<PAGE>
EXHIBIT 10.1 --




                         YAMHILL VALLEY VINEYARDS, INC.

                             2002 STOCK OPTION PLAN
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
Section 1.   Purpose......................................................    1

Section 2.   Definitions..................................................    1

Section 3.   Stock Subject to This Plan...................................    2

Section 4.   Administration...............................................    3

Section 5.   Options and Eligible Participants............................    4

Section 6.   Provisions Applicable to All Options.........................    4

Section 7.   Provisions applicable to ISOs Only...........................    5

Section 8.   Employment with Related Entities.............................    6

Section 9.   Termination of Relationship with Company.....................    6

Section 10.  Options Not Transferable.....................................    8

Section 11.  Changes in Company's Capital Structure.......................    8

Section 12.  Securities Regulation and Other Required Approvals...........    9

Section 13.  Withholding Tax Requirement..................................   10

Section 14.  Status of Shareholder........................................   11

Section 15.  Rights and Relationships.....................................   11

Section 16.  Amendment and Termination....................................   11

Section 17.  Applicable Law...............................................   12

Section 18.  Effectiveness of This Plan...................................   12
</TABLE>


                                       i
<PAGE>
                         YAMHILL VALLEY VINEYARDS, INC.

                             2002 STOCK OPTION PLAN

      SECTION 1. PURPOSE. The purpose of this Yamhill Valley Vineyards, Inc.
2002 Stock Option Plan (this "Plan") is to provide a means for Yamhill Valley
Vineyards, Inc. (the "Company") and related entities to continue to attract,
motivate and retain key employees, consultants and other independent contractors
and directors, and to provide these individuals with greater incentive for their
service to the Company (and related entities) by linking their interests in the
Company's success with those of the Company and its shareholders.

      SECTION 2. DEFINITIONS. When used in this Plan the following terms are
defined as set forth below:

            "ADMINISTRATOR" has the meaning provided in Section 4.

            "BOARD" means the Board of Directors of the Company.

            "CAPITALIZATION CHANGE" has the meaning provided in Section 11.1.

            "CAUSE" has the meaning provided in Section 9.1.2.

            "CODE" means the Internal Revenue Code of 1986, as amended.

            "COMMON STOCK" has the meaning provided in Section 3.

            "COMPANY" means Yamhill Valley Vineyards, Inc.

            "EFFECTIVE DATE" has the meaning provided in Section 17.

            "ELIGIBLE PARTICIPANTS" has the meaning provided in Section 5.2.

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

            "EXERCISE PRICE" means the amount to be paid by an Optionee to
exercise an Option.

            "FAIR MARKET VALUE" of a share of Common Stock is the fair market
value established in good faith by the Administrator, unless one of the
following applies: (a) If the Common Stock is listed on the Nasdaq National
Market, then the Fair Market Value is the closing sales price for the Common
Stock as recorded by the Nasdaq SmallCap or National Market for the immediately
preceding trading day; (b) if the Common Stock is listed on the New York Stock
Exchange or the American Stock Exchange, then the Fair Market Value is the
closing sales price for the Common Stock as such price is officially quoted in
the composite tape of transactions on such exchange for the immediately
preceding trading day; or (c) if the Common Stock is publicly traded but there
is no reported closing sales price on Nasdaq or the applicable exchange for the
date in question, then such price on the last preceding date for which a closing
sales price exists shall be determinative of Fair Market Value.


PAGE 1 - 2002 STOCK OPTION PLAN
<PAGE>
            "GRANT DATE" means the date on which the Administrator completes the
corporate action relating to the grant of an Option and all conditions precedent
to the grant have been satisfied, provided that conditions relating to
exercisability or vesting of an Option shall not defer the Grant Date.

            "ISO" or "INCENTIVE STOCK OPTION" has the meaning provided in
Section 4.1.

            "NQSO" or "NONQUALIFIED STOCK OPTION" has the meaning provided in
Section 5.1.

            "OPTION" means an option granted pursuant to this Plan for the
purchase of shares of Common Stock.

            "OPTION AGREEMENT" means a written agreement that details the terms
and conditions of a particular Option.

            "OPTIONEE" means an individual or entity who has received an Option
under this Plan.

            "PLAN" means this Yamhill Valley Vineyards, Inc. 2002 Stock Option
Plan.

            "RELATED ENTITY" means any entity that, directly or indirectly, is
in control of, or is controlled by, or under common control with the Company.

            "SALES EVENT" has the meaning provided in Section 11.2.1.

            "SECURITIES ACT" means the Securities Act of 1933, as amended.

            "TOTAL DISABILITY" has the meaning provided in Section 9.2.

      SECTION 3. STOCK SUBJECT TO THIS PLAN. The stock issuable under this Plan
is the Company's Common Stock, with voting rights, either authorized but
unissued or reacquired by the Company.

            3.1   AMOUNT. Subject to adjustment under Section 11.1, the maximum
amount of Common Stock that may be issued for Options under this Plan is 250,000
shares, as such Common Stock was constituted on the Effective Date.

            3.2   RETURNED SHARES. If any outstanding Option expires, or is
exchanged, canceled or terminated for any reason without having been exercised
or realized in full, then the unpurchased or unissued shares subject to such
Options will again be available for issuance under this Plan. If the Company
repurchases shares of Common Stock issued pursuant to an Option, then the
repurchased shares will not be available again for issuance under this Plan,
unless the shares relate to an Option (or portion of an Option) that was
exercised prior to becoming vested, which shares are then repurchased by the
Company, for the Optionee's Exercise Price, in conjunction with the Optionee
terminating employment or services with the Company prior to satisfaction of the
underlying vesting schedule, in which case the repurchased shares will again be
available for issuance under this Plan; provided, that the aggregate number


PAGE 2 - 2002 STOCK OPTION PLAN
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of shares that may be issued upon the exercise of ISOs will in no event exceed
280,000, subject to adjustment from time to time as provided in Section 11.1.

      SECTION 4. ADMINISTRATION.

            4.1   ADMINISTRATOR. The Board of Directors of the Company will
administer this Plan, except to the extent that it delegates administrative
responsibilities to a committee or subcommittee. The body charged with
administering the Plan is referred to as the "Administrator." Notwithstanding
the delegation of administrative authority, the Board has exclusive authority to
(a) amend or terminate this Plan as provided in Section 16, and (b) remove
members from and add members to the Administrator. The Administrator may further
delegate administrative duties to those officers and managers of the Company as
it so determines.

            4.2   PROCEDURES. The Administrator may hold meetings at such times
and places as it determines, and from time to time adopt and amend rules and
regulations relating to the administration of this Plan, provided that absent
the adoption of any formal rules, the acts of a majority of the members of the
Administrator at a meeting, or acts approved in writing by all Administrator
members, are valid acts of the Administrator.

            4.3   RESPONSIBILITIES. Except as stated elsewhere in this Plan, the
Administrator has full discretionary authority to determine all matters relating
to Options, including but not limited to (a) the selection of Eligible
Participants to receive Options, (b) the number of shares subject to each
Option, (c) the Exercise Price to be paid for any Option, (d) any vesting or
forfeiture schedule, (e) the acceleration of the exercise date, and (f) the
extension of the exercise period. In exercising its authority to set the terms
and conditions of an Option, and subject only to the limits of applicable law,
the Administrator shall be under no obligation or duty to treat similarly
situated Optionees in the same manner, and any action taken by the Administrator
with respect to the grant of an Option to one individual shall in no way
obligate the Administrator to take the same or similar action with respect to
any other individual. The Administrator may exercise its discretion in a manner
such that Options granted to individuals who are foreign nationals or are
employed outside the United States contain terms and conditions that are
different from the provisions otherwise anticipated in this Plan, but which are
consistent with the tax and other laws of applicable foreign jurisdictions and
consistent with the Company's objectives in establishing this Plan.

            4.4   PLAN CONSTRUCTION AND INTERPRETATION. Subject to Section 4.5,
the Administrator may correct any defect, supply any omission, or reconcile any
inconsistency (a) within this Plan, (b) between this Plan and any related
agreement, or (c) between this Plan and any rule or regulation promulgated under
this Plan, in the manner and to the extent the Administrator deems appropriate
to carry out this Plan. The Administrator's interpretation or construction of
any such Plan provision, related agreement, rule or regulation shall be final,
conclusive and binding on all interested parties.

            4.5   AMENDMENT OF OPTIONS. The Administrator may modify or amend
outstanding Options granted under this Plan. The modification or amendment of an
outstanding Option shall not, without the consent of the Optionee, impair,
diminish or terminate any of the rights of the Optionee or any of the
obligations of the Company under the Option, except as


PAGE 3 - 2002 STOCK OPTION PLAN
<PAGE>
otherwise provided in this Plan, or as required to comply with applicable law.
Unless the Optionee agrees otherwise, any changes or adjustments made to
outstanding ISOs granted under this Plan will be made in a manner so as not to
constitute a "modification," as defined in Code Section 424(h), and so as not to
cause any ISO to fail to continue to qualify under Code Section 422(b).

      SECTION 5. OPTIONS AND ELIGIBLE PARTICIPANTS.

            5.1   TYPES. Subject to Section 4, the Administrator may, from time
to time, grant under this Plan (i) incentive stock options (also referred to as
"ISOs"), as defined in Code Section 422, or (ii) options that do not qualify as
ISOs (referred to as "nonqualified stock options" or "NQSOs"). ISOs and NQSOs
may be granted singly or in combination.

            5.2   ELIGIBLE PARTICIPANTS. The Administrator, as it determines
from time to time, may grant Options to officers, directors and employees of the
Company and its Related Entities. The Administrator may also grant Options to
consultants, agents, advisors and independent contractors who provide services
to the Company or its Related Entities, or both, provided that such Option
recipients (a) render bona fide services that are not in connection with the
offer and sale of the Company's securities in a capital-raising transaction, and
(b) render bona fide services that do not directly or indirectly promote or
maintain a market for the Company's securities.

            5.3   TERMS AND CONDITIONS. The terms and conditions of Options
granted under this Plan need not be identical in any respect, even when grants
are made simultaneously or to persons with the same or similar status.

      SECTION 6. PROVISIONS APPLICABLE TO ALL OPTIONS. The provisions of this
Section 6 apply to both ISOs and NQSOs.

            6.1   OPTION AGREEMENT. Each Option will be evidenced by an Option
Agreement that incorporates this Plan by reference and describes the terms and
conditions of the Option. In particular, the Option Agreement will specify the
number of shares of Company Stock that may be purchased, whether the Option is
an ISO or a NQSO, the Option's expiration date, the schedule (if any) under
which the Option may be exercised, the Exercise Price, and any other terms,
conditions, restrictions, representations or warranties required by the
Administrator.

            6.2   EXERCISE PRICE. The Administrator will determine the Exercise
Price of NQSOs and ISOs, provided that subject to the requirements of Section 7,
the per share Exercise Price with respect to an ISO will be at least the Fair
Market Value of a share of the Common Stock as of the Grant Date.

            6.3   TERM. The term of each Option will be ten years from the Grant
Date, unless a shorter period is required under Section 7 or the Administrator
establishes a shorter period of time.

            6.4   VESTING. To ensure the Company achieves the purposes and
receives the benefits contemplated in this Plan, any Option granted under this
Plan shall, unless the condition of this Section 6.4 is waived or modified in
the Option Agreement or by action of the Administrator, be exercisable according
to the following schedule:


PAGE 4 - 2002 STOCK OPTION PLAN
<PAGE>
<TABLE>
<CAPTION>
            Period of Optionee's Continuous
             Service Relationship With the
               Company or Related Entity                Portion of Total Option
                  From The Grant Date                     That Is Exercisable
                  -------------------                     -------------------
<S>                                                     <C>
                  Less than 1 year                                         0%
                  Completion of 1 year                                    25%
                  Each additional month                   An additional 1/48th
                  After 4 years                                          100%
</TABLE>

            For purposes of calculating an "additional month," the Administrator
will measure from the anniversary date of the one-year period (or other
applicable date) and go to the same date of the following month (or if there is
not the same date in the following month, then to the last day of the following
month).

            6.5   EXERCISE. The Recipient may exercise Options by delivering
written notice to the Administrator of the number of shares sought to be
exercised, together with payment of the Exercise Price. The Administrator may
specify the form of such notice and the manner of its delivery. Subject to any
vesting schedule in the Option Agreement and to any additional holding period
required by law, the Optionee may exercise each Option in whole or in part,
except that only whole shares of Common Stock will be issued pursuant to the
exercise of any Option.

            6.6   PAYMENT OF EXERCISE PRICE. An Optionee must pay the Exercise
Price in full at the time of exercise. Payment of the Exercise Price shall be in
cash, by bank certified or cashier's check or by personal check (unless at the
time of exercise the Administrator in a particular case determines not to accept
a personal check). The Administrator may determine in its complete discretion,
as of the Grant Date for ISOs or at any time before exercise for NQSOs, that
alternative forms of payment will be permitted, including but not limited to
installment payments on such terms as the Administrator may determine or various
cashless exercise arrangements. Unless otherwise provided by the Administrator,
an Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Common Stock unless the shares either have been owned by
the Optionee for more than six months (and were not used for another Option
exercise by attestation during that period) or were not acquired, directly or
indirectly, from the Company.

      SECTION 7. PROVISIONS APPLICABLE TO ISOS ONLY. ISOs are subject to the
following terms and conditions, in addition to the provisions of Section 6:

                  7.1.1 GREATER THAN 10% SHAREHOLDERS. If the Company grants
ISOs to an employee who owns more than 10% of the total combined voting power of
all classes of stock of the Company, with stock ownership to be determined in
light of the attribution rules set forth in Code Section 424(d), the term of
such ISO may not exceed five years and the Exercise Price may be not less than
110% of the Fair Market Value of the Common Stock on the ISO's Grant Date. To
the extent an Option purports to be an ISO but exceeds these limits, the Option
will be deemed to be a NQSO.


PAGE 5 - 2002 STOCK OPTION PLAN
<PAGE>
                  7.1.2 LIMITATION ON VALUE. The aggregate Fair Market Value of
all shares available under ISOs (under this Plan and any other incentive stock
option plan of the Company or a Related Entity) that are exercisable for the
first time in any calendar year may not exceed $100,000. For purposes of this
limit, Fair Market Value is measured as of the Grant Date of the applicable
Option. To the extent Options are granted as ISOs but exceed the $100,000
threshold, the Options beyond the $100,000 threshold (starting with the most
recent grants) shall be treated as NQSOs. If the Code is amended to provide for
a different limitation from that set forth in this Section 7.1.2, then that
different limitation will be deemed incorporated into this Plan, effective as of
the date and with respect to those Options as dictated by the applicable
amendment to the Code. If an Option is treated as possessing both ISOs and NQSOs
by virtue of the limitation of this Section 7.1.2, then upon exercise the
Optionee may designate whether the portion being exercised constitutes ISOs or
NQSOs (or both). In the absence of a designation by the Optionee, the Optionee
will be deemed to have first exercised the ISO portion of the Option. The Plan
Administrator may direct that separate certificates be issued to reflect the
exercise of ISOs versus the exercise of NQSOs.

      SECTION 8. EMPLOYMENT WITH RELATED ENTITIES. For purposes of this Plan,
being engaged in employment or other service relationship with a Related Entity
constitutes employment or other service relationship with the Company. In
particular, the provisions of Section 9, below, shall apply by using the terms
"Company" and "Related Entity" interchangeably. A transfer between the Company
and one or more Related Entities will not constitute a termination of employment
or other service relationship with the Company (provided that pursuant to
Section 9.5, a change in status from an employee to a non-employee worker will
constitute a termination of employment for federal tax purposes with respect to
ISOs).

      SECTION 9. TERMINATION OF RELATIONSHIP WITH COMPANY. Except as provided
otherwise in the applicable Option Agreement, all Options that are unvested
automatically expire upon termination of an Optionee's employment or other
service relationship with the Company for any reason. And except as provided
otherwise in the applicable Option Agreement, the effect of a termination of
employment or other service relationship upon vested Options is as follows:

            9.1   TERMINATION FOR CAUSE.

                  9.1.1 EFFECT UPON OPTIONS. If the Company terminates an
Optionee's employment or other service relationship for Cause, then, as of the
Company's first discovery of any of the grounds for termination for Cause, any
Option held by that Optionee shall automatically terminate. If an Optionee is
suspended pending an investigation of whether or not the Optionee will be
terminated for Cause, then all of the Optionee's rights under any Option will
also be suspended during the period of investigation.

                  9.1.2 DEFINITION OF CAUSE. Termination for "Cause" means the
Optionee's (a) willful refusal to perform his obligations to the Company, (b)
willful misconduct contrary to the interests of the Company, (c) commission of a
serious criminal act whether denominated a felony, misdemeanor or otherwise, or
(d) engaging in activities directly in competition or antithetical to the best
interests of the Company. To the extent an Optionee is a party to an employment
agreement or offer letter of employment with the Company that defines


PAGE 6 - 2002 STOCK OPTION PLAN
<PAGE>
"cause" or a similar term, then the meaning set forth in that agreement shall
also be considered "Cause" for purposes of this Plan.

            9.2   TERMINATION BECAUSE OF TOTAL DISABILITY. If an Optionee's
employment or other service relationship with the Company terminates because of
a "Total Disability," as defined below, then the Optionee's vested Options
(determined as of the termination) shall not expire (and any ISOs will not cease
to be treated as ISOs) until the sooner of (i) the end of the 12-month period
following such termination or (ii) the normal expiration date of the Option. For
purposes of this Plan, Total Disability means a mental or physical impairment
that (a) causes an individual to be unable to engage in any substantial gainful
activity, after reasonable accommodation, and (b) is expected to result in death
or has lasted or is expected to last for a continuous period of 12 months or
more. The status of Total Disability will be determined by the Administrator
and, if requested by the affected Optionee, two independent physicians, and
shall be deemed to exist on the first day after the Administrator (and the two
independent physicians, if applicable) reach the conclusion. The application of
this Section 9.2 will not accelerate the vesting of Options.

            9.3   TERMINATION BECAUSE OF, OR SHORTLY BEFORE, DEATH. If an
Optionee dies (a) while still engaged in a service relationship with the Company
or (b) within the 60-day period (or 12-month period in the case of Total
Disability) following cessation of such relationship, then any vested Options
may be exercised at any time prior to (i) the end of the 12-month period
following the death or (ii) the regular expiration date applicable to the
Option, whichever is earlier. The application of this Section 9.3 will not
accelerate the vesting of Options. The vested portion of the Option (determined
as of the Optionee's date of death) may be exercised by the personal
representative or the person to whom the Optionee's rights pass by will or by
the laws of descent and distribution.

            9.4   OTHER TERMINATIONS. If an Optionee's relationship with the
Company terminates for a reason other than Cause, death, or Total Disability,
the Optionee may exercise outstanding Options until the earlier of (a) the end
of the 60-day period following termination of an Optionee's employment or other
service relationship with the Company, or (b) the expiration date stated in the
Option Agreement, after which all unexercised Options will expire. However, the
Administrator may extend the exercise period, in its the sole discretion,
provided that ISOs exercised beyond the three-month period following termination
of an Optionee's employment with the Company will be treated as NQSOs. Unless
provided otherwise in an individual Option Agreement, an Optionee's change in
status from being an employee to a non-employee worker (such as a consultant)
will not constitute a termination of the Optionee's employment with the Company
for purposes of applying the provisions of this Section 9.4 to any ISOs held by
the Optionee, provided that the Optionee's exercise of any ISO beyond the
three-month period following the change of the Optionee's status from being an
employee to a non-employee worker will be treated as the exercise of a NQSO.

            9.5   MILITARY LEAVE, SICK LEAVE AND BONA FIDE LEAVE OF ABSENCE. To
the extent determined by the Administrator, an Optionee's employment or other
working relationship with the Company may be deemed to continue while the
Optionee is on military leave, sick leave or other bona fide leave of absence.
However, with respect to ISOs,


PAGE 7 - 2002 STOCK OPTION PLAN
<PAGE>
employment will not be deemed to continue beyond the first 90 days of leave,
unless the individual's reemployment rights are guaranteed by statute or by
contract.

      SECTION 10. OPTIONS NOT TRANSFERABLE. Options are personal to the Optionee
during the Optionee's lifetime and may not be transferred, assigned, pledged,
attached or otherwise disposed of in any manner, except by will or the laws of
descent and distribution, and provided further that to the extent authorized by
the Administrator, on a case by case basis, an Optionee may transfer NQSOs into
a revocable trust created by the Optionee for the benefit of the Optionee's
descendants, to an immediate family member, or to a partnership in which only
immediate family members or such trusts are partners. Any attempt to transfer,
assign, pledge, attach or otherwise dispose of any Option contrary to this
Section 10 will be null and void.

      SECTION 11. CHANGES IN COMPANY'S CAPITAL STRUCTURE.

            11.1  ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. In the event of
any merger, consolidation, reorganization, stock split, stock dividend or other
event causing a capital adjustment affecting the number of outstanding shares of
Common Stock ("Capitalization Change"), the Administrator will make
corresponding adjustments to preserve the relative value of Options. To that end
the Administrator will make adjustments, as necessary, in: (a) the aggregate
number or kind of shares for which Options may be granted under this Plan; (b)
the number or kind of shares covered by any outstanding Options under this Plan;
and (c) other terms of this Plan or outstanding Options that merit a change in
conjunction with the Capitalization Change. Any fractional shares resulting from
an adjustment will be disregarded. In the event the Company issues additional
shares of Common Stock for consideration (including non-cash consideration),
neither the total amount of shares subject to this Plan, nor the amount of
shares subject to any outstanding Option, will be adjusted. The Administrator's
determination as to what adjustments should be made and the extent of the
adjustments will be final, binding and conclusive.

            11.2  EFFECT OF SALE, MERGER OR EXCHANGE.

                  11.2.1 TERMINATION OF OPTIONS. Subject to Section 11.2.2, upon
the occurrence of a "Sales Event" (as defined below) any unexercised Options
will expire and cease to be effective, provided that Optionees will have advance
notice and an opportunity prior to the Sales Event to exercise any vested
Options. In the alternative, at the complete discretion of the Administrator,
the Company may (i) determine to cash out some or all of the unexercised, vested
Options by paying each affected Optionee an amount equal to the Fair Market
Value of a share of Common Stock (as determined for purposes of the Sales
Event), multiplied by the number of shares of Common Stock available under the
vested portion of the Optionee's Option, reduced by the aggregate Exercise Price
associated with that portion of the Option, or (ii) continue some or all of the
Options, subject to the same terms and conditions (including the vesting
schedule, if any) that applied prior to the Sales Event, modified as deemed
appropriate by the Administrator in conjunction with the Sales Event. For
purposes of this Plan a "Sales Event" will include (a) a complete liquidation of
the Company, (b) a sale of substantially all of the Company's assets, or (c) a
merger, consolidation, reorganization or other similar event (other than an
initial public offering) in which the Company is not the surviving entity.
Unless provided otherwise in the


PAGE 8 - 2002 STOCK OPTION PLAN
<PAGE>
applicable Option Agreements, or pursuant to an action of the Board, the vesting
schedules applicable to outstanding Options will not accelerate in connection
with a Sales Event.

                  11.2.2 CONVERSION ON STOCK FOR STOCK EXCHANGE. If pursuant to
a Sales Event the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock,
then the Company and the corporation issuing the Exchange Stock may (at their
discretion) provide that any unexercised Options under this Plan will be
converted into options to purchase shares of Exchange Stock. The number of
shares and exercise price of options for Exchange Stock will be determined by
adjusting the number of shares and Exercise Price of the unexercised Options in
the same proportion as used for determining the number of shares of Exchange
Stock that the shareholders of Common Stock receive in the transaction. Other
than the potential changes to the Exercise Price and number of shares of the
outstanding Options, all of the terms and conditions relating to the converted
Options under this Plan shall apply to options for the Exchange Stock, unless
otherwise determined by the Administrator.

            11.3  NO RESTRICTION ON ABILITY TO ACCOMPLISH CORPORATE CHANGES.
This Plan and Options granted hereunder will not in anyway limit the right or
power of the Company, or its stockholders, to make or authorize any or all
adjustments in connection with recapitalizations, reorganizations or other
changes in the Company's structure or its business, or any merger or
consolidation of the Company, or any issuance of stock or of options, warrants
or rights to purchase stock or bonds, debentures, preferred or prior preference
stocks whose rights are superior to or affect the Common Stock or rights of
holders thereof or which are convertible into or exchangeable for Common Stock,
the dissolution or liquidation of the Company, or any sale or transfer of all or
any part of its assets or business, or any corporate act or proceeding, whether
of a similar character or otherwise.

      SECTION 12. SECURITIES REGULATION AND OTHER REQUIRED APPROVALS. The
Company shall not issue shares subject to an Option unless the exercise,
issuance and delivery of such shares comply with all relevant provisions of law,
including any applicable state securities laws, the Securities Act, the Exchange
Act, any relevant securities rules and regulations, and the requirements of any
stock exchange upon which the shares may then be listed. The issuance of shares
shall be further subject to the approval of counsel for the Company with respect
to such compliance, including the availability of an exemption from registration
for the issuance and sale of any shares under this Plan.

            12.1  EFFECT OF LACK OF AUTHORITY. The Company will use its best
efforts to obtain from the appropriate regulatory agencies any requisite
authorization in order to issue the number of shares of its Common Stock as
needed to satisfy the requirements of this Plan. The Company's inability to
obtain the authority that Company's counsel deems to be necessary for the lawful
issuance of any shares under this Plan, or the unavailability of an exemption
from registration for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-issuance of such
shares.

            12.2  SECTION 16(B) COMPLIANCE; BIFURCATION OF PLAN. In the event
the Company registers any of its equity securities pursuant to Section 12(b) or
12(g) of the Exchange Act, this Plan and the Options granted under this Plan
shall comply in all respects with Rule 16b-


PAGE 9 - 2002 STOCK OPTION PLAN
<PAGE>
3 under the Exchange Act (or any successor rule). If any Plan provision is later
found not to be in compliance with Rule16b-3, the provision shall be deemed null
and void, or if possible construed in favor of its meeting the requirements of
Rule 16b-3. Notwithstanding anything in this Plan to the contrary, the
Administrator, in its absolute discretion, may bifurcate this Plan so as to
restrict, limit or condition the use of any provision of this Plan to Optionees
who are officers and directors subject to Section 16(b) of the Exchange Act
without so restricting, limiting or conditioning other Optionees. This provision
shall not obligate the Company to undertake registration of any of the Options
or shares of Common Stock.

            12.3  REPRESENTATIONS AND WARRANTIES. As a condition to granting any
Option, the Company may require the recipient to make any representation or
warranty to the Company as may be required, in the judgment of the Company,
including executing and delivering to the Company an agreement as may from time
to time be necessary to comply with federal and state securities laws. At the
election of the Company, a stop-transfer order against any shares of stock may
be placed on the official stock books and records of the Company, and a legend
may be stamped on stock certificates indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
(concurred in by counsel for the Company) stating that such transfer is not in
violation of any applicable law or regulation.

            12.4  LEGENDS ON OPTION AGREEMENTS AND STOCK CERTIFICATES. Unless an
appropriate registration statement is filed pursuant to the Securities Act, with
respect to the shares of Common Stock issued under this Plan, each certificate
representing such Common Stock shall be endorsed with the following legend or
its equivalent:

            The securities represented by this certificate have not been
            registered under the Securities Act of 1933, as amended (the "Act)
            and may not be sold, assigned, offered or otherwise transferred
            unless (a) there is an effective registration statement under the
            Act, or (b) the Company receives an opinion of legal counsel for the
            holder of these securities (concurred in by legal counsel for the
            Company) stating that the transaction is exempt from registration or
            the Company otherwise satisfies itself that the transaction is
            exempt from registration.

In addition to this legend, each Option Agreement and each certificate
representing shares of Common Stock acquired through an Option shall be endorsed
with all legends, if any, which are required by applicable state securities laws
and the Administrator.

      SECTION 13. WITHHOLDING TAX REQUIREMENT. The Company will have the right
to retain and withhold from any payment of cash, or shares of Common Stock, the
amount of taxes required by any government to be withheld. The Company may
require an individual receiving cash or shares of Common Stock under this Plan
to advance or reimburse the Company for any such taxes required to be withheld
and may withhold any distribution in whole or in part until the Company is so
reimbursed. In lieu of withholding or reimbursement, the Company has the right
to withhold from any other cash amounts due or to become due from the Company to
the individual in an amount equal to the taxes, or to retain and withhold a
number of shares having a


PAGE 10 - 2002 STOCK OPTION PLAN
<PAGE>
market value not less than the amount of the taxes required to be withheld as
reimbursement for any taxes and cancel (in whole or in part) any shares so
withheld.

      SECTION 14. STATUS OF SHAREHOLDER. No Optionee, nor any party to which an
Optionee's rights and privileges may pass, will have any of the rights or
privileges of a shareholder of the Company with respect to the shares related to
an Option unless, until and to the extent the Option has been properly exercised
for shares.

      SECTION 15. RIGHTS AND RELATIONSHIPS.

            15.1  THIS PLAN. This Plan is purely voluntary on the part of the
Company. The adoption or continuance of this Plan will not be deemed to
constitute a commitment to Eligible Participants by the Company to continue this
Plan.

            15.2  NO EMPLOYMENT CONTRACT. Nothing in this Plan, nor in any
Option granted pursuant to this Plan, shall give any Optionee any right to
continued employment with the Company or a Related Entity, or to interfere in
any way with the right of the Company (or Related Entity) to terminate the
Optionee's employment or service relationship with the Company at any time.

            15.3  OTHER AGREEMENTS. To the extent required by the Administrator,
each person who receives shares as a result of any Option shall agree to enter
into and be bound by the shareholders agreement then in effect, if any, or other
similar agreement between the Company and its shareholders relating to the
repurchase by the shareholders and/or the Company of outstanding shares of
Common Stock. In addition, as required by the Administrator, shares available
through Options may be subject to restrictions on the transfer of the shares or
commitments regarding the Company's repurchase of the Optionee's shares, which
restrictions or commitments may be a condition of the delivery of certificates
representing shares to the Optionee.

      SECTION 16. AMENDMENT AND TERMINATION.

            16.1  BOARD ACTION. The Board may at any time suspend, amend or
terminate this Plan, provided that the approval of the Company's shareholders is
necessary within 12 months before or after the adoption by the Board of any
amendment which will (a) increase the number of shares reserved for the issuance
of Options under this Plan; or (b) permit the granting of Options to a class of
persons other than those presently permitted to receive Options under this Plan.

            16.2  AUTOMATIC TERMINATION. Unless sooner terminated by the Board,
this Plan shall terminate ten years from the earlier of (a) the date on which
this Plan is adopted by the Board or (b) the date on which this Plan is approved
by the shareholders of the Company.

            16.3  EFFECT. No Option may be granted after the termination or
during any suspension of this Plan. In addition, no amendment, suspension or
termination of this Plan shall adversely affect Options granted on or prior to
the date thereof, without the consent of the Optionees, unless expressly
provided for in this Plan or a particular Option Agreement.


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<PAGE>
      SECTION 17. APPLICABLE LAW. This Plan shall be governed and construed in
accordance with the laws of the State of Oregon.

      SECTION 18. EFFECTIVENESS OF THIS PLAN. This Plan shall become effective
upon adoption by the Board, so long as it is approved by the Company's
shareholders any time within 12 months before or after the adoption of this
Plan.


PAGE 12 - 2002 STOCK OPTION PLAN