Document:

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                                                                    EXHIBIT 10.8

                        ASSET PURCHASE AND SALE AGREEMENT

      This Asset Purchase and Sale Agreement is made this 14th day of May,
2001 between CORTELCO SYSTEMS PR, INC., a Puerto Rico corporation ("Buyer"),
and OCHOA TELECOM, INC., a Puerto Rico corporation ("Seller").

                                    RECITALS

      A. Seller owns all the assets used in the operation of its telephone
interconnect business (the "Business").

      B. Buyer wishes to purchase, and Seller wishes to sell, the Business (as
hereinafter defined) and the Assets (as hereinafter defined), upon the terms set
forth below.

                                    AGREEMENT

      In consideration of the foregoing recitals, which are incorporated herein
and made a part hereof, the mutual covenants herein contained and other good and
valuable consideration (the receipt, adequacy and sufficiency of which are
hereby acknowledged by the parties by their execution hereof), the parties
hereto, intending to be legally bound, hereby agree as follows:

                                    ARTICLE 1
                            DEFINITIONS; CONSTRUCTION

      Section 1.1 DEFINITIONS. For purposes of this Agreement, unless the
context clearly indicates otherwise, the following capitalized terms have the
following meanings:

      "Agreement" means this Asset Purchase and Sale Agreement, including all
Exhibits and Schedules hereto.

      "Accounts Receivables" means all trade accounts receivable and all notes,
bonds and other evidences of indebtedness of, and rights to receive payments
arising out of, sales occurring in the conduct of the Business, including, but
not limited to the accounts receivable listed in Exhibit A, and the security
arrangements and collateral related thereto, including any rights of or any
other actions or proceedings which have been commenced in connection therewith.

      "Applicable Law" means any applicable law, statute, rule, regulation,
judgment or ordinance of any Governmental Authority to which Seller, Buyer, the
Business or the Assets is subject.

      "Assets" means (a) the Personal Property, (b) the Contracts, (c) the
Account Receivables, td) the cash, revenues and collections described in Section
6.8 hereof, and (e) the Other Assets, described in Exhibit A.

      "Assumed Liabilities" has the meaning set forth in Section 2.3 hereof.

      "Business" means the telephone interconnect business of the Seller.
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      "Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required to close under the laws of the
United States or the Commonwealth.

      "Buyer" has the meaning set forth in the opening paragraph of this
Agreement.

      "Closing" has the meaning set forth in Section 3.1.

      "Closing Date" has the meaning set forth in Section 3.1.

      "Commonwealth" means the Commonwealth of Puerto Rico.

      "Confidential Information" means information concerning the Business which
is nonpublic, confidential, or proprietary in nature and shall include all
information furnished Buyer by or on behalf of Seller, whether written or oral,
or as obtained upon a review of the Business and the Assets.

      "Contracts" means the agreements described on EXHIBIT B.

      "Contractual Obligation" means any obligation, agreement or undertaking,
whether oral or written.

      "Disclosure Schedule" means collectively the schedules prepared by Seller
and delivered to Buyer upon the execution of this Agreement.

      "Dollar" or "$" means United States of America dollars.

      "Encumbrance" means any mortgage, deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lease, lien (statutory or otherwise), security
interest or preferential arrangement of any kind or nature whatsoever, including
any conditional sale or other title retention agreement.

      "Environmental Laws" means all Applicable Laws existing as of the Closing
Date relating to the protection of the environment, including all applicable
requirements pertaining to reporting, licensing, permitting, investigation and
remediation of emissions, discharges, releases or threatened releases of
Hazardous Materials, whether solid, liquid or gaseous in nature, into the air,
surface water, ground water or land, or relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, whether solid, liquid or gaseous in nature.

      "Excluded Assets" means all assets, documents, and items not listed on
EXHIBIT A.

      "GAAP" means United States generally accepted accounting principles
consistently applied for general purpose users set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Start Board or in such other statements by such other entity as may
be approved by a significant segment of the accounting profession.
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      "Governmental Authority" means the Government of the United States, the
commonwealth and any political subdivision or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
thereto.

      "Hazardous Material" means any substance: (a) the presence of which
requires investigation or remediation under any Environmental Law; or (b) which
is or becomes defined as a "hazardous waste" or "hazardous substance" under any
Environmental Law.

      "Indemnifiable Losses" has the meaning set forth in Section 8.2.

      "Inventory" means any and all of the following of the Seller held for use
or sale exclusively in connection with the Business: (a) any and all
inventories, including raw materials, work in process, finished goods and
supplies, (b) all such property which has been returned, repossessed or stopped
in transit and (c) all bills of lading, warehouse receipts or documents of
relating to, covering or evidencing any right, title, interest or claim in or to
any of the foregoing.

      "Lease Agreement" means the lease agreement substantially in the form of
EXHIBIT C.

      "Material Adverse Change" means a material adverse change in the Assets or
the Business (financially or otherwise), taken as a whole.

      "Material Adverse Effect" means an effect that would result in a Material
Adverse Change in prices of products, raw materials or component products of 15%
or more.

      "Noncompetition Agreement" means the noncompetition agreement
substantially in the term of EXHIBIT D.

      "Other Assets" means all assets owned by the Seller and used exclusively
in the Business, wherever located, including all records, files, invoices, sales
records, sales correspondence, price fits. Supplies, correspondence and
memoranda, customer and supplier lists, final working drawings, plans and
specifications, shop drawings, and change orders, but excluding 'the contracts,
the Personal Property, and the Excluded Assets.

      "Party" means the Buyer and the Seller.

      "Permit" means all approvals, authorizations, consents, licenses,
franchises, orders and other permits of any Governmental Authority.

      "Permitted Encumbrances" means (a) any Encumbrances for taxes and
assessment, not yet past due, (b) mechanics', workmen's, materialmen's,
landlord's, carriers' or other like Encumbrances, (c) Encumbrances reflected in
the Schedules hereto, and (d) any Encumbrances that do not materially interfere
with the use by the Seller of the property subject thereto or affected thereby
or otherwise do not materially impair the results of operations or financial
results of the Business considered as a whole.

      "Person" means any natural person, corporation, limited partnership,
general partnership, joint venture, association, company, trust, joint stock
company, bank, trust company, land trust,
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vehicle trust, business trust, real estate investment trust, estate, limited
liability company or other organization irrespective of whether it is a legal
entity, and any Governmental Authority.

      "Personal Property" means all furniture, machinery, equipment, fixtures,
trade fixtures, leasehold improvements, shelving, tools, spare parts, supplies,
storage tanks, piping, valves, pumps, motors, Inventory, and any and all other
property, all to the extent, and only to the extent, that such property is owned
by Seller and used exclusively in the Business.

      "Purchase Price" has the meaning set forth in Section 2.5 hereof.

      "Responsible Officer" means a president, a chief executive officer, a
chief financial officer, a vice president, secretary or a treasurer of a
corporation or comparable entity.

      "Retained Liabilities" has the meaning set forth in Section 2.4.

      "Seller" has the meaning set forth in the opening paragraph of this
Agreement.

      "Seller's Knowledge" shall mean that wherever the phrase "Seller's
knowledge" or "knoll ledge of the Seller" is used in connection with any
representation and warranty made by Seller hereunder, the representation and
warranty so qualified shall be deemed to be made by the Seller on the basis of
the knowledge of its directors, officers or shareholders.

      "Tax" means any tax, charge, fee, levy, duty, impost, withholding or other
assessment, together with any interest and penalties imposed by any Governmental
Authority.

      Section 1.2 CONSTRUCTION. Unless the context of this Agreement clearly
requires otherwise: (a) references to the plural include the singular and vice
versa; (b) references to any Person include such Person's successors and
assigns; (c) references to one gender include all genders: (d) "including" is
not limited but is inclusive; (e) the words "hereof', "herein", "hereby",
"hereunder" and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement; (f) article,
section, subsection, Exhibit and Schedule references are to this Agreement
unless otherwise specified; (g) reference to any agreement including this
Agreement), document or instrument means such agreement, document or instrument
as amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms hereof.

                                    ARTICLE 2
                           PURCHASE AND SALE OF ASSETS

      Section 2.1 PURCHASE AND SALE. Subject to the terms and conditions hereof,
on the closing Date, Seller agrees to sell, assign, transfer, grant, bargain,
deliver and convey to Buyer, and Buyer agrees to purchase from Seller, all of
the right, title and interest that Seller possesses and has the right to
transfer in and to the Assets and the Business (as the same shall exist at the
close of business on the Closing Date). Notwithstanding any provision hereof to
the contrary, the assets shall not include, and Buyer shall not acquire, the
Excluded Assets.

      Section 2.2 ASSIGNABILITY AND CONSENTS. Anything in this Agreement to the
contrary notwithstanding, this Agreement shall not constitute agreement to
assign any order, contract,
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agreement, lease, commitment, license, franchise, permits, authorization or
concession (the "Accords") if an attempted assignment thereof, without the
consent of another party thereto or any Governmental Authority, would constitute
a breach of any such Accord or in any way affect the rights of Seller
thereunder. Seller shall use all reasonable efforts and Buyer shall cooperate in
all reasonable respects with Seller to obtain all consents and waivers and to
resolve all impracticalities of assignments or transfers necessary to convey the
Assets to Buyer.

      Section 2.3 ASSUMED LIABILITIES. At the Closing, Buyer shall assume, and
shall thereafter pay, perform and discharge as and when due the following
liabilities and obligations relating to the Business (collectively referred to
hereinafter as the "Assumed Liabilities"):

            (a) CONTRACTS. All liabilities and obligations of Seller arising
      under the Contracts, except the distribution contracts enclosed in Exhibit
      B for which the Buyer will assume the obligations of Seller only as to
      events or conditions occurring or existing in connection with, or that
      arise out of, Buyer's operation of the Business or its ownership, use,
      possession or sale of the Assets on or after the Closing Date;

            (b) PERSONAL PROPERTY. All liabilities and obligations of Seller
      under any lease of Personal Property, including, without limitation, all
      liabilities and obligations with respect to rental payments due thereunder
      which are based on events or conditions Occurring or existing in
      connection with, or arise out of, Buyer's operation of the Business or its
      ownership, use, possession or sale of the Assets on and after the Closing
      Date;

            (c) POST-CLOSING OPERATION. All obligations, liabilities and claims
      which are based on events or conditions occurring or existing in
      connection with, or arise out of, Buyer's operation of the Business or its
      ownership, use, possession or sale of the Assets on and after the Closing
      Date, or for which claim is first made on or after the Closing Date,
      including, without limitation, claims for product warranty, refunds,
      returns, personal injury and property damage and all other liabilities and
      obligations, relating to products sold or shipped or services provided on
      or after the Closing Date except for Retained Liabilities; and

            (d)   CERTAIN OTHER LIABILITIES. All liabilities and obligations
      of Seller set forth in Section 2.3(d) of the Disclosure Schedule hereto.

      Section 2.4 RETAINED LIABILITIES. Except as provided in Section 2.3,
Seller shall, retain, and Buyer shall not assume, or be responsible or liable
with respect to, any of the following liabilities and obligations of Seller
(collectively referred to hereinafter as the "Retained Liabilities"):

            (a) LIABILITIES RELATING TO THE SALE OF ASSETS. Any finder's or
      broker's fees or any fees or expenses of any attorneys or accountants
      incurred by Seller, or its directors, officers, shareholders or agents, as
      a result of this Agreement or the transactions contemplated hereby,
      whether incurred prior to, at, or subsequent to the Closing Date;

            (b)   TAXES. Any liabilities or obligations of Seller for Taxes;
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            (c)   LIABILITIES RELATING TO EXCLUDED ASSETS. Any liability or
      obligation arising with respect to the Excluded Assets; and

            (d) ALL OTHER LIABILITIES. All liabilities and obligations of Seller
      arising out of the operation of the Business or use of the Assets prior to
      the date hereof, including, but not limited to, contractual, labor,
      employment, environmental, tort and liabilities to employees terminated by
      Seller prior to the Closing Date and claims for defective products arising
      from an Occurrence prior is the Closing Date. For all purposes under this
      Agreement, "Occurrence" means an accident including continuous or repeated
      exposure to substantially the same general conditions, which result in
      bodily injury or property damage, either intended or expected by Sellers.

      Section 2.5 PURCHASE PRICE.

      At the Closing, Buyer, in consideration for the sale, transfer, conveyance
and assignment of the Assets, shall, in addition to its assumption of the
Assumed Liabilities, deliver and pay to Seller a purchase price of One Million
Four Hundred Thousand Dollars ($l,400,000.00) (the "Purchase Price").

      Section 2.6 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid by
Buyer to Seller as follows:

            (a) Eight Hundred Thousand Dollars ($800,000.00) to be paid at the
      Closing, to the extent that First Bank approves a $500,000 loan to the
      Buyer on or before the Closing Date. Otherwise, the Buyer shall pay the
      amount of $400,000 at Closing and the balance of the Purchase Price in
      installments as follows (i) 90 days after the Closing, $250,000 (ii) 180
      days after the Closing, $350,000; and (iii) 270 days after the Closing
      Date, $400,000.

            (b)   One Hundred and Fifty Thousand Dollars ($150,000.00) to be
      paid one hundred eighty (180) days after the Closing;

            (c)   Four Hundred and Fifty Thousand Dollars ($450,000.00) to be
      paid two hundred seventy (270) days after the Closing;

      As long as payments are made not later than their due date, interest will
not accrue. Any payment made 15 days after the due date of any installment, will
accumulate annual interest at the rate of 8% from the Closing Date until fully
paid and will be payable monthly from there on. The amounts specified in Section
2.6(b), (c) and (d) (the "Deferred Purchase Price") and interest thereon as
above stated shall be evidenced by a promissory note to be delivered by Buyer to
Seller. The obligation evidenced by said promissory note shall be collateralized
with a security interest hereof and financing statement over the
Assets pursuant to Chapter 9-Secured Transactions-of the Puerto Rico Commercial
Transactions Act, under terms reasonably satisfactory to Seller and Buyer. The
entire principal sum of the Deferred Purchase Price (as defined in Section 2.6),
from time to time outstanding, and all accrued interest thereon shall become due
and payable at the option of Seller after default in the payment of any
installment for a period of 90 days.
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                                    ARTICLE 3
                         CLOSING: CONDITIONS TO CLOSING

      Section 3.1 CLOSING. Subject to the terms and conditions of this
Agreement, the closing of the purchase and sale contemplated herein (the
"Closing") shall occur at the offices of Biddler, Gonzalez & Rodriguez LLP,
Attorneys and Counselors at Law, Sixth Floor, BBV Plaza Building, Hato Rey,
Puerto Rico, or such other place upon which the Parties may mutually agree, at
10:00 AM Puerto Rico time on the later of (i) May 29, 2001, or (ii) the second
Business Day following the date on which the last condition set forth in this
Article 3 is fulfilled or waived, or (iii) at such other date upon which the
Parties may mutually agree (the "Closing Date"), but in no event later than July
lst 2001.

      Section 3.2 SELLER'S CONDITIONS. All of the obligations of Seller
hereunder are subject to the satisfaction, on or prior to the Closing Date, of
the following conditions precedent unless, and only to the extent, waived in
writing by Seller:

            (a) the representations and warranties of Buyer herein shall be true
      and correct in all material respects as of the Closing Date as though made
      at such time (except for any representation or warranty made only as of a
      specified date);

            (b) the covenants, agreements and undertakings of Buyer required by
      this Agreement to be performed by Buyer on or prior to the Closing Date
      shall have been duly complied with in all material respects as of the
      Closing Date;

            (c) all material consents of third parties set forth on Section 5.5
      of the Disclosure Schedule required for the consummation of the
      transactions contemplated Hereby shall have been received;

            (d) no proceeding, investigation or inquiry shall be pending or
      threatened by or before any arbitrator or Governmental Authority to
      enjoin, restrain, or prohibit, or which questions the legality of this
      Agreement or the consummation of the transactions contemplated hereby, and
      no Applicable Law which would prevent or make illegal the consummation of
      the transactions contemplated hereby shall have been promulgated, enacted,
      entered or enforced by any Governmental Authority;

            (e) at the Closing, Buyer shall have tendered to Seller the
      following, executed in a manner and otherwise in form and substance
      reasonably satisfactory to Seller:

                  (i)   the consideration specified in Section 2.6(a) hereof;

                  (ii)  promissory notes in the amounts specified in Section
            2.6(b)(c), and (d);

                  (iii) UCC Financing Statement

                  (iv) an instrument of assumption for the Assumed Liabilities,
            in form and substance reasonably acceptable to the Seller, and such
            other documents reasonably required by Seller in order to evidence
            the Buyer's assumption of the
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            Assumed Liabilities, including Seller's obligations under the
            Contracts, and any lease of Personal Property included in the
            Assets;

                  (v) a copy of resolutions duly adopted by the board of
            directors and, to the extent required, the shareholders of Buyer
            authorizing the execution and delivery of this Agreement and the
            consummation of the transactions herein contemplated to be
            consummated by Buyer, duly certified, as of the Closing Date, by the
            secretary or any assistant secretary to Buyer;

                  (vi) a certificate, dated as of the Closing Date, of a
            Responsible Officer of Buyer to the effect that all of the
            conditions precedent to Seller's obligations in Section 3.2 that
            have not been waived by Seller have been satisfied, and that the
            representations and warranties of Buyer herein are true and correct
            in all material respects; and

                  (vii) a certificate of the secretary or assistant secretary of
            Buyer that certifies the names and signatures of the officers of
            Buyer who have been authorized to execute and deliver this Agreement
            and any other agreement executed and delivered on behalf of Buyer in
            connection herewith;

      Section 3.3 BUYER'S CONDITIONS. All of the obligations of Buyer hereunder
are subject to the satisfaction, on or prior to the Closing Date, of the
following conditions precedent unless, and only to the extent, waived in writing
by Buyer:

            (a) the representations and warranties of Seller herein shall be
      true and correct in all material respects as of the Closing Date as though
      made at such time (except for any representation and warranty made only as
      of a specified date), excluding, however, changes contemplated by this
      Agreement and changes which occur as a result of the operation of the
      Business in the ordinary course subsequent to the date hereof and on or
      prior to the Closing;

            (b) the covenants, agreements and undertakings of Seller required by
      this Agreement to be performed by Seller on or prior to the Closing Date
      shall have been duly complied with in all material respects;

            (c) no Material Adverse Change has occurred since the date of this
      Agreement;

            (d) all material consents of third parties set forth on Section 4.6
      of the Disclosure Schedule required for the consummation of the
      transactions contemplated hereunder shall have been received;

            (e) no proceeding, investigation or inquiry shall be pending or
      threatened by or before any arbitrator or Governmental Authority to
      enjoin, restrain or prohibit, or which question the legality of, this
      Agreement or the consummation of the transactions contemplated hereby, and
      no Applicable Law which would prevent or make illegal the consummation of
      the transactions contemplated hereby shall have been promulgated, enacted,
      entered or enforced by any Governmental Authority;
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            (f)   compliance with the provision of the Puerto Rico Bulk Sales
      Act, as provided in Section 6.7 of the Agreement;

            (g) at the Closing, Seller has tendered to Buyer the following,
      executed in a manner and otherwise in form and substance reasonably
      satisfactory to Buyer:

                  (i) a bill of sale and certificate of title, where applicable,
            transferring the tangible Personal Property owned by Seller to
            Buyer;

                  (ii) the Noncompetition Agreement duly executed by Seller;

                  (iii) the Lease Agreement;

                  (iv) instruments of assignment, to evidence the Seller's
            assignment to Buyer of its rights under the leases of Personal
            Property and Contracts included in the Assets;

                  (v) a copy of resolutions duly adopted by the board of
            directors of Seller authorizing the execution and delivery of this
            Agreement and the consummation of the transactions herein
            contemplated to be consummated by Seller, duly certified, as of the
            Closing Date, by the secretary or any assistant secretary to Seller;

                  (vi) a certificate, dated as of the Closing Date, of a
            Responsible Officer of Seller to the effect that all of the
            conditions precedent to Buyer's obligations in Section 3.3 that have
            not been waived by Buyer have been satisfied, and that the
            representations and warranties of Seller herein are true and correct
            in all material respects; except for changes contemplated by this
            Agreement and changes which occur as a result of the operation of
            the Business in the ordinary course subsequent to the date hereof
            and on or prior to the Closing; and

                  (vii) a certificate of the secretary or an assistant secretary
            of Seller that contains certifying the names and signatures of the
            officers of Seller who have been authorized to execute and deliver
            this Agreement and any other agreement executed and delivered on
            behalf of Seller in connection herewith;

                                    ARTICLE 4
                    REPRESENTATIONS AND WARRANTIES OF SELLER

      Except as set forth on the Disclosure Schedule, Seller hereby represents
and warrants to Buyer as follows:

      Section 4.1 CORPORATE ORGANIZATION OF THE SELLER. Seller is a duly
organized and validly existing corporation in good standing under the laws of
the Commonwealth of Puerto Rico. Seller has the power and authority to own,
lease and operate the Assets which it owns and to conduct the Business as
presently being conducted.
<PAGE>
      Section 4.2 POWER AND AUTHORITY TO SELL. Sell full right, power and
authority to enter into this Agreement and the other agreements, documents and
instruments to be executed and delivered by Seller pursuant hereto and to
consummate the transactions contemplated of it hereunder and thereunder, and the
consummation by Seller of all transactions contemplated of it hereunder and
thereunder has been duly authorized by all necessary corporate action. This
Agreement constitutes, and when executed and delivered each of the other
agreements, documents and instruments to be executed by Seller pursuant hereto
will constitute a legal, valid and binding obligation of the Seller enforceable
against the Seer in accordance with its terms except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization or moratorium laws
or other similar laws affecting enforcement of creditor's rights generally or by
general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law).

      Section 4.3 TAXES. Seller has timely filed, all federal, Commonwealth,
local and foreign Tax reports and returns required to be filed by it for the
Business prior to the date hereof, and the full amount of Taxes, if any,
together with interest and penalties thereon, shown to be due on such Tax
returns have been timely paid. To the knowledge of Seller, the foregoing Tax
returns reflected accurately the facts regarding the income, business, assets,
operations and activities of the Business and any other information required to
be shown thereon. To the knowledge of Seller, there are no claims pending
against Seller for deficient or past due Taxes, nor is any unassessed Tax
deficiency proposed against Seller.

      Section 4.4 NO CONFLICT OR VIOLATION. Neither the execution and delivery
by Seller of this Agreement nor the consummation of the transactions
contemplated to be consummated by Seller hereby nor compliance by Seller with
any of the provisions hereof will: (i) violate or conflict with any provision of
the certificate of incorporation, bylaws, or comparable organizational documents
of Seller; (ii) violate or conflict with, in any material respect any Applicable
Law, or any order, judgment, writ, injunction,, decree or award applicable to
Seller, or constitute an event which, with the giving of notice, lapse of time,
or both, would result in any such violation or conflict; (iii) result in a
violation or breach of, or constitute a default (or an event which, with the
giving or notice or the lapse of time or both, would become a default) under any
material agreement, note, bond, mortgage, indenture, license, permit or
instrument to which Seller is a party or by which any of the Assets are bound,
or (iv) result in the imposition of any Encumbrance on any Asset (other than
Permitted Encumbrances), or an event which, with the giving of notice, lapse of
time, or both, would result in any such imposition; excluding from the foregoing
clauses (i) through (iv) such violations, conflicts, breaches, defaults, and
Encumbrances which, in the aggregate, would not have a Material Adverse Effect.

      Section 4.5 LITIGATION ARID PROCEEDINGS. Except as set forth in Section
4.5 of the Disclosure Schedule there is no action, suit, proceeding or
investigation pending or, to the knowledge of Seller, threatened against or
directly affecting the Assets or the Business before any Governmental Authority
which challenges the validity of this Agreement or otherwise seeks to prevent
the consummation of the transactions contemplated hereunder or which, if
adversely determined, would have a Material Adverse Effect. No judgment, order,
writ, injunction, decree or assessment of any Governmental Authority is
presently i effect which would have a Material Adverse Effect.
<PAGE>
      Section 4.6 CONSENTS AND APPROVALS. Except set forth on Section 4.6 of the
Disclosure Schedule, no consent, approval or authorization of any Person, nor
any declaration, filing or registration with any Governmental Authority or r
Person, is required to be made or obtained by Seller or the Business in
connection with the execution and delivery by Seller of this Agreement and the
consummation by Seller of the transactions contemplated to be consummated by
Seller hereunder

      Section 4.7 ASSETS; TITLE TO ASSETS - EXHIBIT A sets forth a list of all
Personal Property owned by Seller and a list of all leases of Personal Property
to which Seller is a party, and all amendments and modifications thereto. All
leases of Personal Property to which Seller is a party, and all amendments and
modifications thereto, (b) constitute the valid and binding obligation of Seller
enforceable against Seller in accordance with their to except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or
moratorium laws or other similar laws affecting enforcement of creditor's rights
generally or by general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law), and (c) to
Seller's knowledge, constitute the valid and binding obligation of the other
parties thereto, enforceable against such parties in accordance with their t
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization or moratorium laws or other similar laws affecting enforcement of
creditor's rights generally or by general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law).
Except as set forth in Section 4.7 of the Disclosure Schedule, since January 1,
2001, there have been no acquisitions or dispositions of Assets except in the
ordinary course of business and consistent with the past practices of the
Seller's business. The Seller possesses good and marketable title to the Assets
(other than Personal Property leased to Seller, in which the case Seller
possesses a valid right to use such Personal Property), and none of the Assets
are subject to any Encumbrances except Permitted Encumbrances.

      Section 4.8 CUSTOMERS, DISTRIBUTORS AND CONTRACTS.

            (a) EXHIBIT B hereto sets forth a list of all Contracts related to
      the Assets and the Business; and

            (b) Seller is not in breach or violation of, or in default under any
      of the Contracts, and no event has occurred which, with the giving of
      notice, lapse of time, or both, would constitute such a breach, violation
      or default by the Seller, excluding in any case such breaches, violations
      and defaults which, individually or in the aggregate, would not have a
      Material Adverse Effect. All of the Contracts (a) constitute the valid and
      binding obligation of Seller, enforceable against Seller in accordance
      with their terms, except as enforceability may be limited by applicable
      bankruptcy, insolvency, reorganization or moratorium laws or other similar
      laws affecting enforcement of creditor's rights generally or by general
      principles of equity (regardless of whether such enforcement is considered
      in a proceeding in equity or at law) and (b) to Seller's knowledge,
      constitute the valid and binding obligation of the other parties thereto,
      enforceable against such parties in accordance with their terms, except as
      enforceability may be limited by bankruptcy, insolvency, reorganization or
      moratorium laws or other similar laws affecting enforcement of creditor's
      rights generally or by general principles
<PAGE>
      of equity (regardless of whether such enforcement is considered in a
      proceeding in equity or at law).

      Section 4.9 ENVIRONMENTAL MATTERS. Neither the operation of the Business,
nor the ownership or use of the Assets, violates Environmental Laws in any
material respect and no notice of any condition or event has been received by
the Seller relating to the Business or Assets with respect to any violation of
Environmental Laws, excluding any notice for violations, conditions and events
which, individually or in the aggregate, would not have a Material Adverse
Effect.

      Section 4.10 ABSENCE OF UNDISCLOSED LIABILITIES. Seller has not incurred
any liabilities or obligations (whether direct, indirect, accrued, contingent or
otherwise) material to the Business that would be required to be reflected or
reserved against in a balance sheet of the Business.

      Section 4.11 PERMITS. Seller has all Permits necessary for the conduct of
the Business except for any Permits the absence of which would not have a
Material Adverse Effect. Seller has not received notice that it is, and to
Seller's knowledge it is not, operating the Business in default or violation of
any of the Permits, except for any rich defaults or violations which would not
have a Material Adverse Effect. A complete and correct list of all material
Permits is set forth on Section 4.11 of the Disclosure Schedule.

      Section 4.12 COMPLIANCE WITH LAWS. Seller is operating the Business in
compliance with all Applicable Laws, except for such noncompliance which does
not have a Material Adverse Effect.

      Section 4.13 EMPLOYEES; LABOR MATTERS; BENEFIT PLANS.

      Seller will terminate all of the employees of the Business at the time of
the Closing and shall pay all accrued benefits that must be liquidated pursuant
to applicable law. Seller has not received notice of any organizational drive or
petition for representation filed by any employee on behalf of any union, nor
are its employees represented by any labor organization or union. Seller is not
a party to any collective bargaining agreement with respect to the Business.
Seller, in operating the Business, is in material compliance with all Applicable
Laws respecting employment practices, terms and conditions of employment, wages
and hours, there is no unfair labor practice complaint against Seller arising
from the operation of the Business pending before the National Labor Relations
Board or other agency, there is no claim or charge before the Equal Employment
Opportunity Commission or other similar Commonwealth agency arising from the
operation of the Business, and there is no labor strike, material dispute,
slowdown or stoppage pending against the Business.

      Section 4.14 BROKERS. No agent, broker or other Person acting pursuant to
express or implied authority of Seller is entitled to a commission or finder's
fee in connection with the transactions contemplated by this Agreement or,
pursuant to express or implied authority of Seller or the Business, will be
entitled to make any claim (including the assertion of an Encumbrance) against
Buyer or the Business for such a commission finder's fee.
<PAGE>
      Section 4.15 INVENTORY AND EQUIPMENT. All inventory of the Business, is or
will be on the Closing Date, of good and merchantable quality, quantities which
are not excessive but reasonable for the Business and kept in the books of the
Seller at the lower of cost or net realizable value. The equipment and other
items of personal property to be acquired as part of the Assets are in good
operating condition and repair, and adequate for the uses to which they are
being put, and none of such equipment and other items of personal property are
in need of maintenance or repairs except for ordinary, routine maintenance and
repairs that are not material in nature or cost. The equipment and other items
of personal property to be acquired as part of the Assets are sufficient for the
continued conduct of the Business after the Closing in substantially the same
manner as conducted prior to the Closing.

      Section 4.16 ACCOUNTS RECEIVABLE. All of the Accounts Receivable which
shall be transferred to Buyer on the Closing Date are valid and enforceable
claims, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or moratorium laws or other similar laws affecting
enforcement of creditor's rights generally or by general principle of equity
(regardless of whether such enforcement is considered in proceeding in equity or
at law) and the goods and services sold and delivered which gave rise to such
accounts were sold and delivered in substantial conformity with the approved
purchase orders, agreements and specifications and receipt was acknowledged by
the account debtor. The Accounts Receivable are due within thirty (30) days from
the date of delivery of the goods and services giving rise to the same. All
accounts receivable generated by the Business after the date of this Agreement
shall be transferred by the Seller to the Buyer on the Closing Date.

                                    ARTICLE 5
                     REPRESENTATIONS AND WARRANTIES OF BUYER

      Buyer makes the following representations and warranties to Seller:

      Section 5.1 ORGANIZATION. Buyer is a duly organized and validly existing
corporation in good standing under the laws of the Commonwealth, and has the
power and authority to own, lease and operate its assets and properties and to
conduct its business as now being conducted.

      Section 5.2 AUTHORIZATION. Buyer has full right, power and authority to
enter into this Agreement and the other agreements, documents and instruments to
be executed and delivered by Buyer pursuant hereto and to consummate the
transactions contemplated of it hereunder and thereunder and the consummation by
Buyer of all transactions contemplated of it hereunder and thereunder has been
duly authorized by all necessary corporate action. This Agreement constitutes,
and when executed and delivered each of the other agreements, documents and
instruments to be executed and delivered by Buyer pursuant hereto will
constitute a legal, valid and binding obligation of Buyer enforceable against
the Buyer in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization or moratorium laws or other
similar laws affecting enforcement of creditor's rights generally or by general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law).

      Section 5.3 NO CONFLICT OR VIOLATION. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated to be
consummated by
<PAGE>
Buyer hereby nor compliance by Buyer with any of the provisions hereof will: (i)
violate or conflict with any provision of the certificate of incorporation,
bylaws or comparable organizational documents of Buyer; (ii) violate or conflict
with, in material respect, any Applicable Law or any order, judgment, writ,
injunction, decree or award applicable to Buyer, or constitute an event which,
with the giving of notice, lapse of time, or both, would result in any such
violation or conflict; or (iii) result in a violation or breach of, or
constitute a default (or an event which, with the giving of notice or the lapse
of time or both, would become a default) under any material agreement, note,
bond, mortgage, indenture, license, permit or instrument to which Buyer is a
party or by which any of its assets are bound.

      Section 5.4 LITIGATION AND PROCEEDINGS. There is no action, suit,
proceeding or investigation pending or, to the knowledge of Buyer, threatened
before any Governmental Authority which challenges the validity of this
Agreement or otherwise seeks to prevent the consummation of the transactions
contemplated hereunder or which, if adversely determined, would adversely affect
the ability of Buyer to perform its obligations hereunder.

      Section 5.5 CONSENTS AND APPROVALS. Except as set forth on Section 5.5 of
the Disclosure Schedule, no consent, approval or authorization of any Person,
nor any declaration, filing or registration with any Governmental Authority or
other Person, is required to be made or obtained by Buyer in connection with the
execution and delivery by Buyer of this Agreement and the consummation by Buyer
of the transactions contemplated to be consummated by Buyer hereunder.

      Section 5.6 BROKERS. No agent, broker or other Person acting pursuant to
express or implied authority of Buyer is entitled to a commission or finder's
fee in connection with the transactions contemplated by this Agreement or,
pursuant to express or implied authority of Buyer, will be entitled to make any
claim (including the assertion of an Encumbrance) against Sellers or any
affiliate of Sellers or the Business.

      Section 5.7 EMPLOYMENT OF BUSINESS EMPLOYEES. Buyer is not responsible for
hiring or offering employment to any of the employees of the Business after the
Closing. Also, for a period of two years from the time of the Closing, Buyer,
nor any affiliates, shareholder or director will solicit to employ any of the
current employees of the Seller listed in EXHIBIT E of this Agreement, so long
as they are employed by the Seller, without obtaining a prior written consent of
Seller. Notwithstanding the same, Buyer may hire y or all of the former
employees of Seller, terminated by Seller at the time of Closing, under terms
and conditions they may negotiate and Seller will not participate in anyway or
manner in this process.
<PAGE>
                                    ARTICLE 6
                       PRIOR TO, ON AND AFTER THE CLOSING

      The Parties respectively covenant as follows for the period from the date
hereof through and including the Closing Date:

      Section 6.1 MAINTENANCE OF BUSINESS.

            (a) Seller will use its best efforts to cause the Business to be
      conducted in the ordinary course substantially in the same manner
      heretofore conducted. Except in the ordinary course of business and for
      Permitted Encumbrances, Seller will not, directly or indirectly, sell,
      exchange, hypothecate, pledge, encumber, lease or otherwise dispose of any
      Assets without Buyer's prior written consent, which consent may not be
      unreasonably withheld or delayed, except for loans, liens and encumbrances
      that will be paid on or released at Closing. Seller will: (i) adequately
      maintain the Assets consistent with its prior pattern and practice of
      maintenance of such assets, normal wear and tear excepted; (ii) maintain
      insurance covering the Assets comparable to that in effect on the date
      hereof; (iii) reapply for necessary Permits in the ordinary course of
      business; (iv) shall cause any existing Encumbrance over the Assets to be
      canceled before, on or during the Closing; (v) and make timely payments on
      accounts payable, other than Assumed Liabilities, and other Debts of the
      Business, or contest such obligations in good faith.

            (b) Seller will use its reasonable efforts to maintain the
      relationship between Seller and its suppliers, customers, and others
      having business relations with the Business.

            (c) Seller will not, other than in the ordinary course of business,
      adopt, grant, extend or increase any of its employee benefits or
      compensation to any of its employees or enter into or amend any employment
      agreement or severance agreement with any of its employees.

      Section 6.2 CONTRACTS. Except in the ordinary course of business, Seller
will not, without Buyer's prior written consent, which consent may not be
unreasonably withheld or delayed, amend, terminate or waive any rights under any
Contracts or enter into any material Contracts relating to Business.

      Section 6.3 INSPECTION. Buyer and its employees, officers, shareholders,
directors, attorneys, agents, independent auditors and representatives have the
right, from the date of the execution of this Agreement up to and including the
Closing, at Buyer's expense, to inspect the Assets, the books and records of
Seller relating to the Business and facilities and premises of the Business used
in or otherwise relating to the Business, at reasonable times upon reasonable
notice. Buyer, at its own expense, may conduct any inspections necessary or
desirable to evaluate the Assets, and may apply for any Permits which may be
required of Buyer, provided that such inspections or applications do not delay
the Closing or unreasonably interfere with the operation of the Business. Seller
will, and will cause the Business to, cooperate reasonably with Buyer carrying
out the provisions of this Section.
<PAGE>
      Section 6.4 CONSENTS AND BEST EFFORTS. As soon as practicable, the Parties
will commence to take all reasonable action required to obtain all
authorizations, consents, approvals, orders and agreements of, and to give all
notices and make all filings with, Governmental Authorities and any other
Persons necessary to authorize, approve, or permit their respective obligations
pursuant to this Agreement, and the consummation of the transactions
contemplated hereby. In addition, subject to the terms and conditions herein
provided, the Parties covenant and agree to cooperate fully with each other, and
to use their commercially reasonable efforts to take, or cause to be taken, all
actions or do, or cause to be done, all things necessary, proper, or advisable
under Applicable Law or otherwise to consummate and make effective the
transactions contemplated hereby, including filing and processing all
applications for Permits necessary to own, occupy or operate the Assets or
operate and conduct the Business. Seller hereby grants Buyer permission to
contact any parties to Contracts relating to the Business to which Seller is a
party for the purpose of investigating and ascertaining the status thereof.

      Section 6.5 CASUALTY OR CONDEMNATION. If, after the date hereof but prior
to the close of business on the Closing Date, a material portion of the Assets
is damaged, destroyed or lost by fire or other casualty, or if condemnation or
eminent domain proceeding are proposed, threatened or commenced against a
material portion of the Assets, Seller will promptly notify Buyer of such event.
If Seller does not repair, rebuild or replace the portion of the Assets damaged,
destroyed or lost prior to the close of business on the Closing Date, Buyer may
elect to determinate its obligations under this Agreement by notice to Seller,
or may elect to close the purchase and sale contemplated herein, in which case
the Buyer shall receive any and all insurance or condemnation proceeds, if any,
payable as the result of such casualty or condemnation.

      Section 6.6 SUPPLEMENTAL DISCLOSURE. Seller shall have the right from time
to time prior to the close of business on the Closing Date to supplement the
Disclosure Schedule with respect to any matter hereafter arising which, if
existing or known as of the date of this Agreement, would have been required to
be set forth or described in the Disclosure Schedule. For purposes of the rights
and obligations of the Parties hereunder, any such supplemental disclosure shall
be deemed to cure any breach of any representation or warranty made in this
Agreement and to have been disclosed as of the date of this Agreement, but it
shall not have any effect for the purpose of determining whether or not the
conditions set forth in Section 3.3 have satisfied.

      Section 6.7 BULK SALES LAWS. Seller and Buyer agree to comply with the
provisions of the Puerto Rico Bulk Sales Act, Act No. 60 of April 27, 1931, in
connection with the sale of the Assets to Buyer. Nonetheless, Seller shall
indemnify Buyer from, and hold it harmless against any claim or damages
resulting from or arising out of (i) Seller's failure to comply with any of such
laws in respect of the transaction contemplated by this Agreement, or (ii) any
action brought or levy made as a result thereof.

      Section 6.8 COLLECTIONS. On the Closing Date, Seller shall tender to Buyer
all cash, revenues and collections of Accounts Receivable received by Buyer from
the date of execution of this Agreement until the Closing Date. In the event
Seller receives after the Closing Date any payment on account of any Account
Receivable, Seller shall tender and deliver to Buyer any such payment in the
form received with any necessary endorsement.
<PAGE>
                                    ARTICLE 7
                               FURTHER AGREEMENTS

      On the Closing Date, Seller or an affiliate of Seller and Buyer, shall
and/or may enter into tile following agreement:

      Section 7.1 NONCOMPETITION AGREEMENT. Seller shall enter into the
Noncompetition Agreement in which the Seller and its affiliates agree not to
compete with the business operated by the Buyer for a period of five (5) years.

      Section 7.2 LEASE AGREEMENT. Seller shall cause its sister corporation,
Ochoa Industrial Sales Corporation ("OISC"), to lease to Buyer, on a month to
month basis, the facilities Seller occupies in the property of DISC, under the
same, rent, terms and conditions as DISC leases said facilities to Seller.

      Section 7.3 MAINTENANCE AGREEMENT. Buyer and OISC shall enter into a
Maintenance Agreement from the Closing Date and until the fifth anniversary of
the Closing Date, whereby Buyer shall provide to the PABX system and all its
peripherals, installed in the property owned by OISC and as expanded from to
time, maintenance and repair (including spare parts) services at Buyer's landed
cost plus 10% and without any charge for labor.

                                    ARTICLE 8
                                 INDEMNIFICATION

      Section 8.1 SURVIVAL OF COVENANTS; REPRESENTATIONS AND Warranties. All
representations, warranties and covenants made by the Parties in this Agreement
shall, unless this agreement is terminated and abandoned as provided herein,
survive the Closing and continue in full force and effect thereafter; provided,
however, that no action b upon any breach or inaccuracy of any representation
and warranty contained in Sections 4.5, 4.6, 5.4 and 5.5 maybe asserted unless
notice of such claim is given to the party or parties against whom the claim is
asserted within one (1) year after the Closing Date; and provided her, however,
that no action based upon any breach or inaccuracy of any representation,
warranty or covenant contained in Sections 4.4, 4.8, 4.10, 4.11, 4.12, 4.15,
4.16 and 5.,3 may be asserted unless notice of such claim is given to the party
or parties against whom the claim is asserted within four (4) years after the
Closing Date, except for notices of claims asserted under Sections 4.3, 4.9 and
4.13 which may be given to the party or parties against whom the claim is
asserted within their applicable statute of limitations and claims under
Sections 4.1, 4.2, 4.7, 4.9, 4.14, 5.1, 5.2, 5.6 and 5.7 which shall not be
subject to any expiration period.

      Section 8.2 INDEMNIFICATION BY SELLER. From and after the Closing Date,
Seller shall indemnify and hold Buyer, its directors, officers and employees
harmless against any losses, liabilities, costs, damages and expenses, including
without limitation, interest, penalties, fines and reasonable attorneys' fees
(collectively "Indemnifiable Losses"), resulting from:

                  (i) the failure of Seller to pay, perform or discharge the
            Retained Liabilities;
<PAGE>
                  (ii) any breach of a warranty, representation or covenant of
            Seller contained herein (other than those described in subsection
            (b) below); and

                  (iii) any matter described in the Disclosure Schedule; and

                  (iv) all Losses arising as a result of claims made pursuant to
            the so-called "bulk sales" laws.

      Section 8.3 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify and
hold Seller, its directors, officers, employees and agents harmless at all times
from and after the date of this Agreement, against and in respect to
Indemnifiable Losses resulting from: (iv) the failure of Buyer to assume, pay,
perform and discharge the Assumed Liabilities; and (v) any breach of any
warranty, representation or covenant of Buyer contained in this Agreement.

      Section 8.4 PROCEDURE FOR NOTICES OF INDEMNIFIABLE LOSSES. Promptly after
receipt by an indemnified party under Sections 8.2 and 8.3, above of notice of
the commencement of any action by a third party, such indemnified party shall,
if a claim in respect thereof is to be made against the indemnifying party under
such paragraph, promptly notify the indemnifying party in writing of the
commencement thereof. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall assume the defense thereof, and, after
such assumption, the indemnifying party shall not be liable to such indemnified
party under such paragraph for any legal expenses of other counsel or any other
expenses subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. The indemnified
party shall provide the indemnifying party with access to all records and
documents of the indemnified party relating to any claim Indemnifiable
hereunder. The indemnifying party shall obtain the consent of the indemnified
party, which consent shall not be unreasonably denied, in case of a settlement
which involves the payment of any amount or the taking, or the cease or desist.
of any action by the indemnified party.

                                    ARTICLE 9
                                   TERMINATION

      Section 9.1 TERMINATION AND ABANDONMENT. This Agreement may be terminated
and , abandoned at any time prior to the Closing Date, only as follow:

            (a) by mutual written consent of the Parties;

            (b) by Buyer, if the conditions set forth in Section 3.3 have not
      been complied with or performed in any material respect and such
      non-compliance or non-performance has not been cured or eliminated (or by
      its nature cannot be cured or eliminated) by Seller on or before June 1st,
      2001; or

            (c) by Seller, if the conditions set forth in Section 3.2 have not
      been complied with or performed in any material respect and such
      non-compliance or non-performance lease not been cured or eliminated (or
      by its nature cannot be cured or eliminated) by Buyer on or before June
      lst, 2001.
<PAGE>
      If any Party hereto shall terminate this Agreement pursuant to the
provisions hereof, such termination shall be effected by notice to the other
Party specifying the provision hereof pursuant to which such termination is
made.

      Section 9.2 EFFECT OF TERMINATION. Except (i) for any breach of this
Agreement, (ii) for the confidentiality obligations contained in Section 10.7
hereof, and (iii) as set forth in Section 10.14 hereof, upon the termination of
this Agreement pursuant to Section 9.1 hereof, this Agreement shall forthwith
become null and void and no Party hereto or any of its officers, directors,
employees or stockholders shall have any liability or obligation hereunder or
with respect thereto.

      Section 9.3 DEFAULT BY SELLER. In the event of a breach by Seller of any
of its obligations hereunder, Buyer may terminate this Agreement as set forth in
Section 9.1(b). In addition. Buyer shall have such other rights available under
the laws of the Commonwealth.

      Section 9.4 DEFAULT BY BUYER. In the event of a breach by Buyer of any of
its Obligations hereunder, Seller may terminate this Agreement as set forth in
Section 9.1(c). In addition, Seller shall have, such other rights available
under the laws of the Commonwealth.

                                   ARTICLE 10
                               GENERAL PROVISIONS

      Section 10.1 ACCOUNTING TERMS. All accounting to not specifically defined
herein , I)c construed in accordance with GAAP.

      Section 10.2 AMENDMENT AND MODIFICATION. No amendment, modification,
supplement, termination, consent or waiver of any provision of this Agreement,
nor consent to any departure therefrom, will in any event be effective unless
the same is signed by the Party against whom enforcement of the same is sought:
Any waiver of any provision of this Agreement and any consent to any departure
from the terms of any provision of this Agreement shall be effective only in the
specific instance and for the specific purpose for which give

      Section 10.3 APPROVALS AND CONSENTS. If any provision hereof requires the
approval of consent of any Party to any actor omission, such approval or consent
is not to be unreasonably withheld or delayed except as set forth herein.

      Section 10.4 ASSIGNMENTS. No Party may assign or transfer any of its
rights or obligations under this Agreement to any other Person without the prior
written consent of the other Party.

      Section 10.5 CAPTIONS. Captions contained in this Agreement have been
inserted herein only as a matter of convenience and in no way define, limit,
extend car describe the scope of this Agreement or the intent of any provision
hereof.

      Section 10.6 COMPLIANCE WITH LAW. None of the terms or provisions of this
Agreement require any of the Parties to take any action prohibited by, or
contrary to, Applicable Law.
<PAGE>
      Section 10.7 CONFIDENTIALITY. Each Party agrees to maintain any
Confidential Information that it previously has or may receive from the other
Parties confidential and may not disclose such information to any Person without
the prior written consent of the Party originally furnishing such Confidential
Information. However, a Party may disclose such Confidential Information: (a) to
legal counsel and other professional advisors of such Party (but only if they
have been informed of the confidential nature of such Confidential Information
and agree in writing to be bound by the terms of this Section), (b) to
regulatory officials having jurisdiction over such Party, and (e) as required by
law or legal process or in connection with any legal proceeding to which it is a
party or is otherwise subject, but, in each such event, such Party, prior to
such disclosure, shall inform the Party originally furnishing such Confidential
Information.

      Section 10.8 COUNTERPARTS. This Agreement may be executed by the Parties
on any number of separate counterparts, and all such counterparts so executed
constitute one agreement binding on all the Parties notwithstanding that all the
Parties are not signatories on the same counterpart.

      Section 10.9 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, letters of intent. understandings, negotiations
and discussions of the Parties, whether oral or written.

      Section 10.10 EXHIBITS. All of the Exhibits and Schedules attached to this
Agreement are deemed incorporated herein by reference.

      Section 10.11 FAILURE OR DELAY. No failure on the part of any Party to
exercise, and no delay in exercising, any right, power or privilege hereunder
operates as a waiver thereof; nor does any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof, or the exercise of any other right, power or privilege. No notice to or
demand on any Party in any case entitles such Party to any other or further
notice or demand in similar or other circumstances.

      Section 10.12 FURTHER ASSURANCES. The Parties will execute and deliver
such further instruments and do such further acts and things as may be required
to carry out the intent and purpose of this Agreement.

      Section 10.13 GOVERNING LAW. This Agreement and the rights and obligations
of the Parties hereunder are to be governed by and construed and interpreted in
accordance with the laws of the Commonwealth of Puerto Rico applicable to
contracts made and to be performed wholly within Puerto Rico, without regard to
choice or conflict of laws rules.

      Section 10.14 LEGAL FEES, COSTS. All legal and other costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby are to be paid by the Party incurring such costs and expenses; provided,
however, that the provision of this Section 10.14 shall not in anyway limit the
rights of any Party hereto against the other Party with respect to a breach by
such other Party of its obligations hereunder.

      Section 10.15 NOTICES. All notices, consents, requests, demands and other
communications hereunder are to be in writing, and are deemed to have been duly
given or
<PAGE>
made: (d) when delivered in person; (e) on the date noted on the return receipt
of the delivery date or attempted delivery date, when mailed by United States
mail, first class, return receipt requested first class postage prepaid; (f) in
the case of telegraph or overnight courier services, on the day of delivery by
the telegraph company or overnight courier service with payment provided for; or
(g) in the case of telex or telecopy or fax, when sent, verification received,
in each case addressed as follows:

                  (i)   if to Buyer:

                        Cortelco Systems PR, Inc.
                        P.0. Box 363665
                        San Juan, Puerto Rico 00936-3665
                        Attention: Mr. Sergio Moren
                        Fax #: (787) 281-1740

                        with a copy to:

                        Fiddler, Gonzalez & Rodriguez
                        Chase Manhattan Bank Building
                        Sixth Floor
                        Hato Rey, Puerto Rico 00918
                        Post Office Box 363507
                        San Juan, Puerto Rico 00936-3507
                        Attention: Josh Julian Alvarez-Maldonado, Esq.
                                  Guillermo Zuniga-Lopez, Esq.
                        Fax # (787) 754-7539

                  (ii)  if to Seller:

                        Ochoa Telecom, Inc.
                        Post Office Box 366242
                        San Juan, Puerto Rico 00936-6242
                        Attention: Mr. Eitel R. Gomez
                        Fax #: (787) 641-5364

                        with a copy to:

                        Totti & Rodriguez Diaz
                        416 Ponce de Leon Ave.
                        Suite 1200, Hato Rey
                        P.O. Box 191732
                        San Juan Puerto Rico, 00919-1 732
                        Attention: Hernando A. Rivera, Esq.
                        Fax # (787) 764-9480

or to such other address as any Party may designate by notice to the other in
accordance with this Section.

      Section 10.16 PUBLICITY. Any publicity release, advertisement, filing,
public statement or announcement made by or at the request of any Party
regarding this Agreement shall be first
<PAGE>
reviewed by and must be satisfactory and consented to by the Party, which
consent will not unreasonably withheld.

      Section 10.17 SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction is, as to such
jurisdiction, ineffective to the extent of any such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof, or affecting the validity, enforceability or legality of such
provision ill any other jurisdiction, unless the ineffectiveness of such
provision would result in such a material change as to cause completion of the
transactions contemplated hereby to be unreasonable.

      Section 10.18 SUBMISSION TO JURISDICTION: ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO SHALL BE BROUGHT
IN THE COURTS OF THE COMMONWEALTH OF PUERTO RICO, OR ANY COURT OF THE UNITED
STATES OF AMERICA FOR THE COMMONWEALTH OF PUERTO RICO, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY HEREBY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF SUCH COURTS.
THE PARTIES IRREVOCABLY WAIVE ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH ANY OF
THEM MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING
IN SUCH RESPECTIVE JURISDICTIONS. EACH PARTY IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING
OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO EACH OF
THE OTHER PARTIES AT ITS ADDRESS PROVIDED HEREIN, SUCH SERVICE TO BECOME
EFFECTIVE 45 DAYS AFTER SUCH MAILING.

      Section 10.19 SUCCESSORS AND ASSIGNS. All provisions of this Agreement are
binding upon, inure to the benefit of, and are enforceable by or against, the
Parties and their respective heirs, executors, administrators or other legal
representatives and permitted successors and assigns.

      Section 10.20 THIRD-PARTY BENEFICIARY. This Agreement is solely for the
benefit of the Parties and their respective successors and permitted assigns,
and no other Person has any right, benefit, priority or interest under, or
because of the existence of, this Agreement.

      Section 10.21 SIGNATURE WARRANTY. Each Person executing this Agreement
warrants that lie is authorized to do so on behalf of the Party for whom he
signs this Agreement.
<PAGE>
      IN WITNESS WHEREOF, Buyer and Seller have executed this Agreement, or have
caused same to be executed by their respective officers, as of the day and year
first above written.

SELLER                                        BUYER:
OCHOA TELECOM, INC.                           CORTELCO SYSTEMS PR, INC.
 /s/ Eitel R. Gomez                            /s/ Sergio Moren
-----------------------------                 ----------------------------------
      Eitel R. Gomez                                Sergio Moren
      President                                     PresidentExhibit 10.1

                        MICROCHIP TECHNOLOGY INCORPORATED
                             1993 STOCK OPTION PLAN
                       AS AMENDED THROUGH OCTOBER 26, 2001

                                ARTICLE I GENERAL

     1.1 PURPOSE OF THE PLAN

          (a) AMENDMENT. On January 19, 1993, the Board of Directors (the
"Board") of Microchip Technology Incorporated, a Delaware corporation (the
"Corporation") adopted the 1993 Stock Option/Stock Issuance Plan. On April 23,
1993 and September 14, 1993, the Board amended the Plan authorizing additional
available shares of Common Stock. On October 7, 1993, the Board amended and
restated the Plan as stated herein. On April 18, 1994, the Board amended the
Plan authorizing additional available shares of Common Stock, subject to
stockholder approval. On January 20, and April 26, 1995, the Board amended the
Plan authorizing, among other matters, additional available shares of Common
Stock, subject to stockholder approval and the elimination of the stock issuance
portion of the Plan. Any options outstanding under the Plan before this
amendment shall remain valid and unchanged. On April 25, 1997, the Board amended
the Plan authorizing, among other matters, additional available shares of Common
Stock, subject to stockholder approval. On August 18, 2000 the stockholders
approved an amendment to the Plan (which was adopted by the Board on May 5,
2000) to extend its term as set forth in Section 5.3(d) hereof. The Board also
amended the Plan to provide that, following the approval by the stockholders of
the extension of the term of the Plan, Incentive Options could no longer be
granted (see Section 2.2(e)). On October 26, 2001 the Board amended the Plan to
permit the payment of the option exercise price by delivering shares of Common
Stock.

          (b) PURPOSE. This 1993 Stock Option Plan, amended through October 26,
2001 ("Plan"), is intended to promote the interests of the Corporation by
providing (i) key employees (including officers) of the Corporation (or its
parent or subsidiary corporations) who are responsible for the management,
growth and financial success of the Corporation (or its parent or subsidiary
corporations), (ii) non-employee members of the Corporation's Board of Directors
(the "Board") and (ii) consultants and other independent contractors who provide
valuable services to the Corporation (or its parent or subsidiary corporations)
the opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the corporation as an incentive for them to remain in
the service of the Corporation (or its parent or subsidiary corporations).

          (c) EFFECTIVE DATE. The Plan became effective on the first date on
which the shares of the Corporation's common stock are registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "1934 Act"). Such
date is hereby designated as the Effective Date of the Plan. The effective date
of any amendments to the Plan shall be as of the date of Board approval.

                                       1
<PAGE>
Notwithstanding the foregoing, certain amendments referenced herein must be
approved by the stockholders of the Corporation.

          (d) SUCCESSOR TO 1989 PLAN. This Plan shall serve as the successor to
the Corporation's 1989 Stock Option Plan (the "1989 Plan"), and no further
option grants or stock issuances shall be made under the 1989 Plan from and
after the Effective Date of this Plan. All options outstanding under the 1989
Plan on such Effective Date are hereby incorporated into this Plan and shall
accordingly be treated as outstanding options under this Plan. However, each
outstanding option so incorporated shall continue to be governed solely by the
express terms and conditions of the instrument evidencing such grant, and no
provision of this Plan shall be deemed to affect or otherwise modify the rights
or obligations of the holders of such incorporated options with respect to their
acquisition of shares of the Corporation's common stock thereunder. All
outstanding unvested share issuances under the 1989 Plan shall continue to be
governed solely by the express terms and conditions of the instruments
evidencing such issuances, and no provision of this Plan shall be deemed to
affect or otherwise modify the rights or obligations of the holders of such
unvested shares.

          (e) PARENT/SUBSIDIARIES. For purposes of the Plan, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:

               (i) Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered to be a
parent of the corporation, provided each such corporation in the unbroken chain
(other than the Corporation) owns, at the time of the determination, stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock in any other corporation in such chain.

               (ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to be a
subsidiary of the Corporation, provided each such corporation (other than the
last corporation) in the unbroken chain owns, at the time of the determination,
stock possessing fifty percent (50%) or more of the total combined voting power
all classes of stock in any other corporation in such chain.

          (f) All references herein to number of shares of Common Stock have
been restated reflect a 2-for-1 stock split of the Common Stock effected on
September 14, 1993, a 3-for-2 stock split of the Common Stock effected on April
4, 1994, a 3-for-2 split of the Common Stock effected on November 8, 1994, a
3-for-2 split of the Common Stock effected on January 6, 1997, a 3-for-2 split
of the Common Stock effected on February 7, 2000 and a 3-for-2 split of the
Common Stock effected on September 26, 2001.

     1.2 STRUCTURE OF THE PLAN

          (a) STOCK PROGRAMS. The Plan shall be divided into two separate
components: the Discretionary Option Grant Program specified in Article II and
the Automatic Option Grant Program specified in Article IV. Under the
Discretionary Option Grant Program, eligible individuals may, at the discretion
of the Plan Administrator, be granted options to purchase shares of Common Stock

                                       2
<PAGE>
in accordance with the provisions of Article II. Under the Automatic Option
Grant Program, non-employee members of the Board will be automatically granted
options to purchase shares of the Common Stock in accordance with the provisions
of Article IV.

          (b) GENERAL PROVISIONS. Unless the context clearly indicates
otherwise, the provisions of Articles I and V shall apply to the Discretionary
Option Grant Program and the Automatic Stock Grant Program, and shall
accordingly govern the interests of all individuals under the Plan.

     1.3 ADMINISTRATION OF THE PLAN

          (a) BIFURCATION OF ADMINISTRATION. The eligible persons under the
Discretionary Option Grant Program shall be divided into two groups and there
shall be a separate administrator for each group. One group shall be comprised
of eligible persons that are "Affiliates." For purposes of the Plan, the term
"Affiliates" shall mean (i) all "executive officers" as that term is defined in
Rule 16a-1(f) promulgated under the Securities and Exchange Act of 1934 as
amended (the "1934 Act"), (ii) all directors of the Company, and (iii) all
persons who own 10% or more of the Company's issued and outstanding common
stock. The other group shall be comprised of all eligible persons under the Plan
that are not Affiliates ("Non-Affiliates").

          (b) AFFILIATE ADMINISTRATION. The power to administer the
Discretionary Option Grant Program with respect to eligible persons that are
Affiliates shall be vested with a committee (the "Senior Committee") of two (2)
or more non-employee Board members appointed by the Board. No Board member shall
be eligible to serve on the Senior Committee if such individual has, within the
relevant period designated below, received an option grant or direct stock
issuance under this Plan (not including any option grants made pursuant to the
Automatic Option Grant Program set forth in Article IV) or any other stock plan
of the Corporation (or any parent or subsidiary corporation):

               (i) for each of the initial members of the Committee, the period
commencing with the Effective Date of the Plan and ending with the date of his
or her appointment to the Senior Committee, or

               (ii) for any successor or substitute member, the twelve-month
period immediately preceding the date of his or her appointment to the Senior
Committee or (if shorter) the period commencing with the Effective Date of the
Plan and ending with the date of his or her appointment to the Senior Committee.

          (c) NON-AFFILIATE ADMINISTRATION. The power to administer the
Discretionary Option Grant Program with respect to eligible persons that are not
Non-Affiliates shall be vested with the Board. The Board, however, may at any
time appoint a committee (the "Employee Committee") of one or more persons who
are members of the Board and delegate to such Employee Committee the power, in
whole or in part, to administer the Discretionary Stock Option Grant Program
with respect to the Non-Affiliates.

                                        3
<PAGE>
          (d) TERM ON COMMITTEE. Members of the Senior Committee and the
Employee Committee shall serve for such period of time as the Board may
determine and shall be subject to removal by the Board at any time. The Board at
any time may terminate the functions of the Employee Committee and reassume all
powers and authority previously delegated to such Committee.

          (e) AUTHORITY OF PLAN ADMINISTRATORS. The Board, the Employee
Committee, and the Senior Committee, whichever is applicable, shall each be
referred to herein as a "Plan Administrator." Each Plan Administrator shall have
the authority and discretion, with respect to its administered group, to select
which eligible persons shall participate in the Plan. Unless otherwise required
by law, decisions among members of a Plan Administrator shall be by majority
vote. With respect to each administered group, the applicable Plan Administrator
shall have full power and authority (subject to the express provisions of the
Plan) to establish such rules and regulations as it may deem appropriate for the
proper administration of the Discretionary Option Grant Program and to make such
determinations under, and issue such interpretations of, the provisions of such
programs and any outstanding option grants or stock issuances thereunder as it
may deem necessary or advisable. All decisions made by a Plan Administrator
shall be final and binding on all parties in its administered group who have an
interest in the Discretionary Option Grant Program or any outstanding option
thereunder. The Plan Administrator shall also have full authority to determine,
with respect to the option grants made under the Discretionary Option Program,
the number of shares to be covered by each such grant, the status of the granted
option as either an incentive stock option ("Incentive option") which satisfies
the requirements of Section 422 of the Internal Revenue Code or a non-statutory
option not intended to meet such requirements, the time or times at which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding.

          (f) INDEMNIFICATION. In addition to such other rights of
indemnification as they may have, the members of each Plan Administrator shall
be indemnified and held harmless by the Company, to the extent permitted under
applicable law, for, from and against all costs and expenses reasonably incurred
by them in connection with any action, legal proceeding to which any such member
thereof may be a party, by reason of any action taken or failed to be taken,
under or in connection with the Plan or any rights granted thereunder, and
against all amounts paid by them in settlement thereof or paid by them in
satisfaction of a judgment of any such action, suit or proceeding, except a
judgment based upon a finding of bad faith.

     1.4 ELIGIBLE PERSONS UNDER THE PLAN

          (a) DISCRETIONARY OPTION GRANT PROGRAM. The persons eligible to
participate in the Discretionary Option Grant Program under Article II are as
follows:

               (i) officers and other key employees of the Corporation (or its
parent or subsidiary corporations) who render services which contribute to the
management, growth and financial success of the Corporation (or its parent or
subsidiary corporations);

               (ii) non-employee members of the Board (excluding those current
members of the Senior Committee); and

                                       4
<PAGE>
               (iii) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or subsidiary
corporations).

          (b) AUTOMATIC OPTION GRANT PROGRAM. The persons eligible to
participate in the Automatic Option Grant Program shall be limited to
non-employee Board members. A non-employee Board member shall not be eligible to
participate in the Automatic Option Grant Program, however, if such individual
has at any time been in the prior employ of the Corporation (or any parent or
subsidiary corporation). Unless otherwise provided in the Plan, persons who are
eligible under the Automatic Option Grant Program may also be eligible to
receive option grants under the Discretionary Option Grant Program in effect
under this Plan.

     1.5 STOCK SUBJECT TO THE PLAN

          (a) AMENDMENT(1). Under the Plan, 13,662,511 shares were originally
authorized to be issued under the Plan (constituting 12,523,449 authorized
shares under the 1989 Plan and rolled over into this Plan plus 1,139,062
additional shares authorized by the Board on January 19, 1993). On April 23,
1993, an additional 4,935,937 shares were authorized by the Board, subject to
stockholder approval at the next stockholders' meeting. At that point, the total
available authorized shares was 18,598,448. On September 14, 1993, the Board
authorized the number of shares of Common Stock issuable under the Plan to be
increased by 5,133,375 shares. On April 18, 1994, the Board authorized the
number of shares of Common Stock issuable under the Plan to be increased by
6,581,250 shares. On January 20, 1995 and April 25, 1997, the Board authorized
the number of shares of Common Stock issuable under the Plan to be increased by
3,206,250 and 4,500,000 shares, respectively, subject to Stockholder approval,
such that the maximum number of shares issuable for the term of the Plan shall
be as set forth in Section 1.5(b) below.

          (b) AVAILABLE SHARES. Shares of the Corporation's common stock (the
"Common Stock") shall be available for issuance under the Plan and shall be
drawn from either the Corporation's authorized but unissued shares of Common
Stock or from reacquired shares of Common Stock, including shares repurchased by
the Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 38,019,323
shares, subject to adjustment from time to time in accordance with the
provisions of this Section 1.5. To the extent one or more outstanding options
under the 1989 Plan which have been incorporated into this Plan (as adjusted for
the 1993 Stock Dividend) are subsequently exercised, the number of shares issued
with respect to each such option shall reduce, on a share-for-share basis, the
number of shares available for issuance under this Plan.

          (c) ADJUSTMENTS FOR ISSUANCES. Should one or more outstanding options
under this Plan (including outstanding options under the 1989 Plan incorporated
into this Plan) expire or terminate for any reason prior to exercise in full,
then the shares subject to the portion of each option not so exercised shall be
available for subsequent option grant under the Plan. All share issuances under

----------
(1) All numbers are as adjusted for stock splits which have occurred through
September 2000.
                                        5
<PAGE>
the Plan, whether or not the shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent option grants under the Plan. In addition, should the exercise price
of an outstanding option under the Plan (including any option incorporated from
the 1989 Plan) be paid with shares of Common Stock or should shares of Common
Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an outstanding option under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross number
of shares for which the option is exercised, and not by the net number of shares
of Common Stock actually issued to the option holder.

          (d) ADJUSTMENTS FOR ORGANIC CHANGES. Should any change be made to the
Common Stock issuable under the Plan by reason of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, then appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities and price per share in effect
under each option outstanding under either the Discretionary Option Grant
Program or the Automatic Option Grant Program and (iii) the number and/or class
of securities and price per share in effect under each outstanding option
incorporated into this Plan from the 1989 Plan. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Board shall be final, binding and conclusive. The
amount of options granted automatically under the Automatic Option Grant Program
on the Annual Automatic Grant Date and on the Initial Automatic Grant Date shall
not be adjusted regardless of any organic changes made to the Common Stock
issuable under the Plan.

          (e) LIMITATIONS ON GRANTS TO EMPLOYEES. Notwithstanding any other
provision herein to the contrary, the following limitations shall apply to
grants of options to Employees:

               (i) No employee shall be granted, in any fiscal year of the
Corporation, options to purchase more than one million twelve thousand five
hundred (1,012,500) shares.

               (ii) In connection with his or her initial employment, an
Employee may be granted options to purchase up to an additional one million six
hundred eighty-seven thousand five hundred (1,687,500) shares which shall not
count against the limit set forth in subsection (i) above.

               (iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Corporation's capitalization as described
in Section 1.5(d).

               (iv) If an option is cancelled in the same fiscal year of the
Corporation in which such option was granted (other than in connection with a
transaction described in Section 1.5(d)), the cancelled option will be counted
against the limit set forth in Section 1.5(e)(i). For this purpose, if the
exercise price of an option is reduced, the transaction will be treated as a
cancellation of the option and the grant of a new option.

                                        6
<PAGE>
                                   ARTICLE II
                       DISCRETIONARY OPTION GRANT PROGRAM

     2.1 TERMS AND CONDITIONS OF OPTIONS

          (a) GENERAL. Options granted to eligible persons ("Optionees")
pursuant to the Discretionary Option Grant Program set forth in this Article II
shall be authorized by action of the Plan Administrator and, at the Plan
Administrator's discretion, may be either Incentive Options or non-statutory
options. Individuals who are not Employees of the Corporation or its parent or
subsidiary corporations may only be granted non-statutory options. Each granted
option shall be evidenced by one or more instruments in the form approved by the
Plan Administrator; provided, however, that each such instrument shall comply
with the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section 2.2 hereof.

          (b) OPTION PRICE. The option price per share shall be fixed by the
Plan Administrator in accordance with the following provisions:

               (i) The option price per share of the Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent (100%) of
the fair market value of such Common Stock on the grant date; and

               (ii) The option price per share of the Common Stock subject to a
non-statutory stock option shall in no event be less than one hundred percent
(100%) of the fair market value of such Common Stock on the grant date.

          (c) PAYMENT OF OPTION PRICE. The option price shall become immediately
due upon exercise of the option and shall be payable in one of the following
alternative forms specified below:

               (i) full payment in cash or check made payable to the
Corporation's order; or

               (ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at fair market value on the Exercise
Date (as such term is defined below); or

               (iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at fair market value on the
Exercise Date and cash or check drawn to the Corporation's order; or

                                        7
<PAGE>
               (iv) full payment through a broker-dealer sale and remittance
procedure pursuant to which the Optionee (A) shall provide irrevocable written
instructions to a designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate option
price payable for the purchased shares plus all applicable Federal and State
income and employment taxes required to be withheld by the Corporation in
connection with such purchase and shall (B) provide written directives to the
Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sales transaction.

     For purposes of this Section 2.1(c), the Exercise Date shall be the date on
which written notice of the option exercise is delivered to the Corporation.
Except to the extent the sale and remittance procedure is utilized in connection
with the exercise of the option, payment of the option price for the purchased
shares must accompany such notice.

          (d) FAIR MARKET VALUE. The fair market value per share of Common Stock
shall be determined in accordance with the following provisions:

               (i) If the Common Stock is not at the time listed or admitted to
trading on any national stock exchange but is traded on the NASDAQ National
Market System, the fair market value shall be the closing price per share on the
date in question, as such price is reported by the National Association of
Securities Dealers through the NASDAQ National Market System or any successor
system. If there is no reported closing selling price for the Common Stock on
the date in question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of fair market value.

               (ii) If the Common Stock is at the time listed or admitted to
trading on any national stock exchange, then the fair market value shall be the
closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no reported sale of Common Stock on such exchange
on the date in question, then the fair market value shall be the closing selling
price on the exchange on the last preceding date for which such quotation
exists.

          (e) TERM AND EXERCISE OF OPTIONS. Each option granted under this
Discretionary Option Grant Program shall be exercisable at such time or times
and during such period as is determined by the Plan Administrator and set forth
in the instrument evidencing the grant. No such option, however, shall have a
maximum term in excess of ten (10) years from the grant date. During the
lifetime of the Optionee, the option shall be exercisable only by the Optionee
and shall not be assignable or transferable by the Optionee other than by will
or by the laws of descent and distribution following the Optionee's death.

                                        8
<PAGE>
          (f) TERMINATION OF SERVICE. The following provisions shall govern the
exercise period applicable to any outstanding options held by the Optionee at
the time of cessation of Service or death:

               (i) Should an Optionee cease Service for any reason (including
permanent disability as defined in Section 22(e)(3) of the Internal Revenue Code
but not including death) while holding one or more outstanding options under
this Article II, then none of those options shall (except to the extent
otherwise provided pursuant to Section 2.1(g) below) remain exercisable for more
than a ninety (90) day period (or such shorter or longer period determined by
the Plan Administrator and set forth in the instrument evidencing the grant, but
not to exceed twelve (12) months) measured from the date of such cessation of
Service.

               (ii) Any option held by the Optionee under this Article II and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's estate
or by the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. Such
exercise, however, must occur prior to the earlier of (x) six months following
the date of Optionee's death or (y) the specified expiration date of the option
term. Upon the occurrence of the earlier event, the option shall terminate and
cease to be outstanding.

               (iii) Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.

               (iv) During the applicable post-Service exercise period, the
option shall not be exercisable for more than the number of shares (if any) in
which the Optionee is vested at the time of his or her cessation of Service
(less any option shares subsequently purchased by the Optionee prior to death).
Upon the expiration of the limited post-Service exercise period or (if earlier)
upon the specified expiration date of the option term, each such option shall
terminate and cease to be outstanding with respect to any vested shares for
which the option has not otherwise been exercised. However, each outstanding
option shall immediately terminate and cease to be outstanding, at the time of
the Optionee's cessation of Service, with respect to any shares for which the
option is not otherwise at that time exercisable or in which the Optionee is not
otherwise at that time vested.

               (v) Should (A) the Optionee's service be terminated for
misconduct (including, but not limited to, any act of dishonesty, willful
misconduct, fraud or embezzlement) or (B) the Optionee make any unauthorized use
or disclosure of confidential information or trade secrets of the Corporation or
its parent or subsidiary corporations, then in any such event all outstanding
options held by the Optionee under this Article II shall terminate immediately
and cease to be outstanding.

          (g) DISCRETION TO ACCELERATE VESTING. The Plan Administrator shall
have complete discretion, exercisable either at the time the option is granted
or at any time while the option remains outstanding, to permit one or more
options held by the Optionee under this Article II to be exercised, during the
limited post-Service exercise period applicable under Section 2.1(f) above,

                                        9
<PAGE>
not only with respect to the number of vested shares of Common Stock for which
each such option is exercisable at the time of the Optionee's cessation of
Service but also with respect to one or more subsequent installments of vested
shares for which the option would otherwise have become exercisable had such
cessation of Service not occurred.

          (h) DISCRETION TO EXTEND EXERCISE PERIOD. The Plan Administrator shall
also have full power and authority to extend the period of time for which the
option is to remain exercisable following the Optionee's cessation of Service or
death from the limited period in effect under Section 2.1(f) above to such
greater period of time as the Plan Administrator shall deem appropriate. In no
event, however, shall such option be exercisable after the specified expiration
date of the option term.

          (i) DEFINITIONS. For purposes of the foregoing provisions of this
Section 2.1 (and for all other purposes under the Discretionary Option Grant
Program):

               (i) The Optionee shall (except to the extent otherwise
specifically provided in the applicable stock option agreement) be deemed to
remain in SERVICE for so long as such individual renders services on a periodic
basis to the Corporation (or any parent or subsidiary corporation) in the
capacity of an Employee, a non-employee member of the Board or an independent
consultant or advisor.

               (ii) The Optionee shall be considered to be an EMPLOYEE for so
long as he or she remains in the employ of the Corporation or one or more parent
or subsidiary corporations, subject to the control and direction of the employer
entity not only as to the work to be performed but also as to the manner and
method of performance.

          (j) STOCKHOLDER RIGHTS. An Optionee shall have no stockholder rights
with respect to any shares covered by the option until such individual shall
have exercised the option and paid the option price for the purchased shares.

          (k) REPURCHASE RIGHTS. The shares of Common Stock acquired upon the
exercise of any Article II option grant may be subject to repurchase by the
Corporation in accordance with the following provisions:

               (i) The Plan Administrator shall have the discretion to authorize
the issuance of unvested shares of Common Stock under this Article II. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase any or all of those unvested shares at the
option price paid per share. The terms and conditions upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the instrument evidencing such
repurchase right.

               (ii) All of the Corporation's outstanding repurchase rights under
this Article II shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence of any
Corporate Transaction under Section 2.3 hereof, except to the extent: (A) any
such repurchase right is expressly assigned to the successor corporation (or

                                       10
<PAGE>
parent thereof) in connection with the Corporate Transaction or (B) such
accelerated vesting is precluded by other limitations imposed by the Plan
Administrator at the time the repurchase right is issued.

               (iii) The Plan Administrator shall have the discretionary
authority, exercisable either before or after the Optionee's cessation of
Service, to cancel the Corporation's outstanding repurchase rights with respect
to one or more shares purchased or purchasable by the Optionee under this
Discretionary Option Grant Program and thereby accelerate the vesting of such
shares in whole or in part at any time.

     2.2 INCENTIVE OPTIONS

          (a) GENERAL. The terms and conditions specified below shall be
applicable to all incentive options ("Incentive Options") granted under this
Article II pursuant to Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). Incentive Options may only be granted to individuals who
are employees of the Corporation. Options which are specifically designated as
"non-statutory" options when issued under the Plan shall NOT be subject to such
terms and conditions.

          (b) DOLLAR LIMITATION. The aggregate fair market value (determined as
of the respective date or dates of grant) of the Common Stock for which one or
more Incentive Options granted to any Employee under this Plan (or any other
option plan of the Corporation or its parent or subsidiary corporations) may for
the first time become exercisable during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two or more such Incentive Options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the exercisability
of such options as Incentive Options under the federal tax laws shall be applied
on the basis of the order in which such Incentive Options are granted. Should
the number of shares of Common Stock for which any Incentive Option first
becomes exercisable in any calendar year exceed the applicable One Hundred
Thousand Dollar ($100,000) limitation, then that option may nevertheless be
exercised in that calendar year for the excess number of shares as a
non-statutory option under the federal tax laws.

          (c) 10% STOCKHOLDER. If any individual to whom an Incentive Option is
granted is the owner of stock (as determined under Code Section 424(d))
possessing ten percent (10%) or more of the total combined voting power of all
classes of stock of the Corporation or any one of its parent or subsidiary
corporations, then the option price per share shall not be less than one hundred
and ten percent (110%) of the fair market value per share of Common Stock on the
grant date, and the option term shall not exceed five years, measured from the
grant date.

          (d) APPLICATION. Except as modified by the preceding provisions of
this Section 2.2, the provisions of Articles I, II and V of the Plan shall apply
to all Incentive Options granted hereunder.

          (e) NO INCENTIVE OPTIONS AFTER AUGUST 18, 2000. From and after August
18, 2000, no Incentive Options shall be granted under the Plan.

                                       11
<PAGE>
     2.3 CORPORATE TRANSACTIONS

          (a) DEFINITION. For purposes of this Plan, any of the following
stockholder approved transactions to which the Corporation is a party shall be
considered a "Corporate Transaction":

               (i) a merger or consolidation in which the corporation is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State in which the Corporation is incorporated,

               (ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation, or

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

          (b) ACCELERATION OF OPTION. Upon the stockholder approval of a
Corporate Transaction, each option which is at the time outstanding under this
Article II shall automatically accelerate so that each such option shall,
immediately prior to the specified effective date for the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for all or any
portion of such shares. However, an outstanding option under this Article II
shall not so accelerate if and to the extent: (A) 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 to
purchase shares of the capital stock of the successor corporation or parent
thereof, (B) such option is to be replaced with a cash incentive program of the
successor corporation which preserves the option spread existing at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option, or (C) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (A) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.

          (c) TERMINATION OF OPTIONS. Upon the consummation of the Corporate
Transaction, all outstanding options under this Article II shall terminate and
cease to be outstanding, except to the extent assumed by the successor
corporation or its parent company.

          (d) ADJUSTMENTS ON ASSUMPTION OR CONTINUATION. Each outstanding option
under this Article II which is assumed in connection with the Corporate
Transaction or is otherwise to continue in effect shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply and pertain to
the number and class of securities which would have been issued to the option
holder, in consummation of such Corporate Transaction, had such person exercised
the option immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the option price payable per share, provided
the aggregate option price payable for such securities shall remain the same. In

                                       12
<PAGE>
addition, the class and number of securities available for issuance under the
Plan following the consummation of the Corporate Transaction shall be
appropriately adjusted.

          (e) DISCRETION TO ACCELERATE. The Plan Administrator shall have the
discretion, exercisable either in advance of any actually-anticipated Corporate
Transaction or at the time of an actual Corporate Transaction, to provide (upon
such terms as it may deem appropriate) for the automatic acceleration of one or
more outstanding options granted under the Plan which are assumed or replaced in
the Corporate Transaction and do not otherwise accelerate at that time, in the
event the Optionee's Service should subsequently terminate within a designated
period following the effective date of such Corporate Transaction.

          (f) PLAN NOT TO AFFECT CORPORATION. The grant of options under this
Article II shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.

     2.4 CHANGE IN CONTROL

          (a) DEFINITION. For purposes of this Plan, a Change in Control shall
be deemed to occur in the event:

               (i) any person or related group of persons (other than the
Corporation or a person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) directly or indirectly
acquires beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act)
of securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders which the Board
does not recommend such stockholders to accept; or

               (ii) there is a change in the composition of the Board over a
period of twenty-four (24) consecutive months or less such that a majority of
the Board members (rounded up to the next whole number) ceases, by reason of one
or more proxy contests for the election of Board members, to be comprised of
individuals who either (a) have been Board members continuously since the
beginning of such period or (b) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (a) who were still in office at the time such election or
nomination was approved by the Board.

          (b) DISCRETION TO ACCELERATE. The Plan Administrator shall have the
discretionary authority, exercisable either in advance of any actually
anticipated Change in Control or at the time of an actual Change in Control, to
provide for the automatic acceleration of one or more outstanding options under
this Article II (and the termination of one or more of the Corporation's
outstanding repurchase rights under this Article II) upon the occurrence of the
Change in Control. The Plan Administrator shall also have full power and
authority to condition any such option acceleration (and the termination of any
outstanding repurchase rights) upon the subsequent termination of the Optionee's
Service within a specified period following the Change in Control.

                                       13
<PAGE>
          (c) EXERCISE RIGHTS. Any options accelerated in connection with the
Change in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.

     2.5 INCENTIVE OPTIONS

          The exercisability as Incentive Options of any options accelerated
under Sections 2.3 or 2.4 hereof in connection with a Corporate Transaction or
Change in Control shall remain subject to the dollar limitation of Section 2.2
hereof.

                                   ARTICLE III
                                    RESERVED

                                   ARTICLE IV
                         AUTOMATIC OPTION GRANT PROGRAM

     4.1 TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

          (a) AMOUNT AND DATE OF GRANT. During the term of this Plan, automatic
option grants (the "Automatic Option Grant") shall be made to each eligible
non-employee member of the Board ("Optionee") as follows:

               (i) Each year on the Annual Automatic Grant Date an option to
acquire 5,000 shares of Common Stock ("Option Shares") shall be granted to each
eligible non-employee member of the Board for so long as there are shares of
Common Stock available under Section 1.5 hereof. The "Annual Automatic Grant
Date" shall be as of the first business day of the month in which the
Corporation's Annual Stockholders Meeting is held. Notwithstanding the
foregoing, (1) any non-Employee Member of the Board whose term ended as of such
Automatic Grant Date shall not be eligible to receive any automatic option
grants on that Annual Automatic Grant Date and (2) any non-Employee Member of
the Board who has received an Automatic Grant pursuant to Section 4.1(a)(ii) on
the same date as the Annual Automatic Grant Date or within 30 days prior
thereto, shall not be eligible to receive an Automatic Option Grant on that
Annual Automatic Grant Date.

               (ii) On the Initial Automatic Grant Date, every new member of the
Board who is an eligible non-Employee and has not previously been a member of
the Board shall be granted an option to acquire 10,000 shares of Common Stock
("Option Shares") as long as there are shares of Common Stock available under
Section 1.5 hereof. The "Initial Automatic Grant Date" shall be as of the date
that the Optionee was first appointed or elected to the Board.

          (b) EXERCISE PRICE. The exercise price per share of Common Stock
subject to each automatic option grant made under this Article IV shall be equal
to 100% of the fair market value per share of the Common Stock on the applicable
Automatic Grant Date, as determined in accordance with the valuation provisions
of Section 2.1(d) hereof.

                                       14
<PAGE>
          (c) METHOD OF EXERCISE. In order to exercise an option with respect to
any Option Shares for which an Automatic Option Grant is exercisable at the
time, Optionee (or in the case of an exercise after Optionee's death, Optionee's
executor, administrator, heir or legatee, as the case may be) must take the
following action:

               (i) execute and deliver to the Secretary of the Company a written
notice of exercise;

               (ii) pay the aggregate Option Price in one of the alternate forms
as set forth in Section 4.1(d) below; and

               (iii) furnish appropriate documentation that the person or
persons exercising the option (if other than the Optionee) has the right to
exercise such option. As soon after the Exercise Date (as defined in Section
4.1(e) hereof), as practical, the Company shall mail or deliver to or on behalf
of the Optionee (or any other person or persons exercising this option in
accordance herewith) a certificate or certificates representing the shares for
which the option has been exercised in accordance with the provisions of this
Plan. In no event may any option be exercised for any fractional shares.

          (d) PAYMENT PRICE. The exercise price shall be payable in one of the
alternative forms specified below:

               (i) full payment in cash or check made payable to the
Corporation's order; or

               (ii) full payment in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at fair market value on the Exercise
Date (as such term is defined below); or

               (iii) full payment in a combination of shares of Common Stock
held for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at fair market value on the
Exercise Date and cash or check drawn to the Corporation's order; or

               (iv) full payment through a sale and remittance procedure
pursuant to which the non-employee Board member (A) shall provide irrevocable
written instructions to a designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares and shall (B) concurrently
provide written directives to the Corporation to deliver the certificates for
the purchased shares directly to such brokerage firm in order to complete the
sales transaction.

                                       15
<PAGE>
               For purposes of this Section 4.1.(d), the Exercise Date shall be
the date on which written notice of the option exercise is delivered to the
Corporation. Except to the extent the sale and remittance procedure is utilized
in connection with the exercise of the option, payment of the exercise price for
the purchased shares must accompany such notice.

          (e) EXERCISE DATE. For purposes of this Article IV, the Exercise Date
shall be the date on which written notice of the option exercise is delivered to
the Corporation, and the fair market value per share of Common Stock on any
relevant date under this Article IV shall be determined in accordance with the
provisions of Section 2.1(d) hereof. Except to the extent the sale and
remittance procedure specified above is utilized for the exercise of the potion,
payment of the option price for the purchased shares must accompany the exercise
notice.

          (f) TERM OF OPTION. Each automatic option grant under this Article IV
shall have a maximum term of ten (10) years measured from the Automatic Grant
Date. Should Optionee's service as a Board member cease for any reason while an
option remains outstanding and unexercised, then the option term shall
immediately terminate and the option shall cease to be outstanding prior to the
Expiration Date in accordance with the following provisions:

               (i) The option shall immediately terminate and cease to be
outstanding for any shares of Common Stock for which the option was not
otherwise exercisable at the time of Optionee's cessation of Board service.

               (ii) Should Optionee cease, for any reason other than death, to
serve as a member of the Board, then Optionee shall have a six-month period
measured from the date of such cessation of Board service in which to exercise
the options which vested prior to the time of such cessation of Board service.
In no event, however, may any option be exercised after the Expiration Date of
such option.

               (iii) Should Optionee die while serving as a Board member or
within six months after cessation of Board service, then the personal
representative of the Optionee's estate (or the person or persons to whom the
option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution) shall have the right to exercise any option
for any or all of the shares of Common Stock for which the option is, in
accordance with the provisions of this Plan, exercisable at the time of the
Optionee's cessation of Board service, less any shares subsequently purchased by
the Optionee pursuant to the option prior to death. Such right shall cease to be
exercisable and the option shall accordingly terminate with respect to all
Common Stock available under such option by the earlier of (A) the expiration of
the twelve-month period measured from the date of Optionee's death or (B) the
Expiration Date.

          (g) VESTING. Each Automatic Option Grant made pursuant to Section
4.1(a)(i) shall become exercisable and vest in a series of twelve (12) equal and
successive monthly installments, with the first such installment to become
exercisable one month after the Annual Automatic Grant Date. Each Automatic
Option Grant made pursuant to Section 4.1(a)(ii) shall become exercisable and
vest in a series of 36 equal and successive monthly installments, with the first
such installment to become exercisable one month after the Initial Automatic

                                       16
<PAGE>
Grant Date. Each installment of an option shall only vest and become exercisable
if the Optionee has not ceased serving as a Board member as of such installment
date.

          (h) LIMITED TRANSFERABILITY. Each Automatic Option Grant shall be
exercisable only by Optionee during Optionee's lifetime and shall be neither
transferable nor assignable, other than by will or by the laws of descent and
distribution following Optionee's death.

     4.2 CORPORATE TRANSACTION

          In the event of stockholder approval of a Corporate Transaction (as
that term is defined in Section 2.3(a)), then all options granted pursuant to
this Article IV (to the extent outstanding at such time, but not otherwise fully
exercisable and vested) shall automatically accelerate and immediately vest so
that the option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the Option Shares at
the time subject to the option and may thereafter be exercised for any or all
such Option Shares. Upon the consummation of the Corporate Transaction, the
option shall, to the extent not previously exercised, terminate and cease to be
outstanding.

     4.3 CHANGE IN CONTROL

          All options granted pursuant to an Automatic Option Agreement under
this Article IV (to the extent outstanding, but not otherwise fully exercisable
and vested) shall automatically accelerate in connection with a Change in
Control (as that term is defined in Section 2.4(a)), so that such option shall,
immediately prior to the effective date of such Change in Control, become fully
exercisable for all of the Option Shares at the time subject to that option and
may be exercised for any or all of such Option Shares. The option shall remain
so exercisable until such option has terminated in accordance with Section
4.1(d) hereof.

     4.4 MISCELLANEOUS PROVISIONS

          (a) CORPORATION RIGHTS. The Automatic Option Grants shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

          (b) PRIVILEGE OF STOCK OWNERSHIP. An Optionee shall not have any of
the rights of a stockholder with respect to Option Shares until such individual
shall have exercised the option and paid the option price for the Option Shares.

                                       17
<PAGE>
                                    ARTICLE V
                                  MISCELLANEOUS

     5.1 AMENDMENT OF THE PLAN AND AWARDS

          (a) BOARD AUTHORITY. The Board has complete and exclusive power and
authority to amend or modify the Plan (or any component thereof) in any or all
respects whatsoever. However, no such amendment or modification shall, without
the consent of the Corporation's stockholders, disqualify any option previously
granted under the Plan for treatment as an Incentive Option, or adversely affect
rights and obligations with respect to options at the time outstanding under the
Plan, unless the Optionee or Participant consents to such amendment. In
addition, the Board may not, without the approval of the Corporation's
stockholders, amend the Plan to (i) materially increase the maximum number of
shares issuable under the Plan, except for permissible adjustments under Section
1.5(d) or extend the term of the Plan, (ii) materially modify the eligibility
requirements for plan participation or (iii) materially increase the benefits
accruing to plan participants.

          (b) OPTIONS ISSUED PRIOR TO STOCKHOLDER APPROVAL. Options to purchase
shares of Common Stock may be granted under the Discretionary Option Grant
Program and the Automatic Option Grant Program prior to any required stockholder
approvals, provided, any shares actually issued under the Plan are held in
escrow until stockholder approval is obtained. If such stockholder approval is
not obtained within twelve (12) months of the meeting of the Board approving the
Plan or any amendments, then (i) any unexercised options shall terminate and
cease to be exercisable and (ii) the Corporation shall promptly refund the
purchase price paid for any excess shares actually issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow.

          (c) RULE 16b-3 PLAN. With respect to persons subject to Section 16 of
the 1934 Act, the Plan is intended to comply with all applicable conditions of
Rule 16b-3 (and all subsequent revisions thereof) promulgated under the 1934
Act. To the extent any revision of the Plan or action by any Plan Administrator
fails to so comply, it shall be deemed null and void, to the extent permitted by
law and deemed advisable by such Plan Administrator. In addition, the Board may
amend the Plan from time to time as it deems necessary in order to meet the
requirements of any amendments to Rule 16b-3 without the consent of the
shareholders of the Company.

     5.2 TAX WITHHOLDING

          (a) GENERAL. The Corporation's obligation to deliver shares of Common
Stock upon the exercise of stock options for such shares or the vesting of such
shares under the Plan shall be subject to the satisfaction of all applicable
Federal, State and local income tax and employment tax withholding requirements.

          (b) SHARES TO PAY FOR WITHHOLDING. A Plan Administrator may, in its
discretion and in accordance with the provisions of this Section 5.2(b) and such
supplemental rules as the Plan Administrator may from time to time adopt

                                       18
<PAGE>
(including the applicable safe-harbor provisions of SEC Rule 16b-3), provide any
or all holders of non-statutory options or unvested shares under the Plan with
the right to use shares of the Corporation's Common Stock in satisfaction of all
or part of the Federal, State and local income tax and employment tax
liabilities incurred by such holders in connection with the exercise of their
options or the vesting of their shares (the "Taxes"). Such right may be provided
to any such holder in either or both of the following formats:

               (i) STOCK WITHHOLDING. The holder of the non-statutory option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such non-statutory option or the vesting of such shares, a portion of those
shares with an aggregate fair market value equal to the percentage of the
applicable Taxes (not to exceed one hundred percent (100%)) designated by the
holder.

               (ii) STOCK DELIVERY. The Plan Administrator may, in its
discretion, provide the holder of the non-statutory option or the unvested
shares with the election to deliver to the Corporation, at the time the
non-statutory option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such individual (other than pursuant to the
transaction triggering the Taxes) with an aggregate fair market value equal to
the percentage of the taxes incurred in connection with such option exercise or
share vesting (not to exceed one hundred percent (100%)) designated by the
holder.

     5.3 EFFECTIVE DATE AND TERM OF PLAN

          (a) EFFECTIVE DATE. This Plan, as successor to the Corporation's 1989
Stock Option Plan, become effective as of the applicable Effective Date, and no
further option grants or stock issuances shall be made under the 1989 Plan from
and after such Effective Date.

          (b) INCORPORATION OF 1989 PLAN. Each option issued and outstanding
under the 1989 Plan immediately prior to the Effective Date of the Discretionary
Option Grant Program shall be incorporated into this Plan and treated as an
outstanding option under this Plan, but each such option shall continue to be
governed solely by the terms and conditions of the instrument evidencing such
grant, and nothing in this Plan shall be deemed to affect or otherwise modify
the rights or obligations of the holders of such options with respect to their
acquisition of shares of Common Stock thereunder.

          (c) DISCRETION. The option and vesting acceleration provisions of
Article II relating to Corporate Transactions and Changes in Control may, in the
Plan Administrator's discretion, be extended to one or more stock options which
are outstanding under the 1989 Plan on the Effective Date of the Discretionary
Option Grant Program but which do not otherwise provide for such acceleration.

          (d) TERMINATION OF PLAN. The Plan shall terminate upon the earlier of
(i) January 19, 2013(2) or (ii) the date on which all shares available for
issuance under the Plan shall have been issued pursuant to the exercise of
options granted under the Plan. If the date of termination is determined under
clause (i) above, then all option grants and unvested stock issuances

----------
(2) By amendment approved by the stockholders on August 18, 2000, the term of
the Plan was extended from January 19, 2003 to January 19, 2013.

                                       19
<PAGE>
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants or
issuances.

     5.4 USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants under the Plan shall be used for general corporate
purposes.

     5.5 REGULATORY APPROVALS

          (a) GENERAL. The implementation of the Plan, the granting of any
option under the Plan, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.

          (b) SECURITIES REGISTRATION. No shares of Common Stock or other assets
shall be issued or delivered under this Plan unless and until there shall have
been compliance with all applicable requirements of Federal and State securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which stock of the
same class is then listed.

     5.6 NO EMPLOYMENT/SERVICE RIGHTS

          Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any parent or subsidiary corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation retaining the services of such individual) may terminate
such individual's employment or service at any time and for any reason, with or
without cause.

     5.7 MISCELLANEOUS PROVISIONS

          (a) ASSIGNMENT. The right to acquire Common Stock or other assets
under the Plan may not be assigned, encumbered or otherwise transferred by any
Optionee or Participant. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.

          (b) CHOICE OF LAW. The provisions of the Plan relating to the exercise
of options and the vesting of shares shall be governed by the laws of the State
of Arizona, as such laws are applied to contracts entered into and performed in
such State.

                                       20
<PAGE>
          (c) PLAN NOT EXCLUSIVE. This Plan is not intended to be the exclusive
means by which the Corporation may issue options or warrants to acquire its
shares of Common Stock, stock awards or issuances, or any other type of award or
issuance. To the extent permitted by applicable law, any such other option,
warrants, issuance, or awards may be issued by the Company, other than pursuant
to this Plan, without shareholder approval.

     EXECUTED as of the 26th day of October, 2001.

                                 MICROCHIP TECHNOLOGY CORPORATION,
                                 a Delaware corporation

                                 By: /s/ Steve Sanghi
                                     -------------------------------------------
                                     Steve Sanghi

                                 Its: Chairman of the Board, President and Chief
                                 Executive Officer

Attested by:

/s/ Mary K. Simmons
-----------------------------
Mary K. Simmons, Secretary

                                       21

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