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                                                                    EXHIBIT 10.2

                       U.S. DIGITAL COMMUNICATIONS, INC.

                       1998 STOCK OPTION, DEFERRED STOCK

                                      AND

                             RESTRICTED STOCK PLAN



Section 1.  General Purpose of Plan; Definitions.
            ------------------------------------ 

     (a)  This plan is intended to implement and govern the 1998 Stock Option,
Deferred Stock and Restricted Stock Plan (the "Plan") of U.S. Digital
Communications, Inc., a Nevada corporation (the "Company").  The Plan was
adopted by the Board of Directors on February 21, 1998, subject to the approval
of the Company's shareholders.  The purpose of the Plan is to enable the Company
and its Subsidiaries to obtain and retain competent personnel who will
contribute to the Company's success by their ability, ingenuity and industry,
and to provide incentives to such personnel and other important persons that are
linked directly to increases in shareholder value, and will therefore, inure to
the benefit of all shareholders of the Company.

     (b)  For purposes of the Plan, the following terms shall be defined as set
forth below:

          (1) "Administrator" means the Board, or if the Board does not
administer the Plan, the Committee in accordance with Section 2.

          (2) "Award" means any award of Deferred Stock, Restricted Stock, Stock
Appreciation Right, Limited Stock Appreciation Right or Stock Option.

          (3) "Board" means the Board of Directors of the Company.

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

          (5) "Committee" means the Compensation Committee of the Board, or any
other Committee the Board may subsequently appoint to administer the Plan.  If
at any time the Board shall administer the Plan, then the functions of the Board
specified in the Plan shall be exercised by the Committee.

          (6) "Company" means U.S. Digital Communications, Inc., a corporation
organized under the laws of the State of Nevada (and any successor corporation).

          (7) "Deferred Stock" means an award made granted pursuant to Section 7
below of the right to receive Stock at the end of a specified deferral period.

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          (8)  "Disability" means permanent and total disability as determined
under the Company's disability program or policy.

          (9)  "Effective Date" shall mean the date provided pursuant to Section
16.

          (10) "Eligible Employee" means an employee, consultant or advisor of
the Company, any Subsidiary or Parent Corporation eligible to participate in the
Plan pursuant to Section 4.

          (11) "Fair Market Value" means, as of any given date, with respect to
any Awards granted hereunder, at the discretion of the Administrator and subject
to such limitations as the Administrator may impose, (A) the closing sale price
of the Stock on such date as reported in the Western Edition of the Wall Street
Journal Composite Tape, or (B) the average of the closing price of the Stock on
each day on which the Stock was traded over a period of up to twenty trading
days immediately prior to such date, or (C) if the Stock is not publicly traded,
the fair market value of the Stock as otherwise determined by the Administrator
in the good faith exercise of its discretion.

          (12) "Incentive Stock Option" means any Stock option intended to be
designated as an "incentive stock option" within the meaning of Section 422 of
the Code.

          (13) "Limited Stock Appreciation Right" means a Stock Appreciation
Right that can be exercised only in the event of a Change of Control as defined
in Section 10.

          (14) "Non-Qualified Stock Option" means any Stock Option that is not
an Incentive Stock Option, including any Stock Option that provides (as of the
time such option is granted) that it will not be treated as an Incentive Stock
Option.

          (15) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations other than the Company owns stock possessing 50% or more of
the total combined voting power of all classes of stock in one of the other
corporations in the chain.

          (16) "Participant" means any Eligible Employee selected by the
Administrator pursuant to the Administrator's authority in Section 2 below, to
receive grants of Stock Options or Awards or any combination of the foregoing.

          (17) "Restricted Period" means the period set by the Administrator as
it pertains to Deferred Stock or Restricted Stock awards pursuant to Section 7.

          (18) "Restricted Stock" means an award of shares of Stock granted
pursuant to Section 7 subject to restrictions that will lapse with the passage
of time or upon the attainment of performance objectives.

          (19) "Stock" means the Common Stock, no par value per share, of the
Company.

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          (20) "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 below to receive an amount equal to the difference
between (A) the Fair Market Value, as of the date such Stock Appreciation Right
or portion thereof is surrendered, of the shares of Stock covered by such right
or such portion thereof and (B) the aggregate exercise price of such right or
such portion thereof.

          (21) "Stock Option" means an option to purchase shares of Stock
granted pursuant to Section 5.

          (22) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations (other than the last corporation) in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.

Section 2.  Administration.

     (a) The Plan shall be administered by the Board or by a Committee appointed
by the Board, which shall serve at the pleasure of the Board; provided, however,
that if the Committee does not consist solely of "Non-Employee Directors," as
defined in Rule 16b-3 as promulgated by the Securities and Exchange Commission
(the "Commission") under the Securities axchange Act of 1934 (the "Exchange
Act"), and as such Rule may be amended from time to time, or any successor
definition adopted by the Commission, then the Plan shall be administered, and
each grant shall be approved, by the Board.

     (b) The Administrator shall have the power and authority to grant to
Eligible Employees, pursuant to the terms of the Plan: (A) Stock Options, (B)
Stock Appreciation Rights or Limited Stock Appreciation Rights, (C) Deferred
Stock, (D) Restricted Stock, or (E) any combination of the foregoing.

     In particular, the Administrator shall have the authority;

          (1)  to select those employees of the Company or any Subsidiary or
Parent Corporation who are Eligible Employees;

          (2)  to determine whether and to what extent Stock Options, Stock
Appreciation Rights, Limited Stock Appreciation Rights, Deferred Stock,
Restricted Stock or a combination of the foregoing, are to be granted to
Eligible Employees of the Company or any Subsidiary hereunder;

          (3) to determine the number of shares of Stock to be covered by each
such Award;

          (4) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any such Award including, but not limited to, (x) the
restricted period applicable to Deferred Stock or Restricted Stock awards, (y)
the date or dates on which restrictions applicable to such

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Deferred Stock or Restricted Stock shall lapse during such period, and (z) when
and in what increments shares covered by Stock Options may be purchased; and

          (5) to determine the terms and conditions (including restrictions on
transfer as may be appropriate under Federal and state securities laws),
consistent with the terms of this Plan, which shall govern all written
instruments evidencing the Stock Options, Stock Appreciation Rights, Limited
Stock Appreciation Rights, Deferred Stock, Restricted Stock or any combination
of the foregoing.

     (c) The Administrator shall have the authority, in its discretion, to
adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall from time to time deem advisable; to interpret
the terms and provisions of the Plan and any Award issued under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan.

     (d) All decisions made by the Administrator pursuant to the provisions of
the Plan shall be final and binding on all persons, including the Company, any
Subsidiaries, Parent Corporation and the Participants.

Section 3.  Stock Subject to Plan.

     (a) The total number of shares of Stock reserved and available for issuance
under the Plan shall be 6,000,000 shares. Such shares shall consist of
authorized but unissued shares.

     (b) To the extent that (i) a Stock Option expires or is otherwise
terminated without being exercised or (ii) any shares of Stock subject to any
Deferred Stock or Restricted Stock award granted hereunder are forfeited, such
shares shall again be available for issuance in connection with future Awards
under the Plan.  If any shares of Stock have been pledged as collateral for
indebtedness incurred by a Participant in connection with the exercise of a
Stock Option and such shares are returned to the Company in satisfaction of such
indebtedness, such shares shall again be available for issuance in connection
with future Awards under the Plan.

     (c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, or other change in corporate structure
affecting the Stock, a substitution or adjustment may be made in (i) the
aggregate number of shares reserved for issuance under the Plan, and (ii) the
kind, number and option price of shares subject to outstanding Stock Options
granted under the Plan as may be determined by the Administrator, in its sole
discretion, provided that the number of shares subject to any Award shall always
be a whole number. Such other substitutions or adjustments shall be made as may
be determined by the Administrator, in its sole discretion; provided, however,
that with respect to Incentive Stock Options, such adjustment shall be made in
accordance with Section 424 of the Code. An adjusted option price shall also be
used to determine the amount payable by the Company upon the exercise of any
Stock Appreciation Right or Limited Stock Appreciation Rights associated with
any Stock Option.

Section 4.  Eligibility.

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     (a) Officers and other key employees, directors and consultants and
advisors of the Company, any Subsidiary or Parent Corporation who are
responsible for or contribute to the management, growth and/or profitability of
the business of the Company, shall be eligible to be granted Non-Qualified Stock
Options, Stock Appreciation Rights, Limited Stock Appreciation Rights, and
Deferred Stock or Restricted Stock awards hereunder. Officers and other key
employees of the Company, any Subsidiary or Parent Corporation shall also be
eligible to be granted Incentive Stock Options hereunder.  The Participants
under the Plan shall be selected from time to time by the Administrator, in its
sole discretion, from among the Eligible Employees recommended by the senior
management of the Company, and the Administrator shall determine, in its sole
discretion, the number of shares covered by each Award.

Section 5.  Stock Option for Eligible Employees.

     (a) Stock Options may be granted to Eligible Employees alone or in addition
to other Awards granted under the Plan.  Any Stock Option granted under the Plan
shall be in such form as the Administrator may from time to time approve, and
the provisions of Stock Option awards need not be the same with respect to each
optionee. Recipients of Stock Options shall enter into a stock option agreement
with the Company, in such form as the Administrator shall determine, which
agreement shall set forth, among other things, the exercise price of the option,
the term of the option and provisions regarding exercisability of the option
granted thereunder.

     The Stock Options granted under the Plan to Eligible Employees may be of
two types: (x) Incentive Stock Options and (y) Non-Qualified Stock Options.

     (b) The Administrator shall have the authority under this Section 5 to
grant any optionee Incentive Stock Options, Non-Qualified Stock Options, or both
types of Stock Options (in each case with or without Stock Appreciation Rights
or Limited Stock Appreciation Rights); provided, however, that Incentive Stock
Options may not be granted to any individual who is not an employee of the
Company, its Subsidiaries or Parent Corporation. To the extent that any Stock
Option does not qualify as an Incentive Stock Option, it shall constitute a
separate Non-Qualified Stock Option. More than one option may be granted to the
same optionee and be outstanding concurrently hereunder.

     (c) Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Administrator shall deem
desirable:

          (i)   Option Price. The option price per share of Stock purchasable
                ------------                                                 
under a Stock Option shall be determined by the Administrator in its sole
discretion at the time of grant but shall be not less than 100% of the Fair
Market Value of the Stock on such date, and shall not, in any event, be less
than the par value of the Stock.  The option price per share of Stock
purchasable under a Non-Qualified Stock Option may be less than 100% of such
Fair Market Value.  If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than 10% of
the combined voting power of all classes of stock of the Company or any Parent
Corpo  ration or Subsidiary and an Incentive Stock Option is granted to such
employee, the option

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price of such Incentive Stock Option (to the extent required by the Code at the
time of grant) shall be no less than 110% of the Fair Market Value of the Stock
on the date such Incentive Stock Option is granted.

          (ii)  Option Term.  The term of each Stock Option shall be fixed by
                -----------                                                  
the Administrator, but no Stock Option shall be exercisable more than ten years
after the date such Stock Option is granted; provided, however, that if an
                                             --------  -------            
employee owns or is deemed to own (by reason of the attribution rules of Section
424(d) of the Code) more than 10% of the combined voting power of all classes of
stock of the Company or any Parent Corporation or Subsidiary and an Incentive
Stock Option is granted to such employee, the term of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall be no
more than five years from the date of grant.

          (iii) Exercisability.  Stock Options shall be exercisable at such time
                --------------                                                  
or times and subject to such terms and conditions as shall be determined by the
Administrator at or after grant; provided, however, that, except as provided
                                 --------  -------                          
herein or unless otherwise determined by the Administrator at or after grant,
Stock Options shall be exercisable one year following the date of grant of the
option, but in no case, less than six (6) months following the date of the grant
of the option. To the extent not exercised, installments shall accumulate and be
exercisable in whole or in part at any time after becoming exercisable but not
later than the date the Stock Option expires. The Administrator may provide, in
its discretion, that any Stock Option shall be exercisable only in installments,
and the Administrator may waive such installment exercise provisions at any time
in whole or in part based on such factors as the Administrator may determine in
its sole discretion.

          (iv)  Method of Exercise.  Subject to Section 5(c), Stock Options may
                ------------------                                             
be exercised in whole or in part at any time during the option period, by giving
written notice of exercise to the Company specifying the number of shares to be
purchased, accompanied by payment in full of the purchase price in cash or its
equivalent, as determined by the Administrator.  As determined by the
Administrator, in its sole discretion, payment in whole or in part may also be
made (i) in the form of unrestricted Stock already owned by the optionee, or, in
the case of the exercise of a Non-Qualified Stock Option, Restricted Stock
subject to an Award hereunder (based, in each case, on the Fair Market Value of
the Stock on the date the option is exercised), (ii) by cancellation of any
indebtedness owed by the Company to the optionee, (iii) by a full recourse
promissory note executed by the optionee, (iv) by requesting that the Company
withhold whole shares of Common Stock then issuable upon exercise of the Stock
Option (based on the Fair Market Value of the Stock on the date the option is
exercised), (v) by arrangement with a broker which is acceptable to the
Administrator where payment of the option price is made pursuant to an
irrevocable direction to the broker to deliver all or part of the proceeds from
the sale of the shares underlying the option to the Company, or (vi) by any
combination of the foregoing; provided, however, that in the case of an
                              --------  -------                        
Incentive Stock Option, the right to make payment in the form of already owned
shares may be authorized only at the time of grant.  Any payment in the form of
stock already owned by the optionee may be effected by use of an attestation
form approved by the Administrator.  If payment of the option exercise price of
a Non-Qualified Stock Option is made in whole or in part in the form of
Restricted Stock, the shares received upon the exercise of such Stock Option (to
the extent of the number of shares of Restricted Stock surrendered upon exercise
of such Stock Option) shall be restricted in accordance with the original terms
of the Restricted Stock award in question, except that the

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Administrator may direct that such restrictions shall apply only to that number
of shares equal to the number of shares surrendered upon the exercise of such
option. An optionee shall generally have the rights to dividends and other
rights of a shareholder with respect to shares subject to the option only after
the optionee has given written notice of exercise, has paid in full for such
shares, and, if requested, has given the representation described in paragraph
(a) of Section 11.

     (d)  The Administrator may require the voluntary surrender of all or a
portion of any Stock Option granted under the Plan as a condition precedent to a
grant of a new Stock Option.  Subject to the provisions of the Plan, such new
Stock Option shall be exercisable at the price, during such period and on such
other terms and conditions as are specified by the Administrator at the time the
new Stock Option is granted; provided, however, that should the Administrator
                             --------  -------                                  
so require, the number of shares subject to such new Stock Option shall not be
greater than the number of shares subject to the surrendered Stock Option. Upon
their surrender, the Stock Options shall be canceled and the shares previously
subject to such canceled Stock Options shall again be available for grants of
Stock Options and other Awards hereunder.

     (e)  Loans.  The Company may make loans available to Stock Option holders
          -----  
in connection with the exercise of outstanding options granted under the Plan,
as the Administrator, in its discretion, may determine. Such loans shall (i) be
evidenced by promissory notes entered into by the Stock Option holders in favor
of the Company, (ii) be subject to the terms and conditions set forth in this
Section 5(e) and such other terms and conditions, not inconsistent with the
Plan, as the Administrator shall determine, (iii) bear interest, if any, at such
rate as the Administrator shall determine and (iv) be subject to Board approval.
In no event may the principal amount of any such loan exceed the sum of (x) the
exercise price less the par value of the shares of Stock covered by the option,
or portion thereof, exercised by the holder and (y) any Federal, state, and
local income tax attributable to such exercise.  The initial term of the loan,
the schedule of payments of principal and interest under the loan, the extent to
which the loan is to be with or without recourse against the holder with respect
to principal or interest and the conditions upon which the loan will become
payable in the event of the holder's termination of employment shall be
determined by the Administrator; provided, however, that the term of the loan,
                                 --------  -------                            
including extensions, shall not exceed seven years.  Unless the Administrator
determines otherwise, when a loan is made, shares of Common Stock having a Fair
Market Value at least equal to the principal amount of the loan shall be pledged
by the holder to the Company as security for payment of the unpaid balance of
the loan, and such pledge shall be evidenced by a pledge agreement, the terms of
which shall be determined by the Administrator, in its discretion; provided,
                                                                   -------- 
however, that each loan shall comply with all applicable laws, regulations and
-------                                                                       
rules of the Board of Governors of the Federal Reserve System and any other
governmental agency having jurisdiction.

     (f)  Limits on Transferability of Options.
          ------------------------------------ 

          (i) Subject to Section 5(f)(ii), no Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution or, with respect to Non-Qualified Stock Options, pursuant to a
"qualified domestic relations order," as such term is defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Incentive Stock

                                      -7-
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Options shall be exercisable, during the optionee's lifetime, only by the
optionee or, with respect to Non-Qualified Stock Options, in accordance with the
terms of a qualified domestic relations order.

          (ii) The Administrator may, in its discretion, authorize all or a
portion of the options (other than Incentive Stock Options) to be granted to an
optionee to be on terms which permit transfer by such optionee to (A) the
spouse, qualified domestic partner, children or grandchildren of the optionee
and any other persons related to the optionee as may be approved by the
Administrator ("Immediate Family Members"), (B) a trust or trusts for the
exclusive benefit of such Immediate Family Members, (C) a partnership or
partnerships in which such Immediate Family Members are the only partners, or
(D) any other persons or entities as may be approved by the Administrator,
provided that (x) there may be no consideration for any transfer unless approved
by the Administrator, (y) the stock option agreement pursuant to which such
options are granted must be approved by the Administrator, and must expressly
provide for transferability in a manner consistent with this Section 5(f)(ii),
and (z) subsequent transfers of transferred options shall be prohibited except
those in accordance with Section 5(f)(i) or expressly approved by the
Administrator. Following transfer, any such options shall continue to be subject
to the same terms and conditions as were applicable immediately prior to
transfer, provided that, except for purposes of Sections 5(g), (h) and (i) and
11(c) hereof, the terms "optionee," "Stock Option holder" and "Participant"
shall be deemed to refer to the transferee. The events of termination of
employment under Sections 5(g), (h) and (i) hereof shall continue to be applied
with respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods specified
under such sections unless the option agreement governing such options otherwise
provides. Notwithstanding the transfer, the original optionee will continue to
be subject to the provisions of Section 11(c) regarding payment of taxes,
including the provisions entitling the Company to deduct such taxes from amounts
otherwise due to such optionee. "Qualified domestic partner" for the purpose of
this Section 5(f)(ii) shall mean a domestic partner living in the same household
as the optionee and registered with, certified by or otherwise acknowledged by
the county or other applicable governmental body as a domestic partner or
otherwise establishing such status in any manner satisfactory to the
Administrator.

     (g)  Termination by Death.  If an optionee's employment with the Company,
          --------------------                                                
any Subsidiary or Parent Corporation terminates by reason of death, the Stock
Option may thereafter be immediately exercised, to the extent then exercisable
(or on such accelerated basis as the Administrator shall determine at or after
grant), by the legal representative of the estate or by the legatee of the
optionee under the will of the optionee, for a period of twelve months (or such
shorter period as the Administrator shall specify at grant) from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is shorter.

     (h)  Termination by Reason of Disability.  If an optionee's employment with
          -----------------------------------                                   
the Company, any Subsidiary or Parent Corporation terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable at the time of such termination (or on such
accelerated basis as the Administrator shall determine at the time of grant),
for a period of twelve months (or such shorter period as the Administrator shall
specify at grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is shorter;
provided, however, that, if the optionee dies within 
--------  -------

                                      -8-
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such twelve-month period (or such shorter period as the Administrator shall
specify at grant) and prior to the expiration of the stated term of such Stock
Option, any unexercised Stock Option held by such optionee shall thereafter be
exercisable to the extent to which it was exercisable at the time of termination
for a period of twelve months (or such shorter period as the Administrator shall
specify at grant) from the time of death or until the expiration of the stated
term of such Stock Option, whichever period is shorter. In the event of a
termination of employment by reason of Disability, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the aeode, such Stock Option shall thereafter be
treated as a Non-Qualified Stock Option.

     (i) Other Termination.  Except as otherwise provided in this paragraph or
         -----------------                                                    
otherwise determined by the Administrator, if an optionee's employment with the
Company, any Subsidiary or Parent Corporation terminates for any reason other
than death or Disability, the Stock Option may be exercised until the earlier to
occur of (i) three months from the date of such termination or (ii) the
expiration of the stated term of such Stock Option.

     (j) Annual Limit on Incentive Stock Options.  To the extent that the
         ---------------------------------------                         
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the shares of Stock with respect to which Incentive Stock
Options granted to an optionee under this Plan and all other option plans of the
Company, its Parent Corporation and any Subsidiary become exercisable for the
first time by the optionee during any calendar year exceeds $100,000, such Stock
Options shall be treated as Non-Qualified Stock Options.

Section 6.  Stock Appreciation Rights.

     (a) Grant and Exercise.  Stock Appreciation Rights and Limited Stock
         ------------------                                              
Appreciation Rights may be granted either alone ("Free Standing Rights") or in
conjunction with all or part of any Stock Option granted under the Plan
("Related Rights").  In the case of a Non-Qualified Stock Option, Related Rights
may be granted either at or after the time of the grant of such Stock Option.
In the case of an Incentive Stock Option, Related Rights may be granted only at
the time of the grant of the Incentive Stock Option.

     A Related Right or applicable portion thereof granted in conjunction with a
given Stock Option shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option, except that, unless
otherwise provided by the Administrator at the time of grant, a Related Right
granted with respect to less than the full number of shares covered by a related
Stock Option shall only be reduced if and to the extent that the number of
shares covered by the exercise or termination of the related Stock Option
exceeds the number of shares not covered by the Stock Appreciation Right.

     A Related Right may be exercised by an optionee, in accordance with
paragraph (b) of this Section 6, by surrendering the applicable portion of the
related Stock Option.  Upon such exercise and surrender, the optionee shall be
entitled to receive an amount determined in the manner prescribed in paragraph
(b) of this Section 6. Stock Options which have been so surrendered, in

                                      -9-
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whole or in part, shall no longer be exercisable to the extent the Related
Rights have been so exercised.

     (b)  Terms and Conditions.  Stock Appreciation Rights shall be subject to
          --------------------                                                
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Administrator, including the
following:

          (i)  Related Stock Appreciation Rights.

               (A) Stock Appreciation Rights that are Related Rights ("Related
     Stock Appreciation Rights") shall be exercisable only at such time or times
     and to the extent that the Stock Options to which they relate shall be
     exercisable in accordance with the provisions of Section 5 and this Section
     6; provided, however, that any Related Stock Appreciation Right shall not
        --------  -------                                                     
     be exercisable during the first six months of its term, except that this
     additional limitation shall not apply in the event of death or Disability
     of the optionee prior to the expiration of such six-month period.

               (B) Upon the exercise of a Related Stock Appreciation Right, an
     optionee shall be entitled to receive up to, but not more than, an amount
     in cash or that number of shares of Stock (or in some combination of cash
     and shares of Stock) equal in value to the excess of the Fair Market Value
     of one share of Stock as of the date of exercise over the option price per
     share specified in the related Stock Option multiplied by the number of
     shares of Stock in respect of which the Related Stock Appreciation Right is
     being exercised, with the Administrator having the right to determine the
     form of payment.

               (C) Related Stock Appreciation Rights shall be transferable or
     exercisable only when and to the extent that the underlying Stock Option
     would be transferable or exercisable under paragraph (f) of Section 5 of
     the Plan.

               (D) Upon the exercise of a Related Stock Appreciation Right, the
     Stock Option or part thereof to which such Related Stock Appreciation Right
     is related shall be deemed to have been exercised for the purpose of the
     limitation set forth in Section 3 of the Plan on the number of shares of
     Stock to be issued under the Plan, but only to the extent of the number of
     shares issued under the Related Stock Appreciation Right.

               (E) A Related Stock Appreciation Right granted in connection with
     an Incentive Stock Option may be exercised only if and when the Fair Market
     Value of the Stock subject to the Incentive Stock Option exceeds the
     exercise price of such Stock Option.

          (ii) Free Standing Stock Appreciation Rights.

               (A) Stock Appreciation Rights that are Free Standing Rights
     ("Free Standing Stock Appreciation Rights") shall be exercisable at such
     time or times and subject to such terms and conditions as shall be
     determined by the Administrator at or after grant; provided, however, that
                                                        --------  -------      
     Free Standing Stock Appreciation Rights shall not be exercisable

                                      -10-
<PAGE>
 
     during the first six months of its term, except that this limitation shall
     not apply in the event of death or Disability of the recipient of the Free
     Standing Stock Appreciation Right prior to the expiration of such six-month
     period.

               (B) The term of each Free Standing Stock Appreciation Right shall
     be fixed by the Administrator, but no Free Standing Stock Appreciation
     Right shall be exer  cisable more than ten years after the date such right
     is granted.

               (C) Upon the exercise of a Free Standing Stock Appreciation
     Right, a recipient shall be entitled to receive up to, but not more than,
     an amount in cash or that number of shares of Stock (or any combination of
     cash or shares of Stock) equal in value to the excess of the Fair Market
     Value of one share of Stock as of the date of exercise over the price per
     share specified in the Free Standing Stock Appreciation Right (which price
     shall be no less than 100% of the Fair Market Value of the Stock on the
     date of grant) multiplied by the number of shares of Stock with respect to
     which the right is being exercised, with the Administrator having the right
     to determine the form of payment.

               (D) Free Standing Stock Appreciation Rights shall be transferable
     or exercisable subject to the provisions governing the transferability and
     exercisability of Stock Options set forth in paragraphs (c) and (f) of
     Section 5.

               (E) In the event of the termination of an em ployee who has
     received Free Standing Stock Appreciation Rights, such rights shall be
     exercisable to the same extent that a Stock Option would have been
     exercisable in the event of the termination of the optionee.

               (F) For the purpose of the limitation set forth in Section 3 on
     the number of shares to be issued under the Plan, the grant or exercise of
     Free Standing Stock Appreciation Rights shall be deemed to constitute the
     grant or exercise, respectively, of Stock Options with respect to the
     number of shares of Stock with respect to which such Free Standing Stock
     Appreciation Rights were so granted or exercised.

          (iii)  Limited Stock Appreciation Rights.

               (A) Limited Stock Appreciation Rights may only be exercised
     within the 30-day period following a "Change of Control" (as defined in
     Section 10 below), and, with respect to Limited Stock Appreciation Rights
     that are Related Rights ("Related Limited Stock Appreciation Rights"), only
     to the extent that the Stock Options to which they relate shall be
     exercisable in accordance with the provisions of Section 5 and this Section
     6; provided, however, that no Related Limited Stock Appreciation Right
     shall be exercisable during the first six months of its term, except that
     this additional limitation shall not apply in the event of death or
     Disability of the optionee prior to the expiration of such six-month
     period.

               (B) Upon the exercise of a Limited Stock Appreciation Right, the
     recipient shall be entitled to receive an amount in cash equal in value to
     the excess of the

                                      -11-
<PAGE>
 
     "Change of Control Price" (as defined in Section 10) of one share of Stock
     as of the date of exercise over (1) the option price per share specified in
     the related Stock Option, or (2) in the case of a Limited Stock
     Appreciation Right which is a Free Standing Stock Appreciation Right, the
     price per share specified in the Free Standing Stock Appreciation Right,
     such excess to be multiplied by the number of shares in respect of which
     the Limited Stock Appreciation Right shall have been exercised.

Section 7. Deferred Stock and Restricted Stock.

     (a)  General.  Deferred Stock and Restricted Stock awards may be issued to
          -------                                                              
Eligible Employees either alone or in addition to other Awards granted under the
Plan.  The Administrator shall determine the Eligible Employees, and the time or
times at which, grants of Deferred Stock or Restricted Stock awards shall be
made; the number of shares to be awarded; the price, if any, to be paid by the
recipient of Deferred Stock or Restricted Stock awards; the Restricted Period
(as defined in paragraph 7(c) hereof) applicable to Deferred Stock or Restricted
Stock awards; the performance objectives applicable to Deferred Stock or
Restricted Stock awards; the date or dates on which restrictions applicable to
such Deferred Stock or Restricted Stock awards shall lapse during such
Restricted Period; and all other conditions of the Deferred Stock or Restricted
Stock awards. The Administrator may also condition the grant of Deferred Stock
or Restricted Stock awards upon the exercise of Stock Options, or upon such
other criteria as the Administrator may determine, in its sole discretion. The
provisions of Deferred Stock or Restricted Stock awards need not be the same
with respect to each recipient.

     (b) Awards and Certificates.  The prospective recipient of a Deferred Stock
         -----------------------                                                
or Restricted Stock award shall not have any rights with respect to such Award,
unless and until such recipient has executed an agreement evidencing the Award
(a "Deferred Stock Award Agreement" or "Restricted Stock Award Agreement" as
appropriate) and has delivered a fully executed copy thereof to the Company,
within a period of sixty days (or such other period as the Administrator may
specify) after the Award date.

     Except as provided below in this Section 7(b), (i) each Participant who is
awarded Restricted Stock shall be issued a stock certificate in respect of such
shares of Restricted itock; and (ii) such certificate shall be registered in the
name of the Participant, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award, substantially in
the following form:

     "The transferability of this certificate and the shares of stock
     represented hereby are subject to the terms and conditions (including
     forfeiture) of the U.S. Digital Communications, Inc. 1998 Stock Option,
     Deferred Stock and Restricted Stock Plan and a Restricted Stock Award
     Agreement entered into between the registered owner and U.S. Digital
     Communications, Inc. Copies of such Plan and Agreement are on file in the
     offices of U.S. Digital Communications, Inc."

     The Company shall require that the stock certificates evidencing such
shares be held in the custody of the Company until the restrictions thereon
shall have lapsed, and that, as a condition of
     
                                      -12-
<PAGE>
 
any Restricted Stock award, the Participant shall have delivered a stock power,
endorsed in blank, relating to the Stock covered by such Award.

     With respect to Deferred Stock awards, at the expiration of the Restricted
Period, stock certificates in respect of such shares of Deferred Stock shall be
delivered to the Participant, or his legal representative, in a number equal to
the shares of Stock covered by the Deferred Stock award.

     (c) Restriction and Conditions.  The Deferred Stock or Restricted Stock
         --------------------------                                         
awards granted pursuant to this Section 7 shall be subject to the following
restrictions and conditions:

          (i)   Subject to the provisions of the Plan and the Deferred Stock or
Restricted Stock Award Agreements, during such period as may be set by the
Administrator commencing on the grant date (the "Restricted Period"), the
Participant shall not be permitted to sell, transfer, pledge or assign shares of
Deferred Stock or Restricted Stock awarded under the Plan.  Within these limits,
the Administrator may, in its sole discretion, provide for the lapse of such
restrictions in installments and may accelerate or waive such restrictions in
whole or in part based on such factors and such circumstances as the
Administrator may determine, in its sole discretion, including, but not limited
to, the attainment of certain performance related goals, the Participant's
termination, death or Disability or the occurrence of a "Change of Control" as
defined in Section 10 below.

          (ii)  Except as provided in paragraph (c)(i) of this Section 7, the
Participant shall have, with respect to the shares of Restricted Stock, all of
the rights of a shareholder of the Company, including the right to vote the
shares, and the right to receive any dividends thereon during the Restricted
Period. With respect to Deferred Stock awards, the Participant shall generally
not have the rights of a shareholder of the Company, including the right to vote
the shares during the Restricted Period; provided, however, that dividends
                                         --------  -------                
declared during the Restricted Period with respect to the number of shares
covered by a Deferred Stock award shall be paid to the Participant.
Certificates for shares of unrestricted Stock shall be delivered to the
Participant promptly after, and only after, the Restricted Period shall expire
without forfeiture in respect of such shares of Deferred Stock or Restricted
Stock, except as the Administrator, in its sole discretion, shall otherwise
determine.

          (iii) Subject to the provisions of the Deferred Stock or Restricted
Stock Award Agreement and this Section 7, upon termination of employment for any
reason during the Restricted Period, all shares subject to any restriction as of
the date of such termination shall be forfeited by the Participant, and the
Participant shall only receive the amount, if any, paid by the Participant for
such Deferred Stock or Restricted Stock, plus simple interest on such amount at
the rate of 8% per year.

Section 8. Amendment and Termination.

     (a) The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would impair the rights of the
Participant under any Award theretofore granted without such Participant's
consent, or that without the approval of the shareholders (as described below)
would:

                                      -13-
<PAGE>
 
         (i) except as provided in Section 3, increase the total number of
             shares of Stock reserved for the purpose of the Plan;

        (ii) change the employees or class of employees eligible to
             participate in the Plan;

       (iii) extend the maximum option period under Section 5 of the Plan.

     (b) Notwithstanding the foregoing, shareholder approval under this Section
8 shall only be required at such time and under such circumstances as
shareholder approval would be required under applicable laws, regulations and
exchange requirements.

     (c) The Administrator may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 3, no such amendment
shall impair the rights of any holder without his or her consent.

Section 9.  Unfunded Status of Plan.

     The Plan is intended to constitute an "unfunded" plan for incentive
compensation.  With respect to any payments not yet made to a Participant or
optionee by the Company, nothing contained herein shall give any such
Participant or optionee any rights that are greater than those of a general
creditor of the Company.

Section 10. Change of Control.

     The following acceleration and valuation provisions shall apply in the
event of a "Change of Control," as defined in paragraph (b) of this Section 10:

     (a) In the event of a "Change of Control," unless otherwise determined by
the Administrator or the Board in writing at or after grant (including under any
individual agreement), but prior to the occurrence of such Change of Control;

         (i)   any Stock Appreciation Rights outstanding for at least six months
and any Stock Options awarded under the Plan not previously exercisable and
vested shall become fully exercisable and vested;

         (ii)  the restrictions applicable to any Restricted Stock or Deferred
Stock awards under the Plan shall lapse, and such shares and Awards shall be
deemed fully vested;

         (iii) any indebtedness incurred pursuant to Section 5(e) above shall
be forgiven and the collateral pledged in connection with any such loan shall be
released; and

         (iv)  the value of all outstanding Stock Options, Stock Appreciation
Rights, Limited Stock Appreciation Rights, Restricted Stock and Deferred Stock
awards shall, to the extent determined by the Administrator at or after grant,
be cashed out by a payment of cash or other  

                                     -14-
<PAGE>
 
property, as the Administrator may determine, on the basis of the "Change of
Control Price" (as defined in paragraph (c) of this Section 10) as of the date
the Change of Control occurs or such other date as the Administrator may
determine prior to the Change of Control.

     (b) For purposes of paragraph (a) of this Section 10, a "Change of Control"
shall be deemed to have occurred if:

         (i)   any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act(other than the Company; any trustee or other fiduciary holding
securities under an employee benefit plan of the Company; or any company owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of the Stock of the Company) is or becomes
after the Effective Date the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such person or any securities
acquired directly from the Company or its affiliates) representing 30% or more
of the combined voting power of the Company's then outstanding securities; or

         (ii)  during any period of two consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (i), (iii) or (iv) of this Section
10(b)) whose election by the Board or nomination for election by the Company's
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof; or

         (iii) the shareholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than (A) a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation or (B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or

         (iv)  the shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.

     (c) For purposes of this Section 10, "Change of Control Price" means the
higher of (i) the highest price per share paid or offered in any transaction
related to a Change of Control of the Company or (ii) the highest price per
share paid in any transaction reported on the exchange or national market system
on which the Stock is listed, at any time during the preceding sixty day

                                     -15-
<PAGE>
 
period as determined by the Administrator, except that, in the case of Incentive
Stock Options and Stock Appreciation Rights or Limited Stock Appreciation Rights
relating to Incentive Stock Options, such price shall be based only on
transactions reported for the date on which the Administrator decides to cash
out such options.

Section 11. General Provisions.

     (a) The Administrator may require each person purchasing shares pursuant to
a Stock Option to represent to and agree with the Company in writing that such
person is acquiring the shares without a view to distribution thereof.  The
certificates for such shares may include any legend which the Administrator
deems appropriate to reflect any restrictions on transfer.

     All certificates for shares of Stock delivered under the Plan shall be
subject to such stock-transfer orders and other restrictions as the
Administrator may deem advisable under the rules, regulations, and other
requirements of the Commission, any stock exchange upon which the Stock is then
listed, and any applicable Federal or state securities law, and the
Administrator may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions.

     (b) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.

     (c) Each Participant shall, no later than the date as of which the value of
an Award first becomes includable in the gross income of the Participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to the
Award.  The obligations of the Company under the Plan shall be conditional on
the making of such payments or arrangements, and the Company (and, where
applicable, its Subsidiaries) shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Participant.

     (d) No member of the Board or the Administrator, nor any officer or
employee of the Company acting on behalf of the Board or the Administrator,
shall be personally liable for any action, determination, or interpretation
taken or made in good faith with respect to the Plan, and all members of the
Board or the Administrator and each and any officer or employee of the Company
acting on their behalf shall, to the extent permitted by law, be fully
indemnified and protected by the Company in respect of any such action,
determination or interpretation.

     (e) No Enlargement of Employee Rights.  This Plan is purely voluntary on
the part of the Company, and while the Company hopes to continue it
indefinitely, the continuance of the Plan shall not be deemed to constitute a
contract between the Company and any employee, or to be consideration for or a
condition of the employment of any employee.  Nothing contained in the Plan
shall be deemed to give any employee the right to be retained in the employ of
the Company, its Subsidiaries, or its Parent Corporation to interfere with the
right of the Company, or it Subsidiaries

                                      -16-
<PAGE>
 
to discharge or retire any employee thereof at any time. No employee shall have
any right to or interest in Stock Options, Stock Appreciation Rights or Limited
Stock Appreciation Rights, Restricted Stock, or Deferred Stock, authorized
hereunder prior to the grant of such a Stock Option or other award described
herein to such employee, and upon such grant he or she shall have only such
rights and interests as are expressly provided herein, subject, however, to all
applicable provisions of the Company's Articles of Incorporation, as the same
may be amended from time to time.

Section 12.  Specific Performance.

     The Stock Options granted under this Plan and the Shares issued pursuant to
the exercise of such Stock Options cannot be readily purchased or sold in the
open market, and, for that reason among others, the Company and its shareholders
will be irreparably damaged in the event that this Plan is not specifically
enforced.  In the event of any controversy concerning the right or obligation to
purchase or sell any such Option or Optioned Stock, such right or obligation
shall be enforceable in a court of equity by a decree of a specific performance.
Such remedy shall, however, be cumulative and not exclusive, and shall be in
addition to any other remedy which the parties may have.

Section 13.  Invalid Provision.

     In the event that any provision of this Plan is found to be invalid or
otherwise unenforceable under any applicable law, such invalidity or
unenforceability shall not be construed as rendering any other provisions
contained herein invalid or unenforceable, and all such other provisions shall
be given full force and effect to the same extent as though the invalid
unenforceable provision was not contained herein.

                                     -17-
<PAGE>
 
Section 14.  Applicable Law.

     This Plan shall be governed by and construed in accordance with the laws of
the State of California.

Section 15.  Successors and Assigns.

     This Plan shall be binding on and inure to the benefit of the Company and
the employees to whom an Option is granted hereunder, and such employees' heirs,
executors, administrators, legatees, personal representatives, assignees and
transferees.

Section 16.  Effective Date of Plan.

     The Plan became effective (the "Effective Date") on January 1, 1998.

Section 17.  Term of Plan.

     No Stock Option, Stock Appreciation Right, Limited Stock Appreciation
Right, Deferred Stock or Restricted Stock award shall be granted pursuant to the
Plan on or after the tenth anniversary of the Effective Date, but Awards
theretofore granted may extend beyond that date.

     IN WITNESS WHEREOF, pursuant to the due authorization and adoption of this
plan by the Board on the day and year first above written, the Company has
caused this Plan to be duly executed by its duly authorized officers.


                         U.S. Digital Communications, Inc.

                         By: /s/ Robert J. Wussler
                            ------------------------------
                            Name:
                            Title:


                                      -18-