<PAGE>
 
                                                                    EXHIBIT 10.4
                              SYMMETRICOM, INC.
                          1990 EMPLOYEE STOCK PLAN
                     (AS AMENDED THROUGH JUNE 29, 1998)


     1.  Purposes of the Plan.  The purposes of this Employee Stock Plan are to
         --------------------                                                  
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business.  Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422  of the Code, as amended, and the
regulations promulgated thereunder.  Stock appreciation rights ("SARs") and
stock purchase rights may also be granted under the Plan.

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

          (a) "Administrator" means the Board or any of its Committees as shall
              ---------------                                                  
be administering the Plan, in accordance with Section 4 of the Plan.

          (b) "Board" means the Board of Directors of the Company.
              -------                                             

          (c) "Code" means the Internal Revenue Code of 1986, as amended from
              ------                                                         
time to time, and any successor thereto.

          (d) "Common Stock" means the Common Stock of the Company.
              --------------                                       

          (e) "Company" means Symmetricom, Inc., a California corporation.
              ---------                                                   

          (f) "Committee" means a Committee, if any, appointed by the Board in
              -----------                                                     
accordance with paragraph (a) of Section 4 of the Plan.

          (g) "Consultant" means any person, including an advisor, who is
              ------------                                               
engaged by the Company or any Parent or Subsidiary to render services to the
Company.  The term Consultant shall include directors of the Company.

          (h) "Continuous Status as an Employee or Consultant" means the absence
              ------------------------------------------------                  
of any interruption or termination of the employment or consulting relationship
by the Company or any Subsidiary.  Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of:  (i) sick leave;
(ii) military leave; (iii) any other leave of absence approved by the Board,
provided that such leave is for a period of not more than ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed by contract
or statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or its successor.

          (i) "Disability" means total and permanent disability, as defined in
              ------------                                                    
Section 22(e)(3) of the Code.
<PAGE>
 
          (j) "Employee" means any person, including officers and directors,
              ----------                                                    
employed by the Company or any Subsidiary.  The payment of directors' fees by
the Company shall not be sufficient to constitute "employment" by the Company.

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

          (l) "Fair Market Value" means, as of any date, the value of Common
              -------------------                                           
Stock determined as follows:

             (i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the National Market
System of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the day of determination, as
reported in the Wall Street Journal or such other source as the Administrator
deems reliable;

             (ii) If the Common Stock is quoted on the NASDAQ System (but not on
the National Market System thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high and low asked prices
for the Common Stock on the day of determination, as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;

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

          (m) "Incentive Stock Option" means an Option that satisfies the
              ------------------------                                   
provisions of Section 422A of the Code.

          (n) "Nonstatutory Stock Option" means an Option that is not an
              ---------------------------                               
Incentive Stock Option.

          (o) "Option" means an Option granted pursuant to the Plan.
              --------                                              

          (p) "Optioned Stock" means the Common Stock subject to an Option or
              ----------------                                               
Right.

          (q) "Optionee" means an Employee or Consultant who receives an Option
              ----------                                                       
or Right.

          (r) "Parent" corporation shall have the meaning defined in Section
              --------                                                      
425(e) of the Code.

          (s) "Plan" means this 1990 Employee Stock Plan.
              ------                                     

                                      -2-
<PAGE>
 
          (t) "Restricted Stock" means shares of Common Stock acquired pursuant
              ------------------                                               
to a grant of Stock Purchase Rights under Section 8 below.

          (u) "Right" means and includes SARs and Stock Purchase Rights granted
              -------                                                          
pursuant to the Plan.

          (v) "SAR" means a stock appreciation right granted pursuant to Section
              -----                                                             
7 below.

          (w) "Share" means the Common Stock, as adjusted in accordance with
              -------                                                       
Section 11 of the Plan.

          (x) "Stock Purchase Right" means the right to purchase Common Stock
              ----------------------                                         
pursuant to Section 8.

          (y) "Subsidiary" corporation shall have the meaning defined in Section
              ------------                                                      
425(f) of the Code.

     In addition, the terms "Rule 16b-3" and "Applicable Laws," the term
"Insiders," the term "Tax Date," and the terms "Change of Control" and "Change
of Control Price," shall have the meanings set forth, respectively, in Sections
4, 7, 9 and 11 below.

     3.  Stock Subject to the Plan.  Subject to the provisions of Section 11 of
         -------------------------                                             
the Plan, the total number of Shares reserved and available for distribution
pursuant to awards made under the Plan shall be two million, two hundred
thousand (2,200,000), increased on the first day of each fiscal year of the
Company, beginning with the fiscal year commencing July 1, 1996, by a number
equal to 3.0% of the number of shares outstanding as of the last trading day of
the Company's immediately preceding fiscal year.  The maximum number of Shares
reserved and available for issuance pursuant to Incentive Stock Options is
2,200,000.  The Shares may be authorized but unissued, or reacquired stock.

          If an Option or Right should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for other Options or Rights under the Plan.

     4.  Administration of the Plan.
         -------------------------- 

          (a)  Procedure.
               --------- 

               (i) Administration With Respect to Directors and Officers.  With
                   -----------------------------------------------------
respect to grants of Options or Rights to Employees who are also officers or
directors of the Company, the Plan shall be administered by (A) the Board if the
Board may administer the Plan in compliance with Rule 16b-3 promulgated under
the Exchange Act or any successor rule ("Rule 16b-3") with respect to a plan
intended to qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which Committee shall be
constituted in such a manner as to permit 

                                      -3-
<PAGE>
 
the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or without cause) and
appoint new members in substitution therefor, fill vacancies, however caused,
and remove all members of the Committee and thereafter directly administer the
Plan, all to the extent permitted by Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan.

               (ii) Administration With Respect to Consultants and Other
                    ----------------------------------------------------
                    Employees. With respect to grants of Options or Rights to 
                    ---------
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a Committee designated by
the Board, which Committee shall be constituted in such a manner as to satisfy
the legal requirements, if any, relating to the administration of incentive
stock option plans under California corporate and securities laws and under the
Code (the "Applicable Laws"). Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and thereafter directly administer the Plan, all to
the extent permitted by the Applicable Laws.

               (iii) Multiple Administrative Bodies.  If permitted by Rule 
                     ------------------------------
16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers and Consultants who are not directors.

          (b) Powers of the Administrator.  Subject to the provisions of the
              ---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:

               (i) to determine the Fair Market Value of the Common Stock, in
     accordance with Section 2(l) of the Plan;

               (ii) to select the officers, Consultants and Employees to whom
     Options and Rights may from time to time be granted hereunder;

               (iii)  to determine whether and to what extent Options and Rights
     or any combination thereof, are granted hereunder;

               (iv) to determine the number of shares of Common Stock to be
     covered by each such award granted hereunder;

               (v) to approve forms of agreement for use under the Plan;

               (vi) to determine the terms and conditions, not inconsistent with
     the terms of the Plan, of any award granted hereunder (including, but not
     limited to, the share price and 

                                      -4-
<PAGE>
 
     any restriction or limitation, or any vesting acceleration or waiver of
     forfeiture restrictions regarding any Option or other award and/or the
     shares of Common Stock relating thereto, based in each case on such
     factors as the Administrator shall determine, in its sole discretion);

               (vii)  to determine whether and under what circumstances an
     Option may be settled in cash under subsection 7(a)(vii) instead of Common
     Stock;

               (viii) to determine whether, to what extent and under what
     circumstances Common Stock and other amounts payable with respect to an
     award under this Plan shall be deferred either automatically or at the
     election of the participant (including providing for and determining the
     amount (if any) of any deemed earnings on any deferred amount during any
     deferral period);

               (ix) to reduce the exercise price of any Option to the then
     current Fair Market Value if the Fair Market Value of the Common Stock
     covered by such Option shall have declined since the date the Option was
     granted; and

               (x) to determine the terms and restrictions applicable to Options
     and Rights and any Restricted Stock acquired pursuant to Rights.

          (c) Effect of Committee's Decision.  All decisions, determinations and
              ------------------------------                                    
interpretations of the Administrator shall be final and binding.

     5.  Eligibility.
         ----------- 

          (a) Nonstatutory Stock Options and Rights may be granted only to
Employees and Consultants.  Incentive Stock Options may be granted only to
Employees.  An Employee who has been granted an Option or Right may, if he or
she is otherwise eligible, be granted additional Options or Rights.  Each Option
shall be evidenced by a written Option agreement, which shall expressly identify
the Options as Incentive Stock Options or as Nonstatutory Stock Options, and
which shall be in such form and contain such provisions as the Administrator
shall from time to time deem appropriate.  Without limiting the foregoing, the
Administrator may, at any time, or from time to time, authorize the Company,
with the consent of the respective recipients, to issue Options in exchange for
the surrender and cancellation of any or all outstanding Options, other options,
or Rights.

          (b) Neither the Plan nor any Option or Right agreement shall confer
upon any Optionee any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with the Optionee's right or the
Company's right to terminate the Optionee's employment at any time.

          (c) The following limitations shall apply to grants of Options and
Rights to Employees:

                                      -5-
<PAGE>
 
          (i) No Employee shall be granted, in any fiscal year of the Company,
Options and Rights to purchase more than an aggregate of 250,000 Shares.

          (ii) In connection with his or her initial employment, an Employee may
be granted Options and Rights to purchase up to an additional 250,000 Shares in
the aggregate which shall not count against the limit set forth in subsection
(i) above.

          (iii) The foregoing limitations shall be adjusted proportionately in
connection with any change in the Company's capitalization as described in
Section 11.

          (iv) If an Option or Right is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a
transaction described in Section 11), the cancelled Option or Right will be
counted against the limits set forth in subsections (i) and (ii) above. For
this purpose, if the exercise price of an Option or Right is reduced, the
transaction will be treated as a cancellation of the Option or Right and the
grant of a new Option or Right.

     6.  Term of Plan.  Subject to Section 17 of the Plan, the Plan shall become
         ------------                                                           
effective upon the earlier to occur of its adoption by the Board or its approval
by the shareholders of the Company as described in Section 17.  It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.

     7.  Options and SARs.
         ---------------- 

          (a) Options.  The Administrator, in its discretion, may grant Options
              -------                                                          
to eligible participants and shall determine whether such Options shall be
Incentive Stock Options or Nonstatutory Stock Options.  Each Option shall be
evidenced by a written Option agreement which shall expressly identify the
Options as Incentive Stock Options or as Nonstatutory Stock Options, and be in
such form and contain such provisions as the Administrator shall from time to
time deem appropriate.  Without limiting the foregoing, the Administrator may,
at any time, or from time to time, authorize the Company, with the consent of
the respective recipients, to issue Options or Rights in exchange for the
surrender and cancellation of any or all outstanding Options or Rights.  Option
agreements shall contain the following terms and conditions:

              (i) Option Price; Number of Shares.  The per Share exercise price
                  ------------------------------
for the Shares issuable pursuant to an Option shall be such price as is
determined by the Administrator, but shall in no event be less than 85% of the
Fair Market Value of Common Stock, determined as of the date of grant of the
Option.  In the event that the Administrator shall reduce the exercise price,
the exercise price shall be no less than 85% of the Fair Market Value as of the
date of that reduction.

              The Option agreement shall specify the number of Shares to which
it pertains.

              (ii)   Waiting Period and Exercise Dates.  At the time an Option 
                 ---------------------------------                           
is granted, the Administrator will determine the terms and conditions to be
satisfied before Shares may be 

                                      -6-
<PAGE>
 
purchased, including the dates on which Shares subject to the Option may first
be purchased. The Administrator may specify that an Option may not be
exercised until the completion of the service period specified at the time of
grant. (Any such period is referred to herein as the "waiting period.") At the
time an Option is granted, the Administrator shall fix the period within which
the Option may be exercised, which shall not be less than the waiting period,
if any, nor, in the case of an Incentive Stock Option, more than ten (10)
years, from the date of grant.

          (iii) Form of Payment.  The consideration to be paid for the Shares
                ---------------                                              
to be issued upon exercise of an Option, including the method of payment, shall
be determined by the Administrator (and, in the case of an Incentive Stock
Option, shall be determined at the time of grant) and may consist entirely of
(1) cash, (2) check, (3) promissory note, (4) other Shares which (x) in the case
of Shares acquired upon exercise of an Option either have been owned by the
Optionee for more than six months on the date of surrender or were not acquired,
directly or indirectly, from the Company, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of sale or loan proceeds required to pay the
exercise price, (6) delivery of an irrevocable subscription agreement for the
Shares which irrevocably obligates the Optionee to take and pay for the Shares
not more than twelve months after the date of delivery of the subscription
agreement, (7) any combination of the foregoing methods of payment, or (8) such
other consideration and method of payment for the issuance of Shares to the
extent permitted under Applicable Laws.

          (iv) Termination of Employment or Consulting Relationship.  In the
               ----------------------------------------------------         
event an Optionee's Continuous Status as an Employee or Consultant terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option, but only within such period of time as is determined by the
Administrator at the time of grant, not to exceed six (6) months (three (3)
months in the case of an Incentive Stock Option) from the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement).  To the extent
that Optionee was not entitled to exercise an Option at the date of such
termination, and to the extent that the Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.

          (v) Special Incentive Stock Option Provisions.  In addition to the
              -----------------------------------------                     
foregoing, Options granted under the Plan which are intended to be Incentive
Stock Options under Section 422A of the Code shall be subject to the following
terms and conditions:

              (A) Exercise Price.  The per share exercise price of an Incentive
              --------------                                               
Stock Option shall be no less than 100% of the Fair Market Value per Share on
the date of grant.

              (B) Dollar Limitation.  To the extent that the aggregate Fair 
                  -----------------
Market Value of (i) the Shares with respect to which Options designated as
Incentive Stock Options plus (ii) the shares of stock of the Company, Parent
and any Subsidiary with respect to which other 

                                      -7-
<PAGE>
 
incentive stock options are exercisable for the first time by an Optionee
during any calendar year under all plans of the Company and any Parent and
Subsidiary exceeds $100,000, such Options shall be treated as Nonstatutory
Stock Options. For purposes of the preceding sentence, (i) Options shall be
taken into account in the order in which they were granted, and (ii) the Fair
Market Value of the Shares shall be determined as of the time the Option or
other incentive stock option is granted.

              (C) 10% Shareholder.  If any Optionee to whom an Incentive Stock
                  ---------------                                             
Option is to be granted pursuant to the provisions of the Plan is, on the date
of grant, the owner of Common Stock (as determined under Section 425(d) of the
Code) possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any Subsidiary, then the following special provisions
shall be applicable to the Option granted to such individual:

                         (1) The per Share Option price of Shares subject to
such Incentive Stock Option shall not be less than 110% of the Fair Market
Value of Common Stock on the date of grant; and

                         (2) The Option shall not have a term in excess of five
(5) years from the date of grant.

Except as modified by the preceding provisions of this subsection 7(a)(v) and
except as otherwise limited by Section 422A of the Code, all of the provisions
of the Plan shall be applicable to the Incentive Stock Options granted
hereunder.

          (vi)   Other Provisions.  Each Option granted under the Plan may
                 ----------------                                         
contain such other terms, provisions, and conditions not inconsistent with the
Plan as may be determined by the Administrator.

          (vii)  Buyout Provisions.  The Administrator may at any time offer to
                 -----------------                                             
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.

      (b)  SARs.
           ---- 

          (i)    In Connection with Options.  At the sole discretion of the
                 --------------------------                                
Administrator, SARs may be granted in connection with all or any part of an
Option, either concurrently with the grant of the Option or at any time
thereafter during the term of the Option.  The following provisions apply to
SARs that are granted in connection with Options:

              (A) The SAR shall entitle the Optionee to exercise the SAR by
surrendering to the Company unexercised a portion of the related Option.  The
Optionee shall receive in exchange from the Company an amount equal to the
excess of (x) the Fair Market Value on the date of exercise of the SAR of the
Common Stock covered by the surrendered portion of the related Option over (y)
the exercise price of the Common Stock covered by the surrendered portion of the
related Option.  Notwithstanding the foregoing, the Administrator may place
limits on the amount 

                                      -8-
<PAGE>
 
that may be paid upon exercise of an SAR; provided, however, that such limit
shall not restrict the exercisability of the related Option.

                    (B) When an SAR is exercised, the related Option, to the
extent surrendered, shall cease to be exercisable.

                    (C) An SAR shall be exercisable only when and to the
extent that the related Option is exercisable and shall expire no later than
the date on which the related Option expires.

                    (D) An SAR may only be exercised at a time when the Fair
Market Value of the Common Stock covered by the related Option exceeds the
exercise price of the Common Stock covered by the related Option.

          (ii)   Independent of Options.  At the sole discretion of the
                 ----------------------                                
Administrator, SARs may be granted without related Options.  The following
provisions apply to SARs that are not granted in connection with Options:

                    (A) The SAR shall entitle the Optionee, by exercising the
SAR, to receive from the Company an amount equal to the excess of (x) the Fair
Market Value of the Common Stock covered by the exercised portion of the SAR,
as of the date of such exercise, over (y) the Fair Market Value of the Common
Stock covered by the exercised portion of the SAR, as of the last market
trading date prior to the date on which the SAR was granted; provided,
however, that the Administrator may place limits on the aggregate amount that
may be paid upon exercise of an SAR.

                    (B) SARs shall be exercisable, in whole or in part, at
such times as the Administrator shall specify in the Optionee's SAR agreement.

          (iii)  Form of Payment.  The Company's obligation arising upon the
                 ---------------                                            
exercise of an SAR may be paid in Common Stock or in cash, or in any combination
of Common Stock and cash, as the Administrator, in its sole discretion, may
determine.  Shares issued upon the exercise of an SAR shall be valued at their
Fair Market Value as of the date of exercise.

          (iv)   Section 16 Restrictions.  SARs granted to persons who are
                 -----------------------                                  
subject to Section 16 of the Exchange Act ("Insiders") shall be subject to any
additional restrictions applicable to SARs granted to such persons in compliance
with Rule 16b-3.  An Insider may only exercise an SAR during such time or times
as are permitted by Rule 16b-3.

      (c)  Method of Exercise.
           ------------------ 

          (i)    Procedure for Exercise; Rights as a Shareholder.  Any Option or
                 -----------------------------------------------                
SAR granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator and as shall be permissible under
the terms of the Plan.

                                      -9-
<PAGE>
 
          An Option may not be exercised for a fraction of a Share.

          An Option or SAR shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option or SAR by the person entitled to exercise the Option or SAR and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company.  Full payment may, as authorized by the Administrator
(and, in the case of an Incentive Stock Option, determined at the time of grant)
and permitted by the Option Agreement consist of any consideration and method of
payment allowable under subsection 7(a)(iii) of the Plan.  Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option.  No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11 of the Plan.

          Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter shall be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.  Exercise of an SAR in any manner shall, to the extent the
SAR is exercised, result in a decrease in the number of Shares which thereafter
shall be available for purposes of the Plan, and the SAR shall cease to be
exercisable to the extent it has been exercised.

          (ii)   Rule 16b-3.  Options and SARs granted to Insiders must comply
                 ----------                                                   
with the applicable provisions of Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.

          (iii)  Termination of Employment or Consulting Relationship.  In the
                 ----------------------------------------------------         
event an Optionee's Continuous Status as an Employee or Consultant terminates
(other than upon the Optionee's death or Disability), the Optionee may exercise
his or her Option or SAR, but only within such period of time as is determined
by the Administrator at the time of grant, not to exceed six (6) months (three
(3) months in the case of an Incentive Stock Option) from the date of such
termination, and only to the extent that the Optionee was entitled to exercise
it at the date of such termination (but in no event later than the expiration of
the term of such Option or SAR as set forth in the Option or SAR Agreement).  To
the extent that Optionee was not entitled to exercise an Option or SAR at the
date of such termination, and to the extent that the Optionee does not exercise
such Option or SAR (to the extent otherwise so entitled) within the time
specified herein, the Option or SAR shall terminate.

          (iv)   Disability of Optionee.  In the event an Optionee's Continuous
                 ----------------------                                        
Status as an Employee or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option or SAR, but only within
six (6) months from the date of such termination, and only to the extent that
the Optionee was entitled to exercise it at the date of such termination (but in
no event later than the expiration of the term of such Option or SAR as set
forth in the Option or 

                                      -10-
<PAGE>
 
SAR Agreement). To the extent that Optionee was not entitled to exercise an
Option or SAR at the date of such termination, and to the extent that the
Optionee does not exercise such Option or SAR (to the extent otherwise so
entitled) within the time specified herein, the Option or SAR shall terminate.

          (v)    Death of Optionee.  In the event of an Optionee's death, the
                 -----------------                                           
Optionee's estate or a person who acquired the right to exercise the deceased
Optionee's Option or SAR by bequest or inheritance may exercise the Option or
SAR, but only within six (6) months following the date of death, and only to the
extent that the Optionee was entitled to exercise it at the date of death (but
in no event later than the expiration of the term of such Option or SAR as set
forth in the Option or SAR Agreement).  To the extent that Optionee was not
entitled to exercise an Option or SAR at the date of death, and to the extent
that the Optionee's estate or a person who acquired the right to exercise such
Option does not exercise such Option or SAR (to the extent otherwise so
entitled) within the time specified herein, the Option or SAR shall terminate.

     8.  Stock Purchase Rights.
         --------------------- 

          (a) Rights to Purchase.  Stock Purchase Rights may be issued either
              ------------------                                             
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan.  After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that the offeree shall be entitled to
purchase, the price to be paid (which price shall not be less than 50% of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which the offeree must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right.  The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator.  Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."

          (b) Repurchase Option.  Unless the Administrator determines otherwise,
              -----------------                                                 
the Restricted Stock purchase agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
Disability).  The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company.  The repurchase option shall lapse at such rate as the
Administrator may determine.

          (c) Other Provisions.  The Restricted Stock purchase agreement shall
              ----------------                                                
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.  In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.

          (d) Section 16 Restrictions.  Stock Purchase Rights granted to
              -----------------------                                   
Insiders, and Shares purchased by Insiders in connection with Stock Purchase
Rights, shall be subject to any 

                                      -11-
<PAGE>
 
restrictions applicable thereto in compliance with Rule 16b-3. An Insider may
only purchase Shares pursuant to the grant of a Stock Purchase Right, and may
only sell Shares purchased pursuant to the grant of a Stock Purchase Right,
during such time or times as are permitted by Rule 16b-3.

          (e) Rights as a Shareholder.  Once the Stock Purchase Right is
              -----------------------                                   
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company.  No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 11
of the Plan.

     9.  Stock Withholding to Satisfy Withholding Tax Obligations.  At the
         --------------------------------------------------------         
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 9.  When an Optionee incurs tax liability in
connection with the an Option or Right, which tax liability is subject to tax
withholding under applicable tax laws, and the Optionee is obligated to pay the
Company an amount required to be withheld under applicable tax laws, the
Optionee may satisfy the withholding tax obligation by electing to have the
Company withhold from the Shares to be issued upon exercise of the Option, or
the Shares to be issued in connection with the Right, if any, that number of
Shares having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined (the "Tax Date").

     All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:

          (a) the election must be made on or prior to the applicable Tax Date;

          (b) once made, the election shall be irrevocable as to the particular
     Shares of the Option or Right as to which the election is made;

          (c) all elections shall be subject to the consent or disapproval of
     the Administrator;

          (d) if the Optionee is an Insider, the election must comply with the
     applicable provisions of Rule 16b-3 and shall be subject to such additional
     conditions or restrictions as may be required thereunder to qualify for the
     maximum exemption from Section 16 of the Exchange Act with respect to Plan
     transactions.

     In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option or Right is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.

                                      -12-
<PAGE>
 
     10.  Non-Transferability of Options.  Options and Rights may not be sold,
          ------------------------------                                      
pledged, assigned, hypothecated, transferred or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.

     11.  Adjustments Upon Changes in Capitalization or Merger.
          ---------------------------------------------------- 

          (a) Subject to any required action by the shareholders of the Company,
the number of Shares covered by each outstanding Option and Right, and the
number of Shares which have been authorized for issuance under the Plan but as
to which no Options or Rights have yet been granted or which have been returned
to the Plan upon cancellation or expiration of an Option or Right, as well as
the price per Share covered by each such outstanding Option or Right, shall be
proportionately adjusted for any increase or decrease in the number of issued
Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the aggregate number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration."  Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of Shares of
stock of any class, or securities convertible into Shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of Shares subject to an Option or Right.

          In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options and Rights will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by the
Board.  The Board may, in the exercise of its sole discretion in such instances,
declare that any Option or Right shall terminate as of a date fixed by the Board
and give each Optionee the right to exercise his Option or Right as to all or
any part of the Optioned Stock or Right, including Shares as to which the Option
or Right would not otherwise be exercisable.

          Subject to the provisions of paragraph (b) hereof, in the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each outstanding Option
and Right shall be assumed or an equivalent option or Right shall be substituted
by such successor corporation or a parent or subsidiary of such successor
corporation, unless the Board determines, in the exercise of its sole discretion
and in lieu of such assumption or substitution, that the Optionee shall have the
right to exercise the Option or Right as to all of the Optioned Stock, including
Shares as to which the Option or Right would not otherwise be exercisable.  If
the Board makes an Option or Right fully exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Company shall
notify the Optionee that the Option or Right shall be fully exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Right will terminate upon the expiration of such period.  For purposes of this
paragraph, an Option granted under the Plan shall be deemed to be assumed if,
following the sale of assets or merger, the Option confers the right to
purchase, for each Share of 

                                      -13-
<PAGE>
 
Optioned Stock subject to the Option immediately prior to the sale of assets
or merger, the consideration (whether stock, cash or other securities or
property) received in the sale of assets or merger by holders of Common Stock
for each Share held on the effective date of the transaction (and if such
holders were offered a choice of consideration, the type of consideration
chosen by the holders if a majority of the outstanding Shares); provided,
however, that if such consideration received in the sale of assets or merger
was not solely Common Stock of the successor corporation or its parent, the
Board may, with the consent of the successor corporation and the participant,
provide for the consideration to be received upon exercise of the Option or
Right to be solely Common Stock of the successor corporation or its parent
equal in Fair Market Value to the per share consideration received by holders
of Common Stock in the sale of assets or merger.

          (b) In the event of a "Change in Control" of the Company, as defined
in paragraph (c) below, any or all or none of the following acceleration and
valuation provisions shall apply, as the Board, in its discretion, shall
determine prior to such Change of Control:

               (i)    Any Options and Rights outstanding as of the date such
     Change in Control is determined to have occurred that are not yet
     exercisable and vested on such date shall become fully exercisable and
     vested;

               (ii)   To the extent they are exercisable and vested, the value
     of all outstanding Options and Rights shall, unless otherwise determined by
     the Board at or after grant, shall be cashed out at the Change in Control
     Price, reduced by the exercise price applicable to such Options or Rights.
     The cash out proceeds shall be paid to the Optionee or, in the event of
     death of an Optionee prior to payment, to the estate of the Optionee or to
     a person who acquired the right to exercise the Option or Right by bequest
     or inheritance.

          (c) Definition of "Change in Control".  For purposes of this Section
              ---------------------------------                               
11, a "Change in Control" means the happening of any of the following:

               (i)    When any "person," as such term is used in Sections 13(d)
     and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
     Company employee benefit plan, including any trustee of such plan acting as
     trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3
     under the Exchange Act), directly or indirectly, of securities of the
     Company representing fifty percent (50%) or more of the combined voting
     power of the Company's then outstanding securities; or

               (ii)   The occurrence of a transaction requiring shareholder
     approval, and involving the sale of all or substantially all of the assets
     of the Company or the merger of the Company with or into another
     corporation.

          (d) Change in Control Price.  For purposes of this Section 11, "Change
              -----------------------                                           
in Control Price" shall be, as determined by the Board, (i) the highest closing
sale price of a Share of Common Stock as reported by the NASDAQ System and as
appearing in the Wall Street Journal (or, in the event the Common Stock is
listed on a stock exchange, the highest closing price on such exchange as

                                      -14-
<PAGE>
 
reported on the Composite Transaction Reporting System), at any time within the
60 day period immediately preceding the date of determination of the Change in
Control Price by the Board (the "60-Day Period"), or (ii) the highest price paid
or offered, as determined by the Board, in any bona fide transaction or bona
fide offer related to the Change in Control of the Company, at any time within
the 60-Day Period, or (iii) some lower price as the Board, in its discretion,
determines to be a reasonable estimate of the fair market value of a share of
Common Stock.

     12.  Time of Granting Options and Rights.  The date of grant of an Option
          -----------------------------------                                 
or Right shall, for all purposes, be the date on which the Administrator makes
the determination granting such Option or Right.  Notice of the determination
shall be given to each Employee or Consultant to whom an Option or Right is so
granted within a reasonable time after the date of such grant.

     13.  Amendment and Termination of the Plan.
          ------------------------------------- 

          (a) Amendment and Termination.  The Board may at any time amend,
              -------------------------                                   
alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent.  In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or under Section 422A of the Code (or any other applicable law
or regulation), the Company shall obtain shareholder approval of any Plan
amendment in such a manner and to such a degree as required.

          (b) Effect of Amendment or Termination.  Any such amendment or
              ----------------------------------                        
termination of the Plan shall not affect Options or Rights already granted and
such Options and Rights shall remain in full force and effect as if this Plan
had not been amended or terminated.

     14.  Conditions Upon Issuance of Shares.  Shares shall not be issued with
          ----------------------------------                                  
respect to an Option or Right unless the exercise of such Option or Right and
the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

          As a condition to the exercise of an Option or the issuance of Shares
on exercise of an Option or Right, the Company may require the person exercising
such Option or Right to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.

     15.  Reservation of Shares.  The Company, during the term of this Plan,
          ---------------------                                             
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

                                      -15-
<PAGE>
 
          Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the non-issuance or sale of such
Shares as to which such requisite authority shall not have been obtained.

     16.  Agreements.  Options and Rights shall be evidenced by written
          ----------                                                   
agreements in such form as the Board shall approve from time to time.

     17.  Shareholder Approval.  Continuance of the Plan shall be subject to
          --------------------                                              
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted as provided in Section 6.  Such shareholder
approval shall be obtained in the degree and manner required under applicable
state and federal law.

                                      -16-