EXHIBIT 4.1

              1998 STOCK OPTION PLAN WITH FORM OF OPTION AGREEMENT

                                   LION, INC.

                             1998 STOCK OPTION PLAN

         This 1998 Stock Option Plan ("Plan")  provides for the grant of options
to acquire  shares of common  stock,  .001 par value  ("Common  Stock") of LION,
INC., a Washington  corporation  ("Company").  Stock options  granted under this
Plan are  referred to in this Plan as  "Options."  Options  that  qualify  under
Section 422 of the  Internal  Revenue  Code of 1986,  as amended  ("Code"),  are
referred to in this Plan as "Incentive  Stock  Options."  Options  granted under
this Plan that do not qualify  under  Section 422 of the Code are referred to as
"Nonqualified Stock Options."

1.0      PURPOSES

         1.1      The  purposes of this Plan are (i) to retain the services of a
management team, qualified employees of the Company and non-employee advisors or
consultants  as the Plan  Administrators  shall select in  accordance  with this
Plan; (ii) to retain the services of valued  non-employee  directors pursuant to
Section 5.15 below; (iii) to provide these persons with an opportunity to obtain
or increase a proprietary  interest in the Company,  to provide  incentives  for
effective service and high-level  performance,  to strengthen their incentive to
achieve the objectives of the shareholders of the Company;  and (iv) to serve as
an  aid  and   inducement  in  the  hiring  or  recruitment  of  new  employees,
consultants,   non-employee  directors  and  other  persons  needed  for  future
operations  and growth of the  Company.  Employees,  non-employee  advisors  and
consultants are referred to in this Plan as "Service Providers."

2.0      ADMINISTRATION

         2.1      This Plan shall be administered  by, or in accordance with the
recommendation  of, the Board of Directors of the Company  ("Board").  The Board
may, in its discretion, establish a committee composed of two or more members of
the Board to  administer  this  Plan  ("Committee")  which may be an  executive,
compensation  or other  committee,  including  a separate  committee  especially
created for this purpose.  The Committee  shall have the powers and authority as
the Board may delegate to it, including the power and authority to interpret any
provision  of this Plan or of any  Option.  The members of the  Committee  shall
serve at the discretion of the Board. The Board, and/or the Committee if one has
been  established  by the  Board,  are  referred  to in this  Plan as the  "Plan
Administrators."

         2.2      Following  registration  of any of  the  Company's  securities
under Section 12 of the Securities  Exchange Act of 1934, as amended  ("Exchange
Act"),  the Plan  Administrators  shall not take any action which is not in full
compliance with the exemption from Section 16(b) of the Exchange Act provided by
Rule 16b-3, as amended,  or any successor rule or rules,  and any other rules or
regulations of the Securities and Exchange Commission,  a national exchange, the
Nasdaq Stock Market, the NASD Bulletin Board, or any other applicable regulatory
authorities, and any such action shall be void and of no effect.

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         2.3      Except as limited by Section  5.15  below,  and subject to the
provisions  of this Plan,  and with a view to effecting  its  purpose,  the Plan
Administrators shall have sole authority,  in their absolute discretion,  to (i)
construe and interpret this Plan; (ii) define the terms used in this Plan; (iii)
prescribe,  amend and rescind rules and regulations  relating to this Plan; (iv)
correct any defect,  supply any omission or reconcile any  inconsistency in this
Plan;  (v) select the Service  Providers to whom Options  shall be granted under
this Plan and whether the Option is an Incentive  Stock Option or a Nonqualified
Stock Option; (vi) determine the time or times at which Options shall be granted
under this Plan; (vii) determine the number of shares of Common Stock subject to
each Option,  the exercise price of each Option, the duration of each Option and
the times at which each Option shall become  exercisable;  (viii)  determine all
other terms and conditions of Options; (ix) approve the forms of agreement to be
used under the Plan;  (x) to determine  the "Fair Market  Value",  as defined in
Section 2.4 below;  (xi) 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 the Option shall have declined  since the date the Option was granted;  (xii)
to institute a program whereby  outstanding  options are surrendered in exchange
for options with a lower exercise price; (xiii) to provide financial  assistance
to  Optionees  in the  exercise of their  outstanding  options by  allowing  the
individuals  to deliver a  full-recourse,  interest-bearing  promissory  note in
payment of the exercise price and any associated  withholding  taxes incurred in
connection with the exercise;  (xiv) to allow  Optionees to satisfy  withholding
tax  obligations  by electing to have the  Company  withhold  from the shares of
Common  Stock to be issued  upon  exercise  of an Option  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.  All  elections  by an
Optionee to have shares withheld for this purpose shall be made in such form and
under  such  conditions  as  the  Plan  Administrators  may  deem  necessary  or
advisable; (xiv) to authorize any person to execute on behalf of the Company any
instrument  required to effect the grant of an Option previously  granted by the
Plan  Administrators;  and  (xv)  make all  other  determinations  necessary  or
advisable for the administration of this Plan. All decisions, determinations and
interpretations  made by the Plan Administrators shall be binding and conclusive
on all participants in this Plan and on their legal  representatives,  heirs and
beneficiaries.  None of the Plan  Administrators  shall be liable for any action
taken or determination made in good faith with respect to the Plan or any grant.

         2.4      "Fair Market Value" shall be deemed to be, 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,  or if the principal market
         for the Common Stock is the over-the-counter  market, including without
         limitation Nasdaq NMS or Nasdaq SmallCap of the Nasdaq Stock Market, as
         the case may be, its Fair Market Value shall be the closing sales price
         for such  stock (or the  closing  bid,  if no sales were  reported)  as
         quoted on such  exchange  or system  for the last  market  trading  day
         immediately  preceding  the date of  determination,  as reported in The
         Wall Street  Journal or such other  source as the  Administrator  deems
         reliable.  If the  principal  market for the  Common  Stock is the NASD
         Electronic Bulletin Board or other  over-the-counter  market other than
         Nasdaq NMS or Nasdaq  SmallCap  of the Nasdaq  Stock  Market,  its Fair
         Market  Value  shall be the mean  between  the  closing  bid and  asked
         quotations  for the Common Stock for the 20 trading days last preceding
         the date of conversion.

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

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3.0      ELIGIBILITY

         3.1      Incentive  Stock Options may be granted to any individual who,
at the time the Option is granted,  is an employee of the Company or any parent,
subsidiary or other corporation  permitted by the Code,  including employees who
are directors of the Company  ("Employees").  Nonqualified  Stock Options may be
granted to Service  Providers as the Plan  Administrators  shall select,  and to
non-employee  directors  of the  Company  pursuant  to the  formula set forth in
Section  5.15 below.  Options  may be granted in  substitution  for  outstanding
Options of another  corporation  in connection  with the merger,  consolidation,
acquisition  of property  or stock or other  reorganization  between  such other
corporation  and the Company or any subsidiary of the Company.  Options also may
be granted in exchange for outstanding  Options. Any person to whom an Option is
granted under this Plan is referred to as an "Optionee."

4.0      NUMBER OF SHARES AVAILABLE

         4.1      The Plan  Administrators  are  authorized  to grant Options to
acquire up to a total of Fifteen  Million  (15,000,000)  shares of the Company's
authorized but unissued, or reacquired,  Common Stock. The number of shares with
respect to which  Options may be granted  hereunder is subject to  adjustment as
set forth  below in  Section  5.14.  If any  outstanding  Option  expires  or is
terminated  for  any  reason,  the  shares  of  Common  Stock  allocable  to the
unexercised portion of such Option may again be subject to an Option to the same
Optionee or to a different person eligible under this Plan.

5.0      TERMS AND CONDITIONS OF OPTIONS

         5.1      Each Option  granted  under this Plan shall be  evidenced by a
written agreement approved by the Plan Administrators ("Agreement").  Agreements
may contain such additional provisions,  not inconsistent with this Plan, as the
Plan  Administrators  in their  discretion may deem advisable.  All Options also
shall comply with the following requirements.

         5.2      NUMBER OF SHARES  AND TYPE OF  OPTION.  Each  Agreement  shall
state the number of shares of Common  Stock to which it pertains  and  designate
whether the Option is intended to be an Incentive Stock Option or a Nonqualified
Stock  Option.  In the absence of action or  designation  to the contrary by the
Plan Administrators in connection with the grant of an Option, all Options shall
be Nonqualified  Stock Options.  The aggregate Fair Market Value,  determined at
the Date of  Grant,  as  defined  below,  of the  stock  with  respect  to which
Incentive  Stock  Options  are  exercisable  for the first time by the  Optionee
during any calendar year,  granted under this Plan and all other Incentive Stock
Option plans of the Company, a related corporation or a predecessor corporation,
shall not exceed $100,000,  or such other limit as may be prescribed by the Code
as it may be amended  from time to time.  Any Option  which  exceeds  the annual
limit shall not be void but rather shall be a Nonqualified Stock Option.

         5.3      DATE OF GRANT.  Each  Agreement  shall state the date the Plan
Administrators  have deemed to be the effective  date of the Option for purposes
of, and in accordance with, this Plan ("Date of Grant").

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         5.4      OPTION PRICE.  Each Agreement  shall state the price per share
of Common Stock at which it is exercisable. The exercise price shall be fixed by
the Plan  Administrators at whatever price the Plan Administrators may determine
in the exercise of its sole  discretion;  provided,  that the per share exercise
price for any Option granted following the effective date of registration of any
of the  Company's  securities  under the Exchange Act shall not be less than the
Fair  Market  Value  per  share  of the  Common  Stock  at the  Date of Grant as
determined by the Plan Administrators in good faith; provided further, that with
respect  to  Incentive   Stock  Options  granted  to  greater  than  10  percent
shareholders  of the Company,  as determined with reference to Section 424(d) of
the Code, the exercise price per share shall not be less than 110 percent of the
Fair  Market  Value per  share of the  Common  Stock at the Date of Grant;  and,
provided  further,  that Incentive  Stock Options  granted in  substitution  for
outstanding  Options of  another  corporation  in  connection  with the  merger,
consolidation,   acquisition  of  property  or  stock  or  other  reorganization
involving  such  other  corporation  and the  Company or any  subsidiary  of the
Company may be granted with an exercise  price equal to the  exercise  price for
the  substituted  Option of the other  corporation,  subject  to any  adjustment
consistent with the terms of the transaction  pursuant to which the substitution
is to occur.

         5.5      DURATION OF  OPTIONS.  At the time of the grant of the Option,
the Plan  Administrators  shall  designate,  subject to paragraph 5.8 below, the
expiration date of the Option,  which date shall not be later than 10 years from
the Date of Grant;  provided,  that the expiration  date of any Incentive  Stock
Option  granted to a  greater-than-10  percent  shareholder  of the  Company (as
determined with reference to Section 424(d) of the Code) shall not be later than
five years from the Date of Grant.  In the absence of action to the  contrary by
the Plan Administrators in connection with the grant of a particular Option, and
except in the case of Incentive  Stock Options as described  above,  all Options
granted under this Plan shall expire 10 years from the Date of Grant.

         5.6      VESTING SCHEDULE.  No Option shall be exercisable until it has
vested.  The vesting  schedule  for each Option  shall be  specified by the Plan
Administrators at the time of grant of the Option;  provided, that if no vesting
schedule  is  specified  at the time of grant or in the  Agreement,  the  entire
Option shall vest according to the following schedule:

            NUMBER OF YEARS                  PERCENTAGE OF TOTAL OPTION
        FOLLOWING DATE OF GRANT                  TO BE EXERCISABLE

                   1                                    25%
                   2                                    50%
                   3                                    75%
                   4                                   100%

         5.7      ACCELERATION   OF   VESTING.   The  vesting  of  one  or  more
outstanding  Options may be accelerated by the Plan Administrators at such times
and in such amounts as it shall determine in its sole discretion. The vesting of
Options also shall be accelerated  under the  circumstances  described  below in
Section 5.14.

         5.8      TERM OF OPTION.

         5.8.1    Vested Options shall  terminate,  to the extent not previously
exercised,  upon the  occurrence of the first of the following  events:  (i) the
expiration of the Option,  as designated  by the Plan  Administrators;  (ii) the
expiration of 30 days from the date of an Optionee's  termination of employment,
contractual or director relationship with the Company or any Related Corporation
for any reason  whatsoever  other than death or  Disability,  as defined  below,
unless, in the case of a

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Nonqualified Stock Option, the exercise period is otherwise defined by terms of
an agreement with Optionee entered into prior to the effective date of the Plan,
or the exercise period is extended by the Plan Administrators until a date not
later than the expiration date of the Option; or (iii) the expiration of one
year from (A) the date of death of the Optionee or (B) cessation of an
Optionee's employment, contractual or director relationship with the Company or
any Related Corporation by reason of Disability (as defined below) unless, in
the case of a Nonqualified Stock Option, the exercise period is extended by the
Plan Administrators until a date not later than the expiration date of the
Option. If an Optionee's employment, contractual or director relationship with
the Company or any Related Corporation is terminated by death, any Option held
by the Optionee shall be exercisable only by the person or persons to whom such
Optionee's rights under such Option shall pass by the Optionee's will or by the
laws of descent and distribution of the state or county of the Optionee's
domicile at the time of death. "Disability" shall mean that a person is unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or that has lasted or can be expected to last for a continuous period of
not less than 12 months. The Plan Administrators shall determine whether an
Optionee has incurred a Disability on the basis of medical evidence acceptable
to the Plan Administrators. Upon making a determination of Disability, the
Committee shall, for purposes of the Plan, determine the date of an Optionee's
termination of employment, contractual or director relationship.

         5.8.2    Unless accelerated as set forth above,  unvested Options shall
terminate immediately upon termination of Optionee's employment,  contractual or
director relationship with the Company or any Related Corporation for any reason
whatsoever, including death or Disability. If, in the case of an Incentive Stock
Option,  an Optionee's  relationship  with the Company  changes  (e.g.,  from an
employee to a non-employee,  such as a consultant,  or a non-employee director),
such change shall not  necessarily  constitute a  termination  of an  Optionee's
contractual  relationship  with the Company but rather the Optionee's  Incentive
Stock Option shall  automatically be converted into a Nonqualified Stock Option.
For purposes of this Plan,  transfer of employment  between or among the Company
and/or any Related  Corporation  shall not be deemed to constitute a termination
of employment with the Company or any Related Corporation.  For purposes of this
subsection with respect to Incentive Stock Options,  employment  shall be deemed
to continue  while the Optionee is on military  leave,  sick leave or other bona
fide leave of absence as  determined by the Plan  Administrators.  The foregoing
notwithstanding,  employment shall not be deemed to continue beyond the first 90
days of such leave, unless the Optionee's re-employment rights are guaranteed by
statute or by contract.

         5.8.3    Unvested Options shall terminate immediately upon any material
breach, as determined by the Plan Administrators, by Optionee of any employment,
non-competition,  non-disclosure or similar agreement by and between the Company
and Optionee.

         5.9      EXERCISE OF OPTIONS. Options shall be exercisable,  either all
or in part,  at any time  after  vesting,  until the Option  terminates  for any
reason set forth under this Plan,  unless the exercise period is extended by the
Plan  Administrators  until a date not  later  than the  expiration  date of the
Option.  If less than all of the shares  included  in the vested  portion of any
Option are  purchased,  the  remainder may be purchased at any  subsequent  time
prior to the  expiration  of the Option term.  No portion of any Option for less
than ten thousand  (10,000) shares,  as adjusted pursuant to Section 5.14 below,
may be  exercised;  provided,  that if the vested  portion of any Option is less
than ten  thousand  (10,000)  shares,  it may be  exercised  with respect to all
shares for which it is vested.  Only whole  shares may be issued  pursuant to an
Option,  and to the extent  that an Option  covers  less than one  share,  it is
unexercisable.  Options or portions  thereof may be exercised by giving  written
notice to the Company, which notice shall specify the number of


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shares to be  purchased,  and be  accompanied  by  payment  in the amount of the
aggregate exercise price for the Common Stock so purchased,  which payment shall
be in the form  specified  in this Plan.  The Company  shall not be obligated to
issue,  transfer or deliver a certificate of Common Stock to any Optionee, or to
his personal  representative,  until the aggregate  exercise price has been paid
for all shares  for which the Option  shall  have been  exercised  and  adequate
provision has been made by the Optionee for  satisfaction of any tax withholding
obligations  associated with such exercise.  During the lifetime of an Optionee,
Options are exercisable only by the Optionee.

         5.10     PAYMENT  UPON  EXERCISE  OF OPTION.  Upon the  exercise of any
Option,  the aggregate exercise price shall be paid to the Company in cash or by
certified  or  cashier's   check.  In  addition,   upon  approval  of  the  Plan
Administrators,  an  Optionee  may pay for all or any  portion of the  aggregate
exercise  price  by (i)  delivering  to  the  Company  shares  of  Common  Stock
previously  held by Optionee which have been owned by Optionee for more than six
(6) months on the date of surrender; (ii) having shares withheld from the amount
of shares of Common Stock to be received by the Optionee;  (iii)  delivery of an
irrevocable  subscription  agreement obligating the Optionee to take and pay for
the shares of Common Stock to be purchased within eighteen months of the date of
exercise, to be accompanied by a full-recourse, interest-bearing promissory note
in payment of the exercise price and any associated  withholding  taxes incurred
in connection  with the  exercise;  (iv)  consideration  received by the Company
under a cashless exercise program  implemented by the Company in connection with
the  Plan;  (v) a  reduction  in the  amount  of any  Company  liability  to the
Optionee,  including any liability attributable to the Optionee's  participation
in any Company-sponsored  deferred compensation program or arrangement;  or (vi)
such other consideration and method of payment for the issuance of shares to the
extent  permitted by  Applicable  Laws.  The shares of Common Stock  received or
withheld by the Company as payment for shares of Common Stock purchased upon the
exercise of Options  shall have a Fair Market  Value at the date of exercise (as
determined by the Plan Administrators) equal to the aggregate exercise price (or
portion thereof) to be paid by the Optionee upon such exercise.

         5.11     RIGHTS AS A SHAREHOLDER. An Optionee shall have no rights as a
shareholder  with respect to any shares covered by an Option until such Optionee
becomes a record holder of the shares, irrespective of whether such Optionee has
given  notice of  exercise.  Subject to the  provisions  of Section 5.14 of this
Plan, no rights shall accrue to an Optionee and no adjustments  shall be made on
account of dividends (ordinary or extraordinary,  whether in cash, securities or
other property) or distributions or other rights declared on, or created in, the
Common Stock for which the record date is prior to the date the Optionee becomes
a  record  holder  of  the  shares  of  Common  Stock  covered  by  the  Option,
irrespective of whether such Optionee has given notice of exercise.

         5.12     TRANSFER OF OPTION.  Options  granted  under this Plan and the
rights and privileges  conferred by this Plan may not be transferred,  assigned,
pledged or hypothecated in any manner, whether by operation of law or otherwise,
other than by will or by applicable  laws of descent and  distribution  or, with
respect to Nonqualified  Stock Options,  pursuant to a domestic relations order,
and shall not be subject to execution,  attachment or similar process.  Upon any
attempt to transfer,  assign,  pledge,  hypothecate or otherwise  dispose of any
Option or of any right or  privilege  conferred  by this  Plan  contrary  to the
provisions  hereof,  or upon the sale, levy or any attachment or similar process
upon the  rights  and  privileges  conferred  by this Plan,  such  Option  shall
thereupon terminate and become null and void.

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         5.13     SECURITIES REGULATION AND TAX WITHHOLDING.

         5.13.1   Shares  shall not be issued with  respect to an Option  unless
the  exercise of such Option and the  issuance and delivery of such shares shall
comply with all relevant provisions of law, including,  without limitation,  any
applicable state  securities  laws, the Securities Act of 1933, as amended,  the
Exchange Act, the rules and regulations  thereunder and the  requirements of any
stock exchange upon which such shares may then be listed.  The issuance shall be
further  subject to the approval of counsel for the Company with respect to such
compliance, including the availability of an exemption from registration for the
issuance  and sale of such shares.  The  inability of the Company to obtain from
any regulatory body the authority  deemed by the Company to be necessary for the
lawful issuance and sale of any shares under this Plan, or the unavailability of
an  exemption  from  registration  for the issuance and sale of any shares under
this Plan,  shall  relieve  the  Company of any  liability  with  respect to the
non-issuance or sale of such shares.

         5.13.2   As a  condition  to the  exercise  of an  Option,  in order to
comply with federal or state securities laws the Plan Administrators may require
the  Optionee to represent  and warrant in writing at the time of such  exercise
that the  shares  are  being  purchased  only for  investment  and  without  any
then-present  intention to sell or distribute such shares.  At the option of the
Plan Administrators,  a stop-transfer order against such shares may be placed on
the stock books and records of the  Company,  and a legend  indicating  that the
stock may not be pledged,  sold or  otherwise  transferred  unless an opinion of
counsel is  provided  stating  that such  transfer  is not in  violation  of any
applicable law or regulation,  may be stamped on the  certificates  representing
such  shares  in  order to  assure  an  exemption  from  registration.  The Plan
Administrators  also may require  such other  documentation  as may from time to
time be necessary to comply with federal and state  securities laws. THE COMPANY
HAS NO  OBLIGATION TO UNDERTAKE  REGISTRATION  OF OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS.

         5.13.3   As a condition  to the  exercise of any Option  granted  under
this Plan, the Optionee shall make such arrangements as the Plan  Administrators
may require for the satisfaction of any federal,  state or local withholding tax
obligations that may arise in connection with such exercise.  Alternatively, the
Plan  Administrators  may  provide  that a  Grantee  may  elect,  to the  extent
permitted  or required by law, to have the  Company  deduct  federal,  state and
local taxes of any kind  required by law to be withheld  upon such exercise from
any  payment  of any  kind  due  to  the  Grantee.  Without  limitation,  at the
discretion  of  the  Plan  Administrators,  the  withholding  obligation  may be
satisfied by the withholding or delivery of shares of Common Stock.

         5.13.4   The issuance,  transfer or delivery of  certificates of Common
Stock  pursuant to the exercise of Options may be delayed,  at the discretion of
the Plan  Administrators,  until the Plan  Administrators are satisfied that the
applicable  requirements  of the  federal  and  state  securities  laws  and the
withholding provisions of the Code have been met.

         5.14     STOCK DIVIDEND, REORGANIZATION OR LIQUIDATION.

         5.14.1   If  (i)  the  Company  shall  at any  time  be  involved  in a
transaction described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine,  its
Common Stock or (iii) any other event with  substantially  the same effect shall
occur, the Plan  Administrators  shall, with respect to each outstanding Option,

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proportionately  adjust the number of shares of Common Stock and/or the exercise
price per share so as to  preserve  the  rights  of the  Optionee  substantially
proportionate  to the rights of the  Optionee  prior to such  event,  and to the
extent that such action  shall  include an increase or decrease in the number of
shares of Common  Stock  subject to  outstanding  Options,  the number of shares
available  under  Section 4.0 of this Plan shall  automatically  be increased or
decreased,  as the case may be,  proportionately,  without further action on the
part of the Plan Administrators, the Company or the Company's shareholders.

         5.14.2   If  the  Company  is  liquidated   or   dissolved,   the  Plan
Administrators  shall allow the holders of any  outstanding  Options to exercise
all or any part of the unvested  portion of the Options held by them;  provided,
however, that such Options must be exercised prior to the effective date of such
liquidation or dissolution.  If the Option holders do not exercise their Options
prior to such effective date, each outstanding  Option shall terminate as of the
effective date of the liquidation or dissolution.

         5.14.3   The  foregoing  adjustments  in the shares  subject to Options
shall be made by the Plan Administrators,  or by any successor  administrator of
this  Plan,  or by the  applicable  terms  of  any  assumption  or  substitution
document.

         5.14.4   The grant of an Option  shall not  affect in any way the right
or power of the Company to make adjustments, reclassifications,  reorganizations
or changes of its  capital  or  business  structure,  to merge,  consolidate  or
dissolve, to liquidate or to sell or transfer all or any part of its business or
assets.

         5.15     OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.

         5.15.1   AUTOMATIC   GRANTS.   Upon  the  initial   appointment   of  a
Non-Employee  Director, as defined below, the Plan Administrators are authorized
to grant initial Options ("Initial  Options") to each  Non-Employee  Director in
such amounts and upon such terms,  provisions and vesting schedule as determined
in the sole discretion of the Plan Administrators. After the Initial Options are
fully vested,  or in the event no Initial  Options are granted to a Non-Employee
Director, Options shall be granted to Non-Employee Directors under the terms and
conditions  of this  Section  5.15 of this  Plan.  Unless  the  number of shares
available  under Section 4.0 of this Plan shall have been decreased to less than
50,000, immediately after each annual meeting of shareholders at which he or she
is elected a director,  each  Non-Employee  Director,  as defined below,  of the
Company shall  automatically be granted a Nonqualified  Stock Option to purchase
15,000  shares of Common Stock for each year included in the term for which such
he or she was elected a director at such meeting;  provided,  however, that if a
director is appointed to fill a vacancy in the Company's  Board of Directors,  a
Non-Employee  Director shall be granted a Nonqualified  Stock Option to purchase
that number of shares of Common Stock equal to 15,000  multiplied by a fraction,
the  numerator  of which shall be equal to the number of months from the date of
his or her  appointment  until the next  regularly  scheduled  annual meeting of
shareholders  at  which  directors  are  to be  elected  (as  determined  by the
Company's bylaws and rounded to the nearest whole number) and the denominator of
which shall be twelve (12).  "Non-Employee  Director" shall have the meaning set
forth in Rule 16b-3 under the Exchange Act as such rule is in effect on the date
this Plan is approved by the  shareholders of the Company,  as it may be amended
from time to time, or any successor rule or rules.

         5.15.2   OPTION PRICE.  The option price for the Options  granted under
Section  5.15  shall be not less  than one  hundred  percent  (100%) of the Fair
Market Value of the shares of Common Stock on the Date of Grant,  as  determined
by the Plan  Administrators  in good faith in accordance

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<PAGE>


with the  definition  set forth in Section  2.4 of this Plan.  Each such  Option
shall have a four-year term from the Date of Grant,  unless  earlier  terminated
pursuant to Section 5.8.

         5.15.3   VESTING  SCHEDULE.   No  Option  shall  be  exercisable  by  a
Non-Employee  Director  until it has vested.  For Options  granted in connection
with the  election  of a director  at an annual  meeting of  shareholders,  each
Option  shall vest as to 15,000  shares of Common Stock for each year of service
as a director  on each  anniversary  date of the  annual  meeting.  For  Options
granted in connection with the appointment of a director, each Option shall vest
as to 15,000  shares of Common  Stock for each year of service as a director  on
each anniversary date of such appointment.

         5.16     COMMON STOCK REPURCHASE RIGHTS

         5.16.1   REPURCHASE   OPTION.  At  the  sole  discretion  of  the  Plan
Administrators,  each  Option  granted  under this Plan may  contain  repurchase
provisions  pursuant to which,  after  exercise  of the  Option,  the Company is
granted an irrevocable,  exclusive option ("Repurchase Option") to purchase from
Optionee  the Common  Stock  issued upon  exercise  of the  Option.  If the Plan
Administrators  determine that Options granted under the Plan will be subject to
a  Repurchase   Option,   Service  Providers  shall  be  notified  by  the  Plan
Administrators  of the terms,  conditions  and  restrictions  of the  Repurchase
Option by means of a Restricted Stock Purchase  Agreement,  and Options shall be
accepted by Service  Providers  by  execution  of a  Restricted  Stock  Purchase
Agreement in the form  determined  by the Plan  Administrators.  Unless the Plan
Administrators  determine  otherwise,  the Restricted  Stock Purchase  Agreement
shall grant the Company a repurchase  option  exercisable  upon the voluntary or
involuntary  termination  of the  purchaser's  service  with the Company for any
reason (including death or disability).

         5.16.2   PURCHASE PRICE AND DURATION.  The purchase price for shares of
Common Stock  repurchased  pursuant to the Restricted  Stock Purchase  Agreement
shall be the  original  price per share  paid by the  purchaser,  plus an amount
equal to any federal or state income tax  liability  incurred by purchaser  upon
exercise of a  Nonqualified  Stock  Option.  The  purchase  price may be paid by
cancellation of any indebtedness of the purchaser to the Company. The Repurchase
Option shall lapse after one year  following  the date of  exercise,  unless the
repurchase  period is shortened in accordance with a schedule  determined by the
Plan Administrators.

         5.16.3   ESCROW OF SHARES.  The Restricted Stock Purchase Agreement may
also provide that the shares of Common Stock be delivered and deposited  with an
escrow holder designated by the Company until such time as the Repurchase Option
expires.

         5.16.4   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.

         5.16.5   RIGHTS AS A  SHAREHOLDER.  Once the  Option is  exercised  and
unless  and until  the  Repurchase  Option  is  exercised  by the  Company,  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.

         5.17     COMMON STOCK RESALE RESTRICTIONS

         5.17.1   RESALE  RESTRICTIONS.  At the  sole  discretion  of  the  Plan
Administrators,   each  Option  granted  under  this  Plan  may  contain  resale
provisions pursuant to which, after exercise of

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<PAGE>


the Option, the purchaser of the Common Stock issued upon exercise of the Option
shall be limited to sales of Common Stock sold for the account of the  purchaser
or an  affiliate of the  purchaser  in an amount which shall not exceed  250,000
shares of Common Stock during any three-month period.

         5.17.2   DURATION.  The Resale  Restriction may continue for as long as
the  purchaser  beneficially  owns the Common Stock issued upon  exercise of the
Option, unless the Resale Restriction is shortened in accordance with a schedule
determined by the Plan Administrators.

6.0      EFFECTIVE DATE; TERM

         6.1      This Plan shall be effective as of October 30, 1998.  The Plan
shall include all options granted by Plan Administrators  prior to the effective
date of the Plan, in accordance with the effective Date of Grant and other terms
of each agreement with Optionee.  Incentive  Stock Options may be granted by the
Plan  Administrators  from  time to time  thereafter  until  October  30,  2003.
Nonqualified  Stock  Options may be granted until this Plan is terminated by the
Board in its sole  discretion.  Termination of this Plan shall not terminate any
Option granted prior to such termination. Any Incentive Stock Options granted by
the Plan Administrators  prior to the approval of this Plan by a majority of the
shareholders  of the Company shall be granted  subject to  ratification  of this
Plan by the  shareholders  of the  Company  within 12 months  after this Plan is
adopted by the Board, and if shareholder  ratification is not obtained, each and
every Incentive Stock Option shall become a Nonqualified Stock Option.

7.0      NO OBLIGATIONS TO EXERCISE OPTION

         7.1      The grant of an Option  shall  impose no  obligation  upon the
Optionee to exercise such Option.


8.0      NO  RIGHT  TO  OPTIONS  OR  TO  EMPLOYMENT,   CONTRACTUAL  OR  DIRECTOR
RELATIONSHIP

         8.1      Except as provided in Section  5.15 above,  whether or not any
Options  are to be  granted  under  this Plan  shall be  exclusively  within the
discretion of the Plan Administrators,  and nothing contained in this Plan shall
be construed as giving any person or Service  Provider any right to  participate
under this Plan.  The grant of an Option shall in no way  constitute any form of
agreement or  understanding  binding on the Company or any Related  Corporation,
express or implied,  that the Company or any Related  Corporation  will  employ,
contract with, or use any efforts to cause to continue service as a director by,
an Optionee for any length of time.

9.0      APPLICATION OF FUNDS

         9.1      The  proceeds  received by the Company from the sale of Common
Stock  issued upon the exercise of Options  shall be used for general  corporate
purposes, unless otherwise directed by the Board.

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<PAGE>


10.0     INDEMNIFICATION OF PLAN ADMINISTRATOR

         10.1     In addition to all other  rights of  indemnification  they may
have as  members  of the  Board,  members  of the Plan  Administrators  shall be
indemnified  by the Company for all reasonable  expenses and  liabilities of any
type or nature,  including  attorneys'  fees,  incurred in  connection  with any
action,  suit or  proceeding  to which they or any of them are a party by reason
of, or in connection  with, this Plan or any Option granted under this Plan, and
against all  amounts  paid by them in  settlement  thereof,  provided  that such
settlement is approved by  independent  legal  counsel  selected by the Company,
except to the  extent  that such  expenses  relate  to  matters  for which it is
adjudged that such Plan Administrators  member is liable for willful misconduct;
provided,  that within 15 days after the institution of any such action, suit or
proceeding,  the Plan  Administrator  member involved therein shall, in writing,
notify the Company of such action,  suit or proceeding,  so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.

11.0     AMENDMENT OF PLAN

         11.1     Except as otherwise  provided  above in Section 5.15, the Plan
Administrators  may,  at any  time,  modify,  amend or  terminate  this Plan and
Options granted under this Plan; provided,  that no amendment with respect to an
outstanding Option shall be made over the objection of the Optionee thereof; and
provided further,  that if required in order to keep the Plan in full compliance
with the  exemption  from  Section  16(b) of the  Exchange  Act provided by Rule
16b-3,  as  amended,  or any  successor  rule or rules,  or any  other  rules or
regulations of the Securities and Exchange Commission,  a national exchange, the
Nasdaq Stock Market,  the NASD Bulletin Board, or other regulatory  authorities,
amendments  to  this  Plan  shall  be  subject  to  approval  by  the  Company's
shareholders  in  compliance  with  the   requirements  of  any  such  rules  or
regulations.

         Without   limiting  the   generality   of  the   foregoing,   the  Plan
Administrators  may modify grants to persons who are eligible to receive Options
under this Plan who are foreign  nationals or employed outside the United States
to recognize differences in local law, tax policy or custom.

         Date  Approved by Board of Directors of Company:  October 30, 1998,  as
amended on July 14, 2003.

                                   LION, Inc.


                                   ---------------------------------------------
                                   by:  Corporate Secretary

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