Document:

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                                  EXHIBIT 10.1

                                    SBE, INC.

                             1996 STOCK OPTION PLAN

                ADOPTED BY THE BOARD OF DIRECTORS JULY 21, 1987,
          AMENDED MARCH 23, 1993, AUGUST 23, 1994 AND JANUARY 17, 1995
            APPROVED BY SHAREHOLDERS MARCH 9, 1989 AND MARCH 21, 1995
                      AMENDED AND RESTATED JANUARY 18, 1996
                 APPROVED BY THE SHAREHOLDERS ON APRIL 16, 1996
                            AMENDED DECEMBER 9, 1997
                 APPROVED BY THE STOCKHOLDERS ON APRIL 14, 1998
                            AMENDED JANUARY 27, 1999
                 APPROVED BY THE STOCKHOLDERS ON MARCH 23, 1999
                             AMENDED JANUARY 8, 2001
                 APPROVED BY THE STOCKHOLDERS ON MARCH 20, 2001
                            AMENDED DECEMBER 14, 2001
                 APPROVED BY THE STOCKHOLDERS ON MARCH 19, 2002
                              AMENDED MAY 21, 2002
                              AMENDED JULY 30, 2002

1.   PURPOSES.

     (a) The  purpose  of the  Plan is to  provide  a means  by  which  selected
Employees and Directors of and  Consultants to the Company,  and its Affiliates,
may be given an opportunity to purchase stock of the Company.

     (b) The  Company,  by means of the Plan,  seeks to retain the  services  of
persons who are now Employees or Directors of or  Consultants  to the Company or
its  Affiliates,  to secure and retain the services of new Employees,  Directors
and  Consultants,  and to provide  incentives  for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

     (c) The Company  intends that the Stock Awards issued under the Plan shall,
in the  discretion  of the Board or any  Committee to which  responsibility  for
administration  of the Plan has been delegated  pursuant to subsection  3(c), be
Incentive  Stock  Options,  Nonstatutory  Stock  Options or stock  bonuses.  All
Options shall be separately  designated  Incentive Stock Options or Nonstatutory
Stock  Options  at the time of grant,  and in such form as  issued  pursuant  to
Section 6, and a separate  certificate or certificates will be issued for shares
purchased on exercise of each type of Option.  Stock  bonuses will be designated
as such on the date of grant and shall be subject to the terms and conditions of
Section 7.

2.   DEFINITIONS.

     (a)  "Affiliate"  means any parent  corporation or subsidiary  corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.

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

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     (c) "Code" means the Internal Revenue Code of 1986, as amended.

     (d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.

     (e) "Company" means SBE, Inc., a Delaware corporation.

     (f)  "Consultant"  means any person,  including an advisor,  engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services,  provided that the term "Consultant"  shall not include Directors
who are paid only a director's fee by the Company or who are not  compensated by
the Company for their services as Directors.

     (g) "Continuous  Status as an Employee,  Director or Consultant" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Board, in its sole discretion,
may determine whether  Continuous Status as an Employee,  Director or Consultant
shall  be  considered  interrupted  in the  case of:  (i) any  leave of  absence
approved  by the Board,  including  sick  leave,  military  leave,  or any other
personal  leave;  or (ii)  transfers  between the Company,  Affiliates  or their
successors.

     (h) "Covered  Employee" means the chief executive  officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to  stockholders  under the Exchange  Act, as determined
for purposes of Section 162(m) of the Code.

     (i) "Director" means a member of the Board.

     (j)  "Disability"  means the  inability  of a person,  in the  opinion of a
qualified  physician  acceptable to the Company,  to perform the major duties of
that person's  position with the Company or an Affiliate of the Company  because
of the sickness or injury of the person.

     (k) "Non-Employee  Director" means a Director who either (i) was not during
the one year prior to service as an administrator of the Plan granted or awarded
equity  securities  pursuant to the Plan or any other plan of the Company or any
affiliate entitling the participants therein to acquire equity securities of the
Company or any affiliate except as permitted by Rule 16b-3(c)(2)(i);  or (ii) is
otherwise  considered to be a  "disinterested  person" in  accordance  with Rule
16b-3(c)(2)(i), or any other applicable rules, regulations or interpretations of
the Securities and Exchange Commission.

     (l) "Employee" means any person, including Officers and Directors, employed
by the Company or any  Affiliate of the Company.  Neither  service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.

     (m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

     (n) "Fair  Market  Value"  means,  as of any date,  the value of the common
stock of the Company determined as follows

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          (1) If the common stock is listed on any established stock exchange or
a national  market system,  including  without  limitation  the National  Market
System  of the  National  Association  of  Securities  Dealers,  Inc.  Automated
Quotation  ("NASDAQ")  System,  the Fair Market Value of a share of common stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were  reported) as quoted on such system or exchange  (or the exchange  with the
greatest volume of trading in common stock) on the last market trading day prior
to the day of  determination,  as reported  in the Wall  Street  Journal or such
other source as the Board deems reliable;

          (2) If the common stock is quoted on the NASDAQ System (but not on the
National  Market  System  thereof)  or  is  regularly  quoted  by  a  recognized
securities dealer but selling prices are not reported,  the Fair Market Value of
a share of common  stock shall be the mean  between the bid and asked prices for
the  common  stock  on  the  last  market  trading  day  prior  to  the  day  of
determination,  as reported in the Wall Street  Journal or such other  source as
the Board deems reliable;

          (3) In the absence of an established  market for the common stock, the
Fair  Market  Value shall be  determined  in good faith by the Board and, to the
extent  that the  Company is subject to Section  260.140.50  on the date a Stock
Award is granted, in a manner consistent with Section 260.140.50.

     (o)  "Incentive  Stock  Option"  means an Option  intended to qualify as an
incentive  stock  option  within the  meaning of Section 422 of the Code and the
regulations promulgated thereunder.

     (p) "Nonstatutory  Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.

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

     (r) "Option" means a stock option granted pursuant to the Plan.

     (s) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement shall be subject to the terms and conditions of the Plan.

     (t) "Optionee" means a person who holds an outstanding Option.

     (u)  "Outside  Director"  means a Director  who either (i) is not a current
employee of the Company or an  "affiliated  corporation"  (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former  employee  of  the  Company  or  an  "affiliated  corporation"  receiving
compensation  for prior  services  (other than  benefits  under a tax  qualified
pension plan), was not an officer of the Company or an "affiliated  corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an  "affiliated  corporation"  for services in any capacity other
than as a Director,  or (ii) is otherwise  considered an "outside  director" for
purposes of Section 162(m) of the Code.

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     (v) "Participant"  means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable,  such other person who holds an outstanding Stock
Award.

     (w) "Plan" means this SBE, Inc. 1996 Stock Option Plan.

     (x) "Rule 16b-3"  means Rule 16b-3 of the Exchange Act or any  successor to
Rule 16b-3,  as in effect when discretion is being exercised with respect to the
Plan.

     (y)  "Section  260.140.41"  means  Section  260.140.41  of  Title 10 of the
California Code of Regulations.

     (z)  "Section  260.140.42"  means  Section  260.140.42  of  Title 10 of the
California Code of Regulations.

     (aa)  "Section  260.140.45"  means  Section  260.140.45  of Title 10 of the
California Code of Regulations.

     (bb)  "Section  260.140.50"  means  Section  260.140.50  of Title 10 of the
California Code of Regulations.

     (cc) "Stock  Award" means any right  granted  under the Plan,  including an
Option and a stock bonus.

     (dd) "Stock Award Agreement" means a written  agreement between the Company
and a  holder  of a Stock  Award  evidencing  the  terms  and  conditions  of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

     (ee) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock  possessing  more than ten percent
(10%) of the total combined  voting power of all classes of stock of the Company
or any of its Affiliates.

3.   ADMINISTRATION.

     (a) The Plan shall be  administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).

     (b) The Board shall have the power,  subject to, and within the limitations
of, the express provisions of the Plan:

          (1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock  Awards;  when and how each Stock Award shall be
granted;  whether an Option will be an Incentive  Stock Option or a Nonstatutory
Stock Option;  the  provisions  of each Stock Award  granted  (which need not be
identical),  including  the time or times such Stock Award may be  exercised  in
whole or in part;  and the  number of shares  for which a Stock  Award  shall be
granted to each such person.

          (2) To construe and interpret the Plan and Stock Awards  granted under
it,  and  to  establish,   amend  and  revoke  rules  and  regulations  for  its
administration.  The Board,  in the  exercise  of this  power,  may  correct any

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defect,  omission or  inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem  necessary  or expedient to make the
Plan fully effective.

          (3) To amend the Plan or a Stock Award as provided in Section 12.

          (4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company.

     (c) The  Board  may  delegate  administration  of the  Plan to a  committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which  Committee  shall be  Non-Employee  Directors  and may also be,  in the
discretion of the Board, Outside Directors.  If administration is delegated to a
Committee,  the Committee shall have, in connection with the  administration  of
the Plan, the powers theretofore  possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee),  subject,  however,  to
such  resolutions,  not inconsistent  with the provisions of the Plan, as may be
adopted from time to time by the Board.  The Board may abolish the  Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything  in this  Section 3 to the  contrary,  the Board or the  Committee  may
delegate to a committee of one or more persons the authority to grant Options to
eligible  persons who (1) are not then subject to Section 16 of the Exchange Act
and/or (2) are either (i) not then Covered  Employees and are not expected to be
Covered  Employees  at the time of  recognition  of income  resulting  from such
Option,  or (ii) not persons with  respect to whom the Company  wishes to comply
with Section 162(m) of the Code.

     (d) Any  requirement  that an  administrator  of the Plan be a Non-Employee
Director shall not apply if the Board or the Committee  expressly  declares that
such  requirement  shall not apply.  Any  Non-Employee  Director shall otherwise
comply with the requirements of Rule 16b-3.

4.   SHARES SUBJECT TO THE PLAN.

     (a) Subject to the  provisions of Section 11 relating to  adjustments  upon
changes in stock and subject to Section  4(c) below,  the stock that may be sold
pursuant to Stock Awards  shall not exceed in the  aggregate  one million  seven
hundred thirty thousand (1,730,000) shares of the Company's common stock. If any
Stock Award shall for any reason expire or otherwise  terminate,  in whole or in
part,  without having been exercised in full, the stock not purchased under such
Stock Award shall revert to and again become  available  for issuance  under the
Plan.

     (b) The stock  subject  to the Plan may be  unissued  shares or  reacquired
shares, bought on the market or otherwise.

     (c)  Notwithstanding  Section 4(a), if at the time of each grant of a Stock
Award  under the Plan the  Company is subject to Section  260.140.45,  the total
number of securities  issuable upon exercise of all outstanding  options and the
total number of shares provided for under this Plan and any other stock bonus or
similar  plan or  agreement  of the  Company  shall not  exceed  30% of the then
outstanding  capital  stock of the Company (as  measured as set forth in Section
260.140.45),  unless  stockholder  approval has been obtained in compliance with

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Section  260.140.45  to exceed 30%, in which case the limit shall be such higher
percentage as approved by the stockholders.

5.   ELIGIBILITY.

     (a) Incentive Stock Options may be granted only to Employees.  Nonstatutory
Stock Options and stock  bonuses may be granted only to Employees,  Directors or
Consultants.

     (b) No Ten  Percent  Stockholder  shall  be  eligible  for the  grant of an
Incentive  Stock Option unless the exercise price of such Incentive Stock Option
is at least one  hundred ten  percent  (110%) of the Fair  Market  Value of such
stock at the date of grant and the  Incentive  Stock  Option is not  exercisable
after the expiration of five (5) years from the date of grant.

     (c) Subject to the  provisions of Section 11 relating to  adjustments  upon
changes in stock,  no person  shall be eligible to be granted  Options  covering
more than one hundred fifty thousand  (150,000)  shares of the Company's  common
stock in any calendar year.

6.   OPTION PROVISIONS.

     Each  Option  shall be in such  form  and  shall  contain  such  terms  and
conditions  as the Board  shall deem  appropriate.  The  provisions  of separate
Options  need  not  be  identical,   but  each  Option  shall  include  (through
incorporation of provisions  hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

     (a) TERM. No Option shall be  exercisable  after the expiration of ten (10)
years from the date it was granted.

     (b) PRICE.  The exercise price of each Incentive  Stock Option shall be not
less  than one  hundred  percent  (100%) of the Fair  Market  Value of the stock
subject to the Option on the date the Option is granted.  The exercise  price of
each Nonstatutory Stock Option shall be not less than eighty-five  percent (85%)
of the Fair  Market  Value of the stock  subject  to the  Option on the date the
Option is  granted;  provided,  however,  that to the extent that the Company is
subject to Section  260.140.41 at the time the Option is granted,  a Ten Percent
Stockholder shall not be granted a Nonstatutory Stock Option unless the exercise
price of such Option is at least (i) one hundred ten percent  (110%) of the Fair
Market  Value of the  common  stock on the  date of  grant  or (ii)  such  lower
percentage  of the Fair Market Value of the common stock on the date of grant as
is permitted by Section 260.140.41 at the time of the grant of the Option.

     (c)  CONSIDERATION.  The purchase  price of stock  acquired  pursuant to an
Option  shall be paid,  to the  extent  permitted  by  applicable  statutes  and
regulations,  either (i) in cash at the time the Option is exercised, or (ii) at
the  discretion of the Board or the  Committee,  at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the  foregoing,  the use of other common stock of the
Company)  with the person to whom the Option is granted or to whom the Option is
transferred  pursuant  to  subsection  6(d),  or (C) in any other  form of legal
consideration that may be acceptable to the Board.

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     In the case of any deferred payment arrangement,  interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any  amounts  other than  amounts  stated to be interest  under the  deferred
payment arrangement.

     (d)  TRANSFERABILITY.  An Incentive  Stock Option shall not be transferable
except  by will  or by the  laws of  descent  and  distribution,  and  shall  be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is  granted  only by such  person.  A  Nonstatutory  Stock  Option  shall not be
transferable  except  by will or by the  laws of  descent  and  distribution  or
pursuant  to a  domestic  relations  order (a "DRO"),  and shall be  exercisable
during the  lifetime  of the  person to whom the Option is granted  only by such
person or any  transferee  pursuant  to a DRO.  The person to whom the Option is
granted may, by delivering written notice to the Company, in a form satisfactory
to the  Company,  designate  a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.

     (e) VESTING.  The total number of shares of stock subject to an Option may,
but need not, be allotted in periodic  installments (which may, but need not, be
equal).  The Option  Agreement may provide that from time to time during each of
such  installment  periods,  the  Option may become  exercisable  ("vest")  with
respect  to some  or all of the  shares  allotted  to  that  period,  and may be
exercised  with  respect to some or all of the shares  allotted  to such  period
and/or any prior period as to which the Option  became  vested but was not fully
exercised.  The Option may be subject to such other terms and  conditions on the
time or times when it may be  exercised  (which may be based on  performance  or
other  criteria)  as the  Board may deem  appropriate.  The  provisions  of this
subsection  6(e) are  subject to any Option  provisions  governing  the  minimum
number of shares as to which an Option may be exercised, including the following
Section 6(f).

     (f) MINIMUM  VESTING.  Notwithstanding  the foregoing  Section 6(e), to the
extent  that the  Company is subject to the  following  restrictions  on vesting
under Section 260.140.41(f) of Title 10 of the California Code of Regulations at
the time of the grant of the Option, then:

          (1) Options granted to an Employee who is not an Officer,  Director or
Consultant  shall  provide for  vesting of the total  number of shares of common
stock at a rate of at least  twenty  percent  (20%) per year over five (5) years
from the date the Option was granted,  subject to reasonable  conditions such as
continued employment; and

          (2) Options granted to Officers,  Directors or Consultants may be made
fully   exercisable,   subject  to  reasonable   conditions  such  as  continued
employment, at any time or during any period established by the Company.

     (g) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or any
person to whom an Option is transferred under subsection 6(d), as a condition of
exercising any such Option, (1) to give written  assurances  satisfactory to the
Company as to the Optionee's  knowledge and experience in financial and business
matters and/or to employ a purchaser  representative  reasonably satisfactory to
the Company who is  knowledgeable  and  experienced  in  financial  and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Option; and (2)

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to give written assurances  satisfactory to the Company stating that such person
is acquiring  the stock  subject to the Option for such person's own account and
not with any present  intention of selling or otherwise  distributing the stock.
The  foregoing   requirements,   and  any  assurances  given  pursuant  to  such
requirements,  shall be  inoperative  if (i) the issuance of the shares upon the
exercise  of the Option has been  registered  under a then  currently  effective
registration  statement  under  the  Securities  Act of 1933,  as  amended  (the
"Securities Act"), or (ii) as to any particular requirement,  a determination is
made by counsel for the  Company  that such  requirement  need not be met in the
circumstances under the then applicable securities laws. The Company may require
the  Optionee  to provide  such other  representations,  written  assurances  or
information  which the  Company  shall  determine  is  necessary,  desirable  or
appropriate to comply with  applicable  securities and other laws as a condition
of granting an Option to such  Optionee or  permitting  the Optionee to exercise
such  Option.  The Company  may,  upon advice of counsel to the  Company,  place
legends  on stock  certificates  issued  under  the Plan as such  counsel  deems
necessary or appropriate  in order to comply with  applicable  securities  laws,
including, but not limited to, legends restricting the transfer of the stock.

     (h)  TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the  event an  Optionee's  Continuous  Status  as an  Employee,  Director  or
Consultant terminates (other than upon the Optionee's death or Disability),  the
Optionee  may  exercise  his or her Option (to the extent that the  Optionee was
entitled  to  exercise  it as of the date of  termination)  but only within such
period of time ending on the earlier of (i) the date three (3) months  after the
termination  of the  Optionee's  Continuous  Status as an Employee,  Director or
Consultant (or such longer or shorter period specified in the Option  Agreement,
which period, to the extent that the Company is subject to Section 260.140.41 at
the time the Option is  granted,  shall not be less than thirty (30) days unless
such termination is for cause), or (ii) the expiration of the term of the Option
as set forth in the Option Agreement.  If, after termination,  the Optionee does
not  exercise  his or  her  Option  within  the  time  specified  in the  Option
Agreement,  the Option shall  terminate,  and the shares  covered by such Option
shall revert to and again become available for issuance under the Plan.

     (i) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status as
an Employee,  Director or Consultant  terminates  as a result of the  Optionee's
Disability,  the Optionee may exercise his or her Option (to the extent that the
Optionee  was entitled to exercise it as of the date of  termination),  but only
within  such  period of time  ending on the  earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period, to the extent that the Company is subject to
Section 260.140.41 at the time the Option is granted, shall not be less than six
(6) months),  or (ii) the  expiration  of the term of the Option as set forth in
the  Option  Agreement.  If, at the date of  termination,  the  Optionee  is not
entitled  to  exercise  his or her  entire  Option,  the  shares  covered by the
unexercisable  portion of the Option shall revert to and again become  available
for issuance  under the Plan.  If,  after  termination,  the  Optionee  does not
exercise his or her Option within the time  specified  herein,  the Option shall
terminate,  and the shares  covered  by such  Option  shall  revert to and again
become available for issuance under the Plan.

     (j) DEATH OF OPTIONEE.  In the event of the death of an Optionee during, or
within a period  specified in the Option Agreement after the termination of, the
Optionee's Continuous Status as an Employee,  Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option

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as of the date of death) by the Optionee's  estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's  death  pursuant to subsection  6(d),
but only within the period  ending on the earlier of (i) the date  eighteen (18)
months  following the date of death (or such longer or shorter period  specified
in the Option Agreement, which period, to the extent that the Company is subject
to Section 260.140.41 at the time the Option is granted,  shall not be less than
six (6) months),  or (ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, at the time of death, the Optionee was not entitled
to exercise his or her entire Option,  the shares  covered by the  unexercisable
portion of the Option shall revert to and again  become  available  for issuance
under the Plan.  If, after death,  the Option is not  exercised  within the time
specified  herein,  the Option shall  terminate,  and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.

     (k) EARLY  EXERCISE.  The Option  may,  but need not,  include a  provision
whereby  the  Optionee  may elect at any time  while an  Employee,  Director  or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option  prior to the full  vesting of the  Option.  Any  unvested  shares so
purchased may be subject to a repurchase right in favor of the Company or to any
other restriction the Board determines to be appropriate.

     (l)  WITHHOLDING.  To  the  extent  provided  by  the  terms  of an  Option
Agreement,  the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold  shares  from the shares of the common  stock  otherwise
issuable to the  Optionee as a result of the  exercise of the Option;  provided,
however,  that no shares of common stock are withheld with a value exceeding the
minimum  amount of tax  required to be withheld by law (or such lower  amount as
may be necessary to avoid variable award  accounting);  or (3) delivering to the
Company owned and unencumbered shares of the common stock of the Company.

7.   STOCK BONUS PROVISIONS.

         Each stock bonus agreement shall be in such form and shall contain such
terms and conditions as the Board shall deem appropriate. The terms and
conditions of stock bonus agreements may change from time to time, and the terms
and conditions of separate stock bonus agreements need not be identical, but
each stock bonus agreement shall include (through incorporation of provisions
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions:

     (a)  CONSIDERATION.  A stock bonus may be awarded in consideration for past
services actually rendered to the Company or an Affiliate for its benefit.

     (b)  VESTING.  Subject to the  "Repurchase  Limitation"  in Section  10(g),
shares of Company common stock awarded under the stock bonus  agreement may, but
need not,  be subject to a share  repurchase  option in favor of the  Company in
accordance with a vesting schedule to be determined by the Board.

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     (c)  TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
Subject to the  "Repurchase  Limitation" in Section  10(g),  in the event that a
Participant's   Continuous  Status  as  an  Employee,   Director  or  Consultant
terminates,  the  Company  may  reacquire  any or all of the shares  held by the
Participant  that have not vested as of the date of termination  under the terms
of the stock bonus agreement.

     (d)  TRANSFERABILITY.  Rights to  acquire  shares  under  the  stock  bonus
agreement shall not be transferable except by will or by the laws of descent and
distribution  and shall be  exercisable  during the lifetime of the  Participant
only by the Participant.

     (e) SECURITIES LAW COMPLIANCE. The Company may require any Participant,  as
a  condition  of  acquiring  stock under a stock  bonus  agreement,  (1) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and  experience in financial and business  matters  and/or to employ a purchaser
representative  reasonably  satisfactory to the Company who is knowledgeable and
experienced in financial and business matters,  and that he or she is capable of
evaluating, alone or together with the purchaser representative,  the merits and
risks of  acquiring  stock  under the  stock  bonus  agreement;  and (2) to give
written  assurances  satisfactory  to the  Company  stating  that such person is
acquiring the stock subject to the stock bonus for such person's own account and
not with any present  intention of selling or otherwise  distributing the stock.
The  foregoing   requirements,   and  any  assurances  given  pursuant  to  such
requirements, shall be inoperative if (i) the issuance of the shares pursuant to
the stock bonus agreement has been registered  under a then currently  effective
registration  statement  under  the  Securities  Act of 1933,  as  amended  (the
"Securities Act"), or (ii) as to any particular requirement,  a determination is
made by counsel for the  Company  that such  requirement  need not be met in the
circumstances under the then applicable securities laws. The Company may require
the  Participant to provide such other  representations,  written  assurances or
information  which the  Company  shall  determine  is  necessary,  desirable  or
appropriate to comply with  applicable  securities and other laws as a condition
of granting a stock bonus to such  Participant or permitting the  Participant to
acquire  stock under a stock bonus  agreement.  The Company may,  upon advice of
counsel to the Company,  place  legends on stock  certificates  issued under the
Plan as such  counsel  deems  necessary or  appropriate  in order to comply with
applicable securities laws,  including,  but not limited to, legends restricting
the transfer of the stock.

     (f)  WITHHOLDING.  To the  extent  provided  by the terms of a stock  bonus
agreement,  the  Participant  may  satisfy  any  federal,  state  or  local  tax
withholding  obligation  relating  to the  acquisition  of stock under the stock
bonus agreement by any of the following means or by a combination of such means:
(1) tendering a cash payment;  (2)  authorizing  the Company to withhold  shares
from the shares of the common stock  otherwise  issuable to the Participant as a
result of the acquisition of shares under the stock bonus  agreement;  provided,
however,  that no shares of common stock are withheld with a value exceeding the
minimum  amount of tax  required to be withheld by law (or such lower  amount as
may be necessary to avoid variable award  accounting);  or (3) delivering to the
Company owned and unencumbered shares of the common stock of the Company.

8.   COVENANTS OF THE COMPANY.

                                       10
<PAGE>

     (a) During the terms of the Stock Awards,  the Company shall keep available
at all times  the  number of shares of stock  required  to  satisfy  such  Stock
Awards.

     (b) The Company  shall seek to obtain from each  regulatory  commission  or
agency having  jurisdiction  over the Plan such  authority as may be required to
issue and sell  shares of stock upon  exercise  of the Stock  Awards;  provided,
however,  that this undertaking  shall not require the Company to register under
the  Securities  Act either  the Plan,  any Stock  Award or any stock  issued or
issuable  pursuant to any such Stock Award.  If, after reasonable  efforts,  the
Company is unable to obtain from any such  regulatory  commission  or agency the
authority  which counsel for the Company deems necessary for the lawful issuance
and sale of stock  under  the  Plan,  the  Company  shall be  relieved  from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.

9.   USE OF PROCEEDS FROM STOCK.

     Proceeds from the sale of stock  pursuant to Stock Awards shall  constitute
general funds of the Company.

10.  MISCELLANEOUS.

     (a) The Board shall have the power to accelerate  the time at which a Stock
Award may first be  exercised or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding the provisions in
the Stock Award  stating the time at which it may first be exercised or the time
during which it will vest.

     (b) No  Participant  shall be deemed to be the holder of, or to have any of
the rights of a holder  with  respect  to, any shares  subject to a Stock  Award
unless and until such person has satisfied all  requirements for exercise of the
Stock Award pursuant to its terms.

     (c) Nothing in the Plan or any  instrument  executed or Stock Award granted
pursuant  thereto shall confer upon any Participant any right to continue in the
employ of the Company or any Affiliate  (or to continue  acting as a Director or
Consultant)  or shall  affect  the  right of the  Company  or any  Affiliate  to
terminate the employment of any Employee,  with or without cause,  to remove any
Director as provided in the Company's  By-Laws and the provisions of the General
Corporation  Law of the State of Delaware,  or to terminate the  relationship of
any Consultant in accordance with the terms of that Consultant's  agreement with
the Company or Affiliate to which such Consultant is providing services.

     (d) To the extent that the aggregate  Fair Market Value  (determined at the
time of grant) of stock  with  respect  to which  Incentive  Stock  Options  are
exercisable  for the first time by any Optionee  during any calendar  year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000),  the Options or portions  thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory  Stock
Options.

     (e) (1) The Board or the Committee  shall have the authority to effect,  at
any time and from  time to time (i) the  repricing  of any  outstanding  Options
under the Plan, provided,  however, that to the extent the Company is subject to
Section  260.140.41 on the date of any repricing,  the new exercise price of the

                                       11
<PAGE>

repriced outstanding Options shall not be less than eighty-five percent (85%) of
the Fair  Market  Value,  except that the price shall be 110% of the Fair Market
Value in the case of a Ten Percent Stockholder,  and/or (ii) with the consent of
the affected holders of Options, the cancellation of any outstanding Options and
the grant in  substitution  therefor of new Options  under the Plan covering the
same or  different  numbers of shares of common  stock,  but having an  exercise
price per share not less than eighty-five percent (85%) of the Fair Market Value
(one hundred percent (100%) of the Fair Market Value in the case of an Incentive
Stock Option or, in the case of an Incentive Stock Option or Nonstatutory  Stock
Option granted to a Ten Percent  Stockholder,  not less than one hundred and ten
percent  (110%) of the Fair Market  Value) per share of common  stock on the new
grant date.

          (2) Shares subject to an Option canceled under this  subsection  10(e)
shall continue to be counted  against the maximum award of Options  permitted to
be granted  pursuant to subsection  5(d) of the Plan. The repricing of an Option
under this  subsection  10(e),  resulting in a reduction of the exercise  price,
shall be deemed to be a cancellation  of the original  Option and the grant of a
substitute  Option;  in the event of such  repricing,  both the original and the
substituted  Options  shall be counted  against  the  maximum  awards of Options
permitted to be granted  pursuant to subsection 5(d) of the Plan. The provisions
of this  subsection  10(e) shall be  applicable  only to the extent  required by
Section 162(m) of the Code.

     (f)  INFORMATION  OBLIGATION.  To the extent that the Company is subject to
Section 260.140.46 of Title 10 of the California Code of Regulations at the time
a Stock Award is granted,  the Company  shall  deliver  financial  statements to
Participants  at least  annually.  This  Section  10(f)  shall  not apply to key
Employees  whose  duties in  connection  with the Company  assure them access to
equivalent information.

     (g)  REPURCHASE  LIMITATION.  The terms of any  repurchase  option shall be
specified in the Stock Award,  and the  repurchase  price may be either the Fair
Market  Value of the  shares  of  common  stock on the  date of  termination  of
employment or their original  purchase  price. To the extent that the Company is
subject to Section 260.140.41 or Section 260.140.42 at the time a Stock Award is
made, any repurchase  option  contained in a Stock Award granted to a person who
is not an Officer,  Director  or  Consultant  shall be upon the terms  described
below:

     (1) FAIR MARKET VALUE. If the repurchase option gives the Company the right
to repurchase  the shares of common stock upon  termination of employment at not
less than the Fair Market Value of the shares of common stock to be purchased on
the date of  termination  of  Continuous  Status  as an  Employee,  Director  or
Consultant,  then (i) the right to  repurchase  shall be  exercised  for cash or
cancellation  of  purchase  money  indebtedness  for the shares of common  stock
within  ninety (90) days of  termination  of  Continuous  Status as an Employee,
Director or  Consultant  (or in the case of shares of common  stock  issued upon
exercise of Stock Awards after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be agreed to by the
Company  and the  Participant  (for  example,  for  purposes of  satisfying  the
requirements  of  Section  1202(c)(3)  of the Code  regarding  "qualified  small
business  stock") and (ii) the right  terminates when the shares of common stock
become publicly traded.

     (2) ORIGINAL PURCHASE PRICE. If the repurchase option gives the Company the
right to repurchase  the shares of common stock upon  termination  of Continuous

                                       12
<PAGE>

Status as an Employee,  Director or Consultant at their original purchase price,
then (x) the right to repurchase at the original  purchase  price shall lapse at
the rate of at least twenty percent (20%) of the shares of common stock per year
over five (5) years from the date the Stock Award is granted (without respect to
the date the Stock Award was exercised or became  exercisable) and (y) the right
to repurchase  shall be exercised  for cash or  cancellation  of purchase  money
indebtedness  for  the  shares  of  common  stock  within  ninety  (90)  days of
termination of Continuous  Status as an Employee,  Director or Consultant (or in
the case of shares of common  stock issued upon  exercise of Options  after such
date of termination,  within ninety (90) days after the date of the exercise) or
such longer period as may be agreed to by the Company and the  Participant  (for
example,  for purposes of satisfying the  requirements of Section  1202(c)(3) of
the Code regarding "qualified small business stock").

11.  ADJUSTMENTS UPON CHANGES IN STOCK.

     (a) If any change is made in the stock  subject to the Plan,  or subject to
any   Stock    Award    (through    merger,    consolidation,    reorganization,
recapitalization,  stock dividend,  dividend in property other than cash,  stock
split,  liquidating dividend,  combination of shares, exchange of shares, change
in  corporate  structure  or other  transaction  not  involving  the  receipt of
consideration by the Company),  the Plan will be  appropriately  adjusted in the
class(es)  and  maximum  number  of  shares  subject  to the  Plan  pursuant  to
subsection  4(a) and the maximum number of shares subject to award to any person
during any calendar year pursuant to subsection 5(d), and the outstanding  Stock
Awards will be appropriately  adjusted in the class(es) and number of shares and
price  per  share  of stock  subject  to such  outstanding  Stock  Awards.  Such
adjustments shall be made by the Board or Committee,  the determination of which
shall be final,  binding and  conclusive.  (The  conversion  of any  convertible
securities of the Company shall not be treated as a  "transaction  not involving
the receipt of consideration by the Company.")

     (b) In the  event of:  (1) a  dissolution,  liquidation,  or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the  Company is not the  surviving  corporation;  (3) a reverse  merger in
which the Company is the surviving  corporation  but the shares of the Company's
common  stock  outstanding  immediately  preceding  the merger are  converted by
virtue of the merger  into other  property,  whether in the form of  securities,
cash or otherwise;  or (4) the acquisition by any person, entity or group within
the meaning of Section  13(d) or 14(d) of the  Exchange  Act, or any  comparable
successor  provisions  (excluding  any employee  benefit plan, or related trust,
sponsored or  maintained  by the Company or any Affiliate of the Company) of the
beneficial  ownership  (within the meaning of Rule 13d-3  promulgated  under the
Exchange  Act,  or  comparable  successor  rule) of  securities  of the  Company
representing  at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent permitted by applicable
law: (i) any  surviving or acquiring  corporation  shall assume any Stock Awards
outstanding under the Plan or shall substitute similar Stock Awards (including a
stock award to acquire the same  consideration  paid to the  stockholders in the
transaction  described in this subsection 11(b)) for those outstanding under the
Plan, or (ii) such Stock Awards shall continue in full force and effect.  In the
event any  surviving  or  acquiring  corporation  refuses  to assume  such Stock
Awards,  or to substitute  similar Stock Awards for those  outstanding under the
Plan, then with respect to Stock Awards held by persons then performing services
as Employees,  Directors or Consultants,  the vesting of such Stock Awards (and,
if  applicable,  the time at which such Stock Award may be  exercised)  shall be

                                       13
<PAGE>

accelerated  in full prior to such event and the Stock Awards  terminated if not
exercised (if applicable) after such acceleration and at or prior to such event.

12.  AMENDMENT OF THE PLAN AND STOCK AWARDS.

     (a) The  Board at any  time,  and from  time to time,  may  amend the Plan.
However,  except as provided in Section 11 relating to adjustments  upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the  Company  within  twelve  (12)  months  before or after the  adoption of the
amendment, where the amendment will:

     (1) Increase the number of shares reserved for Stock Awards under the Plan;

     (2) Modify the requirements as to eligibility for participation in the Plan
(to the extent such modification  requires stockholder approval in order for the
Plan to satisfy the requirements of Section 422 of the Code); or

     (3)  Modify  the  Plan  in any  other  way if  such  modification  requires
stockholder  approval  in order  for the Plan to  satisfy  the  requirements  of
Section 422 of the Code or to comply with the requirements of Rule 16b-3.

     (b) The Board may in its sole discretion  submit any other amendment to the
Plan for stockholder approval,  including, but not limited to, amendments to the
Plan intended to satisfy the  requirements of Section 162(m) of the Code and the
regulations  promulgated thereunder regarding the exclusion of performance-based
compensation  from the limit on corporate  deductibility of compensation paid to
certain executive officers.

     (c) It is expressly  contemplated  that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide  Participants with the
maximum benefits provided or to be provided under the provisions of the Code and
the  regulations  promulgated  thereunder  relating to Incentive  Stock  Options
and/or to bring the Plan and/or  Incentive  Stock Options  granted under it into
compliance therewith.

     (d) Rights and obligations  under any Stock Award granted before  amendment
of the Plan shall not be  impaired by any  amendment  of the Plan unless (i) the
Company  requests  the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.

     (e) The  Board at any time,  and from time to time,  may amend the terms of
any one or more Stock Awards; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company  requests  the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.

13.  TERMINATION OR SUSPENSION OF THE PLAN.

     (a) The Board may suspend or terminate the Plan at any time.  Unless sooner
terminated,  the Plan shall  terminate on January 17, 2006 which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
stockholders  of the  Company,  whichever  is  earlier.  No Stock  Awards may be

                                       14
<PAGE>

granted under the Plan while the Plan is suspended or after it is terminated.

     (b) Rights and obligations  under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Stock Award was granted.

14.  EFFECTIVE DATE OF PLAN.

     The Plan shall become  effective as determined  by the Board,  but no Stock
Awards  granted under the Plan shall be exercised  unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.

                                       15

<PAGE><PAGE>

                                  EXHIBIT 10.2

                                    SBE, INC.

                 2001 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
         (FORMERLY, THE 1991 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN)

                            Adopted January 24, 1991
                     Approved by Stockholders March 19, 1991
                             Amended August 24, 1993
                     Approved by Stockholders March 15, 1994
                            Amended January 17, 1995
                      Amended and Restated January 8, 2001
                     Approved By Stockholders March 20, 2001
                              Amended May 21, 2002
                              Amended July 30, 2002

1. PURPOSES.

     (a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options are
the Non-Employee Directors of the Company.

     (b)  AVAILABLE  OPTIONS.  The  purpose of the Plan is to provide a means by
which  Non-Employee  Directors  may be  given an  opportunity  to  benefit  from
increases  in value of the Common  Stock  through the  granting of  Nonstatutory
Stock Options.

     (c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain the
services of its Non-Employee Directors, to secure and retain the services of new
Non-Employee  Directors  and to  provide  incentives  for such  persons to exert
maximum efforts for the success of the Company and its Affiliates.

2.   DEFINITIONS.

     (a) "AFFILIATE" means any parent  corporation or subsidiary  corporation of
the Company,  whether now or hereafter  existing,  as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

     (b) "ANNUAL  GRANT" means an Option  granted  annually to all  Non-Employee
Directors who meet the criteria specified in subsection 6(b) of the Plan.

     (c) "APPROVAL  DATE" means the date the Plan, as amended and restated as of
January 8, 2001, is approved by the stockholders of the Company.

     (d) "BOARD" means the Board of Directors of the Company.

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

                                       1
<PAGE>

     (f) "COMMON STOCK" means the common stock of the Company.

     (g) "COMPANY" means SBE, Inc., a Delaware corporation.

     (h) "CONSULTANT" means any person, including an advisor, (i) engaged by the
Company or an Affiliate  to render  consulting  or advisory  services and who is
compensated  for such services or (ii) who is a member of the Board of Directors
of an  Affiliate.  However,  the term  "Consultant"  shall  not  include  either
Directors  of the  Company  who are not  compensated  by the  Company  for their
services  as  Directors  or  Directors  of the  Company  who are  merely  paid a
director's fee by the Company for their services as Directors.

     (i)  "CONTINUOUS  SERVICE" means that the  Optionholder's  service with the
Company or an Affiliate,  whether as an Employee, Director or Consultant, is not
interrupted or terminated.  The  Optionholder's  Continuous Service shall not be
deemed to have  terminated  merely  because of a change in the capacity in which
the Optionholder  renders service to the Company or an Affiliate as an Employee,
Consultant  or  Director  or a change in the entity  for which the  Optionholder
renders such service,  provided that there is no  interruption or termination of
the Optionholder's service. For example, a change in status without interruption
from a  Non-Employee  Director of the Company to a Consultant of an Affiliate or
an Employee of the Company will not  constitute  an  interruption  of Continuous
Service.  The Board or the  chief  executive  officer  of the  Company,  in that
party's sole  discretion,  may  determine  whether  Continuous  Service shall be
considered  interrupted  in the case of any leave of  absence  approved  by that
party, including sick leave, military leave or any other personal leave.

     (j) "DIRECTOR" means a member of the Board of Directors of the Company.

     (k)  "DISABILITY"  means the  inability  of a person,  in the  opinion of a
qualified  physician  acceptable to the Company,  to perform the major duties of
that person's  position with the Company or an Affiliate of the Company  because
of the sickness or injury of the person.

     (l)  "EMPLOYEE"  means any person  employed by the Company or an Affiliate.
Mere service as a Director or payment of a  director's  fee by the Company or an
Affiliate  shall not be sufficient to constitute  "employment" by the Company or
an Affiliate.

     (m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

     (n) "FAIR  MARKET  VALUE"  means,  as of any date,  the value of the Common
Stock determined as follows:

          (i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq  National Market or the Nasdaq  SmallCap  Market,  the Fair
Market  Value of a share of Common  Stock shall be the  closing  sales price for
such stock (or the  closing  bid, if no sales were  reported)  as quoted on such
exchange  or market  (or the  exchange  or market  with the  greatest  volume of
trading in the Common Stock) on the last market  trading day prior to the day of
determination,  as reported in The Wall Street  Journal or such other  source as
the Board deems reliable.

                                       2
<PAGE>

          (ii) In the  absence of such  markets for the Common  Stock,  the Fair
Market  Value shall be  determined  in good faith by the Board and to the extent
that the Company is subject to Section  260.140.50  on the date a Stock Award is
granted, in a manner consistent with Section 260.140.50.

     (o) "INITIAL GRANT" means an Option granted to a Non-Employee  Director who
meets the criteria specified in subsection 6(a) of the Plan.

     (p) "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.

     (q) "NONSTATUTORY  STOCK OPTION" means an Option not intended to qualify as
an incentive  stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

     (r)  "OFFICER"  means a person who is an officer of the Company  within the
meaning  of  Section  16 of the  Exchange  Act and  the  rules  and  regulations
promulgated thereunder.

     (s) "OPTION"  means a  Nonstatutory  Stock Option  granted  pursuant to the
Plan.

     (t) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionholder  evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.

     (u) "OPTIONHOLDER"  means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

     (v) "PARTICIPANT"  means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable,  such other person who holds an outstanding Stock
Award.

     (w) "PLAN" means this SBE, Inc. 2001  Non-Employee  Directors' Stock Option
Plan.

     (x) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.

     (y)  "SECTION  260.140.41"  means  Section  260.140.41  of  Title 10 of the
California Code of Regulations.

     (z)  "SECTION  260.140.45"  means  Section  260.140.45  of  Title 10 of the
California Code of Regulations.

     (aa)  "SECTION  260.140.50"  means  Section  260.140.50  of Title 10 of the
California Code of Regulations.

     (bb) "SECURITIES ACT" means the Securities Act of 1933, as amended.

     (cc) "STOCK  AWARD" means any right  granted  under the Plan,  including an
Option, a stock bonus and a right to acquire restricted stock.

                                       3
<PAGE>

     (dd) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock  possessing  more than ten percent
(10%) of the total combined  voting power of all classes of stock of the Company
or of any of its Affiliates.

3.   ADMINISTRATION.

     (a) ADMINISTRATION BY BOARD. The Board shall administer the Plan.

     (b) POWERS OF BOARD. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:

          (i) To  determine  the  provisions  of each  Option to the  extent not
specified in the Plan.

          (ii) To construe and interpret the Plan and Options  granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board,  in the exercise of this power,  may correct any defect,  omission or
inconsistency  in the Plan or in any  Option  Agreement,  in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.

          (iii) To amend the Plan or an Option as provided in Section 12.

          (iv) To terminate or suspend the Plan as provided in Section 13.

          (v) Generally, to exercise such powers and to perform such acts as the
Board deems  necessary or expedient to promote the best interests of the Company
that are not in conflict with the provisions of the Plan.

     (c) EFFECT OF BOARD'S DECISION.  All  determinations,  interpretations  and
constructions  made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.

4.   SHARES SUBJECT TO THE PLAN.

     (a) SHARE  RESERVE.  Subject to the  provisions  of Section 11  relating to
adjustments  and  subject to Section  4(d) below,  the Common  Stock that may be
issued pursuant to Options shall not exceed one hundred forty thousand (140,000)
shares of Common Stock.

     (b) REVERSION OF SHARES TO THE SHARE  RESERVE.  If any Option shall for any
reason expire or otherwise  terminate,  in whole or in part, without having been
exercised in full,  the shares of Common  Stock not  acquired  under such Option
shall revert to and again become available for issuance under the Plan.

     (c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.

     (d)  Notwithstanding  Section 4(a), if at the time of each grant of a Stock
Award  under the Plan the  Company is subject to Section  260.140.45,  the total

                                       4
<PAGE>

number of securities  issuable upon exercise of all outstanding  options and the
total number of shares provided for under this Plan and any other stock bonus or
similar  plan or  agreement  of the  Company  shall not  exceed  30% of the then
outstanding  capital  stock of the Company (as  measured as set forth in Section
260.140.45),  unless  stockholder  approval has been obtained in compliance with
Section  260.140.45  to exceed 30%, in which case the limit shall be such higher
percentage as approved by the stockholders.

5.   ELIGIBILITY.

     The  Options as set forth in Section 6 of the Plan  automatically  shall be
granted under the Plan to all Non-Employee Directors.

6.   NON-DISCRETIONARY GRANTS.

     (a) INITIAL  GRANTS.  Without any further action of the Board,  each person
who is elected or appointed for the first time to be a Non-Employee  Director on
or after the  Approval  Date  automatically  shall,  upon the date of his or her
initial  election or appointment  to be a Non-Employee  Director by the Board or
stockholders  of the Company,  be granted an Initial  Grant to purchase  fifteen
thousand  (15,000)  shares of Common Stock on the terms and conditions set forth
herein.

     (b) ANNUAL GRANTS.  Without any further action of the Board, on April 1 (or
the next business day should such date be a legal  holiday),  each person who is
then a Non-Employee  Director  automatically shall be granted an Annual Grant to
purchase  five  thousand  (5,000)  shares  of  Common  Stock  on the  terms  and
conditions set forth herein; provided,  however, that if the person has not been
serving as a Non-Employee Director for the entire twelve (12) month period since
the  preceding  April 1, then the number of shares  subject to the Annual  Grant
shall be reduced pro rata for each full month prior to the date of grant  during
which such person did not serve as a Non-Employee Director.

7.   OPTION PROVISIONS.

     Each  Option  shall be in such  form  and  shall  contain  such  terms  and
conditions as required by the Plan.  Each Option shall  contain such  additional
terms and conditions,  not  inconsistent  with the Plan, as the Board shall deem
appropriate.  Each Option shall  include  (through  incorporation  of provisions
hereof by reference  in the Option or  otherwise)  the  substance of each of the
following provisions:

     (a) TERM.  Each  Option  granted  prior to the  Approval  Date shall not be
exercisable after the expiration of five (5) years from the date it was granted,
and each Option  granted on or after the Approval Date shall not be  exercisable
after the expiration of seven (7) years from the date it was granted.

     (b) EXERCISE PRICE.  The exercise price of each Option shall be one hundred
percent  (100%) of the Fair Market  Value of the stock  subject to the Option on
the date the Option is granted;  provided,  however, that to the extent that the
Company is subject to Section 260.140.41 on the date a Stock Award is granted, a
Ten Percent Stockholder shall not be granted an Option unless the exercise price
of such Option is at least (i) one hundred ten percent (110%) of the Fair Market

                                       5
<PAGE>

Value of the Common Stock on the date of grant or (ii) such lower  percentage of
the Fair Market  Value of the Common  Stock on the date of grant as is permitted
by Section 260.140.41 at the time of the grant of the Option.

     (c)  CONSIDERATION.  The purchase  price of stock  acquired  pursuant to an
Option  may  be  paid,  to the  extent  permitted  by  applicable  statutes  and
regulations, in any combination of the following methods:

          (i) By cash or check.

          (ii)  Provided  that at the  time of  exercise  the  Common  Stock  is
publicly traded and quoted regularly in The Wall Street Journal,  by delivery of
already-owned  shares of Common Stock either that the  Optionholder has held for
the  period  required  to  avoid a charge  to the  Company's  reported  earnings
(generally  six months) or that the  Optionholder  did not acquire,  directly or
indirectly from the Company, that are owned free and clear of any liens, claims,
encumbrances or security interests,  and that are valued at Fair Market Value on
the date of exercise.  "Delivery" for these  purposes shall include  delivery to
the Company of the  Optionholder's  attestation  of  ownership of such shares of
Common Stock in a form approved by the Company.  Notwithstanding  the foregoing,
the  Optionholder may not exercise the Option by tender to the Company of Common
Stock to the  extent  such  tender  would  violate  the  provisions  of any law,
regulation or agreement restricting the redemption of the Company's stock.

          (iii)  Provided  that at the  time of  exercise  the  Common  Stock is
publicly  traded and quoted  regularly in The Wall Street  Journal,  for Options
granted on or after the Approval  Date,  pursuant to a program  developed  under
Regulation T as  promulgated  by the Federal  Reserve  Board that,  prior to the
issuance  of Common  Stock,  results in either the receipt of cash (or check) by
the  Company or the receipt of  irrevocable  instructions  to pay the  aggregate
exercise price to the Company from the sales proceeds.

     (d) TRANSFERABILITY.  An Option shall not be transferable except by will or
by the laws of descent  and  distribution  and,  to the extent  provided  in the
Option Agreement,  to such further extent as permitted by Section  260.140.41(d)
at the time of the grant of the  Option,  and shall be  exercisable  during  the
lifetime of the Optionholder  only by the  Optionholder.  If the Option does not
provide for transferability, then the Option shall not be transferable except by
will or by the laws of descent and distribution and shall be exercisable  during
the lifetime of the Optionholder only by the Optionholder.  Notwithstanding  the
foregoing, the Optionholder may, by delivering written notice to the Company, in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the  Optionholder,  shall  thereafter  be entitled to exercise  the
Option.

     (e) EXERCISE  SCHEDULE.  The Option shall be  exercisable  as the shares of
Common Stock subject to the Option vest.

     (f) Vesting Schedule. Shares of Common Stock subject to each Option granted
prior to the Approval  Date shall vest at a rate of  twenty-five  (25%) per year
over four (4) years  from the date the  Option was  granted,  provided  that the
Optionholder's Continuous Service for the entire year prior to each such vesting
date was not  terminated  or  interrupted.  Each Option  granted on or after the

                                       6
<PAGE>

Approval Date shall, on the one year anniversary of the date on which the Option
was granted, vest as to one hundred percent (100%) of the shares of Common Stock
subject to the Option,  provided that the Optionholder's  Continuous Service for
the entire year prior to such vesting date was not terminated or interrupted.

     (g)  TERMINATION  OF  CONTINUOUS  SERVICE.  In the event an  Optionholder's
Continuous  Service  terminates  (other  than upon the  Optionholder's  death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the  Optionholder was entitled to exercise it as of the date of termination) but
only  within such period of time ending on the earlier of (i) the date seven (7)
months following the termination of the Optionholder's  Continuous  Service,  or
(ii)  the  expiration  of the term of the  Option  as set  forth  in the  Option
Agreement. If, after termination,  the Optionholder does not exercise his or her
Option  within the time  specified  in the Option  Agreement,  the Option  shall
terminate.

     (h) EXTENSION OF TERMINATION  DATE. If the exercise of the Option following
the termination of the  Optionholder's  Continuous  Service (other than upon the
Optionholder's  death or  Disability)  would be  prohibited  at any time  solely
because the issuance of shares would violate the registration requirements under
the  Securities  Act, then the Option shall  terminate on the earlier of (i) the
expiration  of the term of the Option set forth in  subsection  7(a) or (ii) the
expiration  of a  period  of seven  (7)  months  after  the  termination  of the
Optionholder's  Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.

     (i) DISABILITY OF OPTIONHOLDER.  In the event an Optionholder's  Continuous
Service   terminates  as  a  result  of  the  Optionholder's   Disability,   the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time  ending  on the  earlier  of (i) the date  eighteen  (18)  months
following  such  termination or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination,  the Optionholder does
not  exercise his or her Option  within the time  specified  herein,  the Option
shall terminate.

     (j) DEATH OF OPTIONHOLDER.  In the event (i) an  Optionholder's  Continuous
Service  terminates  as a  result  of  the  Optionholder's  death  or  (ii)  the
Optionholder  dies within the  seven-month  period after the  termination of the
Optionholder's Continuous Service for a reason other than death, then the Option
may be exercised  (to the extent the  Optionholder  was entitled to exercise the
Option as of the date of death) by the  Optionholder's  estate,  by a person who
acquired  the right to  exercise  the Option by bequest or  inheritance  or by a
person designated to exercise the Option upon the Optionholder's death, but only
within the period  ending on the  earlier of (1) the date  eighteen  (18) months
following the date of death or (2) the  expiration of the term of such Option as
set forth in the Option Agreement.  If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

8.   COVENANTS OF THE COMPANY.

     (a)  AVAILABILITY OF SHARES.  During the terms of the Options,  the Company
shall keep  available at all times the number of shares of Common Stock required
to satisfy such Options.

                                       7
<PAGE>

     (b) SECURITIES LAW  COMPLIANCE.  The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Options and to issue and sell shares of Common Stock
upon exercise of the Options; provided, however, that this undertaking shall not
require the Company to register under the Securities Act the Plan, any Option or
any stock issued or issuable  pursuant to any such Option.  If, after reasonable
efforts, the Company is unable to obtain from any such regulatory  commission or
agency the  authority  which  counsel for the Company  deems  necessary  for the
lawful  issuance and sale of stock under the Plan, the Company shall be relieved
from any  liability  for  failure to issue and sell stock upon  exercise of such
Options unless and until such authority is obtained.

9.   USE OF PROCEEDS FROM STOCK.

     Proceeds  from the sale of  stock  pursuant  to  Options  shall  constitute
general funds of the Company.

10.  MISCELLANEOUS.

     (a) STOCKHOLDER  RIGHTS.  No Optionholder  shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Option unless and until such Optionholder has satisfied all requirements
for exercise of the Option pursuant to its terms.

     (b) NO SERVICE  RIGHTS.  Nothing in the Plan or any instrument  executed or
Option granted  pursuant thereto shall confer upon any Optionholder any right to
continue to serve the  Company as a  Non-Employee  Director or shall  affect the
right of the Company or an  Affiliate  to  terminate  (i) the  employment  of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate,  and any applicable  provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

     (c) INVESTMENT  ASSURANCES.  The Company may require an Optionholder,  as a
condition of exercising or acquiring stock under any Option, (i) to give written
assurances  satisfactory to the Company as to the  Optionholder's  knowledge and
experience  in  financial  and  business  matters  and/or to employ a  purchaser
representative  reasonably  satisfactory to the Company who is knowledgeable and
experienced  in financial and business  matters and that he or she is capable of
evaluating, alone or together with the purchaser representative,  the merits and
risks of exercising the Option; and (ii) to give written assurances satisfactory
to the Company  stating that the  Optionholder is acquiring the stock subject to
the Option for the Optionholder's own account and not with any present intention
of selling or otherwise distributing the stock. The foregoing requirements,  and
any assurances given pursuant to such requirements,  shall be inoperative if (1)
the issuance of the shares upon the exercise or  acquisition  of stock under the
Option  has  been  registered  under  a then  currently  effective  registration
statement  under the Securities Act or (2) as to any particular  requirement,  a
determination  is made by counsel for the Company that such requirement need not
be met in the  circumstances  under the then  applicable  securities  laws.  The
Company  may,  upon  advice of counsel to the  Company,  place  legends on stock

                                       8
<PAGE>

certificates   issued  under  the  Plan  as  such  counsel  deems  necessary  or
appropriate in order to comply with applicable securities laws,  including,  but
not limited to, legends restricting the transfer of the stock.

     (d)  WITHHOLDING  OBLIGATIONS.  The  Optionholder  may satisfy any federal,
state  or  local  tax  withholding   obligation  relating  to  the  exercise  or
acquisition of stock under an Option by any of the following  means (in addition
to  the  Company's  right  to  withhold  from  any  compensation   paid  to  the
Optionholder by the Company) or by a combination of such means:  (i) tendering a
cash payment; (ii) authorizing the Company to withhold shares from the shares of
the Common  Stock  otherwise  issuable  to the  Optionholder  as a result of the
exercise or acquisition of stock under the Option,  provided,  however,  that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.

     (e)  INFORMATION  OBLIGATION.  To the extent that the Company is subject to
Section 260.140.46 of Title 10 of the California Code of Regulations on the date
a Stock Award is granted,  the Company  shall  deliver  financial  statements to
Participants  at least  annually.  This  Section  10(e)  shall  not apply to key
Employees  whose  duties in  connection  with the Company  assure them access to
equivalent information.

11.  ADJUSTMENTS UPON CHANGES IN STOCK.

     (a) CAPITALIZATION  ADJUSTMENTS. If any change is made in the stock subject
to the Plan, or subject to any Option,  without the receipt of  consideration by
the Company (through merger,  consolidation,  reorganization,  recapitalization,
reincorporation,  stock  dividend,  dividend in property other than cash,  stock
split,  liquidating dividend,  combination of shares, exchange of shares, change
in  corporate  structure  or other  transaction  not  involving  the  receipt of
consideration by the Company),  the Plan will be  appropriately  adjusted in the
class(es) and maximum number of securities  subject both to the Plan pursuant to
subsection 4(a) and to the nondiscretionary  Options specified in Section 6, and
the  outstanding  Options will be  appropriately  adjusted in the  class(es) and
number of securities  and price per share of stock  subject to such  outstanding
Options.  The Board shall make such adjustments,  and its determination shall be
final, binding and conclusive.  (The conversion of any convertible securities of
the  Company  shall  not  be  treated  as  a  transaction  "without  receipt  of
consideration" by the Company.)

     (b) CORPORATE TRANSACTION. In the event of (i) a dissolution or liquidation
of the Company;  (ii) a merger or  consolidation in which the Company is not the
surviving  corporation;  (iii) a  reverse  merger in which  the  Company  is the
surviving  corporation but the shares of the Company's Common Stock  outstanding
immediately  preceding  the merger are  converted  by virtue of the merger  into
other property,  whether in the form of securities,  cash or otherwise;  or (iv)
any other capital  reorganization  in which more than fifty percent (50%) of the
shares of the Company  entitled to vote are  exchanged,  then,  with  respect to
Options  held by persons  whose  Continuous  Service  with the  Company  has not
terminated,  all outstanding  Options shall become  exercisable in full at least
ten (10)  days  prior to such  event.  Outstanding  Options  that  have not been
exercised prior to such event shall terminate on the date of such event.

                                       9
<PAGE>

12.  AMENDMENT OF THE PLAN AND OPTIONS.

     (a) AMENDMENT OF PLAN.  The Board at any time,  and from time to time,  may
amend  the  Plan.  However,  except  as  provided  in  Section  11  relating  to
adjustments  upon  changes in stock,  no  amendment  shall be  effective  unless
approved by the stockholders of the Company to the extent  stockholder  approval
is  necessary  to  satisfy  the  requirements  of Rule  16b-3 or any  Nasdaq  or
securities exchange listing requirements.

     (b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval.

     (c) NO  IMPAIRMENT  OF  RIGHTS.  Rights  under any  Option  granted  before
amendment of the Plan shall not be impaired by any  amendment of the Plan unless
(i)  the  Company  requests  the  consent  of  the  Optionholder  and  (ii)  the
Optionholder consents in writing.

     (d) AMENDMENT OF OPTIONS. The Board at any time, and from time to time, may
amend the terms of any one or more Options;  provided,  however, that the rights
under any Option  shall not be  impaired  by any such  amendment  unless (i) the
Company  requests  the  consent of the  Optionholder  and (ii) the  Optionholder
consents in writing.

13.  TERMINATION OR SUSPENSION OF THE PLAN.

     (a) PLAN TERM.  The Board may  suspend or  terminate  the Plan at any time.
Unless  sooner  terminated,  the Plan shall  terminate  ten (10) years after the
latest date on which the Plan is approved by the stockholders of the Company. No
Options may be granted under the Plan while the Plan is suspended or after it is
terminated.

     (b) NO IMPAIRMENT OF RIGHTS.  Suspension or  termination  of the Plan shall
not impair rights and obligations  under any Option granted while the Plan is in
effect except with the written consent of the Optionholder.

14.  EFFECTIVE DATE OF PLAN.

     The Plan shall become effective on the Approval Date.

15.  CHOICE OF LAW.

     All questions  concerning the construction,  validity and interpretation of
this Plan shall be governed by the law of the State of Delaware,  without regard
to such state's conflict of laws rules.

                                       10
<PAGE>

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