,  then such
individual  shall  have a six  (6)-month  period  following  the  date  of  such
cessation of Board  service in which to exercise each such option for any or all
of the  option  shares  in which  the  Optionee  is  vested  at the time of such
cessation of Board service.  However,  each such option shall,  immediately upon
the  Optionee's  cessation  of Board  service,  terminate  and  cease to  remain
outstanding  with  respect to any  option  shares in which the  Optionee  is not
otherwise at that time vested under such option.

                  2. Should an Optionee with less than four (4) years of service
on the Board die within the six  (6)-month  period  following the date of his or
her  cessation of Board  service,  then any  automatic  option grant held by the
Optionee at the time of his or her death may subsequently be exercised,  for any
or all of the option  shares in which the  Optionee is vested at the time of his
or her cessation of Board service (less any option shares subsequently purchased
by  the  Optionee  prior  to  death),  by  the  personal  representative  of the
Optionee's  estate or by the person or persons to whom the option is transferred
pursuant to the  Optionee's  will or in accordance  with the laws of descent and
distribution.  The right to  exercise  each such  option  shall  lapse  upon the
expiration  of the  twelve  (12)-  month  period  measured  from the date of the
Optionee's death.

                  3. If the  Optionee  ceases  to  serve as a  Director  for any
reason (other than removal for cause) after completion of four (4) or more years
of Board  service,  then the shares of common  stock at the time subject to each
automatic option grant held by the Optionee shall  immediately vest in full (and
the   Corporation's   repurchase  right  with  respect  to  those  shares  shall
terminate),  and the Optionee (or the representative of the Optionee's estate or
the  person or persons to whom the  option is  transferred  upon the  Optionee's
death)  shall have  until the  expiration  date of the  option  term in which to
exercise such option for any or all of those vested shares of common stock.

                  4.  Should the  Optionee  die or become  Permanently  Disabled
while serving as a Director, then the shares of common stock at the time subject
to each automatic  option grant held by the Optionee shall  immediately  vest in
full (and the Corporation's  repurchase right with respect to those shares shall
terminate),  and the Optionee (or the representative of the Optionee's estate or
the  person or persons to whom the  option is  transferred  upon the  Optionee's
death)  shall have  until the  expiration  date of the  option  term in which to
exercise such option for any or all of those vested shares of common stock.

March 20, 1997
                                       21
<PAGE>



                  5. In no event shall any  automatic  grant under this  Article
Three remain  exercisable after the expiration date of the option term. Upon the
expiration of the applicable post- service exercise period under subparagraphs 1
through 4 above or (if earlier)  upon the  expiration  of the option  term,  the
automatic  grant  shall  terminate  and cease to be  outstanding  for any option
shares in which the  Optionee is vested at the time of his or her  cessation  of
Board service but for which such option is not otherwise exercised.

     I. Stockholder  Rights.  The holder of an automatic option grant under this
Article Three shall have none of the rights of a stockholder with respect to any
shares  subject to that option until such  individual  shall have  exercised the
option and paid the exercise price for the purchased shares.

     J. Remaining  Terms.  The remaining  terms and conditions of each automatic
option grant shall be as set forth in the form Automatic Stock Option  Agreement
attached as Exhibit A to the Plan.

III.     CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

         A. In the  event of any  Corporate  Transaction,  the  shares of common
stock at the time subject to each  outstanding  option under this Article  Three
but not otherwise vested shall  automatically vest in full and the Corporation's
repurchase right with respect to those shares shall terminate, so that each such
option  shall,  immediately  prior  to the  specified  effective  date  for  the
Corporate Transaction,  become fully exercisable for all of the shares of common
stock at the time  subject to that  option and may be  exercised  for all or any
portion  of such  shares as fully  vested  shares of common  stock.  Immediately
following the  consummation of the Corporate  Transaction,  all automatic option
grants under this Article Three shall terminate and cease to remain outstanding,
except to the extent one or more such grants are assumed by the successor entity
or its parent corporation.

         B. In connection with any Change in Control or Hostile Take-Over of the
Corporation,  the shares of common stock at the time subject to each outstanding
option under this Article  Three but not  otherwise  vested shall  automatically
vest in full and the Corporation's repurchase right with respect to those shares
shall  terminate,  so that  each such  option  shall,  immediately  prior to the
specified effective date for the Change in Control or Hostile Take-Over,  become
fully  exercisable  for all of the shares of common stock at the time subject to
that option and may be exercised  for all or any portion of such shares as fully
vested shares of common stock.  Each option shall remain so exercisable  for all
the option shares following the Change in Control or Hostile Take-Over until the
expiration or sooner termination of the option term.

         C. Upon the occurrence of a Hostile Take-Over,  the Optionee shall also
have a thirty  (30)-day  period in which to  surrender to the  Corporation  each
option held by him or her under this Article Three. The Optionee shall in return
be entitled to a cash  distribution  from the  Corporation in an amount equal to
the excess of: (i) the Take-Over Price of the shares of common stock at the time
subject to the  surrendered  option  over;  (ii) the  aggregate  exercise  price
payable for such shares.  Such cash  distribution  shall be paid within five (5)
days following the surrender of the option to the

March 20, 1997
                                       22


<PAGE>



Corporation. Stockholder approval of the November 1, 1996 amendments to the Plan
shall  constitute  pre-approval  of the  subsequent  grant of each  such  option
surrender  right under this  Automatic  Option Grant Program and the  subsequent
exercise  of that  right in  accordance  with the terms and  provisions  of this
Section  II.C.  No  additional  approval of the Board or any Plan  Administrator
shall  be  required  at the  time  of  the  actual  option  surrender  and  cash
distribution.  The shares of common stock subject to each option  surrendered in
connection  with the Hostile  Take-Over  shall not be available  for  subsequent
issuance under the Plan.

         D. The  automatic  option grants  outstanding  under this Article Three
shall in no way  affect  the right of the  Corporation  to  adjust,  reclassify,
reorganize  or otherwise  change its capital or business  structure or to merge,
consolidate,  dissolve,  liquidate  or sell or  transfer  all or any part of its
business or assets.


March 20, 1997
                                       23


<PAGE>



                                  ARTICLE FOUR

                                STOCK FEE PROGRAM


I.       ELIGIBILITY

         Each individual serving as a non-employee Director shall be eligible to
elect to apply all or any portion of the annual  retainer fee otherwise  payable
to such individual in cash to the acquisition of unvested shares of common stock
upon the terms and conditions of this Article Four.

II.      ELECTION PROCEDURE

         A. Filing. The non-employee Director must make the stock-in-lieu-of-fee
election prior to the start of the calendar year for which the election is to be
effective.  The first  calendar  year for which any such  election  may be filed
shall be the 1995 calendar year. The election, once filed, shall be irrevocable.
The election for any  upcoming  calendar  year may be filed at any time prior to
the  start  of  that  year,  but  in no  event  later  than  December  31 of the
immediately  preceding  calendar  year.  The  non-employee  Director  may file a
standing election to be in effect for two (2) or more consecutive calendar years
or to remain in effect  indefinitely  until revoked by written  instrument filed
with the Plan  Administrator  prior to the start of the first  calendar year for
which such standing election is no longer to remain in effect.

     B. Election Form. The election must be filed with the Plan Administrator on
the  appropriate  form  provided for this  purpose.  On the election  form,  the
non-employee  Director must  indicate the  percentage or dollar amount of his or
her annual retainer fee to be applied to the acquisition of unvested  restricted
shares under this Article Six Program.

III.     SHARE ISSUANCE

         A. Issue Date. On the first trading day in January of the calendar year
for which the election is effective,  the portion of the retainer fee subject to
such election  shall  automatically  be applied to the  acquisition of shares of
common stock by dividing the elected  dollar amount by the Fair Market Value per
share of common stock on that  trading day. The number of issuable  shares shall
be rounded down to the next whole share,  and the issued shares shall be held in
escrow by the  Secretary  of the  Corporation  as  partly-paid  shares until the
non-employee  Director vests in those shares.  The  non-employee  Director shall
have full shareholder rights, including voting, dividend and liquidation rights,
with respect to all issued shares held in escrow on his or her behalf,  but such
shares shall not be assignable or transferable while they remain unvested.

     B. Vesting.  Upon completion of each calendar month of Board service during
the year for which the election is in effect,  the  non-employee  Director shall
vest in one-twelfth  (1/12) of the issued shares,  and the stock certificate for
those shares shall be released from escrow.  Immediate vesting in all the issued
shares shall occur in the event: (i) the non-employee Director should die or

March 20, 1997
                                       24


<PAGE>



become Permanently  Disabled during his or her period of Board service;  or (ii)
there  should  occur a  Corporate  Transaction,  Change in  Control  or  Hostile
Take-Over  occur while such  individual  remains in Board  service.  Should such
individual  cease  Board  service  prior  to  vesting  in  one or  more  monthly
installments of the issued shares, then those unvested shares shall be cancelled
by the Corporation,  and the non-employee  Director shall not be entitled to any
cash payment or other  consideration  from the  Corporation  with respect to the
cancelled  shares and shall have no further  shareholder  rights with respect to
such shares.

March 20, 1997
                                       25


<PAGE>



                                  ARTICLE FIVE

                         SALARY REDUCTION GRANT PROGRAM

I.       ELIGIBILITY

         The Plan Administrator shall have plenary authority to select, prior to
the start of each  calendar  year,  the  particular  key  employees who shall be
eligible  for  participation  in the Salary  Reduction  Grant  Program  for that
calendar year. In order to  participate  for a particular  calendar  year,  each
selected  individual  must,  prior to the start of that calendar year, file with
the Plan Administrator (or its designate) an irrevocable authorization directing
the  Corporation  to reduce his or her base salary for that  calendar  year by a
designated  multiple of one percent (1%), but in no event less than five percent
(5%).

         The Plan  Administrator  shall  review  the  filed  authorizations  and
determine  whether  to  approve,  in  whole  or in  part,  one or more of  those
authorizations.  To the  extent  the  Plan  Administrator  approves  one or more
authorizations,  the individuals who filed those authorizations shall be granted
options under this Salary  Reduction  Grant  Program.  To the extent one or more
authorizations are not approved by the Primary Committee,  those  authorizations
shall have no force or effect and no options shall be granted under this Article
Five to the individuals who filed those authorizations.

         To the extent  options are  granted  under the Salary  Reduction  Grant
Program, such options shall be Non-Statutory Options evidenced by instruments in
such form as the Primary  Committee  shall from time to time approve;  provided,
however,  that each such instrument  shall comply with and incorporate the terms
and conditions specified below.

II.      TERMS AND CONDITIONS OF OPTION

         A.       Exercise Price.

                  1. The  exercise  price per share  shall be  thirty-three  and
one-third  percent (33- 1/3%) of the Fair Market Value per share of common stock
on the grant date.

                  2.  The  exercise  price  shall  become  immediately  due upon
exercise  of the option and shall be  payable  in any of the  alternative  forms
authorized under Section I.A.2 of Article Two.

     B. Number of Option Shares.  The number of shares of common stock for which
each grant under this Article Five is to be made to a selected Optionee shall be
determined  pursuant to the following formula (rounded down to the nearest whole
number):

                           X = A / (B x 66-2/3%), where

                           X is the number of option shares;

March 20, 1997
                                       26


<PAGE>



            A is the dollar amount of the approved reduction in the Optionee's
            base salary for the calendar year; and

            B is the Fair Market  Value per share of common stock on the date 
            of the grant.

         C.       Term and Exercise of Options.

                  1. Each  option  shall  have a maximum  term of ten (10) years
measured from the grant date.  Provided the Optionee  continues in Service,  the
option  shall become  exercisable  for:  (i) fifty  percent  (50%) of the option
shares on the last day of June in the  calendar  year for  which  the  option is
granted;  and for (ii) the  balance of the option  shares in a series of six (6)
successive  equal monthly  installments  on the last day of each of the next six
(6) calendar months.

                  2. One or more  options  granted  under this Salary  Reduction
Grant Program may be structured so as to be assignable or  transferable in whole
or in  part  by the  Optionee  during  his  or her  lifetime,  subject  to  such
restrictions or limitations as the Plan  Administrator may impose at the time of
grant.  Otherwise,  the options shall be exercisable only by the Optionee during
his or her lifetime and shall not be  assignable or  transferable  other than by
transfer  of  the  option  effected  by  will  or by the  laws  of  descent  and
distribution following the Optionee's death.

         D.       Effect of Termination of Service.

                  1. Should an Optionee  cease  Service for any reason after his
or her  outstanding  option under this Article  Five has become  exercisable  in
whole or in part, then that option shall remain  exercisable,  for any or all of
the shares for which the option is  exercisable on the date of such cessation of
Service,  until the  expiration of the ten  (10)-year  option term or its sooner
termination under Section III.A. of this Article Five.  Following the Optionee's
death, such option may be exercised,  for any or all of the shares for which the
option is  exercisable  at the time of the  Optionee's  death,  by the  personal
representative  of the Optionee's estate or by the person or persons to whom the
option is transferred  pursuant to the Optionee's will or in accordance with the
laws of descent and  distribution.  Such right of exercise shall lapse,  and the
option shall terminate,  upon the expiration of the ten (10)-year option term or
its sooner termination under Section III.A. of this Article Five.

                  2.  Should the  Optionee  die  before  his or her  outstanding
option under this Article Five becomes exercisable for any of the option shares,
then the  personal  representative  of the  Optionee's  estate or the  person or
persons to whom the option is transferred  pursuant to the Optionee's will or in
accordance with the laws of descent and distribution shall nevertheless have the
right to exercise  such option for up to that number of option  shares equal to:
(i) one-twelfth  (1/12) of the total number of option shares multiplied by; (ii)
the number of full calendar  months which have elapsed  between the first day of
the  calendar  year for which the  option  was  granted  and the last day of the
calendar month during which the Optionee ceases Service.  Such right of exercise
shall lapse, and the option shall terminate,  upon the earliest to occur of: (i)
the specified  expiration  date of the option term;  (ii) the termination of the
option under Section III.A. of this Article Five; or (iii) the third

March 20, 1997
                                       27


<PAGE>



anniversary of the date of the Optionee's death. However, the option shall, with
respect to any and all option shares for which it is not exercisable at the time
of  the  Optionee's  cessation  of  Service,  terminate  immediately  upon  such
cessation of Service and shall cease to remain outstanding with respect to those
option shares.

                  3. Should the Optionee become  Permanently  Disabled and cease
by reason  thereof to remain in Service  before  his or her  outstanding  option
under this Article Five becomes  exercisable for any of the option shares,  then
the Optionee shall nevertheless have the right to exercise such option for up to
that  number of option  shares  equal to:  (i)  one-twelfth  (1/12) of the total
number of option shares  multiplied by; (ii) the number of full calendar  months
which have  elapsed  between  the first day of the  calendar  year for which the
option was  granted  and the last day of the  calendar  month  during  which the
Optionee  ceases  Service.  Such right of exercise  shall lapse,  and the option
shall  terminate,  upon the  expiration of the ten (10)-year  option term or its
sooner  termination  under Section  III.A.  of this Article Five.  However,  the
option  shall,  with  respect to any and all  option  shares for which it is not
exercisable  at the  time of the  Optionee's  cessation  of  Service,  terminate
immediately upon such cessation of Service and shall cease to remain outstanding
with respect to those option shares.

                  4.  Except to the  limited  extent  specifically  provided  in
subparagraphs 2 and 3 above,  should the Optionee cease for any reason to remain
in Service  before his or her  outstanding  option under this Article Five first
become  exercisable  for one or more  option  shares,  then  that  option  shall
immediately  terminate  upon such cessation of Service and shall cease to remain
outstanding.

     E.  Stockholder  Rights.  The  Optionee  shall have none of the rights of a
stockholder  with respect to any option shares until such individual  shall have
exercised the option and paid the exercise price for those shares.

III.     CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER

         A. Should any Corporate Transaction occur while the Optionee remains in
Service,  then each outstanding  option held by such Optionee under this Article
Five shall become exercisable, immediately prior to the specified effective date
of such Corporate Transaction, for all of the shares at the time subject to such
option and may be exercised for any or all of such shares as fully-vested shares
of  common  stock.  Immediately  following  the  consummation  of the  Corporate
Transaction,  each such option shall  terminate  unless assumed by the successor
entity or its parent corporation.

         B. Upon the occurrence of: (i) a Hostile  Take-Over  while the Optionee
remains  in  Service;  or (ii) the  Involuntary  Termination  of the  Optionee's
Service  following a Change in  Control,  each  outstanding  option held by such
Optionee under this Article Five shall immediately become exercisable for all of
the shares at the time  subject to such option and may be  exercised  for any or
all of such shares as  fully-vested  shares of common  stock.  The option  shall
remain so exercisable until the expiration of the ten (10)-year option term.


March 20, 1997
                                       28


<PAGE>



         C.  Option  grants  under  this  Article  Five  shall  not  affect  the
Corporation's right to adjust,  reclassify,  reorganize or change its capital or
business  structure  or to merge,  consolidate,  dissolve,  liquidate or sell or
transfer any or all of its assets.

March 20, 1997
                                       29


<PAGE>



                                   ARTICLE SIX

                             STOCK ISSUANCE PROGRAM


I.       TERMS AND CONDITIONS OF STOCK ISSUANCES

         Shares of common stock may be issued under the Stock  Issuance  Program
through  direct and immediate  purchases  without any  intervening  stock option
grants.  The issued  shares  shall be evidenced  by a Stock  Issuance  Agreement
("Issuance  Agreement")  that  complies  with the terms and  conditions  of this
Article Six.

        A.        Consideration

                  1.  Newly  Issued  Shares  shall be  issued  under  the  Stock
Issuance  Program for one or more of the following items of  consideration  that
the Plan Administrator may deem appropriate in each individual instance:

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

                        (ii) a  promissory  note  payable  to the  Corporation's
         order in one or more installments, which may be subject to cancellation
         in whole or in part upon terms and  conditions  established by the Plan
         Administrator; or

                       (iii)        past services rendered to the Corporation or
 any Subsidiary.

                  2. Newly Issued Shares may, in the absolute  discretion of the
Plan Administrator, be issued for consideration with a value less than, equal to
or greater  than the Fair Market  Value of such shares at the time of  issuance,
but in no event less than the par value per issued share of common stock.

                  3.  Treasury  Shares  may be issued  under the Stock  Issuance
Program  for  such  consideration  (including  one  or  more  of  the  items  of
consideration  specified in subparagraph 1 above) as the Plan  Administrator may
deem appropriate, whether such consideration is in an amount less than, equal to
or greater  than the Fair  Market  Value of the  Treasury  Shares at the time of
issuance.  Treasury  Shares  may, in lieu of any cash  consideration,  be issued
subject to such vesting  requirements tied to the Participant's period of future
Service.

                  4.  Treasury  Shares  may  also,  in the Plan  Administrator's
absolute  discretion,  be issued  pursuant  to an  irrevocable  election  by the
Participant  to receive a portion of his or her base  salary in shares of common
stock in lieu of such  base  salary.  Any such  issuance  shall be  effected  in
accordance with the following guidelines:

                  -        On the first trading day in January of the calendar 
         year for which the election

March 20, 1997
                                       30


<PAGE>



         is effective, the portion of base salary subject to such election shall
         automatically be applied to the acquisition of common stock by dividing
         the elected  dollar  amount by the Fair  Market  Value per share of the
         common stock on that  trading day. The number of issuable  shares shall
         be rounded down to the next whole share, and the issued shares shall be
         held  in  escrow  by  the  Secretary  of  the  Corporation   until  the
         Participant  vests in those  shares.  The  Participant  shall have full
         stockholder rights,  including voting, dividend and liquidation rights,
         with respect to all issued  shares held in escrow on his or her behalf,
         but such shares  shall not be  assignable  or  transferable  while they
         remain unvested; and

                  - Upon completion of each calendar month of Service during the
         year for which the election is in effect, the Participant shall vest in
         one-twelfth  (1/12) of the issued shares, and the stock certificate for
         those shares shall be released from escrow. All the issued shares shall
         immediately vest upon: (i) the occurrence of a Corporate Transaction or
         Hostile Take-Over while such individual remains in Service; or (ii) the
         Involuntary Termination of the Participant's Service following a Change
         in Control.  Should the  Participant  otherwise  cease Service prior to
         vesting in one or more monthly  installments of the issued shares, then
         those  unvested   shares  shall   immediately  be  surrendered  to  the
         Corporation for cancellation, and the Participant shall not be entitled
         to any cash payment or other  consideration  from the Corporation  with
         respect to the cancelled  shares and shall have no further  stockholder
         rights with respect to such shares.

                  5. In lieu of the immediate issuance of shares of common stock
under the Stock  Issuance  Program,  the Plan  Administrator  may  condition the
actual  issuance of those shares upon the  attainment  by the  Corporation,  any
designated   Subsidiary  or  division  of  the  Corporation  or  the  individual
Participant  of one or  more  performance  objectives  established  by the  Plan
Administrator  at the time the  Participant  is provided with the notice of such
contingent Award.

         B.       Vesting Provisions

                  1. The shares of common stock issued under the Stock  Issuance
Program  (other  than  shares  issued in lieu of salary)  may,  in the  absolute
discretion  of the Plan  Administrator,  be fully and  immediately  vested  upon
issuance or may vest in installments over the  Participant's  period of Service.
The Plan  Administrator  shall have the authority to condition either the actual
issuance of the shares of common stock  subject to an Award made under the Stock
Issuance  Program or the  subsequent  vesting of any  unvested  shares of common
stock  issued  under the  Stock  Issuance  Program  upon the  attainment  by the
Corporation,  any  designated  Subsidiary or division of the  Corporation or the
individual Participant of one or more following performance objectives:

-        earnings per share                     -        return on assets
-        revenue                                -        market share
-        stock price                            -        customer satisfaction
-        operating income                       -        time to market
-        consolidated pre-tax profit            -        employee development
-        operating profit margin                -        quality

March 20, 1997
                                       31


<PAGE>



-        return on equity                         -        cash
-        inventory                                -        employee satisfaction
-        gross margin                             -        market perception

                  The Plan  Administrator  shall  have  complete  discretion  to
condition  either the actual  issuance of the shares of common stock  subject to
the Award or the subsequent vesting of the issued shares upon the attainment of:
(i) one particular  performance  objective;  (ii) one of a series of alternative
performance  objectives;  or (iii) any  combination  of two or more  performance
objectives,  as the Plan Administrator  deems appropriate in each instance.  The
specific target for each selected performance  objective shall be established by
the Plan Administrator  either: (i) at the time the Award is made, if the shares
subject  to that Award are not to be issued  unless  the  target or targets  are
achieved;  or (ii) at the time the  shares of common  stock are  issued,  if the
subsequent vesting of those shares is subject to the attainment of the specified
target or targets.

                  2. The remaining  elements of the vesting schedule  applicable
to any unvested shares of common stock issued under the Stock Issuance  Program,
namely:

                         (i) any Service period to be completed by the 
Participant;

                        (ii) the number of installments in which the shares are 
to vest;

                       (iii) the interval or intervals (if any) which are to 
lapse between installments; and

                        (iv) the effect which  death,  Permanent  Disability  or
oher event designated by the Plan Administrator is to have upon the vesting
schedule,

shall be determined by the Plan  Administrator and incorporated into either: (i)
the Award,  if the shares  subject to that Award are not to be issued  until the
applicable  vesting  requirements are satisfied;  or (ii) the Issuance Agreement
executed by the Corporation and the Participant,  if the shares are to be issued
initially as unvested shares.

                  3. The  Participant  shall have full  stockholder  rights with
respect  to any  shares  of  common  stock  issued to him or her under the Stock
Issuance Program,  whether or not his or her interest in those shares is vested.
Accordingly,  the  Participant  shall have the right to vote such  shares and to
receive any regular cash dividends paid on such shares.  Any new,  additional or
different shares of stock or other property  (including money paid other than as
a regular cash  dividend)  which the  Participant  may have the right to receive
with  respect  to his or her  unvested  shares by reason of any stock  dividend,
stock  split,  recapitalization,  combination  of shares,  exchange of shares or
other change  affecting  the  outstanding  common  stock as a class  without the
Corporation's receipt of consideration shall be issued, subject to: (i) the same
vesting requirements  applicable to the Participant's  unvested shares; and (ii)
such escrow arrangements as the Plan Administrator shall deem appropriate.

                  4.       Should the Participant cease to remain in Service 
while holding one or more

March 20, 1997
                                       32


<PAGE>



unvested  shares of common stock under the Stock  Issuance  Program,  then those
shares shall be immediately  cancelled by the  Corporation,  and the Participant
shall have no further  stockholder  rights with respect to those shares.  To the
extent the  cancelled  shares  were  previously  issued to the  Participant  for
consideration  paid  in cash or cash  equivalent  (including  the  Participant's
purchase- money promissory note), the Corporation shall repay to the Participant
the cash  consideration  paid for the  surrendered  shares and shall  cancel the
unpaid  principal  balance  of  any  outstanding  purchase-  money  note  of the
Participant  attributable to such cancelled shares. The cancelled shares may, at
the Plan Administrator's  discretion, be retained by the Corporation as Treasury
Shares or may be retired to authorized but unissued share status.

                  5. The Plan Administrator may in its discretion elect to waive
the cancellation of one or more unvested shares of common stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of any
Service  requirement  incorporated into the vesting schedule applicable to those
shares.  Such waiver shall result in the immediate  vesting of the Participant's
interest  in the  shares of common  stock as to which the waiver  applies.  Such
waiver may be effected at any time,  whether  before or after the  Participant's
cessation  of  Service.  However,  the Plan  Administrator  shall  not waive any
performance  objectives  specified  in  Section  I.B.1  above  which  serve as a
condition  to either  the  issuance  of shares of common  stock  under the Stock
Issuance  Program or the  subsequent  vesting of any  unvested  shares  actually
issued under such Program.

II.      CORPORATE TRANSACTIONS/CHANGE IN CONTROL/HOSTILE TAKE-OVER

         A. Upon the  occurrence  of any  Corporate  Transaction,  all  unvested
shares of common stock at the time outstanding under this Stock Issuance Program
(other than shares issued in lieu of base salary) shall immediately vest in full
and the Corporation's  repurchase rights shall terminate,  except to the extent:
(i) any such repurchase right is expressly assigned to the successor corporation
(or parent thereof) in connection with the Corporate  Transaction;  or (ii) such
termination is precluded by other limitations imposed in the Issuance Agreement.

         B. The Plan  Administrator  shall  have  the  discretionary  authority,
exercisable  at any time while  unvested  shares remain  outstanding  under this
Stock Issuance  Program,  to provide for the immediate and automatic  vesting of
those  unvested  shares  in  whole  or in  part,  and  the  termination  of  the
Corporation's   repurchase  rights  with  respect  to  those  shares,  upon  the
occurrence of a Change in Control or Hostile  Take-Over.  The Plan Administrator
shall also have full  power and  authority  to  condition  any such  accelerated
vesting upon the subsequent  termination of the Participant's Service through an
Involuntary  Termination effected within a specified period following the Change
in Control or Hostile Take-Over.

III.     TRANSFER RESTRICTIONS/SHARE ESCROW

     A. Unvested shares may, in the Plan Administrator's  discretion, be held in
escrow by the Corporation until the Participant's  interest in such shares vests
or may be issued directly to the  Participant  with  restrictive  legends on the
certificates evidencing such unvested shares. To the extent

March 20, 1997
                                       33


<PAGE>



an escrow  arrangement  is utilized,  the unvested  shares and any securities or
other  assets  issued with  respect to such  shares  (other  than  regular  cash
dividends)  shall be delivered in escrow to the Corporation to be held until the
Participant's  interest in such shares (or other  securities  or assets)  vests.
Alternatively,  if the unvested shares are issued  directly to the  Participant,
the  restrictive   legend  on  the  certificates  for  such  shares  shall  read
substantially as follows:

                  "THE SHARES  REPRESENTED BY THIS  CERTIFICATE ARE UNVESTED AND
         ARE   SUBJECT  TO:  (i)  CERTAIN   TRANSFER   RESTRICTIONS;   AND  (ii)
         CANCELLATION  OR  REPURCHASE  IN THE EVENT THE  REGISTERED  HOLDER  (OR
         HIS/HER  PREDECESSOR IN INTEREST) CEASES TO REMAIN IN THE CORPORATION'S
         SERVICE.  SUCH TRANSFER  RESTRICTIONS  AND THE TERMS AND  CONDITIONS OF
         SUCH  CANCELLATION  OR  REPURCHASE  ARE SET  FORTH IN A STOCK  ISSUANCE
         AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
         PREDECESSOR IN INTEREST) DATED
                                                 , A COPY OF WHICH IS ON FILE AT
         AT THE PRINCIPAL OFFICE OF THE CORPORATION."

         B. The Participant  shall have no right to transfer any unvested shares
of common  stock  issued to him or her under  the Stock  Issuance  Program.  For
purposes  of this  restriction,  the  term  "transfer"  shall  include  (without
limitation)  any  sale,  pledge,   assignment,   encumbrance,   gift,  or  other
disposition  of such shares,  whether  voluntary or  involuntary.  Upon any such
attempted  transfer,  the  unvested  shares  shall  immediately  be cancelled in
accordance with  substantially the same procedures in effect under Section I.B.3
of this  Article Six, and neither the  Participant  nor the proposed  transferee
shall have any  rights  with  respect to such  cancelled  shares.  However,  the
Participant  shall  have the right to make a gift of  unvested  shares  acquired
under the Stock Issuance Program to the Participant's spouse or issue, including
adopted children,  or to a trust established for such spouse or issue,  provided
the transferee of such shares delivers to the Corporation a written agreement to
be bound by all the  provisions of the Stock  Issuance  Program and the Issuance
Agreement applicable to the transferred shares.

March 20, 1997
                                       34


<PAGE>



                                  ARTICLE SEVEN

                                  MISCELLANEOUS


I.       LOANS OR INSTALLMENT PAYMENTS

         A. The Plan Administrator  may, in its discretion,  assist any Optionee
or Participant  (including an Optionee or  Participant  who is an officer of the
Corporation),  in the exercise of one or more options  granted to such  Optionee
under the  Discretionary  Option  Grant  Program or the Salary  Reduction  Grant
Program or the purchase of one or more shares issued to such  Participant  under
the Stock Issuance Program, including the satisfaction of any federal, state and
local  income  and  employment  tax  obligations  arising  therefrom,   by:  (i)
authorizing  the  extension of a loan from the  Corporation  to such Optionee or
Participant;  or (ii) permitting the Optionee or Participant to pay the exercise
price or purchase price for the acquired shares in installments over a period of
years.  The terms of any loan or  installment  method of payment  (including the
interest  rate and  terms of  repayment)  shall be upon  such  terms as the Plan
Administrator  specifies  in the  applicable  option or  issuance  agreement  or
otherwise  deems  appropriate  under  the  circumstances.  Loans or  installment
payments may be authorized with or without security or collateral.  However, the
maximum  credit  available  to the  Optionee or  Participant  may not exceed the
exercise or purchase  price of the  acquired  shares (less the par value of such
shares) plus any federal,  state and local income and  employment  tax liability
incurred by the Optionee or  Participant in connection  with the  acquisition of
such shares.

         B. The Plan  Administrator may, in its absolute  discretion,  determine
that one or more loans extended under this financial assistance program shall be
subject to  forgiveness  by the  Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.

II.      AMENDMENT OF THE PLAN AND AWARDS

         A. The Board has complete and exclusive power and authority to amend or
modify the Plan (or any  component  thereof) in any or all respects  whatsoever.
However,  no such amendment or modification  shall  adversely  affect rights and
obligations with respect to stock options, stock appreciation rights or unvested
stock issuances at the time outstanding  under the Plan,  unless the Optionee or
Participant  consents to such  amendment.  In addition,  certain  amendments may
require stockholder approval pursuant to applicable laws or regulations.

         B. Options to purchase  shares of common stock may be granted under the
Discretionary  Option Grant Program and the Salary  Reduction  Grant Program and
shares of common stock may be issued under the Stock Issuance Program, which are
in excess of the number of shares then  available  for issuance  under the Plan,
provided any excess shares actually issued under the Discretionary  Option Grant
Program,  the Salary  Reduction Grant Program or the Stock Issuance  Program are
held in escrow until stockholder  approval is obtained for a sufficient increase
in the  number  of  shares  available  for  issuance  under  the  Plan.  If such
stockholder approval is not obtained

March 20, 1997
                                       35


<PAGE>



within  twelve (12) months after the date the first such excess option grants or
excess share issuances are made, then: (i) any unexercised  excess options shall
terminate and cease to be exercisable;  and (ii) the Corporation  shall promptly
refund the purchase price paid for any excess shares  actually  issued under the
Plan and held in escrow,  together with interest (at the  applicable  short term
federal rate) for the period the shares were held in escrow.

III.     TAX WITHHOLDING

         A. The Corporation's  obligation to deliver shares of common stock upon
the  exercise  of stock  options  or stock  appreciation  rights  or the  direct
issuance  or  vesting  of such  shares  under the Plan  shall be  subject to the
satisfaction  of  all  applicable  federal,  state  and  local  income  tax  and
employment tax withholding requirements.

         B. The Plan Administrator may, in its discretion and in accordance with
the  provisions  of this  Section  III and such  supplemental  rules as the Plan
Administrator may from time to time adopt (including the applicable  safe-harbor
provisions of Securities and Exchange Commission Rule 16b-3), provide any or all
holders of  Non-Statutory  Options (other than the automatic  option grants made
pursuant to Article Three) or unvested  shares under the Stock Issuance  Program
with the right to use shares of common stock in  satisfaction  of all or part of
the federal, state and local income and employment tax liabilities (the "Taxes")
incurred by such holders in connection with the exercise of their options or the
vesting of their shares. Such right may be provided to any such holder in either
or both of the following formats:

                  - Stock Withholding: The holder of the Non-Statutory Option or
         unvested  shares  may  be  provided  with  the  election  to  have  the
         Corporation  withhold,  from  the  shares  of  common  stock  otherwise
         issuable upon the exercise of such Non-Statutory  Option or the vesting
         of such shares, a portion of those shares with an aggregate Fair Market
         Value equal to the  percentage of the Taxes (up to one hundred  percent
         (100%)) specified by such holder.

                  - Stock Delivery:  The holder of the  Non-Statutory  Option or
         the unvested shares may be provided with the election to deliver to the
         Corporation,  at the time the Non- Statutory Option is exercised or the
         shares vest, one or more shares of common stock previously  acquired by
         such  individual  (other than in connection with the option exercise or
         share vesting triggering the Taxes) with an aggregate Fair Market Value
         equal to the percentage of the Taxes (up to one hundred percent (100%))
         specified by such holder.

IV.      EFFECTIVE DATE AND TERM OF PLAN

         A.  This Plan  became  effective  upon  approval  by the  Corporation's
stockholders  at the 1994  Annual  Meeting  held on May 5, 1994.  The Plan shall
serve as the successor to the Predecessor Plans, and no further option grants or
stock  issuances  shall be made under the  Predecessor  Plans from and after the
date of 1994 Annual Meeting.

     B. On January 25, 1995, the Board approved an amendment to the Plan to:

March 20, 1997
                                       36


<PAGE>



                         (i) extend the term for which options granted under the
         Automatic  Option Grant Program may be exercised from ten (10) years to
         fifteen (15) years from the date of grant;

                        (ii)  provide  for the  immediate  vesting of all shares
         purchased or purchasable by a non-employee Director under the Automatic
         Option  Grant  Program  in the event such  individual's  service on the
         Board  terminates  for any reason  (other than removal for cause) after
         his or her completion of at least four (4) years of Board service,  and
         allow any outstanding options held by such non-employee  Director under
         the  Automatic   Option  Grant  Program  to  remain   exercisable   for
         fully-vested shares until the expiration of the option term; and

                       (iii) identify a series of  performance  goals upon which
         the Plan  Administrator  may condition either the issuance of shares of
         common stock under the Stock Issuance Program or the subsequent vesting
         of  any  unvested  shares  actually  issued  under  such  Program.  The
         amendment was approved by the  stockholders at the 1995 Annual Meeting.
         The item (ii)  change is to be in effect  for all  outstanding  options
         under the Automatic Option Grant Program,  whether made before or after
         the date of the  amendment.  The item (i)  change  is to apply  only to
         options granted on or after the date of the 1995 Annual Meeting.

     C. On  November  1, 1996,  the Board  approved  an  amendment  to the Plan,
subject  to  stockholder  approval  at the 1997  Annual  Meeting,  to effect the
following changes:

                          - The number of shares  available  for issuance  under
         the Plan is to  increase  automatically  on the date of the 1997 Annual
         Stockholders  Meeting by an amount  equal to 2% of the total  number of
         shares of common stock outstanding on the immediately preceding trading
         day;

                          - The number of shares of common stock  available  for
         issuance  under  the Plan is to  automatically  increase  on the  first
         trading day of each  calendar  year,  beginning  with the 1998 calendar
         year,  by an amount equal to 3% of the total number of shares of common
         stock outstanding on December 31 of the immediately  preceding calendar
         year;

                          - Each such  automatic  increase to the share  reserve
         will,  however,  be subject to  reduction  to the extent  necessary  to
         assure  that the  maximum  number of shares of common  stock  available
         immediately  thereafter  for future  option  grants  and  direct  stock
         issuances under the Plan (net of all options then outstanding) will not
         exceed 6,000,000 shares;

                          - allow  one or more  Non-Statutory  Options,  whether
         currently  outstanding  or  subsequently  granted,  to be assignable or
         transferable  by the Optionee  during his or her  lifetime,  subject to
         such restrictions and limitations as the Plan Administrator may impose;


March 20, 1997
                                       37


<PAGE>



                          - allow the  option  grants  made on or after the 1997
         Annual Meeting of  Stockholders  to  non-employee  Directors  under the
         Automatic  Option Grant Program to be  transferable  during  Optionee's
         lifetime  for  estate  planning  purposes  to a  member  of  his or her
         immediate family or to a trust  established for one or more such family
         members;

                          -         allow non-employee Directors to receive 
         discretionary grants and stock issuances under the Discretionary Option
         Grant and Stock Issuance Programs;

                          - eliminate the  restriction  that the individuals who
         serve as the Plan  Administrator  may not receive any option  grants or
         direct  stock  issuances  from the  Corporation  during their period of
         service as such or during the twelve  (12)-month period preceding their
         appointment as Plan Administrator;

                          - liberalize the  requirements  for the withholding of
         shares of common stock in satisfaction  of tax withholding  obligations
         incurred in connection  with the exercise of  Non-Statutory  Options or
         the vesting of unvested  stock  issuances so that the only condition to
         the  exercise of those  withholding  rights is the approval of the Plan
         Administrator,  either at the time those rights are exercised or at any
         earlier time;

                          -         require stockholder approval of future 
         amendments to the Plan only to the extent necessary to satisfy 
         applicable laws or regulations;

                          -  eliminate  both the six  (6)-month  holding  period
         requirement and the ten (10) business day "window"  period  requirement
         for the exercise of any stock  appreciation  rights  granted  under the
         Plan; and

                          - allow unvested shares  reacquired by the Corporation
         upon the  Optionee's  or  Participant's  cessation of Service  prior to
         vesting in those shares to be added back to the share reserve available
         for future issuance under the Plan.

         D. Each option issued and outstanding  under the Predecessor  Plans and
each unvested share issued thereunder immediately prior to the Effective Date of
this Plan shall be  incorporated  into this Plan and  treated as an  outstanding
option  or share  issuance  under  this  Plan,  but each such  option  and share
issuance shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant or issuance,  and nothing in this Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders of
such options or share  issuances with respect to their  acquisition of shares of
common stock thereunder.

         E. One or more  provisions  or  features  of this Plan may, in the Plan
Administrator's  discretion,  be extended  to any or all stock  options or share
issuances  outstanding  under the  Predecessor  Plans on the Effective  Date and
incorporated into this Plan.

     F. The Plan shall  terminate upon the earlier of: (i) December 31, 2008; or
(ii) the date on which all shares  available  for issuance  under the Plan shall
have been issued or cancelled pursuant

March 20, 1997
                                       38


<PAGE>



to the  exercise  of options or stock  appreciation  rights or the  issuance  of
shares  (whether  vested or unvested) under the Plan. If the date of termination
is determined under clause (i) above,  then all option grants and unvested stock
issuances  outstanding on such date shall thereafter  continue to have force and
effect in accordance  with the  provisions of the  instruments  evidencing  such
grants or issuances.

V.       USE OF PROCEEDS

         Any cash proceeds  received by the Corporation  from the sale of shares
pursuant to option  grants or stock  issuances  under the Plan shall be used for
general corporate purposes.

VI.      REGULATORY APPROVALS

         A. The  implementation of the Plan, the granting of any option or stock
appreciation  right under the Plan,  the  issuance of any shares under the Stock
Issuance  Program,  and the  issuance of common  stock upon the  exercise of the
stock options and stock  appreciation  rights granted hereunder shall be subject
to the  Corporation's  procurement  of all  approvals  and  permits  required by
regulatory  authorities having jurisdiction over the Plan, the stock options and
stock appreciation  rights granted under it and the common stock issued pursuant
to it.

         B. No  shares  of  common  stock or other  assets  shall be  issued  or
delivered under this Plan unless and until there shall have been compliance with
all applicable  requirements of federal and state securities laws, including the
filing and  effectiveness of the Form S-8 registration  statement for the shares
of common stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the common stock is then listed for trading.

VII.     NO EMPLOYMENT/SERVICE RIGHTS

         Neither the action of the Corporation in establishing the Plan, nor any
action taken by the Plan Administrator  hereunder, nor any provision of the Plan
shall be  construed  so as to grant  any  individual  the right to remain in the
Service of the Corporation (or Subsidiary) for any period of specific  duration,
and  the  Corporation  (or  any  Subsidiary   retaining  the  services  of  such
individual)  may  terminate  such  individual's  Service at any time and for any
reason, with or without cause.


March 20, 1997
                                       39


<PAGE>



                                   ADDENDUM I

                  AMDAHL CORPORATION 1994 STOCK INCENTIVE PLAN

                       UNITED KINGDOM STOCK OPTION SCHEME



March 20, 1997
                                       40


<PAGE>



                                   ADDENDUM I

                  AMDAHL CORPORATION 1994 STOCK INCENTIVE PLAN

                       UNITED KINGDOM STOCK OPTION SCHEME

Preamble

This  scheme (the  "Scheme")  is for the  benefit of those  employees  of Amdahl
Corporation and its subsidiary  corporations  who are subject to taxation in the
United Kingdom.  The terms and conditions of the Scheme are established in order
to render the Scheme  capable of  approval as an approved  share  option  scheme
under  Schedule 9 of the United Kingdom  Income and  Corporation  Taxes Act 1988
("Taxes  Act")  ("Schedule  9").  Accordingly,  the terms and  conditions of the
Scheme shall be interpreted in a manner  consistent with Schedule 9. All options
subject to the  provisions  of the Scheme shall be  specifically  designated  as
"Approved UK Stock Options."

The Scheme is an  addendum  to the 1994 Stock  Incentive  Plan (the  "Plan") and
should  be  read  in  conjunction  with  the  Plan.  Accordingly,   any  options
specifically  designated  as  Approved UK Stock  Options  will be subject to the
terms and  conditions  of the Plan  except  to the  extent  that such  terms and
conditions  differ  from  (or  are  otherwise  in  conflict  with)  the  express
provisions of the Scheme in which event,  the rules of the Scheme shall prevail.
Any term not otherwise defined in the Scheme shall have the meaning set forth in
Section II, Article One of the Plan.

For the  avoidance  of doubt only  Articles  One, Two Section IC and Seven shall
apply to the Scheme except to the extent that its terms and conditions differ or
are otherwise in conflict with the Scheme.

(a)      Eligibility

The individuals  eligible to receive  Approved UK Stock Options shall be limited
to:

     i)   any Director except for a non-employee  Director of the Corporation or
          one or more of its  Subsidiaries who normally devotes not less than an
          aggregate of 25 hours per week  (excluding  meal breaks) to the duties
          of such directorships; and

     ii)  any  non-director  employee of the Corporation or its Subsidiaries who
          is required  under his terms of employment to provide not less than an
          aggregate of 20 hours per week of service  (excluding  meal breaks) to
          the Corporation or its subsidiaries.

An individual may not be granted, nor may an individual exercise, an Approved UK
Stock Option if such  individual  has at the time (or had at any time during the
preceding twelve (12) months) a material  interest (as defined in Section 187(3)
Taxes Act 1988) in a close company (as defined under Chapter I of Part XI of the
Taxes Act disregarding  section  414(1)(a) and 415) whose shares may be acquired
on the exercise of rights obtained under the Scheme or which has control

March 20, 1997
                                       41


<PAGE>



of such a company or is a member of a consortium  (as defined in Section  187(7)
of the Taxes Act 1988) which owns such a company.

(b)      Grant of Options

Approved UK Stock  Options  granted  under the Scheme by the Plan  Administrator
shall be granted by deed and the exercise price per share of stock subject to an
Approved UK Stock Option ("the  Option  Shares")  shall in no event be less than
one hundred per cent.  (100%) of the Fair Market Value of such Option  Shares on
the grant date or such earlier date as is agreed with the Inland Revenue.

Each Approved UK Stock Option shall be exercisable at such time or times, during
such period and for such number of Option  Shares as shall be  determined by the
Plan  Administrator  and set forth in the instrument  evidencing such option. No
Approved UK Stock Option  shall,  however,  have a maximum term in excess of ten
(10) years. No Approved UK Stock Option may be transferred, assigned, or charged
and any purported transfer, assignment or charge shall be void ab initio.

(c)      Stock issued pursuant to exercise of approved UK stock options

The Option Shares  issued  pursuant to the exercise of Approved UK Stock Options
shall not be subject to any restrictions (as such term is defined in Schedule 9)
other than  restrictions  which  apply to all  outstanding  Option  Shares.  The
issuance of such Option  Shares must be effected  within  thirty (30) days after
the date of exercise of the Approved UK Stock Options.

(d)      Loans or guarantee of loans

Notwithstanding the provisions of Section I, Article Seven of the Plan:

     i)   no  financing  shall  be  provided   directly  or  indirectly  by  the
          Corporation  or any of its  Subsidiaries  to the holder of Approved UK
          Stock Options for the purposes of assisting  such  individuals  in the
          exercise of their Approved UK Stock Options; and

     ii)  no holder of an Approved UK Stock  Option shall be permitted to pay in
          instalments the purchase price of Option Shares  acquired  pursuant to
          the exercise of such option.

(e)      Termination of Service

Should an Optionee cease service for any reason (excluding death and Misconduct)
while  holding  one or more  outstanding  Approved UK Stock  Options  then those
Approved UK Stock Options shall terminate upon the earlier of:

     (i)  the expiration of ten (10) years after the grant date of this option;

March 20, 1997
                                       42


<PAGE>



     (ii) the  expiration  of  thirty-six  (36) months  after the  cessation  of
          service; or

     (iii)the  expiration  of such  period  following  cessation  of  service as
          determined by the Plan Administrator at the date of grant.

If  Optionee's  employment  is  terminated  by reason of  Misconduct  within the
specified  term of the  Approved UK Stock  Option,  then the option  shall lapse
immediately.

(f)      Limitation of rights

Except as may subsequently be permitted by amendment to Schedule 9, the grant of
an Approved UK Stock  Option  under the Plan shall be limited and take effect so
that the grant of such option  would not,  at the time of grant,  cause the Fair
Market Value (as of the date of grant) of the Option  Shares  purchasable  under
all Approved UK Stock Options granted to such Optionee by:

     i)   the Corporation;

     ii)  any company which controls (or at any time within the preceding twelve
          (12) months controlled) the Corporation;

     iii) any company  which is  controlled by (or within the twelve (12) months
          was controlled by) the Corporation; or

     iv)  any company which is (or within the preceding  twelve (12) months was)
          under  the  control  of the same  person or  persons  as  control  the
          Corporation;

to exceed in the aggregate for Approved UK Stock Options  granted on or after 17
July 1995 Li.30,000 taking into account the Fair Market Value (as at the date of
grant) of the Option  Shares  purchasable  under all  Approved UK Stock  Options
granted to the Optionee before 17 July 1995.

For the purposes of the Scheme "Control" shall mean:

     (i)  a person shall be taken to have control of a company if he  exercises,
          or is able to exercise, or is entitled to acquire,  direct or indirect
          control over the company's  affairs,  and in  particular,  but without
          prejudice to the generality of the preceding words, if he possesses or
          is entitled to acquire-

               (a) the greater part of the share capital or issued share capital
               of the company or of the voting power in the company;

               (b) such part of the  issued  share  capital  of the  company  as
               would,  if the whole of the  income of the  company  were in fact
               distributed among the participators (without regard to any rights
               which he or any other person has as a loan creditor), entitle him
               to receive the greater part of the amount so distributed; or

March 20, 1997
                                       43


<PAGE>



               (c) such rights as would,  in the event of the  winding-up of the
               company or in any other circumstances, entitle him to receive the
               greater  part of the assets of the  company  which  would then be
               available for distribution among the participators.

For the purposes of  calculating  the limits in this rule (f) the exchange  rate
for the conversion of US dollars to pounds sterling shall be the Financial Times
pound spot rate  forward as of the date of grant of the Approved UK Stock Option
to which the Option  Shares are subject or on the last  previous  date for which
such rate exists.

(g)      Changes in Capitalisation

No change or adjustment shall be effected pursuant to Section VI, Article One of
the Plan to:

     i)   the  number  of  Option  Shares  or  other  securities  covered  by an
          outstanding Approved UK Stock Option; or

     ii)  the  exercise  price  payable per Option  Share  under an  outstanding
          Approved UK Stock Option;

unless  any  adjustment  has been  confirmed  in  writing  by the  Corporation's
auditors to be fair and reasonable, the aggregate exercise price payable by each
Optionee is not increased and any  adjustment,  whilst the Scheme is intended to
remain approved, has been approved by the Board of Inland Revenue.

(h)      Amendment of the Scheme

Whilst it is intended to remain approved by the Inland  Revenue,  the Scheme may
not be amended without prior Inland Revenue approval.  Accordingly, unless Board
of Inland  Revenue  approval  shall have been  obtained for any amendment to the
Plan, the terms and conditions of the Scheme shall be determined by reference to
the provisions of the Plan as in existence prior to such amendment.

(i)      Surrender of Approved UK Stock Options

Notwithstanding  Sections III and V, Article Two and Section III,  Article Three
of the Plan,  no Approved UK Stock Option may be  surrendered  for cash or stock
payment  from  the  Corporation.  However,  Approved  UK  Stock  Options  may be
surrendered,  cancelled  or  renounced  by their  holders  at any time  prior to
exercise.

(j)      Exercise upon death

Notwithstanding  Section IC of Article Two and Section II H of Article  Three of
the Plan, upon the Optionee's death an Approved UK Stock Option may;


March 20, 1997
                                       44


<PAGE>



     i)   in no event remain outstanding for more than one (1) year; and

     ii)  be exercised only by the deceased Optionee's personal representatives.

(k)      Share limitations

Notwithstanding  Section II B, Article  Seven of the Plan,  no Approved UK Stock
Option may be  granted  pursuant  to the  provisions  of the Scheme to  purchase
Option  Shares in excess of the number of shares  then  available  for  issuance
under the Scheme.

(l)      Stock subject to the scheme

No Approved UK Stock  Option may be granted  pursuant to the  provisions  of the
Scheme to purchase stock which does not satisfy the  requirements  of paragraphs
10 to 14 of Schedule 9.

(m)      Manner of exercise

An Optionee  may  exercise  an  Approved  UK Stock  Option by sending his option
certificate  together  with  the  exercise  price  in cash or by  cheque  to the
Corporation. Notwithstanding any rights determined by reference to a record date
preceding  the date of issue,  stock  issued on the  exercise  of an Approved UK
Stock  Option  shall rank pari passu with the other  shares as the same class in
issue at the date of issue. If any shares are listed or quoted on any recognised
stock  exchange,  no approved  UK Stock  Option may be granted or  exercised  in
contravention  of the terms of such  rules of such body as may be in force  from
time to time.

(n)      Service Rights

Rights  and  obligations  of any  Optionee  under  the  terms of his  office  or
employment with the Corporation  and its  subsidiaries  shall not be affected by
participation  in the Scheme or any right to participate  therein.  Any Optionee
who  participates  therein  shall  waive any and all rights to  compensation  or
damages and  consequence of the  termination of his office or employment for any
reason  whatsoever in so far as those rights arise or may arise from his ceasing
to have rights  under or be entitled to exercise  any  Approved UK Stock  Option
under the Scheme as the result of such termination.

(o)      Takeovers

If any person obtains Control of the Corporation as a result of making;

         (i)      a  general  offer to  acquire  the whole of the  issued  share
                  capital of the  Corporation  (other than that which is already
                  owned  by him)  which is  unconditional  or which is made on a
                  condition  such that if it is satisfied  the person making the
                  offer will have Control of the Corporation; or


March 20, 1997
                                       45


<PAGE>



         (ii)     a general  offer to  acquire  all of the  shares  (other  than
                  shares  which  are  already  owned by him) in the  Corporation
                  which are of the same class as the shares

Then the Plan  Administrator  shall notify all  Optionees of the offer and shall
use its best efforts to have the options  assumed by the acquiring  entity,  and
any Approved UK Stock  Option so assumed may be  exercised  upon receipt of this
notice  up to the  expiry  of a period  ending 6 months  from the time  when the
person  making  the  offer  has  obtained  Control  of the  Corporation  and any
conditions subject to which the offer has been made has been satisfied.

If as a result of the events  specified above, a company has obtained Control of
the  Corporation,  the  Optionee  may,  if that other  company  ("the  Acquiring
Company")  so  agrees  release  any  Approved  UK  Stock  Options  he  holds  in
consideration of the grant of a new option over shares in the Acquiring  Company
or some other company  falling  within  paragraph  10(b) or 10(c) of Schedule 9,
providing such new option meets the  requirements  of paragraph 15 (3)(a) to (d)
of  Schedule 9 and that such  release and grant  occur  within the  "appropriate
period" as defined by paragraph 15 (2) Schedule 9.

A new option  issued in  consideration  of the  release of an  Approved UK Stock
Option  shall be  evidenced  by an option  certificate  which  shall  import the
relevant provisions of the Plan subject to the consequent amendments (including,
without prejudice to the generality of the foregoing, the amendment of the terms
"Corporation",  "share" and "Approved UK Stock Option") necessary to accommodate
the new  options  and to comply with  paragraph  15(3)  Schedule 9. A new option
shall, for all other purposes of the Scheme,  be treated as having been acquired
at the same time as the corresponding released options.

For the  purpose of this  paragraph  a person  shall be deemed to have  obtained
Control  of the  Corporation  if he, and other  acting in concert  with him have
obtained Control of it.

(p)      Corporate Transactions, Hostile Takeovers and Changes in Control

In the event of a  Corporate  Transaction  or an  Involuntary  Termination  as a
result of the  Corporate  Transaction  any option shall be  exercisable  for the
period  specified  by the Plan  Administrator,  and on expiry of such period the
option shall lapse.



March 20, 1997
                                       46


<PAGE>



                                    EXHIBIT A


                        AUTOMATIC STOCK OPTION AGREEMENT


March 20, 1997
                                       47


<PAGE>



                                    NOTICE OF
                          AUTOMATIC STOCK OPTION GRANT


                  Notice is hereby  given of the  following  stock  option  (the
"Option")  to purchase  shares of the common  stock of Amdahl  Corporation  (the
"Corporation")  which has been granted  pursuant to the  Automatic  Option Grant
Program  in effect  under the  Corporation's  1994  Stock  Incentive  Plan ( the
"Plan"):

Optionee:

Grant Date:

Type of Option:                Non-Statutory Stock Option

Exercise Price:                $______ (100% of Fair Market Value on Grant Date)

Shares Granted:                5,000

Expiration Date:

Exercise  Schedule:  The Option is  immediately  exercisable  for all the Option
Shares.

Vesting  Schedule:  The Option Shares shall initially be unvested and subject to
repurchase  by the  Corporation,  at the  Exercise  Price paid per  share,  upon
Optionee's  cessation  of  service  as a member  of the  Corporation's  Board of
Directors (the "Board")  prior to vesting in the Option  Shares.  Optionee shall
acquire a vested interest in the Option Shares, and the Corporation's repurchase
right with  respect  to the  Option  Shares  shall  lapse,  in two (2) equal and
successive  annual  installments  over  Optionee's  continued  period  of  Board
service,  with the first such installment to vest upon Optionee's  completion of
one (1) year of Board service measured from the Grant Date.

                  Optionee  understands  and  agrees  that the Option is granted
subject to and in accordance  with the express terms and  conditions of the Plan
governing  automatic option grants to Board members.  Optionee further agrees to
be bound by the terms and conditions of the Plan and the terms and conditions of
the Option as set forth in the Automatic Stock Option Agreement  attached hereto
as Exhibit A.

                  Optionee hereby acknowledges receipt of a copy of the official
Plan Summary and  Prospectus.  A copy of the Plan is also available upon request
made to the  Corporate  Secretary at the  Corporate  Offices at 1250 East Arques
Avenue, P.O. Box 3470, Sunnyvale, California 94088-3470.


March 20, 1997
                                       48


<PAGE>



                  REPURCHASE  RIGHT.  OPTIONEE  HEREBY  AGREES THAT ALL UNVESTED
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE
AND SHALL BE SUBJECT TO REPURCHASE BY THE  CORPORATION  AND ITS ASSIGNS,  AT THE
EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S  CESSATION OF SERVICE AS A MEMBER
OF THE  CORPORATION'S  BOARD OF  DIRECTORS.  THE  TERMS AND  CONDITIONS  OF SUCH
REPURCHASE RIGHT SHALL BE SET FORTH IN A STOCK ISSUANCE  AGREEMENT,  IN FORM AND
SUBSTANCE  SATISFACTORY TO THE CORPORATION,  EXECUTED BY OPTIONEE AT THE TIME OF
THE OPTION EXERCISE.

                  No provision of this Notice of Automatic Stock Option Grant or
the attached  Automatic Stock Option  Agreement shall in any way be construed or
interpreted  so as to affect  adversely  or  otherwise  impair  the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.

DATED:                     , 199__


                                                              AMDAHL CORPORATION

                                                              By:





                                                                OPTIONEE





Attachments:
Exhibit A:  Automatic Stock Option Grant Agreement


March 20, 1997
                                       49


<PAGE>




                                    EXHIBIT A

                               AMDAHL CORPORATION

                     AUTOMATIC STOCK OPTION GRANT AGREEMENT


RECITALS

         A. The Corporation has approved an Automatic Option Grant Program under
the 1994 Stock  Incentive  Plan (the "Plan"),  pursuant to which special  option
grants are to be made to non-employee  Directors of the  Corporation's  Board of
Directors (the "Board") at periodic intervals over their period of Board service
in order to encourage such individuals to remain in the Corporation's service.

         B. Optionee is an Eligible Director in accordance with Article Three of
the Plan, and this  Agreement is executed  pursuant to, and is intended to carry
out the purposes of, the Plan in connection  with the automatic grant of a stock
option to purchase shares of the  Corporation's  common stock, par value of $.05
per share ("common stock") under the Plan.

         C. The granted  option is intended to be a  non-statutory  option which
does not meet the  requirements of Section 422 of the Internal  Revenue Code and
is designed to provide Optionee with a meaningful incentive to continue to serve
as a member of the Board.

         NOW, THEREFORE, it is hereby agreed as follows:

                  1.  Grant  of  Option.  Subject  to and  upon  the  terms  and
conditions set forth in this Agreement,  there is hereby granted to Optionee, as
of the date of grant (the "Grant Date") specified in the accompanying  Notice of
Automatic Stock Option Grant (the "Grant Notice"), a stock option to purchase up
to the number of shares of common stock (the "Option Shares") as is specified in
the Grant  Notice.  The Option  Shares  shall be  purchasable  from time to time
during the option term at the price per share (the "Exercise  Price")  specified
in the Grant Notice.

                  2.  Option  Term.  This  option  shall have a maximum  term of
fifteen (15) years measured from the Grant Date and shall expire at the close of
business on the Expiration Date specified in the Grant Notice, unless terminated
earlier pursuant to Paragraph 5, 7 or 8.

                  3. Limited  Transferability.  This option,  together  with the
special  stock  appreciation  right  provided  under  Paragraph  8.b,  shall  be
transferable  or  assignable  by Optionee:  (i) during  Optionee's  lifetime for
estate  planning  purposes  to a member of his or her  immediate  family or to a
trust  established for one or more such family  members;  and (ii) by will or by
the laws of descent and distribution following Optionee's death.


March 20, 1997
                                       50


<PAGE>



                  4.  Exercisability/Vesting.  This option shall be  immediately
exercisable  for any or all of the  Option  Shares,  whether  or not the  Option
Shares are at the time vested in accordance with the Vesting  Schedule set forth
in the Grant Notice.  However,  any shares  purchased under this option shall be
subject to repurchase by the Corporation,  at the exercise price paid per share,
upon the  Optionee's  termination  of Board  service  prior to  vesting in those
shares. This option shall remain exercisable until the Expiration Date unless it
is fully exercised or terminated earlier pursuant to Paragraphs 5, 7 or 8. In no
event shall this option be exercisable after the Expiration Date.

                  The Option  Shares  will vest in  accordance  with the Vesting
Schedule set forth in the Grant  Notice.  Vesting of the Option  Shares shall be
subject  to  acceleration  as  provided  in  Paragraphs  5, 7 or 8. In no event,
however,   shall  any  additional   Option  Shares  vest  following   Optionee's
termination of service as a Director,  except as otherwise  provided pursuant to
Paragraph 5, 7 or 8 of this Agreement.

                  5.       Termination of Board Service.

                           a. Should  Optionee  cease to serve as a Director for
         any  reason  (other  than  death  or  permanent  disability)  prior  to
         completing  at least four (4) years of Board service while holding this
         option, then Optionee shall have a six (6) month period commencing with
         the date of such  termination of Board service in which to exercise any
         outstanding  Option  Shares  under this option  which are vested at the
         time of Optionee's  termination of Board service, but in no event shall
         this option be exercisable at any time after the Expiration Date.

                           b. Should Optionee,  with less than four (4) years of
         service on the Board, die within the six (6)-month period following the
         date of his or her  termination  of Board  service,  then the  personal
         representative  of Optionee's  estate, or the person or persons to whom
         the option is transferred  pursuant to Optionee's will or in accordance
         with the laws of descent  and  distribution,  shall have a twelve  (12)
         month  period to exercise  any  outstanding  Option  Shares  under this
         option which are vested at the time of Optionee's  termination of Board
         service,  but in no event shall this option be  exercisable at any time
         after the Expiration Date.

                           c. Should  Optionee  cease to serve as a Director for
         any  reason  (other  than  removal  for  cause)  following  his  or her
         completion  of four  (4) or more  years  of  Board  service,  then  any
         outstanding  Option  Shares  under  this  option  at the  time  of such
         termination  of Board service shall  immediately  vest in full (and the
         Corporation's repurchase right with respect to such Option Shares shall
         terminate),  and Optionee or the personal  representative of Optionee's
         estate or the  person or  persons  to whom this  option is  transferred
         pursuant to Optionee's  will or in accordance  with the laws of descent
         and  distribution  shall  have the right to  exercise  any  outstanding
         Option Shares prior to the Expiration Date.

                           d. Should Optionee die or become permanently disabled
         while serving as a Director,  then any outstanding Option Shares at the
         time of such  termination  of Board service shall  immediately  vest in
         full (and the Corporation's repurchase rights with respect to

March 20, 1997
                                       51


<PAGE>



         the Option  Shares  shall  terminate),  and  Optionee  or the  personal
         representative  of  Optionee's  estate or the person or persons to whom
         the option is transferred  pursuant to Optionee's will or in accordance
         with  the  laws of  descent  and  distribution  shall  have  until  the
         expiration date of the option term in which to exercise any outstanding
         Option Shares.

                           e.  Optionee   shall  be  deemed  to  be  permanently
         disabled  if Optionee  is unable to engage in any  substantial  gainful
         activity  by reason of any  medically  determinable  physical or mental
         impairment  expected to result in death or to be of continuous duration
         of twelve (12) months or more.

                  6.       Adjustment in Option Shares.

                           a.  Should  any  change be made to the  common  stock
         issuable under the Plan by reason of any stock split,  stock  dividend,
         recapitalization,  combination  of shares,  exchange of shares or other
         change affecting such common stock as a class without the Corporation's
         receipt  of  consideration,  then the  number  and class of  securities
         purchasable  under this option and the Exercise Price payable per share
         shall be appropriately  adjusted to prevent the dilution or enlargement
         of  Optionee's  rights  hereunder;  provided,  however,  the  aggregate
         Exercise Price shall remain the same.

                           b. To the extent this option is assumed in connection
         with any  Corporate  Transaction  under  Paragraph 7 or is otherwise to
         continue  in  effect,  this  option  shall be  appropriately  adjusted,
         immediately after such Corporate  Transaction,  to apply and pertain to
         the  number and class of  securities  which  would have been  issued to
         Optionee,  in  consummation  of such  Corporate  Transaction,  had this
         option been exercised immediately prior to such Corporate  Transaction.
         Appropriate  adjustments  shall  also  be made  to the  Exercise  Price
         payable per share,  provided the aggregate  Exercise  Price payable for
         such securities shall remain the same.

                  7.       Corporate Transaction.  In the event of any of the 
following stockholder-approved transactions to which the Corporation is a party 
(a "Corporate Transaction"):

                           a. a merger or consolidation in which the Corporation
         is not the surviving  entity, except for a  transaction the  principal 
         purpose of  which is to change the state in which the  Corporation is 
         incorporated;

                           b.       the sale, transfer or other disposition of 
         all or substantially all of the assets of the Corporation in complete 
         liquidation or dissolution of the Corporation; or

                           c. any reverse merger in which the Corporation is the
         surviving  entity but in which  securities  possessing  more than fifty
         percent (50%) of the total combined  voting power of the  Corporation's
         outstanding securities are transferred to a person or persons different
         from those who held such securities immediately prior to such merger;


March 20, 1997
                                       52


<PAGE>



all outstanding Option Shares under this option shall automatically vest in full
(and the  Corporation's  repurchase  right with  respect to those  shares  shall
immediately terminate) immediately prior to the specified effective date for the
Corporate  Transaction,  and this option may be  exercised  for any  outstanding
Option  Shares.   Immediately   following  the  consummation  of  the  Corporate
Transaction, this option shall terminate and cease to be outstanding,  except to
the extent assumed by the successor corporation (or parent thereof).

                  8.       Change in Control/Hostile Takeover.

                  Any outstanding Option Shares under this option at the time of
a Change in Control or Hostile Take-Over (as such terms are defined below) shall
automatically vest in full (and the Corporation's  repurchase right with respect
to such Option  Shares shall  terminate).  This option shall remain  exercisable
until  the  earliest  to  occur  of (i) the  Expiration  Date,  (ii)  the  early
termination  of this option in  accordance  with  Paragraph 5 or 7, or (iii) the
surrender of this option under Paragraph 8.b.

                  Optionee shall also have the unconditional  right (exercisable
during the thirty (30)-day period immediately following the consummation of such
Hostile Take-Over) to surrender this option to the Corporation in exchange for a
cash  distribution  from the Corporation in an amount equal to the excess of (i)
the Take-Over  Price of the Option Shares at the time subject to the surrendered
option over (ii) the aggregate  Exercise Price payable for such shares ("limited
stock appreciation right").

                  To exercise this limited stock  appreciation  right,  Optionee
must,  during the  applicable  thirty  (30)-day  exercise  period,  provide  the
Corporation  with  written  notice of the  option  surrender  in which  there is
specified  the  number  of  Option  Shares  as to  which  the  option  is  being
surrendered. Such notice must be accompanied by the return of Optionee's copy of
this Agreement, together with any written amendments to such Agreement. The cash
distribution  shall be paid to  Optionee  within  five (5) days  following  such
delivery  date,  and neither  the  approval  of the Plan  Administrator  nor the
consent of the Board shall be required in connection  with the option  surrender
and cash distribution. Upon receipt of such cash distribution, this option shall
be cancelled  with respect to the shares subject to the  surrendered  option (or
the surrendered portion),  and Optionee shall cease to have any further right to
acquire those Option Shares under this Agreement. However, should this option be
surrendered  for only a portion of the Option  Shares at the time subject to the
option,  a new  stock  option  agreement  (substantially  in the  form  of  this
Agreement)  shall be issued by the  Corporation  for the  balance  of the Option
Shares for which this option is not surrendered.

                  This  limited  stock  appreciation  right  shall in all events
terminate upon the expiration or sooner termination of the option term.

     Definitions:  For purposes of this  Agreement,  the  following  definitions
shall be in effect:

March 20, 1997
                                       53


<PAGE>



     Change in  Control:  a change in  ownership  or control of the  Corporation
effected through either of the following transactions:

                  - a direct  acquisition  by any  person (or  related  group of
         persons) of beneficial  ownership  (within the meaning of Rule 13d-3 of
         the  Securities and Exchange Act of 1934, as amended (the "1934 Act")),
         of  securities  possessing  more  than ten  percent  (10%) of the total
         combined voting power of the Corporation's outstanding securities,

                  - the direct or indirect  acquisition by any person or related
         group of persons,  whether by tender or exchange offer made directly to
         the Corporation's  stockholders,  private purchases from one or more of
         the  Corporation's  stockholders,  open market  purchases  or any other
         transaction,   of  additional   securities  of  the  Corporation  which
         increases the beneficial ownership (within the meaning of Rule 13d-3 of
         the 1934 Act) of the  total  securities  holdings  of such  person  (or
         related group of persons) to a level of securities possessing more than
         fifty  percent  (50%)  of  the  total  combined  voting  power  of  the
         Corporation's outstanding securities, or

                  - the direct or indirect  acquisition by any person or related
         group of persons,  whether by tender or exchange offer made directly to
         the Corporation's  stockholders,  private purchases from one or more of
         the  Corporation's  stockholders,  open market  purchases  or any other
         transaction,  of beneficial ownership (within the meaning of Rule 13d-3
         of the 1934 Act) of securities of the Corporation possessing sufficient
         voting  power in the  aggregate  to elect an  absolute  majority of the
         Board (rounded up to the next whole number).

     Hostile  Take-Over:  a change  in  ownership  of the  Corporation  effected
through the following transaction:

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

                  - more than fifty percent (50%) of the acquired securities are
         accepted  from holders  other than the  officers  and  directors of the
         Corporation  subject to the short-swing profit  restrictions of Section
         16 of the 1934 Act.


March 20, 1997
                                       54


<PAGE>



     Take-Over  Price:  the greater of: (i) the Fair Market Value (as defined in
subparagraph  9.b.  below)  per share of common  stock on the date the option is
surrendered to the Corporation in connection with the Hostile Take-Over; or (ii)
the highest  reported price per share of common stock paid by the tender offeror
in effecting such Hostile Take-Over.

                  9.       Manner of Exercising Option.

     a. In order  to  exercise  this  option  for all or any part of the  Option
Shares for which the option is at the time exercisable, Optionee (or in the case
of exercise after Optionee's death, Optionee's executor,  administrator, heir or
legatee, as the case may be) must take the following actions:

          (i) To the extent the option is exercised  for vested  Option  Shares,
     the Secretary of the  Corporation  shall be provided with written notice of
     the option exercise (the "Exercise  Notice"),  in substantially the form of
     Exhibit I attached hereto, in which there is specified the number of vested
     Option Shares which are to be purchased under the exercised  option. To the
     extent the option is  exercised  for one or more  unvested  Option  Shares,
     Optionee  (or other  person  exercising  the option)  shall  deliver to the
     Secretary  of the  Corporation  a stock  issuance  agreement  (in  form and
     substance satisfactory to the Corporation) which grants the Corporation the
     right to repurchase,  at the Exercise  Price,  any and all unvested  Option
     Shares  held by  Optionee  at the  time of his or her  cessation  of  Board
     service and which precludes the sale,  transfer or other disposition of any
     purchased  Option Shares  subject to such  repurchase  right (the "Issuance
     Agreement");

          (ii) The aggregate  Exercise  Price for the purchased  shares shall be
     paid in one of the following alternative forms:

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

               (b) full  payment in shares of common  stock held by Optionee for
          the requisite period necessary to avoid a charge to the  Corporation's
          earnings for  financial  reporting  purposes and valued at Fair Market
          Value on the Exercise Date (as defined below);

               (c) full payment in a combination  of shares of common stock held
          for  the  requisite   period  necessary  to  avoid  a  charge  to  the
          Corporation's  earnings for financial reporting purposes and valued at
          Fair Market Value on the Exercise  Date and cash or check made payable
          to the Corporation's order; or

               (d) to the  extent  the option is  exercised  for  vested  Option
          Shares,  full payment effected  through the Immediate Sale Program:  a
          broker-dealer sale and remittance procedure pursuant to which Optionee
          shall provide irrevocable instructions (i) to a Corporation-designated
          brokerage  firm to effect  the  immediate  sale of the  vested  shares
          purchased  under the option and remit to the  Corporation,  out of the
          sale proceeds available

March 20, 1997
                                       55


<PAGE>



         on the  settlement  date,  sufficient  funds  to  cover  the  aggregate
         Exercise Price payable for those shares; and (ii) to the Corporation to
         deliver the  certificates  for the  purchased  shares  directly to such
         brokerage firm in order to complete the sale; and

          (iii) Appropriate  documentation evidencing the right to exercise this
     option  shall be  furnished  to the  Corporation  if the  person or persons
     exercising the option is other than Optionee.
 
      b.     For purposes of subparagraph 9.a. above and for all other valuation
purposes under this  Agreement,  the Fair Market Value per share of common stock
on any relevant  date shall be the mean  between the highest and lowest  selling
prices per share on the date in question on the principal  exchange on which the
common stock is then listed or admitted to trading,  as such prices are reported
on the composite tape of transactions on such exchange. If there are no reported
sales of the common  stock on the date in  question,  then the Fair Market Value
shall be the mean  between  the highest  and lowest  selling  prices on the last
preceding date for which such quotations exist.

     c. The  Exercise  Date  shall be the date on which the  Exercise  Notice is
delivered to the Secretary of the  Corporation,  together  with the  appropriate
Issuance Agreement for any unvested shares acquired under the option.  Except to
the extent the Immediate Sale Program  specified above is utilized in connection
with the  exercise  of the  option  for  vested  Option  Shares,  payment of the
Exercise Price for the purchased shares must accompany such notice.

     d. As soon as practical  after the Exercise  Date,  the  Corporation  shall
issue to or on behalf of Optionee  (or other person or persons  exercising  this
option) a certificate or certificates  representing the purchased Option Shares.
To the extent any such Option Shares are unvested,  the  certificates  for those
Option  Shares  shall be endorsed  with an  appropriate  legend  evidencing  the
Corporation's  repurchase  rights and may be held in escrow with the Corporation
until such shares vest.

     e. In no event may this option be exercised for any fractional share.

                  10.      Stockholder Rights.        The holder of this option 
shall not have any of the rights of a stockholder with respect to the Option 
Shares until such individual shall have exercised this option and paid the 
Exercise Price for the purchased shares.

                  11. No Impairment of Rights.  This Agreement  shall not in any
way affect the right of the  Corporation  to adjust,  reclassify,  reorganize or
otherwise  make  changes  in its  capital  or  business  structure  or to merge,
consolidate,  dissolve,  liquidate  or sell or  transfer  all or any part of its
business  or  assets.  Nor  shall  this  Agreement  in any way be  construed  or
interpreted  so as to affect  adversely  or  otherwise  impair  the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.


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                                       56


<PAGE>



                  12. Compliance with Laws and Regulations. The exercise of this
option and the issuance of the Option Shares upon such exercise shall be subject
to compliance by the Corporation  and Optionee with all applicable  requirements
of law relating  thereto and with all  applicable  regulations of any securities
exchange  on which  shares of the common  stock may be listed for trading at the
time of such exercise and issuance.

                  13.  Successors  and Assigns.  Except to the extent  otherwise
provided in Paragraph 3 or 7, the  provisions of this  Agreement  shall inure to
the benefit of, and be binding  upon,  the  successors,  administrators,  heirs,
legal  representatives and assigns of Optionee and the Corporation's  successors
and assigns.

                  14.  Discharge of Liability.  The inability of the Corporation
to obtain  approval  from any  regulatory  body having  authority  deemed by the
Corporation to be necessary to the lawful  issuance and sale of any common stock
pursuant to this option shall  relieve the  Corporation  of any  liability  with
respect  to the  non-issuance  or sale of the  common  stock  as to  which  such
approval shall not have been obtained.  However,  the Corporation  shall use its
best efforts to obtain all such applicable approvals.

                  15.  Notices.  Any notice required to be given or delivered to
the  Corporation  under  the terms of this  Agreement  shall be in  writing  and
addressed to the Corporation in care of the Corporate Secretary at the Corporate
Offices  at 1250  East  Arques  Avenue,  P.O.  Box 3470,  Sunnyvale,  California
94088-3470. Any notice required to be given or delivered to Optionee shall be in
writing and  addressed  to Optionee at the address  indicated  below  Optionee's
signature  line on the Grant  Notice.  All notices  shall be deemed to have been
given or delivered  upon  personal  delivery or upon  deposit in the U.S.  mail,
postage prepaid and properly addressed to the party to be notified.

                  16.  Construction/Governing Law. This Agreement and the option
evidenced  hereby  are  made  and  granted  pursuant  to the Plan and are in all
respects limited by and subject to the express terms and provisions of the Plan,
including the Automatic Option Grant Program  provisions of Article Three of the
Plan. The interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the State of California  without  resort to that State's
conflict-of-laws provisions.



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                                       57


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                                    EXHIBIT I

                              NOTICE OF EXERCISE OF
                             AUTOMATIC STOCK OPTION


     I hereby  notify Amdahl  Corporation  (the  "Corporation")  that I elect to
purchase  ____________  shares of the  Corporation's  common  stock par value of
$0.05 per share (the "Purchased Shares") at the option exercise price of $______
per share (the "Exercise  Price") pursuant to that certain option (the "Option")
granted to me under the Corporation's  1994 Stock Incentive Plan on ___________,
199_ to purchase up to 5,000 shares of the Corporation's common stock.

     Concurrently  with the delivery of this Exercise Notice to the Secretary of
the  Corporation,  I shall hereby pay to the  Corporation the Exercise Price for
the Purchased  Shares in accordance with the provisions of my agreement with the
Corporation   evidencing  the  Option  and  shall  deliver  whatever  additional
documents  may be  required  by such  agreement  as a  condition  for  exercise.
Alternatively,  I may utilize the special Immediate Sale procedure  specified in
my agreement to effect payment of the Exercise Price for any Purchased Shares in
which I am vested at the time of exercise.


Date                                                                   Optionee

                                    Address:



Print name in exact manner
it is to appear on the
stock certificate:

Address to which certificate
is to be sent, if different
from address above:



Social Security Number:

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