Document:

June 1, 2000

Network Peripherals Inc.
2859 Bayview Drive
Fremont, CA 94538

Gentlemen:

         This letter is to confirm that Wells Fargo Bank,  National  Association
("Bank"),  subject to all terms and conditions  contained herein,  has agreed to
make available to Network  Peripherals  Inc.  ("Borrower"),  a revolving line of
credit under which Bank will make  advances to Borrower  from time to time up to
and  including  June 1, 2001,  not to exceed at any time the  maximum  principal
amount of Five Million Dollars  ($5,000,000.00) ("Line of Credit"), the proceeds
of which shall be used for working capital requirements.

I.      CREDIT TERMS:

          1.    LINE OF CREDIT:

         (a) Line of Credit Note.  Borrower's obligation to repay advances under
the Line of Credit shall be evidenced by a promissory note  substantially in the
form of Exhibit A attached  hereto ("Line of Credit  Note"),  all terms of which
are incorporated herein by this reference.

         (b)  Letter of Credit  Subfeature.  As a  subfeature  under the Line of
Credit,  Bank agrees from time to time during the term thereof to issue  standby
and commercial letters of credit for the account of Borrower (each, a "Letter of
Credit" and collectively,  "Letters of Credit"); provided however, that the form
and  substance of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion;  and provided further, that the aggregate undrawn amount of
all  outstanding  Letters of Credit  shall not at any time exceed  Five  Million
Dollars ($5,000,000.00). Each Letter of Credit shall be issued for a term not to
exceed 365 days, as designated by Borrower;  provided however, that no Letter of
Credit shall have an expiration date subsequent to the maturity date of the Line
of Credit.  The undrawn  amount of all Letters of Credit shall be reserved under
the Line of Credit and shall not be available for  borrowings  thereunder.  Each
Letter of Credit shall be subject to the additional  terms and conditions of the
Letter of Credit Agreement and related  documents,  if any,  required by Bank in
connection with the issuance thereof.  Each draft paid by Bank under a Letter of
Credit  shall be deemed an advance  under the Line of Credit and shall be repaid
by  Borrower  in  accordance  with  the  terms  and  conditions  of this  letter
applicable to such advances;  provided however,  that if advances under the Line
of Credit are not  available,  for any reason,  at the time any draft is paid by
Bank, then Borrower shall immediately pay to Bank the full amount of such draft,
together with interest  thereon from the date such amount is paid by Bank to the
date such amount is fully repaid by Borrower, at the rate of interest applicable
to advances under the Line of Credit.  In such event Borrower  agrees that Bank,
in its sole  discretion,  may debit any demand  deposit  account  maintained  by
Borrower with Bank for the amount of any such draft.

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 2

         (c) Borrowing and Repayment.  Borrower may from time to time during the
term of the Line of Credit  borrow,  partially or wholly  repay its  outstanding
borrowings,  and  reborrow,  subject  to  all  of  the  limitations,  terms  and
conditions  contained  herein or in the Line of Credit Note;  provided  however,
that the total outstanding  borrowings under the Line of Credit shall not at any
time exceed the maximum  principal  amount  available  thereunder,  as set forth
above.

         2.       COLLATERAL:

         As security for all  indebtedness  of Borrower to Bank subject  hereto,
Borrower  hereby  grants to Bank  security  interests  of first  priority in all
Borrower's Institutional Brokerage account.

         All of the foregoing  shall be evidenced by and subject to the terms of
such  security  agreements,  financing  statements,  deeds  of trust  and  other
documents  as  Bank  shall  reasonably  require,   all  in  form  and  substance
satisfactory to Bank.  Borrower shall reimburse Bank Immediately upon demand for
all costs and expenses  Incurred by Bank in connection with any of the foregoing
security,  including without limitation,  filing and recording fees and costs of
appraisals, audits and title insurance.

II.     INTEREST/FEES:

         1. Interest.  The outstanding  principal  balance of the Line of Credit
shall  bear  interest  at the rate of  interest  set forth in the Line of Credit
Note.

         2. Computation and Payment.  Interest shall be computed on the basis of
a 360-day year, actual days elapsed.  Interest shall be payable at the times and
place set forth in the Line of Credit Note.

         3.  Commitment  Fee.  Borrower  shall  pay  to  Bank  a  non-refundable
commitment   fee  for  the  Line  of  Credit  equal  to  Ten  Thousand   Dollars
($10,000.00),  which fee shall be due and  payable In full on the date  Borrower
acknowledges this letter.

         4.  Letter of  Credit  Fees.  Borrower  shall pay to Bank fees upon the
issuance of each Letter of Credit,  upon the payment or  negotiation  by Bank of
each  draft  under any  Letter of Credit  and upon the  occurrence  of any other
activity with respect to any Letter of Credit (including without limitation, the
transfer,  amendment  or  cancellation  of any Letter of Credit)  determined  in
accordance  with  Bank's  standard  fees and  charges  then in  effect  for such
activity.

         5.  Collection  of  Payment.  Borrower  authorizes  Bank to collect all
interest  and fees due under the Line of Credit by  charging  Borrower's  demand
deposit  account  number  4761-067479  with Bank,  or any other  demand  deposit
account  maintained by Borrower with Bank, for the full amount  thereof.  Should
there be  insufficient  funds in any such demand deposit account to pay all such
sums when due, the full amount of such  deficiency  shall be immediately due and
payable by Borrower.

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 3

III.    REPRESENTATIONS AND WARRANTIES:

         Borrower  makes the following  representations  and warranties to Bank,
which  representations and warranties shall survive the execution of this letter
and shall  continue in full force and effect  until the full and final  payment,
and satisfaction  and discharge,  of all obligations of Borrower to Bank subject
to this letter.

         1. Legal Status. Borrower is a corporation, duly organized and existing
and in good standing  under the laws of the state of Delaware,  and is qualified
or licensed to do business in all  jurisdictions in which such  qualification or
licensing Is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.

         2.  Authorization and Validity.  This letter,  the Line of Credit Note,
and each other  document,  contract or  instrument  deemed  necessary by Bank to
evidence  any  extension  of  credit  to  Borrower  pursuant  to the  terms  and
conditions  hereof, or now or at any time hereafter  required by or delivered to
Bank in connection with this letter  (collectively,  the "Loan  Documents") have
been duly  authorized,  and upon their execution and delivery in accordance with
the provisions  hereof will constitute legal,  valid and binding  agreements and
obligations  of Borrower or the party which  executes the same,  enforceable  in
accordance with their respective terms.

         3. No Violation. The execution, delivery and performance by Borrower of
each  of the  Loan  Documents  do  not  violate  any  provision  of  any  law or
regulation,  or  contravene  any provision of the Articles of  Incorporation  or
By-Laws of Borrower,  or result in a breach of or constitute a default under any
contract, obligation, indenture or other instrument to which Borrower is a party
or by which Borrower may be bound.

         4.  Litigation.  There  are no  pending,  or to the best of  Borrower's
knowledge threatened,  actions, claims, Investigations,  suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which  could  have a  material  adverse  effect on the  financial  condition  or
operation of Borrower other than those  disclosed by Borrower to Bank in writing
prior to the date hereof.

         5.  Correctness  of Financial  Statement.  The  financial  statement of
Borrower dated 12/31/99,  a true copy of which has been delivered by Borrower to
Bank prior to the date hereof,  (a) is complete and correct and presents  fairly
the financial  condition of Borrower,  (b) discloses all liabilities of Borrower
that are required to be reflected or reserved  against under generally  accepted
accounting principles, whether liquidated or unliquidated,  fixed or contingent,
and (c) has been  prepared in  accordance  with  generally  accepted  accounting
principles  consistently  applied.  Since the date of such  financial  statement
there  has  been no  material  adverse  change  in the  financial  condition  of
Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or
otherwise  encumbered any of its assets or properties except in favor of Bank or
as otherwise permitted by Bank in writing.

         6.  Income  Tax  Returns.  Borrower  has no  knowledge  of any  pending
assessments or adjustments of its income tax payable with respect to any year.

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 4

         7. No  Subordination.  There is no  agreement,  indenture,  contract or
instrument to which  Borrower is a party or by which  Borrower may be bound that
requires the subordination in right of payment of any of Borrower's  obligations
subject to this letter to any other obligation of Borrower.

         8. Permits, Franchises. Borrower possesses, and will hereafter possess,
all permits,  consents,  approvals,  franchises  and  licenses  required and all
rights to  trademarks,  trade  names,  patents  and  fictitious  names,  if any,
necessary  to enable it to conduct  the  business  in which it is now engaged in
compliance with applicable law.

         9. ERISA.  Borrower is in compliance in all material  respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time ("ERISN"); Borrower has not violated any
provision  of any defined  employee  pension  benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan");  no Reportable Event,
as defined in ERISA,  has  occurred and is  continuing  with respect to any Plan
initiated by Borrower;  Borrower has met its minimum funding  requirements under
ERISA  with  respect to each  Plan;  and each Plan will be able to  fulfill  its
benefit  obligations as they come due in accordance  with the Plan documents and
under generally accepted accounting principles.

         10. Other Obligations. Borrower is not in default on any obligation for
borrowed  money,  any purchase  money  obligation or any other  material  lease,
commitment, contract, instrument or obligation.

         11. Environmental  Matters.  Except as disclosed by Borrower to Bank in
writing  prior to the date  hereof,  Borrower is in  compliance  in all material
respects with all applicable  federal or state  environmental,  hazardous waste,
health  and  safety  statutes,  and any rules or  regulations  adopted  pursuant
thereto,  which govern or affect any of Borrower's operations and/or properties,
including  without  limitation,   the  Comprehensive   Environmental   Response,
Compensation   and  Liability  Act  of  1980,   the  Superfund   Amendments  and
Reauthorization Act of 1986, the Federal Resource  Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended,  modified or supplemented  from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action  involving a material  expenditure is needed to respond to a
release  of any toxic or  hazardous  waste or  substance  into the  environment.
Borrower has no material contingent  liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

 IV.     CONDITIONS:

         1. Conditions of Initial Extension of Credit. The obligation of Bank to
extend any credit  contemplated  by this  letter is  subject to  fulfillment  to
Bank's satisfaction of all of the following conditions:

         (a) Documentation. Bank shall have received each of the Loan Documents,
duly executed and in form and substance satisfactory to Bank.

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 5

         (b)  Financial  Condition.  There shall have been no  material  adverse
change,  as  determined  by Bank,  in the  financial  condition  or  business of
Borrower,  nor any material decline,  as determined by Bank, in the market value
of any collateral required hereunder or a substantial or material portion of the
assets of Borrower.

         (c)  Insurance.  Borrower  shall have  delivered  to Bank  evidence  of
insurance  coverage on all Borrower's  property,  in form,  substance,  amounts,
covering risks and issued by companies  satisfactory to Bank, and where required
by Bank, with loss payable endorsements in favor of Bank.

         2.  Conditions of Each  Extension of Credit.  The obligation of Bank to
make each extension of credit  requested by Borrower  hereunder shall be subject
to the fulfillment to Bank's satisfaction of each of the following conditions:

         (a) Compliance.  The representation and warranties contained herein and
in each of the other Loan  Documents  shall be true on and as of the date of the
signing  of this  letter  and on the date of each  extension  of  credit by Bank
pursuant  hereto,  with the same  effect  as  though  such  representations  and
warranties  had been made on and as of each such date, and on each such date, no
default  hereunder,  and no  condition,  event or act which  with the  giving of
notice or the  passage of time or both would  constitute  such a default,  shall
have occurred and be continuing or shall exist.

         (b)  Documentation.  Bank shall have received all additional  documents
which may be required in connection with such extension of credit.

 V.      COVENANTS:

         Borrower  covenants  that so long as Bank  remains  committed to extend
credit to  Borrower  pursuant  hereto,  or any  liabilities  (whether  direct or
contingent,  liquidated  or  unliquidated)  of Borrower to Bank under any of the
Loan Documents remain outstanding,  and until payment in full of all obligations
of Borrower subject hereto,  Borrower shall,  unless Bank otherwise  consents in
writing:

         1. Punctual Payment.  Punctually pay all principal,  interest,  fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon demand by Bank, the amount
by which the  outstanding  principal  balance  of the Line of Credit at any time
exceeds any limitation on borrowings applicable thereto.

         2.  Accounting   Records.   Maintain  adequate  books  and  records  in
accordance with generally accepted accounting  principles  consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records,  to make copies of the same, and inspect the
properties of Borrower.

         3. Financial Statements.  Provide to Bank all of the following, in form
and detail satisfactory to Bank:

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 6

         (a) not later  than 120 days  after and as of the end of each  calendar
year, a 10-K report of Borrower,  prepared by an  independent  certified  public
accountant acceptable to Bank, and filed with Securities Exchange Commission;

         (b) not later than 60 days after and as of the end of each  quarter,  a
10-Q report of Borrower,  prepared by an independent certified public accountant
acceptable to Bank, and filed with Securities Exchange Commission;

         (c) on a  monthly  basis,  a copy of  Institutional  Brokerage  Account
Statement; and

         (d) from time to time such  other  information  as Bank may  reasonably
request.

         4.   Compliance.   Preserve  and  maintain   all   licenses,   permits,
governmental  approvals,  rights,  privileges and  franchises  necessary for the
conduct  of its  business;  and  comply  with the  provisions  of all  documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws,  rules,  regulations and orders
of a governmental agency applicable to Borrower and/or its business.

         5. Insurance.  Maintain and keep in force insurance of the types and in
amounts  customarily  carried in lines of business  similar to that of Borrower,
including but not limited to fire, extended coverage,  public liability,  flood,
property damage and workers' compensation,  with all such insurance carried with
companies and in amounts  satisfactory to Bank, and deliver to Bank from time to
time at Bank's request schedules setting forth all insurance then in effect.

         6.  Facilities.  Keep all properties  useful or necessary to Borrower's
business  in good  repair and  condition,  and from time to time make  necessary
repairs,  renewals and  replacements  thereto so that such  properties  shall be
fully and efficiently preserved and maintained.

         7. Taxes and Other Liabilities.  Pay and discharge when due any and all
indebtedness,  obligations,  assessments  and  taxes,  both  real  or  personal,
including without  limitation federal and state income taxes and state and local
property  taxes and  assessments,  except (a) such as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's satisfaction,  for eventual payment thereof in the
event that Borrower is obligated to make such payment.

         8.  Litigation.  Promptly  give  notice  in  writing  to  Bank  of  any
litigation pending or threatened against Borrower.

 VI.     DEFAULT, REMEDIES:

         1.  Default,  Remedies.  Upon the violation of any term or condition of
any of the Loan  Documents,  or upon the  occurrence  of any  default or defined
event of  default  under  any of the Loan  Documents:  (a) all  indebtedness  of
Borrower  under each of the Loan  Documents,  any term  thereof to the  contrary
notwithstanding,  shall at Bank's option and without  notice become  immediately
due and payable without presentment,  demand, protest or notice of dishonor, all
of which are expressly waived by Borrower,  (b) the obligation,  if any, of Bank
to extend any further credit under any of the Loan Documents  shall  immediately
cease and  terminate;  and (c) Bank shall have all rights,  powers and  remedies
available under each of the Loan Documents, or

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 7

accorded by law,  including without limitation the right to resort to any or all
security  for any  credit  extended  by Bank to  Borrower  under any of the Loan
Documents and to exercise any or all of the rights of a  beneficiary  or secured
party  pursuant to the applicable  law. All rights,  powers and remedies of Bank
may be exercised at any time by Bank and from time to time after the  occurrence
of any such breach or default, are cumulative and not exclusive, and shall be in
addition to any other rights, powers or remedies provided by law or equity.

         2. No Waiver. No delay, failure or discontinuance of Bank in exercising
 any right,  power or remedy  under any of the Loan  Documents  shall  affect or
 operate as a waiver of such  right,  power or  remedy;  nor shall any single or
 partial  exercise  of any  such  right,  power  or  remedy  preclude,  waive or
 otherwise  affect any other or further  exercise thereof or the exercise of any
 other right,  power or remedy. Any waiver,  permit,  consent or approval of any
 kind by Bank of any breach of or default under any of the Loan  Documents  must
 be in  writing  and shall be  effective  only to the  extent  set forth in such
 writing.

 VII.    MISCELLANEOUS:

         1.  Notices.  All  notices,  requests  and  demands  which any party is
required or may desire to give to any other party  under any  provision  of this
letter must be in writing delivered to each party at its address first set forth
above,  or to such other address as any party may designate by written notice to
all other parties. Each such notice, request and demand shall be deemed given or
made as follows:  (a) if sent by hand delivery,  upon  delivery;  (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit In
the U.S.  mail,  first class and postage  prepaid;  and (c) if sent by telecopy,
upon receipt.

         2. Costs,  Expenses and  Attorneys'  Fees.  Borrower  shall pay to Bank
immediately  upon demand the full  amount of all  payments,  advances,  charges,
costs and expenses,  including  reasonable  attorneys'  fees (to include outside
counsel fees and all allocated  costs of Bank's in-house  counsel),  expended or
incurred by Bank in connection  with (a) the negotiation and preparation of this
letter and the other Loan Documents,  Bank's continued administration hereof and
thereof,  and the preparation of amendments and waivers hereto and thereto,  (b)
the  enforcement  of Bank's  rights  and/or the  collection of any amounts which
become due to Bank under any of the Loan  Documents,  and (c) the prosecution or
defense of any action in any way related to any of the Loan Documents, including
without limitation,  any action for declaratory relief,  whether incurred at the
trial or  appellate  level,  in an  arbitration  proceeding  or  otherwise,  and
including  any of the  foregoing  incurred  in  connection  with any  bankruptcy
proceeding (including without limitation,  any adversary  proceeding,  contested
matter or motion  brought by Bank or any other person)  relating to any Borrower
or any other person or entity.

         3. Successors,  Assignment. This letter shall be binding upon and inure
to the benefit of the heirs, executors,  administrators,  legal representatives,
successors and assigns of the parties;  provided however,  that Borrower may not
assign or transfer its interest  hereunder without Bank's prior written consent.
Bank  reserves  the  right  to  sell,  assign,  transfer,   negotiate  or  grant
participations  in all or any part of, or any  interest  in,  Bank's  rights and
benefits  under each of the Loan  Documents.  In connection  therewith  Bank may
disclose all  documents  and  information  which Bank now has or  hereafter  may
acquire  relating to any credit  extended by Bank to  Borrower,  Borrower or its
business, or any collateral required hereunder.

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 8

         4.  Entire  Agreement;  Amendment.  This  letter  and  the  other  Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to any  extension  of credit by Bank  subject  hereto  and  supersede  all prior
negotiations,  communications,  discussions  and  correspondence  concerning the
subject  matter  hereof.  This letter may be amended or modified only in writing
signed by each party hereto.

         5. No Third Party  Beneficiaries.  This letter is made and entered into
for the sole  protection and benefit of the parties hereto and their  respective
permitted successors and assigns, and no other person or entity shall be a third
party beneficiary of, or have any direct or indirect cause of action or claim in
connection  with,  this letter or any other of the Loan Documents to which it is
not a party.

         6. Severability of Provisions. If any provision of this letter shall be
prohibited  by  or  Invalid  under  applicable  law,  such  provision  shall  be
ineffective  only  to the  extent  of such  prohibition  or  invalidity  without
Invalidating the remainder of such provision or any remaining provisions of this
letter.

         7.  Governing  Law.  This letter shall be governed by and  construed In
accordance with the laws of the State of California.

         8.       Arbitration.

         (a)  Arbitration.  Upon the demand of any party,  any Dispute  shall be
resolved by binding arbitration (except as set forth in (a) below) in accordance
with the terms of this letter. A "Dispute" shall mean any action, dispute, claim
or  controversy  of any kind,  whether in contract or tort,  statutory or common
law,  legal  or  equitable,  now  existing  or  hereafter  arising  under  or in
connection with, or in any way pertaining to, any of the Loan Documents,  or any
past, present or future extensions of credit and other activities,  transactions
or  obligations  of any kind related  directly or  Indirectly to any of the Loan
Documents,  including  without  limitation,  any of  the  foregoing  arising  in
connection  with the  exercise of any  self-help,  ancillary  or other  remedies
pursuant  to any of the Loan  Documents.  Any party may by  summary  proceedings
bring an action in court to compel arbitration of a Dispute. Any party who falls
or refuses to submit to arbitration following a lawful demand by any other party
shall bear all costs and  expenses  incurred by such other  party in  compelling
arbitration of any Dispute.

         (b) Governing Rules.  Arbitration  proceedings shall be administered by
the American Arbitration  Association ("AAA") or such other administrator as the
parties  shall  mutually  agree  upon in  accordance  with  the  AAA  Commercial
Arbitration  Rules. All Disputes  submitted to arbitration  shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding  any  conflicting  choice  of law  provision  in any of the Loan
Documents.  The  arbitration  shall be  conducted  at a location  in  California
selected  by the AAA or  other  administrator.  If  there  is any  inconsistency
between the terms hereof and any such rules,  the terms and procedures set forth
herein shall control. All statutes of limitation applicable to any Dispute shall
apply to any arbitration proceeding. All discovery activities shall be expressly
limited to matters directly relevant to the Dispute being  arbitrated.  Judgment
upon any award  rendered in an  arbitration  may be entered in any court  having
jurisdiction; provided however, that nothing contained herein shall be deemed to
be a waiver by any party that is a bank of the protections  afforded to it under
12 U.S.C. ss.91 or any similar applicable state law.

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 9

         (c) No Waiver;  Provisional  Remedies,  Self-Help and  Foreclosure.  No
provision  hereof  shall  limit  the right of any  party to  exercise  self-help
remedies  such as setoff,  foreclosure  against or sale of any real or  personal
property collateral or security, or to obtain provisional or ancillary remedies,
including  without  limitation  injunctive  relief,  sequestration,  attachment,
garnishment  or the  appointment  of a  receiver,  from  a  court  of  competent
jurisdiction  before,  after or during the pendency of any  arbitration or other
proceeding.  The  exercise of any such  remedy  shall not waive the right of any
party to compel arbitration or reference hereunder.

         (d) Arbitrator  Qualifications and Powers;  Award.  Arbitrators must be
active  members of the  California  State Bar or retired  judges of the state or
federal  judiciary  of  California,   with  expertise  in  the  substantive  law
applicable to the subject  matter of the Dispute.  Arbitrators  are empowered to
resolve  Disputes by summary  rulings in response to motions  filed prior to the
final  arbitration  hearing.  Arbitrators  (i) shall  resolve  all  Disputes  in
accordance with the  substantive law of the State of California,  (ii) may grant
any  remedy or relief  that a court of the State of  California  could  order or
grant within the scope hereof and such ancillary  relief as is necessary to make
effective  any award,  and (iii)  shall have the power to award  recovery of all
costs and fees, to impose  sanctions and to take such other actions as they deem
necessary  to the same  extent a judge could  pursuant  to the Federal  Rules of
Civil  Procedure,  the California  Rules of Civil Procedure or other  applicable
law. Any Dispute in which the amount in  controversy is $5,000,000 or less shall
be decided by a single  arbitrator who shall not render an award of greater than
$5,000,000  (including  damages,  costs, fees and expenses).  By submission to a
single  arbitrator,  each party  expressly  waives any right or claim to recover
more than  $5,000,000.  Any Dispute in which the amount in  controversy  exceeds
$5,000,000  shall be decided by majority  vote of a panel of three  arbitrators;
provided however,  that all three  arbitrators must actively  participate in all
hearings and deliberations.

         (e)  Real  Property  Collateral;  Judicial  Reference.  Notwithstanding
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part,  by any real  property  unless  (i) the  holder of the  mortgage,  lien or
security   interest   specifically   elects  in  writing  to  proceed  with  the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that  might  accrue to them by virtue  of the  single  action  rule  statute  of
California,  thereby  agreeing  that all  indebtedness  and  obligations  of the
parties,  and  all  mortgages,   liens  and  security  interests  securing  such
indebtedness and obligations,  shall remain fully valid and enforceable.  If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with  California  Code of Civil  Procedure  Section 638 et
seq.,  and this  general  reference  agreement  is intended  to be  specifically
enforceable   in   accordance   with  said  Section  638.  A  referee  with  the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's  selection  procedures.  Judgment upon the decision  rendered by a referee
shall be  entered  in the  court in  which  such  proceeding  was  commenced  in
accordance with California Code of Civil Procedure Sections 644 and 645.

         (f)  Miscellaneous.  To the maximum  extent  practicable,  the AAA, the
arbitrators  and the parties  shall take all action  required  to  conclude  any
arbitration  proceeding  within 180 days of the filing of the  Dispute  with the
AAA. No arbitrator or other party to an arbitration  proceeding may disclose the
existence,  content or results thereof, except for disclosures of information by
a party  required in the ordinary  course of its business,  by applicable law or
regulation,  or to the extent  necessary to exercise any judicial  review rights
set forth herein.

<PAGE>

Network Peripherals Inc.
June 1, 2000
Page 10

If more than one agreement for arbitration by or between the parties potentially
applies to a Dispute,  the  arbitration  provision most directly  related to the
Loan  Documents  or  the  subject  matter  of  theDispute  shall  control.  This
arbitration provision shall survive termination,  amendment or expiration of any
of the Loan Documents or any relationship between the parties.

         Your  acknowledgment of this letter shall constitute  acceptance of the
foregoing  terms and  conditions.  Bank's  commitment  to extend  any  credit to
Borrower  pursuant to the terms of this letter shall terminate on June 30, 2000,
unless this letter is acknowledged by Borrower and returned to Bank on or before
that date.

                                            Sincerely,

                                            WELLS FARGO BANK,
                                            NATIONAL ASSOCIATION

                                            By:  /s/ Patty Juarez
                                            Assistant Vice President

Acknowledged and accepted as of 6/1/2000:
                                --------

NETWORK PERIPHERALS INC.

By:     /s/ Wilson Cheung

Title:  CFO

<PAGE>

REVOLVING LINE OF CREDIT NOTE

$5,000,000.00

                                                            San Jose, California
                                                                    June 1, 2000

     FOR VALUE RECEIVED,  the undersigned Network Peripherals Inc.  ("Borrower")
promises to pay to the order of WELLS FARGO BANK, NATIONAL  ASSOCIATION ("Bank")
at its office at Santa Clara  Technology  RCBO, 121 Park Center Plaza 3rd Floor,
San Jose, CA 95113,  or at such other place as the holder hereof may  designate,
in lawful  money of the United  States of America and in  immediately  available
funds, the principal sum of $5,000.000.00, or so much thereof as may be advanced
and be outstanding,  with interest thereon,  to be computed on each advance from
the date of its disbursement as set forth herein.

 INTEREST:

     (a) Interest.  The  outstanding  principal  balance of this Note shall bear
interest  (computed on the basis of a 360-day  year,  actual days  elapsed) at a
rate per annum equal to the Prime Rate in effect  from time to time.  The "Prime
Rate" Is a bass rate that Bank from time to time establishes and which serves as
the basis upon which  effective rates of interest are calculated for those loans
making reference  thereto.  Each change in the rate of interest  hereunder shall
become effective on the date each Prime Rate change is announced within Bank.

     (b) Payment of Interest.  Interest accrued on this Note shall be payable on
the 1st day of each month, commencing July 1, 2000.

     (c) Default  Interest.  From and after the maturity  date of this Note,  or
such earlier date as all principal  owing  hereunder  becomes due and payable by
acceleration or otherwise,  the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day  year,  actual  days  elapsed)  equal to 4% above the rate of
interest from time to time applicable to this Note.

BORROWING AND REPAYMENT:

     (a) Borrowing and Repayment. Borrower may from time to time during the term
of this Note borrow,  partially or wholly repay its outstanding borrowings,  and
reborrow,  subject to all of the limitations,  terms and conditions of this Note
and of any document executed in connection with or governing this Note; provided
however, that the total outstanding  borrowings under this Note shall not at any
time exceed the principal amount stated above.  The unpaid principal  balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder  hereof less the amount of principal  payments  made hereon by or for any
Borrower,  which balance may be endorsed hereon from time to time by the holder.
The outstanding  principal balance of this Note shall be due and payable in full
on June 1, 2001.

     (b) Advances.  Advances hereunder, to the total amount of the principal sum
available hereunder, may be made by the holder at the oral or written request of
(i) Toby Kwang or Wilson  Cheung,  any one acting alone,  who are  authorized to
request advances and direct the disposition of any advances until written notice
of the  revocation  of such  authority  Is  received by the holder at the office
designated above, or (ii) any person,  with respect to advances deposited to the
credit  of any  deposit  account  of  any  Borrower,  which  advances,  when  so
deposited,  shall  be  conclusively  presumed  to have  been  made to or for the
benefit of each  Borrower  regardless  of the fact that persons other then those
authorized to request  advances may have authority to draw against such account.
The holder shall have no obligation to determine  whether any person  requesting
an advance is or has been authorized by any Borrower.

     (c)  Application  of  Payments.  Each  payment  made on this Note  shall be
credited  first,  to any  interest  then  due  and  second,  to the  outstanding
principal balance hereof.

<PAGE>

EVENTS OF DEFAULT:

The  occurrence of any of the following  shall  constitute an "Event of Default"
under this Note:

     (a) The failure to pay any principal,  interest, fees or other charges when
due  hereunder  or under  any  contract,  instrument  or  document  executed  in
connection with this Note.

     (b) The filing of a petition by or against any  Borrower,  any guarantor of
this Note or any general  partner or joint  venturer in any Borrower  which is a
partnership or a joint venture (with each such guarantor, general partner and/or
joint  venturer  referred  to  herein  as a "Third  Party  Obligor")  under  any
provisions of the Bankruptcy  Reform Act, Title 11 of the United States Code, as
amended  or  recodified  from time to time,  or under any  similar  or other law
relating to bankruptcy, insolvency,  reorganization or other relief for debtors;
the  appointment of a receiver,  trustee,  custodian or liquidator of or for any
part of the assets or property  of any  Borrower  or Third  Party  Obligor;  any
Borrower or Third Party Obligor becomes  insolvent,  makes a general  assignment
for the benefit of creditors or is generally not paying its debts as they become
due; or any  attachment  or like levy on any  property of any  Borrower or Third
Party Obligor.

     (c) The death or  incapacity  of any  individual  Borrower  or Third  Party
Obligor,  or the  dissolution  or  liquidation  of any  Borrower  or Third Party
Obligor  which is a  corporation,  partnership,  joint  venture or other type of
entity.

     (d) Any default in the payment or  performance  of any  obligation,  or any
defined event of default,  under any  provisions of any contract,  instrument or
document  pursuant to which any Borrower or Third Party Obligor has incurred any
obligation for borrowed money, any purchase  obligation,  or any other liability
of any kind to any person or entity, including the holder.

     (e) Any financial statement provided by any Borrower or Third Party Obligor
to Bank proves to be incorrect, false or misleading in any material respect.

     (f) Any sale or transfer of all or a  substantial  or material  part of the
assets of any Borrower or Third Party Obligor other than in the ordinary  course
of Its business.

     (g) Any  violation or breach of any  provision  of, or any defined event of
default  under,  any  addendum  to this  Note or any loan  agreement,  guaranty,
security  agreement,  deed of trust,  mortgage  or other  document  executed  in
connection with or securing this Note.

MISCELLANEOUS:

     (a) Remedies.  Upon the  occurrence of any Event of Default,  the holder of
this Note,  at the  holder's  option,  may  declare  all sums of  principal  and
interest  outstanding  hereunder  to be  immediately  due  and  payable  without
presentment,  demand,  notice of nonperformance,  notice of protest,  protest or
notice of dishonor,  all of which are expressly waived by each Borrower, and the
obligation,  if any, of the holder to extend any further credit  hereunder shall
immediately  cease  and  terminate.  Each  Borrower  shall  pay  to  the  holder
immediately  upon demand the full  amount of all  payments,  advances,  charges,
costs and expenses,  including  reasonable  attorneys'  fees (to include outside
counsel fees and all allocated costs of the holder's in-house counsel), expended
or incurred by the holder in  connection  with the  enforcement  of the holder's
rights and/or the collection of any amounts which become due to the holder under
this Note,  and the  prosecution  or defense of any action in any way related to
this Note,  including  without  limitation,  any action for declaratory  relief,
whether incurred at the trial or appellate  level, in an arbitration  proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding  (including without limitation,  any adversary proceeding,
contested  matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.

     (b)  Obligations  Joint and Several.  Should more than one person or entity
sign this Note as a Borrower,  the  obligations  of each such Borrower  shall be
joint and several.

<PAGE>

     (c)  Governing  Law.  This  Note  shall be  governed  by and  construed  in
accordance with the laws of the state of California

IN  WITNESS  WHEREOF,  the  undersigned  has  executed  this Note as of the date
written above.

Network Peripherals, Inc

By:      /s/ Wilson Cheung

Title:   CFONETWORK PERIPHERALS INC.

                                 1997 STOCK PLAN
                       (As Amended Through March 1, 2000)

     1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.

          1.1 Establishment.  The Network  Peripherals Inc. 1997 Stock Plan (the
"Plan") is hereby established  effective as of February 18, 1997 (the "Effective
Date").

          1.2  Purpose.  The purpose of the Plan is to advance the  interests of
the  Participating  Company Group and its stockholders by providing an incentive
to attract,  retain and reward persons performing services for the Participating
Company  Group and by  motivating  such persons to  contribute to the growth and
profitability of the Participating Company Group.

          1.3 Term of Plan.  The Plan shall continue in effect until the earlier
of its  termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all  restrictions  on
such shares  under the terms of the Plan and the  agreements  evidencing  Awards
granted under the Plan have lapsed.  However,  all Incentive Stock Options shall
be  granted,  if at all,  within ten (10) years from the earlier of the date the
Plan is  adopted  by the  Board or the date  the  Plan is duly  approved  by the
stockholders of the Company.

     2. DEFINITIONS AND CONSTRUCTION.

          2.1 Definitions.  Whenever used herein, the following terms shall have
their respective meanings set forth below:

               (a) "Award" means an Option or Restricted Stock.

               (b) "Board"  means the Board of Directors of the Company.  If one
or more  Committees  have been  appointed by the Board to  administer  the Plan,
"Board" also means such Committee(s).

               (c) "Code" means the Internal  Revenue Code of 1986,  as amended,
and any applicable regulations promulgated thereunder.

               (d)  "Committee"  means  the  Compensation   Committee  or  other
committee  of the Board duly  appointed to  administer  the Plan and having such
powers as shall be  specified by the Board.  Unless the powers of the  Committee
have been  specifically  limited,  the Committee shall have all of the powers of
the Board granted herein, including,  without limitation,  the power to amend or
terminate  the  Plan at any  time,  subject  to the  terms  of the  Plan and any
applicable limitations imposed by law.

               (e)  "Company"  means  Network   Peripherals   Inc.,  a  Delaware
corporation, or any successor corporation thereto.

<PAGE>

               (f) "Consultant" means any person,  including an advisor, engaged
by a  Participating  Company to render  services  other than as an Employee or a
Director.

               (g)  "Director"  means a member  of the  Board or of the board of
directors of any other Participating Company.

               (h) "Disability"  means the permanent and total disability of the
Participant within the meaning of Section 22(e)(3) of the Code.

               (i) "Employee" means any person treated as an employee (including
an officer or a Director who is also treated as an employee) in the records of a
Participating Company; provided, however, that neither service as a Director nor
payment of a director's  fee shall be sufficient to  constitute  employment  for
purposes of the Plan.

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

               (k) "Fair Market  Value"  means,  as of any date,  the value of a
share of Stock  or  other  property  as  determined  by the  Board,  in its sole
discretion,  or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein, subject to the following:

                    (i) If,  on such  date,  there  is a public  market  for the
Stock, the Fair Market Value of a share of Stock shall be the closing sale price
of a share of Stock (or the mean of the closing bid and asked  prices of a share
of Stock if the Stock is so quoted  instead)  as quoted on the  Nasdaq  National
Market,  the  Nasdaq  Small-Cap  Market  or  such  other  national  or  regional
securities  exchange or market system  constituting  the primary  market for the
Stock,  as  reported  in the Wall  Street  Journal or such  other  source as the
Company deems reliable. If the relevant date does not fall on a day on which the
Stock has traded on such securities exchange or market system, the date on which
the Fair Market  Value shall be  established  shall be the last day on which the
Stock was so traded prior to the relevant date, or such other appropriate day as
shall be determined by the Board, in its sole discretion.

                    (ii) If, on such  date,  there is no public  market  for the
Stock,  the Fair Market Value of a share of Stock shall be as  determined by the
Board without regard to any restriction  other than a restriction  which, by its
terms, will never lapse.

               (l) "Incentive  Stock Option" means an Option  intended to be (as
set forth in the Option  Agreement)  and which  qualifies as an incentive  stock
option within the meaning of Section 422(b) of the Code.

               (m)  "Insider"  means an officer or a Director  of the Company or
any other  person whose  transactions  in Stock are subject to Section 16 of the
Exchange Act.

               (n)  "Nonstatutory  Stock Option" means an Option not intended to
be (as set  forth in the  Option  Agreement)  or which  does not  qualify  as an
Incentive Stock Option.

<PAGE>

               (o) "Option"  means a right  granted  under Section 6 to purchase
Stock  (subject to  adjustment as provided in Section 4.2) pursuant to the terms
and conditions of the Plan. An Option may be either an Incentive Stock Option or
a Nonstatutory Stock Option.

               (p)  "Option  Agreement"  means a written  agreement  between the
Company and an Optionee setting forth the terms,  conditions and restrictions of
the Option  granted to the  Optionee and any shares  acquired  upon the exercise
thereof.

               (q)  "Optionee"  means a person who has been  granted one or more
Options.

               (r)  "Parent  Corporation"  means any  present or future  "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

               (s) "Participant" means a person who has been granted one or more
Awards.

               (t)  "Participating  Company"  means the  Company  or any  Parent
Corporation or Subsidiary Corporation.

               (u)  "Participating  Company Group" means,  at any point in time,
all corporations collectively which are then Participating Companies.

               (v)  "Restricted  Stock" means Stock  (subject to  adjustment  as
provided in Section 4.2) granted or sold to a Participant  pursuant to Section 7
and the terms and conditions of the Plan.

               (w)  "Restricted  Stock  Agreement"  means  a  written  agreement
between the Company and a Participant  setting forth the terms,  conditions  and
restrictions applying to the Restricted Stock acquired by the Participant.

               (x) "Rule  16b-3"  means Rule 16b 3 under the  Exchange  Act,  as
amended from time to time, or any successor rule or regulation.

               (y) "Section 162(m)" means Section 162(m) of the Code, as amended
by the Revenue  Reconciliation  Act of 1993 (P.L.  103-66),  and any regulations
promulgated thereunder.

               (z)  "Securities  Act"  means  the  Securities  Act of  1933,  as
amended.

               (aa) "Service" means a  Participant's  employment or service with
the  Participating  Company  Group,  whether in the capacity of an  Employee,  a
Director or a Consultant.  The Participant's Service shall not be deemed to have
terminated  merely because of a change in the capacity in which the  Participant
renders  Service  to  the  Participating  Company  Group  or  a  change  in  the
Participating  Company for which the Participant renders such Service,  provided
that there is no  interruption  or  termination  of the  Participant's  Service.
Furthermore,  a Participant's Service with the Participating Company Group shall
not be deemed to have

<PAGE>

terminated if the  Participant  takes any military  leave,  sick leave, or other
bona fide leave of absence approved by the Company;  provided,  however, that if
any such leave exceeds ninety (90) days, on the ninety-first  (91st) day of such
leave the  Participant's  Service shall be deemed to have terminated  unless the
Participant's right to return to Service with the Participating Company Group is
guaranteed  by  statute  or  contract.  Notwithstanding  the  foregoing,  unless
otherwise designated by the Company or required by law, a leave of absence shall
not be  treated  as  Service  for  purposes  of  determining  vesting  under the
Participant's Option Agreement or Restricted Stock Agreement.  The Participant's
Service shall be deemed to have terminated either upon an actual  termination of
Service  or upon the  corporation  for which the  Participant  performs  Service
ceasing to be a Participating Company. Subject to the foregoing, the Company, in
its sole  discretion,  shall  determine  whether the  Participant's  Service has
terminated and the effective date of such termination.

               (bb) "Stock"  means the common stock of the Company,  as adjusted
from time to time in accordance with Section 4.2.

               (cc)  "Subsidiary   Corporation"  means  any  present  or  future
"subsidiary  corporation"  of the Company,  as defined in Section  424(f) of the
Code.

               (dd) "Ten Percent  Stockholder"  means a Participant  who, at the
time an Award is granted to the Participant, owns stock possessing more than ten
percent  (10%) of the total  combined  voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.

          2.2  Construction.  Captions  and  titles  contained  herein  are  for
convenience  only and shall not affect  the  meaning  or  interpretation  of any
provision of the Plan.  Except when  otherwise  indicated  by the  context,  the
singular shall include the plural and the plural shall include the singular. Use
of the term "or" is not  intended to be  exclusive,  unless the context  clearly
requires otherwise.

     3. ADMINISTRATION.

          3.1 Administration by the Board. The Plan shall be administered by the
Board.  All  questions  of  interpretation  of the Plan or of any Award shall be
determined by the Board, and such determinations shall be final and binding upon
all  persons  having an  interest  in the Plan or such  Award.  Any officer of a
Participating  Company  shall have the authority to act on behalf of the Company
with respect to any matter, right,  obligation,  determination or election which
is the  responsibility of or which is allocated to the Company herein,  provided
the  officer  has  apparent  authority  with  respect  to  such  matter,  right,
obligation, determination or election.

          3.2  Administration   with  Respect  to  Insiders.   With  respect  to
participation  by  Insiders  in the  Plan,  at any time that any class of equity
security of the  Company is  registered  pursuant to Section 12 of the  Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b 3.

<PAGE>

          3.3 Powers of the Board.  In addition to any other powers set forth in
the Plan and  subject to the  provisions  of the Plan,  the Board shall have the
full and final power and authority, in its sole discretion:

               (a) to  determine  the persons to whom,  and the time or times at
which,  Awards  shall be granted and the number of shares of Stock to be subject
to each Award;

               (b) to  determine  whether  an Award will be an  Incentive  Stock
Option, a Nonstatutory Stock Option, or Restricted Stock;

               (c) to  determine  the Fair  Market  Value of  shares of Stock or
other property;

               (d)  to  determine  the  terms,   conditions   and   restrictions
applicable to each Award (which need not be identical)  and any shares  acquired
pursuant  to the  Plan,  including,  without  limitation,  (i) the  exercise  or
purchase price, if any, applicable to each Award, (ii) the method of payment for
shares  purchased under the Plan,  (iii) the method for  satisfaction of any tax
withholding  obligation  arising in  connection  with the Award or such  shares,
including by the  withholding  or delivery of shares of stock,  (iv) the timing,
terms and conditions of the  exercisability of each Option or the vesting of any
shares  acquired  pursuant to the Plan,  (v) the time of the  expiration  of the
Award,  (vi) the effect of the  Participant's  termination  of Service  with the
Participating Company Group on any of the foregoing,  and (vii) all other terms,
conditions  and  restrictions  applicable  to  the  Award  or  such  shares  not
inconsistent with the terms of the Plan;

               (e)  to  approve  one or  more  forms  of  Option  Agreement  and
Restricted Stock Agreement;

               (f) to amend,  modify,  extend, or renew, or grant a new Award in
substitution  for,  any  Award  or  to  waive  any  restrictions  or  conditions
applicable to any Award or any shares acquired under the Plan;

               (g) to accelerate,  continue,  extend or defer the exercisability
of any Option or the vesting of any shares  acquired  under the Plan,  including
with respect to the period following a Participant's termination of Service with
the Participating Company Group;

               (h) to  delegate  to  any  proper  officer  of  the  Company  the
authority to grant one or more Awards, without further approval of the Board, to
any person eligible  pursuant to Section 5, other than a person who, at the time
of such grant, is an Insider; provided,  however, that (i) such Awards shall not
be granted to any one person within any fiscal year of the Company for more than
50,000 shares in the aggregate, (ii) the exercise or purchase price per share of
Stock  shall be equal to the Fair  Market  Value  per  share of the Stock on the
effective date of grant, and (iii) each such Award shall be subject to the terms
and  conditions  of  the  appropriate  standard  form  of  Option  Agreement  or
Restricted  Stock  Agreement  approved  by the Board and  shall  conform  to the
provisions of the Plan and such other  guidelines as shall be  established  from
time to time by the Board;

<PAGE>

               (i) to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt  supplements  to, or alternative  versions of,
the Plan,  including,  without  limitation,  as the  Board  deems  necessary  or
desirable to comply with the laws of, or to accommodate the tax policy or custom
of, foreign jurisdictions whose citizens may be granted Awards; and

               (j) to correct any defect,  supply any omission or reconcile  any
inconsistency  in the Plan or any Option Agreement or Restricted Stock Agreement
and to make all other determinations and take such other actions with respect to
the Plan or any Award as the Board may deem  advisable to the extent  consistent
with the Plan and applicable law.

          3.4  Committee  Complying  with  Section  162(m).  If a  Participating
Company is a "publicly held  corporation"  within the meaning of Section 162(m),
the Board may establish a Committee of "outside directors" within the meaning of
Section 162(m) (a "Section 162(m)  Committee") to approve the grant of any Award
which  might  reasonably  be  anticipated  to result in the  payment of employee
remuneration  that would  otherwise  exceed the limit on  employee  remuneration
deductible for income tax purposes pursuant to Section 162(m).

     4. SHARES SUBJECT TO PLAN.

          4.1  Maximum  Number of Shares  Issuable.  Subject  to  adjustment  as
provided in Section  4.2, the maximum  aggregate  number of shares of Stock that
may be issued  under  the Plan  shall be three  million  five  hundred  thousand
(3,500,000) and shall consist of authorized but unissued or reacquired shares of
Stock or any combination thereof. If an outstanding Award for any reason expires
or is terminated or canceled or shares of Stock acquired,  subject to repurchase
or forfeiture, pursuant to an Award are repurchased by the Company or forfeited,
the shares of Stock allocable to the unexercised  portion of such Award, or such
repurchased or forfeited shares of Stock,  shall again be available for issuance
under the Plan.

          4.2 Adjustments for Changes in Capital Structure.  In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification  or similar  change in the capital  structure  of the  Company,
appropriate  adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Awards, in the Section 162(m) Grant Limit set
forth in Section  4.3,  and in the  exercise or purchase  price per share of any
outstanding but unexercised Awards. If a majority of the shares which are of the
same class as the shares that are subject to  outstanding  Awards are  exchanged
for,  converted  into,  or  otherwise  become  (whether  or not  pursuant  to an
Ownership Change Event, as defined in Section 8.1) shares of another corporation
(the "New Shares"),  the Board may unilaterally  amend the outstanding Awards to
provide that such Awards are for New Shares. In the event of any such amendment,
the number of shares subject to outstanding  Awards and the exercise or purchase
price per share of  outstanding  but  unexercised  Awards shall be adjusted in a
fair and equitable  manner as determined by the Board,  in its sole  discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment
pursuant to this  Section  4.2 shall be rounded up or down to the nearest  whole
number, as determined by the Board, and in no event may the exercise or purchase
price of any Award be decreased to an amount less than the par value, if any, of
the stock subject to the Award. The adjustments determined by the Board pursuant
to this Section 4.2 shall be final, binding and conclusive.

<PAGE>

          4.3 Section  162(m) Grant Limit.  Subject to adjustment as provided in
Section  4.2, at any such time as a  Participating  Company is a "publicly  held
corporation"  within the meaning of Section 162(m), no Employee shall be granted
one or more Awards  within any fiscal year of the Company which in the aggregate
are for more than five hundred thousand  (500,000)  shares;  provided,  however,
that  the  Company  may make an  additional  one-time  grant to any  newly-hired
Employee of an Award for up to two hundred fifty thousand  (250,000) shares (the
"Section  162(m) Grant  Limit").  An Option which is canceled in the same fiscal
year of the Company in which it was granted shall continue to be counted against
the Section 162(m) Grant Limit for such period.

     5. ELIGIBILITY.  Awards may be granted only to Employees,  Consultants, and
Directors.  For purposes of the foregoing sentence,  "Employees,"  "Consultants"
and "Directors" shall include prospective Employees, prospective Consultants and
prospective  Directors to whom Awards,  other than a Restricted  Stock Bonus (as
defined in Section 7 below), may be granted in connection with written offers of
a Service  relationship with the Participating  Company Group.  Eligible persons
may be granted more than one (1) Award.

     6. TERMS AND CONDITIONS OF OPTIONS.

                  Options shall be evidenced by Option Agreements specifying the
number of shares of Stock covered thereby,  in such form as the Board shall from
time to time  establish.  Option  Agreements may  incorporate  all or any of the
terms of the Plan by  reference  and shall  comply  with and be  subject  to the
following terms and conditions:

          6.1 Limitations on Options.

               (a) Option Grant Restrictions.  Any person who is not an Employee
on the  effective  date of the grant of an Option to such  person may be granted
only a  Nonstatutory  Stock  Option.  An  Incentive  Stock  Option  granted to a
prospective  Employee  upon the  condition  that such person  become an Employee
shall be deemed granted  effective on the date such person commences  Service as
an Employee with a Participating  Company,  with an exercise price determined as
of such date in accordance with Section 6.2.

               (b) Fair Market  Value  Limitation.  To the extent  that  options
designated as Incentive  Stock Options  (granted under all stock option plans of
the Participating  Company Group,  including the Plan) become  exercisable by an
Optionee  for the first time during any  calendar  year for stock  having a Fair
Market Value greater than One Hundred Thousand Dollars  ($100,000),  the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options.  For purposes of this Section 6.1(b),  options  designated as Incentive
Stock  Options  shall be taken  into  account  in the  order in which  they were
granted,  and the Fair Market Value of stock shall be  determined as of the time
the option  with  respect to such  stock is  granted.  If the Code is amended to
provide for a different  limitation  from that set forth in this Section 6.1(b),
such different  limitation shall be deemed  incorporated  herein effective as of
the

<PAGE>

date and with respect to such Options as required or permitted by such amendment
to the Code. If an Option is treated as an Incentive Stock Option in part and as
a  Nonstatutory  Stock Option in part by reason of the  limitation  set forth in
this Section 6.1(b), the Optionee may designate which portion of such Option the
Optionee is exercising.  In the absence of such designation,  the Optionee shall
be deemed to have  exercised  the Incentive  Stock Option  portion of the Option
first. Separate certificates representing each such portion shall be issued upon
the exercise of the Option.

          6.2  Exercise  Price.  The  exercise  price for each  Option  shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise  price per share for an  Incentive  Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective  date of grant of the
Option,  (b) the exercise price per share for a Nonstatutory  Stock Option shall
be not less than eighty five  percent  (85%) of the Fair Market Value of a share
of Stock on the  effective  date of grant of the  Option,  and (c) no  Incentive
Stock Option granted to a Ten Percent  Stockholder  shall have an exercise price
per share less than one hundred ten percent (110%) of the Fair Market Value of a
share of Stock on the effective date of grant of the Option. Notwithstanding the
foregoing,  an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted  with an exercise  price lower than the minimum  exercise
price set forth above if such Option is granted  pursuant  to an  assumption  or
substitution  for another option in a manner  qualifying under the provisions of
Section 424(a) of the Code.

          6.3 Exercise  Period.  Options  shall be  exercisable  at such time or
times,  or upon such event or events,  and  subject to such  terms,  conditions,
performance  criteria,  and restrictions as shall be determined by the Board and
set forth in the Option  Agreement  evidencing such Option;  provided,  however,
that (a) no Incentive Stock Option shall be exercisable  after the expiration of
ten  (10)  years  after  the  effective  date of grant  of such  Option,  (b) no
Incentive Stock Option granted to a Ten Percent Stockholder shall be exercisable
after the expiration of five (5) years after the effective date of grant of such
Option,  and  (c) no  Option  granted  to a  prospective  Employee,  prospective
Consultant or prospective  Director may become  exercisable prior to the date on
which such person  commences  Service with a  Participating  Company.  Except as
otherwise  provided  in this  Section or by the Board in the grant of an Option,
any  Option  granted  hereunder  shall  have a term of ten (10)  years  from the
effective date of grant of the Option.

          6.4 Payment of Exercise Price.

               (a)  Forms  of  Consideration  Authorized.  Except  as  otherwise
provided below,  payment of the exercise price for the number of shares of Stock
being  purchased  pursuant to any Option shall be made (i) in cash, by check, or
cash  equivalent,  (ii) by tender to the Company of shares of Stock owned by the
Optionee having a Fair Market Value (as determined by the Company without regard
to any  restrictions  on  transferability  applicable to such stock by reason of
federal or state  securities  laws or  agreements  with an  underwriter  for the
Company)  not less  than the  exercise  price,  (iii) by the  assignment  of the
proceeds  of a sale or loan  with  respect  to some or all of the  shares  being
acquired upon the exercise of the Option (including, without limitation, through
an exercise  complying with the  provisions of Regulation T as promulgated  from
time to time by the  Board  of  Governors  of the  Federal  Reserve  System)  (a

<PAGE>

"Cashless Exercise"),  (iv) by the Optionee's promissory note in a form approved
by the Company,  (v) by such other consideration as may be approved by the Board
from time to time to the extent  permitted  by  applicable  law,  or (vi) by any
combination thereof. The Board may at any time or from time to time, by adoption
of or by  amendment  to the  standard  forms of Option  Agreement  described  in
Section 6.7, or by other  means,  grant  Options  which do not permit all of the
foregoing forms of  consideration to be used in payment of the exercise price or
which otherwise restrict one or more forms of consideration.

               (b) Tender of Stock. Notwithstanding the foregoing, an Option may
not be  exercised by tender to the Company of shares of Stock to the extent such
tender of Stock would  constitute  a  violation  of the  provisions  of any law,
regulation or agreement  restricting  the  redemption  of the  Company's  stock.
Unless otherwise provided by the Board, an Option may not be exercised by tender
to the Company of shares of Stock  unless such shares  either have been owned by
the  Optionee  for more than six (6) months or were not  acquired,  directly  or
indirectly, from the Company.

               (c)  Cashless  Exercise.  The  Company  reserves,  at any and all
times, the right, in the Company's sole and absolute  discretion,  to establish,
decline to approve or terminate  any program or  procedures  for the exercise of
Options by means of a Cashless Exercise.

               (d)  Payment by  Promissory  Note.  No  promissory  note shall be
permitted  if the  exercise  of an Option  using a  promissory  note  would be a
violation of any law. Any  permitted  promissory  note shall be on such terms as
the Board shall  determine  at the time the Option is  granted.  The Board shall
have the  authority to permit or require the  Optionee to secure any  promissory
note used to  exercise  an Option  with the  shares of Stock  acquired  upon the
exercise  of the  Option or with other  collateral  acceptable  to the  Company.
Unless otherwise provided by the Board, if the Company at any time is subject to
the  regulations  promulgated  by the Board of Governors of the Federal  Reserve
System or any other  governmental  entity  affecting  the extension of credit in
connection with the Company's securities,  any promissory note shall comply with
such applicable regulations, and the Optionee shall pay the unpaid principal and
accrued interest, if any, to the extent necessary to comply with such applicable
regulations.

          6.5 Tax  Withholding.  The Company  shall have the right,  but not the
obligation,  to deduct from the shares of Stock issuable upon the exercise of an
Option,  or to accept from the  Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company,  equal to all
or any part of the federal,  state, local and foreign taxes, if any, required by
law to be  withheld  by the  Participating  Company  Group with  respect to such
Option or the shares  acquired upon the exercise  thereof.  Alternatively  or in
addition,  in its sole  discretion,  the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise,  including
by means of a Cashless  Exercise,  to make  adequate  provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares  acquired upon the exercise  thereof.  The Company
shall  have no  obligation  to deliver  shares of Stock or to release  shares of
Stock from an escrow  established  pursuant  to the Option  Agreement  until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.

<PAGE>

          6.6 Effect of Termination of Service.

               (a) Option Exercisability.  Subject to earlier termination of the
Option as otherwise  provided  herein,  an Option shall be exercisable  after an
Optionee's termination of Service as follows:

                    (i)   Disability.   If  the  Optionee's   Service  with  the
Participating  Company  Group is  terminated  because of the  Disability  of the
Optionee,  the Option, to the extent  unexercised and exercisable on the date on
which the Optionee's  Service  terminated,  may be exercised by the Optionee (or
the  Optionee's  guardian  or legal  representative)  at any  time  prior to the
expiration of six (6) months (or such longer period of time as determined by the
Board, in its sole  discretion)  after the date on which the Optionee's  Service
terminated,  but in any  event no  later  than  the  date of  expiration  of the
Option's term as set forth in the Option  Agreement  evidencing such Option (the
"Option Expiration Date").

                    (ii) Death. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the  extent  unexercised  and  exercisable  on the date on which the  Optionee's
Service terminated,  may be exercised by the Optionee's legal  representative or
other  person who  acquired  the right to  exercise  the Option by reason of the
Optionee's  death at any time prior to the expiration of six (6) months (or such
longer period of time as determined by the Board, in its sole discretion)  after
the date on which the Optionee's Service  terminated,  but in any event no later
than the Option Expiration Date. The Optionee's  Service shall be deemed to have
terminated  on account of death if the  Optionee  dies  within  three (3) months
after the Optionee's termination of Service.

                    (iii)  Other  Termination  of  Service.  If  the  Optionee's
Service with the Participating  Company Group terminates for any reason,  except
Disability or death,  the Option,  to the extent  unexercised and exercisable by
the  Optionee on the date on which the  Optionee's  Service  terminated,  may be
exercised by the Optionee within thirty (30) days (or such longer period of time
as determined by the Board, in its sole discretion)  after the date on which the
Optionee's  Service  terminated,  but in any  event  no later  than  the  Option
Expiration Date.

               (b) Extension if Exercise Prevented by Law.  Notwithstanding  the
foregoing,  if the exercise of an Option within the applicable  time periods set
forth in Section 6.6(a) is prevented by the provisions of Section 10 below,  the
Option  shall  remain  exercisable  until  three (3)  months  after the date the
Optionee is notified by the Company that the Option is  exercisable,  but in any
event no later than the Option Expiration Date.

               (c)   Extension   if   Optionee   Subject   to   Section   16(b).
Notwithstanding the foregoing,  if a sale within the applicable time periods set
forth in Section 6.6(a) of shares acquired upon the exercise of the Option would
subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following  the  date on which a sale of such  shares  by the  Optionee  would no
longer be subject to such suit,  (ii) the one hundred and ninetieth  (190th) day
after the  Optionee's  termination  of Service,  or (iii) the Option  Expiration
Date.

          6.7 Standard Forms of Option Agreement.  Unless otherwise  provided by
the  Board at the  time the  Option  is  granted,  an  Option  designated  as an
"Incentive Stock Option" or a "Nonstatutory  Stock Option" shall comply with and
be subject to the terms and conditions set forth in the form of Incentive  Stock
Option Agreement or Nonstatutory Stock Option Agreement,  respectively,  adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time.  The Board shall have the authority from time to time to vary the terms
of any of the  standard  forms of Option  Agreement  described  in this  Section
either in connection  with the grant or amendment of an individual  Option or in
connection  with the  authorization  of a new standard form or forms;  provided,
however,  that the terms and  conditions  of any such new,  revised  or  amended
standard form or forms of Option Agreement are not  inconsistent  with the terms
of the Plan.  Such authority  shall include,  but not by way of limitation,  the
authority to grant  Options  which are  immediately  exercisable  subject to the
Company's  right to  repurchase  any  unvested  shares of Stock  acquired  by an
Optionee upon the exercise of an Option in the event such Optionee's  employment
or service with the  Participating  Company Group is terminated  for any reason,
with or without cause.

          6.8 Nontransferability of Incentive Stock Options. During the lifetime
of the  Optionee,  an Option  shall be  exercisable  only by the Optionee or the
Optionee's  guardian or legal  representative.  No Option shall be assignable or
transferable  by the  Optionee,  except  by will or by the laws of  descent  and
distribution.  Notwithstanding the foregoing,  a Nonstatutory Stock Option shall
be assignable or transferable to the extent permitted by the Board and set forth
in the Option Agreement evidencing such Option.

     7.  TERMS AND CONDITIONS OF RESTRICTED STOCK.

                  The Board may from time to time grant  Restricted Stock Awards
which may be in the form of a stock  bonus (a  "Restricted  Stock  Bonus")  or a
stock purchase right (a "Restricted  Stock Purchase  Right").  Restricted  Stock
Awards shall be evidenced by Restricted Stock Agreements,  specifying the number
of shares of Stock covered  there,  in such form as the Board shall from time to
time establish.  Restricted  Stock  Agreements may incorporate all or any of the
terms of the Plan by  reference  and shall  comply  with and be  subject  to the
following terms and conditions:

          7.1  Performance-Based  Restricted  Stock  Awards.  A  Section  162(m)
Committee may, but need not,  condition the grant of any Restricted  Stock Award
(a  "Performance  Award")  on  the  attainment,   during  a  performance  period
established  by such  Committee,  of one or more  performance  goals pursuant to
procedures  intended to qualify such Award as  "performance-based  compensation"
for  purposes  of  Section  162(m).   Any  such   performance   goals  shall  be
preestablished  in writing by the  Section  162(m)  Committee  within the period
required  by Section  162(m) and shall be based on one or more of the  following
business  criteria with respect to the  Participating  Company  Group:  revenue,
operating income,  pre-tax profit, net income,  gross margin,  operating margin,
earnings per share, return on stockholder equity,  return on capital,  return on
assets,  or the initial shipment of a new product.  Such business criteria shall
have the same meaning as used in the Company's financial statements,  or, if not
used in the Company's  financial  statements,  the meaning pursuant to generally
accepted  accounting  principles or as used generally in the Company's industry.
Each performance  goal

<PAGE>

shall be objectively  determinable  and may be an absolute measure or a relative
measure  determined with reference to an index or other standard selected by the
Section  162(m)  Committee.  Prior  to  the  issuance  of  Stock  pursuant  to a
Performance  Award,  the Section 162(m)  Committee  shall certify in writing the
attainment  of the  relevant  performance  goals.  Neither  the  Board  nor  any
Committee  thereof  shall have the  discretion  to waive the  attainment  of any
performance  goal or to  increase  the number of shares  issuable  pursuant to a
Performance  Award in excess of the amount  determined  in  accordance  with the
objective  formula  established  by the Section  62(m)  Committee.  However,  if
provided in a  Participant's  Restricted  Stock  Agreement,  the  Section  62(m)
Committee  shall have the  authority  to reduce the number of shares  that would
otherwise become issuable to the Participant upon the attainment of the relevant
performance  goals if, in the Section 162(m)  Committee's  sole  judgment,  such
reduction is  appropriate;  provided,  however,  that such  reduction  shall not
increase the number of shares issuable to another Participant.

          7.2 Purchase  Price.  The purchase price under each  Restricted  Stock
Purchase  Right shall be established  by the Board.  No monetary  payment (other
than applicable tax withholding) shall be required as a condition of receiving a
Restricted Stock Bonus, the  consideration  for which shall be services actually
rendered to the Participating Company Group or for its benefit.

          7.3  Purchase  Period.  A  Restricted  Stock  Purchase  Right shall be
exercisable  within a period  established by the Board,  which shall in no event
exceed thirty (30) days from the effective  date of the grant of the  Restricted
Stock Purchase Right; provided, however, that no Restricted Stock Purchase Right
granted  to  a  prospective  Employee,  prospective  Consultant  or  prospective
Director may become exercisable prior to the date on which such person commences
Service with a Participating Company.

          7.4 Payment of Purchase Price.

               (a)  Forms  of  Consideration  Authorized.  Except  as  otherwise
provided below,  payment of the purchase price for the number of shares of Stock
being  purchased  pursuant to any Restricted  Stock Purchase Right shall be made
(i) in cash, by check, or cash equivalent,  (ii) by the Participant's promissory
note in a form approved by the Company, (iii) by such other consideration as may
be approved by the Board from time to time to the extent permitted by applicable
law, or (iv) by any combination  thereof. The Board may at any time or from time
to time, by adoption of or by amendment to the standard form of Restricted Stock
Agreement  described in Section 7.9, or by other means,  grant  Restricted Stock
Purchase Rights which do not permit all of the foregoing forms of  consideration
to be used in payment of the purchase price or which  otherwise  restrict one or
more  forms of  consideration.  Restricted  Stock  Bonuses  shall be  issued  in
consideration for services actually rendered to the Participating  Company Group
or for its benefit.

               (b)  Payment by  Promissory  Note.  No  promissory  note shall be
permitted if the purchase of Restricted Stock using a promissory note would be a
violation of any law. Any  permitted  promissory  note shall be on such terms as
the Board shall  determine at the time the  Restricted  Stock  Purchase Right is
granted. The Board shall have the authority to permit

<PAGE>

or require  the  Participant  to secure  any  promissory  note used to  purchase
Restricted  Stock with such shares or with other  collateral  acceptable  to the
Company.  Unless otherwise  provided by the Board, if the Company at any time is
subject to the regulations  promulgated by the Board of Governors of the Federal
Reserve  System or any other  governmental  entity  affecting  the  extension of
credit in connection  with the Company's  securities,  any promissory note shall
comply  with such  applicable  regulations,  and the  Participant  shall pay the
unpaid principal and accrued interest, if any, to the extent necessary to comply
with such applicable regulations.

          7.5 Tax  Withholding.  The Company shall have the right to require the
Participant,  through payroll  withholding,  cash payment or otherwise,  to make
adequate  provision for the federal,  state,  local and foreign  taxes,  if any,
required by law to be withheld by the Participating  Company Group in connection
with a  Restricted  Stock Award or the shares  acquired  pursuant  thereto.  The
Company shall have no obligation to deliver shares of Stock or to release shares
of Stock from an escrow  established  pursuant to the Restricted Stock Agreement
until the  Participating  Company Group's tax withholding  obligations have been
satisfied by the Participant.

          7.6 Vesting and  Restrictions  on Transfer.  Shares issued pursuant to
any Restricted  Stock Award may be made subject to vesting  conditioned upon the
satisfaction  of such Service  requirements,  performance  goals (which may, but
need not, be  established  and  certified in accordance  with the  provisions of
Section 7.1), or other  restrictions  (the "Vesting  Restrictions")  as shall be
determined by the Board (or a Section 162(m) Committee,  as the case may be) and
set forth in the Restricted Stock Agreement  evidencing such Award.  During such
period (the  "Restriction  Period") as shares acquired  pursuant to a Restricted
Stock Award remain subject to Vesting Restrictions, such shares may not be sold,
exchanged,  transferred,  pledged,  assigned or otherwise disposed of other than
pursuant to an  Ownership  Change  Event or as provided  in Section  7.10.  Upon
request by the Company,  each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall  promptly  present to the  Company any and all  certificates  representing
shares of Stock  acquired  hereunder for the placement on such  certificates  of
appropriate legends evidencing any such transfer restrictions.

          7.7 Voting Rights;  Dividends.  Except as provided in this Section and
Section 7.6,  during the Restriction  Period  applicable to shares of Restricted
Stock held by a Participant,  the Participant  shall have all of the rights of a
stockholder of the Company holding shares of Stock,  including the right to vote
the  shares  of  Restricted  Stock  and  to  receive  all  dividends  and  other
distributions paid with respect to such shares;  provided,  however, that if any
such dividends or distributions  are paid in shares of Stock,  such shares shall
be subject to the same Vesting  Restrictions  as the shares of Restricted  Stock
with respect to which they were paid.

          7.8 Effect of Termination of Service. If a Participant's  Service with
the Participating Company Group terminates for any reason,  whether voluntary or
involuntary  (including the Participant's death or disability),  (a) the Company
shall have the option to repurchase at the original  purchase  price paid by the
Participant shares of Restricted Stock acquired by the Participant pursuant to a
Restricted  Stock  Purchase Right and (b) the  Participant  shall forfeit to the
Company  shares of Restricted  Stock acquired by the  Participant  pursuant to a

<PAGE>

Restricted  Stock  Bonus  which,  in either  case,  remain  subject  to  Vesting
Restrictions  as of the date of the  Participant's  termination of Service.  The
Company shall have the right to assign at any time any  repurchase  right it may
have,  whether or not such right is then exercisable,  to one or more persons as
may be selected by the Company.

          7.9 Standard Forms of Restricted Stock Agreement. The Board shall have
the  authority  from  time to time to  approve  one or more  standard  forms  of
Restricted  Stock  Agreement  and to vary the terms of any such  standard  forms
either in  connection  with the grant or amendment of an  individual  Restricted
Stock Award or in connection  with the  authorization  of a new standard form or
forms; provided, however, that the terms and conditions of any such new, revised
or  amended  standard  form or  forms  of  Restricted  Stock  Agreement  are not
inconsistent with the terms of the Plan.

          7.10  Nontransferability  of Restricted Stock Award Rights.  Rights to
acquire shares of Stock pursuant to a Restricted Stock Award may not be assigned
or  transferred  in any  manner  except  by will  or the  laws  of  descent  and
distribution,  and, during the lifetime of the Participant, shall be exercisable
only by the Participant.

     8.  TRANSFER OF CONTROL.

          8.1 Definitions.

               (a) An "Ownership  Change Event" shall be deemed to have occurred
if any of the following occurs with respect to the Company:

                    (i) the direct or  indirect  sale or exchange in a single or
series of related  transactions by the  stockholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;

                    (ii) a merger or  consolidation  in which the  Company  is a
party;

                    (iii)   the  sale,   exchange,   or   transfer   of  all  or
substantially all of the assets of the Company; or

                    (iv) a liquidation or dissolution of the Company.

               (b) A "Transfer of Control" shall mean an Ownership  Change Event
or a series of related Ownership Change Events (collectively, the "Transaction")
wherein the  stockholders of the Company  immediately  before the Transaction do
not  retain  immediately  after  the  Transaction,  in  substantially  the  same
proportions  as  their  ownership  of  shares  of  the  Company's  voting  stock
immediately before the Transaction,  direct or indirect beneficial  ownership of
more  than  fifty  percent  (50%)  of the  total  combined  voting  power of the
outstanding  voting stock of the Company or the  corporation or  corporations to
which  the   assets  of  the   Company   were   transferred   (the   "Transferee
Corporation(s)"),  as the case may be. For purposes of the  preceding  sentence,
indirect beneficial  ownership shall include,  without  limitation,  an interest
resulting from ownership of the voting stock of one or more corporations  which,
as  a  result  of  the

<PAGE>

Transaction,  own the Company or the Transferee Corporation(s),  as the case may
be, either  directly or through one or more subsidiary  corporations.  The Board
shall have the right to  determine  whether  multiple  sales or exchanges of the
voting stock of the Company or multiple Ownership Change Events are related, and
its determination shall be final, binding and conclusive.

          8.2  Effect  of  Transfer  of  Control  on  Awards.  In the event of a
Transfer of Control,  the Board,  in its sole  discretion,  may provide that any
unexercisable or unvested portion of the outstanding Awards shall be immediately
exercisable  and vested in full as of a date  determined by the Board and/or may
arrange with the surviving, continuing,  successor, or purchasing corporation or
parent corporation  thereof,  as the case may be (the "Acquiring  Corporation"),
for the  Acquiring  Corporation  to  either  assume  the  Company's  rights  and
obligations  under  outstanding  Awards or  substitute  for  outstanding  Awards
substantially  equivalent  awards for the  Acquiring  Corporation's  stock.  For
purposes of this Section 8.2, an Award shall be deemed assumed if, following the
Transfer of Control,  the Award confers the right to acquire in accordance  with
its  terms  and  conditions,  for  each  share  of Stock  subject  to the  Award
immediately prior to the Transfer of Control, the consideration  (whether stock,
cash or other  securities  or property) to which a holder of a share of Stock on
the effective date of the Transfer of Control was entitled. Any Awards which are
neither  assumed or substituted  for by the Acquiring  Corporation in connection
with the  Transfer of Control nor  exercised  as of the date of the  Transfer of
Control shall terminate and cease to be outstanding  effective as of the date of
the Transfer of Control.  Notwithstanding  the foregoing,  shares  acquired upon
exercise  of an Award prior to the  Transfer  of Control  and any  consideration
received  pursuant to the  Transfer of Control with respect to such shares shall
continue  to be  subject to all  applicable  provisions  of the Award  Agreement
evidencing such Award except as otherwise provided in such Award Agreement or by
the Board.

     9.  PROVISION OF  INFORMATION.  Each  Participant  shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.

     10. COMPLIANCE WITH SECURITIES LAW. The grant of Awards and the issuance of
shares of Stock  pursuant  to Awards  shall be  subject to  compliance  with all
applicable  requirements  of federal,  state or foreign law with respect to such
securities.  No shares may be issued  pursuant an Award if such  issuance  would
constitute a violation of any applicable  federal,  state or foreign  securities
laws or other law or  regulations or the  requirements  of any stock exchange or
market system upon which the Stock may then be listed. In addition, no Award may
be exercised  or shares  issued  pursuant to an Award unless (a) a  registration
statement  under  the  Securities  Act  shall  at the time of such  exercise  or
issuance be in effect with respect to the shares issuable  pursuant to the Award
or (b) in the  opinion of legal  counsel  to the  Company,  the shares  issuable
pursuant  to the  Award  may be  issued  in  accordance  with  the  terms  of an
applicable  exemption from the registration  requirements of the Securities Act.
The  inability  of the  Company  to  obtain  from  any  regulatory  body  having
jurisdiction the authority,  if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares  hereunder shall relieve
the  Company of any  liability  in respect of the  failure to issue or sell such
shares as to which such requisite  authority shall not have been obtained.  As a
condition  to the  issuance  of shares  pursuant  to any Award,  the Company may
require the Participant to satisfy any

<PAGE>

qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.

     11. INDEMNIFICATION. In addition to such other rights of indemnification as
they  may  have  as  members  of the  Board  or  officers  or  employees  of the
Participating  Company Group, members of the Board and any officers or employees
of the Participating Company Group to whom authority to act for the Board or the
Company is delegated  shall be indemnified by the Company against all reasonable
expenses,  including  attorneys'  fees,  actually  and  necessarily  incurred in
connection with the defense of any action, suit or proceeding,  or in connection
with any appeal  therein,  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 right granted hereunder,  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 action,  suit or  proceeding,  except in relation to matters as to which it
shall be adjudged in such action,  suit or proceeding that such person is liable
for gross negligence,  bad faith or intentional misconduct in duties;  provided,
however,  that within sixty (60) days after the institution of such action, suit
or  proceeding,  such  person  shall  offer  to the  Company,  in  writing,  the
opportunity at its own expense to handle and defend the same.

     12.  TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or amend the
Plan at any time. However,  subject to changes in applicable law, regulations or
rules that  would  permit  otherwise,  without  the  approval  of the  Company's
stockholders,  there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued  under the Plan  (except by  operation of the
provisions  of Section 4.2),  (b) no change in the class of persons  eligible to
receive  Incentive  Stock Options,  and (c) no other  amendment of the Plan that
would require approval of the Company's  stockholders  under any applicable law,
regulation or rule. In any event,  no  termination  or amendment of the Plan may
adversely affect any then outstanding Award or any unexercised  portion thereof,
without the consent of the Participant,  unless such termination or amendment is
required to enable an Option  designated as an Incentive Stock Option to qualify
as an Incentive  Stock Option or is necessary to comply with any applicable law,
regulation or rule.

         IN WITNESS WHEREOF, the undersigned  Secretary of the Company certifies
that the foregoing sets forth the Network  Peripherals  Inc. 1997 Stock Plan, as
amended by the Board through March 1, 2000.

                                                  /s/ Wilson Cheung

                                                  Secretary

<PAGE>

                                  PLAN HISTORY

February 18, 1997   Board  adopts  Plan,  with an initial  reserve of  1,500,000
                    shares.

April 24, 1997      Stockholders  approve  Plan,  with  an  initial  reserve  of
                    1,500,000 shares.

March 24, 1998      Board  approves   1,000,000  share  reserve  increase  (from
                    1,500,000 to 2,500,000).

May 26, 1998        Stockholders   approve   1,000,000  share  reserve  increase
                    (approved by Board on March 24, 1998).

March 1, 2000       Board  approves an increase in reserve of  1,000,000  shares
                    (from 2,500,000 to 3,500,000 shares in total).

April 25, 2000      Stockholders  approve an  increase  in reserve of  1,000,000
                    shares (approved by Board on March 1, 2000).

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00013-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00013-of-00352.parquet"}]]