Document:

REGISTRATION RIGHTS AGREEMENT

This  Registration  Rights  Agreement  (this "AGREEMENT")  is entered into as of
August  8,  2002,  by and between SafeGuard Health Enterprises, Inc., a Delaware
corporation  ("SAFEGUARD"),  and  Jack  R.  Anderson  ("HOLDER").

                                   BACKGROUND
                                   ----------

On  the date of this Agreement, Holder acquired a Convertible Promissory Note of
SafeGuard  (the  "NOTE")  in  the  principal  amount  of  $2,000,000,  which  is
convertible  into  Common  Stock  of  SafeGuard.  SafeGuard  agreed  to  grant
registration  rights with respect to the Common Stock of SafeGuard issuable upon
conversion  of  the  Note  on  and  subject  to the terms and conditions of this
Agreement.

                                 OPERATIVE TERMS
                                 ---------------

The  parties  agree  as  follows:

                           ARTICLE 1.     DEFINITIONS
                                          -----------

      1.1   CERTAIN DEFINED TERMS.
             ---------------------

            "Commission"  means  the  Securities  and Exchange Commission or any
             ----------
other  federal  agency  at  the  time  administering  the  Securities  Act.

            "Common Stock"  means the common stock, $.01 par value per share, of
             ------------
SafeGuard.

            "Conversion Shares"  means  any  shares  of Common Stock issuable or
             -----------------
issued  upon  conversion  of  the  Note.

            "Exchange Act"  means  the  Securities  Exchange  Act  of  1934,  as
             ------------
amended.

            "Holder"  means  Jack  R. Anderson and each subsequent holder of the
             ------
Note  (or portion of the Note) or shares of Common Stock issued on conversion of
the  Note.

            "RegistrableSecurities" means (i) any Conversion Shares that  may be
             ---------------------
issued  pursuant to the conversion of the Note, and (ii) any Common Stock issued
as  a  dividend  or  other distribution with respect to or in exchange for or in
replacement  of  the  Conversion  Shares.

            "Securities Act"  means  the  Securities Act of 1933, as amended, or
             --------------
any  similar  federal  statute,  and the rules and regulations of the Commission
thereunder,  in  effect  at  the  time.

            "Underwritten Public Offering"  means  a  public  offering of Common
             ----------------------------
Shares  for  cash that is offered and sold in a registered transaction on a firm
commitment  underwritten basis through one or more underwriters, all pursuant to
an  underwriting  agreement  between  the  Company  and  such  the underwriters.

<PAGE>
            "Underwriters"  means  a  securities  dealer  that  purchases  any
             ------------
Registrable  Securities  as  principal  and  not  as  part  of  such  dealer's
market-making  activities.

                       ARTICLE II.     REGISTRATION RIGHTS
                                       -------------------

     2.1     DEMAND REGISTRATION.
             --------------------

            (a)  Rights to Registration.  On notice (a "DEMAND NOTICE") from all
                ----------------------
      Holders  or  Holders of at least fifty (50%) of the Registrable Securities
      (the "INITIATING HOLDERS"), SafeGuard shall effect one demand registration
      for  those  Holders.  SafeGuard  shall:

                  (1)  promptly  give written notice to all other Holders of the
            proposed  registration,  qualification  or  compliance;  and

                  (2) use its best efforts to promptly effect the registrations,
            qualifications,  and compliances (including, without limitation, the
            execution  of  an  undertaking  to  file  post-effective amendments,
            appropriate  qualifications  under  the applicable blue sky or other
            state  securities  laws,  and  appropriate compliance with exemptive
            regulations  issued  under  the  Securities  Act  and  any  other
            governmental  requirements  or  regulations)  needed  to  permit  or
            facilitate  the  public  sale  and  distribution  of  the requesting
            Holders'  Registrable  Securities  specified  in  the notice and the
            Registrable Securities of any other Holders that notify SafeGuard of
            their  desire  to  join in the request within ten (10) business days
            after  they  receive  SafeGuard's  notice  specified  in  part  (1).
            SafeGuard  shall  use  its best efforts to prepare and file with the
            Commission  a  registration  statement  covering  the  Registrable
            Securities  subject to the registration request within 60 days after
            it  receives  the  Demand  Notice.

            (b) Underwriting. The  Initiating  Holders  shall  include  in their
                ------------
      request  made pursuant to Section 2.1 the name of the managing underwriter
                                -----------
      or  underwriters, if any, that the majority in interest of such Initiating
      Holders  propose  to  underwrite  the  public  offering  pursuant  to  the
      requested  registration. SafeGuard  will include these underwriters' names
      in its written notice to the other Holders pursuant to Section 2.1. If the
                                                             -----------
      sale  proposed  by the requesting Holders is to be effected pursuant to an
      Underwritten Public Offering, each Holder's right to registration pursuant
      to  Section  2.1  will  be  conditioned  on  its  participation  in  the
          -----------
      underwriting  and  inclusion  of  its  Registrable  Securities  in  the
      underwriting  to the extent requested (unless otherwise mutually agreed by
      a  majority  in  interest  of  the  Initiating  Holders and such Holders).
      SafeGuard  shall  (together with all Holders proposing to distribute their
      securities  through  such underwriting) use its best efforts to enter into
      an underwriting agreement in customary form with the underwriters selected
      for  the  underwriting in the manner set forth above. SafeGuard shall take
      the  actions required for compliance with the terms and obligations of the
      underwriting  agreement,  and  shall  furnish  the  underwriters and their
      respective  representatives  reasonable  and  sufficient  access  to  all
      information  requested  for  their "due diligence" review of SafeGuard and
      its  operations,  subject  to  the  terms  of  any  letter  of  intent,
      confidentiality  or  other  agreement  between  SafeGuard  and  the

                                        2
<PAGE>
      underwriter(s).  Notwithstanding  any other provisions of Section 2.1, if,
                                                                -----------
      in  connection  with  an  Underwritten  Public  Offering,  the  managing
      underwriter  advises  SafeGuard  or the Initiating Holders in writing that
      marketing  factors require that the number of shares to be underwritten be
      limited,  the Initiating Holders shall so advise SafeGuard (or vice versa)
      and  Holders  with  shares  that  would  otherwise  be  registered  and
      underwritten  pursuant  to  this  Agreement,  and  the number of shares of
      Registrable Securities to be included in the registration and underwriting
      will  be  allocated  among  all  Holders  in  proportion,  as  nearly  as
      practicable, to the respective amounts of Registrable Securities that were
      proposed  to  be sold by Holders. The Registrable Securities excluded from
      the  underwriting by reason of the underwriter's marketing limitation will
      not  be  included  in the registration. Any Holder that disapproves of the
      terms  of  an Underwritten Public Offering may elect to withdraw therefrom
      by  written  notice  to  SafeGuard,  the  managing  underwriter  and  the
      Initiating  Holders.  The Registrable Securities so withdrawn will also be
      withdrawn  from  registration;  provided, however, if by the withdrawal of
                                      --------  -------
      the Registrable Securities a greater number of Registrable Securities held
      by  other  Holders  may  be  included in such Underwritten Public Offering
      (subject  to  any  limitation imposed by the underwriters), the requesting
      Holders will offer to all Holders who have included Registrable Securities
      in  the  registration  the  right to include additional shares in the same
      proportion  used  in  effecting  the  limitation referred to above in this
      Section 2(b).
      ------------

            (c) Additional Shares to be Registered. SafeGuard may include in any
                ----------------------------------
      registration  statement  described  in  this  Section 2.1,  for  sale  in
                                                    -----------
      accordance  with  the  method  of  disposition specified by the Initiating
      Holders,  Common Shares to be sold by SafeGuard for its own account or the
      other  SafeGuard  shareholders for their own account, except as and to the
      extent that, in the opinion of the managing underwriter (if such method of
      disposition  is  an  Underwritten  Public  Offering), such inclusion would
      result  in  any  of  the  Registrable Securities proposed to be sold being
      excluded  from  the  offering  or  would  materially  adversely affect the
      marketing  of  such  Registrable  Securities  to  be  sold.

            (d) Exceptions  to  Demand  Registration  Rights.  Anything  in this
                --------------------------------------------
      Section 2.1  to  the  contrary  notwithstanding:
      -----------

                  (1) SafeGuard  will  not  be  required to register Registrable
            Securities  pursuant  to  this  Section  2.1  unless  the  aggregate
                                            ------------
            estimated  public  offering  price  of  all  shares  of  Registrable
            Securities,  including,  without limitation, any shares sold for the
            account  of  SafeGuard  or  any  existing  shareholder  of SafeGuard
            (based, in the case of Common Shares, upon the highest closing price
            or bid price, as the case may be, during the 30-day period preceding
            such  request  for  registration in the principal trading market for
            the  Common Shares, or, if there is no active trading market for the
            Common  Shares,  based  upon  the  proposed  public  offering  price
            estimated  in  good  faith  by the requesting holders of Registrable
            Securities), is at least equal to the lesser of (i) $400,000 or (ii)
            The  total value of all shares of Common Stock then owned by Holder;

                  (2)  SafeGuard  will  not  be  required to file a registration
            statement  requested  pursuant  to  this Section 2.1 during the time
                                                     -----------
            period  between the last day of SafeGuard's fiscal year and the date
            on  which  SafeGuard's  audited  financial statements for the fiscal
            year  are  first  available;

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<PAGE>
                  (3)  SafeGuard will not be obligated to effect, or to take any
            action  to  effect, any registration pursuant to this Section 2.1 in
                                                                  -----------
            any  particular jurisdiction in which SafeGuard would be required to
            execute  a  general  consent to service of process in effecting such
            registration,  qualification,  or  compliance,  unless  SafeGuard is
            already subject to service in such jurisdiction and except as may be
            required  by  the  Securities  Act;

                  (4)  SafeGuard will not be obligated to effect, or to take any
            action  to  effect,  any  registration  pursuant to this Section 2.1
                                                                     -----------
            during  the  period  starting  with  the  date  30  days  prior  to
            SafeGuard's good faith estimate of the date of filing of, and ending
            on  a  date  120  days  after  the  effective  date  of,  a
            SafeGuard-initiated  registration;  provided  that  SafeGuard  is
            actively employing in good faith all reasonable efforts to cause the
            registration  statement  to  become  effective;  and

                  (5)  SafeGuard will not be obligated to effect, or to take any
            action  to  effect, any registration pursuant to this Section 2.1 if
                                                                  -----------
            the  Initiating  Holders propose to dispose of shares of Registrable
            Securities  that  may  be  immediately  registered  on  Form  S-3 in
            accordance  with  Section 2.3.
                              -----------

                  (6) SafeGuard  will be entitled to delay filing a registration
            statement  for up to 90 days upon written notice to all Holders that
            it  is  engaged  in  discussions  regarding  a  material transaction
            concerning  SafeGuard  and  that  it  would  be  disadvantageous  to
            disclose  during  such  period.

     2.2     SAFEGUARD REGISTRATION.
             ----------------------

            (a) Rights to Registration. If SafeGuard registers any of its Common
                ----------------------
      Shares  in  an  Underwritten  Public Offering for its own account (but not
      including:  (i)  an  offering  initiated at a Holder's request pursuant to
      Section 2.1,  or  (ii)  an offering that is registered on Commission Forms
      -----------
      S-4  and S-8 or another form not available for registering the Registrable
      Securities  for  sale  by  SafeGuard),  SafeGuard  shall:

                  (1)  Promptly  notify  each  Holder, at least thirty (30) days
            before  the  anticipated filing date of the registration (including,
            to  the  extent  available,  the  jurisdictions  in  which SafeGuard
            intends to qualify the offer and sale of securities under applicable
            blue  sky  or  other  state  securities  laws);  and

                  (2)  Use  its best efforts to include in the registration (and
            any  related  qualification under blue sky laws or other compliance)
            and in any related Underwritten Public Offering, all the Registrable
            Securities  that the Holder specifies in a written request delivered
            to  SafeGuard  within  20  days  after  SafeGuard's  notice.

                                        4
<PAGE>
            (b) Underwriting.  A  Holder's  right  to  registration  pursuant to
                ------------
      Section 2.2  will  be  conditioned  on  the  Holder's  inclusion  of  its
      -----------
      Registrable  Securities  in  any related Underwritten Public Offering. All
      Holders  proposing  to distribute their securities through an Underwritten
      Public  Offering  (together  with  SafeGuard  and  any  other  shareholder
      distributing  its securities through the underwriting) shall enter into an
      underwriting  agreement  in  customary  form  with  the  underwriter  or
      underwriters  selected  for  the  Underwritten  Public  Offering.

            (c) Certain Underwriter Limitations.  Notwithstanding  any  other
                -------------------------------
      provisions  of  this  Section 2.2,  if the managing underwriter reasonably
                            -----------
      determines  that  marketing  factors require a limitation of the number of
      shares  to  be  underwritten,  the  underwriter  may limit the Registrable
      Securities  to  be  included  in  the registration and Underwritten Public
      Offering.  In  such event, the underwriter will so advise all shareholders
      whose  shares  would  otherwise  be  registered  and underwritten pursuant
      thereto, and the number of shares that may be included in the registration
      and  Underwritten  Public  Offering  will  be  allocated:  (1)  first  to
      SafeGuard;  then (2) to the extent that such securities do not exhaust the
      number  of  shares  determined  by  such  underwriter, among all remaining
      shareholders  of  SafeGuard  (including  the  Holders)  to  whom SafeGuard
      extended  registration rights, in proportion, as nearly as practicable, to
      the  respective  amounts  of Common Shares that are proposed to be sold by
      such  shareholders.

            (d) Certain  Sales  During an Underwritten Public Offering.  In  the
                -------------------------------------------------------
      event  that  there is an Underwritten Public Offering and a selling holder
      of  Registrable  Securities  does  not  elect  to  sell  its Registrable
      Securities  to  the  underwriters  of SafeGuard's securities in connection
      with  such offering, such holder, on request of SafeGuard or the principal
      underwriter  managing  that  public  offering, will not sell, make a short
      sale  of, grant an option for the purchase of, or otherwise dispose of any
      Registrable  Securities  without the prior written consent of SafeGuard or
      such  underwriter  as  the  case  may  be, for up to 90 days or such other
      lesser  time  period  that the underwriter specifies. SafeGuard may impose
      stop  transfer  instructions  with  respect to the Common Shares (or other
      securities)  subject  to  this restriction until the end of these periods.
      Notwithstanding anything to the contrary, the obligations of the holder of
      Registrable  Securities under this section are conditioned on the officers
      and  directors  of SafeGuard entering into similar "lock-up" arrangements.

     2.3     REGISTRATION ON FORM S-3.  At  such time as SafeGuard has qualified
             -------------------------
for  the  use  of  Form  S-3 (or any similar form or forms promulgated under the
Securities  Act), Holders will have the right to request up to two registrations
(but no more than one registration each 12 months) on Form S-3 (which request or
requests will be in writing, will specify the Registrable Securities intended to
be  sold or disposed of by the Holder thereof, will state the intended method of
disposition  of  such  Registrable  Securities  by  the  Holder  requesting such
registration,  and  will  relate  to  Registrable  Securities  having a proposed
aggregate  gross  offering price (before deduction of underwriting discounts and
expenses  of  sale) of at least $100,000 based on the current market price), and
SafeGuard  will  be obligated to use its best efforts to effect the registration
or  registrations  on  Form  S-3.  Any  such  registration  shall  satisfy  the
obligations of SafeGuard with respect to a demand registration underSection 2.1.

                                        5
<PAGE>
     2.4     REGISTRATION EXPENSES.  SafeGuard  shall  pay all  expenses  of any
             ----------------------
registrations  permitted  pursuant to this Agreement (including, but not limited
to,  the expenses of any interim audit required by any underwriters in the event
of an offering requested pursuant toSection 2.1 hereof, any qualifications under
the  blue-sky  or  other  state  securities  laws,  compliance with governmental
requirements  of preparing and filing any post-effective amendments required for
the  lawful  distribution  of  any  securities  to the public in connection with
registration,  of  supplying prospectuses, offering circulars or other documents
and  the  reasonable fees and disbursements of a single special counsel retained
by  a  majority in interest of the Holders, but excluding underwriting discounts
and  selling  commissions  applicable to the sale of the Registrable Securities,
which  are payable by the Holders, pro rata on the basis of the number of shares
registered).

     2.5     REGISTRATION PROCEDURES.  In  the  case  of  a  registration,
             ------------------------
qualification or compliance effected by SafeGuard pursuant to this Article Il in
which  any Holder's Registrable Securities are included, SafeGuard shall, at its
expense:

            (a)  Prepare  and  file with the Commission a registration statement
      with  respect to the Common Shares, and use its best efforts to cause such
      registration  statement to become and remain effective for the period that
      is  reasonably  necessary  to effect the sale of the Common Shares, not to
      exceed  nine  (9)  months or, if sooner, upon completion by Holders of the
      contemplated  distribution;

            (b)  Prepare  and  file  with  the Commission such amendments to the
      registration statement and supplements to the prospectus contained therein
      as may be necessary to keep such registration statement effective for such
      period  as  may  be reasonably necessary to effect the sale of such Common
      Shares,  not  to  exceed nine (9) months or, if sooner, upon completion by
      Holders  of  the  contemplated  distribution;

            (c) Furnish to the Holders participating in such registration and to
      the  underwriters of Common Shares being registered such reasonable number
      of  copies  of  the  registration statement, preliminary prospectus, final
      prospectus  and  such  other documents as such underwriters may reasonably
      request  in  order to facilitate the public offering of the Common Shares;

            (d)  Use  its diligent good faith efforts to register or qualify the
      Common  Shares  covered  by  such  registration statement under such state
      securities  or  blue  sky laws of such jurisdictions as such participating
      Holders  may  reasonably  request  in writing within 20 days following the
      original  filing of such registration statement; provided, however, in the
                                                       --------  -------
      case of an Underwritten Public Offering, the managing underwriter will (to
      the  exclusion  of the participation of the Holders) advise SafeGuard with
      respect  to  blue  sky  qualification  and  related  matters;

            (e)  Notify  counsel  for  the  Holders  participating  in  such
      registration,  promptly after it receives notice thereof, of the time when
      such  registration  statement  has become effective or a supplement to any
      prospectus  forming  a part of such registration statement has been filed;

                                        6
<PAGE>
            (f)  Notify  counsel for such Holders promptly of any request by the
      Commission for the amending or supplementing of the registration statement
      or  prospectus  or  for  additional  information;

            (g)  Prepare and file with the Commission, promptly upon the request
      of  any  Holders,  any  amendments  or  supplements  to  the  registration
      statement  or prospectus which, in the opinion of counsel for such Holders
      (and  concurred  in  by  counsel  for  SafeGuard),  is  required under the
      Securities  Act or the rules and regulations thereunder in connection with
      the  distribution  of  the  Common  Shares,  other  than  an  amendment or
      supplement  required solely as a result of a change by such Holders in the
      method  of  distribution  of  the  Common  Shares;

            (i)  Prepare  and  promptly  file  with  the Commission and promptly
      notify  counsel  for  the  Holders  of  the  filing  of  such amendment or
      supplement to the registration statement or prospectus as may be necessary
      to  correct  any statements or omissions if, at the time when a prospectus
      relating  to  such  Common  Shares  is  required to be delivered under the
      Securities  Act,  any  event  other  than  a  change  in  the  method  of
      distribution  of  the  Common Shares selected by a Holders has occurred as
      the result of which any such prospectus or any other prospectus as then in
      effect  would include any untrue statement of a material fact or omit to '
      state  any  material fact necessary to make the statements therein, in the
      light  of  the  circumstances in which they were made, not misleading; and

            (j)  Not  file  any  amendment  or  supplement  to  the registration
      statement  or  prospectus  if, in the opinion of counsel for such Holders,
      the  amendment or supplement does not comply in all material respects with
      the  requirements  of  the  Securities  Act  or  the rules and regulations
      thereunder,  after  having been furnished with a copy substantially in the
      form  thereof  at  least  two  business  days prior to the filing thereof,
      provided, however,  if in the opinion of counsel for SafeGuard, the filing
      --------  -------
      of  the  amendment  or  supplement  is  reasonably  necessary  to  protect
      SafeGuard  from  any liabilities under any applicable federal or state law
      and  the  filing  will not violate applicable law, SafeGuard may make such
      filing.

     2.6     RELATED REGISTRATION MATTERS.  SafeGuard shall use its best efforts
             -----------------------------
to  enter  into  an  underwriting  agreement in connection with any registration
subject  to the provisions of thisArticle II in which any Holder's Common Shares
is  included, which agreement will contain such terms, provisions and agreements
as  are  customary and appropriate for such registration. In connection with any
Underwritten  Public  Offering in which any Holder's Common Shares are included,
to  the  extent  not  provided  in  the  underwriting, agreement related to such
offering,  SafeGuard  will  use  its  best  efforts  to:

            (a)  List  the  shares of Common Shares included in such offering on
      any  national  securities  exchange  or  stock  market on which the Common
      Shares  is  approved  for  listing;

            (b)  Engage  a  bank  or  other company to act as transfer agent and
      registrar  for  the  Common  Shares;

                                        7
<PAGE>
            (c)  Cause  customary  opinions  of  counsel,  comfort  letters  of
      accountants,  and  other  appropriate  documents  to  be  delivered  by
      representatives  of  SafeGuard;  and

            (d)  As  soon  as  practicable  after  "the  effective  date  of the
      registration  statement"  (within  the  meaning  of  Rule  158  under  the
      Securities  Act),  and,  in  any  event, within 16 months thereafter, make
      "generally  available  to  its  securities holders" (within the meaning of
      Rule  158  under the Securities Act) an earnings statement (which need not
      be  audited)  complying  with  Section  II(a)  of  the  Securities Act and
      covering  a  period  of at least 12 consecutive months beginning after the
      effective  date  of  the  registration  statement.

     2.7     INDEMNIFICATION AND CONTRIBUTION.
             ---------------------------------

            (a)  In the case of each registration effected by SafeGuard pursuant
      to  this  Agreement  in  which  any  Holder's  Common  Shares is included,
      SafeGuard agrees to indemnify and hold harmless such Holder, including its
      Officers  and partners, each underwriter of the shares of Common Shares so
      registered  and  each  person who controls any such underwriter within the
      meaning  of  Section 15 of the Securities Act, against any and all losses,
      claims,  damages  or  liabilities  to which they or any of them may become
      subject  under  the  Securities  Act  or  any other statute or common law,
      including  any  amount  paid in settlement of any litigation, commenced or
      threatened,  and  to  reimburse  them  for  any  reasonable legal or other
      reasonable  expenses incurred by them in connection with the investigation
      of  any  claims  and defenses of any actions (subject to subsection (c) of
      this  Section  2.7  ,  insofar  as  any  such  losses,  claims,  damages,
            ------------
      liabilities  or  actions  arise  out  of  or  are  based  upon: any untrue
      statement  or alleged untrue statement of a material fact contained in the
      registration  statement,  any  preliminary  prospectus or final prospectus
      contained therein, or any amendment or supplement thereto, or the omission
      or alleged omission to state therein a material fact required to be stated
      therein  or  necessary  to  make  the  statements  therein not misleading;
      provided, however,  notwithstanding  the foregoing, SafeGuard may agree to
      --------  -------
      indemnify  each  such  underwriter  and  person  who  so  controls  such
      underwriter  to  such  other extent as SafeGuard and such underwriter will
      agree;  and  provided further, however, that the indemnification agreement
                   -------- -------  -------
      contained  in  this  subsection  (a)  will  not  (1) apply to such losses,
      claims, damages, liabilities or actions arising out of, or based upon, any
      such untrue statement or alleged untrue statement, or any such omission or
      alleged  omission, if such statement or omission was made in reliance upon
      and  in conformity with information furnished to SafeGuard in writing by a
      Holder  or such underwriter claiming rights of indemnification pursuant to
      this Section 2.7 for use in connection the preparation of the registration
           -----------
      statement  or  any preliminary prospectus or final prospectus contained in
      the  registration  statement  or  any such amendment thereof or supplement
      thereto; (2) inure to the benefit of any underwriter (or to the benefit of
      any  person  controlling  such underwriter) from whom the person asserting
      any  such  losses,  claims, damages, expenses or liabilities purchased the
      securities  which  are  the subject thereof, if such underwriter failed to
      send  or  give  a  copy  of  the  final  prospectus,  as  then  amended or
      supplemented,  to  such  person  and  if  the untrue statement or omission
      alleged  had  been corrected in such final prospectus; or (3) inure to the
      benefit  of  any  person  to  the  extent  such  person's.  claim  for
      indemnification  hereunder  arises  out of or is based on any violation by
      such  person  of  applicable  law.

                                        8
<PAGE>
            (b)  In the case of each registration effected by SafeGuard pursuant
      to  this  Agreement  in which any Holder's Common Shares is included, such
      Holder will be obligated, and will cause each underwriter of the shares of
      Common  Shares  to be registered on behalf of such person (each Holder and
      such  underwriters  being  referred to severally in this subsection (b) as
      the  "INDEMNIFYING PERSON") to be obligated, in the same manner and to the
      same  extent  as  set  forth  in  subsection  (a)  of this Section 2.7. to
                                                                 -----------
      indemnify  and  hold  harmless  SafeGuard  and  each  person,  if any, who
      controls SafeGuard within the meaning of Section 15 of the Securities Act,
      its  directors,  officers,  partners,  accountants and legal counsel, with
      respect  to  any  statement or alleged untrue statement in, or omission or
      alleged  omission  from, such registration statement or any post-effective
      amendment  thereof  or  any preliminary prospectus or final prospectus (as
      amended  or  supplemented,  if  amended  or  supplemented  as  aforesaid)
      contained  in  such  registration statement, if such statement or omission
      was  made in reliance upon and in conformity with information furnished in
      writing  to  SafeGuard  by  such indemnifying person for use in connection
      with  the  preparation  of  such registration statement or any preliminary
      prospectus or final prospectus contained in such registration statement or
      any  such  amendment thereof or supplement thereto; provided, however, the
                                                          --------  -------
      liability  of  each  Holder  hereunder  is  limited  to the gross proceeds
      received  by  each  Holder  from the sale of Common Shares covered by such
      registration  statement,  amendment, supplement or prospectus, as the case
      may  be.

            (c) Each person to be indemnified pursuant to this Section 2.7 will,
                                                               -----------
      promptly  after  its  receipt of written notice of the commencement of any
      action  against  such indemnified person in respect of which indemnity may
      be  sought  from an indemnifying person under this Section 2.7, notify the
                                                         -----------
      indemnifying  person  in  writing  of  the  commencement  thereof.  The
      indemnifying  person  will  assume  the  defense  thereof  with  counsel
      reasonably  satisfactory to such indemnified person and assume the payment
      of  all  fees  and expenses. In any such proceeding, the indemnified party
      may  retain its own counsel, but the fees and expenses of the counsel will
      be  at  the  indemnified party's expense, unless (1) the indemnified party
      has  employed  counsel  in  an  action  in which the indemnified party and
      indemnifying party are both defendants and there is a conflict of interest
      between  such  parties  that  would  prevent  counsel  from  adequately
      representing  both  parties,  as  determined by counsel to the indemnified
      person,  (2)  the indemnifying party has not employed counsel satisfactory
      within  the  exercise  of  reasonable judgment of the indemnified party to
      represent  the indemnified party within a reasonable time after the notice
      of  the  commencement  of  the  action,  or (3) the indemnifying party has
      authorized  the  employment  of  counsel  for the indemnified party at the
      expense  of  the  indemnifying  party.  The  undertaking contained in this
      Section 2.7 is in addition to any liabilities that the indemnifying person
      -----------
      might  have pursuant to law. No indemnifying party will, without the prior
      written  consent  of  the  indemnified party, effect any settlement of any
      pending or threatened proceeding in respect of which any indemnified party
      is  or  could have been a party and indemnity could have been sought under
      this Agreement by the indemnified party, unless the settlement includes an
      unconditional  release of the indemnified party from all liability arising
      from  the  proceeding.

                                        9
<PAGE>
            (d)  If the indemnification provided for in this Section 2.7 is held
                                                             -----------
      by  a  court of competent jurisdiction to be unavailable to an indemnified
      party  with  respect  to  any  loss,  liability, claim, damage, or expense
      referred  to therein, then the indemnifying party, in lieu of indemnifying
      such  indemnified  party  hereunder, will contribute to the amount paid or
      payable  by  such  indemnified  party as a result of such loss, liability,
      claim,  damage, or expense in such proportion as is appropriate to reflect
      the  relative  fault  of the indemnifying party on the one hand and of the
      indemnified  party  on  the  other  in  connection  with the statements or
      omissions that resulted in such loss, liability, claim, damage, or expense
      as well as any other relevant equitable considerations. The relative fault
      of  the indemnifying party and of the indemnified party will be determined
      by  reference to, among other things, whether the untrue or alleged untrue
      statement  of  a  material  fact  or the omission to state a material fact
      relates  to  information  supplied  by  the  indemnifying  party or by the
      indemnified  party  and the parties' relative intent, knowledge, access to
      information,  and  opportunity  to  correct  or  prevent such statement or
      omission.

            (e) Notwithstanding the foregoing, to the extent that the provisions
      on indemnification and contribution contained in an underwriting agreement
      entered  into  in  connection with the underwritten public offering are in
      conflict with the foregoing provisions, the provisions of the underwriting
      agreement will control.

     2.8     INFORMATION BY HOLDERS.  Each Holder requesting Registrable
             -----------------------
Securities  to  be  included in any registration shall furnish to SafeGuard such
information  regarding  such Holder and the distribution proposed by such Holder
as  SafeGuard  may  request and as is reasonably required in connection with any
registration,  qualification  or  compliance  described  in  this  Article  II.

2.9     RULE 144 REPORTING.  With  a  view to making available to the Holder the
        -------------------
benefits  of certain rules and regulations of the Commission that may permit the
sale of the Registrable Securities to the public without registration, SafeGuard
will:

            (a) Commission Reports.  File with the Commission in a timely manner
                ------------------
      all  reports  and  other  documents  thereafter  required  of SafeGuard if
      SafeGuard  is  or becomes subject to the reporting requirements of Section
      13  or  15(d)  of  the  Exchange  Act;  and

            (b) Other Information.  Furnish  to  each  Holder  promptly upon its
                -----------------
      request  the  following  information:

                  (1)  A  written  statement  by  SafeGuard  as  to  SafeGuard's
            compliance  with  the  public information requirements of Commission
            Rule  144 (at any time after 90 days after SafeGuard becomes subject
            to the reporting requirements of Section 13 or 15(d) of the Exchange
            Act),

                  (2)  A  copy  of the most recent annual or quarterly report of
            SafeGuard,  and

                                       10
<PAGE>
                  (3)  Such  other reports and documents filed by SafeGuard with
            the Commission as may be reasonably requested in availing any Holder
            of  any  rule or regulation of the Commission permitting the sale of
            any  such  securities  without  registration.

     2.10     TRANSFER OF REGISTRATION RIGHTS.  The rights to cause SafeGuard to
              --------------------------------
register  securities  under this Article II may be assigned following receipt by
                                 ----------
SafeGuard  of  notice  of the proposed transfer by any Holder to any assignee or
transferee  of  the  Common  Shares  issued upon conversion of the Note who also
qualifies  as a Holder; provided that: (a) the transfer is otherwise be effected
in  accordance  with  registration requirements imposed by applicable securities
laws,  and  (b)  the  transferee  agrees  to  be  bound  by  this  Agreement.

     2.11     NOTICE OF SALE INFORMATION.Any notice from a Holder of Registrable
              ---------------------------
Securities requesting registration of some or all of such Registrable Securities
pursuant  to  this  Article  II  will:

            (a)  Specify the number of shares of Registrable Securities intended
      to  be  included  in  such  registration;

            (b)  Describe  the  nature  and  method of the proposed offering and
      sale;

            (c)  Include an undertaking to provide all information and materials
      concerning  such  Holder  and  the  method of distribution and to take any
      other  actions  reasonably  requested  by SafeGuard to enable SafeGuard to
      comply  with  the  Securities  Act,  any  state  securities law and/or the
      applicable  requirements  of  the  Commission  or  any  state  securities
      commissioner  or  similar  agency  or  official;  and

            (d) If such Holder is not a party to this Agreement, include such
      Holder's  agreement  to  be  bound  by  the  provisions  of this Agreement
      applicable  to  Holders  of  Registrable  Securities.

     2.12     SUSPENSION.   SafeGuard  may  suspend  the  Holders'  further
              -----------
disposition  of  Registrable  Securities  by notifying the Holders of a state of
facts or the occurrence of any event (including pending negotiations regarding a
transaction  that  might  require SafeGuard's disclosure of additional material,
non-public  information  in  its  registration  statement,  for  which SafeGuard
believes  in  good  faith  it  has  a  bona fide business purpose for preserving
confidentiality  or  circumstances  which render SafeGuard unable to comply with
the  published  rules and regulations of the Commission under the Securities Act
or  the  Exchange  Act)  which  might reasonably cause a legal deficiency in the
registration  statement  or  the  prospectus  issued  under  the  registration
statement.  SafeGuard  shall deliver amended disclosure materials to the Holders
within  15 days following this notice. At its request, the Holders shall deliver
to  SafeGuard  all  copies  in  their possession of the prospectus covering such
Registrable Securities that was current when they received the notice. SafeGuard
may  not,  without  the  Holders'  consent,  suspend  disposition of Registrable
Securities  for  more  than  90  calendar  days in any rolling twelve (12) month
period.

                                       11
<PAGE>
                         ARTICLE III.     MISCELLANEOUS
                                          -------------

     3.1     REMEDIES. Each  party  hereto acknowledges that a remedy at law for
             ---------
any breach or attempted breach of this Agreement will be inadequate, agrees that
each  other  party hereto is entitled to specific performance and injunctive and
other  equitable  relief  in  case  of  any such breach or attempted breach, and
further  agrees to waive any requirement for the securing or posting of any bond
in  connection  with the obtaining of any such injunctive or any other equitable
relief.

     3.2     EFFECT  OF  SALE.  Any  Holder  who  sells  all  of  his  Note  and
             -----------------
Registrable  Securities pursuant to the terms of this Agreement will cease to be
a  party  to  this  Agreement  and  will  have  no further rights or obligations
hereunder.

     3.3     AMENDMENT.  This  Agreement  may be amended from time to time by an
             ----------
instrument  in writing signed by SafeGuard and Holders of a majority of the then
outstanding  Registrable  Securities.

     3.4     NOTICES.  Any  notice,  request,  reply  instruction  or  other
             --------
communication  (herein  severally  and  collectively  called  "NOTICE")  in this
Agreement  provided  or permitted to be given to SafeGuard or to any Holder must
be  given  in  writing and may be given or served by overnight delivery service,
depositing  the  same in the United States mail, in certified or registered form
postage  fully  prepaid,  addressed to the party or parties to be notified, with
return  postage  fully  requested,  or  by delivering the same in person to such
party  or  parties.  Notice  deposited  in the United States mail, mailed in the
manner  hereinabove  described,  will be effective upon deposit. Notice given in
any  other manner will be effective only if and when received by the party to be
notified.  For purpose of notice hereunder, until notice is given of a change of
address, the address of SafeGuard will be 95 Enterprise, Suite 100, Aliso Viejo,
California 92656-2605, and the address of Holder will be the address hereinafter
set  forth  on  the  signature  page.

     3.5     LEGAL MATTERS.
             --------------

            (a) Jurisdiction; Venue.  The  laws of the State of Delaware and the
                -------------------
      federal  laws of the United States of America, excluding the laws of those
      jurisdictions  pertaining to the resolution of conflict with laws of other
      jurisdictions,  govern  the  validity,  construction,  enforcement,  and
      interpretation  of  this  Agreement.

            (b) Costs.  In  any  legal  proceeding  between SafeGuard and Holder
                -----
      arising  out  of  this  Agreement,  the  losing  party shall reimburse the
      prevailing  party,  on  demand,  for  all reasonable costs incurred by the
      prevailing  party  in enforcing, defending, or prosecuting this Agreement.

     3.6     SUCCESSORS AND ASSIGNS.  This  Agreement is binding upon and inures
             -----------------------
to  the  parties  contained  in  this  Agreement  and  their  respective  heirs,
executors,  distributees,  successors  (including  successors  by  merger)  and
permitted  assigns.

     3.7     INVALID PROVISIONS.   Should  any  portion  of  this  Agreement  be
             -------------------
adjudged  or  held  to  be invalid, unenforceable or void, such holding will not
have  the  effect of invalidating or voiding the remainder of this Agreement and
the parties hereby agree that the portion so held invalid, unenforceable or void
will,  if  possible,  be  deemed amended or reduced in scope, or to otherwise be
stricken from this Agreement to the extent required for the purposes of validity
and  enforcement  thereof.

                                       12
<PAGE>
     3.8     SECTION HEADINGS.  The  section  and  paragraph  headings contained
             -----------------
herein  are  for  reference  purposes  only  and  will not in any way affect the
meaning  and  interpretation  of  this  Agreement.

     3.9     EXECUTION IN COUNTERPARTS.  This  Agreement  may be executed in any
             --------------------------
number  of  counterparts,  each  of which when so executed and delivered will be
deemed  an  original,  and  such  counterparts together will constitute only one
instrument.

     3.10     ADJUSTMENTS.  In the event SafeGuard declares a stock split, stock
              ------------
dividend or other distribution of capital stock in respect of, or issues capital
stock  in  replacement  of or exchange for, shares of Common Shares, such shares
will  be  subject  to  this  Agreement,  and  the  provisions  of this Agreement
providing  for  calculations based on the number of shares of Common Shares will
include  the  shares  issued  in  respect  of  the  Common Shares and the shares
converted  into  Common  Shares  from  the  Note.

                  (REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

                                       13
<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE

The  undersigned  execute  the  Registration Rights Agreement and authorize this
signature  page  to  be  attached  to  a  counterpart of the Registration Rights
Agreement  executed  by  the other parties to the Registration Rights Agreement.

Executed as of the day and year first above written.

                                "SAFEGUARD"

                                SAFEGUARD HEALTH ENTERPRISES, INC.,
                                a Delaware corporation

                                By:  /s/ James E. Buncher
                                     --------------------
                                     James E. Buncher
                                     President and Chief Executive Officer

                                By:  /s/ Ronald I. Brendzel
                                     ----------------------
                                     Ronald I. Brendzel
                                     Senior Vice President and Secretary

                                       14
<PAGE>
                          REGISTRATION RIGHTS AGREEMENT

                                 SIGNATURE PAGE

The  undersigned  executes  the Registration Rights Agreement and authorize this
signature  page  to  be  attached  to  a  counterpart of the Registration Rights
Agreement  executed  by  the other parties to the Registration Rights Agreement.

Executed  as  of  the  day  and  year  first  above  written.

                                "HOLDER"

                                /s/ Jack R. Anderson
                                ------------------------------------------------
                                Jack R. Anderson
                                16495 Dallas Parkway
                                Suite 735
                                Addison, TX  75001

                                       15
<PAGE>AMENDED AND RESTATED

                                STOCK OPTION PLAN

                                       OF

                       SAFEGUARD HEALTH ENTERPRISES, INC.

          SAFEGUARD  HEALTH ENTERPRISES, INC., a corporation organized under the
laws  of  the  State  of Delaware, hereby adopts this Amended and Restated Stock
Option  Plan  of  Safeguard  Health  Enterprises,  Inc., as of January 15, 2002.

     The  purposes  of  this  Plan  are  as  follows:

               (1)     To  further the growth, development and financial success
of  the  Company  by providing additional incentives to certain of its Directors
and  executive  and  other  key  Employees  who  have  been  or  will  be  given
responsibility  for  the  management or administration of the Company's business
affairs,  by assisting them to become owners of capital stock of the Company and
thus  to  benefit  directly  from its growth, development and financial success.

               (2)     To  enable  the Company to obtain and retain the services
of  the  type  of Directors and professional, technical and managerial Employees
considered  essential  to the long range success of the Company by providing and
offering  them  an  opportunity to become owners of capital stock of the Company
under  options,  some  of  which  are  intended  to  qualify as "incentive stock
options"  under  Section  422  of  the  Internal  Revenue  Code.

          The  Plan  shall  be  divided  into  two  separate  components:  the
Discretionary  Option Grant Program described in Articles III through VI and the
Automatic  Option  Grant  Program  described  in  Article  VII.  Under  the
Discretionary  Option Grant Program, eligible individuals may, at the discretion
of the Plan Administrator, be granted stock options to purchase shares of Common
Stock  in  accordance with the provisions of Articles III through VI.  Under the
Automatic  Option  Grant  Program,  each  eligible  member  of  the  Board  will
automatically  receive periodic option grants to purchase shares of Common Stock
in  accordance  with  the  provisions  of  Article  VII.

          Unless  the  context  clearly  indicates  otherwise, the provisions of
Articles I, II and VIII of the Plan shall apply to both the Discretionary Option
Grant  Program  and  the  Automatic  Option  Grant Program and shall accordingly
govern  the  interests  of  all  individuals  under  the  Plan.

<PAGE>
                                    ARTICLE I

                                   DEFINITION
                                   ----------

Section  1.1  -  General
------------     -------

          Whenever  the  following  terms are used in this Plan, they shall have
the  meaning  specified  below  unless  the  context  clearly  indicates  to the
contrary.

Section  1.2  -  Board
------------     -----

          "Board"  shall  mean  the  Board  of  Directors  of  the  Company.

Section  1.3  -  Code
------------     ----

          "Code"  shall  mean the Internal Revenue Code of 1986, as amended from
time  to  time.

Section  1.4  -  Committee
------------     ---------

          "Committee"  shall  mean the committee appointed by the Board pursuant
to Section 6.1(a) to administer the provisions of the Discretionary Stock Option
Grant  Program.

Section  1.5  -  Company
------------     -------

          "Company"  shall  mean  Safeguard  Health  Enterprises,  Inc.

Section  1.6  -  Director
------------     --------

          "Director"  shall  mean  a  member  of  the  Board.

Section  1.7  -  Employee
------------     --------

          "Employee"  shall mean any employee (as defined in accordance with the
Regulations  and  Revenue  Rulings  then applicable under Section 3401(c) of the
Code) of the Company or of any corporation which is then a Parent or Subsidiary,
whether such employee is so employed at the time this Plan is adopted or becomes
so  employed  subsequent  to  the  adoption  of  this  Plan.

Section  1.8  -  Incentive  Stock  Option
------------     ------------------------

          "Incentive Stock Option" shall mean an Option qualifying under Section
422  of  the  Code  and  designated  as  such  by  the  Plan  Administrator.

                                      - 2 -
<PAGE>
Section  1.9  -  Non-Employee  Director
------------     ----------------------

          "Non-Employee  Director"  shall  mean  any Director who qualifies as a
"non-employee  director"  within  the  meaning  of Rule 16b-3 promulgated by the
Securities  and  Exchange  Commission pursuant to the Securities Exchange Act of
1934,  as  amended.

Section  1.10-  Non-Qualified  Stock  Option
-------------   ----------------------------

          "Non-Qualified  Stock  Option"  shall  mean  an Option which is not an
Incentive  Stock  Option and which is designated as a Non-Qualified Stock Option
by  the  Plan  Administrator.

Section  1.11  -  Officer
-------------     -------

          "Officer"  shall  mean  an  officer of the Company or of any Parent or
Subsidiary.

Section  1.12  -  Option
-------------     ------

          "Option"  shall  mean  an  option  to  purchase  capital  stock of the
Company,  granted  under  the  Plan.  "Options"  includes  both  Incentive Stock
Options  and  Non-Qualified  Stock  Options, except that for purposes of Article
VII,  such  term  shall  refer  solely  to  Non-Qualified  Stock  Options.

Section  1.13  -  Optionee
-------------     --------

          "Optionee"  shall mean an Employee or non-Employee member of the Board
to  whom  an  Option  is  granted  under  the  Plan.

Section  1.14  -  Parent  Corporation
-------------     -------------------

          "Parent"  shall  mean  any  corporation  in  an  unbroken  chain  of
corporations ending with the Company if each of the corporations in the unbroken
chain  (other  than  the  Company)  owns  at  the  time  of  determination stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes  of  stock  in  one  of  the  other  corporations  in  such  chain.

Section  1.15  -  Plan
-------------     ----

          The  "Plan"  shall  mean  this  Stock  Option Plan of Safeguard Health
Enterprises,  Inc.

Section  1.16  -  Plan  Administrator
-------------     -------------------

          "Plan  Administrator"  shall mean the Board or the Committee appointed
to  administer  the  Discretionary  Option  Grant provisions of the Plan, to the
extent  such  entity is carrying out its administrative functions under the Plan
in  accordance  with  the  provisions  of  Article  VI.

                                      - 3 -
<PAGE>
Section  1.17  -  Pronouns
-------------     --------

          The  masculine  pronoun  shall include the feminine and neuter and the
singular  shall  include  the  plural,  where  the  context  so  indicates.

Section  1.18  -  Secretary
-------------     ---------

          "Secretary"  shall  mean  the  Secretary  of  the  Company.

Section  1.19  -  Subsidiary
-------------     ----------

          "Subsidiary"  shall  mean  any  corporation  in  an  unbroken chain of
corporations  beginning  with the Company if each of the corporations other than
the  last  corporation  in  the unbroken chain owns at the time of determination
stock  possessing fifty percent (50%) or more of the total combined voting power
of  all  classes  of  stock  in  one  of  the  other corporations in such chain.

Section  1.20  -  Termination  of  Employment
-------------     ---------------------------

          "Termination  of  Employment"  shall  mean  the  time  when  the
employee-employer  relationship  between  the  Optionee  and  the Company or any
Parent  or Subsidiary corporation, is terminated for any reason, with or without
cause,  at  any  time, including, but not by way of limitation, a termination by
resignation,  discharge,  death  or retirement, but excluding terminations where
there  is a simultaneous reemployment by the Company or any Parent or Subsidiary
corporation.  The  Plan  Administrator,  in  its  absolute  discretion,  shall
determine  the  effect  of  all  other  matters  and  questions  relating to the
Optionee's  Termination  of Employment, including, but not by way of limitation,
the  question  of  whether a Termination of Employment resulted from a discharge
for  good  cause,  and  all  questions  of  whether particular leaves of absence
constitute  Terminations of Employment; provided, however, that, with respect to
Incentive  Stock  Options,  a leave of absence shall constitute a Termination of
Employment  if,  and  to  the  extent  that,  such  leave  of absence interrupts
employment for the purposes of Section 422(a)(2) of the Code and then applicable
Treasury  Regulations  and  other  administrative  authority under said Section.

                                   ARTICLE II

                             SHARES SUBJECT TO PLAN
                             ----------------------

Section  2.1  -  Shares  Subject  to  the  Plan
------------     ------------------------------

          The  shares  of  stock  subject  to  Options  shall  be  shares of the
Company's  authorized  common  stock  ("Common Stock").  The aggregate number of

                                      - 4 -
<PAGE>
such  shares,  which  may  be issued over the term of the Plan, shall not exceed
3,600,000.  The total number of shares issuable from time to time under the Plan
shall  be  subject  to  periodic adjustment in accordance with the provisions of
Section  2.3  below.

          Should  an Option expire or terminate for any reason prior to exercise
or  surrender  in  full,  the shares subject to the portion of the Option not so
exercised  or  surrendered shall be available for subsequent Option grants under
the  Plan.  Shares  subject  to  any  Option  or  portion thereof surrendered in
accordance with Section 7.10 of the Plan and all share issuances under the Plan,
whether  or not such shares are subsequently repurchased by the Company pursuant
to its repurchase rights under the Plan, shall reduce on a share-for-share basis
the  number  of  shares  of  Common Stock available for subsequent Option grants
under  this Plan.  In addition, should the option price of an outstanding Option
under the Plan be paid with shares of Common Stock, then the number of shares of
Common Stock subsequently available for issuance under the Plan shall be reduced
by  the gross number of shares for which the Option is exercised, and not by the
net  number  of  shares  of  Common  Stock  actually  issued  to  the  Optionee.

Section  2.2  -  Limitation  on  Incentive  Stock  Option  Grants
------------     ------------------------------------------------

          The  aggregate fair market value (determined as of the respective date
or dates of grant) of the shares of Common Stock for which one or more Incentive
Stock  Options granted to any Employee under the Plan (or any other stock option
plan  of the Company or its Parent or Subsidiary corporations) may for the first
time  become  exercisable  as Incentive Stock Options under the Federal tax laws
during  any  one  (1)  calendar  year  shall  not  exceed the sum of One Hundred
Thousand  Dollars  ($100,000)  or  such greater amount as may be permitted under
subsequent  amendments  to  Section  422  of  the Internal Revenue Code.  To the
extent  the Employee holds two (2) or more such Options which become exercisable
for  the  first  time in the same calendar year, the foregoing limitation on the
exercisability  thereof  as  Incentive  Stock Options under the Federal tax laws
shall  be  applied  on the basis of the order in which such Options are granted.
In  the  event  the  applicable  $100,000  limitation is in fact exceeded in any
calendar  year, the Option may nevertheless be exercised for those excess shares
as  a  Non-Qualified  Stock  Option.

Section  2.3  -  Changes  in  Company's  Shares
------------     ------------------------------

          In  the  event  that  the  outstanding  shares  of Common Stock of the
Company  are  hereafter changed into or exchanged for a different number or kind
of  shares  or  other  securities  of the Company, or of another corporation, by
reason  of  reorganization,  merger,  consolidation,  recapitalization,
reclassification,  stock  split-up,  stock  dividend  or  combination of shares,
appropriate  adjustments  shall  be  made  by  the Stock Option Committee in the
number  and  kind  of  shares  for the purchase of which Options may be granted,
including  adjustments of the limitations in Sections 2.1 and 2.2 on the maximum
number  and  kind  of  shares  which  may  be  issued  on  exercise  of Options.

                                      - 5 -
<PAGE>
                                   ARTICLE III

                        GRANTING OF DISCRETIONARY OPTIONS
                        ---------------------------------

Section  3.1  -  Eligibility  for  Option  Grants
------------     --------------------------------

          (a)     The  persons eligible to receive Option grants pursuant to the
Discretionary  Option  Grant  Program  shall  be  limited  to  the  following
individuals:

               (i)     such Employee-members of the Board as the Committee shall
select  from  time  to  time;  and

               (ii)     such other key Employees (including officers who are not
Directors)  as  the  Plan  Administrator  shall  select  from  time  to  time.

          (b)     The  Plan  Administrator  shall  have  the  sole and exclusive
authority,  within  the scope of its administrative functions under the Plan, to
select  the  eligible  individuals  who  are  to receive Option grants under the
Discretionary  Option  Grant Program and to determine the number of shares to be
covered by each such Option grant, the status of the granted Option as either an
Incentive  Stock  Option  or  a Non-Qualified Stock Option, the time or times at
which  such  Option  is to become exercisable and the maximum term for which the
Option  is  to  remain  outstanding.

          (c)     Non-Employee  members  of  the Board (including members of the
Committee)  shall  not  be  eligible  to participate in the Discretionary Option
Grant  Program.  However, non-Employee members of the Board shall be eligible to
receive periodic Option grants pursuant to the Automatic Option Grant provisions
of  Article  VII.

          (d)     Upon  the  selection  of  an eligible individual to receive an
Option  grant  under  the  Discretionary  Option  Grant  Program,  the  Plan
Administrator  shall  instruct the Secretary to issue such Option and may impose
such  conditions  on  the grant of such Option as it deems appropriate.  Without
limiting  the  generality of the preceding sentence, the Plan Administrator may,
in  its  discretion  and  on  such  terms  as it deems appropriate, require as a
condition  to  the  grant  of  the  Option  that  the  Optionee  surrender  for
cancellation  some  or all of the unexercised Options which have been previously
granted  to  him.  Any  Option  the  grant  of  which is unconditioned upon such
surrender  may  have  an option price lower (or higher) than the option price of
the  surrendered  Option,  may cover the same (or a lesser or greater) number of
shares  as  the  surrendered  Option,  may  contain such other terms as the Plan
Administrator  deems appropriate and shall be exercisable in accordance with its
terms, without regard to the number of shares, price, option period or any other
term  or  condition  of  the  surrendered  Option.

                                      - 6 -
<PAGE>
                                   ARTICLE IV

                      TERMS OF DISCRETIONARY OPTION GRANTS
                      ------------------------------------

Section  4.1  -  Option  Agreement
------------     -----------------

          Each  Option issued under the Discretionary Option Grant Program shall
be evidenced by a written Stock Option Agreement, which shall be executed by the
Optionee  and  authorized  Officers  of the Company and which shall contain such
terms  and conditions as the Plan Administrator shall determine, consistent with
the  Plan.  Stock  Option  Agreements  evidencing  Incentive Stock Options shall
contain such terms and conditions as may be necessary to qualify such Options as
"incentive  stock  options"  under  Section  422  of  the  Code.

Section  4.2  -  Option  Price
------------     -------------

          (a)     The price of the shares subject to each Option shall be set by
the Plan Administrator; provided, however, that the price per share shall be not
less  than one hundred percent (100%) of the fair market value of such shares on
the  date  such  Option  is  granted; provided, further, that, in the case of an
Incentive  Stock Option granted to an individual then owning (within the meaning
of Section 424(d) of the Code) more than ten percent (10%) of the total combined
voting  power  of  all  classes of stock of the Company or any Subsidiary or any
Parent  corporation (a "10% Stockholder"), the price per share shall not be less
than  one  hundred ten percent (110%) of the fair market value of such shares on
the  date  such  Option  is  granted.

          (b)     For  the  purpose  of  Section  4.2(a) and all other valuation
purposes under the Plan, the fair market value of a share of the Company's stock
on  the date the Option is granted shall be: (i) the closing price of a share of
the  Company's  Stock on the principal exchange on which shares of the Company's
stock  are  then trading, if any, on such date, or, if shares were not traded on
such  date, then on the next preceding trading day during which a sale occurred;
or  (ii)  if  such  stock is not traded on an exchange but quoted on NASDAQ or a
successor quotation system, (1) the last sale price (if the stock is then listed
as  a  National Market Issue) or (2) the mean between the closing representative
bid and asked prices (in all other cases) for the stock on such date as reported
by  NASDAQ  or  such  successor  quotation system; or (iii) if such stock is not
publicly traded on an exchange and not quoted on NASDAQ or a successor quotation
system,  the mean between the closing bid and asked prices for the stock on such
date as determined in good faith by the Committee effecting the Option grant; or
(iv)  if  the  Company's  stock  is  not  publicly traded, the fair market value
established  by  such  Plan  Administrator  acting  in  good  faith.

Section  4.3  -  Commencement  of  Exercisability
------------     --------------------------------

          (a)     No  Option  may  be  exercised  in whole or in part during the
first  year  after  such Option is granted.  Thereafter the Optionee may, within
the  specified  term  of  the  Option  and  pursuant  to  the provisions of this
Agreement,  purchase  the  Optioned  Shares  in  accordance  with  the following
schedule:

                                      - 7 -
<PAGE>
               (i)     One-third  of  the  Optioned Shares at any time after the
     expiration  of  twelve  (12)  months  measured  from  the  date  of  grant.

               (ii)     An  additional  one-third  of the Optioned Shares at any
     time after the expiration of twenty-four (24) months measured from the date
     of  grant.

               (iii)     The  final one-third of the Optioned Shares at any time
     after  the  expiration  of thirty-six (36) months measured from the date of
     grant.

          Within the limitations provided in this Section 4.3 but subject to the
other provisions of this Agreement, an Optionee may, on any two (2) occasions in
each  fiscal  year  during  the  term  of the Option, purchase any or all of the
Optioned  Shares  for  which  the  Option  is  at the time exercisable; provided
however,  that  each exercise shall be for not less than twenty-five (25) shares
or the minimum installment set forth in this Section 4.3, if a smaller number of
shares.  In no event, however, shall an Option be exercisable for any fractional
shares.

          (b)     Subject  to  the  provisions  of  Sections  4.3(a) and 4.3(c),
Options  shall  become exercisable at such times and in such installments (which
may  be  cumulative) as the Plan Administrator shall provide in the terms of the
individual  Option;  provided,  however,  that  by a resolution adopted after an
Option  is  granted, the Plan Administrator may, on such terms and conditions as
it  may  determine  to be appropriate and subject to Sections 4.3(a) and 4.3(c),
accelerate  the  time  at  which  such  Option  or  any  portion  thereof may be
exercised.

          (c)     No  portion of an Option which is unexercisable at Termination
of  Employment  shall  thereafter  become  exercisable.

Section  4.4  -  Expiration  of  Options
------------     -----------------------

          (a)     No  Incentive  Stock  Option may be exercised to any extent by
anyone  after  the  first  to  occur  of  the  following  events:

               (i)     The expiration of ten (10) years from the date the Option
     as  granted;

               (ii)     In the case of a 10% Stockholder, the expiration of five
     (5)  years  from  the  date  that  the  Option  was  granted;

               (iii)     Except  in  the  case  of  any Optionee who is disabled
     (within  the  meaning of Section 22(e)(3) of the Code) at the time Employee
     status  terminates, the expiration of ninety (90) days from the date of the
     Optionee's  Termination  of  Employment  for  any  reason,  other than such
     Optionee's  death  unless  the  Optionee dies within said thirty (30) days;

               (iv)     In  the  case of an Optionee who is disabled (within the
     mean  of  Section  22(e)(3)  of  the  Code)  at  the  time  Employee status

                                      - 8 -
<PAGE>
     terminates,  the  expiration  of  six  (6)  months  from  the  date  of the
     Optionee's  Termination  of  Employment  for  any  reason  other  than such
     Optionee's death unless the Optionee dies within said six (6) month period;

               (v)     The  expiration  of  six  (6) months from the date of the
     Optionee's  death.

          No Non-Qualified Stock Option may be exercised to any extent by anyone
after  the expiration of ten (10) years and one (1) day from the date the Option
was  granted.

          (b)     Subject  to  the  provisions  of  Section  4.4(a),  the  Plan
Administrator  shall  provide,  as  part  of  the terms of the Option, when such
Option  expires  and becomes unexercisable; and (without limiting the generality
of the foregoing) the Plan Administrator may provide as part of the terms of the
Option  that  such  Option  is  to  expire  immediately  upon  a  Termination of
Employment  for  any  reason.

Section  4.5  -  Consideration
------------     -------------

          In  consideration  of  the  granting of the Option, the Optionee shall
agree,  in  the  written  Stock Option Agreement, to remain in the employ of the
Company  or  a Parent or Subsidiary corporation for a period of at least one (1)
year  after  the Option is granted.  Nothing in this Plan or in any Stock Option
Agreement  hereunder shall confer upon any Optionee any right to continue in the
employ of the Company or any Parent or Subsidiary corporation or shall interfere
with  or  restrict  in  any way the rights of the Company and any such Parent or
Subsidiary  corporation,  which  are hereby expressly reserved, to discharge any
Optionee  at  any  time  for  any reason whatsoever, with or without good cause.

Section  4.6  -  Adjustments  in  Outstanding  Options
------------     -------------------------------------

          In  the  event  that  the  outstanding  shares of the stock subject to
Options  are  changed into or exchanged for a different number or kind of shares
of  the  Company  or  other  securities  of  the  Company  by  reason of merger,
consolidation,  recapitalization,  reclassification,  stock  split-up,  stock
dividend  or  combination  of  shares,  the  Plan  Administrator  shall  make an
appropriate  and  equitable  adjustment  in  the number and kind of shares as to
which  all  outstanding  Options, or portions thereof then unexercised, shall be
exercisable,  to  the  end  that  after  such event the Optionee's proportionate
interest  (vis-a-vis  the other stockholders of the Company) shall be maintained
as  before  the  occurrence  of  such  event.  Such adjustment in an outstanding
Option  shall be made without change in the total price applicable to the Option
or the unexercised portion of the Option (except for any change in the aggregate
price  resulting  from  rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in option price per share; provided, however,
that, in the case of Incentive Stock Options, each such adjustment shall be made
in  such  manner  as  not  to  constitute a "modification" within the meaning of
Section  424(h)  (3)  of  the  Code.  Any  such  adjustment  made by the Primary
Committee  (or  the  Board)  shall  be final and binding upon all Optionees, the
Company  and  all  other  interested  persons.

                                      - 9 -
<PAGE>
Section  4.7  -  Merger,  Consolidation,  Exchange,  Acquisition, Liquidation or
------------     ---------------------------------------------------------------
Dissolution
-----------

          In  its  absolute  discretion,  and on such terms and conditions as it
deems  appropriate,  the  Plan Administrator may provide as part of the terms of
the  Option  that  such  Option  cannot  be  exercised  after  the  merger  or
consolidation  of  the  Company  into  another  corporation,  the acquisition by
another  corporation  of  all  or  substantially  all of the Company's assets or
eighty  percent  (80%) or more of the Company's then outstanding voting stock or
the  liquidation or dissolution of the Company; and if the Plan Administrator so
provides, it may, in its absolute discretion and on such terms and conditions as
it  deems  appropriate,  also provide either by the terms of such Option or by a
resolution  adopted  prior  to  the  occurrence  of  such merger, consolidation,
exchange, acquisition, liquidation or dissolution, that, for some period of time
prior  to  such event, such Option shall be exercisable as to all shares covered
thereby,  notwithstanding  anything  to  the contrary in Section 4.3(a), Section
4.3(b)  and/or  in  any  installment  provisions  of  such  Option.

                                    ARTICLE V

                        EXERCISE OF DISCRETIONARY OPTIONS
                        ---------------------------------

Section  5.1  -  Persons  Eligible  to  Exercise
------------     -------------------------------

          During  the  lifetime  of the Optionee, only he may exercise an Option
granted  to  him,  or any portion thereof.  After the death of the Optionee, any
exercisable  portion  of  an  Option  may,  prior  to the time when such portion
becomes  unexercisable  under  Section  4.4  or Section 4.7, be exercised by his
personal  representative  or by any person empowered to do so under the deceased
Optionee's  Will  or under the then applicable laws of descent and distribution.

Section  5.2  -  Partial  Exercise
------------     -----------------

          At  any  time  and  from  time  to  time  prior  to  the time when any
exercisable  Option  or  exercisable portion thereof becomes unexercisable under
Section  4.4  or Section 4.7, such Option or portion thereof may be exercised in
whole  or  in part; provided, however, that the Company shall not be required to
issue  fractional shares and the Plan Administrator may, as part of the terms of
the  Option,  require  any  partial  exercise  to be with respect to a specified
minimum  number  of  shares.

Section  5.3  -  Manner  of  Exercise
------------     --------------------

          An  exercisable  Option,  or  any  exercisable portion thereof, may be
exercised  solely  by  delivery  to  the  Secretary  or his office of all of the
following  prior  to  the  time  when  such  Option  or  such  portion  becomes
unexercisable  under  Section  4.4  or  Section  4.7:

          (a)     Notice  in writing signed by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or portion
is exercised, such notice complying with all applicable rules established by the
Plan  Administrator;  and

                                     - 10 -
<PAGE>
          (b)     Payment of the option price for the purchased shares in any of
the  following  forms:

               (i)     full  payment  in  a  cashiers'  check  or  wire transfer
payable  to  the  Company's  order;  or

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

               (iii)     payment  effected  through  a  broker-dealer  sale  and
remittance  procedure  pursuant  to which the Optionee shall provide irrevocable
written instruction (I) to the designated brokerage firm to effect the immediate
sale  of  the  purchased  shares  and  to  remit to the Company, out of the sale
proceeds  available  on  the  settlement  date, an amount equal to the aggregate
option  price  payable  for the purchased shares plus all applicable federal and
state  income  and  employment  taxes  required to be withheld by the Company in
connection  with  such  purchase and sale and (II) to the Company to deliver the
certificates  for  the purchased shares directly to such brokerage firm in order
to  complete  the  sale  transaction;  or

               (iv)     any  combination  of  the  consideration provided in the
foregoing  subsections  (i),  (ii)  and  (iii).

          For purposes of this subsection 5.3(b), the Exercise Date shall be the
date  on which written notice of the Option exercise is received by the Company.
Except to the extent the sale and remittance procedure is utilized in connection
with  the  Option exercise, payment of the option price for the purchased shares
must  accompany  such  exercise  notice;  and

          (c)     Such  representations  and documents as the Plan Administrator
may,  in  its  absolute  discretion,  deem  necessary  or  advisable  to  effect
compliance  with  all  applicable  provisions  of the Securities Act of 1933, as
amended,  and  any  other  federal or state securities laws or regulations.  The
Plan  Administrator  may,  in  its  absolute  discretion,  also  take  whatever
additional  actions  it  deems  appropriate to effect such compliance including,
without  limitation,  placing  legends  on  share  certificates  and  issuing
stop-transfer  orders  to  transfer  agents  and  registrars;  and

          (d)     In  the  event  that  the  Option  or portion thereof shall be
exercised  pursuant  to  Section  5.1  by  any  person or persons other than the
Optionee,  appropriate  proof of the right of such person or persons to exercise
the  Option  or  portion  thereof.

                                     - 11 -
<PAGE>
Section  5.4  -  Conditions  to  Issuance  of  Stock  Certificates
------------     -------------------------------------------------

          The  shares  of stock issuable and deliverable upon the exercise of an
Option, or any portion thereof, may be either previously authorized but unissued
shares  or  issued  shares  which have then been reacquired by the Company.  The
Company  shall  not  be  required  to  issue  or  deliver  any  certificate  or
certificates  for  shares  of stock purchased upon the exercise of any Option or
portion  thereof  prior  to  fulfillment  of  all  of  the following conditions:

          (a)     The admission of such shares to listing on all stock exchanges
on  which  such  class  of  stock  is  then  listed;  and

          (b)     The  completion  of any registration or other qualification of
such  shares  under any state or federal law or under the rulings or regulations
of  the  Securities and Exchange Commission or any other governmental regulatory
body,  which  the  Plan  Administrator  shall,  in its absolute discretion, deem
necessary  or  advisable;  and

          (c)     The  obtaining  of  any  approval  or other clearance from any
state  or federal governmental agency which the Plan Administrator shall, in its
absolute  discretion,  determine  to  be  necessary  or  advisable;  and

          (d)     The payment to the Company of all amounts which it is required
to withhold under federal, state or local law in connection with the exercise of
the  Option;  and

          (e)     The  lapse  of  such  reasonable  period of time following the
exercise of the Option as the Plan Administrator may establish from time to time
for  reasons  of  administrative  convenience.

Section  5.5  -  Rights  as  Stockholders
------------     ------------------------

          The  holders  of  Options  shall not be, nor have any of the rights or
privileges  of, stockholders of the Company in respect of any shares purchasable
upon  the  exercise  of  any  part  of  an  Option unless and until certificates
representing  such  shares  have  been  issued  by  the Company to such holders.

Section  5.6  -  Transfer  Restrictions
------------     ----------------------

          The  Plan  Administrator,  in its absolute discretion, may impose such
restrictions  on the transferability of the shares purchasable upon the exercise
of  the  Option  as  it deems appropriate, and any such restriction shall be set
forth  in  the  respective  Stock Option Agreement and may be referred to on the
certificates  evidencing  such  shares.  The  Plan  Administrator may require an
Optionee  to  give  the  Company  prompt  notice of any disposition of shares of
stock,  acquired  by exercise of an Incentive Stock Option, within two (2) years
from the date of granting such Option or one (1) year after the transfer of such
shares  to  such  Optionee.  The  Plan  Administrator  may  direct  that  the
certificates  evidencing  shares acquired by exercise of an Option refer to such
requirement  to  give  prompt  notice  of  disposition.

                                     - 12 -
<PAGE>
                                   ARTICLE VI

                                 ADMINISTRATION
                                 --------------

Section  6.1  -  Administration  of  Plan
------------     ------------------------

          The  Plan  shall  be  administered  in  accordance  with the following
standards:

          (a)     The  Discretionary  Option Grant Program shall be administered
by the Plan Administrator, which shall be the Board or, in the discretion of the
Board, a Committee appointed by the Board and composed solely of two (2) or more
Non-Employee  Directors.  Members  of the Committee shall serve for such term as
the  Board  may  determine  and  shall be subject to removal by the Board at any
time.  Subject  to the provisions of the Plan, the Plan Administrator shall have
the sole and exclusive authority to grant Options under the Discretionary Option
Grant Program, to accelerate the exercisability of such Options, and to make all
determinations  necessary  or  advisable  for  the  administration  of  the
Discretionary  Option  Grant  Program.

          (b)     The  Plan  Administrator  shall  have full power and authority
(subject  to  the  express  provisions  of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
functions  within  the scope of its administrative authority and to make any and
all  determinations  with respect to those functions which it may deem necessary
or  advisable.  All  decisions of the Plan Administrator taken in good faith and
within  the  scope of its administrative authority under the Plan shall be final
and  binding  on  the  Optionee,  the  Company and all other parties who have an
interest  in  any  outstanding  Option  granted  pursuant  to  such  authority.

          (c)     Administration  of  the  Automatic  Option Grant provisions of
Article  VII  shall  be  self-executing in accordance with the express terms and
conditions  of  such  Article  VII, and the Plan Administrator shall exercise no
discretionary  functions with respect to the Option grants made pursuant to such
Article  VII.

Section  6.2  -  Compensation;  Professional  Assistance;  Good  Faith  Actions
------------     --------------------------------------------------------------

          Individuals  serving  as  Plan  Administrator  shall  not  receive
compensation  for  their services as such, but all expenses and liabilities they
incur  in  connection  with the administration of the Plan shall be borne by the
Company.  The  Plan  Administrator  may,  with the approval of the Board, employ
attorneys,  consultants, accountants, appraisers, brokers or other persons.  The
Plan  Administrator,  together  with the Company and its Officers and Directors,
shall  be  entitled  to rely upon the advice, opinions or valuations of any such
persons.  No individual serving as Plan Administrator shall be personally liable
for  any action, determination or interpretation made in good faith with respect
to the Plan or the Options, and such individuals shall be fully protected by the
Company  with  respect  to  any  such  action,  determination or interpretation.

                                     - 13 -
<PAGE>
                                   ARTICLE VII

                         AUTOMATIC OPTION GRANT PROGRAM
                         ------------------------------

Section  7.1  -  Eligible  Optionees
------------     -------------------

          (a)     Each  individual serving as a non-Employee member of the Board
at  any time on or after November 9, 1992, shall be eligible to receive periodic
automatic  Option  grants  pursuant  to  the  provisions  of  this  Article VII.
However,  in  no event will any non-Employee Board member be eligible to receive
Option  grants under this Article VII program, if such individual has previously
served  as  an  Employee of the Company or any Parent or Subsidiary corporation.

          (b)     Except  for  the  Option  grants  to  be  made pursuant to the
provisions of this Article VII, non-Employee Board members shall not be eligible
to  receive  any  additional  Option  grants  under  this  Plan.

Section  7.2  -  Grant  Dates
------------     ------------

          Option  grants  will  be  made  under  this  Article  VII on the dates
specified  below:

               (i)     On  November  9, 1992, each individual who is at the time
          serving  as  a non-Employee member of the Board shall automatically be
          granted  on  that  date  a  Non-Qualified Stock Option to purchase two
          thousand  (2,000) shares of Common Stock upon the terms and conditions
          of  this  Article  VII.

               (ii)     On  the  second  Monday  of  November of each subsequent
          year, commencing with the 1993 calendar year, each member of the Board
          shall  automatically  be  granted  on  that date a Non-Qualified Stock
          Option  to  purchase  two thousand (2,000) shares of Common Stock upon
          the  terms and conditions of this Article VII, or such other number of
          shares of Common Stock as may be fixed by the Board from time to time.

          There  shall be no limit on the number of such share Option grants any
one  non-Employee  Board  member  may  receive over his period of service on the
Board.  The  number  of shares subject to each automatic Option grant (including
grants  to  be  made  in  the  future)  shall  be subject to periodic adjustment
pursuant  to  the  applicable  provisions  of  Section  4.7.

Section  7.3  -  Option  Price
------------     -------------

          The  option  price  per  share  shall  be equal to one hundred percent
(100%) of the fair market value per share of Common Stock on the automatic grant
date.

                                     - 14 -
<PAGE>
Section  7.4  -  Payment
------------     -------

          The  option  price  shall  be  payable in one of the alternative forms
specified  below:

          (i)     full  payment  in a cashiers check or wire transfer payable to
     the  Company's  order;  or

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

          (iii)     payment effected through a broker-dealer sale and remittance
     procedure  pursuant to which the Optionee shall provide irrevocable written
     instructions  (I)  to the designated brokerage firm to effect the immediate
     sale  of  the purchased shares and to remit to the Company, out of the sale
     proceeds available on the settlement date, an amount equal to the aggregate
     option  price  payable  for the purchased shares and (II) to the Company to
     deliver  the  certificates  for  the  purchased  shares  directly  to  such
     brokerage  firm  in  order  to  complete  the  sale  transaction;  or

          (iv)     any  combination  of  the  consideration  provided  in  the
     foregoing  subsections  (i),  (ii),  and  (iii).

          For  purposes  of  this subsection 7.4, the Exercise Date shall be the
date  on which written notice of the Option exercise is received by the Company.
Except to the extent the sale and remittance procedure is utilized in connection
with  the  Option exercise, payment of the option price for the purchased shares
must  accompany  such  exercise  notice.

Section  7.5  -  Option  Term
------------     ------------

          Each  automatic grant under this Article VII shall have a maximum term
of  ten  (10)  years  measured  from  the  automatic  grant  date.

Section  7.6  -  Exercisability
------------     --------------

          Each  automatic  Option shall become exercisable for the Option shares
one  (1)  year  after  the  grant  date.

Section  7.7  -  Termination  of  Board  Service
------------     -------------------------------

          (a)     Should  the  Optionee  cease service as a Board member for any
reason while holding one or more automatic Option grants under this Article VII,
then  such  options  granted  hereunder not exercised by the Board member at the
time  of  termination  of  Board  membership,  shall  terminate  and cease to be
exercisable  as  of  such  date.

                                     - 15 -
<PAGE>
          (b)     In  no  event shall any automatic grant under this Article VII
remain  exercisable  after  the  specified  expiration date of the ten (10) year
Option  term.  Upon  the  expiration  of  the  applicable  exercise  period  in
accordance  with  subparagraph  (a) above or (if earlier) upon the expiration of
the  ten  (10)  year Option term, the automatic Option grant shall terminate and
cease  to  be  exercisable.

Section  7.8  -  Stockholder  Rights
------------     -------------------

          The  holder  of an automatic Option grant under this Article VII shall
have  no  stockholder  rights  with respect to any shares covered by such Option
until such individual shall have exercised the Option, paid the option price for
the  purchased  shares  and  been  issued  a  stock certificate for such shares.

Section  7.9  -  Corporate  Transaction
------------     ----------------------

          In the event of any of the following stockholder-approved transactions
to  which  the  Company  is  a  party (a "Corporate Transaction"): any merger or
consolidation  of  the  Company  into  another  corporation,  the acquisition by
another  corporation  of all or substantially all of the Company's assets or the
liquidation  or dissolution of the Company, the exercisability of each automatic
Option  grant at the time outstanding under this Article VII shall automatically
accelerate  so  that  each such option shall, immediately prior to the specified
effective  date  for  the  Corporate  Transaction, become fully exercisable with
respect  to  the  total  number of shares of Common Stock at the time subject to
such  Option  and  may be exercised for all or any portion of such shares.  Upon
the consummation of the Corporate Transaction, all automatic Option grants under
this  Article  VII  shall  terminate  and  cease  to  be  outstanding.

Section  7.10  -  Change  in  Control
-------------     -------------------

          In  connection  with  any  Change  in  Control  of  the  Company,  the
exercisability of each automatic Option grant at the time outstanding under this
Article  VII  shall  automatically  accelerate  so  that each such Option shall,
immediately  prior  to  the  specified effective date for the Change in Control,
become  fully  exercisable  with respect to the total number of shares of Common
Stock  at  the  time  subject to such Option and may be exercised for all or any
portion  of  such shares.  For purposes of this Article VII, a Change in Control
shall be deemed to occur when any person or related group or persons (other than
the  Company or a person that directly or indirectly controls, is controlled by,
or  is  under  common control with, the Company) directly or indirectly acquires
beneficial  ownership  [within  the  meaning  of  Rule  13d-3  of the Securities
Exchange Act of 1934, as amended (the "1934 Act")] of securities possessing more
than  eighty  percent  (80%) of the total combined voting power of the Company's
outstanding  securities  pursuant to a tender or exchange offer made directly to
the  Company's stockholders which the Board does not recommend such stockholders
to  accept.

          The  shares  of  Common  Stock  subject  to each Option surrendered in
connection  with  the  Change  in  Control shall not be available for subsequent
issuance  under  this  Plan.

                                     - 16 -
<PAGE>
          The  automatic  Option grants outstanding under this Article VII shall
in  no  way affect the right of the Company to adjust, reclassify, reorganize or
otherwise  change  its  capital  or business structure or to merge, consolidate,
dissolve,  liquidate  or  sell  or  transfer  all or any part of its business or
assets.

Section  7.11  -  Remaining  Terms
-------------     ----------------

          The  remaining  terms  and  conditions  of each automatic Option grant
shall  be  as  set  forth  in  the  prototype  Directors  Automatic Option Grant
Agreement.

Section  7.12  -  Amendment  of  the  Automatic  Grant  Provisions
-------------     ------------------------------------------------

          The  provisions  of this Automatic Option Grant Program, including any
automatic  Option  grants outstanding under this Article VII, may not be amended
at  intervals  more frequently than once every six (6) months, other than to the
extent  necessary  to  comply  with  applicable  federal  income  tax  laws  and
regulations.

                                  ARTICLE VIII

                            MISCELLANEOUS PROVISIONS
                            ------------------------

Section  8.1  -  Options  Not  Transferable
------------     --------------------------

          During  the lifetime of the Optionee, Options granted under either the
Discretionary  Option  Grant  Program or the Automatic Option Grant Program (and
any  stock  appreciation  rights attaching thereto) shall be exercisable only by
the  Optionee  and shall not be assignable or transferable by the Optionee other
than  by a transfer of the Option effected by the Optionee's will or by the laws
of descent and distribution following the Optionee's death.  Accordingly, except
for  such  permitted  transfer,  the Option (or any interest or right therein or
part  thereof)  shall  not  be  subject  to disposition by transfer, alienation,
anticipation,  pledge,  encumbrance,  assignment or any other means whether such
disposition  be  voluntary  or  involuntary  or by operation of law by judgment,
levy,  attachment,  garnishment  or  any  other  legal  or equitable proceedings
(including bankruptcy), and any such attempted disposition thereof shall be null
and  void  and  of  no  effect.

Section  8.2  -  Amendment,  Suspension  or  Termination  of  the  Plan
------------     ------------------------------------------------------

          (a)     The  Plan  may  be  wholly  or  partially amended or otherwise
modified,  suspended  or  terminated  at  any  time or from  time to time by the
Board;  provided,  however,  that  (I)  no such amendment or modification shall,
without  the  consent  of  the Option holders, adversely affect their rights and
obligations  under  their Options and (II) any amendment to the Automatic Option
Grant  program  shall  be effected in compliance with the limitations of Section
7.12.  In  addition,  the Board shall not, without the approval of the Company's
stockholders,  (i)  materially  increase  the  maximum number of shares issuable
under  the  Plan,  except  for  permissible  adjustments under Section 2.3, (ii)
materially  modify  the  eligibility requirements for the grant of Options under
the  Plan, (iii) materially increase the benefits accruing to participants under
the  Plan  or  (iv)  increase  the maximum number of  shares for which Automatic
Option  Grants  may  be  periodically made pursuant to the provisions of Article
VII.

                                     - 17 -
<PAGE>
          (b)     No  Option  may be granted during any period of suspension nor
after  termination  of the Plan, and in no event may any Option be granted under
this  Plan  after  the  earlier  of  the  following  events:

               (i)     December  31,  2006;  or

               (ii)     the  date  on  which  all  shares available for issuance
under  the  Plan  shall have been issued or canceled pursuant to the exercise or
surrender  of  the  Options  granted  hereunder.

          If the date of termination is determined under clauses (i) above, then
options  outstanding  on  such  date shall thereafter continue to have force and
effect  in  accordance  with  the  provisions of the instruments evidencing such
options.

Section  8.3  -  Effective  Date  of  Plan
------------     -------------------------

          (a)     The Plan was initially adopted by the Board on April 25, 1984,
and  approved  by  the  Company's  stockholders on May 22, 1984.  On November 9,
1992,  the  Board approved a restatement of the Plan, effective as of such date,
to (i) increase the number of shares of Common Stock reserved for issuance under
the Plan by an additional 450,000 shares, (ii) bring the Plan in compliance with
the applicable requirements of SEC Rule 16b-3, as amended May 1, 1991, under the
1934  Act,  (iii)  revise  the  Incentive Stock Option provisions of the Plan to
conform  to  applicable  changes  in  the  federal  tax laws, (iv) establish the
Automatic Option Grant Program for non-Employee Board members and (v) extend the
term  of  the  Plan  to  December  31,  2002.  The November 1992 restatement was
approved  by  the  Company's stockholders on May 26, 1993.  On February 7, 1997,
the  Board  approved an Amendment to the Plan, effective as of such date, to (i)
increase  the  number  of shares of Common Stock reserved for issuance under the
Plan  by  an  additional 500,000 shares, and (ii) extend the term of the Plan to
December 31, 2006.  The February 1997 Amendment will be submitted to stockholder
approval  at  the 1997 Annual Meeting and no options granted on the basis of the
500,000  share increase shall  become exercisable in whole or in part unless and
until  such  stockholder  approval  shall  have been obtained at the 1997 Annual
Meeting.

          The  November  1992  restatement  shall  apply only to options granted
under the Plan from and after the November 9, 1992, effective date.  Each option
issued  and  outstanding under the Plan immediately prior to such effective date
shall  continue  to be governed by the terms and conditions of the Plan (and the
instrument  evidencing  such  option)  as  in effect on the date such option was
previously granted, and nothing in the November 1992 restatement shall be deemed
to  affect  or otherwise modify the rights or obligations of the holders of such
options  with  respect  to the acquisition of shares of Common Stock thereunder.

                                     - 18 -
<PAGE>
          (b)     The  sale  and  remittance  procedure  for  the  exercise  of
outstanding  options  shall  be available for all options granted under the Plan
after  November  9,  1992,  and  for all Non-Qualified Stock Options outstanding
under  the  Plan  on  such  date.  The  Plan  Administrator  may also allow such
procedure  to  be  utilized  in  connection  with  one  or  more  disqualifying
dispositions  of  Incentive  Stock  Option  shares  effected  after  such  date.

          (c)     Options  may  be granted under this Plan to purchase shares of
Common Stock in excess of the number of shares then available for issuance under
the  Plan,  provided  (i)  an amendment to increase the maximum number of shares
issuable  under  the  Plan is adopted by the Board prior to the initial grant of
any  such  option  and is thereafter submitted to the Company's stockholders for
approval  and (ii) each option so granted is not to become exercisable, in whole
or  in  part,  at  any time prior to the obtaining of such stockholder approval.

Section  8.4  -  Effect  of  Plan  Upon  Other  Options  and  Compensation Plans
------------     ---------------------------------------------------------------

          The  adoption  of this Plan shall not affect any other compensation or
incentive  plans  in  effect  for  the  Company  or  any  Parent  or  Subsidiary
corporation.  Nothing  in this Plan shall be construed to limit the right of the
Company or any Parent or Subsidiary corporation (a) to establish any other forms
of  incentives  or  compensation  for  employees of the Company or any Parent or
Subsidiary  corporation  or  (b) to grant or assume options otherwise than under
this Plan in connection with any proper corporate purpose, including, but not by
way  of  limitation,  the  grant or assumption of options in connection with the
acquisition  by  purchase,  lease,  merger,  consolidation  or otherwise, of the
business,  stock  or  assets  of  any  corporation,  firm  or  association.

Section  8.5  -  Titles
------------     ------

          Titles  are  provided herein for convenience only and are not to serve
as  a  basis  for  interpretation  or  construction  of  the  Plan.

We  hereby  certify that the above Amended and Restated Stock Option Plan of the
Company,  was duly adopted by the Board of Directors and the Stockholders of the
Company  as  of  January  15,  2002,  and  May  30,  2002,  respectively.

Executed  at  Aliso  Viejo,  California  on  May  30,  2002.

         /s/James  E.  Buncher                      /s/  Ronald  I.  Brendzel
----------------------------------------         -------------------------------
JAMES  E.  BUNCHER                               RONALD  I.  BRENDZEL
President  and  Chief  Executive Officer         Senior Vice President and
Secretary

                                     - 19 -
<PAGE>

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