As filed with the Securities and Exchange Commission on March 30, 1999
                                                  Registration No. 333 -
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549



                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933



                                    CASTELLE
             (Exact name of registrant as specified in its charter)


        California                                        77-0164056
  (State of Incorporation)                 (I.R.S. Employer Identification No.)
                                     



                  3255-3 Scott Boulevard, Santa Clara, CA 95054
                    (Address of principal executive offices)


                           1988 Equity Incentive Plan
                            (Full title of the plans)

                                   Laurie Gee
                            Vice President of Finance
                                    Castelle
                             3255-3 Scott Boulevard
                          Santa Clara, California 95054
                                 (408) 496-0474
 (Name, address, including zip code, and telephone number, including area code, 
                             of agent for service)


                                   Copies to:
                            Samuel M. Livermore, Esq.
                               Cooley Godward LLP
                         One Maritime Plaza, 20th Floor
                             San Francisco, CA 94111
                                 (415) 693-2000





<PAGE>

<TABLE>
<CAPTION>
                                                                  

                         CALCULATION OF REGISTRATION FEE



========================== ---------------------- ------------------------- -------------------------- =========================
                                                      Proposed Maximum          Proposed Maximum
 Title of Securities to                              Offering Price Per     Aggregate Offering Price
      be Registered            Amount to be              Share (1)                     (1)              Amount of Registration
                                Registered                                                                       Fee
========================== ====================== ========================= ========================== =========================
<S>                                      <C>                  <C>                       <C>                             <C>    
Stock  Options and Common
Stock (par value $.001)                  981,935              $.5925-$2.04              $1,680,269.50                   $467.11


========================== ====================== ========================= ========================== =========================

</TABLE>


         (1) Estimated  solely for the purpose of calculating  the amount of the
         registration   fee  pursuant  to  Rule  457(c)  and  (h)(1)  under  the
         Securities Act of 1933, as amended (the "Act").  The offering price per
         share and  aggregate  offering  price are based  upon (a) the  weighted
         average  exercise  price,  for shares  subject to  outstanding  options
         granted under Castelle  ("Registrant" or "Company") under the Company's
         1988 Equity  Incentive  Plan (the  "Incentive  Plan")(pursuant  to Rule
         457(h)  under the Act) or (b) the average of the high and low prices of
         Registrant's  Common Stock as reported on the Nasdaq National Market on
         March 25, 1999,  for shares  reserved for future grant  pursuant to the
         Incentive  (pursuant to Rule 457(c) under the Act). The following chart
         illustrates the calculation of the registration fee:

<TABLE>
<CAPTION>

----------------------------------------------------------- ------------------- --------------------- ==========================
                     Title of Shares                         Number of Shares    Offering Price Per   Aggregate Offering Price
                                                                                       Share
----------------------------------------------------------- ------------------- --------------------- ==========================
<S>                                                         <C>                 <C>                   <C>   
----------------------------------------------------------- ------------------- --------------------- ==========================
Shares  issuable  pursuant to  outstanding  stock  options             758,876                 $2.04              $1,548,107.04
pursuant to 1988 Equity Incentive Plan
----------------------------------------------------------- ------------------- --------------------- ==========================

Shares   issuable   pursuant  to  unissued  stock  options             223,059                $.5925                $132,162.46
pursuant to 1988 Equity Incentive Plan
----------------------------------------------------------- ------------------- --------------------- ==========================

Proposed Maximum Aggregate Offering Price                                                                         $1,680,269.50
----------------------------------------------------------- ------------------- --------------------- ==========================

Registration Fee                                                                                                        $467.11
----------------------------------------------------------- ------------------- --------------------- ==========================

</TABLE>





                                       2

<PAGE>


                    INCORPORATION BY REFERENCE OF CONTENTS OF
                REGISTRATION STATEMENT ON FORM S-8 NO. 333-06083


         The contents of Registration  Statement on Form S-8 No. 333-06083 filed
with the Securities and Exchange Commission on June 14, 1996 are incorporated by
reference herein.

         Amendments to the 1988 Equity Incentive Plan (the "Incentive  Plan") by
the  Board in April  1997,  approved  by the  shareholders  on  April  29,  1998
increased  the number of shares of the  Company's  Common Stock  authorized  for
issuance from 945,582 shares to 1,927,517 and made changes to the Incentive Plan
in response to the  requirements of Code Section 162(m) of the Internal  Revenue
Code of 1986, as amended (the "Code").

<TABLE>
<CAPTION>

                                    EXHIBITS

Exhibit
Number
<S>               <C>    

5.1               Opinion of Cooley Godward LLP

23.1              Consent of PricewaterhouseCoopers LLP

23.2              Consent of Cooley Godward LLP is contained in Exhibit 5.1 to 
                  this Registration Statement

24                Power of Attorney is contained on the signature pages.

99.1              1988 Equity Incentive Plan, as amended as of April 29, 1998.

</TABLE>

                                       3
<PAGE>


                                   SIGNATURES


         Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the  requirements  for  filing  on  Form  S-8 and has  duly  caused  this
Registration Statement to be signed on its behalf by the undersigned,  thereunto
duly  authorized,  in the City of Santa  Clara,  State of  California,  on March
29, 1999.


                                                CASTELLE
                                                By: /s/ Laurie Gee 
                                                    Laurie Gee
                                                    Vice President, Finance




                                POWER OF ATTORNEY


         KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature
appears below  constitutes  and appoints Donald Rich and Laurie Gee, and each or
any one of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments)  to this  Registration  Statement,  and to file the  same,  with all
exhibits  thereto,  and  other  documents  in  connection  therewith,  with  the
Securities and Exchange  Commission,  granting unto said  attorneys-in-fact  and
agents,  and each of them,  full power and  authority to do and perform each and
every act and thing requisite and necessary to be done in connection  therewith,
as fully to all intents and  purposes as he might or could do in person,  hereby
ratifying and confirming all that said  attorneys-in-fact  and agents, or any of
them, or their or his substitutes or substitute,  may lawfully do or cause to be
done by virtue hereof.

                                       4

<PAGE>



         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature                        Title                          Date

<S>                         <C>                               <C> 
 /s/ Donald L. Rich         Chief Executive Officer,          March 29, 1999
 Donald L. Rich             President and Director
                            (Principal Executive Officer)




 /s/ Laurie Gee             Vice President, Finance           March 29, 1999              
 Laurie Gee                 (Principal Financial and
                             Accounting Officer)




 /s/ John Freidenrich       Director                          March 29, 1999             
 John Freidenrich 




                            Director                          ________, 1999              
 Robert Hambrecht




 /s/ Alan Kessman           Director                          March 29, 1999              
 Alan Kessman




 /s/ Arthur Bruno           Director                          March 29, 1999               
 Arthur Bruno
 
</TABLE>
                                       5

<PAGE>


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

Exhibit                                                                          Sequential
Number                      Description                                         Page Number

<S>         <C>                                                                 <C>
5.1         Opinion of Cooley Godward LLP
23.1        Consent of PricewaterhouseCoopers LLP
23.2        Consent of Cooley Godward LLP is contained in Exhibit 5.1
                 to this Registration Statement
24          Power of Attorney is contained  on the  signature  pages.  
99.1        1988 Equity Incentive Plan, as amended as of April 29, 1998.

</TABLE>




                                       6
<PAGE>







                                                                             5.1
March 29, 1999

Castelle
3255-3 Scott Boulevard
Santa Clara, CA  95054

Ladies and Gentlemen:

You have  requested  our opinion with respect to certain  matters in  connection
with the filing by Castelle (the "Company") of a Registration  Statement on Form
S-8 (the "Registration  Statement") with the Securities and Exchange  Commission
covering the offering of up to 981,935 shares of the Company's  Common Stock, no
par value,  (the  "Shares")  pursuant  to its 1988  Equity  Incentive  Plan (the
"Plan").

In connection with this opinion, we have examined the Registration Statement and
related Prospectus,  your Articles of Incorporation and By-laws, as amended, and
such other documents, records, certificates,  memoranda and other instruments as
we deem necessary as a basis for this opinion.  We have assumed the  genuineness
and authenticity of all documents  submitted to us as originals,  the conformity
to originals of all  documents  submitted to us as copies  thereof,  and the due
execution and delivery of all  documents  where due execution and delivery are a
prerequisite to the effectiveness thereof.

On the basis of the foregoing,  and in reliance  thereon,  we are of the opinion
that the  Shares,  when  sold and  issued  in  accordance  with  the  Plan,  the
Registration  Statement and related  Prospectus,  will be validly issued,  fully
paid, and nonassessable (except as to shares issued pursuant to certain deferred
payment  arrangements,  which  will be fully  paid and  nonassessable  when such
deferred payments are made in full).

We  consent to the  filing of this  opinion  as an  exhibit to the  Registration
Statement.

Very truly yours,

Cooley Godward LLP



By:      /s/ Samuel M. Livermore          
         Samuel M. Livermore



<PAGE>


                                                                            23.1

                      Consent of PricewaterhouseCoopers LLP
                             Independent Accountants



We consent to the  incorporation by reference in the  registration  statement of
Castelle  and  subsidiaries  on Form S-8 (File No.  333- ) of our  report  dated
February 5, 1999,  on our audits of the  consolidated  financial  statements  of
Castelle and  subsidiaries as of December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, and our report dated February
5, 1999,  on our audit of the  financial  statement  schedule,  which  report is
included in Form 10-K.



San Jose, California
March 26, 1999




<PAGE>


                                                                            99.1
              1988 EQUITY INCENTIVE PLAN, AS AMENDED APRIL 29, 1998


<PAGE>







                                    CASTELLE

                           1988 EQUITY INCENTIVE PLAN

                             Adopted: April 29, 1988
                             Amended: June 22, 1995
                           Amended: November 15, 1995
                             Amended: April 30, 1997
                            Approved: April 29, 1998


1.       PURPOSES.

(a) The purpose of the Plan is to provide a means by which selected Employees of
and Consultants or Directors to the Company, and its Affiliates, may be given an
opportunity  to  benefit  from  increases  in value of the stock of the  Company
through the granting of (i) Incentive  Stock Options,  (ii)  Nonstatutory  Stock
Options,  (iii) stock bonuses, and (iv) rights to purchase restricted stock, all
as defined below.

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

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

2.       DEFINITIONS.

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

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

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

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

                                        1
 <PAGE>                                      

(e) "Company" means Castelle, a California corporation.

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

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

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

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

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

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

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

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

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

(n)  "Non-Employee  Director"  means a Director of the Company who either (i) is
not a current  Employee or Officer of the Company or its parent or a subsidiary,
does not receive  compensation  (directly or indirectly) from the Company or its
parent or a subsidiary for services  rendered as a consultant or in any capacity
other than as a Director  (except for an amount as to which disclosure would not
be required  under Item 404(a) of  Regulation  S-K  promulgated  pursuant to the
Securities Act  ("Regulation  S-K")),  does not possess an interest in any other
transaction  as to which  disclosure  would be  required  under  Item  404(a) of
Regulation  S-K  and is not  engaged  in a  business  relationship  as to  which
disclosure  would be required  under Item 404(b) of  Regulation  S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.


                                       2
 <PAGE>                                      

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

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

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

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

(s)  "Optionee"  means  an  Employee,   Director  or  Consultant  who  holds  an
outstanding Option.

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

(u) "Plan" means this Castelle 1988 Equity Incentive Plan.

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

(w) "Stock Award" means any right granted under the Plan,  including any Option,
any stock bonus or any right to purchase restricted stock.

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

3.       ADMINISTRATION.

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

                                       3
 <PAGE>                                      


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

(1) To determine from time to time which of the persons  eligible under the Plan
shall be granted Stock  Awards;  when and how each Stock Award shall be granted;
whether a Stock Award will be an Incentive  Stock Option,  a Nonstatutory  Stock
Option, a stock bonus, a right to purchase restricted stock, or a combination of
the  foregoing;  the  provisions of each Stock Award granted  (which need not be
identical),  including  the time or times when a person  shall be  permitted  to
receive stock  pursuant to a Stock Award;  and the number of shares with respect
to which a Stock Award shall be granted to each such person.

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

(3) To amend the Plan or a Stock Award as provided in Section 13.

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

(c)  The  Board  may  delegate  administration  of the  Plan to a  Committee  or
Committees of one or more members of the Board, and the term  "Committee"  shall
apply to any person or persons to whom such  authority  has been  delegated.  If
administration  is  delegated  to a  Committee,  the  Committee  shall have,  in
connection with the administration of the Plan, the powers theretofore possessed
by the Board,  including  the power to  delegate  to a  subcommittee  any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall  thereafter be to the  Committee or  subcommittee),
subject,  however, to such resolutions,  not inconsistent with the provisions of
the  Plan,  as may be  adopted  from  time to time by the  Board.  The Board may
abolish the Committee at any time and revest in the Board the  administration of
the Plan.

                  In the discretion of the Board, a Committee may consist solely
of two or more Outside Directors, in accordance with Section 162(m) of the Code,
and/or solely of two or more  Non-Employee  Directors,  in accordance  with Rule
16b-3.  Within the scope of such  authority,  the Board or the Committee may (i)
delegate to a committee  of one or more members of the Board who are not Outside
Directors,  the  authority  to grant Stock  Awards to  eligible  persons who are
either  (A) not  then  Covered  Employees  and are not  expected  to be  Covered
Employees at the time of recognition  of income  resulting from such Stock Award
or (B) not  persons  with  respect  to whom the  Company  wishes to comply  with
Section  162(m) of the Code and/or (ii)  delegate to a committee  of one or more
members of the Board who are not  Non-Employee  Directors the authority to grant
Stock  Awards to eligible  persons who are not then subject to Section 16 of the
Exchange Act.

                                       4
 <PAGE>                                      

4.       SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, the stock that may be issued pursuant to Stock Awards shall not exceed
in the  aggregate  one million nine hundred  twenty-seven  thousand five hundred
seventeen  (1,927,517) shares of the Company's common stock. If any Option shall
for any  reason  expire or  otherwise  terminate,  in whole or in part,  without
having been  exercised in full,  the stock not acquired  under such Option shall
revert to and again become  available for issuance under the Plan. If any shares
of the Company's common stock which are subject to a repurchase or reacquisition
right  in  favor of the  Company,  any such  shares  which  are  repurchased  or
reacquired  by the Company  pursuant to the terms of such rights shall revert to
and again become available for issuance under the Plan.

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

5.       ELIGIBILITY.

(a) Incentive Stock Options may be granted only to Employees. Stock Awards other
than  Incentive  Stock  Options may be granted only to  Employees,  Directors or
Consultants.

(b) No person shall be eligible  for the grant of an Incentive  Stock Option if,
at the time of grant,  such person owns (or is deemed to own pursuant to Section
424(d) of the Code) stock  possessing  more than ten percent  (10%) of the total
combined  voting  power of all  classes of stock of the Company or of any of its
Affiliates  unless the exercise price of such Incentive Stock Option is at least
one  hundred ten  percent  (110%) of the Fair Market  Value of such stock at the
date of grant  and the  Incentive  Stock  Option  is not  exercisable  after the
expiration  of five  (5)  years  from  the  date of  grant,  or in the case of a
restricted  stock  purchase  award,  the purchase  price is at least one hundred
percent (100%) of the Fair Market Value of such stock at the date of grant.

(c) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, no employee shall be eligible to be granted Options covering more than
four hundred  thousand  (400,000) shares of the Common Stock during any calendar
year.
 
6.       OPTION PROVISIONS.

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

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

(b) Price.  The exercise price of each Incentive  Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the stock subject to
the Option on the date the Option is granted (one hundred and ten percent (110%)
in the case of a 10%  shareholder  as described in Section  5(b));  the exercise
price of each  Nonstatutory  Stock  Option  shall be not less  than  eighty-five
percent  (85%)  percent  of the Fair  Market  Value of the stock  subject to the
Option on the date the Option is  granted.  Notwithstanding  the  foregoing,  an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted  with an  exercise  price  lower  than that set  forth in the  preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another  option in a manner  satisfying  the provisions of Section 424(a) of the
Code.

                                       5
 <PAGE>                                      

(c)  Consideration.  The purchase price of stock acquired  pursuant to an Option
shall be paid, to the extent  permitted by applicable  statutes and regulations,
either  (i) in  cash  at the  time  the  Option  is  exercised,  or  (ii) at the
discretion  of the  Board  or the  Committee,  at the  time of the  grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the  foregoing,  the use of other common stock of the
Company)  with the person to whom the Option is granted or to whom the Option is
transferred  pursuant  to  subsection  6(d),  or (C) in any other  form of legal
consideration  that may be acceptable to the Board.  In the case of any deferred
payment  arrangement,  interest  shall be payable at least annually and shall be
charged at the minimum  rate of interest  necessary  to avoid the  treatment  as
interest, under any applicable provisions of the Code, of any amounts other than
amounts  stated to be  interest  under the  deferred  payment  arrangement.  The
principal amount of any deferred payment arrangement shall not exceed the amount
permitted  by  law,  including  but  not  limited  to any  state  corporate  law
requirements requiring the immediate payment of the par value of stock.

(d) Transferability.  An Incentive Stock Option shall not be transferable except
by will or by the laws of descent  and  distribution,  and shall be  exercisable
during the lifetime of the person to whom the Incentive  Stock Option is granted
only by such person.  A Nonstatutory  Stock Option shall be  transferable to the
extent provided in the Option Agreement;  provided,  however, that if the Option
Agreement  does  not  specifically  provide  for   transferability,   then  such
Nonstatutory Stock Option shall be not be transferable  except by will or by the
laws of descent and distribution.  Notwithstanding the foregoing,  the person to
whom the Option is granted may, by delivering written notice to the Company,  in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionee, shall thereafter be entitled to exercise the Option.

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

                                       6
 <PAGE>                                      

(f) Termination of Employment or  Relationship as a Consultant.  In the event an
Optionee's  Continuous Status as an Employee,  Director or Consultant terminates
(other than upon the Optionee's death or disability),  the Optionee may exercise
his or her Option (to the extent that the  Optionee  was entitled to exercise it
at the date of  termination)  but only  within such period of time ending on the
earlier of (i) the date three (3) months after the termination of the Optionee's
Continuous  Status as an  Employee,  Director or  Consultant  (or such longer or
shorter period specified in the Option Agreement,  or (ii) the expiration of the
term of the Option as set forth in the Option Agreement.  If, after termination,
the Optionee  does not exercise his or her Option  within the time  specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.

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

(h)  Death of  Optionee.  In the event of the death of an  Optionee  during,  or
within a period specified in the Option after the termination of, the Optionee's
Continuous  Status as an  Employee,  Director or  Consultant,  the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's  estate,  by a person who acquired the right to
exercise  the Option by  bequest or  inheritance  or by a person  designated  to
exercise the option upon the Optionee's  death pursuant to subsection  6(d), but
only  within the period  ending on the  earlier  of (i) the date  eighteen  (18)
months  following the date of death (or such longer or shorter period  specified
in the Option  Agreement,  or (ii) the  expiration of the term of such Option as
set forth in the Option  Agreement.  If, at the time of death,  the Optionee was
not entitled to exercise  his or her entire  Option,  the shares  covered by the
unexercisable  portion of the Option shall revert to and again become  available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become  available  for issuance  under the
Plan.

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

                                       7
 <PAGE>                                      

(j) Re-Load  Options.  Without in any way limiting the authority of the Board or
Committee  to make or not to make  grants  of  Options  hereunder,  the Board or
Committee shall have the authority (but not an obligation) to include as part of
any Option  Agreement a provision  entitling the Optionee to a further Option (a
"Re-Load  Option") in the event the Optionee  exercises the Option  evidenced by
the Option  Agreement,  in whole or in part,  by  surrendering  other  shares of
common stock in  accordance  with this Plan and the terms and  conditions of the
Option  Agreement.  Any such Re-Load  Option (i) shall be for a number of shares
equal to the number of shares  surrendered  as part or all of the exercise price
of such  Option;  (ii)  shall have an  expiration  date which is the same as the
expiration  date of the Option the  exercise of which gave rise to such  Re-Load
Option;  and (iii)  shall have an  exercise  price which is equal to one hundred
percent  (100%) of the Fair  Market  Value of the  common  stock  subject to the
Re-Load Option on the date of exercise of the original  Option.  Notwithstanding
the foregoing,  a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10%  shareholder (as described in subsection  5(b)),  shall have an
exercise  price which is equal to one  hundred  ten  percent  (110%) of the Fair
Market Value of the stock subject to the Re-Load  Option on the date of exercise
of the  original  Option and shall have a term which is no longer  than five (5)
years.

         Any  such  Re-Load  Option  may  be  an  Incentive  Stock  Option  or a
Nonstatutory  Stock Option,  as the Board or Committee may designate at the time
of the grant of the original Option; provided,  however, that the designation of
any Re-Load  Option as an  Incentive  Stock  Option  shall be subject to the one
hundred  thousand  dollar  ($100,000)  annual  limitation on  exercisability  of
Incentive Stock Options described in subsection 11(d) of the Plan and in Section
422(d) of the Code.  There shall be no Re-Load Options on a Re-Load Option.  Any
such Re-Load Option shall be subject to the  availability  of sufficient  shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.

7.       TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

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

         (a) Purchase  Price.  The purchase  price under each  restricted  stock
purchase  agreement  shall  be such  amount  as the  Board  or  Committee  shall
determine  and  designate  in such  agreement.  In any  event,  the Board or the
Committee may determine  that eligible  participants  in the Plan may be awarded
stock  pursuant to a stock bonus  agreement in  consideration  for past services
actually rendered to the Company or for its benefit.

         (b) Transferability.  No rights under a stock bonus or restricted stock
purchase  agreement shall be transferable  except by will or the laws of descent
and  distribution  or pursuant to a domestic  relations  order, so long as stock
awarded under such agreement remains subject to the terms of the agreement.

                                       8
 <PAGE>                                      

         (c)  Consideration.  The purchase price of stock acquired pursuant to a
stock  purchase  agreement  shall  be paid  either:  (i) in cash at the  time of
purchase;  (ii) at the discretion of the Board or the Committee,  according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal  consideration that may be acceptable to the
Board or the Committee in their discretion.  Notwithstanding the foregoing,  the
Board or the Committee to which  administration  of the Plan has been  delegated
may award stock pursuant to a stock bonus  agreement in  consideration  for past
services actually rendered to the Company or for its benefit.

         (d)  Vesting.  Shares of stock sold or awarded  under the Plan may, but
need  not,  be  subject  to a  repurchase  option  in  favor of the  Company  in
accordance  with  a  vesting  schedule  to be  determined  by the  Board  or the
Committee.

         (e)  Termination  of  Employment  or  Relationship  as  a  Director  or
Consultant.  In the event a  Participant's  Continuous  Status  as an  Employee,
Director or  Consultant  terminates,  the Company may  repurchase  or  otherwise
reacquire,  subject to the limitations  described in subsection 7(d), any or all
of the shares of stock held by that person  which have not vested as of the date
of termination  under the terms of the stock bonus or restricted  stock purchase
agreement between the Company and such person.

8.       CANCELLATION AND RE-GRANT OF OPTIONS.

(a) The Board or the Committee  shall have the authority to effect,  at any time
and from time to time,  (i) the repricing of any  outstanding  Options under the
Plan  and/or  (ii) with the  consent of the  affected  holders of  Options,  the
cancellation  of any  outstanding  Options  under  the  Plan  and the  grant  in
substitution  therefor  of new  Options  under  the  Plan  covering  the same or
different numbers of shares of stock, but having an exercise price per share not
less than  eighty-five  percent  (85%) of the Fair  Market  Value  (one  hundred
percent  (100%)  of the Fair  Market  Value in the  case of an  Incentive  Stock
Option) or, in the case of an Option granted to a 10%  shareholder (as described
in subsection  5(b)),  not less than one hundred ten percent  (110%) of the Fair
Market  Value)  per share of stock on the new grant  date.  Notwithstanding  the
foregoing, the Board or the Committee may grant an Option with an exercise price
lower  than  that  set  forth  above  if such  Option  is  granted  as part of a
transaction to which section 424(a) of the Code applies.

(b) Shares  subject to an Option which is amended or canceled under this Section
8 in order to set a lower  exercise price per share shall continue to be counted
against  the  maximum  award of  Options  permitted  to be granted  pursuant  to
subsection 5(c). The repricing of an Option under this Section 8, resulting in a
reduction of the exercise  price,  shall be deemed to be a  cancellation  of the
original  Option  and the  grant of a  substitute  Option  in the  event of such
repricing,  both the  original  and the  substituted  Options  shall be  counted
against any such maximum awards of Options.  The  provisions of this  subsection
8(b) shall be applicable  only to the extent  required by Section  162(m) of the
Code.

9.       COVENANTS OF THE COMPANY.

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

                                       9
 <PAGE>                                      

(b) The Company shall seek to obtain from each  regulatory  commission or agency
having jurisdiction over the Plan such authority as may be required to issue and
sell shares of stock upon exercise of the Stock Award;  provided,  however, that
this undertaking  shall not require the Company to register under the Securities
Act of 1933, as amended (the "Securities  Act") either the Plan, any Stock Award
or any stock  issued or issuable  pursuant to any such Stock  Award.  If,  after
reasonable  efforts,  the Company is unable to obtain  from any such  regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful  issuance and sale of stock under the Plan,  the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Stock Awards unless and until such authority is obtained.

10.      USE OF PROCEEDS FROM STOCK.

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

11.      MISCELLANEOUS.

(a) The Board shall have the power to accelerate the time at which a Stock Award
may  first be  exercised  or the  time  during  which a Stock  Award or any part
thereof  will vest  pursuant to  subsection  6(e) or 7(d),  notwithstanding  the
provisions  in the  Stock  Award  stating  the  time at  which  it may  first be
exercised or the time during which it will vest.

(b) No Employee,  Director or  Consultant or any person to whom a Stock Award is
transferred  under subsection 6(d) or 7(b), shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares  subject to
such Stock Award unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.

(c)  Nothing  in the Plan or any  instrument  executed  or Stock  Award  granted
pursuant thereto shall confer upon any Employee,  Director,  Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue  acting as a Director or  Consultant)  or shall affect
(i) the right of the Company or any Affiliate to terminate the employment of any
Employee  with or  without  cause,  (ii)  the  right of the  Company's  Board of
Directors and/or the Company's  shareholders to remove any Director  pursuant to
the  terms  of the  Company's  By-Laws  and  the  provisions  of the  California
Corporations  Code,  or (iii) the right to  terminate  the  relationship  of any
Consultant pursuant to the terms of such Consultant's agreement with the Company
or Affiliate.

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

                                       10
 <PAGE>                                      

(e) The Company may require any person to whom a Stock Award is granted,  or any
person to whom a Stock Award is transferred pursuant to subsection 6(d) or 7(b),
as a condition of  exercising or acquiring  stock under any Stock Award,  (1) to
give  written  assurances  satisfactory  to  the  Company  as to  such  person's
knowledge and  experience in financial and business  matters  and/or to employ a
purchaser   representative   reasonably  satisfactory  to  the  Company  who  is
knowledgeable and experienced in financial and business matters,  and that he or
she  is  capable  of   evaluating,   alone  or  together   with  the   purchaser
representative,  the merits and risks of exercising the Stock Award;  and (2) to
give written assurances  satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present  intention of selling or otherwise  distributing the stock.
The  foregoing   requirements,   and  any  assurances  given  pursuant  to  such
requirements,  shall be  inoperative  if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective  registration  statement under the Securities Act, or
(ii) as to any particular  requirement,  a determination  is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the Optionee to provide
such other representations,  written assurances or information which the Company
shall determine is necessary, desirable or appropriate to comply with applicable
securities  and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. The Company may, upon advice
of counsel to the Company,  place legends on stock certificates issued under the
Plan as such  counsel  deems  necessary or  appropriate  in order to comply with
applicable securities laws,  including,  but not limited to, legends restricting
the transfer of the stock.

(f) To the extent provided by the terms of a Stock Award  Agreement,  the person
to whom a Stock Award is granted may  satisfy  any  federal,  state or local tax
withholding  obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means or by a combination of such means: (1)
tendering a cash payment;  (2)  authorizing  the Company to withhold shares from
the shares of the common stock otherwise issuable to the participant as a result
of the exercise or acquisition of stock under the Stock Award; or (3) delivering
to the Company owned and unencumbered shares of the common stock of the Company.

12.      ADJUSTMENTS UPON CHANGES IN STOCK.

(a) If any change is made in the stock  subject  to the Plan,  or subject to any
Stock  Award,  without the  receipt of  consideration  by the  Company  (through
merger, consolidation, reorganization, recapitalization,  reincorporation, stock
dividend,  dividend  in  property  other than  cash,  stock  split,  liquidating
dividend,  combination  of  shares,  exchange  of  shares,  change in  corporate
structure or other transaction not involving the receipt of consideration by the
Company),  the Plan will be appropriately  adjusted in the class(es) and maximum
number of shares  subject to the Plan pursuant to subsection  4(a),  the maximum
annual award pursuant to subsection 5(c), and the outstanding  Stock Awards will
be  appropriately  adjusted in the  class(es) and number of shares and price per
share of stock subject to such outstanding Stock Awards.  Such adjustments shall
be made by the  Board or the  Committee,  the  determination  of which  shall be
final, binding and conclusive.  (The conversion of any convertible securities of
the Company shall not be treated as a "transaction  not involving the receipt of
consideration by the Company.")

                                       11
 <PAGE>                                      

(b)  In  the  event  of:  (1) a  dissolution,  liquidation  or  sale  of  all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the  Company is not the  surviving  corporation;  (3) a reverse  merger in
which the Company is the surviving  corporation  but the shares of the Company's
common  stock  outstanding  immediately  preceding  the merger are  converted by
virtue of the merger  into other  property,  whether in the form of  securities,
cash or otherwise;  or (4) the acquisition by any person, entity or group within
the meaning of Section  13(d) or 14(d) of the  Exchange  Act, or any  comparable
successor  provisions  (excluding  any employee  benefit plan, or related trust,
sponsored or  maintained  by the Company or any Affiliate of the Company) of the
beneficial  ownership  (within the meaning of Rule 13d-3  promulgated  under the
Exchange  Act,  or  comparable  successor  rule) of  securities  of the  Company
representing  at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent permitted by applicable
law:  (i) any  surviving  or  acquiring  corporation  shall  assume any  Options
outstanding  under the Plan or shall  substitute  similar Options  (including an
option  to  acquire  the  same  consideration  paid to the  shareholders  in the
transaction  described in this subsection 12(b)) for those outstanding under the
Plan, or (ii) such Options shall continue in full force and effect. In the event
any surviving or acquiring  corporation  refuses to assume such  Options,  or to
substitute  similar  options for those  outstanding  under the Plan,  then, with
respect to Options  held by  persons  then  performing  services  as  Employees,
Directors  or  Consultants,  the time during which such Options may be exercised
shall be  accelerated  prior to such  event and the  Options  terminated  if not
exercised after such  acceleration  and at or prior to such event. An Optionee's
Option Agreement may include additional provisions which address the handling of
such option upon the  occurrence of a transaction  described in this  subsection
12(b);  provided,  however, that any such additional provisions shall not impair
or reduce the rights of the Optionee under this subsection 12(b).

13.      AMENDMENT OF THE PLAN AND STOCK AWARDS.

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

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

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

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

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

                                       12
 <PAGE>                                      

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

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

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

14.      TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board may  suspend  or  terminate  the Plan at any time.  Unless  sooner
terminated, the Plan shall terminate on November 14, 2005, which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
shareholders  of the  Company,  whichever  is  earlier.  No Stock  Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

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

15.      EFFECTIVE DATE OF PLAN.

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



                                       13
<PAGE>
[{"type": "S-8", "sequence": "1", "description": "REGISTRATION STMT UNDER THE SEC ACT OF 1933", "secsgml_size_bytes": 58001}]
{"company-data": {"conformed-name": "CASTELLE \\CA\\", "cik": "0000908605", "assigned-sic": "3577", "irs-number": "770164056", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-8", "act": "33", "file-number": "333-75247", "film-number": "99578245"}, "business-address": {"street1": "3255-3 SCOTT BLVD", "city": "SANTA CLARA", "state": "CA", "zip": "95054", "phone": "4084960474"}, "mail-address": {"street1": "3255-3 SCOTT BOULEVARD", "city": "SANTA CLARA", "state": "CA", "zip": "95054"}, "former-company": {"former-conformed-name": "CASTELLE INC", "date-changed": "19930702"}}
As filed with the Securities and Exchange Commission on March 30, 1999
                                                  Registration No. 333 -
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM S-8
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933

                                    CASTELLE
             (Exact name of registrant as specified in its charter)

        California                                        77-0164056
  (State of Incorporation)                 (I.R.S. Employer Identification No.)
                                     

                  3255-3 Scott Boulevard, Santa Clara, CA 95054
                    (Address of principal executive offices)

                           1988 Equity Incentive Plan
                            (Full title of the plans)

                                   Laurie Gee
                            Vice President of Finance
                                    Castelle
                             3255-3 Scott Boulevard
                          Santa Clara, California 95054
                                 (408) 496-0474
 (Name, address, including zip code, and telephone number, including area code, 
                             of agent for service)

                                   Copies to:
                            Samuel M. Livermore, Esq.
                               Cooley Godward LLP
                         One Maritime Plaza, 20th Floor
                             San Francisco, CA 94111
                                 (415) 693-2000
CALCULATION OF REGISTRATION FEE

========================== ---------------------- ------------------------- -------------------------- =========================
                                                      Proposed Maximum          Proposed Maximum
 Title of Securities to                              Offering Price Per     Aggregate Offering Price
      be Registered            Amount to be              Share (1)                     (1)              Amount of Registration
                                Registered                                                                       Fee
========================== ====================== ========================= ========================== =========================
Stock  Options and Common
Stock (par value $.001)                  981,935              $.5925-$2.04              $1,680,269.50                   $467.11

========================== ====================== ========================= ========================== =========================
(1) Estimated  solely for the purpose of calculating  the amount of the
         registration   fee  pursuant  to  Rule  457(c)  and  (h)(1)  under  the
         Securities Act of 1933, as amended (the "Act").  The offering price per
         share and  aggregate  offering  price are based  upon (a) the  weighted
         average  exercise  price,  for shares  subject to  outstanding  options
         granted under Castelle  ("Registrant" or "Company") under the Company's
         1988 Equity  Incentive  Plan (the  "Incentive  Plan")(pursuant  to Rule
         457(h)  under the Act) or (b) the average of the high and low prices of
         Registrant's  Common Stock as reported on the Nasdaq National Market on
         March 25, 1999,  for shares  reserved for future grant  pursuant to the
         Incentive  (pursuant to Rule 457(c) under the Act). The following chart
         illustrates the calculation of the registration fee:
----------------------------------------------------------- ------------------- --------------------- ==========================
                     Title of Shares                         Number of Shares    Offering Price Per   Aggregate Offering Price
                                                                                       Share
----------------------------------------------------------- ------------------- --------------------- ==========================
----------------------------------------------------------- ------------------- --------------------- ==========================
Shares  issuable  pursuant to  outstanding  stock  options             758,876                 $2.04              $1,548,107.04
pursuant to 1988 Equity Incentive Plan
----------------------------------------------------------- ------------------- --------------------- ==========================

Shares   issuable   pursuant  to  unissued  stock  options             223,059                $.5925                $132,162.46
pursuant to 1988 Equity Incentive Plan
----------------------------------------------------------- ------------------- --------------------- ==========================

Proposed Maximum Aggregate Offering Price                                                                         $1,680,269.50
----------------------------------------------------------- ------------------- --------------------- ==========================

Registration Fee                                                                                                        $467.11
----------------------------------------------------------- ------------------- --------------------- ==========================
2
INCORPORATION BY REFERENCE OF CONTENTS OF
                REGISTRATION STATEMENT ON FORM S-8 NO. 333-06083

         The contents of Registration  Statement on Form S-8 No. 333-06083 filed
with the Securities and Exchange Commission on June 14, 1996 are incorporated by
reference herein.

         Amendments to the 1988 Equity Incentive Plan (the "Incentive  Plan") by
the  Board in April  1997,  approved  by the  shareholders  on  April  29,  1998
increased  the number of shares of the  Company's  Common Stock  authorized  for
issuance from 945,582 shares to 1,927,517 and made changes to the Incentive Plan
in response to the  requirements of Code Section 162(m) of the Internal  Revenue
Code of 1986, as amended (the "Code").
EXHIBITS

Exhibit
Number
5.1               Opinion of Cooley Godward LLP

23.1              Consent of PricewaterhouseCoopers LLP

23.2              Consent of Cooley Godward LLP is contained in Exhibit 5.1 to 
                  this Registration Statement

24                Power of Attorney is contained on the signature pages.

99.1              1988 Equity Incentive Plan, as amended as of April 29, 1998.
3
SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the  requirements  for  filing  on  Form  S-8 and has  duly  caused  this
Registration Statement to be signed on its behalf by the undersigned,  thereunto
duly  authorized,  in the City of Santa  Clara,  State of  California,  on March
29, 1999.

                                                CASTELLE
                                                By: /s/ Laurie Gee 
                                                    Laurie Gee
                                                    Vice President, Finance

                                POWER OF ATTORNEY

         KNOW ALL PERSONS BY THESE  PRESENTS,  that each person whose  signature
appears below  constitutes  and appoints Donald Rich and Laurie Gee, and each or
any one of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments)  to this  Registration  Statement,  and to file the  same,  with all
exhibits  thereto,  and  other  documents  in  connection  therewith,  with  the
Securities and Exchange  Commission,  granting unto said  attorneys-in-fact  and
agents,  and each of them,  full power and  authority to do and perform each and
every act and thing requisite and necessary to be done in connection  therewith,
as fully to all intents and  purposes as he might or could do in person,  hereby
ratifying and confirming all that said  attorneys-in-fact  and agents, or any of
them, or their or his substitutes or substitute,  may lawfully do or cause to be
done by virtue hereof.

                                       4
Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities and on the dates indicated.
Signature                        Title                          Date
/s/ Donald L. Rich         Chief Executive Officer,          March 29, 1999
 Donald L. Rich             President and Director
                            (Principal Executive Officer)

 /s/ Laurie Gee             Vice President, Finance           March 29, 1999              
 Laurie Gee                 (Principal Financial and
                             Accounting Officer)

 /s/ John Freidenrich       Director                          March 29, 1999             
 John Freidenrich 

                            Director                          ________, 1999              
 Robert Hambrecht

 /s/ Alan Kessman           Director                          March 29, 1999              
 Alan Kessman

 /s/ Arthur Bruno           Director                          March 29, 1999               
 Arthur Bruno
5
EXHIBIT INDEX
Exhibit                                                                          Sequential
Number                      Description                                         Page Number
5.1         Opinion of Cooley Godward LLP
23.1        Consent of PricewaterhouseCoopers LLP
23.2        Consent of Cooley Godward LLP is contained in Exhibit 5.1
                 to this Registration Statement
24          Power of Attorney is contained  on the  signature  pages.  
99.1        1988 Equity Incentive Plan, as amended as of April 29, 1998.
6
5.1
March 29, 1999

Castelle
3255-3 Scott Boulevard
Santa Clara, CA  95054

Ladies and Gentlemen:

You have  requested  our opinion with respect to certain  matters in  connection
with the filing by Castelle (the "Company") of a Registration  Statement on Form
S-8 (the "Registration  Statement") with the Securities and Exchange  Commission
covering the offering of up to 981,935 shares of the Company's  Common Stock, no
par value,  (the  "Shares")  pursuant  to its 1988  Equity  Incentive  Plan (the
"Plan").

In connection with this opinion, we have examined the Registration Statement and
related Prospectus,  your Articles of Incorporation and By-laws, as amended, and
such other documents, records, certificates,  memoranda and other instruments as
we deem necessary as a basis for this opinion.  We have assumed the  genuineness
and authenticity of all documents  submitted to us as originals,  the conformity
to originals of all  documents  submitted to us as copies  thereof,  and the due
execution and delivery of all  documents  where due execution and delivery are a
prerequisite to the effectiveness thereof.

On the basis of the foregoing,  and in reliance  thereon,  we are of the opinion
that the  Shares,  when  sold and  issued  in  accordance  with  the  Plan,  the
Registration  Statement and related  Prospectus,  will be validly issued,  fully
paid, and nonassessable (except as to shares issued pursuant to certain deferred
payment  arrangements,  which  will be fully  paid and  nonassessable  when such
deferred payments are made in full).

We  consent to the  filing of this  opinion  as an  exhibit to the  Registration
Statement.

Very truly yours,

Cooley Godward LLP

By:      /s/ Samuel M. Livermore          
         Samuel M. Livermore
23.1

                      Consent of PricewaterhouseCoopers LLP
                             Independent Accountants

We consent to the  incorporation by reference in the  registration  statement of
Castelle  and  subsidiaries  on Form S-8 (File No.  333- ) of our  report  dated
February 5, 1999,  on our audits of the  consolidated  financial  statements  of
Castelle and  subsidiaries as of December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, and our report dated February
5, 1999,  on our audit of the  financial  statement  schedule,  which  report is
included in Form 10-K.

San Jose, California
March 26, 1999
99.1
              1988 EQUITY INCENTIVE PLAN, AS AMENDED APRIL 29, 1998
CASTELLE

                           1988 EQUITY INCENTIVE PLAN

                             Adopted: April 29, 1988
                             Amended: June 22, 1995
                           Amended: November 15, 1995
                             Amended: April 30, 1997
                            Approved: April 29, 1998

1.       PURPOSES.

(a) The purpose of the Plan is to provide a means by which selected Employees of
and Consultants or Directors to the Company, and its Affiliates, may be given an
opportunity  to  benefit  from  increases  in value of the stock of the  Company
through the granting of (i) Incentive  Stock Options,  (ii)  Nonstatutory  Stock
Options,  (iii) stock bonuses, and (iv) rights to purchase restricted stock, all
as defined below.

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

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

2.       DEFINITIONS.

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

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

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

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

                                        1
(e) "Company" means Castelle, a California corporation.

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

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

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

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

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

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

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

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

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

(n)  "Non-Employee  Director"  means a Director of the Company who either (i) is
not a current  Employee or Officer of the Company or its parent or a subsidiary,
does not receive  compensation  (directly or indirectly) from the Company or its
parent or a subsidiary for services  rendered as a consultant or in any capacity
other than as a Director  (except for an amount as to which disclosure would not
be required  under Item 404(a) of  Regulation  S-K  promulgated  pursuant to the
Securities Act  ("Regulation  S-K")),  does not possess an interest in any other
transaction  as to which  disclosure  would be  required  under  Item  404(a) of
Regulation  S-K  and is not  engaged  in a  business  relationship  as to  which
disclosure  would be required  under Item 404(b) of  Regulation  S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.

                                       2
(o)  "Nonstatutory  Stock  Option" means an Option not intended to qualify as an
Incentive Stock Option.

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

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

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

(s)  "Optionee"  means  an  Employee,   Director  or  Consultant  who  holds  an
outstanding Option.

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

(u) "Plan" means this Castelle 1988 Equity Incentive Plan.

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

(w) "Stock Award" means any right granted under the Plan,  including any Option,
any stock bonus or any right to purchase restricted stock.

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

3.       ADMINISTRATION.

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

                                       3
(b) The Board shall have the power,  subject to, and within the  limitations of,
the express provisions of the Plan:

(1) To determine from time to time which of the persons  eligible under the Plan
shall be granted Stock  Awards;  when and how each Stock Award shall be granted;
whether a Stock Award will be an Incentive  Stock Option,  a Nonstatutory  Stock
Option, a stock bonus, a right to purchase restricted stock, or a combination of
the  foregoing;  the  provisions of each Stock Award granted  (which need not be
identical),  including  the time or times when a person  shall be  permitted  to
receive stock  pursuant to a Stock Award;  and the number of shares with respect
to which a Stock Award shall be granted to each such person.

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

(3) To amend the Plan or a Stock Award as provided in Section 13.

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

(c)  The  Board  may  delegate  administration  of the  Plan to a  Committee  or
Committees of one or more members of the Board, and the term  "Committee"  shall
apply to any person or persons to whom such  authority  has been  delegated.  If
administration  is  delegated  to a  Committee,  the  Committee  shall have,  in
connection with the administration of the Plan, the powers theretofore possessed
by the Board,  including  the power to  delegate  to a  subcommittee  any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall  thereafter be to the  Committee or  subcommittee),
subject,  however, to such resolutions,  not inconsistent with the provisions of
the  Plan,  as may be  adopted  from  time to time by the  Board.  The Board may
abolish the Committee at any time and revest in the Board the  administration of
the Plan.

                  In the discretion of the Board, a Committee may consist solely
of two or more Outside Directors, in accordance with Section 162(m) of the Code,
and/or solely of two or more  Non-Employee  Directors,  in accordance  with Rule
16b-3.  Within the scope of such  authority,  the Board or the Committee may (i)
delegate to a committee  of one or more members of the Board who are not Outside
Directors,  the  authority  to grant Stock  Awards to  eligible  persons who are
either  (A) not  then  Covered  Employees  and are not  expected  to be  Covered
Employees at the time of recognition  of income  resulting from such Stock Award
or (B) not  persons  with  respect  to whom the  Company  wishes to comply  with
Section  162(m) of the Code and/or (ii)  delegate to a committee  of one or more
members of the Board who are not  Non-Employee  Directors the authority to grant
Stock  Awards to eligible  persons who are not then subject to Section 16 of the
Exchange Act.

                                       4
4.       SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, the stock that may be issued pursuant to Stock Awards shall not exceed
in the  aggregate  one million nine hundred  twenty-seven  thousand five hundred
seventeen  (1,927,517) shares of the Company's common stock. If any Option shall
for any  reason  expire or  otherwise  terminate,  in whole or in part,  without
having been  exercised in full,  the stock not acquired  under such Option shall
revert to and again become  available for issuance under the Plan. If any shares
of the Company's common stock which are subject to a repurchase or reacquisition
right  in  favor of the  Company,  any such  shares  which  are  repurchased  or
reacquired  by the Company  pursuant to the terms of such rights shall revert to
and again become available for issuance under the Plan.

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

5.       ELIGIBILITY.

(a) Incentive Stock Options may be granted only to Employees. Stock Awards other
than  Incentive  Stock  Options may be granted only to  Employees,  Directors or
Consultants.

(b) No person shall be eligible  for the grant of an Incentive  Stock Option if,
at the time of grant,  such person owns (or is deemed to own pursuant to Section
424(d) of the Code) stock  possessing  more than ten percent  (10%) of the total
combined  voting  power of all  classes of stock of the Company or of any of its
Affiliates  unless the exercise price of such Incentive Stock Option is at least
one  hundred ten  percent  (110%) of the Fair Market  Value of such stock at the
date of grant  and the  Incentive  Stock  Option  is not  exercisable  after the
expiration  of five  (5)  years  from  the  date of  grant,  or in the case of a
restricted  stock  purchase  award,  the purchase  price is at least one hundred
percent (100%) of the Fair Market Value of such stock at the date of grant.

(c) Subject to the provisions of Section 12 relating to adjustments upon changes
in stock, no employee shall be eligible to be granted Options covering more than
four hundred  thousand  (400,000) shares of the Common Stock during any calendar
year.
 
6.       OPTION PROVISIONS.

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

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

(b) Price.  The exercise price of each Incentive  Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the stock subject to
the Option on the date the Option is granted (one hundred and ten percent (110%)
in the case of a 10%  shareholder  as described in Section  5(b));  the exercise
price of each  Nonstatutory  Stock  Option  shall be not less  than  eighty-five
percent  (85%)  percent  of the Fair  Market  Value of the stock  subject to the
Option on the date the Option is  granted.  Notwithstanding  the  foregoing,  an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted  with an  exercise  price  lower  than that set  forth in the  preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another  option in a manner  satisfying  the provisions of Section 424(a) of the
Code.

                                       5
(c)  Consideration.  The purchase price of stock acquired  pursuant to an Option
shall be paid, to the extent  permitted by applicable  statutes and regulations,
either  (i) in  cash  at the  time  the  Option  is  exercised,  or  (ii) at the
discretion  of the  Board  or the  Committee,  at the  time of the  grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the  foregoing,  the use of other common stock of the
Company)  with the person to whom the Option is granted or to whom the Option is
transferred  pursuant  to  subsection  6(d),  or (C) in any other  form of legal
consideration  that may be acceptable to the Board.  In the case of any deferred
payment  arrangement,  interest  shall be payable at least annually and shall be
charged at the minimum  rate of interest  necessary  to avoid the  treatment  as
interest, under any applicable provisions of the Code, of any amounts other than
amounts  stated to be  interest  under the  deferred  payment  arrangement.  The
principal amount of any deferred payment arrangement shall not exceed the amount
permitted  by  law,  including  but  not  limited  to any  state  corporate  law
requirements requiring the immediate payment of the par value of stock.

(d) Transferability.  An Incentive Stock Option shall not be transferable except
by will or by the laws of descent  and  distribution,  and shall be  exercisable
during the lifetime of the person to whom the Incentive  Stock Option is granted
only by such person.  A Nonstatutory  Stock Option shall be  transferable to the
extent provided in the Option Agreement;  provided,  however, that if the Option
Agreement  does  not  specifically  provide  for   transferability,   then  such
Nonstatutory Stock Option shall be not be transferable  except by will or by the
laws of descent and distribution.  Notwithstanding the foregoing,  the person to
whom the Option is granted may, by delivering written notice to the Company,  in
a form satisfactory to the Company, designate a third party who, in the event of
the death of the Optionee, shall thereafter be entitled to exercise the Option.

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

                                       6
(f) Termination of Employment or  Relationship as a Consultant.  In the event an
Optionee's  Continuous Status as an Employee,  Director or Consultant terminates
(other than upon the Optionee's death or disability),  the Optionee may exercise
his or her Option (to the extent that the  Optionee  was entitled to exercise it
at the date of  termination)  but only  within such period of time ending on the
earlier of (i) the date three (3) months after the termination of the Optionee's
Continuous  Status as an  Employee,  Director or  Consultant  (or such longer or
shorter period specified in the Option Agreement,  or (ii) the expiration of the
term of the Option as set forth in the Option Agreement.  If, after termination,
the Optionee  does not exercise his or her Option  within the time  specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.

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

(h)  Death of  Optionee.  In the event of the death of an  Optionee  during,  or
within a period specified in the Option after the termination of, the Optionee's
Continuous  Status as an  Employee,  Director or  Consultant,  the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option at the
date of death) by the Optionee's  estate,  by a person who acquired the right to
exercise  the Option by  bequest or  inheritance  or by a person  designated  to
exercise the option upon the Optionee's  death pursuant to subsection  6(d), but
only  within the period  ending on the  earlier  of (i) the date  eighteen  (18)
months  following the date of death (or such longer or shorter period  specified
in the Option  Agreement,  or (ii) the  expiration of the term of such Option as
set forth in the Option  Agreement.  If, at the time of death,  the Optionee was
not entitled to exercise  his or her entire  Option,  the shares  covered by the
unexercisable  portion of the Option shall revert to and again become  available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become  available  for issuance  under the
Plan.

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

                                       7
(j) Re-Load  Options.  Without in any way limiting the authority of the Board or
Committee  to make or not to make  grants  of  Options  hereunder,  the Board or
Committee shall have the authority (but not an obligation) to include as part of
any Option  Agreement a provision  entitling the Optionee to a further Option (a
"Re-Load  Option") in the event the Optionee  exercises the Option  evidenced by
the Option  Agreement,  in whole or in part,  by  surrendering  other  shares of
common stock in  accordance  with this Plan and the terms and  conditions of the
Option  Agreement.  Any such Re-Load  Option (i) shall be for a number of shares
equal to the number of shares  surrendered  as part or all of the exercise price
of such  Option;  (ii)  shall have an  expiration  date which is the same as the
expiration  date of the Option the  exercise of which gave rise to such  Re-Load
Option;  and (iii)  shall have an  exercise  price which is equal to one hundred
percent  (100%) of the Fair  Market  Value of the  common  stock  subject to the
Re-Load Option on the date of exercise of the original  Option.  Notwithstanding
the foregoing,  a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10%  shareholder (as described in subsection  5(b)),  shall have an
exercise  price which is equal to one  hundred  ten  percent  (110%) of the Fair
Market Value of the stock subject to the Re-Load  Option on the date of exercise
of the  original  Option and shall have a term which is no longer  than five (5)
years.

         Any  such  Re-Load  Option  may  be  an  Incentive  Stock  Option  or a
Nonstatutory  Stock Option,  as the Board or Committee may designate at the time
of the grant of the original Option; provided,  however, that the designation of
any Re-Load  Option as an  Incentive  Stock  Option  shall be subject to the one
hundred  thousand  dollar  ($100,000)  annual  limitation on  exercisability  of
Incentive Stock Options described in subsection 11(d) of the Plan and in Section
422(d) of the Code.  There shall be no Re-Load Options on a Re-Load Option.  Any
such Re-Load Option shall be subject to the  availability  of sufficient  shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.

7.       TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

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

         (a) Purchase  Price.  The purchase  price under each  restricted  stock
purchase  agreement  shall  be such  amount  as the  Board  or  Committee  shall
determine  and  designate  in such  agreement.  In any  event,  the Board or the
Committee may determine  that eligible  participants  in the Plan may be awarded
stock  pursuant to a stock bonus  agreement in  consideration  for past services
actually rendered to the Company or for its benefit.

         (b) Transferability.  No rights under a stock bonus or restricted stock
purchase  agreement shall be transferable  except by will or the laws of descent
and  distribution  or pursuant to a domestic  relations  order, so long as stock
awarded under such agreement remains subject to the terms of the agreement.

                                       8
(c)  Consideration.  The purchase price of stock acquired pursuant to a
stock  purchase  agreement  shall  be paid  either:  (i) in cash at the  time of
purchase;  (ii) at the discretion of the Board or the Committee,  according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal  consideration that may be acceptable to the
Board or the Committee in their discretion.  Notwithstanding the foregoing,  the
Board or the Committee to which  administration  of the Plan has been  delegated
may award stock pursuant to a stock bonus  agreement in  consideration  for past
services actually rendered to the Company or for its benefit.

         (d)  Vesting.  Shares of stock sold or awarded  under the Plan may, but
need  not,  be  subject  to a  repurchase  option  in  favor of the  Company  in
accordance  with  a  vesting  schedule  to be  determined  by the  Board  or the
Committee.

         (e)  Termination  of  Employment  or  Relationship  as  a  Director  or
Consultant.  In the event a  Participant's  Continuous  Status  as an  Employee,
Director or  Consultant  terminates,  the Company may  repurchase  or  otherwise
reacquire,  subject to the limitations  described in subsection 7(d), any or all
of the shares of stock held by that person  which have not vested as of the date
of termination  under the terms of the stock bonus or restricted  stock purchase
agreement between the Company and such person.

8.       CANCELLATION AND RE-GRANT OF OPTIONS.

(a) The Board or the Committee  shall have the authority to effect,  at any time
and from time to time,  (i) the repricing of any  outstanding  Options under the
Plan  and/or  (ii) with the  consent of the  affected  holders of  Options,  the
cancellation  of any  outstanding  Options  under  the  Plan  and the  grant  in
substitution  therefor  of new  Options  under  the  Plan  covering  the same or
different numbers of shares of stock, but having an exercise price per share not
less than  eighty-five  percent  (85%) of the Fair  Market  Value  (one  hundred
percent  (100%)  of the Fair  Market  Value in the  case of an  Incentive  Stock
Option) or, in the case of an Option granted to a 10%  shareholder (as described
in subsection  5(b)),  not less than one hundred ten percent  (110%) of the Fair
Market  Value)  per share of stock on the new grant  date.  Notwithstanding  the
foregoing, the Board or the Committee may grant an Option with an exercise price
lower  than  that  set  forth  above  if such  Option  is  granted  as part of a
transaction to which section 424(a) of the Code applies.

(b) Shares  subject to an Option which is amended or canceled under this Section
8 in order to set a lower  exercise price per share shall continue to be counted
against  the  maximum  award of  Options  permitted  to be granted  pursuant  to
subsection 5(c). The repricing of an Option under this Section 8, resulting in a
reduction of the exercise  price,  shall be deemed to be a  cancellation  of the
original  Option  and the  grant of a  substitute  Option  in the  event of such
repricing,  both the  original  and the  substituted  Options  shall be  counted
against any such maximum awards of Options.  The  provisions of this  subsection
8(b) shall be applicable  only to the extent  required by Section  162(m) of the
Code.

9.       COVENANTS OF THE COMPANY.

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

                                       9
(b) The Company shall seek to obtain from each  regulatory  commission or agency
having jurisdiction over the Plan such authority as may be required to issue and
sell shares of stock upon exercise of the Stock Award;  provided,  however, that
this undertaking  shall not require the Company to register under the Securities
Act of 1933, as amended (the "Securities  Act") either the Plan, any Stock Award
or any stock  issued or issuable  pursuant to any such Stock  Award.  If,  after
reasonable  efforts,  the Company is unable to obtain  from any such  regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful  issuance and sale of stock under the Plan,  the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Stock Awards unless and until such authority is obtained.

10.      USE OF PROCEEDS FROM STOCK.

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

11.      MISCELLANEOUS.

(a) The Board shall have the power to accelerate the time at which a Stock Award
may  first be  exercised  or the  time  during  which a Stock  Award or any part
thereof  will vest  pursuant to  subsection  6(e) or 7(d),  notwithstanding  the
provisions  in the  Stock  Award  stating  the  time at  which  it may  first be
exercised or the time during which it will vest.

(b) No Employee,  Director or  Consultant or any person to whom a Stock Award is
transferred  under subsection 6(d) or 7(b), shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares  subject to
such Stock Award unless and until such person has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.

(c)  Nothing  in the Plan or any  instrument  executed  or Stock  Award  granted
pursuant thereto shall confer upon any Employee,  Director,  Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue  acting as a Director or  Consultant)  or shall affect
(i) the right of the Company or any Affiliate to terminate the employment of any
Employee  with or  without  cause,  (ii)  the  right of the  Company's  Board of
Directors and/or the Company's  shareholders to remove any Director  pursuant to
the  terms  of the  Company's  By-Laws  and  the  provisions  of the  California
Corporations  Code,  or (iii) the right to  terminate  the  relationship  of any
Consultant pursuant to the terms of such Consultant's agreement with the Company
or Affiliate.

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

                                       10
(e) The Company may require any person to whom a Stock Award is granted,  or any
person to whom a Stock Award is transferred pursuant to subsection 6(d) or 7(b),
as a condition of  exercising or acquiring  stock under any Stock Award,  (1) to
give  written  assurances  satisfactory  to  the  Company  as to  such  person's
knowledge and  experience in financial and business  matters  and/or to employ a
purchaser   representative   reasonably  satisfactory  to  the  Company  who  is
knowledgeable and experienced in financial and business matters,  and that he or
she  is  capable  of   evaluating,   alone  or  together   with  the   purchaser
representative,  the merits and risks of exercising the Stock Award;  and (2) to
give written assurances  satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present  intention of selling or otherwise  distributing the stock.
The  foregoing   requirements,   and  any  assurances  given  pursuant  to  such
requirements,  shall be  inoperative  if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective  registration  statement under the Securities Act, or
(ii) as to any particular  requirement,  a determination  is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the Optionee to provide
such other representations,  written assurances or information which the Company
shall determine is necessary, desirable or appropriate to comply with applicable
securities  and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. The Company may, upon advice
of counsel to the Company,  place legends on stock certificates issued under the
Plan as such  counsel  deems  necessary or  appropriate  in order to comply with
applicable securities laws,  including,  but not limited to, legends restricting
the transfer of the stock.

(f) To the extent provided by the terms of a Stock Award  Agreement,  the person
to whom a Stock Award is granted may  satisfy  any  federal,  state or local tax
withholding  obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means or by a combination of such means: (1)
tendering a cash payment;  (2)  authorizing  the Company to withhold shares from
the shares of the common stock otherwise issuable to the participant as a result
of the exercise or acquisition of stock under the Stock Award; or (3) delivering
to the Company owned and unencumbered shares of the common stock of the Company.

12.      ADJUSTMENTS UPON CHANGES IN STOCK.

(a) If any change is made in the stock  subject  to the Plan,  or subject to any
Stock  Award,  without the  receipt of  consideration  by the  Company  (through
merger, consolidation, reorganization, recapitalization,  reincorporation, stock
dividend,  dividend  in  property  other than  cash,  stock  split,  liquidating
dividend,  combination  of  shares,  exchange  of  shares,  change in  corporate
structure or other transaction not involving the receipt of consideration by the
Company),  the Plan will be appropriately  adjusted in the class(es) and maximum
number of shares  subject to the Plan pursuant to subsection  4(a),  the maximum
annual award pursuant to subsection 5(c), and the outstanding  Stock Awards will
be  appropriately  adjusted in the  class(es) and number of shares and price per
share of stock subject to such outstanding Stock Awards.  Such adjustments shall
be made by the  Board or the  Committee,  the  determination  of which  shall be
final, binding and conclusive.  (The conversion of any convertible securities of
the Company shall not be treated as a "transaction  not involving the receipt of
consideration by the Company.")

                                       11
(b)  In  the  event  of:  (1) a  dissolution,  liquidation  or  sale  of  all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the  Company is not the  surviving  corporation;  (3) a reverse  merger in
which the Company is the surviving  corporation  but the shares of the Company's
common  stock  outstanding  immediately  preceding  the merger are  converted by
virtue of the merger  into other  property,  whether in the form of  securities,
cash or otherwise;  or (4) the acquisition by any person, entity or group within
the meaning of Section  13(d) or 14(d) of the  Exchange  Act, or any  comparable
successor  provisions  (excluding  any employee  benefit plan, or related trust,
sponsored or  maintained  by the Company or any Affiliate of the Company) of the
beneficial  ownership  (within the meaning of Rule 13d-3  promulgated  under the
Exchange  Act,  or  comparable  successor  rule) of  securities  of the  Company
representing  at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then to the extent permitted by applicable
law:  (i) any  surviving  or  acquiring  corporation  shall  assume any  Options
outstanding  under the Plan or shall  substitute  similar Options  (including an
option  to  acquire  the  same  consideration  paid to the  shareholders  in the
transaction  described in this subsection 12(b)) for those outstanding under the
Plan, or (ii) such Options shall continue in full force and effect. In the event
any surviving or acquiring  corporation  refuses to assume such  Options,  or to
substitute  similar  options for those  outstanding  under the Plan,  then, with
respect to Options  held by  persons  then  performing  services  as  Employees,
Directors  or  Consultants,  the time during which such Options may be exercised
shall be  accelerated  prior to such  event and the  Options  terminated  if not
exercised after such  acceleration  and at or prior to such event. An Optionee's
Option Agreement may include additional provisions which address the handling of
such option upon the  occurrence of a transaction  described in this  subsection
12(b);  provided,  however, that any such additional provisions shall not impair
or reduce the rights of the Optionee under this subsection 12(b).

13.      AMENDMENT OF THE PLAN AND STOCK AWARDS.

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

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

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

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

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

                                       12
(c) It is  expressly  contemplated  that the  Board  may  amend  the Plan in any
respect the Board deems necessary or advisable to provide eligible  Employees or
Consultants  with the maximum  benefits  provided  or to be  provided  under the
provisions of the Code and the regulations  promulgated  thereunder  relating to
Incentive Stock Options and/or to bring the Plan and/or  Incentive Stock Options
granted under it into compliance therewith.

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

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

14.      TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board may  suspend  or  terminate  the Plan at any time.  Unless  sooner
terminated, the Plan shall terminate on November 14, 2005, which shall be within
ten (10) years from the date the Plan is adopted by the Board or approved by the
shareholders  of the  Company,  whichever  is  earlier.  No Stock  Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

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

15.      EFFECTIVE DATE OF PLAN.

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

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