SBE, INC DIRECTOR AND OFFICER BONUS PLAN

This Director and Officer Bonus Plan (the “ Plan ”) is established by SBE, Inc., a Delaware corporation (the “ Company ”), effective as of September 21, 2006.

1.      Purpose Of The Plan . The purpose of the Plan is to establish a bonus mechanism to provide incentive to executive officers and non-employee members of the Board of Directors of the Company to continue in the service of the Company.

2.      Definitions .

(a)       “ Board ” shall mean the Board of Directors of the Company.

(b)       “ Bonus Award ” shall mean the compensation awarded to a Participant under the Plan upon a Triggering Event, calculated as follows:

(i)       with respect to a Triggering Event that is a Change in Control or a Qualifying Financing, an amount of cash or Equity Securities (as determined by the Board in its sole discretion) equal in value (as determined by the Board in its sole discretion) to the product of (A) the dollar amount set forth in the Participant’s Participation Agreement and (B) (1) in the case of Participants who are non-employee members of the Board, the number of months elapsed since July 31, 2006; or (2) in the case of Participants who are executive officers of the Company, the number of Company pay periods that have elapsed since August 15, 2006; or

(ii)       with respect to a Discretionary Triggering Event, such award of Equity Securities or cash as determined by the Board in its sole discretion.

(c)       “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

(d)       “ Equity Securities ” shall mean common stock, preferred stock, options, warrants or other rights to purchase preferred stock or common stock of the Company.

(e)       “ Triggering Event ” shall mean the first to occur of the following during the term of this Plan:

(i)       there is consummated (A) a merger, consolidation or similar transaction to which the Company is a party and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not own, directly or indirectly, outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving entity in such merger, consolidation or similar transaction or more than 50% of the combined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction, or (B) a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries to an entity, more than 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale, lease, license or other disposition (any such event described in this paragraph (i) is referred to as a “ Change in Control ”);

(ii)       the Company consummates a sale of equity or debt securities resulting in at least $2 million in net proceeds (after deduction of any underwriting commissions, placement agent fees, attorneys’ fees and other transaction expenses, as determined by the Board in its sole discretion) (a “ Qualifying Financing ”); or

(iii)       there occurs any such other event as the Board in its sole discretion determines shall constitute a Triggering Event (a “ Discretionary Triggering Event ”).

3.      Operation Of The Plan .

(a)      Eligibility to Participate . An individual shall be eligible to participate in the Plan if he or she is an executive officer of the Company or non-employee member of the Board and is designated as a participant in the Plan (a “ Participant ”) by the Board, and is notified in writing of such designation, provided he or she accepts such designation subject to such terms as determined by the Board at the time of designation (the “ Participation Agreement ”). An individual’s eligibility to participate in the Plan shall terminate as of the date on which such individual’s employment relationship or directorship with the Company is terminated.

(b)      Eligibility for Payment of Bonus Awards . Unless the Board has determined otherwise with respect to an individual Participant, as evidenced by the Participation Agreement