Document:

EMPLOYMENT AGREEMENT

     This Employment Agreement is made and entered into this 1st day of
February, 2000, by and between World Wide Wireless Communications Inc., a Nevada
corporation (the "Company"), and Douglas P. Haffer, an individual ("Executive").

                                    RECITALS

     A. The Company desires to be assured of the association and services of
Executive for the Company.

     B. Executive is willing and desires to be employed by the Company, and the
Company is willing to employ Executive, upon the terms, covenants and conditions
hereinafter set forth.

                                    AGREEMENT

     NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinafter set forth, the parties hereto do hereby agree as follows:

     1. Employment. The Company hereby employs Executive as president and chief
executive officer, subject to the supervision and direction of the Company's
Board of Directors.

     2. Term/Renewal. The term of this Agreement shall be for a period of three
(3) years commencing on the date hereof, unless terminated earlier pursuant to
Section 8 below; provided, however, that Executive's obligations in Section 7
below shall continue in effect after such termination. The Term of this
Agreement shall be automatically extended for one year after completion of
one-year service, and on each annual anniversary date thereof.

     3. Compensation; Reimbursement.

          3.1 Base Salary. For all services rendered by Executive under this
Agreement, the Company shall pay Executive a base salary of Two Hundred Thirty
Thousand Dollars ($230,000) per annum, payable twice monthly in equal
installments (the "Base Salary"). The amount of the Base Salary shall be
increased fifteen percent (15%) annually, and at any time and from time to time
by the Board of Directors of the Company

          3.2 Incentive Bonus. In addition to the Base Salary, Executive shall
be eligible for an incentive bonus ("Incentive Bonus") each year in an amount
not less than 10% of the Base Salary (the "Minimum Bonus") nor more than 100% of
the Base Salary. The Incentive Bonus shall be based upon the operating results
for that year of Executive's division or subsidiary, as the case may be, and
shall be paid, if earned, within 30 days after such operating results have been
determined by the Company's accountants. The criteria upon which the Incentive
Bonus is awarded shall be

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<PAGE>

comparable to those applicable to the other chief operating officer of the
Company's operating divisions or subsidiaries.

          3.3 Additional Benefits. In addition to the Base Salary and the
Incentive Bonus, Executive shall be entitled to all other benefits of employment
provided to the Company's upper management.

          3.4 Reimbursement. Executive shall be reimbursed for all reasonable
"out of pocket" business expenses for business travel and business entertainment
incurred in connection with the performance of his or her duties under this
Agreement (1) so long as such expenses constitute business deductions from
taxable income for the Company and are excludable from taxable income to the
Executive under the governing laws and regulations of the Internal Revenue Code
(provided, however, that Executive shall be entitled to full reimbursement in
any case where the Internal Revenue Service may, under Section 274(n) of the
Internal Revenue Code, disallow to the Company 20% of meals and entertainment
expenses); and (2) to the extent such expenses do not exceed the amounts
allocable for such expenses in budgets that are approved from time to time by
the Company. The reimbursement of Executive's business expenses shall be upon
monthly presentation to and approval by the Company of valid receipts and other
appropriate documentation for such expenses.

     4. Scope of Duties.

          4.1 Assignment of Duties. Executive shall have such duties as may be
assigned to him or her from time to time by the Company's Board of Directors
commensurate with his experience and responsibilities in the position for which
he is employed pursuant to Section 1 above. Such duties shall be exercised
subject to the control and supervision of the Board of Directors of the Company.

          4.2 General Specification of Duties. Executive's duties shall include,
but not be limited to, the duties and performance goals as follows:

          (1) act as president and chief executive officer the Company and
perform all duties, functions and responsibilities generally associated with the
head of an operating division or subsidiary;

          (2) execute on behalf of the Company, in his capacity as president and
chief executive all documents as requested by the Company;

          (3) employ, pay, supervise and discharge all employees of the Company,
and determine all matters with regard to such personnel, including, without
limitation, compensation, bonuses and fringe benefits, all in accordance with
the Annual Plan (as defined in Section 4.3);

          (4) establish procedures for implementing the policies established by
the Company;

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<PAGE>

          (5) cause to be prepared, as directed by the Company, financial
statements, tax returns and other similar items respecting the operation of the
Company.

          The foregoing specifications are not intended as a complete
itemization of the duties which Executive shall perform and undertake on behalf
of the Company in satisfaction of his or her employment obligations under this
Agreement.

          4.3 Executive's Devotion of Time. Executive hereby agrees to devote
his full time, abilities and energy to the faithful performance of the duties
assigned to him or her and to the promotion and forwarding of the business
affairs of the Company, and not to divert any business opportunities from the
Company to himself or herself or to any other person or business entity.

          4.4 Conflicting Activities.

          (1) Executive shall not, during the term of this Agreement, be engaged
     in any other business activity without the prior consent of the Board of
     Directors of the Company; provided, however, that this restriction shall
     not be construed as preventing Executive from investing his personal assets
     in passive investments in business entities which are not in competition
     with the Company or its affiliates, or from pursuing business opportunities
     as permitted by paragraph 4.5(b).

          (2) Executive hereby agrees to promote and develop all business
     opportunities that come to his attention relating to current or anticipated
     future business of the Company, in a manner consistent with the best
     interests of the Company and with his duties under this Agreement. Should
     Executive discover a business opportunity that does not relate to the
     current or anticipated future business of the Company, he shall first offer
     such opportunity to the Company. Should the Board of Directors of the
     Company not exercise its right to pursue this business opportunity within a
     reasonable period of time, not to exceed sixty (60) days, then Executive
     may develop the business opportunity for himself; provided, however, that
     such development may in no way conflict or interfere with the duties owed
     by Executive to the Company under this Agreement. Further, Executive may
     develop such business opportunities only on his own time, and may not use
     any service, personnel, equipment, supplies, facility, or trade secrets of
     the Company in their development. As used herein, the term "business
     opportunity" shall not include business opportunities involving investment
     in publicly traded stocks, bonds or other securities, or other investments
     of a personal nature.

     5. Stock of Company. So long as this Agreement is in effect, Executive
shall be entitled to purchase stock of the Company in the same amounts and for
the same consideration, terms and conditions as provided to upper management of
the Company. The manner of acquisition of stock shall be structured so as to
minimize

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<PAGE>

adverse tax consequences to Executive. Company confirms that during August,
1998, Executive was granted options under the Company's Incentive Stock Option
plan (ISOP) to purchase 800,000 shares with a strike price of 9.5 cents per
share. Executive is further granted options under the ("The ISOP") to purchase
800,000 shares per year of the Company's stock at the lowest price permitted
under the ISOP such that the grant or exercise of the Options will not create a
current taxable event.

     6. Severance. So long as this Agreement is in effect, Executive shall at
all times be entitled to severance benefits equal to those provided to other
chief operating officers of the Company's operating divisions or subsidiaries.
These benefits shall include, without limitation, the Company's maintenance at
its cost of a life insurance policy and disability policy on Executive payable
to Executive and/or his or her legal representative or heirs as applicable, in
amounts reasonably agreed to by Executive and the Company.

     7. Confidentiality of Trade Secrets and Other Materials.

          7.1 Trade Secrets. Other than in the performance of his or her duties
hereunder, Executive agrees not to disclose, either during the term of his or
her employment by the Company or at any time thereafter, to any person, firm or
corporation any information concerning the business affairs, the trade secrets
or the customer lists or similar information of the Company. Any technique,
method, process or technology used by the Company shall be considered a "trade
secret" for the purposes of this Agreement.

          7.2 Ownership of Trade Secrets; Assignment of Rights. Executive hereby
agrees that all know how, documents, reports, plans, proposals, marketing and
sales plans, client lists, client files and materials made by him or her or by
the Company are the property of the Company and shall not be used by him in any
way adverse to the Company's interests. Executive shall not deliver, reproduce
or in any way allow such documents or things to be delivered or used by any
third party without specific direction or consent of the Board of Directors of
the Company. Executive hereby assigns to the Company any rights which he or she
may have in any such trade secret or proprietary information; provided, however,
that such assignment does not apply to any right which qualifies fully under Cal
Labor Code Sec. 2870].

     8. Termination.

          8.1 Bases for Termination.

          (1) Executive's employment hereunder may be terminated at any time by
     mutual agreement of the parties.

          (2) This Agreement shall automatically terminate (a) on the last day
     of the month in which Executive dies or (b) Executive shall be relieved of
     his duties hereunder if he becomes permanently incapacitated. "Permanent
     incapacity" as used herein shall mean mental or physical incapacity, or
     both,

                                      -4-
<PAGE>

     reasonably determined by the Company's Board of Directors based upon a
     certification of such incapacity by, in the discretion of the Company's
     Board of Directors, either Executive's regularly attending physician or a
     duly licensed physician selected by the Company's Board of Directors,
     rendering Executive unable to perform substantially all of his or her
     duties hereunder and which appears reasonably certain to continue for at
     least six consecutive months without substantial improvement. Executive
     shall be deemed to have "become permanently incapacitated" on the date the
     Company's Board of Directors has determined that Executive is permanently
     incapacitated and so notifies Executive (the "Notification Date"). Should
     Executive be relieved of his duties because of permanent incapacity, the
     Company shall continue to pay Executive's salary and benefits otherwise
     owing to Executive for the remainder of the Term of the Agreement then
     existing as of the date the Notification Date.

          (3) Executive's employment may be terminated by the Company "with
     cause," effective upon delivery of written notice to Executive given at any
     time (without any necessity for prior notice) upon Executive's felony
     criminal conviction or other criminal conviction involving Executive's lack
     of honesty or moral turpitude;

          (4) Executive's employment may be terminated by the Company "with out
     cause" (for any reason or no reason at all) at any time by giving Executive
     60 days prior written notice of termination, which termination shall be
     effective on the 60th day following such notice. If Executive's employment
     under this Agreement is so terminated, the Company shall (a) make a lump
     sum cash payment to Executive within 10 days after termination of an amount
     equal to (i) Executive's Base Salary and minimum bonus for the balance of
     the term of the Employment Agreement (ii) any unreimbursed expenses
     accruing to the date of termination; and (b) make a lump sum cash payment
     equal to Executive's annual Base Salary, as increased pursuant to Section
     3.1, on each anniversary date of this Agreement for the balance of the term
     specified in Section 2. For purposes of this provision, Executive's annual
     Base Salary and the remaining portion of the term of the Agreement shall be
     calculated as of the termination date.

          (5) Executive may terminate his employment hereunder by giving the
     Company 60 days prior written notice, which termination shall be effective
     on the 60th day following such notice.

          8.2 Payment Upon Termination. Upon termination under paragraphs
8.1(1), (2a) , (3), or (5), the Company shall pay to Executive within 10 days
after termination an amount equal to the sum of (1) Executive's Base Salary
accrued to the date of termination; and (2) unreimbursed expenses accrued to the
date of termination. After any such termination, the Company shall not be
obligated to compensate Executive, his or her estate or representatives except
for the foregoing

                                      -5-
<PAGE>

compensation then due and owing, nor provide the benefits to Executive described
in Section 3.4 (except as provided by law).

          8.3 Severance Provisions. The provisions of Sections 8.1 and 8.2 shall
be subject to and deemed modified by the terms of any severance benefits granted
to Executive as provided under Section 6.

          8.4 Dismissal from Premises. At the Company's option, Executive shall
immediately leave the Company's premises on the date notice of termination is
given by either Executive or the Company.

     9. Injunctive Relief. The Company and Executive hereby acknowledge and
agree that any default under Section 7 above will cause damage to the Company in
an amount difficult to ascertain. Accordingly, in addition to any other relief
to which the Company may be entitled, the Company shall be entitled to such
injunctive relief as may be ordered by any court of competent jurisdiction
including, but not limited to, an injunction restraining any violation of
Section 7 above and without the proof of actual damages.

     10. Miscellaneous.

          10.1 Transfer and Assignment. This Agreement is personal as to
Executive and shall not be assigned or transferred by Executive without the
prior written consent of the Company. This Agreement shall be binding upon and
inure to the benefit of all of the parties hereto and their respective permitted
heirs, personal representatives, successors and assigns.

          10.2 Severability. Nothing contained herein shall be construed to
require the commission of any act contrary to law. Should there be any conflict
between any provisions hereof and any present or future statute, law, ordinance,
regulation, or other pronouncement having the force of law, the latter shall
prevail, but the provision of this Agreement affected thereby shall be curtailed
and limited only to the extent necessary to bring it within the requirements of
the law, and the remaining provisions of this Agreement shall remain in full
force and effect.

          10.3 Governing Law/ Venue. This Agreement is made under and shall be
construed pursuant to the laws of the State of California. Any action to enforce
any provision of this Agreement shall be maintained solely by the State or
Federal courts at Oakland, California.

          10.4 Counterparts. This Agreement may be executed in several counter
parts and all documents so executed shall constitute one agreement, binding on
all of the parties hereto, notwithstanding that all of the parties did not sign
the original or the same counterparts.

          10.5 Entire Agreement. This Agreement constitutes the entire agreement
and understanding of the parties with respect to the subject matter hereof

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<PAGE>

and supersedes all prior oral or written agreements, arrangements, and
understandings with respect thereto. No representation, promise, inducement,
statement or intention has been made by any party hereto that is not embodied
herein, and no party shall be bound by or liable for any alleged representation,
promise, inducement, or statement not so set forth herein.

          10.6 Modification. This Agreement may be modified, amended,
superseded, or cancelled, and any of the terms, covenants, representations,
warranties or conditions hereof may be waived, only by a written instrument
executed by the party or parties to be bound by any such modification,
amendment, supersesion, cancellation, or waiver.

          10.7 Attorneys' Fees and Costs. In the event of any dispute arising
out of the subject matter of this Agreement, the prevailing party shall recover,
in addition to any other damages assessed, its attorneys' fees and court costs
incurred in litigating or otherwise settling or resolving such dispute whether
or not an action is brought or prosecuted to judgment. In construing this
Agreement, none of the parties hereto shall have any term or provision construed
against such party solely by reason of such party having drafted the same.

          10.8 Waiver. The waiver by either of the parties, express or implied,
of any right under this Agreement or any failure to perform under this Agreement
by the other party, shall not constitute or be deemed as a waiver of any other
right under this Agreement or of any other failure to perform under this
Agreement by the other party, whether of a similar or dissimilar nature.

          10.9 Cumulative Remedies. Each and all of the several rights and
remedies provided in this Agreement, or by law or in equity, shall be
cumulative, and no one of them shall be exclusive of any other right or remedy,
and the exercise of any one of such rights or remedies shall not be deemed a
waiver of, or an election to exercise, any other such right or remedy.

          10.10 Headings. The section and other headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning and interpretation of this Agreement.

          10.11 Notices. Any notice under this Agreement must be in writing, may
be telecopied, sent by express 24 hour guaranteed courier, or hand delivered, or
may be served by depositing the same in the United States mail, addressed to the
party to be notified, postage prepaid and registered or certified with a return
receipt requested. The addresses of the parties for the receipt of notice shall
be as follows:

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<PAGE>

          If to the Company:        520 - 3rd Street, Suite 101
                                    Oakland, California 94607

          If to Executive:          8485 Skyline Boulevard
                                    Oakland, CA 94611

          Each notice given by registered or certified mail shall be deemed
delivered and effective on the date of delivery as shown on the receipt, and
each notice delivered in any other manner shall be deemed to be effective as of
the time of actual delivery thereof. Each party may change its address for
notice by giving notice in the manner provided above.

          10.12 Survival. Any provision of this Agreement which imposes an
obligation after termination or expiration of this Agreement shall survive to
the termination or expiration of this Agreement and be binding on Executive and
the Company.

          10.13 Right of Set-Off. Upon termination of this Agreement the Company
shall have the right to set-off against the amounts due Executive hereunder the
amount of any outstanding loan or advance from the Company to the Executive.

          10.14 Effective Date. This Agreement shall become effective as of the
date set forth on page 1 when signed by the Executive and the Company.

     IT WITNESS WHEREOF, the parties hereto have caused this Employment
agreement to be executed as of the date first set forth above.

Executive                            Company

-----------------------------
Douglas P. Haffer                    World Wide Wireless Communications, Inc.,
                                     a Nevada corporation

                                     By:
                                        ---------------------------------------

                                     Its:
                                         --------------------------------------

                                      -8-World Wide Wireless Communications, Inc
                              A Nevada corporation
                              INCENTIVE STOCK PLAN

     1. Objectives. The WORLD WIDE WIRELESS COMMUNICATIONS 1998 Incentive Stock
Plan (the "Plan") is designed to retain directors, executives and selected
employees and consultants and reward them for making major contributions to the
success of the Company. These objectives are accomplished by making long-term
incentive awards under the Plan thereby providing Participants with a
proprietary interest in the growth and performance of the Company.
     2. Definitions.

     (a) "Board" - The Board of Directors of the Company.
     (b) "California Securities Rules" - The corporate securities rules of the
state of California.
     (c) "Code" - The Internal Revenue Code of 1986, as amended from time to
time.
     (d) "Committee" - The Executive Compensation Committee of the Company's
Board, or such other committee of the Board that is designated by the Board to
administer the Plan, composed of not less than two members of the Board all of
whom are disinterested persons, as contemplated by Rule 16b-3 ("Rule 16b-3")
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The foregoing requirement for disinterested administration shall not
apply prior to the date of the first registration of any of the securities of
the Company under the Exchange Act. [The last sentence of this Section 3(d)
should be deleted if the Company is a reporting company under the Exchange Act.]
     (e) "Company" - WORLD WIDE WIRELESS COMMUNICATIONS and its subsidiaries
including subsidiaries of subsidiaries.
     (f) "Exchange Act" - The Securities Exchange Act of 1934, as amended from
time to time.
     (g) "Fair Market Value" - The fair market value of the Company's issued and
outstanding Stock as determined in good faith by the Board or Committee.
     (h) "Grant" - The grant of any form of stock option, stock award, or stock
purchase offer, whether granted singly, in combination or in tandem, to a
Participant pursuant to such terms, conditions and limitations as the Committee
may establish in order to fulfill the objectives of the Plan.
     (i) "Grant Agreement" - An agreement between the Company and a Participant
that sets forth the terms, conditions and limitations applicable to a Grant.
     (j) "Option" - Either an Incentive Stock Option, in accordance with Section
422 of Code, or a Nonstatutory Option, to purchase the Company's Stock that may
be

<PAGE>

awarded to a Participant under the Plan. A Participant who receives an award of
an Option shall be referred to as an "Optionee."
     (k) "Participant" - A director, officer, employee or consultant of the
Company to whom an Award has been made under the Plan.
     (l) "Restricted Stock Purchase Offer" - A Grant of the right to purchase a
specified number of shares of Stock pursuant to a written agreement issued under
the Plan.
     (m) "Securities Act" - The Securities Act of 1933, as amended from time to
time.
     (n) "Stock" - Authorized and issued or unissued shares of common stock of
the Company.
     (o) "Stock Award" - A Grant made under the Plan in stock or denominated in
units of stock for which the Participant is not obligated to pay additional
consideration.
     3. Administration. The Plan shall be administered by the Board, provided
however, that the Board may delegate such administration to the Committee.
Subject to the provisions of the Plan, the Board and/or the Committee shall have
authority to (a) grant, in its discretion, Incentive Stock Options in accordance
with Section 422 of the Code, or Nonstatutory Options, Stock Awards or
Restricted Stock Purchase Offers; (b) determine in good faith the fair market
value of the Stock covered by any Grant; (c) determine which eligible persons
shall receive Grants and the number of shares, restrictions, terms and
conditions to be included in such Grants; (d) construe and interpret the Plan;
(e) promulgate, amend and rescind rules and regulations relating to its
administration, and correct defects, omissions and inconsistencies in the Plan
or any Grant; (f) consistent with the Plan and with the consent of the
Participant, as appropriate, amend any outstanding Grant or amend the exercise
date or dates thereof; (g) determine the duration and purpose of leaves of
absence which may be granted to Participants without constituting termination of
their employment for the purpose of the Plan or any Grant; and (h) make all
other determinations necessary or advisable for the Plan's administration. The
interpretation and construction by the Board of any provisions of the Plan or
selection of Participants shall be conclusive and final. No member of the Board
or the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Grant made thereunder.

     4. Eligibility.

     (a) General: The persons who shall be eligible to receive Grants shall be
directors, officers, employees or consultants to the Company. The term
consultant shall mean any person, other than an employee, who is engaged by the
Company to render services and is compensated for such services. An Optionee may
hold more than one Option. Any issuance of a Grant to an officer or director of
the Company subsequent to the first registration of any of the securities of the
Company under the Exchange Act shall comply with the requirements of Rule 16b-3.
     (b) Incentive Stock Options: Incentive Stock Options may only be issued to
employees of the Company. Incentive Stock Options may be granted to officers or

<PAGE>

directors, provided they are also employees of the Company. Payment of a
director's fee shall not be sufficient to constitute employment by the Company.
     The Company shall not grant an Incentive Stock Option under the Plan to any
employee if such Grant would result in such employee holding the right to
exercise for the first time in any one calendar year, under all Incentive Stock
Options granted under the Plan or any other plan maintained by the Company, with
respect to shares of Stock having an aggregate fair market value, determined as
of the date of the Option is granted, in excess of $100,000. Should it be
determined that an Incentive Stock Option granted under the Plan exceeds such
maximum for any reason other than a failure in good faith to value the Stock
subject to such option, the excess portion of such option shall be considered a
Nonstatutory Option. To the extent the employee holds two (2) or more such
Options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability of such Option as Incentive Stock
Options under the Federal tax laws shall be applied on the basis of the order in
which such Options are granted. If, for any reason, an entire Option does not
qualify as an Incentive Stock Option by reason of exceeding such maximum, such
Option shall be considered a Nonstatutory Option.

     (c) Nonstatutory Option: The provisions of the foregoing Section 4(b) shall
not apply to any Option designated as a "Nonstatutory Option" or which sets
forth the intention of the parties that the Option be a Nonstatutory Option.
     (d) Stock Awards and Restricted Stock Purchase Offers: The provisions of
this Section 4 shall not apply to any Stock Award or Restricted Stock Purchase
Offer under the Plan.

     5. Stock.

     (a) Authorized Stock: Stock subject to Grants may be either unissued or
reacquired Stock.
     (b) Number of Shares: Subject to adjustment as provided in Section 6(i) of
the Plan, the total number of shares of Stock which may be purchased or granted
directly by Options, Stock Awards or Restricted Stock Purchase Offers, or
purchased indirectly through exercise of Options granted under the Plan shall
not exceed Three Million (3,000,000) shares. If any Grant shall for any reason
terminate or expire, any shares allocated thereto but remaining unpurchased upon
such expiration or termination shall again be available for Grants with respect
thereto under the Plan as though no Grant had previously occurred with respect
to such shares. Any shares of Stock issued pursuant to a Grant and repurchased
pursuant to the terms thereof shall be available for future Grants as though not
previously covered by a Grant.
     (c) Reservation of Shares: The Company shall reserve and keep available at
all times during the term of the Plan such number of shares as shall be
sufficient to satisfy the requirements of the Plan. If, after reasonable
efforts, which efforts shall not include the registration of the Plan or Grants
under the Securities Act, the Company is unable to

<PAGE>

obtain authority from any applicable regulatory body, which authorization is
deemed necessary by legal counsel for the Company for the lawful issuance of
shares hereunder, the Company shall be relieved of any liability with respect to
its failure to issue and sell the shares for which such requisite authority was
so deemed necessary unless and until such authority is obtained.
     (d) Application of Funds
     The proceeds received by the Company from the sale of Stock pursuant to the
exercise of Options or rights under Stock Purchase Agreements will be used for
general corporate purposes.

     (e) No Obligation to Exercise
     The issuance of a Grant shall impose no obligation upon the Participant to
exercise any rights under such Grant.
     6. Terms and Conditions of Options. Options granted hereunder shall be
evidenced by agreements between the Company and the respective Optionees, in
such form and substance as the Board or Committee shall from time to time
approve. The form of Incentive Stock Option Agreement attached hereto as Exhibit
"A" and the three forms of a Nonstatutory Stock Option Agreement for employees,
for directors and for consultants, attached hereto as Exhibits "B-1," "B-2" and
"B-3," respectively, shall be deemed to be approved by the Board. Option
agreements need not be identical, and in each case may include such provisions
as the Board or Committee may determine, but all such agreements shall be
subject to and limited by the following terms and conditions:

     (a) Number of Shares: Each Option shall state the number of shares to which
it pertains.
     (b) Exercise Price: Each Option shall state the exercise price, which shall
be determined as follows:
     (i) Any Option granted to a person who at the time the Option is granted
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 or
value of all classes of stock of the Company ("Ten Percent Holder") shall have
an exercise price of no less than 110% of the Fair Market Value of the Stock as
of the date of grant; and
     (ii) Incentive Stock Options granted to a person who at the time the Option
is granted is not a Ten Percent Holder shall have an exercise price of no less
than 100% of the Fair Market Value of the Stock as of the date of grant; and
     (iii) Nonstatutory Options granted to a person who at the time the Option
is granted is not a Ten Percent Holder shall have an exercise price of no less
than 85% of the Fair Market Value of the Stock as of the date of grant.
     For the purposes of this Section 6(b), the Fair Market Value shall be as
determined by the Board in good faith, which determination shall be conclusive
and binding; provided however, that if there is a public market for such Stock,
the Fair Market Value per share shall be the average of the bid and asked prices
(or the closing price if such stock is listed on the NASDAQ National Market
System or Small Cap Issue Market) on the date

<PAGE>

of grant of the Option, or if listed on a stock exchange, the closing price on
such exchange on such date of grant.

     (c) Medium and Time of Payment: The exercise price shall become immediately
due upon exercise of the Option and shall be paid in cash or check made payable
to the Company. Should the Company's outstanding Stock be registered under
Section 12(g) of the Exchange Act at the time the Option is exercised, then the
exercise price may also be paid as follows:
     (i) in shares of Stock held by the Optionee for the requisite period
necessary to avoid a charge to the Company's earnings for financial reporting
purposes and valued at Fair Market Value on the exercise date, or
     (ii) through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions (a) to a
Company designated brokerage firm to effect the immediate sale of the purchased
shares and remit to the Company, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate exercise price payable
for the purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Company by reason of such
purchase and (b) to the Company to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
     At the discretion of the Board, exercisable either at the time of Option
grant or of Option exercise, the exercise price may also be paid (i) by
Optionee's delivery of a promissory note in form and substance satisfactory to
the Company and permissible under the securities rules of the State of
California and bearing interest at a rate determined by the Board in its sole
discretion, but in no event less than the minimum rate of interest required to
avoid the imputation of compensation income to the Optionee under the Federal
tax laws, or (ii) in such other form of consideration permitted by the
California corporations law as may be acceptable to the Board.

     (d) Term and Exercise of Options: Any Option granted to an employee of the
Company shall become exercisable over a period of no longer than five (5) years,
and no less than twenty percent (20%) of the shares covered thereby shall become
exercisable annually. No Option shall be exercisable, in whole or in part, prior
to one (1) year from the date it is granted unless the Board shall specifically
determine otherwise, as provided herein. In no event shall any Option be
exercisable after the expiration of ten (10) years from the date it is granted,
and no Incentive Stock Option granted to a Ten Percent Holder shall, by its
terms, be exercisable after the expiration of five (5) years from the date of
the Option. Unless otherwise specified by the Board or the Committee in the
resolution authorizing such Option, the date of grant of an Option shall be
deemed to be the date upon which the Board or the Committee authorizes the
granting of such Option.
     Each Option shall be exercisable to the nearest whole share, in
installments or otherwise, as the respective Option agreements may provide.
During the lifetime of an Optionee, the Option shall be exercisable only by the
Optionee and shall not be assignable

<PAGE>

or transferable by the Optionee, and no other person shall acquire any rights
therein. To the extent not exercised, installments (if more than one) shall
accumulate, but shall be exercisable, in whole or in part, only during the
period for exercise as stated in the Option agreement, whether or not other
installments are then exercisable.

     (e) Termination of Status as Employee, Consultant or Director: If
Optionee's status as an employee shall terminate for any reason other than
Optionee's disability or death, then Optionee (or if the Optionee shall die
after such termination, but prior to exercise, Optionee's personal
representative or the person entitled to succeed to the Option) shall have the
right to exercise the portions of any of Optionee's Incentive Stock Options
which were exercisable as of the date of such termination, in whole or in part,
not less than 30 days nor more than three (3) months after such termination (or,
in the event of "termination for cause" as that term is defined in Code and case
law related thereto, or by the terms of the Plan or the Option Agreement or an
employment agreement, the Option shall automatically terminate as of the
termination of employment as to all shares covered by the Option).
     With respect to Nonstatutory Options granted to employees, directors or
consultants, the Board may specify such period for exercise, not less than 30
days (except that in the case of "termination for cause" or removal of a
director, the Option shall automatically terminate as of the termination of
employment or services as to shares covered by the Option, following termination
of employment or services as the Board deems reasonable and appropriate. The
Option may be exercised only with respect to installments that the Optionee
could have exercised at the date of termination of employment or services.
Nothing contained herein or in any Option granted pursuant hereto shall be
construed to affect or restrict in any way the right of the Company to terminate
the employment or services of an Optionee with or without cause.
     (f) Disability of Optionee: If an Optionee is disabled (within the meaning
of Section 22(e)(3) of the Code) at the time of termination, the three (3) month
period set forth in Section 6(e) shall be a period, as determined by the Board
and set forth in the Option, of not less than six months nor more than one year
after such termination.
     (g) Death of Optionee: If an Optionee dies while employed by, engaged as a
consultant to, or serving as a Director of the Company, the portion of such
Optionee's Option which was exercisable at the date of death may be exercised,
in whole or in part, by the estate of the decedent or by a person succeeding to
the right to exercise such Option at any time within (i) a period, as determined
by the Board and set forth in the Option, of not less than six (6) months nor
more than one (1) year after Optionee's death, which period shall not be more,
in the case of a Nonstatutory Option, than the period for exercise following
termination of employment or services, or (ii) during the remaining term of the
Option, whichever is the lesser. The Option may be so exercised only with
respect to installments exercisable at the time of Optionee's death and not
previously exercised by the Optionee.
     (h) Nontransferability of Option: No Option shall be transferable by the
Optionee, except by will or by the laws of descent and distribution.
<PAGE>

     (i) Recapitalization: Subject to any required action of shareholders, the
number of shares of Stock covered by each outstanding Option, and the exercise
price per share thereof set forth in each such Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Stock of
the Company resulting from a stock split, stock dividend, combination,
subdivision or reclassification of shares, or the payment of a stock dividend,
or any other increase or decrease in the number of such shares affected without
receipt of consideration by the Company; provided, however, the conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration" by the Company.
     In the event of a proposed dissolution or liquidation of the Company, a
merger or consolidation in which the Company is not the surviving entity, or a
sale of all or substantially all of the assets or capital stock of the Company
(collectively, a "Reorganization"), unless otherwise provided by the Board, this
Option shall terminate immediately prior to such date as is determined by the
Board, which date shall be no later than the consummation of such
Reorganization. In such event, if the entity which shall be the surviving entity
does not tender to Optionee an offer, for which it has no obligation to do so,
to substitute for any unexercised Option a stock option or capital stock of such
surviving of such surviving entity, as applicable, which on an equitable basis
shall provide the Optionee with substantially the same economic benefit as such
unexercised Option, then the Board may grant to such Optionee, in its sole and
absolute discretion and without obligation, the right for a period commencing
thirty (30) days prior to and ending immediately prior to the date determined by
the Board pursuant hereto for termination of the Option or during the remaining
term of the Option, whichever is the lesser, to exercise any unexpired Option or
Options without regard to the installment provisions of Paragraph 6(d) of the
Plan; provided, that any such right granted shall be granted to all Optionees
not receiving an offer to receive substitute options on a consistent basis, and
provided further, that any such exercise shall be subject to the consummation of
such Reorganization.
     Subject to any required action of shareholders, if the Company shall be the
surviving entity in any merger or consolidation, each outstanding Option
thereafter shall pertain to and apply to the securities to which a holder of
shares of Stock equal to the shares subject to the Option would have been
entitled by reason of such merger or consolidation.
     In the event of a change in the Stock of the Company as presently
constituted, which is limited to a change of all of its authorized shares
without par value into the same number of shares with a par value, the shares
resulting from any such change shall be deemed to be the Stock within the
meaning of the Plan.
     To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustments shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided in this Section 6(i), the Optionee shall have no rights by reason of
any subdivision or consolidation of shares of stock of any class or the payment
of any stock dividend or any other increase or decrease in the number of shares
of stock of any class, and the number or price of shares of

<PAGE>

Stock subject to any Option shall not be affected by, and no adjustment shall be
made by reason of, any dissolution, liquidation, merger, consolidation or sale
of assets or capital stock, or any issue by the Company of shares of stock of
any class or securities convertible into shares of stock of any class.
     The Grant of an Option pursuant to the Plan shall not affect in any way the
right or power of the Company to make any adjustments, reclassifications,
reorganizations or changes in its capital or business structure or to merge,
consolidate, dissolve, or liquidate or to sell or transfer all or any part of
its business or assets.

     (j) Rights as a Shareholder: An Optionee shall have no rights as a
shareholder with respect to any shares covered by an Option until the effective
date of the issuance of the shares following exercise of such Option by
Optionee. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as expressly provided in Section 6(i) hereof.
     (k) Modification, Acceleration, Extension, and Renewal of Options: Subject
to the terms and conditions and within the limitations of the Plan, the Board
may modify an Option, or, once an Option is exercisable, accelerate the rate at
which it may be exercised, and may extend or renew outstanding Options granted
under the Plan or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
for such Options, provided such action is permissible under Section 422 of the
Code and the California securities rules. Notwithstanding the provisions of this
Section 6(k), however, no modification of an Option shall, without the consent
of the Optionee, alter to the Optionee's detriment or impair any rights or
obligations under any Option theretofore granted under the Plan.
     (l) Exercise Before Exercise Date: At the discretion of the Board, the
Option may, but need not, include a provision whereby the Optionee may elect to
exercise all or any portion of the Option prior to the stated exercise date of
the Option or any installment thereof. Any shares so purchased prior to the
stated exercise date shall be subject to repurchase by the Company upon
termination of Optionee's employment as contemplated by Section 6(n) hereof
prior to the exercise date stated in the Option and such other restrictions and
conditions as the Board or Committee may deem advisable.
     (m) Other Provisions: The Option agreements authorized under the Plan shall
contain such other provisions, including, without limitation, restrictions upon
the exercise of the Options, as the Board or the Committee shall deem advisable.
Shares shall not be issued pursuant to the exercise of an Option, if the
exercise of such Option or the issuance of shares thereunder would violate, in
the opinion of legal counsel for the Company, the provisions of any applicable
law or the rules or regulations of any applicable governmental or administrative
agency or body, such as the Code, the Securities Act, the Exchange Act, the
California securities rules, California corporation law, and the rules
promulgated under the foregoing or the rules and regulations of any exchange
upon which the shares of the Company are listed. Without limiting the generality
of the foregoing, the exercise of each Option shall be subject to the condition
that if at any time

<PAGE>

the Company shall determine that (i) the satisfaction of withholding tax or
other similar liabilities, or (ii) the listing, registration or qualification of
any shares covered by such exercise upon any securities exchange or under any
state or federal law, or (iii) the consent or approval of any regulatory body,
or (iv) the perfection of any exemption from any such withholding, listing,
registration, qualification, consent or approval is necessary or desirable in
connection with such exercise or the issuance of shares thereunder, then in any
such event, such exercise shall not be effective unless such withholding,
listing registration, qualification, consent, approval or exemption shall have
been effected, obtained or perfected free of any conditions not acceptable to
the Company.
     (n) Repurchase Agreement: The Board may, in its discretion, require as a
condition to the Grant of an Option hereunder, that an Optionee execute an
agreement with the Company, in form and substance satisfactory to the Board in
its discretion ("Repurchase Agreement"), (i) restricting the Optionee's right to
transfer shares purchased under such Option without first offering such shares
to the Company or another shareholder of the Company upon the same terms and
conditions as provided therein; and (ii) providing that upon termination of
Optionee's employment with the Company, for any reason, the Company (or another
shareholder of the Company, as provided in the Repurchase Agreement) shall have
the right at its discretion (or the discretion of such other shareholders) to
purchase and/or redeem all such shares owned by the Optionee on the date of
termination of his or her employment at a price equal to (A) the fair value of
such shares as of such date of termination, or (B) if such repurchase right
lapses at 20% of the number of shares per year, the original purchase price of
such shares, and upon terms of payment permissible under the California
securities rules; provided that in the case of Options or Stock Awards granted
to officers, directors, consultants or affiliates of the Company, such
repurchase provisions may be subject to additional or greater restrictions as
determined by the Board or Committee.
     7. Stock Awards and Restricted Stock Purchase Offers.

     (a) Types of Grants.
     (i) Stock Award. All or part of any Stock Award under the Plan may be
subject to conditions established by the Board or the Committee, and set forth
in the Stock Award Agreement, which may include, but are not limited to,
continuous service with the Company, achievement of specific business
objectives, increases in specified indices, attaining growth rates and other
comparable measurements of Company performance. Such Awards may be based on Fair
Market Value or other specified valuation. All Stock Awards will be made
pursuant to the execution of a Stock Award Agreement substantially in the form
attached hereto as Exhibit "C".
     (ii) Restricted Stock Purchase Offer. A Grant of a Restricted Stock
Purchase Offer under the Plan shall be subject to such (i) vesting contingencies
related to the Participant's continued association with the Company for a
specified time and (ii) other specified conditions as the Board or Committee
shall determine, in their sole discretion, consistent with the provisions of the
Plan. All Restricted Stock Purchase Offers shall be made

<PAGE>

pursuant to a Restricted Stock Purchase Offer substantially in the form attached
hereto as Exhibit "D".
     (b) Conditions and Restrictions. Shares of Stock which Participants may
receive as a Stock Award under a Stock Award Agreement or Restricted Stock
Purchase Offer under a Restricted Stock Purchase Offer may include such
restrictions as the Board or Committee, as applicable, shall determine,
including restrictions on transfer, repurchase rights, right of first refusal,
and forfeiture provisions. When transfer of Stock is so restricted or subject to
forfeiture provisions it is referred to as "Restricted Stock". Further, with
Board or Committee approval, Stock Awards or Restricted Stock Purchase Offers
may be deferred, either in the form of installments or a future lump sum
distribution. The Board or Committee may permit selected Participants to elect
to defer distributions of Stock Awards or Restricted Stock Purchase Offers in
accordance with procedures established by the Board or Committee to assure that
such deferrals comply with applicable requirements of the Code including, at the
choice of Participants, the capability to make further deferrals for
distribution after retirement. Any deferred distribution, whether elected by the
Participant or specified by the Stock Award Agreement, Restricted Stock Purchase
Offers or by the Board or Committee, may require the payment be forfeited in
accordance with the provisions of Section 7(c). Dividends or dividend equivalent
rights may be extended to and made part of any Stock Award or Restricted Stock
Purchase Offers denominated in Stock or units of Stock, subject to such terms,
conditions and restrictions as the Board or Committee may establish.
     (c) Cancellation and Rescission of Grants. Unless the Stock Award Agreement
or Restricted Stock Purchase Offer specifies otherwise, the Board or Committee,
as applicable, may cancel any unexpired, unpaid, or deferred Grants at any time
if the Participant is not in compliance with all other applicable provisions of
the Stock Award Agreement or Restricted Stock Purchase Offer, the Plan and with
the following conditions:
     (i) A Participant shall not render services for any organization or engage
directly or indirectly in any business which, in the judgment of the chief
executive officer of the Company or other senior officer designated by the Board
or Committee, is or becomes competitive with the Company, or which organization
or business, or the rendering of services to such organization or business, is
or becomes otherwise prejudicial to or in conflict with the interests of the
Company. For Participants whose employment has terminated, the judgment of the
chief executive officer shall be based on the Participant's position and
responsibilities while employed by the Company, the Participant's
post-employment responsibilities and position with the other organization or
business, the extent of past, current and potential competition or conflict
between the Company and the other organization or business, the effect on the
Company's customers, suppliers and competitors and such other considerations as
are deemed relevant given the applicable facts and circumstances. A Participant
who has retired shall be free, however, to purchase as an investment or
otherwise, stock or other securities of such organization or business so long as
they are listed upon a recognized securities exchange or traded
over-the-counter, and such investment does not represent a substantial
investment to the Participant or a greater than 10 percent equity interest in
the organization or business.
<PAGE>

     (ii) A Participant shall not, without prior written authorization from the
Company, disclose to anyone outside the Company, or use in other than the
Company's business, any confidential information or material, as defined in the
Company's Proprietary Information and Invention Agreement or similar agreement
regarding confidential information and intellectual property, relating to the
business of the Company, acquired by the Participant either during or after
employment with the Company.
     (iii) A Participant, pursuant to the Company's Proprietary Information and
Invention Agreement, shall disclose promptly and assign to the Company all
right, title and interest in any invention or idea, patentable or not, made or
conceived by the Participant during employment by the Company, relating in any
manner to the actual or anticipated business, research or development work of
the Company and shall do anything reasonably necessary to enable the Company to
secure a patent where appropriate in the United States and in foreign countries.
     (iv) Upon exercise, payment or delivery pursuant to a Grant, the
Participant shall certify on a form acceptable to the Committee that he or she
is in compliance with the terms and conditions of the Plan. Failure to comply
with all of the provisions of this Section 7(c) prior to, or during the six
months after, any exercise, payment or delivery pursuant to a Grant shall cause
such exercise, payment or delivery to be rescinded. The Company shall notify the
Participant in writing of any such rescission within two years after such
exercise, payment or delivery. Within ten days after receiving such a notice
from the Company, the Participant shall pay to the Company the amount of any
gain realized or payment received as a result of the rescinded exercise, payment
or delivery pursuant to a Grant. Such payment shall be made either in cash or by
returning to the Company the number of shares of Stock that the Participant
received in connection with the rescinded exercise, payment or delivery.
     (d) Nonassignability.
     (i) Except pursuant to Section 7(e)(iii) and except as set forth in Section
7(d)(ii), no Grant or any other benefit under the Plan shall be assignable or
transferable, or payable to or exercisable by, anyone other than the Participant
to whom it was granted.
     (ii) Where a Participant terminates employment and retains a Grant pursuant
to Section 7(e)(ii) in order to assume a position with a governmental,
charitable or educational institution, the Board or Committee, in its discretion
and to the extent permitted by law, may authorize a third party (including but
not limited to the trustee of a "blind" trust), acceptable to the applicable
governmental or institutional authorities, the Participant and the Board or
Committee, to act on behalf of the Participant with regard to such Awards.
     (e) Termination of Employment. If the employment or service to the Company
of a Participant terminates, other than pursuant to any of the following
provisions under this Section 7(e), all unexercised, deferred and unpaid Stock
Awards or Restricted Stock Purchase Offers shall be cancelled immediately,
unless the Stock Award Agreement or Restricted Stock Purchase Offer provides
otherwise:
     (i) Retirement Under a Company Retirement Plan. When a Participant's
employment terminates as a result of retirement in accordance with the terms of
a

<PAGE>

Company retirement plan, the Board or Committee may permit Stock Awards or
Restricted Stock Purchase Offers to continue in effect beyond the date of
retirement in accordance with the applicable Grant Agreement and the
exercisability and vesting of any such Grants may be accelerated.
     (ii) Rights in the Best Interests of the Company. When a Participant
resigns from the Company and, in the judgment of the Board or Committee, the
acceleration and/or continuation of outstanding Stock Awards or Restricted Stock
Purchase Offers would be in the best interests of the Company, the Board or
Committee may (i) authorize, where appropriate, the acceleration and/or
continuation of all or any part of Grants issued prior to such termination and
(ii) permit the exercise, vesting and payment of such Grants for such period as
may be set forth in the applicable Grant Agreement, subject to earlier
cancellation pursuant to Section 10 or at such time as the Board or Committee
shall deem the continuation of all or any part of the Participant's Grants are
not in the Company's best interest.
     (iii) Death or Disability of a Participant.

     (1) In the event of a Participant's death, the Participant's estate or
beneficiaries shall have a period up to the expiration date specified in the
Grant Agreement within which to receive or exercise any outstanding Grant held
by the Participant under such terms as may be specified in the applicable Grant
Agreement. Rights to any such outstanding Grants shall pass by will or the laws
of descent and distribution in the following order: (a) to beneficiaries so
designated by the Participant; if none, then (b) to a legal representative of
the Participant; if none, then (c) to the persons entitled thereto as determined
by a court of competent jurisdiction. Grants so passing shall be made at such
times and in such manner as if the Participant were living.
     (2) In the event a Participant is deemed by the Board or Committee to be
unable to perform his or her usual duties by reason of mental disorder or
medical condition which does not result from facts which would be grounds for
termination for cause, Grants and rights to any such Grants may be paid to or
exercised by the Participant, if legally competent, or a committee or other
legally designated guardian or representative if the Participant is legally
incompetent by virtue of such disability.
     (3) After the death or disability of a Participant, the Board or Committee
may in its sole discretion at any time (1) terminate restrictions in Grant
Agreements; (2) accelerate any or all installments and rights; and (3) instruct
the Company to pay the total of any accelerated payments in a lump sum to the
Participant, the Participant's estate, beneficiaries or representative --
notwithstanding that, in the absence of such termination of restrictions or
acceleration of payments, any or all of the payments due under the Grant might
ultimately have become payable to other beneficiaries.
     (4) In the event of uncertainty as to interpretation of or controversies
concerning this Section 7, the determinations of the Board or Committee, as
applicable, shall be binding and conclusive.
     8. Investment Intent. All Grants under the Plan are intended to be exempt
from registration under the Securities Act provided by Rule 701 thereunder.
Unless and until

<PAGE>

the granting of Options or sale and issuance of Stock subject to the Plan are
registered under the Securities Act or shall be exempt pursuant to the rules
promulgated thereunder, each Grant under the Plan shall provide that the
purchases or other acquisitions of Stock thereunder shall be for investment
purposes and not with a view to, or for resale in connection with, any
distribution thereof. Further, unless the issuance and sale of the Stock have
been registered under the Securities Act, each Grant shall provide that no
shares shall be purchased upon the exercise of the rights under such Grant
unless and until (i) all then applicable requirements of state and federal laws
and regulatory agencies shall have been fully complied with to the satisfaction
of the Company and its counsel, and (ii) if requested to do so by the Company,
the person exercising the rights under the Grant shall (i) give written
assurances as to knowledge and experience of such person (or a representative
employed by such person) in financial and business matters and the ability of
such person (or representative) to evaluate the merits and risks of exercising
the Option, and (ii) execute and deliver to the Company a letter of investment
intent and/or such other form related to applicable exemptions from
registration, all in such form and substance as the Company may require. If
shares are issued upon exercise of any rights under a Grant without registration
under the Securities Act, subsequent registration of such shares shall relieve
the purchaser thereof of any investment restrictions or representations made
upon the exercise of such rights.
     9. Amendment, Modification, Suspension or Discontinuance of the Plan. The
Board may, insofar as permitted by law, from time to time, with respect to any
shares at the time not subject to outstanding Grants, suspend or terminate the
Plan or revise or amend it in any respect whatsoever, except that without the
approval of the shareholders of the Company, no such revision or amendment shall
(i) increase the number of shares subject to the Plan, (ii) decrease the price
at which Grants may be granted, (iii) materially increase the benefits to
Participants, or (iv) change the class of persons eligible to receive Grants
under the Plan; provided, however, no such action shall alter or impair the
rights and obligations under any Option, or Stock Award, or Restricted Stock
Purchase Offer outstanding as of the date thereof without the written consent of
the Participant thereunder. No Grant may be issued while the Plan is suspended
or after it is terminated, but the rights and obligations under any Grant issued
while the Plan is in effect shall not be impaired by suspension or termination
of the Plan.
     In the event of any change in the outstanding Stock by reason of a stock
split, stock dividend, combination or reclassification of shares,
recapitalization, merger, or similar event, the Board or the Committee may
adjust proportionally (a) the number of shares of Stock (i) reserved under the
Plan, (ii) available for Incentive Stock Options and Nonstatutory Options and
(iii) covered by outstanding Stock Awards or Restricted Stock Purchase Offers;
(b) the Stock prices related to outstanding Grants; and (c) the appropriate Fair
Market Value and other price determinations for such Grants. In the event of any
other change affecting the Stock or any distribution (other than normal cash
dividends) to holders of Stock, such adjustments as may be deemed equitable by
the Board or the Committee, including adjustments to avoid fractional shares,
shall be made to give proper effect to such event. In the event of a corporate
merger, consolidation, acquisition of

<PAGE>

property or stock, separation, reorganization or liquidation, the Board or the
Committee shall be authorized to issue or assume stock options, whether or not
in a transaction to which Section 424(a) of the Code applies, and other Grants
by means of substitution of new Grant Agreements for previously issued Grants or
an assumption of previously issued Grants.
     10. Tax Withholding. The Company shall have the right to deduct applicable
taxes from any Grant payment and withhold, at the time of delivery or exercise
of Options, Stock Awards or Restricted Stock Purchase Offers or vesting of
shares under such Grants, an appropriate number of shares for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes. If
Stock is used to satisfy tax withholding, such stock shall be valued based on
the Fair Market Value when the tax withholding is required to be made.
     11. Availability of Information. During the term of the Plan and any
additional period during which a Grant granted pursuant to the Plan shall be
exercisable, the Company shall make available, not later than one hundred and
twenty (120) days following the close of each of its fiscal years, such
financial and other information regarding the Company as is required by the
bylaws of the Company and applicable law to be furnished in an annual report to
the shareholders of the Company.
     12. Notice. Any written notice to the Company required by any of the
provisions of the Plan shall be addressed to the chief personnel officer or to
the chief executive officer of the Company, and shall become effective when it
is received by the office of the chief personnel officer or the chief executive
officer.
     13. Indemnification of Board. In addition to such other rights or
indemnifications as they may have as directors or otherwise, and to the extent
allowed by applicable law, the members of the Board and the Committee shall be
indemnified by the Company against the reasonable expenses, including attorneys'
fees, actually and necessarily incurred in connection with the defense of any
claim, action, suit or proceeding, or in connection with any appeal thereof, to
which they or any of them may be a party by reason of any action taken, or
failure to act, under or in connection with the Plan or any Grant granted
thereunder, and against all amounts paid by them in settlement thereof (provided
such settlement is approved by independent legal counsel selected by the
Company) or paid by them in satisfaction of a judgment in any such claim,
action, suit or proceeding, except in any case in relation to matters as to
which it shall be adjudged in such claim, action, suit or proceeding that such
Board or Committee member is liable for negligence or misconduct in the
performance of his or her duties; provided that within sixty (60) days after
institution of any such action, suit or Board proceeding the member involved
shall offer the Company, in writing, the opportunity, at its own expense, to
handle and defend the same.
     14. Governing Law. The Plan and all determinations made and actions taken
pursuant hereto, to the extent not otherwise governed by the Code or the
securities laws of the United States, shall be governed by the law of the State
of California and construed accordingly.

<PAGE>

     15. Effective and Termination Dates. The Plan shall become effective on the
date it is approved by the holders of a majority of the shares of Stock then
outstanding. The Plan shall terminate ten years later, subject to earlier
termination by the Board pursuant to Section 9.
     The foregoing 1998 Incentive Stock Plan (consisting of 15 pages, including
this page) was duly adopted and approved by the Board of Directors on August 5,
1998 and approved by the shareholders of the Corporation ______, 199--.

                                                                          ------
                                                                     , Secretary

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