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                                                                 Exhibit 10(b)
 
                               AMDAHL CORPORATION
                           1994 STOCK INCENTIVE PLAN
                           -------------------------


                                  ARTICLE ONE
                                    GENERAL
                                    -------


     I.   PURPOSE OF THE PLAN

          A.  This 1994 Stock Incentive Plan (the "Plan") is intended to promote
the interests of Amdahl Corporation, a Delaware corporation (the "Corporation"),
by providing (i) key employees (including officers) of the Corporation (or its
subsidiary corporations) who are responsible for the management, growth and
financial success of the Corporation (or its subsidiary corporations), (ii) the
non-employee members of the Corporation's Board of Directors or the board of
directors of any subsidiary corporation and (iii) those consultants and other
independent contractors who provide valuable services to the Corporation (or its
subsidiary corporations) with the opportunity to acquire a proprietary interest,
or otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation (or its
subsidiary corporations).

          B.  The Plan shall become effective upon its approval by the
Corporation's stockholders at the 1994 Annual Meeting of Stockholders to be 
held on May 5, 1994.  Such date is hereby designated as the Effective Date of 
the Plan.
 
          C.  This Plan shall serve as the successor to the Corporation's four
existing stock programs - the Stock Option Plan (1971), the Stock Option Plan
(1974), the Non-Qualified Stock Option Plan (1982)  and the Restricted Stock
Plan (collectively, the "Predecessor Plans"), and no further option grants or
stock issuances shall be made under the Predecessor Plans after the Effective
Date.  All options outstanding under the Predecessor Plans and all unvested
shares issued thereunder as of such Effective Date shall immediately be
incorporated into this Plan and treated as outstanding options and share
issuances under this Plan.  However, each outstanding option and share issuance
so incorporated shall continue to be governed solely by the express terms and
conditions of the instrument evidencing such option grant or share issuance, and
no provision of this Plan shall be deemed to affect or otherwise modify the
rights or obligations of the holders of such incorporated options or share
issuances with respect to their acquisition of shares of the Corporation's
common stock, par value of $0.05 per share thereunder.

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     II.  DEFINITIONS

     A.  For purposes of the Plan, the following definitions shall be in effect:

     BOARD:  the Corporation's Board of Directors.

     CHANGE IN CONTROL: a change in ownership or control of the Corporation
effected through any of the following transactions:

          -  a direct acquisition by any person (or related group of persons) of
     beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
     securities possessing more than ten percent (10%) of the total combined
     voting power of the Corporation's outstanding securities,

          -  the direct or indirect acquisition by any person or related group
     of persons, whether by tender or exchange offer made directly to the
     Corporation's stockholders, private purchases from one or more of the
     Corporation's stockholders, open market purchases or any other transaction,
     of additional securities of the Corporation which increases the beneficial
     ownership (within the meaning of Rule 13d-3 of the 1934 Act) of the total
     securities holdings of such person (or related group of persons) to a level
     of securities possessing more than fifty percent (50%) of the total
     combined voting power of the Corporation's outstanding securities, or

          -  the direct or indirect acquisition by any person or related group
     of persons, whether by tender or exchange offer made directly to the
     Corporation's stockholders, private purchases from one or more of the
     Corporation's stockholders, open market purchases or any other transaction,
     of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act)
     of securities of the Corporation possessing sufficient voting power in the
     aggregate to elect an absolute majority of the Board (rounded up to the
     next whole number).

     CODE:  the Internal Revenue Code of 1986, as amended.

     COMMITTEE:  a committee of two (2) or more non-employee Board members
appointed by the Board.

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     COMMON STOCK:  shares of the Corporation's common stock, par value of
$0.05 per share.

     CORPORATE TRANSACTION:  any of the following stockholder-approved
transactions to which the Corporation is a party:

          -  a merger or consolidation in which the Corporation is not the
     surviving entity, except for a transaction the principal purpose of which
     is to change the state in which the Corporation is incorporated,

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

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

     EMPLOYEE:  an individual who performs services while in the employ of the
Corporation or one or more Subsidiaries, subject to the control and direction of
the employer entity not only as to the work to be performed but also as to the
manner and method of performance.

     EXERCISE DATE:  the date on which the Corporation shall have received
written notice of the option exercise.

     FAIR MARKET VALUE: the mean between the highest and lowest selling prices
per share on the date in question on the principal exchange on which the Common
Stock is then listed or admitted to trading, as the prices are officially quoted
by the composite tape of transactions on the exchange. If there are no reported
sales of the Common Stock on the date in question, then the Fair Market Value
shall be the mean between the highest and lowest selling prices on the last
previous date for which quotations exist.

     HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through the following transaction:


          -  the direct or indirect acquisition by any person or related group
     of persons of securities possessing more than fifty percent (50%) of the
     total

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     combined voting power of the Corporation's outstanding securities  pursuant
     to a tender or exchange offer made directly to the Corporation's
     stockholders which the Board does not recommend such stockholders to
     accept, and
 
          -  more than fifty percent (50%) of the acquired securities are
     accepted from holders other than the officers and directors of the
     Corporation subject to the short-swing profit restrictions of Section 16 of
     the 1934 Act.

     INCENTIVE OPTION:  a stock option which satisfies the requirements of Code
Section 422.

     INVOLUNTARY TERMINATION:  the termination of the Service of any Optionee or
Participant which occurs by reason of:

          -  such individual's involuntary dismissal or discharge by the
     Corporation for reasons other than Misconduct, or

          -  such individual's voluntary resignation following (A) a change in
     his or her position with the Corporation which materially reduces his or
     her level of responsibility, (B) a reduction in his or her level of
     compensation (including base salary, fringe benefits and any non-
     discretionary and objective-standard incentive payment or bonus award) by
     more than five percent (5%) or (C) a relocation of such individual's place
     of employment by more than fifty (50) miles, provided and only if such
     change, reduction or relocation is effected by the Corporation without the
     individual's consent.
 
     MISCONDUCT:  the commission of any act of fraud, embezzlement or dishonesty
by the Optionee or Participant, any unauthorized use or disclosure by such
individual of confidential information or trade secrets of the Corporation or
its Subsidiaries, or any other intentional misconduct by such individual
adversely affecting the business or affairs of the Corporation in a material
manner.  The foregoing definition shall not be deemed to be inclusive of all the
acts or omissions which the Corporation or any Subsidiary may consider as
grounds for the dismissal or discharge of any Optionee, Participant or other
individual in the Service of the Corporation.

     NEWLY ISSUED SHARES:  shares of Common Stock drawn from the Corporation's
authorized but unissued shares of Common Stock.

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     1934 ACT:  the Securities and Exchange Act of 1934, as amended.

     NON-STATUTORY OPTION:  a stock option not intended to meet the requirements
of Code Section 422.

     OPTIONEE:  any person to whom an option is granted under the Discretionary
Option Grant, Automatic Option Grant or Salary Reduction Grant Program in effect
under the Plan.

     PARTICIPANT:  any person who receives a direct issuance of Common Stock
under the Stock Issuance Program in effect under the Plan.

     PERMANENT DISABILITY OR PERMANENTLY DISABLED:  the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.

     PLAN ADMINISTRATOR:  the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Discretionary Option Grant, the
Salary Reduction and the Stock Issuance Programs.

     SERVICE: the provision of services on a periodic basis to the Corporation
or any Subsidiary in the capacity of an Employee, a non-employee member of the
board of directors or an independent consultant or advisor, except to the extent
otherwise specifically provided in the applicable stock option or stock issuance
agreement.

     SUBSIDIARY:  each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in any other corporation in
such chain.  For purposes of the grant of Non-Statutory Options and stock
appreciation rights under the Discretionary Option Grant Program, the grant of
Non-Statutory Options under the Salary Reduction Grant Program and direct stock
issuances under the Stock Issuance Program, the term Subsidiary shall also
include any partnership, joint venture or other business entity in which the
Corporation owns, directly or indirectly through one or more Subsidiaries, a
fifty percent (50%) or greater capital or profit interest.

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     TAKE-OVER PRICE: the greater of (i) the Fair Market Value per share of
Common Stock on the date the option is surrendered to the Corporation in
connection with a Hostile Take-Over or (ii) the highest reported price per share
of Common Stock paid by the tender offeror in effecting such Hostile Take-Over.
However, if the surrendered option is an Incentive Option, the Take-Over Price
shall not exceed the clause (i) price per share.

     TREASURY SHARES:  shares of Common Stock reacquired by the Corporation and
held as treasury shares.

     III.  STRUCTURE OF THE PLAN

     A.  Stock Programs.  The Plan shall be divided into five separate
components:

          -  The Discretionary Option Grant Program, under which eligible
     individuals may, at the discretion of the Plan Administrator, be granted
     options to purchase shares of Common Stock in accordance with the
     provisions of Article Two.

          -  The Automatic Option Grant Program, under which non-employee Board
     members shall automatically receive special option grants at periodic
     intervals to purchase shares of Common Stock in accordance with the
     provisions of Article Three.

          -  The Stock Fee Program, under which the non-employee Board members
     may elect to apply all or a portion of their annual retainer fee to the
     acquisition of shares of Common Stock in accordance with the provisions of
     Article Four.

          -  The Salary Reduction Grant Program, under which eligible
     individuals may, pursuant to the provisions of Article Five, elect to have
     a portion of their base salary reduced each year in return for options to
     purchase shares of Common Stock at an aggregate discount from the Fair
     Market Value of the option shares on the grant date equal to the salary
     reduction amount.

          -  The Stock Issuance Program, under which eligible individuals may,
     pursuant to the provisions of Article Six, be issued shares of Common Stock
     directly, through the immediate purchase of such shares at a price less
     than, equal to or greater than their Fair Market Value at the time of
     issuance, as a bonus tied to the

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     performance of services or the Corporation's attainment of financial
     objectives, or pursuant to the individual's election to receive such shares
     in lieu of base salary.

     B.  General Provisions.  Unless the context clearly indicates otherwise,
the provisions of Articles One and Seven shall apply to the Discretionary Option
Grant, Automatic Option Grant, Salary Reduction Grant, Stock Issuance and Stock
Fee Programs and shall accordingly govern the interests of all individuals under
the Plan.

     IV.  ADMINISTRATION OF THE PLAN

     A.  The Committee shall have sole and exclusive authority to administer the
Discretionary Option Grant, Salary Reduction Grant and Stock Issuance Programs.
No Board member shall be eligible to serve on the Committee if such individual
has, within the twelve (12)-month period immediately preceding the date such
individual is to be appointed to the Committee, received an option grant or
stock issuance under this Plan or any other stock option, stock appreciation,
stock bonus or other stock plan of the Corporation (or any Subsidiary), other
than pursuant to the Automatic Option Grant Program specified in Article Three
or the Stock Fee Program specified in Article Four or the predecessor automatic
option grant program in effect under the Stock Option Plan (1974).  Members of
the Committee shall serve for such period as the Board may determine and shall
be subject to removal by the Board at any time.

     B.  The Plan Administrator shall have full power and discretion (subject to
the express provisions of the Plan) to establish such rules and regulations as
it may deem appropriate for the proper administration of the Discretionary
Option Grant, Salary Reduction Grant and Stock Issuance Programs and to make
such determinations under, and issue such interpretations of, the provisions of
each such program and any outstanding option grants or stock issuances
thereunder as it may deem necessary or advisable.  Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Discretionary Option Grant, Salary Reduction Grant or Stock Issuance Program
or any outstanding option or stock issuance thereunder.

     D.  Service on the Committee shall constitute service as a Board member,
and members of the Committee shall accordingly be entitled to full
indemnification and reimbursement as Board members

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for their service on the Committee.  No member of the Committee shall be liable
for any act or omission made in good faith with respect to the Plan or any
option granted or shares issued under the Plan.

     E.  Administration of the Automatic Option Grant and the Stock Fee Programs
shall be self-executing in accordance with the express terms and conditions of
Articles Three and Four, respectively, and the Plan Administrator shall not
exercise any discretionary functions with respect to the option grants or stock
issuances made pursuant to such programs.

     V.  ELIGIBILITY

     A.  The persons eligible to participate in the Discretionary Option Grant
Program under Article Two, the Salary Reduction Grant Program under Article Five
and the Stock Issuance Program under Article Six are as follows:

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

               -  those consultants or other independent contractors who provide
     valuable services to the Corporation (or its Subsidiaries).

     B.  Non-employee Board members shall not be eligible to participate in the
Discretionary Option Grant, Salary Reduction Grant or Stock Issuance Program or
in any other stock option, stock purchase, stock bonus or other stock plan of
the Corporation (or its Subsidiaries).  Such non-employee Board members shall,
however, be eligible to participate in the Automatic Option Grant Program under
Article Three and the Stock Fee Program under Article Four.

     C.  The Plan Administrator shall have full authority to determine, (i) with
respect to grants made under the Discretionary Option Grant and Salary Reduction
Grant Programs, which eligible individuals are to receive such grants, the
number of shares to be covered by each such grant, the status of any granted
option as either an Incentive Option or a Non-Statutory Option, the time or
times at which each granted option is to become exercisable and the maximum term
for which the option may remain outstanding and (ii) with respect to stock
issuances under the Stock Issuance Program, which eligible individuals are to be
selected for participation, the number of shares to be issued to each selected
individual, the vesting schedule (if any) to be applicable to the issued shares
and the consideration to be paid for such shares.

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     VI.  STOCK SUBJECT TO THE PLAN

     A.  Shares of Common Stock shall be available for issuance under the Plan
and shall be drawn from either the Corporation's authorized but unissued shares
of Common Stock or from reacquired shares of Common Stock, including shares
repurchased by the Corporation on the open market.  The number of shares of
Common Stock reserved for issuance over the term of the Plan shall initially be
fixed at 14,300,000 shares, subject to adjustment from time to time in
accordance with the provisions of this Section VI.  Such authorized share
reserve shall be comprised of (i) the number of shares which remain available
for issuance under the Predecessor Plans as of the Effective Date, including the
shares subject to the outstanding options incorporated into this Plan and any
other shares which would have been available for future option grant under the
Predecessor Plans (estimated to be 12,900,000 shares in the aggregate), plus
(ii) an additional increase of 1,400,000 shares of Common Stock.  To the extent
one or more outstanding options under the Predecessor Plans which have been
incorporated into this Plan are subsequently exercised, the number of shares
issued with respect to each such option shall reduce, on a share-for-share
basis, the number of shares available for issuance under this Plan.

     B.  The number of shares of Common Stock available for issuance under the
Plan shall automatically increase on the first trading day of each calendar year
during the term of the Plan, beginning with the 1995 calendar year, by an amount
equal to one percent (1%) of the shares of Common Stock outstanding on December
31 of the immediately preceding calendar year; provided, however that each such
one percent (1%) annual increase shall be subject to reduction to the extent
necessary so that the maximum number of shares of Common Stock available
immediately thereafter for future option grants and share issuances under the
Plan shall not exceed 5,000,000 shares, subject to adjustment from time to time
in accordance with the provisions of this Section VI.  None of the additional
shares resulting from such annual increases may be made the subject of Incentive
Options granted under the Plan.

     C. After the Effective Date of the Plan, in no event may any one individual
participating in the Plan be granted stock options, concurrently or
independently exercisable stock appreciation rights and receive direct stock
issuances exceeding 2,000,000 shares in the aggregate over the term of the Plan,
subject to periodic adjustment for certain changes in the Company's capital
structure in accordance with the provisions of this Section VI. E.

     D.  Should one or more outstanding options under this Plan (including
outstanding options under the Predecessor Plans incorporated into this Plan)
expire or terminate for any reason prior to exercise in full (including any
option cancelled in

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accordance with the cancellation-regrant provisions of Section IV of Article
Two), then the shares subject to the portion of each option not so exercised
shall be available for subsequent issuance under the Plan.  Shares subject to
any stock appreciation rights exercised under the Plan and all share issuances
under the Plan (other than issuances in payment of exercised stock appreciation
rights), whether or not the issued shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent issuance under the Plan.  In addition, should the exercise price of
an outstanding option under the Plan (including any option incorporated from the
Predecessor Plans) be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an outstanding option under the Plan or the vesting of a share issuance under
the Plan, then the number of shares of Common Stock available for issuance under
the Plan shall be reduced by the gross number of shares for which the option is
exercised or which vest under the share issuance, and not by the net number of
shares of Common Stock actually issued to the holder of such option or share
issuance.

     E.  Should any change be made to the Common Stock issuable under the Plan
by reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the limit on the number and/or class of
securities which are allowed to remain available for future option grants and
stock issuances in connection with the automatic one percent (1%) increase to
the share reserve effected each year under the Plan, (iii) the maximum number
and/or class of securities for which any one individual participating in the
Plan may be granted stock options, concurrently or independently exercisable
stock appreciation rights and direct stock issuances in the aggregate over the
term of the Plan, (iv) the number and/or class of securities for which automatic
option grants are to be subsequently made to each newly elected or continuing
non-employee Board member under the Automatic Option Grant Program and (v) the
number and/or class of securities and price per share in effect under each
option and stock appreciation right outstanding under the Plan (including each
option incorporated into this Plan from the Predecessor Plans).  Such
adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits under such
options.  The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.

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                                  ARTICLE TWO

                       DISCRETIONARY OPTION GRANT PROGRAM
                       ----------------------------------


     I.  TERMS AND CONDITIONS OF OPTIONS

     Options granted pursuant to the Discretionary Option Grant Program shall be
authorized by action of the Plan Administrator and may, at the Plan
Administrator's discretion, be either Incentive Options or Non-Statutory
Options.  Individuals who are not Employees may only be granted Non-Statutory
Options.  Each granted option shall be evidenced by one or more instruments in
the form approved by the Plan Administrator; provided, however, that each such
instrument shall comply with the terms and conditions specified below.  Each
instrument evidencing an Incentive Option shall, in addition, be subject to the
applicable provisions of Section II of this Article Two.

     A.  Exercise Price.

     1.  The exercise price per share under this Article Two shall be fixed by
the Plan Administrator in accordance with the following provisions:

               The exercise price per share of Common Stock subject to an
     Incentive Option shall in no event be less than one hundred percent (100%)
     of the Fair Market Value of such Common Stock on the grant date.

               The exercise price per share of Common Stock subject to a Non-
     Statutory Option shall be the amount determined by the Plan Administrator
     at the time of grant and may be less than, equal to or greater than the
     Fair Market Value of such Common Stock on the grant date.

     2.  The exercise price shall become immediately due upon exercise of the
option and, subject to the provisions of Section I of Article Seven and the
instrument evidencing the grant, shall be payable in one of the alternative
forms specified below:

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

          (ii) full payment in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise Date,

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          (iii)  full payment in a combination of shares of Common Stock held
for the requisite period necessary to avoid a charge to the Corporation's
earnings for financial reporting purposes and valued at Fair Market Value on the
Exercise Date and cash or check made payable to the Corporation's order, or

          (iv) to the extent the option is exercised for vested shares, full
payment through a broker-dealer sale and remittance procedure pursuant to which
the Optionee shall provide concurrent irrevocable written instructions (I) to a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable federal,
state and local income and employment taxes required to be withheld by the
Corporation in connection with such purchase and (II) to the Corporation to
deliver the certificates for the purchased shares directly to such brokerage
firm in order to complete the sale transaction (the "Immediate Sale Program").

          B.     Term and Exercise of Options.  Each option granted under this
Article Two shall be exercisable at such time or times, during such period and
for such number of shares as shall be determined by the Plan Administrator and
set forth in the instrument evidencing such option.  No Incentive Option shall,
however, have a maximum term in excess of ten (10) years, and no Non-Statutory
Option shall have a maximum term in excess of fifteen (15) years.  During the
lifetime of the Optionee, the option, together with any stock appreciation
rights pertaining to such option, shall be exercisable only by the Optionee and
shall not be assignable or transferable except for a transfer of the option
effected by will or by the laws of descent and distribution following the
Optionee's death.

          C.     Termination of Service.

          1.     Should an Optionee cease Service for any reason (including
death or Permanent Disability) while holding one or more outstanding options
under this Article Two, then none of those options shall (except to the extent
otherwise provided pursuant to subparagraph I.C.7 below) remain exercisable for
more than a thirty-six (36)-month period (or such shorter period determined by
the Plan Administrator and set forth in the instrument evidencing the grant)
measured from the date of such cessation of Service.

          2.     Any option held by the Optionee under this Article Two and
exercisable in whole or in part on the date of his or her death may be
subsequently exercised by the personal representative of the Optionee's estate
or by the person or persons to whom the

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option is transferred pursuant to the Optionee's will or in accordance with the
laws of descent and distribution.  However, the right to exercise such option
shall lapse upon the earlier of (i) the third anniversary of the date of the
Optionee's death (or such shorter period determined by the Plan Administrator
and set forth in the instrument evidencing the grant) or (ii) the specified
expiration date of the option term.  Accordingly, upon the occurrence of the
earlier event, the option shall terminate and cease to remain outstanding.

          3.     Under no circumstances shall any such option be exercisable
after the specified expiration date of the option term.

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

          5.     Should the Optionee's Service be terminated for Misconduct, all
outstanding options held by the Optionee under this Article Two shall terminate
immediately and cease to remain outstanding.

          6.     The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to permit one or more options held by the Optionee
under this Article Two to be exercised, during the limited post-Service exercise
period applicable under this Section I.C, not only with respect to the number of
vested shares of Common Stock for which each such option is exercisable at the
time of the Optionee's cessation of Service but also with respect to one or more
subsequent installments of vested shares for which the option would otherwise
have become exercisable had such cessation of Service not occurred.

          7.     The Plan Administrator shall have full power and authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to extend the period of time for which the option is
to remain exercisable following the Optionee's cessation of Service or death
from the

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limited period in effect under subparagraphs I.C.1 and I.C.2 above to such
greater period of time as the Plan Administrator shall deem appropriate.  In no
event, however, shall such option be exercisable after the specified expiration
date of the option term.

          D.     Stockholder Rights.  An Optionee shall have none of the rights
of a stockholder with respect to any option shares until such individual shall
have exercised the option and paid the exercise price for the purchased shares.

          E.     Repurchase Rights.  The shares of Common Stock acquired under
this Article Two may be subject to repurchase by the Corporation in accordance
with the following provisions:

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

          2.     All of the Corporation's outstanding repurchase rights under
this Article Two shall automatically terminate, and all shares subject to such
terminated rights shall immediately vest in full, upon the occurrence of a
Corporate Transaction, except to the extent: (i) any such repurchase right is
expressly assigned to the successor corporation (or parent thereof) in
connection with the Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed by the Plan Administrator at the time the
repurchase right is issued.

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

     II.  INCENTIVE OPTIONS

          The terms and conditions specified below shall be applicable to all
Incentive Options granted under this Article Two.  Incentive Options may only be
granted to individuals who are

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Employees.  Options which are specifically designated as Non-Statutory Options
when issued under the Plan shall not be subject to such terms and conditions.

          A.     Dollar Limitation.  The aggregate Fair Market Value (determined
as of the respective date or dates of grant) of the Common Stock for which one
or more options granted to any Employee under this Plan (or any other option
plan of the Corporation or its Subsidiaries) may for the first time become
exercisable as incentive stock options under the federal tax laws during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000).  To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the federal tax laws shall be applied on the basis of the order in which
such options are granted.  Should the number of shares of Common Stock for which
any Incentive Option first becomes exercisable in any calendar year exceed the
applicable One Hundred Thousand Dollar ($100,000) limitation, then the option
may nevertheless be exercised in that calendar year for the excess number of
shares as a Non-Statutory Option under the federal tax laws.

          B.     10% Stockholder.  If any individual to whom an Incentive Option
is granted is the owner of stock (as determined under Section 424(d) of the
Code) possessing ten percent (10%) or more of the total combined voting power of
all classes of stock of the Corporation or any one of its Subsidiaries, then the
exercise price per share shall not be less than one hundred ten percent (110%)
of the Fair Market Value per share of Common Stock on the grant date and the
option term shall not exceed five (5) years measured from the grant date.

          Except as modified by the preceding provisions of this Section II, the
provisions of Articles One, Two and Seven shall apply to all Incentive Options
granted hereunder.

     III.  CORPORATE TRANSACTIONS/CHANGES IN CONTROL/
                     HOSTILE TAKE-OVER

          A.     In the event of any Corporate Transaction, each option which is
at the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for such Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares.  However, an outstanding
option under this Article Two shall NOT so

                                      15
<PAGE>
 
accelerate if and to the extent:  (i) such option is, in connection with the
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of the
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant.  The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.

          B.     The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two upon the occurrence of a
Corporate Transaction, whether or not those options are to be assumed or
replaced in the Corporate Transaction, or alternatively to provide for the
subsequent acceleration of any outstanding options under this Article Two which
do not otherwise accelerate at the time of the Corporate Transaction, should the
Optionee's Service terminate through an Involuntary Termination effected within
a designated period following the effective date of such Corporate Transaction.
The Plan Administrator shall also have the authority to provide for the
immediate termination of any of the Corporation's outstanding repurchase rights
under this Article Two which do not otherwise terminate at the time of the
Corporate Transaction, upon the subsequent termination of the Optionee's Service
through an Involuntary Termination effected within a designated period following
the effective date of such Corporate Transaction.

          C.     Immediately following the consummation of the Corporate
Transaction, all outstanding options under this Article Two shall terminate and
cease to remain outstanding, except to the extent assumed by the successor
corporation or its parent company.

          D.     Each outstanding option under this Article Two that is assumed
in connection with the Corporate Transaction or is otherwise to continue in
effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the option holder, in consummation of such Corporate
Transaction, had such person exercised the option immediately prior to such
Corporate Transaction.  Appropriate adjustments shall also be made to the
exercise price payable per share, provided the

                                       16
<PAGE>
 
aggregate exercise price payable for such securities shall remain the same.  In
addition, the class and number of securities available for issuance under the
Plan on both an aggregate and per individual basis following the consummation of
the Corporate Transaction shall be appropriately adjusted.

          E.     The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control or Hostile Take-Over.  The Plan
Administrator shall also have full power and authority to condition any such
option acceleration (and the termination of any outstanding repurchase rights)
upon the subsequent termination of the Optionee's Service through an Involuntary
Termination effected within a specified period following the Change in Control
or Hostile Take-Over.

          F.     Any options accelerated in connection with the Change in
Control or Hostile Take-Over shall remain fully exercisable until the expiration
or sooner termination of the option term or the surrender of such option in
accordance with Section V of this Article Two.

          G.     The grant of options under this Article Two shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.

          H.     The portion of any Incentive Option accelerated under this
Section III in connection with a Corporate Transaction, Change in Control or
Hostile Take-Over shall remain exercisable as an incentive stock option under
the federal tax laws only to the extent the dollar limitation of Section II of
Article Two is not exceeded.  To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a non-statutory
option under the federal tax laws.

     IV.  CANCELLATION AND REGRANT OF OPTIONS

          The Plan Administrator shall have the sole and exclusive authority to
effect, at any time and from time to time, with the consent of the affected
Optionees, the cancellation of any or all outstanding options under this Article
Two (including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under the Plan covering

                                       17
<PAGE>
 
the same or different numbers of shares of Common Stock but with an exercise
price per share based upon the Fair Market Value of the Common Stock on the new
grant date.

      V.  STOCK APPRECIATION RIGHTS

          A.     The Plan Administrator shall have full power and authority,
exercisable in its sole discretion, to grant to selected Optionees or other
individuals eligible to receive option grants under the Discretionary Option
Grant Program stock appreciation rights.

          B.     Four types of stock appreciation rights shall be authorized for
issuance under the Plan: (i) Tandem Stock Appreciation Rights ("Tandem Rights"),
Concurrent Stock Appreciation Rights ("Concurrent Rights"), Independent Stock
Appreciation Rights ("Independent Rights") and Limited Stock Appreciation Rights
("Limited Rights").

          C.     The following terms and conditions shall govern the grant and
exercise of Tandem Rights under this Article Two:

               1.  One or more Optionees may be granted the Tandem Right,
     exercisable upon such terms and conditions as the Plan Administrator may
     establish, to elect between the exercise of the underlying Article Two
     stock option for shares of Common Stock and the surrender of that option in
     exchange for a distribution from the Corporation in an amount equal to the
     excess of (i) the Fair Market Value (on the option surrender date) of the
     number of shares in which the Optionee is at the time vested under the
     surrendered option (or surrendered portion thereof) over (ii) the aggregate
     exercise price payable for such vested shares.

               2.  No such option surrender shall be effective unless it is
     approved by the Plan Administrator.  If the surrender is so approved, then
     the distribution to which the Optionee shall accordingly become entitled
     under this Section V may be made in shares of Common Stock valued at Fair
     Market Value on the option surrender date, in cash, or partly in shares and
     partly in cash, as the Plan Administrator shall in its sole discretion deem
     appropriate.

               3.  If the surrender of an option is rejected by the Plan
     Administrator, then the Optionee shall retain whatever rights the Optionee
     had under the surrendered option (or surrendered portion thereof) on the
     option

                                       18
<PAGE>
 
     surrender date and may exercise such rights at any time prior to the later
     of (i) five (5) business days after the receipt of the rejection notice or
     (ii) the last day on which the option is otherwise exercisable in
     accordance with the terms of the instrument evidencing such option, but in
     no event may such rights be exercised more than ten (10) years after the
     date of the option grant.

          D.     The following terms and conditions shall govern the grant and
exercise of Concurrent Rights under this Article Two:
 
               1.   One or more Optionees may be granted,
     upon such terms and conditions as the Plan Administrator may establish, the
     Concurrent Right to automatically receive an appreciation distribution from
     the Corporation at the same time the underlying stock option under this
     Article Two is exercised for the shares of Common Stock subject to such
     right.  Accordingly, the Optionee shall, upon exercise of the option,
     receive both the purchased shares of Common Stock and the appreciation
     distribution payable on the covered shares.

               2.   The amount of the distribution payable upon exercise of the
     Concurrent Right shall not exceed an amount equal to the excess of (i) the
     Fair Market Value (on the option exercise date) of the number of shares for
     which the option is exercised over (ii) the aggregate exercise price
     payable for such shares under that option.

               3.  The distribution to which the Optionee shall become entitled
     under this Section V may be made in shares of Common Stock valued at Fair
     Market Value on the option exercise date, in cash, or partly in shares and
     partly in cash, as the Plan Administrator shall in its sole discretion deem
     appropriate.

          E.     The following terms and conditions shall govern the grant and
exercise of Independent Rights under this Article Two:

               1.  One or more individuals eligible to participate in the
     Discretionary Option Grant Program may be granted an Independent Right not
     tied to any underlying Article Two stock option.  The Independent Right
     shall be exercisable upon such terms and conditions as the Plan
     Administrator may establish and shall entitle the holder to receive a
     distribution from the Corporation in an amount equal to the excess of (i)
     the aggregate Fair Market Value (on the exercise date of such right) of

                                       19
<PAGE>
 
     the shares of Common Stock subject to the exercised right over (ii) the
     aggregate base price in effect for those shares.

               2.  The number of shares subject to the Independent Right and the
     base price in effect for those shares shall be determined by the Plan
     Administrator in its sole discretion at the time the Independent Right is
     granted.  The base price may be less than, equal to or greater than the
     Fair Market Value (on the grant date of the right) of the shares subject to
     that right.

               3.  The distribution to which the holder of the Independent Right
     shall become entitled under this Section V may be made in shares of Common
     Stock valued at Fair Market Value on the exercise date of such right, in
     cash, or partly in shares and partly in cash, as the Plan Administrator
     shall in its sole discretion deem appropriate.

          F.     The following terms and conditions shall govern the grant and 
exercise of Limited Rights under this Article Two:

               1.  One or more officers of the Corporation subject to the short-
     swing profit restrictions of the federal securities laws may, in the Plan
     Administrator's sole discretion, be granted Limited Rights with respect to
     their outstanding options under this Article Two.
     
               2.  Upon the occurrence of a Hostile Take-Over, each such officer
     holding one or more options with such a Limited Right in effect for at
     least six (6) months shall have the unconditional right (exercisable for a
     thirty (30)-day period following such Hostile Take-Over) to surrender each
     such option to the Corporation, to the extent the option is at the time
     exercisable for fully vested shares of Common Stock. The officer shall in
     return be entitled to a cash distribution from the Corporation in an amount
     equal to the excess of (i) the Take-Over Price of the vested shares of
     Common Stock at the time subject to each surrendered option (or surrendered
     portion of such option) over (ii) the aggregate exercise price payable for
     such vested shares. Such cash distribution shall be made within five (5)
     days following the option surrender date.

               3. Neither the approval of the Plan Administrator nor the consent
     of the Board shall be required in connection with such option surrender and
     cash distribution. Any unsurrendered portion of the option shall continue
     to remain outstanding and become exercisable in accordance with the terms
     of the instrument evidencing such grant.

          G.     The shares of Common Stock subject to any stock appreciation
right exercised under this Section V shall NOT be available for subsequent
issuance under the Plan.

                                       20
<PAGE>
 
                                 ARTICLE THREE

                         AUTOMATIC OPTION GRANT PROGRAM


     I.  ELIGIBILITY

          A.     Eligible Optionees. The individuals eligible to receive
automatic option grants pursuant to the provisions of this Article Three shall
be limited to (i) those individuals who are first elected as non-employee Board
members at the 1994 Annual Meeting of Stockholders, (ii) those individuals who
are first elected or appointed as non-employee Board members after the date of
such Annual Meeting, whether through appointment by the Board or election by the
Corporation's stockholders, and (iii) those individuals who are re-elected to
serve as non-employee Board members at one or more Annual Stockholder Meetings
beginning with the 1994 Annual Meeting. Any non-employee Board member eligible
to participate in the Automatic Option Grant Program pursuant to the foregoing
criteria shall be designated an Eligible Director for purposes of this Article
Three.

          B.     Limitation.  Except for the option grants to be made pursuant
to the provisions of this Automatic Option Grant Program and any share issuance
to be made pursuant to the provisions of the Stock Fee Program under Article
Four, non-employee Board members shall not be eligible to receive any option
grants or stock issuances under this Plan or any other stock plan of the
Corporation (or its Subsidiaries).

     II.  TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS

          A.     Grant Dates.  Option grants shall be made under this Article
Three on the dates specified below:

          1.     Each individual who is first elected as an Eligible Director at
the 1994 Annual Meeting of Stockholders shall automatically be granted on the
date of such Meeting a Non-Statutory Option to purchase 5,000 shares of Common
Stock upon the terms and conditions of this Article Three.

          2.     Each individual who first becomes an Eligible Director after
the date of the 1994 Annual Meeting of Stockholders, whether through election by
the Corporation's stockholders or appointment by the Board, shall automatically
be granted, at the time of such initial election or appointment, a Non-Statutory
Option to purchase 5,000 shares of Common Stock upon the terms and conditions of
this Article Three.

                                       21
<PAGE>
 
          3.  On the date of each Annual Meeting of Stockholders, beginning with
the 1994 Annual Meeting, each individual who is at that time re-elected as a 
non-employee Board member shall automatically be granted a Non-Statutory Option
to purchase an additional 5,000 shares of Common Stock upon the terms and
conditions of this Article Three, provided such individual has served as a Board
member for at least twelve (12) months.

          B.     No Limitation.  There shall be no limit on the number of such
5,000-share annual option grants any one Eligible Director may receive over his
or her period of Board service.  The number of shares for which the automatic
option grants are to be made to newly elected or continuing Eligible Directors
shall be subject to periodic adjustment pursuant to the applicable provisions of
Section VI.E. of Article One.

          C.     Exercise Price.  The exercise price per share of Common Stock
of each automatic option grant made under this Article Three shall be equal to
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the automatic grant date.

          D.     Payment.  The exercise price shall be payable in any of the
alternative forms authorized under Section I.A.2 of Article Two.  To the extent
the option is exercised for any unvested shares, the Optionee must execute and
deliver to the Corporation a stock purchase agreement for those unvested shares
which provides the Corporation with the right to repurchase, at the exercise
price paid per share, any unvested shares held by the Optionee at the time of
cessation of Board service and which precludes the sale, transfer or other
disposition of the purchased shares at any time while those shares remain
subject to the Corporation's repurchase right.

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

          F.     Exercisability/Vesting.  Each automatic grant shall be
immediately exercisable for any or all of the option shares.  However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares.  Each automatic grant shall
vest, and the Corporation's repurchase right shall lapse, in a series of two (2)
equal and successive annual installments over the Optionee's period of continued
service as a Board member, with the first such installment to vest upon
Optionee's completion of one (1) year of Board service measured from the
automatic grant date.

                                       22
<PAGE>
 
          Vesting of the option shares shall be subject to acceleration as
provided in Section II.H.3 and Section III of this Article Three.  In no event
shall any additional option shares vest after the Optionee's cessation of Board
service, except as otherwise provided pursuant to Section II.H.3 of this Article
Three.

          G.     Non-Transferability.  During the lifetime of the Optionee, the
automatic option grant, together with the limited stock appreciation right
pertaining to such option, shall be exercisable only by the Optionee and shall
not be assignable or transferable except for a transfer of the option effected
by will or by the laws of descent and distribution following the Optionee's
death.

          H.     Termination of Board Service.

          1.     Should the Optionee cease to serve as a Board member for any
reason (other than death or Permanent Disability) while holding one or more
automatic option grants under this Article Three, then such individual shall
have a six (6)-month period following the date of such cessation of Board
service in which to exercise each such option for any or all of the option
shares in which the Optionee is vested at the time of such cessation of Board
service.  However, each such option shall immediately terminate and cease to
remain outstanding, at the time of such cessation of Board service, with respect
to any option shares in which the Optionee is not otherwise at that time vested
under such option.

          2.     Should the Optionee die within six (6) months after cessation
of Board service, then any automatic option grant held by the Optionee at the
time of death may subsequently be exercised, for any or all of the option shares
in which the Optionee is vested at the time of his or her cessation of Board
service (less any option shares subsequently purchased by the Optionee prior to
death), by the personal representative of the Optionee's estate or by the person
or persons to whom the option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution.  The right to exercise
each such option shall lapse upon the expiration of the twelve (12)-month period
measured from the date of the Optionee's death.

          3.     Should the Optionee die or become Permanently Disabled while
serving as a Board member, then the shares of Common Stock at the time subject
to each automatic option grant held by the Optionee shall immediately vest in
full (and the Corporation's repurchase right with respect to such shares shall
terminate), and the Optionee (or the representative of the Optionee's estate or
the person or persons to whom the option is transferred upon the

                                       23
<PAGE>
 
Optionee's death) shall have a twelve (12)-month period following the date of
the Optionee's cessation of Board service in which to exercise such option for
any or all of those vested shares of Common Stock.

          4.     In no event shall any automatic grant under this Article Three
remain exercisable after the expiration date of the ten (10)-year option term.
Upon the expiration of the applicable post-service exercise period under
subparagraphs 1 through 3 above or (if earlier) upon the expiration of the ten
(10)-year option term, the automatic grant shall terminate and cease to be
outstanding for any option shares in which the Optionee was vested at the time
of his or her cessation of Board service but for which such option was not
otherwise exercised.

          I.     Stockholder Rights.  The holder of an automatic option grant
under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to that option until such individual shall have
exercised the option and paid the exercise price for the purchased shares.

          J.     Remaining Terms.  The remaining terms and conditions of each
automatic option grant shall be as set forth in the form Automatic Stock Option
Agreement attached as Exhibit A to the Plan.

     III.  CORPORATE TRANSACTION/CHANGE IN CONTROL/
           HOSTILE TAKE-OVER

          A.     In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option under this Article Three
but not otherwise vested shall automatically vest in full and the Corporation's
repurchase right with respect to those shares shall terminate, so that each such
option shall, immediately prior to the specified effective date for the
Corporate Transaction, become fully exercisable for all of the shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully vested shares of Common Stock.  Immediately
following the consummation of the Corporate Transaction, all automatic option
grants under this Article Three shall terminate and cease to remain outstanding,
except to the extent one or more such grants are assumed by the successor entity
or its parent corporation.

          B.     In connection with any Change in Control or Hostile Take-Over
of the Corporation, the shares of Common Stock at the time subject to each
outstanding option under this Article Three but not otherwise vested shall
automatically vest in full and the Corporation's repurchase right with respect
to those shares shall terminate, so that each such option shall, immediately
prior to the

                                       24
<PAGE>
 
specified effective date for the Change in Control or Hostile Take-Over, become
fully exercisable for all of the shares of Common Stock at the time subject to
that option and may be exercised for all or any portion of such shares as fully
vested shares of Common Stock.  Each option shall remain so exercisable for all
the option shares following the Change in Control or Hostile Take-Over until the
expiration or sooner termination of the option term.

          C.     Upon the occurrence of a Hostile Take-Over, the Optionee shall
also have a thirty (30)-day period in which to surrender to the Corporation each
option held by him or her under this Article Three for a period of at least six
(6) months.  The Optionee shall in return be entitled to a cash distribution
from the Corporation in an amount equal to the excess of (i) the Take-Over Price
of the shares of Common Stock at the time subject to the surrendered option over
(ii) the aggregate exercise price payable for such shares.  Such cash
distribution shall be paid within five (5) days following the surrender of the
option to the Corporation.  Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such option
surrender and cash distribution.   The shares of Common Stock subject to each
option surrendered in connection with the Hostile Take-Over shall NOT be
available for subsequent issuance under the Plan.

          D.     The automatic option grants outstanding under this Article
Three shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.

     IV.  AMENDMENT OF THE AUTOMATIC GRANT PROVISIONS

          The provisions of this Automatic Option Grant Program, together with
the automatic option grants outstanding under this Article Three, 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.

                                       25
<PAGE>
 
                                  ARTICLE FOUR

                               STOCK FEE PROGRAM


     I.  ELIGIBILITY

          Each individual serving as a non-employee Board member shall be
eligible to elect to apply all or any portion of the annual retainer fee
otherwise payable to such individual in cash to the acquisition of unvested
shares of Common Stock upon the terms and conditions of this Article Four.

     II.  ELECTION PROCEDURE

          A.     Filing.  The non-employee Board member must make the stock-in-
lieu-of-fee election prior to the start of the calendar year for which the
election is to be effective.  The first calendar year for which any such
election may be filed shall be the 1995 calendar year.  The election, once
filed, shall be irrevocable.  The election for any upcoming calendar year may be
filed at any time prior to the start of that year, but in no event later than
December 31 of the immediately preceding calendar year.  The non-employee Board
member may file a standing election to be in effect for two (2) or more
consecutive calendar years or to remain in effect indefinitely until revoked by
written instrument filed with the Plan Administrator at least six (6) months
prior to the start of the first calendar year for which such standing election
is no longer to remain in effect.

          B.     Election Form.  The election must be filed with the Plan
Administrator on the appropriate form provided for this purpose.  On the
election form, the non-employee Board member must indicate the percentage or
dollar amount of his or her annual retainer fee to be applied to the acquisition
of unvested restricted shares under this Article Six Program.

     III.  SHARE ISSUANCE

          A.     Issue Date.  On the first trading day in January of the
calendar year for which the election is effective, the portion of the retainer
fee subject to such election shall automatically be applied to the acquisition
of shares of Common Stock by dividing the elected dollar amount by the Fair
Market Value per share of Common Stock on that trading day.  The number of
issuable shares shall be rounded down to the next whole share, and the issued
shares shall be held in escrow by the Secretary of the Corporation as partly-
paid shares until the non-employee Board member vests in

                                       26
<PAGE>
 
those shares.  The non-employee Board member shall have full shareholder rights,
including voting, dividend and liquidation rights, with respect to all issued
shares held in escrow on his or her behalf, but such shares shall not be
assignable or transferable while they remain unvested.

          B.     Vesting.  Upon completion of each calendar month of Board
service during the year for which the election is in effect, the non-employee
Board member shall vest in one-twelfth (1/12) of the issued shares, and the
stock certificate for those shares shall be released from escrow.  Immediate
vesting in all the issued shares shall occur in the event (i) the non-employee
Board member should die or become Permanently Disabled during his or her period
of Board service or (ii) there should occur a Corporate Transaction, Change in
Control or Hostile Take-Over occur while such individual remains in Board
service.  Should such individual cease Board service prior to vesting in one or
more monthly installments of the issued shares, then those unvested shares shall
be immediately cancelled by the Corporation for cancellation, and the non-
employee Board member shall not be entitled to any cash payment or other
consideration from the Corporation with respect to the cancelled shares and
shall have no further shareholder rights with respect to such shares.

     IV.  AMENDMENT OF THE STOCK FEE PROGRAM PROVISIONS

          A.     Limited Amendments.  The provisions of this Stock Fee Program,
together with the unvested share issuances outstanding under this Article Four,
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.

                                       27
<PAGE>
 
                                  ARTICLE FIVE

                         SALARY REDUCTION GRANT PROGRAM

     I.  ELIGIBILITY

          The Plan Administrator shall have plenary authority to select, prior
to the start of each calendar year, the particular key employees who shall be
eligible for participation in the Salary Reduction Grant Program for that
calendar year.  In order to participate for a particular calendar year, each
selected individual must, prior to the start of that calendar year, file with
the Plan Administrator (or its designate) an irrevocable authorization directing
the Corporation to reduce his or her base salary for that calendar year by a
designated multiple of one percent (1%), but in no event less than five percent
(5%).

          The Plan Administrator shall review the filed authorizations and
determine whether to approve, in whole or in part, one or more of those
authorizations.  To the extent the Plan Administrator approves one or more
authorizations, the individuals who filed those authorizations shall be granted
options under this Salary Reduction Grant Program.  To the extent one or more
authorizations are not approved by the Primary Committee, those authorizations
shall have no force or effect and no options shall be granted under this Article
Five to the individuals who filed those authorizations.

          To the extent options are granted under the Salary Reduction Grant
Program, such options shall be Non-Statutory Options evidenced by instruments in
such form as the Primary Committee shall from time to time approve; provided,
however, that each such instrument shall comply with and incorporate the terms
and conditions specified below.

     II.  TERMS AND CONDITIONS OF OPTION

          A.     Exercise Price.

          1.     The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the grant date.

          2.     The exercise price shall become immediately due upon exercise
of the option and shall be payable in any of the alternative forms authorized
under Section I.A.2 of Article Two.

                                       28
<PAGE>
 
          B.  Number of Option Shares.  The number of shares of Common Stock for
which each grant under this Article Five is to be made to a selected Optionee
shall be determined pursuant to the following formula (rounded down to the
nearest whole number):

               X = A / (B x 66-2/3%), where

               X is the number of option shares,

               A is the dollar amount of the approved reduction in the
               Optionee's base salary for the calendar year, and

               B is the Fair Market Value per share of Common Stock on the date
               of the grant.

          C.     Term and Exercise of Options.
     
          1.     Each option shall have a maximum term of ten (10) years
measured from the grant date.  Provided the Optionee continues in Service, the
option shall become exercisable for (i) fifty percent (50%) of the option shares
on the last day of June in the calendar year for which the option is granted and
for (ii) the balance of the option shares in a series of six (6) successive
equal monthly installments on the last day of each of the next six (6) calendar
months.

          2.     During the Optionee's lifetime, the option shall be exercisable
only by the Optionee and shall not be assignable or transferable other than by
transfer of the option effected by will or by the laws of descent and
distribution following the Optionee's death.

          D.     Effect of Termination of Service.
     
          1.     Should an Optionee cease Service for any reason AFTER his or
her outstanding option under this Article Five has become exercisable in whole
or in part, then that option shall remain exercisable, for any or all of the
shares for which the option is exercisable on the date of such cessation of
Service, until the expiration of the ten (10)-year option term or its sooner
termination under Section III.A. of this Article Five.  Following the Optionee's
death, such option may be exercised, for any or all of the shares for which the
option is exercisable at the time of the Optionee's death, by the personal
representative of the

                                       29
<PAGE>
 
Optionee's estate or by the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of descent and
distribution.  Such right of exercise shall lapse, and the option shall
terminate, upon the expiration of the ten (10)-year option term or its sooner
termination under Section III.A. of this Article Five.

          2.     Should the Optionee die BEFORE his or her outstanding option
under this Article Five becomes exercisable for any of the option shares, then
the personal representative of the Optionee's estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution shall nevertheless have the right to
exercise such option for up to that number of option shares equal to (i) one-
twelfth (1/12) of the total number of option shares multiplied by (ii) the
number of full calendar months which have elapsed between the first day of the
calendar year for which the option was granted and the last day of the calendar
month during which the Optionee ceases Service.  Such right of exercise shall
lapse, and the option shall terminate, upon the earliest to occur of (i) the
specified expiration date of the option term, (ii) the termination of the option
under Section III.A. of this Article Five or (iii) the third anniversary of the
date of the Optionee's death.  However, the option shall, with respect to any
and all option shares for which it is not exercisable at the time of the
Optionee's cessation of Service, terminate immediately upon such cessation of
Service and shall cease to remain outstanding with respect to those option
shares.

          3.     Should the Optionee become Permanently Disabled and cease by
reason thereof to remain in Service BEFORE his or her outstanding option under
this Article Five becomes exercisable for any of the option shares, then the
Optionee shall nevertheless have the right to exercise such option for up to
that number of option shares equal to (i) one-twelfth (1/12) of the total number
of option shares multiplied by (ii) the number of full calendar months which
have elapsed between the first day of the calendar year for which the option was
granted and the last day of the calendar month during which the Optionee ceases
Service.  Such right of exercise shall lapse, and the option shall terminate,
upon the expiration of the ten (10)-year option term or its sooner termination
under Section III.A. of this Article Five.  However, the option shall, with
respect to any and all option shares for which it is not exercisable at the time
of the Optionee's cessation of Service, terminate immediately upon such
cessation of Service and shall cease to remain outstanding with respect to those
option shares.

                                       30
<PAGE>
 
          4.  Except to the limited extent specifically provided in
subparagraphs 2 and 3 above, should the Optionee cease for any reason to remain
in Service before his or her outstanding option under this Article Five first
become exercisable for one or more option shares, then that option shall
immediately terminate upon such cessation of Service and shall cease to remain
outstanding.

          E.     Stockholder Rights.  The Optionee shall have none of the rights
of a stockholder with respect to any option shares until such individual shall
have exercised the option and paid the exercise price for those shares.

    III.  CORPORATE TRANSACTION/CHANGE IN CONTROL/
          HOSTILE TAKE-OVER

          A.     Should any Corporate Transaction occur while the Optionee
remains in Service, then each outstanding option held by such Optionee under
this Article Five shall become exercisable, immediately prior to the specified
effective date of such Corporate Transaction, for all of the shares at the time
subject to such option and may be exercised for any or all of such shares as
fully-vested shares of Common Stock.  Immediately following the consummation of
the Corporate Transaction, each such option shall terminate unless assumed by
the successor entity or its parent corporation.

          B.     Upon the occurrence of (i) a Hostile Take-Over while the
Optionee remains in Service or (ii) the Involuntary Termination of the
Optionee's Service following a Change in Control, each outstanding option held
by such Optionee under this Article Five shall immediately become exercisable
for all of the shares at the time subject to such option and may be exercised
for any or all of such shares as fully-vested shares of Common Stock.  The
option shall remain so exercisable until the expiration of the ten (10)-year
option term.

          C.     Option grants under this Article Five shall not affect the
Corporation's right to adjust, reclassify, reorganize or change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer any or all of its assets.

                                       31
<PAGE>
 
                                  ARTICLE SIX

                             STOCK ISSUANCE PROGRAM


     I.  TERMS AND CONDITIONS OF STOCK ISSUANCES

          Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants.  The issued shares shall be evidenced by a Stock Issuance Agreement
("Issuance Agreement") that complies with the terms and conditions of this
Article Six.

          A.     Consideration

          1.     Newly Issued Shares shall be issued under the Stock Issuance
Program for one or more of the following items of consideration that the Plan
Administrator may deem appropriate in each individual instance:

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

               (ii) a promissory note payable to the Corporation's order in one
     or more installments, which may be subject to cancellation in whole or in
     part upon terms and conditions established by the Plan Administrator, or

               (iii)  past services rendered to the Corporation or any
     Subsidiary.

          2.  Newly Issued Shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than, equal to or
greater than the Fair Market Value of such shares at the time of issuance, but
in no event less than the par value per issued share of Common Stock.

          3.  Treasury Shares may be issued under the Stock Issuance Program for
such consideration (including one or more of the items of consideration
specified in subparagraph 1 above) as the Plan Administrator may deem
appropriate, whether such consideration is in an amount less than, equal to or
greater than the Fair Market Value of the Treasury Shares at the time of
issuance.  Treasury Shares may, in lieu of any cash consideration, be issued
subject to such vesting requirements tied to the Participant's period of future
Service or the Corporation's attainment of specified performance objectives as
the Plan Administrator may establish at the time of issuance.

                                       32
<PAGE>
 
          4.  Treasury Shares may also, in the Plan Administrator's absolute
discretion, be issued pursuant to an irrevocable election by the Participant to
receive a portion of his or her base salary in shares of Common Stock in lieu of
such base salary.  Any such issuance shall be effected in accordance with the
following guidelines:

          -  On the first trading day in January of the calendar year for which
     the election is effective, the portion of base salary subject to such
     election shall automatically be applied to the acquisition of Common Stock
     by dividing the elected dollar amount by the Fair Market Value per share of
     the Common Stock on that trading day.  The number of issuable shares shall
     be rounded down to the next whole share, and the issued shares shall be
     held in escrow by the Secretary of the Corporation until the Participant
     vests in those shares.  The Participant shall have full stockholder rights,
     including voting, dividend and liquidation rights, with respect to all
     issued shares held in escrow on his or her behalf, but such shares shall
     not be assignable or transferable while they remain unvested.

          -    Upon completion of each calendar month of Service during the year
     for which the election is in effect, the Participant shall vest in one-
     twelfth (1/12) of the issued shares, and the stock certificate for those
     shares shall be released from escrow.  All the issued shares shall
     immediately vest upon (i) the occurrence of a Corporate Transaction or
     Hostile Take-Over while such individual remains in Service or (ii) the
     Involuntary Termination of the Participant's Service following a Change in
     Control.  Should the Participant otherwise cease Service prior to vesting
     in one or more monthly installments of the issued shares, then those
     unvested shares shall immediately be surrendered to the Corporation for
     cancellation, and the Participant shall not be entitled to any cash payment
     or other consideration from the Corporation with respect to the cancelled
     shares and shall have no further stockholder rights with respect to such
     shares.

          B.  Vesting Provisions

          1.  The shares of Common Stock issued under the Stock Issuance Program
(other than shares issued in lieu of salary) may, in the absolute discretion of
the Plan Administrator, be fully and immediately vested upon issuance or may
vest in installments over the Participant's period of Service.  The elements of
the vesting

                                       33
<PAGE>
 
schedule applicable to any unvested shares of Common Stock issued under the
Stock Issuance Program, namely:

          (i) the Service period to be completed by the Participant or the
performance objectives to be achieved by the Corporation,

          (ii) the number of installments in which the shares are to vest,

          (iii)  the interval or intervals (if any) which are to lapse
between installments, and

          (iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule,

shall be determined by the Plan Administrator and incorporated into the Issuance
Agreement executed by the Corporation and the Participant at the time such
unvested shares are issued.

          2.  The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to him or her under the Stock Issuance
Program, whether or not his or her interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.  Any new, additional or
different shares of stock or other property (including money paid other than as
a regular cash dividend) which the Participant may have the right to receive
with respect to his or her unvested shares by reason of any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration shall be issued, subject to (i) the same
vesting requirements applicable to the Participant's unvested shares and (ii)
such escrow arrangements as the Plan Administrator shall deem appropriate.

          3. Should the Participant cease to remain in Service while holding one
or more unvested shares of Common Stock under the Stock Issuance Program, then
those shares shall be immediately cancelled by the Corporation, and the
Participant shall have no further stockholder rights with respect to those
shares. To the extent the cancelled shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money promissory note), the Corporation shall repay to
the Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-

                                       34
<PAGE>
 
money note of the Participant attributable to such cancelled shares. The
cancelled shares may, at the Plan Administrator's discretion, be retained by the
Corporation as Treasury Shares or may be retired to authorized but unissued
share status.

          4. The Plan Administrator may in its discretion elect to waive the
cancellation of one or more unvested shares of Common Stock (or other assets
attributable thereto) which would otherwise occur upon the non-completion of the
vesting schedule applicable to such shares. Such waiver shall result in the
immediate vesting of the Participant's interest in the shares of Common Stock as
to which the waiver applies. Such waiver may be effected at any time, whether
before or after the Participant's cessation of Service or the attainment or non-
attainment of the applicable performance objectives.

     II.  CORPORATE TRANSACTIONS/CHANGE IN CONTROL/
          HOSTILE TAKE-OVER

          A.  Upon the occurrence of any Corporate Transaction, all unvested
shares of Common Stock at the time outstanding under this Stock Issuance Program
(other than shares issued in lieu of base salary) shall immediately vest in full
and the Corporation's repurchase rights shall terminate, except to the extent:
(i) any such repurchase right is expressly assigned to the successor corporation
(or parent thereof) in connection with the Corporate Transaction or (ii) such
termination is precluded by other limitations imposed in the Issuance Agreement.

          B.  The Plan Administrator shall have the discretionary authority,
exercisable at any time while unvested shares remain outstanding under this
Stock Issuance Program, to provide for the immediate and automatic vesting of
those unvested shares in whole or in part, and the termination of the
Corporation's repurchase rights with respect to those shares, upon the
occurrence of a Change in Control or Hostile Take-Over.  The Plan Administrator
shall also have full power and authority to condition any such accelerated
vesting upon the subsequent termination of the Participant's Service through an
Involuntary Termination effected within a specified period following the Change
in Control or Hostile Take-Over.

     II.  TRANSFER RESTRICTIONS/SHARE ESCROW

          A.  Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares.  To the extent an

                                       35
<PAGE>
 
escrow arrangement is utilized, the unvested shares and any securities or other
assets issued with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:

          "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND ARE
     SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS AND (II) CANCELLATION OR
     REPURCHASE IN THE EVENT THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN
     INTEREST) CEASES TO REMAIN IN THE CORPORATION'S SERVICE.  SUCH TRANSFER
     RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION OR
     REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT BETWEEN THE
     CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST)
     DATED ________________, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
     OFFICE OF THE CORPORATION."

          B.  The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary.  Upon any such
attempted transfer, the unvested shares shall immediately be cancelled in
accordance with substantially the same procedures in effect under Section I.B.3
of this Article Six, and neither the Participant nor the proposed transferee
shall have any rights with respect to such cancelled shares.  However, the
Participant shall have the right to make a gift of unvested shares acquired
under the Stock Issuance Program to the Participant's spouse or issue, including
adopted children, or to a trust established for such spouse or issue, provided
the transferee of such shares delivers to the Corporation a written agreement to
be bound by all the provisions of the Stock Issuance Program and the Issuance
Agreement applicable to the transferred shares.

                                       36
<PAGE>
 
                                 ARTICLE SEVEN

                                 MISCELLANEOUS


     I.  LOANS OR INSTALLMENT PAYMENTS

          A.  The Plan Administrator may, in its discretion, assist any Optionee
or Participant (including an Optionee or Participant who is an officer of the
Corporation), in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant Program or the Salary Reduction Grant
Program or the purchase of one or more shares issued to such Participant under
the Stock Issuance Program, including the satisfaction of any federal, state and
local income and employment tax obligations arising therefrom, by (i)
authorizing the extension of a loan from the Corporation to such Optionee or
Participant or (ii) permitting the Optionee or Participant to pay the exercise
price or purchase price for the acquired shares in installments over a period of
years.  The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate under the circumstances.  Loans or installment
payments may be authorized with or without security or collateral.  However, the
maximum credit available to the Optionee or Participant may not exceed the
exercise or purchase price of the acquired shares (less the par value of such
shares) plus any federal, state and local income and employment tax liability
incurred by the Optionee or Participant in connection with the acquisition of
such shares.

          B.  The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Plan Administrator may deem appropriate.

     II.  AMENDMENT OF THE PLAN AND AWARDS

          A.  The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to stock options, stock appreciation rights or unvested
stock issuances at the time outstanding under the Plan, unless the Optionee or
Participant consents to such amendment, and (ii) any amendment made to the
Automatic Option Grant Program or the Stock

                                       37
<PAGE>
 
Fee Program (or any stock options or unvested shares outstanding thereunder)
shall be in compliance with the applicable limitations of Section IV of Article
Three and Section III of Article Four.  In addition, the Board may not, without
the approval of the Corporation's stockholders, amend the Plan to (i) materially
increase the maximum number of shares issuable under the Plan, the number of
shares for which options may be granted to newly elected or continuing non-
employee Board members under Article Three or the maximum number of shares for
which any one individual participating in the Plan may be granted stock options,
concurrently or independently exercisable stock appreciation rights and direct
stock issuances in the aggregate over the term of the Plan, except for
permissible adjustments under Section VI.E. of Article One, (ii) materially
modify the eligibility requirements for Plan participation or (iii) materially
increase the benefits accruing to Optionees or Participants.

          B.  Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and the Salary Reduction Grant Program
and shares of Common Stock may be issued under the Stock Issuance Program, which
are in excess of the number of shares then available for issuance under the
Plan, provided any excess shares actually issued under the Discretionary Option
Grant Program, the Salary Reduction Grant Program or the Stock Issuance Program
are held in escrow until stockholder approval is obtained for a sufficient
increase in the number of shares available for issuance under the Plan.  If such
stockholder approval is not obtained within twelve (12) months after the date
the first such excess option grants or excess share issuances are made, then (i)
any unexercised excess options shall terminate and cease to be exercisable and
(ii) the Corporation shall promptly refund the purchase price paid for any
excess shares actually issued under the Plan and held in escrow, together with
interest (at the applicable short term federal rate) for the period the shares
were held in escrow.

     III.  TAX WITHHOLDING

          A.  The Corporation's obligation to deliver shares of Common Stock
upon the exercise of stock options or stock appreciation rights or the direct
issuance or vesting of such shares under the Plan shall be subject to the
satisfaction of all applicable federal, state and local income tax and
employment tax withholding requirements.

          B.  The Plan Administrator may, in its discretion and in accordance
with the provisions of this Section III and such supplemental rules as the Plan
Administrator may from time to time adopt (including the applicable safe-harbor
provisions of

                                       38
<PAGE>
 
Securities and Exchange Commission Rule 16b-3), provide any or all holders of
Non-Statutory Options (other than the automatic option grants made pursuant to
Article Three) or unvested shares under the Stock Issuance Program with the
right to use shares of Common Stock in satisfaction of all or part of the
federal, state and local income and employment tax liabilities (the "Taxes")
incurred by such holders in connection with the exercise of their options or the
vesting of their shares.  Such right may be provided to any such holder in
either or both of the following formats:

          -  Stock Withholding:  The holder of the Non-Statutory Option or
unvested shares may be provided with the election to have the Corporation
withhold, from the shares of Common Stock otherwise issuable upon the exercise
of such Non-Statutory Option or the vesting of such shares, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of the Taxes
(up to one hundred percent (100%)) specified by such holder.

          -  Stock Delivery:  The holder of the Non-Statutory Option or the
unvested shares may be provided with the election to deliver to the Corporation,
at the time the Non-Statutory Option is exercised or the shares vest, one or
more shares of Common Stock previously acquired by such individual (other than
in connection with the option exercise or share vesting triggering the Taxes)
with an aggregate Fair Market Value equal to the percentage of the Taxes (up to
one hundred percent (100%)) specified by such holder.

     IV.  EFFECTIVE DATE AND TERM OF PLAN

          A.  This Plan shall become effective immediately upon approval by the
Corporation's stockholders at the 1994 Annual Meeting.  The Plan shall serve as
the successor to the Predecessor Plans, and no further option grants or stock
issuances shall be made under the Predecessor Plans from and after the date of
1994 Annual Meeting, if this Plan is approved.

          B.  Each option issued and outstanding under the Predecessor Plans and
each unvested share issued thereunder immediately prior to the Effective Date of
this Plan shall be incorporated into this Plan and treated as an outstanding
option or share issuance under this Plan, but each such option and share
issuance shall continue to be governed solely by the terms and conditions of the
instrument evidencing such grant or issuance, and nothing in this Plan shall be
deemed to affect or otherwise modify the rights or obligations of the holders of
such options or share issuances with respect to their acquisition of shares of
Common Stock thereunder.

                                       39
<PAGE>
 
          C.  One or more provisions or features of this Plan may, in the Plan
Administrator's discretion, be extended to any or all stock options or share
issuances outstanding under the Predecessor Plans on the Effective Date and
incorporated into this Plan.

          D.  The Plan shall terminate upon the earlier of (i) December 31, 2008
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued or cancelled pursuant to the exercise of options or stock
appreciation rights or the issuance of shares (whether vested or unvested) under
the Plan.  If the date of termination is determined under clause (i) above, then
all option grants and unvested stock issuances outstanding on such date shall
thereafter continue to have force and effect in accordance with the provisions
of the instruments evidencing such grants or issuances.

     V.   USE OF PROCEEDS

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

    VI.   REGULATORY APPROVALS

          A.  The implementation of the Plan, the granting of any option or
stock appreciation right under the Plan, the issuance of any shares under the
Stock Issuance Program, and the issuance of Common Stock upon the exercise of
the stock options and stock appreciation rights granted hereunder shall be
subject to the Corporation's procurement of all approvals and permits required
by regulatory authorities having jurisdiction over the Plan, the stock options
and stock appreciation rights granted under it and the Common Stock issued
pursuant to it.

          B.  No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until there shall have been compliance with
all applicable requirements of federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any securities exchange on which the Common Stock is then listed for trading.

   VII.   NO EMPLOYMENT/SERVICE RIGHTS

          Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
Service of the Corporation

                                       40
<PAGE>
 
(or Subsidiary) for any period of specific duration, and the Corporation (or any
Subsidiary retaining the services of such individual) may terminate such
individual's Service at any time and for any reason, with or without cause.















                                       41
<PAGE>
 
                                  ADDENDUM I
                                  
             AMDAHL CORPORATION UNITED KINGDOM STOCK OPTION SCHEME
                        












                                       42
<PAGE>
 
                ADDENDUM I TO AMDAHL 1994 STOCK INCENTIVE PLAN

             AMDAHL CORPORATION UNITED KINGDOM STOCK OPTION SCHEME


Preamble

          This scheme is for the benefit of those employees of Amdahl
Corporation and its subsidiary corporations who are subject to taxation in the
United Kingdom. The terms and conditions of this scheme are established in order
to render the scheme capable of approval as an approved share option scheme
under Schedule 10 of the United Kingdom Finance Act of 1984 ("Schedule 10").
Accordingly, the terms and conditions of this scheme shall be interpreted in a
manner consistent with Schedule 10. All options subject to the provisions of
this scheme shall be specifically designated as "Approved U.K. Stock Options."

          This scheme is an addendum to the 1994 Stock Incentive Plan (the
"Plan") and should be read in conjunction with the Plan. Accordingly, any
options specifically designated as Approved U.K. Stock Options will be subject
to the terms and conditions of the Plan except to the extent that such terms and
conditions differ from (or are otherwise in conflict with) the express
provisions of this scheme. Any term not otherwise defined in this scheme shall
have the meaning set forth in Section II, Article One of the Plan.

          (a)  Eligibility. The individuals eligible to receive Approved U.K.
Stock Options shall be limited to:

               (i) any director of the Corporation or one or more of its
     Subsidiaries who normally devotes not less than an aggregate of 25 hours
     per week (excluding meal breaks) to the duties of such directorships,
     provided any such grant to a non-employee director shall be subject to the
     limitations of Article Three of the Plan; or

               (ii) any non-director employee of the Corporation or its
     Subsidiaries who is required under his terms of employment to provide not
     less than an aggregate of 20 hours per week of service (excluding meal
     breaks) to the Corporation or its Subsidiaries.

          An individual may not be granted, nor may an individual exercise, an
Approved U.K. Stock Option if such individual has at the time (or had at any
time during the preceding twelve (12) months) a material interest (within the
meaning of paragraph 4(1)(b) of Schedule 10) in a close company (as defined
under Chapter III of Part XI of the Taxes Act) which (i) is able to

                                       43
<PAGE>
 
control the affairs of the Corporation or (ii) is one of a number of companies
which among themselves beneficially own Qualified Stock possessing not less than
three-quarters (3/4) of the total combined voting power of all classes of
Qualified Stock of the Corporation and each of which beneficially owns not less
than one-twentieth (1/20) of the total combined voting power of all classes of
such stock. For purposes of this Paragraph (a), the term "Qualified Stock" shall
mean all stock of the Corporation other than stock which entitles its holders to
no right to share in the profits of the Corporation other than the right to
receive a dividend at a fixed rate.

          (b) Stock Issued Pursuant to Exercise of Approved U.K. Stock Options.
The shares of Common Stock issued pursuant to the exercise of Approved U.K.
Stock Options shall not be subject to any restrictions (as such term is defined
in Schedule 10) other than restrictions which apply to all outstanding shares of
Common Stock. The issuance of such shares must be effected within thirty (30)
days after the date of exercise of the Approved U.K. Stock Options.

          (c) Loans or Guarantee of Loans. Notwithstanding the provisions of
Section I, Article Seven of the Plan, (i) no financing shall be provided
directly or indirectly by the Corporation or any of its Subsidiaries to the
holders of Approved U.K. Stock Options for the purposes of assisting such
individuals in the exercise of their Approved U.K. Stock Options and (ii) no
holder of an Approved U.K. Stock Option shall be permitted to pay in
installments the purchase price of stock acquired pursuant to the exercise of
such option.

          (d) Limitation of Rights. Except as may subsequently be permitted by
amendment to Schedule 10, no Optionee may be granted an Approved U.K. Stock
Option under the Plan if such option would, at the time of grant, cause the Fair
Market Value (as of the date of grant) of the Common Stock purchasable under all
Approved U.K. Stock Options granted to such Optionee by (i) the Corporation,
(ii) any company which controls (or at any time within the preceding twelve (12)
months controlled) the Corporation, (iii) any company which is controlled by (or
within the preceding twelve (12) months was controlled by) the Corporation, or
(iv) any company which is (or within the preceding twelve (12) months was) under
the control of the same person or persons as control the Corporation to exceed
in the aggregate the greatest of:

                  (A) 100,000 pounds sterling,

                                       44
<PAGE>
 
                 (B) four (4) times the Optionee's Earnings for his current or
          immediately preceding tax year (whichever is greater), or

                 (C) if there are no Earnings for the previous tax year, four
          (4) times the Optionee's Earnings for the twelve (12)-month period
          measured from the first day of the current tax year for which there
          are Earnings.

For purposes of this scheme, the term "Earnings" shall mean the Optionee's
income from the office or position of employment which renders him eligible to
receive Approved U.K. Stock Options, but only to the extent such income is
subject to United Kingdom withholding taxes (i.e., PAYE). The term "Earnings",
however, shall not include any taxable benefits-in-kind included in the
Optionee's income pursuant to Chapter II of Part III of the Finance Act 1976.

          (e) Changes in Capitalization. No change or adjustment shall be
effected pursuant to Section VI, Article One of the Plan to (i) the number
and/or class of shares or other securities covered by an outstanding Approved
U.K. Stock Option or (ii) the exercise price payable per share under an
outstanding Approved U.K. Stock Option unless any approval required by the Board
of Inland Revenue is first obtained.

          (f) Amendment of the Scheme. This scheme may not be amended without
prior Inland Revenue approval. Accordingly, unless Board of Inland Revenue
approval shall have been obtained for any amendment to the Plan, the terms and
conditions of this scheme shall be determined by reference to the provisions of
the Plan as in existence prior to such amendment.

          (g) Surrender of Options. Notwithstanding Sections III and V, Article 
Two and Section III, Article Three of the Plan, no Approved U.K. Stock Option 
may be surrendered for a cash or stock payment from the Corporation.

          (h) Exercise Upon Death. Notwithstanding Section I.C. of Article Two
and Section II.H. of Article Three of the Plan, upon the Optionee's death an
Approved U.K. Stock Option may (i) in no event remain outstanding for more than
one (1) year and (ii) be exercised only by the deceased Optionee's personal
representatives.

          (i) Share Limitations. Notwithstanding Section II.B., Article Seven of
the Plan, no Approved U.K. Stock Option may be granted pursuant to the
provisions of this scheme to purchase

                                       45
<PAGE>
 
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan.

          (j) Stock Subject to the Scheme. No Approved U.K. Stock Option may be
granted pursuant to the provisions of this scheme to purchase stock which does
not satisfy the requirements of paragraphs 7 to 11 of Schedule 10.

          (k) Immediate Sale Program: Date of Exercise. Notwithstanding Section
I.A., Article Two of the Plan, with respect to the exercise of an Approved U.K.
Stock Option for which the option price is being provided through use of the
Immediate Sale Program, the option shall be considered to have been exercised as
of the date written notice of exercise of the option is delivered to the
Corporation provided the option price is paid within thirty (30) days thereof.

                                       46
<PAGE>
 
                                  ADDENDUM II

          AMDAHL CORPORATION REPUBLIC OF IRELAND STOCK OPTION SCHEME












                                       47
<PAGE>
 
                ADDENDUM II TO AMDAHL 1994 STOCK INCENTIVE PLAN

           AMDAHL CORPORATION REPUBLIC OF IRELAND STOCK OPTION SCHEME
           ----------------------------------------------------------

Preamble
- - --------

          This scheme is for the benefit of those employees and directors of
Amdahl Corporation and its subsidiary corporations who are subject to taxation
in the Republic of Ireland with respect to the receipt or exercise of options
under the 1994 Stock Incentive Plan (the "Plan"). The terms and conditions of
this scheme are established in order to render the scheme capable of approval as
an approved share option scheme under Schedule 2 of the Republic of Ireland
Finance Act, 1986 ("Schedule 2"). Accordingly, the terms and conditions of this
scheme shall be interpreted in a manner consistent with Schedule 2. All options
subject to the provisions of this scheme shall be specifically designated as
"Approved Irish Stock Options."

          This scheme is an addendum to the Plan and should be read in
conjunction therewith.  Accordingly, any options specifically designated as
Approved Irish Stock Options will be subject to the terms and conditions of the
Plan except to the extent that such terms and conditions differ from (or
otherwise are in conflict with) the express provisions of this scheme.  It is
intended that options granted under the Plan which are not specifically
designated as Approved Irish Stock Options will not come within the scope of
Section 10 of the Republic of Ireland Finance Act, 1986.  Any term not defined
in this scheme shall have the meaning set forth in Section II, Article One of
the Plan.

          (a) Eligibility.  The individuals eligible to receive Approved Irish
Stock Options shall be limited to:

               (i) Any director of the Corporation or one or more of its
     Subsidiaries who is required to devote substantially the whole of his time
     to such directorship or directorships, provided any such grant to a non-
     employee director shall be subject to the limitations of Article Three of
     the Plan; or

               (ii) Any non-director employee of the Corporation or one or more
     of its Subsidiaries who is required under the terms of his employment to
     work for such company or companies for at least twenty (20) hours per week.

          An individual may not be granted, nor may an individual exercise, an
Approved Irish Stock Option if such individual has at

                                       48
<PAGE>
 
the time (or had at any time during the preceding twelve (12) months) a material
interest (within the meaning of paragraph 5(4) of Schedule 2) in a close company
(as defined under Part X of the Republic of Ireland Corporation Tax Act, 1976,
as modified by Paragraph 5(3) of Schedule 2) which is able to control the
affairs of the Corporation or is a member of a consortium (within the meaning of
Paragraph 1(4) of Schedule 2) which owns such a company.

          (b) Stock Subject to the Scheme.  The shares of Common Stock issued
pursuant to exercise of an Approved Irish Stock Option shall not be subject to
any restrictions which apply to all Common Stock and shall otherwise satisfy the
requirements of paragraphs 7 to 11 of Schedule 2.

          (c) Plan Amendments.  No amendment to the Plan shall affect the terms
and conditions of this scheme or of any Approved Irish Stock Option until the
earlier of (i) the date the Revenue Commissioner shall have approved such
amendment or (ii) the date the Board specifies that, whether or not approval of
the Revenue Commissioner shall have first been obtained, such amendment is to
become effective with respect to this scheme and Approved Irish Stock Options.

                                       49
<PAGE>
 
                                   EXHIBIT A
                                   ---------

                        AUTOMATIC STOCK OPTION AGREEMENT
                        --------------------------------

                                       50
<PAGE>
 
                                  NOTICE OF 
                         AUTOMATIC STOCK OPTION GRANT

          Notice is hereby given of the following stock option (the "Option") to
purchase shares of the common stock of Amdahl Corporation (the "Corporation")
which has been granted pursuant to the Automatic Option Grant Program in effect
under the Corporation's 1994 Stock Incentive Plan ( the "Plan"):

          OPTIONEE:    _______________________________

          GRANT DATE:    _______________________________

          TYPE OF OPTION:  Non-Statutory Stock Option

          EXERCISE PRICE:  $_________________ per share

          NUMBER OF OPTION SHARES:  5,000 shares

          EXPIRATION DATE: _____________________________

          EXERCISE SCHEDULE:  The Option is immediately exercisable for all the
          Option Shares

          VESTING SCHEDULE:  The Option Shares shall initially be unvested and
          subject to repurchase by the Corporation, at the Exercise Price paid
          per share, upon Optionee's cessation of service as a member of the
          Corporation's Board of Directors (the "Board") prior to vesting in the
          Option Shares.  Optionee shall acquire a vested interest in the Option
          Shares, and the Corporation's repurchase right with respect to the
          Option Shares shall lapse, in two (2) equal and successive annual
          installments over Optionee's continued period of Board service, with
          the first such installment to vest upon Optionee's completion of one
          (1) year of Board service measured from the Grant Date.  In no event
          shall any additional Option Shares vest following Optionee's cessation
          of Board service for any reason other than death or permanent
          disability.

          Optionee understands and agrees that the Option is granted subject to
and in accordance with the express terms and conditions of the Plan governing
automatic option grants to Board members.  Optionee further agrees to be bound
by the terms and

                                       51
<PAGE>
 
conditions of the Plan and the terms and conditions of the Option as set forth
in the Automatic Stock Option Agreement attached hereto as Exhibit A.

          Optionee hereby acknowledges receipt of a copy of the official Plan
Summary and Prospectus. A copy of the Plan is also available upon request made
to the Corporate Secretary at the Corporate Offices at 1250 East Arques Avenue,
P.O. Box 3470, Sunnyvale, California 94088-3470.

          REPURCHASE RIGHT.  OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION
SHARES ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL NOT BE TRANSFERABLE AND
SHALL BE SUBJECT TO REPURCHASE BY THE CORPORATION AND ITS ASSIGNS, AT THE
EXERCISE PRICE PAID PER SHARE, UPON OPTIONEE'S CESSATION OF SERVICE AS A MEMBER
OF THE CORPORATION'S BOARD OF DIRECTORS.  THE TERMS AND CONDITIONS OF SUCH
REPURCHASE RIGHT SHALL BE SET FORTH IN A STOCK ISSUANCE AGREEMENT, IN FORM AND
SUBSTANCE SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF
THE OPTION EXERCISE.

          No provision of this Notice of Automatic Stock Option Grant or the 
attached Automatic Stock Option Agreement shall in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the
Corporation or the stockholders to remove Optionee from the Board at any time in
accordance with the provisions of applicable law.

DATED: ____________________, 199__


                              AMDAHL CORPORATION

                              By: ______________________________

                              Title: ___________________________


                                  ______________________________
                                                OPTIONEE

                              Address:  ________________________

                                        ________________________


ATTACHMENTS:
- - ----------- 
EXHIBIT A:     AUTOMATIC STOCK OPTION GRANT AGREEMENT

                                       52
<PAGE>
 
                               AMDAHL CORPORATION

                    AUTOMATIC STOCK OPTION GRANT AGREEMENT


RECITALS

      A.  The Corporation has approved an Automatic Option Grant Program under
the 1994 Stock Incentive Plan (the "Plan"), pursuant to which special option
grants are to be made to eligible members of the Corporation's Board of
Directors (the "Board") at periodic intervals over their period of Board service
in order to encourage such individuals to remain in the Corporation's service.

      B.  Optionee is an eligible Board member, and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the automatic grant of a stock option to purchase shares of the
Corporation's common stock ("Common Stock") under the Plan.

      C.  The granted option is intended to be a non-statutory option which does
                                                                                
not meet the requirements of Section 422 of the Internal Revenue Code and is
designed to provide Optionee with a meaningful incentive to continue to serve as
a member of the Board.

      NOW, THEREFORE, it is hereby agreed as follows:

      1.   GRANT OF OPTION.  Subject to and upon the terms and conditions set
forth in this Agreement, there is hereby granted to Optionee, as of the date of
grant (the "Grant Date") specified in the accompanying Notice of Grant of
Automatic Stock Option (the "Grant Notice"), a stock option to purchase up to
that number of shares of Common Stock (the "Option Shares") as is specified in
the Grant Notice.  The Option Shares shall be purchasable from time to time
during the option term at the price per share (the "Exercise Price") specified
in the Grant Notice.

      2.        OPTION TERM.  This option shall have a maximum term of ten (10)
years measured from the Grant Date and shall expire at the close of business on
the Expiration Date specified in the Grant Notice, unless sooner terminated
under Paragraph 5, 7 or 8.

      3.   LIMITED TRANSFERABILITY.  This option, together with the special
stock appreciation right provided under Paragraph 8.b, shall be neither
transferable nor assignable by Optionee, other than a transfer of this option
effected by will or by the laws of descent and distribution following Optionee's
death, and may be exercised, during Optionee's lifetime, only by Optionee.

                                       53
<PAGE>
 
      4.   EXERCISABILITY.  This option shall be immediately exercisable for any
or all of the Option Shares, whether or not the Option Shares are at the time
vested in accordance with the Vesting Schedule set forth in the Grant Notice,
and this option shall remain so exercisable until the expiration or sooner
termination of the option term.  In no event, however, shall any additional
Option Shares vest following Optionee's cessation of service as a Board member
for any reason other than death or permanent disability.

      5.   CESSATION OF BOARD SERVICE.  Should Optionee's service as a Board
member cease while this option remains outstanding, then the option term
specified in Paragraph 2 shall terminate (and this option shall cease to remain
outstanding) prior to the Expiration Date in accordance with the following
provisions:

           a.   Should Optionee cease to serve as a Board member for any reason
     (other than death or permanent disability) while holding this option, then
     the period for exercising this option shall be reduced to a six (6)-month
     period commencing with the date of such cessation of Board service, but in
     no event shall this option be exercisable at any time after the Expiration
     Date.  During such limited period of exercisability, this option may not be
     exercised for more than the number of Option Shares (if any) in which
     Optionee is vested on the date Optionee ceases service as a Board member.
     Upon the earlier of (i) the expiration of such six (6)-month period or (ii)
     the specified Expiration Date, the option shall terminate and cease to be
     exercisable with respect to any vested Option Shares for which the option
     has not otherwise been exercised.

           b.  Should Optionee die during the six (6)-month period following his
     or her cessation of Board service, then the personal representative of
     Optionee's estate or the person or persons to whom the option is
     transferred pursuant to Optionee's will or in accordance with the laws of
     descent and distribution shall have the right to exercise this option for
     any or all of the Option Shares in which Optionee is vested at the time of
     Optionee's cessation of Board service (less any Option Shares subsequently
     purchased by Optionee prior to death).  Such right of exercise shall
     terminate, and this option shall accordingly cease to remain exercisable
     for such vested Option Shares, upon the earlier of (i) the expiration of
     the twelve (12)-month period measured from the date of Optionee's death or
     (ii) the specified Expiration Date of the option term.

                                       54
<PAGE>
 
           c.  Should Optionee die or become permanently disabled while serving
     as a Board member, then all the Option Shares subject to this option at the
     time of such cessation of Board service shall immediately vest, and
     Optionee (or the personal representative of Optionee's estate or the person
     or persons to whom the option is transferred pursuant to Optionee's will or
     in accordance with the laws of descent and distribution) shall have the
     right to exercise this option for any or all of those vested Option Shares.
     Such right of exercise shall terminate, and this option shall accordingly
     cease to remain outstanding with respect to the Option Shares, upon the
     earlier of (i) the expiration of the twelve (12)-month period measured from
     the date on which Optionee dies or becomes permanently disabled or (ii) the
     specified Expiration Date of the option term.

           d.  Upon Optionee's cessation of Board service for any reason other
     than death or permanent disability, this option shall immediately terminate
     and cease to remain outstanding with respect to any and all Option Shares
     in which Optionee is not otherwise at that time vested in accordance with
     the normal Vesting Schedule set forth in the Grant Notice or the special
     vesting acceleration provisions of Paragraph 7 or 8.

           e.  Optionee shall be deemed to be PERMANENTLY DISABLED if Optionee
     is unable to engage in any substantial gainful activity by reason of any
     medically determinable physical or mental impairment expected to result in
     death or to be of continuous duration of twelve (12) months or more.

      6.   ADJUSTMENT IN OPTION SHARES.

      A.   Should any change be made to the Common Stock issuable under the Plan
by reason of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting such Common Stock as a
class without the Corporation's receipt of consideration, then the number and
class of securities purchasable under this option and the Exercise Price payable
per share shall be appropriately adjusted to prevent the dilution or enlargement
of Optionee's rights hereunder; provided, however, the aggregate Exercise Price
shall remain the same.

      B.   To the extent this option is assumed in connection with any Corporate
Transaction under Paragraph 7 or is otherwise to continue in effect, this option
shall be appropriately adjusted,

                                       55
<PAGE>
 
immediately after such Corporate Transaction, to apply and pertain to the number
and class of securities which would have been issued to Optionee, in
consummation of such Corporate Transaction, had this option been exercised
immediately prior to such Corporate Transaction.  Appropriate adjustments shall
also be made to the Exercise Price payable per share, provided the aggregate
Exercise Price payable for such securities shall remain the same.

      7.   CORPORATE TRANSACTION.  In the event of any of the following
stockholder-approved transactions to which the Corporation is a party (a
"Corporate Transaction"):

           a.  a merger or consolidation in which the Corporation is not the
     surviving entity, except for a transaction the principal purpose of which
     is to change the state in which the Corporation is incorporated,

           b.  the sale, transfer or other disposition of all or substantially
     all of the assets of the Corporation in complete liquidation or dissolution
     of the Corporation, or

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

           all Option Shares at the time subject to this option but not
 otherwise vested shall automatically vest in full and the Corporation's
 repurchase right with respect to those shares shall immediately terminate, so
 that this option shall, immediately prior to the specified effective date for
 the Corporate Transaction, become fully exercisable for all of the Option
 Shares at the time subject to this option and may be exercised for all or any
 portion of such shares as fully vested shares of Common Stock.  Immediately
 following the consummation of the Corporate Transaction, this option shall
 terminate and cease to be outstanding, except to the extent assumed by the
 successor corporation (or parent thereof).

           8.   CHANGE IN CONTROL/HOSTILE TAKEOVER.

           a.        All Option Shares subject to this option at the time of a
 Change in Control or Hostile Take-Over (as such terms are defined below) but
 not otherwise vested shall automatically vest in full, and the Corporation's
 repurchase right shall immediately terminate with respect to those shares, so
 that this option shall,

                                       56
<PAGE>
 
 immediately prior to the effective date of such Change in Control or Hostile
 Take-Over, become fully exercisable for all of the Option Shares at the time
 subject to this option and may be exercised for all or any portion of such
 shares as fully vested shares of Common Stock.  This option shall remain
 exercisable for such fully vested Option Shares until the earliest to occur of
 (i) the specified Expiration Date of the option term, (ii) the sooner
 termination of this option in accordance with Paragraph 5 or 7 or (iii) the
 surrender of this option under Paragraph 8.b.

           b.        Provided this option has been outstanding for at least six
 (6) months prior to the occurrence of a Hostile Take-Over, Optionee shall also
 have the unconditional right (exercisable during the thirty (30)-day period
 immediately following the consummation of such Hostile Take-Over) to surrender
 this option to the Corporation in exchange for a cash distribution from the
 Corporation in an amount equal to the excess of (i) the Take-Over Price of the
 Option Shares at the time subject to the surrendered option over (ii) the
 aggregate Exercise Price payable for such shares.

           To exercise this limited stock appreciation right, Optionee must,
 during the applicable thirty (30)-day exercise period, provide the Corporation
 with written notice of the option surrender in which there is specified the
 number of Option Shares as to which the Option is being surrendered.  Such
 notice must be accompanied by the return of Optionee's copy of this Agreement,
 together with any written amendments to such Agreement.  The cash distribution
 shall be paid to Optionee within five (5) days following such delivery date,
 and neither the approval of the Plan Administrator nor the consent of the Board
 shall be required in connection with the option surrender and cash
 distribution.  Upon receipt of such cash distribution, this option shall be
 cancelled with respect to the shares subject to the surrendered option (or the
 surrendered portion), and Optionee shall cease to have any further right to
 acquire those Option Shares under this Agreement.  However, should this option
 be surrendered for only a portion of the Option Shares at the time subject to
 the option, a new stock option agreement (substantially in the form of this
 Agreement) shall be issued by the Corporation for the balance of the Option
 Shares for which this option is not surrendered.

           This limited stock appreciation right shall in all events terminate
 upon the expiration or sooner termination of the option term and may not be
 assigned or transferred by Optionee.

           c.        Definitions:  For purposes of this Agreement, the following
 definitions shall be in effect:

                                       57
<PAGE>
 
           CHANGE IN CONTROL: a change in ownership or control of the
 Corporation effected through either of the following transactions:

           -  a direct acquisition by any person (or related group of persons)
      of beneficial ownership (within the meaning of Rule 13d-3 of the
      Securities and Exchange Act of 1934, as amended (the "1934 Act"), of
      securities possessing more than ten percent (10%) of the total combined
      voting power of the Corporation's outstanding securities,

           -  the direct or indirect acquisition by any person or related group
      of persons, whether by tender or exchange offer made directly to the
      Corporation's stockholders, private purchases from one or more of the
      Corporation's stockholders, open market purchases or any other
      transaction, of additional securities of the Corporation which increases
      the beneficial ownership (within the meaning of Rule 13d-3 of the 1934
      Act) of the total securities holdings of such person (or related group of
      persons) to a level of securities possessing more than fifty percent (50%)
      of the total combined voting power of the Corporation's outstanding
      securities, or

           -  the direct or indirect acquisition by any person or related group
      of persons, whether by tender or exchange offer made directly to the
      Corporation's stockholders, private purchases from one or more of the
      Corporation's stockholders, open market purchases or any other
      transaction, of beneficial ownership (within the meaning of Rule 13d-3 of
      the 1934 Act) of securities of the Corporation possessing sufficient
      voting power in the aggregate to elect an absolute majority of the Board
      (rounded up to the next whole number).

           HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
 through the following transaction:

           -  the direct or indirect acquisition by any person or related group
      of persons of beneficial ownership (within the meaning of Rule 13d-3 of
      the 1934 Act) of securities possessing more than fifty percent (50%) of
      the total combined voting power of the Corporation's outstanding
      securities pursuant to a tender or exchange offer made directly to the
      Corporation's stockholders which the Board does not recommend such
      stockholders to accept, and

                                       58
<PAGE>
 
           -  more than fifty percent (50%) of the acquired securities are
      accepted from holders other than the officers and directors of the
      Corporation subject to the short-swing profit restrictions of Section 16
      of the 1934 Act.

           TAKE-OVER PRICE: the greater of (i) the Fair Market Value (as defined
 in subparagraph 9.b. below) per share of Common Stock on the date the option is
 surrendered to the Corporation in connection with the Hostile Take-Over or (ii)
 the highest reported price per share of Common Stock paid by the tender offeror
 in effecting such Hostile Take-Over.

           9.   MANNER OF EXERCISING OPTION.

           a.   In order to exercise this option for all or any part of the
 Option Shares for which the option is at the time exercisable, Optionee (or in
 the case of exercise after Optionee's death, Optionee's executor,
 administrator, heir or legatee, as the case may be) must take the following
 actions:

                (1) To the extent the option is exercised for vested Option
      Shares, the Secretary of the Corporation shall be provided with written
      notice of the option exercise (the "Exercise Notice"), in substantially
      the form of Exhibit I attached hereto, in which there is specified the
      number of vested Option Shares which are to be purchased under the
      exercised option.  To the extent the option is exercised for one or more
      unvested Option Shares, Optionee (or other person exercising the option)
      shall deliver to the Secretary of the Corporation a stock Issuance
      Agreement (in form and substance satisfactory to the Corporation) which
      grants the Corporation the right to repurchase, at the Exercise Price, any
      and all unvested Option Shares held by Optionee at the time of his or her
      cessation of Board service and which precludes the sale, transfer or other
      disposition of any purchased Option Shares subject to such repurchase
      right ("the Issuance Agreement").

                (2) The aggregate Exercise Price for the purchased shares shall
      be paid in one of the following alternative forms:

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

                     (b) full payment in shares of Common Stock held by Optionee
           for the requisite period necessary to avoid a charge to the
           Corporation's earnings for financial reporting

                                       59
<PAGE>
 
<PAGE> 
           purposes and valued at Fair Market Value on the Exercise Date (as
           defined below);

                     (c) full payment in a combination of shares of Common Stock
           held for the requisite period necessary to avoid a charge to the
           Corporation's earnings for financial reporting purposes and valued at
           Fair Market Value on the Exercise Date and cash or check made payable
           to the Corporation's order; or

                     (d) to the extent the option is exercised for vested Option
           Shares, full payment effected through the Immediate Sale Program: a 
           broker-dealer sale and remittance procedure pursuant to which
           Optionee shall provide concurrent irrevocable written instructions
           (i) to a Corporation-designated brokerage firm to effect the
           immediate sale of the vested shares purchased under the option and
           remit to the Corporation, out of the sale proceeds available on the
           settlement date, sufficient funds to cover the aggregate Exercise
           Price payable for those shares and (ii) to the Corporation to deliver
           the certificates for the purchased shares directly to such brokerage
           firm in order to complete the sale.

                (3) Appropriate documentation evidencing the right to exercise
      this option shall be furnished the Corporation if the person or persons
      exercising the option is other than Optionee.

           b. For purposes of subparagraph 9.a. above and for all other
 valuation purposes under this Agreement, the Fair Market Value per share of
 Common Stock on any relevant date shall be the mean between the highest and
 lowest selling prices per share on the date in question on the principal
 exchange on which the Common Stock is then listed or admitted to trading, as
 such prices are reported on the composite tape of transactions on such
 exchange. If there are no reported sales of the Common Stock on the date in
 question, then the Fair Market Value shall be the mean between the highest and
 lowest selling prices on the last preceding date for which such quotations
 exist.

           c. The Exercise Date shall be the date on which the Exercise
 Notice is delivered to the Secretary of the Corporation, together with the
 appropriate Issuance Agreement for any unvested shares acquired under the
 option.  Except to the extent the Immediate Sale Program specified above
 is

                                       60
<PAGE>
 
 utilized in connection with the exercise of the option for vested Option
 Shares, payment of the Exercise Price for the purchased shares must accompany
 such notice.

           d. As soon as practical after the Exercise Date, the
 Corporation shall issue to or on behalf of Optionee (or other person or persons
 exercising this option) a certificate or certificates representing the
 purchased Option Shares.  To the extent any such Option Shares are unvested,
 the certificates for those Option Shares shall be endorsed with an appropriate
 legend evidencing the Corporation's repurchase rights and may be held in escrow
 with the Corporation until such shares vest.

           e. In no event may this option be exercised for any fractional
 share.

           10. STOCKHOLDER RIGHTS. The holder of this option shall not have any
  of the rights of a stockholder with respect to the Option Shares until such
  individual shall have exercised this option and paid the Exercise Price for
  the purchased shares.

           11.  NO IMPAIRMENT OF RIGHTS. This Agreement shall not in any way
  affect the right of the Corporation to adjust, reclassify, reorganize or
 otherwise make changes in its capital or business structure or to merge,
 consolidate, dissolve, liquidate or sell or transfer all or any part of its
 business or assets.  Nor shall this Agreement in any way be construed or
 interpreted so as to affect adversely or otherwise impair the right of the
 Corporation or the stockholders to remove Optionee from the Board at any time
 in accordance with the provisions of applicable law.

           12.  COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of this
  option and the issuance of the Option Shares upon such exercise shall be
 subject to compliance by the Corporation and Optionee with all applicable
 requirements of law relating thereto and with all applicable regulations of any
 securities exchange on which shares of the Common Stock may be listed for
 trading at the time of such exercise and issuance.

           13.   SUCCESSORS AND ASSIGNS. Except to the extent otherwise
  provided in Paragraph 3 or 7, the provisions of this Agreement shall inure to
 the benefit of, and be binding upon, the successors, administrators, heirs,
 legal representatives and assigns of Optionee and the Corporation's successors
 and assigns.

           14.   DISCHARGE OF LIABILITY. The inability of the Corporation to
  obtain approval from any regulatory body having authority deemed by the
 Corporation to be necessary to the lawful issuance and sale of any Common Stock
 pursuant to this option shall

                                       61
<PAGE>
 
 relieve the Corporation of any liability with respect to the non-issuance or
 sale of the Common Stock as to which such approval shall not have been
 obtained.  However, the Corporation shall use its best efforts to obtain all
 such applicable approvals.

           15.  NOTICES.  Any notice required to be given or delivered to the
 Corporation under the terms of this Agreement shall be in writing and addressed
 to the Corporation in care of the Corporate Secretary at the Corporate Offices
 at 1250 East Arques Avenue, P.O. Box 3470, Sunnyvale, California 94088-3470.
 Any notice required to be given or delivered to Optionee shall be in writing
 and addressed to Optionee at the address indicated below Optionee's signature
 line on the Grant Notice.  All notices shall be deemed to have been given or
 delivered upon personal delivery or upon deposit in the U.S. mail, postage
 prepaid and properly addressed to the party to be notified.

           16.  CONSTRUCTION/GOVERNING LAW.  This Agreement and the option
  evidenced hereby are made and granted pursuant to the Plan and are in all
 respects limited by and subject to the express terms and provisions of the
 Plan, including the Automatic Option Grant Program provisions of Article Three
 of the Plan. The interpretation, performance and enforcement of this Agreement
 shall be governed by the laws of the State of California without resort to that
 State's conflict-of-laws provisions.

                                       62
<PAGE>
 
                                   EXHIBIT I

                             NOTICE OF EXERCISE OF
                             AUTOMATIC STOCK OPTION


           I hereby notify Amdahl Corporation (the "Corporation") that I elect
 to purchase ____________________ shares of the Corporation's common stock par 
 value of $.05 per share (the "Purchased Shares") at the option exercise price
 of $______ per share (the "Exercise Price") pursuant to that certain option 
 (the "Option") granted to me under the Corporation's 1994 Stock Incentive Plan
 on ___________, 199_ to purchase up to 5,000 shares of the Corporation's common
 stock.

           Concurrently with the delivery of this Exercise Notice to the
 Secretary of the Corporation, I shall hereby pay to the Corporation the
 Exercise Price for the Purchased Shares in accordance with the provisions of my
 agreement with the Corporation evidencing the Option and shall deliver whatever
 additional documents may be required by such agreement as a condition for
 exercise. Alternatively, I may utilize the special Immediate Sale Program 
 procedure specified in my agreement to effect payment of the Exercise Price for
 any Purchased Shares in which I am vested at the time of exercise.



- - -----------------------------------   ------------------------------------------
Date                                                                    Optionee

                                      Address:   _______________________________

                                                 _______________________________


Print name in exact manner
it is to appear on the
stock certificate:                    __________________________________________


Address to which certificate
is to be sent, if different
from address above:                   __________________________________________

                                      __________________________________________


Social Security Number:               __________________________________________

                                       63
