U.S. ELECTRICAR, INC.

                             1996 STOCK OPTION PLAN

     1.   Purposes of  the  Plan.  The purposes of this Stock Option Plan are to
attract and retain the best  available  personnel for  positions of  substantial
responsibility,  to provide  additional  incentive to  Employees,  Directors and
Consultants  of the Company and its  Subsidiaries  and to promote the success of
the Company's  business.  Options  granted under the Plan may be Incentive Stock
Options or Non-Qualified  Stock Options, as  determined by the  Administrator at
the time of grant.

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

          a.   "Administrator"   means  the  Board  or  any  of  the  Committees
appointed to administer the Plan.

          b.   "Affiliate"  and "Associate"  shall have the respective  meanings
ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

          c.   "Applicable  Laws" means the legal  requirements  relating to the
administration  of stock option plans,  if any, under  applicable  provisions of
federal  securities  laws,  state  corporate and securities  laws, the Code, the
rules of any applicable stock exchange or national market system,  and the rules
of any foreign  jurisdiction applicable to Options granted to residents therein.

          d.   "Board" means the Board of Directors of the Company

          e.   "Code" means the Internal Revenue Code of 1986, as amended.

          f.   "Committee"  means any  committee   appointed  by  the  Board  to
administer the Plan.

          g.   "Common Stock" means the common stock of the Company.

          h.   "Company" means U.S. Electricar, Inc., a California corporation.

          i.   "Consultant"  means any person  who is engaged by the  Company or
any  Parent or  Subsidiary  to render  consulting  or  advisory  services  as an
independent contractor and is compensated for such services.

          j.   "Continuing  Directors" means members of the Board who either (i)
have been Board members  continuously  for a period of at least  thirty-six (36)
months or (ii) have been Board members for less than  thirty-six (36) months and
were elected or nominated  for election as Board  members by at least a majority
of the Board  members  described  in clause  (i) who were still in office at the
time such election or nomination was approved by the Board.

          k.   "Continuous Status as an Employee,  Director or Consultant" means
that the employment,  director or consulting  relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as an
Employee, Director or Consultant shall not be considered interrupted in the case
of (i) any leave of absence  approved by the Company or (ii)


<PAGE>

transfers between  locations of the Company or between the Company,  its Parent,
any  Subsidiary,  or any successor.  A leave of absence  approved by the Company
shall include sick leave,  military  leave, or any other personal leave approved
by an authorized  representative of the Company. For purposes of Incentive Stock
Options,  no such leave may exceed ninety (90) days,  unless  reemployment  upon
expiration of such leave is guaranteed by statute or contract.

          l.   "Corporate    Transaction"    means   any   of   the    following
stockholder-approved transactions to which the Company is a party:

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

               ii.  the  sale,   transfer  or  other   disposition   of  all  or
substantially  all of the assets of the Company  (including the capital stock of
the  Company*s   subsidiary   corporations)  in  connection  with  the  complete
liquidation or dissolution of the Company; or

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

          m.   "Covered  Employee" means an Employee who is a "covered employee"
under  Section 162(m)(3) of the Code.

          n.   "Director" means a member of the Board.

          o.   "Employee"  means any person,  including  an Officer or Director,
who is an employee of the Company or any Parent or Subsidiary of the Company for
purposes of Section  422 of the Code.  The  payment of a  director's  fee by the
Company shall not be sufficient to constitute "employment" by the Company.

          p.   "Exchange  Act" means the  Securities  Exchange  Act of 1934,  as
amended.

          q.   "Fair Market  Value" means,  as of any date,  the value of Common
Stock determined as follows: 

               i.   Where there exists a public market for the Common Stock, the
Fair Market Value shall be (A) the closing  sales price for a Share for the last
market trading day prior to the time of the determination  (or, if no sales were
reported on that date, on the last trading date on which sales were reported) on
the stock exchange  determined by the Administrator to be the primary market for
the Common Stock or the Nasdaq National  Market,  whichever is applicable or (B)
if the  Common  Stock is not  traded on any such  exchange  or  national  market
system, the average of the closing bid and asked prices of a Share on the Nasdaq
Small Cap Market for the day prior to the time of the  determination  (or, if no
such  prices were  reported on that date,  on the last date on which such prices
were  reported),  in each case,  as reported in The Wall Street  Journal or such
other source as the Administrator deems reliable; or


                                       2.
<PAGE>

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

          r.   "Incentive  Stock Option" means an Option  intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.

          s.   "Non-Qualified  Stock  Option"  means an Option not  intended  to
qualify as an Incentive Stock Option.

          t.   "Officer"  means a person who is an officer of the Company within
the  meaning  of Section 16 of the  Exchange  Act and the rules and  regulations
promulgated thereunder.

          u.   "Option" means a stock option granted pursuant to the Plan.

          v.   "Option  Agreement"  means the written  agreement  evidencing the
grant of an Option  executed  by the  Company and the  Optionee,  including  any
amendments thereto.

          w.   "Optioned Stock" means the Common Stock subject to an Option.

          x.   "Optionee" means an Employee, Director or Consultant who receives
an Option under the Plan.

          y.   "Parent" means a "parent  corporation,"  whether now or hereafter
existing, as defined in Section 424(e) of the Code.

          z.   "Performance-Based Compensation" means compensation qualifying as
"performance-based compensation" under Section 162(m) of the Code.

          aa.  "Plan" means this 1996 Stock Option Plan.

          bb.  "Rule 16b-3" means Rule 16b-3  promulgated under the Exchange Act
or any successor thereto.

          cc.  "Share" means a share of the Common Stock.

          dd.  "Subsidiary"  means a  "subsidiary  corporation",  whether now or
hereafter existing, as defined in Section 424(f) of the Code.


                                       3.
<PAGE>

     3.   Stock Subject to the Plan.

          a.   Subject to the  provisions  of Section  10,  below,  the  maximum
aggregate  number of Shares  which may be  optioned  and sold  under the Plan is
10,000,000  Shares.  The Shares may be authorized,  but unissued,  or reacquired
Common Stock.

          b.   If an Option expires or becomes unexercisable without having been
exercised in full, or is  surrendered  pursuant to an Option  exchange  program,
such unissued or retained  Shares shall become  available for future grant under
the Plan (unless the Plan has terminated). Shares that actually have been issued
under the Plan shall not be returned to the Plan and shall not become  available
for future  distribution  under the Plan,  except  that if  unvested  Shares are
forfeited,  or repurchased by the Company at their original purchase price, such
Shares  shall become available for future grant under the Plan.

     4.   Administration of the Plan.

          a.   Plan Administrator.

               i.   Administration with Respect to Directors and Officers.  With
respect to grants of Options to Directors or Employees  who are also Officers or
Directors of the Company, the Plan shall be administered by (A) the Board or (B)
a Committee  designated by the Board,  which  Committee  shall be constituted in
such a manner as to satisfy  the  Applicable  Laws and to permit such grants and
related  transactions  under the Plan to be  exempt  from  Section  16(b) of the
Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall
continue to serve in its  designated  capacity until  otherwise  directed by the
Board.

               ii.  Administration   With  Respect  to  Consultants   and  Other
Employees. With respect to grants of Options to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee  designated by the Board, which Committee shall
be  constituted  in such a  manner  as to  satisfy  the  Applicable  Laws.  Once
appointed,  such Committee  shall  continue to serve in its designated  capacity
until  otherwise  directed  by the Board.  The Board may  authorize  one or more
Officers to grant such Options and may limit such  authority  by requiring  that
such Options must be reported to and ratified by the Board or a Committee within
six (6) months of the grant date,  and if so ratified,  shall be effective as of
the grant date.

               iii. Administration    With   Respect   to   Covered   Employees.
Notwithstanding  the  foregoing,  grants  of  Options  to any  Covered  Employee
intended to qualify as  Performance-Based  Compensation  shall be made only by a
Committee (or  subcommittee of a Committee)  which is comprised solely of two or
more Directors  eligible to serve on a committee  making  Options  qualifying as
Performance-Based  Compensation.  In the case of such Options granted to Covered
Employees, references to the "Administrator" or to a "Committee" shall be deemed
to be  references  to such  Committee or subcommittee.


                                       4.


<PAGE>

               iv.  Administration  Errors. In the event an Option is granted in
a manner  inconsistent  with the provisions of this  subsection (a), such Option
shall be presumptively valid as of its grant date to the extent permitted by the
Applicable Laws.

          b.   Powers of the  Administrator.  Subject to Applicable Laws and the
provisions of the Plan  (including  any other powers given to the  Administrator
hereunder),  and except as otherwise  provided by the Board,  the  Administrator
shall have the authority, in its discretion:

               i.     to select the Employees, Directors and Consultants to whom
Options may be granted from time to time hereunder;

               ii.    to  determine  whether  and to  what  extent  Options  are
granted hereunder;

               iii.   to  determine  the  number of Shares to be covered by each
Option granted hereunder;

               iv.    to  approve  forms of Option  Agreement  for use under the
Plan;

               v.     to  determine  the  terms  and  conditions  of any  Option
granted hereunder;

               vi.    to  establish  additional  terms,  conditions,   rules  or
procedures to accommodate the rules or laws of applicable foreign  jurisdictions
and to afford Optionees favorable treatment under such laws; provided,  however,
that no Option shall be granted  under any such  additional  terms,  conditions,
rules or procedures  with terms or conditions  which are  inconsistent  with the
provisions of the Plan;

               vii.   to amend the terms of any outstanding Option granted under
the Plan, including a reduction in the exercise price of any Option to reflect a
reduction  in the Fair Market  Value of the Common Stock since the grant date of
the  Option,  provided  that any  amendment  that  would  adversely  affect  the
Optionee's  rights  under an  outstanding  Option  shall not be made without the
Optionee's written consent;

               viii.  to  construe  and  interpret  the  terms  of the  Plan and
Options granted pursuant to the Plan; and

               ix.    to take such other action, not inconsistent with the terms
of the Plan, as the Administrator deems appropriate.

          c.   Effect of Administrator's Decision. All decisions, determinations
and  interpretations of the Administrator shall be conclusive and binding on all
persons.

     5.   Eligibility.  Non-Qualified Stock Options may be granted to Employees,
Directors  and  Consultants.  Incentive  Stock  Options  may be granted  only to
Employees.  An Employee,  Director or Consultant  who has been granted an Option
may,  if  otherwise  eligible,  be granted  additional  Options.  Options may be
granted to such Employees of the Company and its  subsidiaries  who are residing
in foreign jurisdictions as the Administrator may determine from time to time.

                                       5.

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     6.   Terms and Conditions of Options.

          a.   Designation of Options. Each Option shall be designated as either
an  Incentive   Stock  Option  or  a   Non-Qualified   Stock  Option.   However,
notwithstanding  such designation,  to the extent that the aggregate Fair Market
Value of Shares subject to Options  designated as Incentive  Stock Options which
become  exercisable  for the first time by an Optionee  during any calendar year
(under all plans of the Company or any Parent or Subsidiary)  exceeds  $100,000,
such excess  Options,  to the extent of the Shares covered  thereby in excess of
the foregoing  limitation,  shall be treated as Non-Qualified Stock Options. For
this purpose,  Incentive  Stock Options shall be taken into account in the order
in which they were  granted,  and the Fair Market  Value of the Shares  shall be
determined as of the date the Option with respect to such Shares is granted.

          b.   Conditions  of  Option.  Subject  to the terms of the  Plan,  the
Administrator  shall  determine the  provisions,  terms,  and conditions of each
Option  including,  but not limited to, the Option vesting schedule (which in no
case  shall be less than 20% per year over five  years  from the date of grant),
repurchase  provisions,  rights of first  refusal,  forfeiture  provisions,  and
satisfaction of any performance  criteria.  The performance criteria established
by the  Administrator may be based on any one of, or combination of, increase in
share price,  earnings per share,  total stockholder  return,  return on equity,
return on  assets,  return on  investment,  net  operating  income,  cash  flow,
revenue,  economic value added, personal management objectives, or other measure
of  performance  selected  by  the  Administrator.  Partial  achievement  of the
specified  criteria  may  result  in  vesting  corresponding  to the  degree  of
achievement as specified in the Option Agreement.

          c.   Term of Option.  The term of each Option shall be the term stated
in the Option Agreement,  provided, however, that the term of an Incentive Stock
Option  shall be no more  than ten (10)  years  from the date of grant  thereof.
However, in the case of an Incentive Stock Option granted to an Optionee who, at
the time the Option is granted,  owns stock  representing  more than ten percent
(10%) of the voting  power of all  classes of stock of the Company or any Parent
or  Subsidiary,  the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.

          d.   Transferability  of Options.  Incentive  Stock Options may not be
sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner
other  than  by  will  or by the  laws of  descent  or  distribution  and may be
exercised,   during  the  lifetime  of  the  Optionee,  only  by  the  Optionee.
Non-Qualified  Stock Options shall be transferable to the extent provided in the
Option Agreement.

          e.   Time of Granting  Options.  The date of grant of an Option  shall
for all purposes, be the date on which the Administrator makes the determination
to grant such Option, or such other date as is determined by the  Administrator.
Notice of the grant determination  shall be given to each Employee,  Director or
Consultant  to whom an Option is so granted  within a reasonable  time after the
date of such grant.

                                       6.

<PAGE>

     7.   Option Exercise Price, Consideration and Taxes.

          a.   Exercise  Price.  The  exercise  price for an Option  shall be as
follows:

               i.   In the case of an Incentive Stock Option:

                    (1)  granted to an Employee who, at the time of the grant of
such Incentive Stock Option owns stock  representing more than ten percent (10%)
of the  voting  power of all  classes  of stock of the  Company or any Parent or
Subsidiary,  the per Share exercise price shall be not less than one hundred ten
percent  (110%) of the Fair Market Value per Share on the date of grant.

                    (2) granted to any Employee other than an Employee described
in the preceding paragraph,  the per Share exercise price shall be not less than
one hundred  percent  (100%) of the Fair  Market  Value per Share on the date of
grant.

               ii.  In  the   case   of   Options   intended   to   qualify   as
Performance-Based  Compensation,  the per Share exercise price shall be not less
than one hundred  percent  (100%) of the Fair Market Value per Share on the date
of grant.

               iii. In the case of a Non-Qualified Stock Option:

                    (1)  granted  to a person  who,  at the time of the grant of
such Option,  owns stock  representing more than ten percent (10%) of the voting
power of all  classes of stock of the Company or any Parent or  Subsidiary,  the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.

                    (2)  granted to any  person,  the per Share  exercise  price
shall be no less than 85% of the Fair Market  Value per Share on the date of the
grant.

          b.   Consideration.  Subject to Applicable Laws, the  consideration to
be paid for the Shares to be issued  upon  exercise of an Option  including  the
method of payment, shall be determined by the Administrator (and, in the case of
an  Incentive  Stock  Option,  shall be  determined  at the time of  grant).  In
addition to any other types of consideration  the  Administrator  may determine,
the  Administrator  is authorized to accept as  consideration  for Shares issued
under the Plan the following:

               i.   cash;

               ii.  check;

               iii. delivery of Optionee*s  promissory  note with such recourse,
interest,  security,  and redemption  provisions provisions as the Administrator
determines as appropriate;

               iv.  surrender  of  Shares   (including   withholding  of  Shares
otherwise  deliverable  upon  exercise of the  Option)  which have a Fair Market
Value on the date of  surrender  equal to the  aggregate  exercise  price of the
Shares as to which said Option shall be exercised (but

                                       7.

<PAGE>

only to the  extent  that such  exercise  of the  Option  would not result in an
accounting  compensation  charge  with  respect  to the  Shares  used to pay the
exercise price unless otherwise determined by the Administrator);

               v.   delivery of a properly  executed  exercise  notice  together
with  such  other   documentation  as  the  Administrator  and  the  broker,  if
applicable,  shall  require to effect an exercise of the Option and  delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or

               vi.  any combination of the foregoing methods of payment.

          c.   Taxes.  No  Shares  shall  be  delivered  under  the  Plan to any
Optionee  or  other  person  until  such  Optionee  or  other  person  has  made
arrangements  acceptable  to  the  Administrator  for  the  satisfaction  of any
foreign,  federal,  state,  or  local  income  and  employment  tax  withholding
obligations,  including, without limitation, obligations incident to the receipt
of Shares or the disqualifying  disposition of Shares received on exercise of an
Incentive Stock Option.  Upon exercise of an Option,  the Company shall withhold
or collect from Optionee an amount sufficient to satisfy such tax obligations.

     8.   Exercise of Option.

          a.   Procedure for Exercise: Rights as a Stockholder.

               i.   Any Option  granted  hereunder  shall be exercisable at such
times and under such  conditions as determined  by the  Administrator  under the
terms of the Plan and specified in the Option Agreement.

               ii.  An  Option  shall be  deemed to be  exercised  when  written
notice of such  exercise  has been given to the Company in  accordance  with the
terms of the  Option by the  person  entitled  to  exercise  the Option and full
payment for the Shares with  respect to which the Option is  exercised  has been
received by the Company.  Until the issuance  (as  evidenced by the  appropriate
entry on the books of the Company or of a duly authorized  transfer agent of the
Company) of the stock  certificate  evidencing such Shares,  no right to vote or
receive  dividends or any other rights as a stockholder shall exist with respect
to Optioned Stock,  notwithstanding the exercise of an Option. The Company shall
issue (or cause to be issued) such stock  certificate  promptly upon exercise of
the Option.  No adjustment  will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued,  except as
provided in the Option  Agreement or Section 10, below.

          b.   Exercise of Option Following Termination of Employment,  Director
or Consulting Relationship.

               i.   Upon  termination of an Optionee's  Continuous  Status as an
Employee,  Director  or  Consultant,  other  than upon the  Optionee's  death or
disability,  the Optionee  may exercise his or her Option  within such period of
time as is  specified  in the Option  Agreement to the extent that the Option is
vested on the date of termination  (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option  Agreement,  the Option shall remain  exercisable
for three (3) months  following the Optionee's  

                                       8.

<PAGE>

termination.  If, on the date of  termination,  the Optionee is not vested as to
his or her entire  Option,  the Shares  covered by the  unvested  portion of the
Option shall revert to the Plan.  If, after  termination,  the Optionee does not
exercise his or her Option within the time specified by the  Administrator,  the
Option shall  terminate,  and the Shares  covered by such Option shall revert to
the Plan.

               ii.  Disability of Optionee.  If an Optionee's  Continuous Status
as an Employee,  Director or Consultant terminates as a result of the Optionee's
disability,  the  Optionee  may  exercise the Option to the extent the Option is
vested on the date of  termination,  but only within twelve (12) months from the
date of such  termination (and in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement). If such disability is
not a "disability"  as such term is defined in Section  22(e)(3) of the Code, in
the  case of an  Incentive  Stock  Option  such  Incentive  Stock  Option  shall
automatically  convert to a  Non-Qualified  Stock Option on the day three months
and one day following  such  termination.  If, on the date of  termination,  the
Optionee  is not  vested as to the  entire  Option,  the  Shares  covered by the
unvested portion of the Option shall revert to the Plan. If, after  termination,
the Option is not exercised within the time specified  herein,  the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.

               iii. Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised at any time within twelve (12) months  following the
date of death  (but in no event  later than the  expiration  of the term of such
Option as set forth in the Option Agreement) to the extent vested on the date of
death.  If, at the time of death,  the  Optionee  is not vested as to the entire
Option, the Shares covered by the unvested portion of the Option shall revert to
the Plan.  The Option may be exercised by the executor or  administrator  of the
Optionee's estate or, if none, by the person(s)  entitled to exercise the Option
under the Optionee's will or the laws of descent or distribution.  If the Option
is not  so  exercised  within  the  time  specified  herein,  the  Option  shall
terminate, and the Shares covered by such Option shall revert to the Plan.

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

     9.   Conditions Upon Issuance of Shares.

          a.   Shares shall not be issued  pursuant to the exercise of an Option
unless the  exercise of such Option and the issuance and delivery of such Shares
pursuant  thereto shall comply with all  Applicable  Laws,  and shall be further
subject  to the  approval  of  counsel  for the  Company  with  respect  to such
compliance.

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


                                       9.

<PAGE>

     10.  Adjustments  Upon  Changes  in Capitalization. Subject to any required
action by the stockholders of the Company,  the number of Shares covered by each
outstanding  Option,  and the number of Shares  which have been  authorized  for
issuance  under the Plan but as to which no  Options  have yet been  granted  or
which have been  returned to the Plan,  as well as the price per share of Common
Stock covered by each such outstanding Option, shall be proportionately adjusted
for any  increase  or decrease  in the number of issued  shares of Common  Stock
resulting from a stock split,  reverse stock split, stock dividend,  combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common  Stock.  Except
as expressly  provided herein,  no issuance by the Company of shares of stock of
any class, or securities  convertible  into shares of stock of any class,  shall
affect,  and no adjustment by reason hereof shall be made  with respect to, the
number or price of Shares subject to an Option.

     11.  Corporate Transactions.

          a.   In the event of any Corporate  Transaction,  each Option which is
at the time outstanding under the Plan  automatically  shall become fully vested
and exercisable and be released from any restrictions on transfer and repurchase
or forfeiture rights,  immediately prior to the specified effective date of such
Corporate  Transaction,  for all of the Shares at the time  represented  by such
Option.  However,  an outstanding  Option under the Plan shall not so fully vest
and be exercisable and released from such limitations if and to the extent:  (i)
such  Option is, in  connection  with the  Corporate  Transaction,  either to be
assumed by the successor  corporation or Parent thereof or to be replaced with a
comparable  Option with respect to shares of the capital  stock of the successor
corporation or Parent thereof, or (ii) such Option is to be replaced with a cash
incentive program of the successor  corporation which preserves the compensation
element of such Option  existing at the time of the  Corporate  Transaction  and
provides for  subsequent  payout in  accordance  with the same vesting  schedule
applicable  to such Option.  The  determination  of Option  comparability  under
clause (i) above shall be made by the Administrator, and its determination shall
be final, binding and conclusive.

          b.   Effective upon the consummation of the Corporate Transaction, all
outstanding  Options  under  the  Plan  shall  terminate  and  cease  to  remain
outstanding,  except to the  extent  assumed  by the  successor  company  or its
Parent.

          c.   The portion of any Incentive Stock Option  accelerated under this
Section 11 in connection with a Corporate  Transaction shall remain  exercisable
as an  Incentive  Stock  Option  under the Code only to the extent the  $100,000
dollar  limitation of Section 422(d) of the Code is not exceeded.  To the extent
such dollar  limitation  is exceeded,  the  accelerated  excess  portion of such
Option shall be exercisable as a Non-Qualified Stock Option.

     12. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company.
It  shall  continue  in  effect  for a term  of ten  (10)  years  unless  sooner
terminated.

                                      10.

<PAGE>

     13.  Amendment, Suspension or Termination of the Plan.

          a.   The Board may at any time amend,  suspend or terminate  the Plan.
To the extent necessary to comply with Applicable Laws, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.

          b.   No Option may be granted  during  any  suspension  of the Plan or
after termination of the Plan.

          c.   Any  amendment,  suspension or  termination of the Plan shall not
affect Options already granted,  and such Options shall remain in full force and
effect as if the Plan had not been  amended,  suspended  or  terminated,  unless
mutually  agreed  otherwise  between the Optionee and the  Administrator,  which
agreement must be in writing and signed by the Optionee and the Company.

     14.  Reservation of Shares.

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

          b.   The  inability  of the  Company  to  obtain  authority  from  any
regulatory body having jurisdiction,  which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell  such  Shares  as to which  such  requisite  authority  shall not have been
obtained.

     15.  No Effect on Terms of  Employment. The Plan shall not confer  upon any
Optionee any right with respect to  continuation  of  employment  or  consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's  right to terminate  his or her  employment or consulting
relationship at any time, with or without cause.

     16.  Stockholder  Approval.  The grant of Incentive Stock Options under the
Plan shall be subject to approval  by the  stockholders  of the  Company  within
twelve  (12)  months  before  or  after  the  date  the  Plan is  adopted.  Such
stockholder  approval shall be obtained in the degree and manner  required under
Applicable Laws. The  Administrator  may grant Incentive Stock Options under the
Plan prior to approval by the stockholders, but until such approval is obtained,
no  such  Incentive  Stock  Option  shall  be  exercisable.  In the  event  that
stockholder  approval  is not  obtained  within  the twelve  (12)  month  period
provided above,  all Incentive Stock Options  previously  granted under the Plan
shall terminate.

     17.  Information to Optionees and Purchasers.  The Company shall provide to
each Optionee,  not less  frequently than annually,  copies of annual  financial
statements.  The Company shall also provide such  statements to each  individual
who acquires Shares pursuant to the Plan while such individual owns such Shares.
The Company  shall not be  required to provide  such  statements  to  Employees,
Directors or  Consultants  whose duties in  connection  with the Company  assure
their access to equivalent information.

                                      11.