EXHIBIT 10.4

                         NATIONAL COMPUTER SYSTEMS, INC.
                     NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN


1.   Purpose of Plan

     This  plan  shall  be  known  as  the  "National  Computer  Systems,   Inc.
Non-Employee  Director Stock Option Plan" and is hereinafter  referred to as the
"Plan." The purpose of the Plan is to promote the interests of National Computer
Systems, Inc., a Minnesota corporation (the "Company"), by enhancing its ability
to attract and retain the services of experienced and knowledgeable non-employee
directors and by providing  additional  incentive for such directors to increase
their interest in the Company's long-term success and progress.  Options granted
under this Plan shall be  nonqualified  stock  options  which do not  qualify as
incentive  stock  options  within the  meaning of Section  422A of the  Internal
Revenue Code of 1986, as amended (the "Code").

2.   Stock Subject to Plan

     Under this Plan,  options may be granted for shares of the Company's Common
Stock,  $03.  par value.  The Common  Stock  subject to options  shall be either
authorized but unissued shares or shares  reacquired by the Company.  Subject to
the adjustment as provided in Section 10 hereof, the maximum number of shares of
Common Stock on which options may be exercised  under this Plan shall be 200,000
(after giving effect to the 2-for-1 stock split declared in March, 1998) shares.
If an  option  under  the Plan  expires,  or for any  reason  is  terminated  or
unexercised with respect to any shares, such shares shall again be available for
options thereafter granted during the term of the Plan.

3.   Administration of Plan

     The Plan shall be  administered  by the Board of  Directors  of the Company
(the "Board"). The Board shall have the authority, in its discretion, subject to
the express provisions of this Plan, to interpret the Plan, to prescribe, amend,
and rescind rules and  regulations  relating to the Plan,  and to make all other
determinations  necessary or advisable for the  administration  of the Plan. The
Board's determinations on the foregoing matters shall be final and conclusive.

4.   Eligibility

     Upon  approval  of the  Plan by the  Board of  Directors,  but  subject  to
approval  of the Plan by  shareholders  of the  Company  pursuant  to Section 13
hereof,  each  director of the Company who is not  otherwise  an employee of the
Company  or any  subsidiary  of  the  Company  (an  "Eligible  Director")  shall
automatically be granted, on each date that he or she is elected or reelected as
a director of the  Company,  an option to acquire  3,000  shares of Common Stock
under the Plan.

5.   Price

     The option price for all options  granted  under the Plan shall be the fair
market  value of the  shares  covered  by the  option on the date the  option is
granted. For purposes of this Plan, the fair market value of the Common Stock on
a given date shall be (i) the last trade  price of the Common  Stock as reported
on the NASDAQ  National  Market System on such date, if the Common Stock is then
quoted on the NASDAQ  National  Market System;  or (ii) the closing price of the
Common Stock on such date on a national securities exchange, if the Common Stock
is then being  traded on a national  securities  exchange.  If on the date as of
which  the fair  market  value  is being  determined,  the  Common  Stock is not
publicly traded, then the next preceding date on which there was a trade will be
used.

6.   Term

     Each option and all rights and obligations thereunder shall, subject to the
provisions  of Section 8 herein,  expire ten years from the date of  granting of
the option.

7.   Exercise of Option

     (a) Options granted under the Plan shall not be exercisable for a period of
six months after date of grant,  or until  shareholder  approval of the Plan has
been obtained,  whichever  occurs later,  but thereafter  will be exercisable in
full at any time or from time to time during the term of the option,  subject to
the provisions of Section 8 hereof

     (b) The exercise of any option granted hereunder shall only be effective at
such time as counsel to the Company shall have  determined that the issuance and
delivery of Common Stock pursuant to such exercise will not violate any state or
federal securities or other laws. An optionee desiring to exercise an option may
be required by the Company,  as a condition of the effectiveness of any exercise
of an option granted hereunder,  to agree in writing that all Common Stock to be
acquired  pursuant  to such  exercise  shall be held for his or her own  account
without a view to any further  distribution  thereof,  that the certificates for
such shares shall bear an appropriate legend to that effect and that such shares
will not be  transferred  or disposed of except in  compliance  with  applicable
federal and state securities laws.

     (c) An optionee electing to exercise an option shall give written notice to
the  Company  of such  election  and of the  number  of shares  subject  to such
exercise.  The full  purchase  price of such shares shall be tendered  with such
notice of  exercise.  Payment  shall be made to the  Company  either (i) in cash
(including  check,  bank  draft  or  money  order),  or (ii) by  delivering  the
Company's  Common Stock already owned by the optionee having a fair market value
on the date of exercise equal to the full purchase price of the shares, or (iii)
by any  combination  of cash and the method  specified in (ii) of this sentence;
provided,  however,  that an optionee  shall not be entitled to tender shares of
Common Stock pursuant to  successive,  substantially  simultaneous  exercises of
options granted hereunder or in any manner tantamount to the technique  commonly
referred to as "pyramiding."  For purposes of the preceding  sentence,  the fair
market value of Common Stock tendered shall be determined as provided in Section
5  hereof  as of the date of  exercise.  Until  such  person  has been  issued a
certificate or certificates  for the shares subject to such exercise,  he or she
shall possess no rights as a shareholder with respect to such shares.

8.   Effect of Termination of Directorship or Death

     (a) In the event  that an  optionee  shall  cease to be a  director  of the
Company for any reason other than his or her gross and willful misconduct or his
or her death,  such optionee  shall have the right to exercise the option at any
time within the remaining term of the option.

     (b) In the event  that an  optionee  shall  cease to be a  director  of the
Company by reason of his or her gross and willful  misconduct  during the course
of his or her service as a director of the Company, including but not limited to
wrongful  appropriation  of funds of the Company,  or the  commission of a gross
misdemeanor or felony, any unexercised option granted pursuant to the Plan shall
be terminated as of the date of the misconduct.

     (c) If the  optionee  shall  die and such  optionee  shall  not have  fully
exercised any option granted under the Plan, such option may be exercised at any
time   within   twelve   months   after  his  or  her  death  by  the   personal
representatives,  administrators or, if applicable,  by any person or persons to
whom the option is  transferred  by will or the  applicable  laws of descent and
distribution,  to the extent of the full number of shares he or she was entitled
to purchase under the option on the date of death,  and subject to the condition
that no option  shall be  exercisable  after the  expiration  of the term of the
option.

     (d) Nothing in this Plan or in any agreement  hereunder shall confer on any
optionee any right to continue as a director of the Company or affect in any way
any legal rights with respect to termination of such  directorship or removal of
such optionee as a director.

9.   Non-Transferability

     No  option  granted  under  the Plan  shall be  transferable  by  optionee,
otherwise  than by will or the laws of descent or  distribution  as  provided in
Section  8(c) herein.  During the  lifetime of an optionee,  the option shall be
exercisable only by such optionee.

10.  Dilution or Other Adjustments

     If  there  shall  be  any  change  in  the  Common  Stock  through  merger,
consolidation,  reorganization,  recapitalization,  stock  dividend (of whatever
amount),  stock split or other change in the  corporate  structure,  appropriate
adjustments in the Plan and  outstanding  options shall be made. In the event of
any such changes,  adjustments shall include, where appropriate,  changes in the
aggregate  number of shares subject to the Plan, the number of shares subject to
outstanding options and the exercise prices thereof in order to prevent dilution
or enlargement of option rights.

11.  Amendment or Discontinuance of Plan

     The  Board  of  Directors  may  amend or  discontinue  the Plan at any time
subject to  applicable  law and  regulations.  The Board of Directors  shall not
alter or impair  any  option  theretofore  granted  under the Plan  without  the
consent of the holder of the option.

12.  Effective Date and Termination of Plan

     (a) The Plan was  approved by the Board of  Directors on February 27, 1989,
and  shall  be  approved  by  shareholders  of  the  Company  within  12  months
thereafter.

     (b) Unless the Plan shall have been  discontinued as provided in Section 11
hereof,  the Plan shall  terminate on January 31, 1999. No option may be granted
after such termination, but termination of the Plan shall not without consent of
the  optionee,  alter or impair  any  rights  or  obligations  under any  option
theretofore granted.

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Plan  approved by  stockholders  on May 25,  1989.  Plan amended by directors on
February 1, 1997. Plan amended by directors on March 3, 1998.