Exhibit 10.8

                              PUBLIC STORAGE, INC.
                             1994 STOCK OPTION PLAN

        Public  Storage,  Inc., a California  corporation  (the  "Company") sets
forth herein the terms of this 1994 Stock Option Plan (the "Plan") as follows:

        1.      PURPOSE

        The Plan is  intended to enhance  the  Company's  ability to attract and
retain  highly  qualified  persons to advance  the  interests  of the Company by
providing  eligible  persons  (as  designated  pursuant to Section 6 below) with
stronger  incentives  to continue to serve the  Company and its  affiliates  (as
defined herein) and to expend maximum effort to improve the business results and
earnings of the Company,  by presenting an  opportunity to acquire or increase a
direct proprietary interest in the operations and future success of the Company.
To this end, the Plan  provides for the grant of stock  options,  in  accordance
with the terms hereof. Each Option (as defined herein) granted under the Plan is
intended to be a non-qualified stock option, and shall not be an Incentive Stock
Option (as defined  herein),  except as otherwise  specifically  provided in the
related Stock Option Agreement entered into hereunder and as further provided in
Section 7 below.

        2.      DEFINITIONS

        For purposes of interpreting the Plan and related  documents  (including
Stock Option Agreements), the following definitions shall apply:

        2.1  "affiliate"  of, or person  "affiliated"  with,  a person means any
company or other trade or business that is controlled by or under common control
with such person, or an affiliate of such person, within the meaning of Rule 405
of Regulation C under the 1933 Act (as defined herein).

        2.2 "Benefit Arrangement" shall have the meaning set forth in Section 13
hereof.

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

        2.4 "Code" means the Internal  Revenue Code of 1986, as now in effect or
as hereafter amended.

        2.5  "Committee"  means a Committee of, and designated from time to time
by resolution of, the Board,  which must consist of no fewer than two members of
the Board,  none of whom shall be an officer or other  salaried  employee of the
Company or any  affiliate,  and each of whom shall  qualify in all respects as a
"disinterested  person"  within the meaning of Rule 16b-3 under the Exchange Act
(as defined  herein).  Commencing on the Effective  Date, and until such time as
the Board shall determine otherwise,  the Committee shall be the Audit Committee
of the Board.

        2.6  "Company" means Public Storage, Inc.

        2.7  "Effective  Date"  means  the date of  adoption  of the Plan by the
Board, as more fully set forth in Section 5 hereof.

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        2.8 "Exchange Act" means the Securities  Exchange Act of 1934, as now in
effect or as hereafter amended.

        2.9 "Fair Market  Value" means the value of each share of Stock  subject
to the Plan determined as follows:  if on the Grant Date or other  determination
date the shares of Stock are listed on an established national or regional stock
exchange,  are  admitted to  quotation  on the Nasdaq  National  Market,  or are
publicly traded on an established  securities  market,  the Fair Market Value of
the shares of Stock  shall be the  closing  price of the shares of Stock on such
exchange or in such market (the highest such closing price if there is more than
one such exchange or market) on the Grant Date or such other  determination date
(or if there is no such reported  closing price,  the Fair Market Value shall be
the mean between the highest bid and lowest asked prices or between the high and
low sale  prices on such  trading  day) or, if no sale of the shares of Stock is
reported for such trading day, on the next preceding day on which any sale shall
have been  reported.  If the shares of Stock are not listed on such an exchange,
quoted on such  System or traded on such a market,  Fair  Market  Value shall be
determined by the Board or the Committee in good faith.

        2.10 "Grant" means an award of one or more Options under the Plan.

        2.11 "Grant Date" means (a) for Grants other than to Outside  Directors,
the later of (i) the date as of which the Committee approves the Grant of one or
more  Options  or (ii) the date as of which  the  Optionee  and the  Company  or
Service  Provider  enter into the  relationship  resulting in the Optionee being
eligible for such  grants,  and (b) for Grants to Outside  Directors,  the Grant
Date shall be as set forth in Section 6.1(c) hereof.

        2.12 "Incentive  Stock Option" means an "incentive  stock option" within
the meaning of Section 422 of the Code,  or the  corresponding  provision of any
subsequently enacted tax statute, as amended from time to time.

        2.13 "1933 Act" means the Securities Act of 1933, as now in effect or as
hereafter amended.

        2.14  "Option"  means an option to purchase  one or more shares of Stock
pursuant to the Plan.

        2.15 "Optionee" means a person who holds an Option under the Plan.

        2.16  "Option  Period"  means the period  during  which  Options  may be
exercised as defined in Section 10 hereof.

        2.17 "Option  Price"  means the  purchase  price for each share of Stock
subject to an Option.

        2.18  "Other  Agreement"  shall have the meaning set forth in Section 13
hereof.

        2.19  "Outside  Director"  means a  member  of the  Board  who is not an
officer or employee of the Company.

        2.20 "Plan"  means the Public  Storage,  Inc.  1994 Stock  Option  Plan,
which,  with respect to authorized  Grants of Options to Outside  Directors,  is
intended to  constitute a "formula  plan"  within the  meaning,  and meeting the
conditions of, Rule 16b-3 under the Exchange Act.

        2.21  "Reporting  Person" means a person who is required to file reports
under Section 16(a) of the Exchange Act.

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        2.22 "Service  Provider" means a consultant or adviser to the Company, a
manager  of the  Company's  properties  or  affairs,  or other  similar  service
provider or affiliate of the Company, and employees of any of the foregoing,  as
such persons may be designated  from time to time by the  Committee  pursuant to
Section 6 hereof.

        2.23  "Stock"  means the  shares of common  stock,  par value  $0.10 per
share, of the Company.

        2.24 "Stock Option  Agreement" means the written  agreement  between the
Company and an Optionee that  evidences and sets out the terms and conditions of
a Grant of one or more Options hereunder.

        2.25  "Subsidiary"  means any  "subsidiary  corporation"  of the Company
within the meaning of Section 425(f) of the Code.

        2.26  "Termination  Date"  shall be the date upon which an Option  shall
terminate or expire, as defined in Section 10.2 hereof.

        3.      ADMINISTRATION OF THE PLAN

        3.1 General. The Plan shall be administered by the Committee.  The Board
may remove members,  add members,  and fill vacancies on the Committee from time
to time,  all in accordance  with the Company's  articles of  incorporation  and
by-laws,  and with applicable law;  provided  however,  that at all times,  each
member of the  Committee  shall  qualify  in all  respects  as a  "disinterested
person" within the meaning of Rule 16b-3 under the Exchange Act.

        3.2 (a) Action by Committee. Subject to clause (c) hereof, the Committee
shall have such powers and authorities related to the administration of the Plan
as are consistent with the Company's  articles of incorporation  and by-laws and
applicable  law. The  Committee  shall have the full power and authority to take
all actions and to make all  determinations  required or provided  for under the
Plan, any Grant awarded  hereunder,  or any Stock Option Agreement  entered into
hereunder,  and shall have the full power and  authority  to take all such other
actions  and  determinations  not  inconsistent  with  the  specific  terms  and
provisions of the Plan that the Committee  deems to be necessary or  appropriate
to the  administration  of the Plan, any Grant awarded  hereunder,  or any Stock
Option  Agreement  entered into hereunder.  All such actions and  determinations
shall be by the  affirmative  vote of a majority of the members of the Committee
present  at a meeting  or by  unanimous  consent of the  Committee  executed  in
writing in accordance with the Company's  articles of incorporation and by-laws,
and with applicable law. The interpretation and construction by the Committee of
any  provision  of the  Plan,  any Grant  made  hereunder,  or any Stock  Option
Agreement entered into hereunder shall be final and conclusive.

                (b) Grants of Options.  Subject to the terms and  conditions  of
the Plan,  the Committee  may, at any time and from time to time,  grant to such
eligible persons as the Committee may determine, Options to purchase such number
of shares of Stock on such terms and  conditions as the Committee may determine,
including any terms or conditions which may be necessary to qualify such Options
as Incentive Stock Options. Such authority  specifically includes the authority,
in order to effectuate  the purposes of the Plan but without  amending the Plan,
to modify  grants to  eligible  individuals  who are  foreign  nationals  or are
individuals who are employed outside the United States to recognize  differences
in local law, tax policy, or custom.

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                (c)  Grants to  Outside  Directors.  With  respect  to Grants to
Outside  Directors  awarded  pursuant to Section 6.1(c) hereof,  the Committee's
responsibilities  under the Plan shall be  limited  to taking all legal  actions
necessary to document the Options so granted,  to maintain  appropriate  records
and reports  regarding  those Options,  and to take all acts  authorized by this
Plan or otherwise reasonably necessary to effect the purposes hereof.

        3.3 No Liability.  No member of the Board or of the  Committee  shall be
liable for any action or  determination  made in good faith with  respect to the
Plan or any Grant awarded or Stock Option Agreement entered into hereunder.

        3.4 Applicability of Rule 16b-3.  Those provisions of the Plan that make
express  reference  to Rule 16b-3  under the  Exchange  Act shall  apply only to
Reporting Persons.

        4.      STOCK SUBJECT TO THE PLAN

        Subject to adjustments  made pursuant to Section 16 hereof,  the maximum
number of shares of Stock  which may be issued  pursuant  to the Plan  shall not
exceed  1,150,000.  If any Option  expires,  terminates  or is canceled  for any
reason before it is exercised in full,  the shares of Stock that were subject to
the  unexercised  portion of the Option  shall be available  for future  Options
granted under the Plan.

        5.      EFFECTIVE DATE AND TERM OF THE PLAN

        5.1  Effective  Date.  The  Plan  shall be  effective  as of the date of
adoption  by the Board,  subject to approval of the Plan within one year of such
Effective  Date,  by an  affirmative  vote of the  holders of a majority  of the
Shares  voting,  provided that the total votes cast  represent a majority of all
Shares  entitled to vote.  Upon approval of the Plan by the  shareholders of the
Company as set forth above,  however, all Grants made under the Plan on or after
the  Effective  Date  shall be fully  effective  as if the  shareholders  of the
Company had approved the Plan on the Plan's  Effective Date. If the shareholders
fail to approve the Plan within one year after such  Effective  Date, any Grants
made hereunder shall be null and void and of no effect.

        5.2 Term. The Plan has no termination date, provided,  however,  that no
Incentive  Stock Option may be granted on or after the tenth  anniversary of the
Effective Date.

        6.      ELIGIBLE PERSONS; GRANT OF OPTIONS

        6.1 Subject in each case to Section 6.2 hereof:

                (a)  Company  or   Subsidiary   Employees.   Grants  of  Options
(including  Incentive  Stock Options) may be made under the Plan to any employee
of the  Company  or any  Subsidiary  (including  any such  individual  who is an
officer or director of the Company or any  Subsidiary)  as the  Committee  shall
determine and designate from time to time.

                (b) Service Providers. Grants of Options (which, with respect to
Service  Providers who are not employees of Subsidiaries  of the Company,  shall
not be  Incentive  Stock  Options)  may be made  under  the Plan to any  Service
Provider whose participation in the Plan is determined by the Committee to be in
the best interests of the Company and is so designated by the Committee.

                (c) Outside  Directors.  (i) Commencing on the Effective Date of
the Plan, each new Outside  Director shall,  upon the date of his or her initial

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election by the Board or the  shareholders of the Company to serve as an Outside
Director,  automatically  be  awarded  a Grant of  Options,  which  shall not be
Incentive Stock Options,  to purchase 15,000 shares of Stock (which amount shall
be subject to adjustment as provided in Section 16 hereof).

                        (ii)   Commencing  with  the  first  Annual  Meeting  of
Shareholders  of the Company held after the Effective  Date, on the date of such
Annual  Meeting of  Shareholders,  each Outside  Director  then duly elected and
serving shall  automatically  be awarded a Grant of Options,  which shall not be
Incentive  Stock Options,  to purchase 2,500 shares of Stock (which amount shall
be subject to adjustment as provided in Section 16 hereof);  provided,  however,
that no Outside  Director  shall be eligible to receive a Grant of Options under
this  Section  6.1(c)(ii)  unless  such  person  has  attended,  in person or by
telephone,  at least  seventy-five  percent  of the  meetings  held by the Board
during the immediately preceding calendar year.

                (d) Successive  Grants. An eligible person may receive more than
one Grant, subject to such restrictions as are provided herein.

        6.2 Ineligible Persons. Notwithstanding any of the foregoing provisions,
no Grants may be made under the Plan to B. Wayne Hughes.

        7.      LIMITATIONS ON OPTIONS

        7.1 Limitation on Shares of Stock Subject to Options. The maximum number
of shares of Stock  subject to Options that can be awarded under the Plan to any
person  eligible  for a Grant under  Section 6, is 575,000  during the first ten
years after the Effective Date of the Plan and 57,500 per year thereafter.

        7.2 Limitations on Incentive Stock Options.  An Option shall  constitute
an Incentive Stock Option only (i) if the Optionee is an employee of the Company
or any Subsidiary of the Company;  (ii) to the extent  specifically  provided in
the related  Stock Option  Agreement  entered into  hereunder;  and (iii) to the
extent that the aggregate  Fair Market Value  (determined at the time the Option
is granted) of the shares of Stock with respect to which Incentive Stock Options
are  exercisable  for the first time by any Optionee  during any  calendar  year
(under the Plan and all other plans of the  Optionee's  employer  and its parent
and Subsidiary)  does not exceed  $100,000.  This limitation shall be applied by
taking Options into account in the order in which they were granted.

        8.      OPTION PRICE

        The  Option  Price  shall be fixed by the  Committee  and stated in each
Stock Option  Agreement.  The Option Price shall be the Fair Market Value of the
shares of Stock on the Grant Date of the Option; provided,  however, that in the
event an Optionee  would  otherwise be ineligible to receive an Incentive  Stock
Option by reason of the provisions of Sections  422(b)(6) and 424(d) of the Code
(relating to stock  ownership of more than ten percent),  the Option Price of an
Option that is intended to be an  Incentive  Stock Option shall be not less than
the greater of par value or 110  percent of the Fair Market  Value of a share of
Stock at the time such Option is granted.  In no case shall the Option  Price be
less than the par value of a share of Stock.

        9.      STOCK OPTION AGREEMENT

        Each Grant of Options pursuant to the Plan shall be evidenced by a Stock
Option  Agreement,  to be executed by the Company and by the  Optionee,  in such

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form or forms as the Committee shall from time to time  determine.  Stock Option
Agreements  covering  Options granted from time to time or at the same time need
not  contain  similar  provisions;  provided,  however,  that each Stock  Option
Agreement shall specify  whether the Options granted  thereunder are intended to
be  non-qualified  stock  options or Incentive  Stock  Options and that all such
Stock Option Agreements shall comply with all terms of the Plan.

        10.     VESTING, TERM AND EXERCISE OF OPTIONS

        10.1 Vesting and Option  Period.  For each Grant,  Options  shall become
exercisable in accordance  with the following  schedule:  (i) prior to the first
anniversary of the Grant Date, no Options shall be exercisable;  (ii) commencing
on the first anniversary and up to (but not including) the second anniversary of
the Grant Date, one-third of the Options shall be exercisable;  (iii) commencing
on the second anniversary and up to (but not including) the third anniversary of
the  Grant  Date,  two-thirds  of the  Options  shall  be  exercisable  and (iv)
commencing  on the  third  anniversary  of the  Grant  Date,  and up to (but not
including) the Termination  Date, as defined in Section 10.2 hereof,  all of the
Options  shall be  exercisable.  For purposes of this Section  10.1,  fractional
numbers of Options shall be rounded down to the next nearest  whole number.  The
period  during  which any Option shall be  exercisable  in  accordance  with the
foregoing  schedule shall  constitute  the "Option  Period" with respect to such
Option.

        10.2 Term.  Each Option  granted under the Plan shall  terminate and all
rights to purchase shares of Stock thereunder shall cease upon the expiration of
ten years from the date such Option is granted,  or under such circumstances and
on such date prior  thereto as may be fixed by the  Committee  and stated in the
Stock  Option  Agreement  relating  to such  Option  (the  "Termination  Date");
provided,  however, that in the event the Optionee would otherwise be ineligible
to receive an  Incentive  Stock Option by reason of the  provisions  of Sections
422(b)(6) and 424(d) of the Code  (relating to stock  ownership of more than ten
percent), an Option granted to such Optionee that is intended to be an Incentive
Stock Option shall in no event be exercisable after the expiration of five years
from the date it is granted.

        10.3 Acceleration. Any limitation on the exercise of an Option contained
in any  Stock  Option  Agreement  may be  rescinded,  modified  or waived by the
Committee,  in its sole discretion,  at any time and from time to time after the
Grant Date of such Option,  so as to accelerate the time at which the Option may
be exercised.  Notwithstanding any other provisions of the Plan, no Option shall
be exercisable in whole or in part prior to the date the Plan is approved by the
shareholders of the Company as provided above.

        10.4  Termination  of  Employment  or  Other   Relationship.   Upon  the
termination  (i) of the  employment of an Optionee with the Company or a Service
Provider;  (ii) of a Service Provider's  relationship with the Company; or (iii)
of an Outside  Director's  service to the  Company,  other than,  in the case of
individuals,  by reason of the death or "permanent and total disability" (within
the meaning of Section  22(e)(3)  of the Code),  at the close of business on the
thirtieth  day following  such  termination,  any Option  granted to an Optionee
pursuant to the Plan that (i) has not vested in accordance  with the  provisions
of Section 10.1 hereof or (ii) has vested in accordance  with the  provisions of
Section 10.1  hereof,  but has not been  exercised,  shall  terminate,  and such
Optionee shall have no further right to purchase shares pursuant to such Option.
Whether a leave of absence or leave on  military  or  government  service  shall
constitute  a  termination  of  employment  for  purposes of the Plan,  shall be
determined by the Committee,  which determination shall be final and conclusive.
For  purposes of the Plan, a  termination  of  employment  with the Company or a
Service  Provider  shall not be deemed to occur if the  Optionee is  immediately
thereafter  employed with the Company or any other Service Provider,  or engaged
as an  Outside  Director  of the  Company.  Whether a  termination  of a Service
Provider's  or an Outside  Director's  relationship  with the Company shall have
occurred  shall be determined by the  Committee,  which  determination  shall be
final and conclusive.

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        10.5 Rights in the Event of Death. If an Optionee dies while employed by
the  Company or a Service  Provider,  or while a Service  Provider or an Outside
Director,  all Options  granted to such Optionee shall fully vest on the date of
death, and the executors or  administrators  or legatees or distributees of such
Optionee's  estate  shall have the right,  at any time within one year after the
date of such Optionee's death and prior to termination of the Option pursuant to
Section 10.2 above,  to exercise any Option held by such Optionee at the date of
such Optionee's  death,  whether or not such Option was exercisable  immediately
prior to such Optionee's death.

        10.6  Rights  in the  Event of  Disability.  If an  Optionee  terminates
employment with the Company or a Service Provider, or ceases to provide services
to the Company (if the Optionee is a Service Provider who is an individual or is
an Outside Director),  by reason of the "permanent and total disability" (within
the  meaning  of  Section  22(e)(3)  of the  Code) of such  Optionee,  then such
Optionee  shall  have  the  right,  at any  time  within  one  year  after  such
termination  of  employment  or service and prior to  termination  of the Option
pursuant to Section  10.2 above,  to exercise,  in whole or in part,  any Option
held by such Optionee at the date of such  termination of employment or service,
whether or not such Option was exercisable immediately prior to such termination
of  employment  or  service.  Whether  a  termination  of  employment  is  to be
considered by reason of "permanent  and total  disability"  for purposes of this
Plan shall be determined by the Committee,  which  determination  shall be final
and conclusive.

        10.7  Limitations on Exercise of Option.  Notwithstanding  the foregoing
Sections,  in no event may Options be exercised,  in whole or in part,  prior to
the date the Plan is  approved  by the  shareholders  of the Company as provided
herein,  or after ten years following the date upon which the Option is granted,
as set forth in Section 2 above, or after the occurrence of an event referred to
in Section 16.3 below which results in  termination  of the Option.  In no event
may the Option be exercised for a fractional share.

        10.8 Method of Exercise.  An Option that is exercisable hereunder may be
exercised  by the  Optionee's  delivery to the Company of written  notice of the
exercise  and the  number of  shares  of Stock  for  which  the  Option is being
exercised.  Such  delivery  shall occur on any  business  day, at the  Company's
principal office, addressed to the attention of the Committee. Such notice shall
specify the number of shares of Stock with  respect to which the Option is being
exercised and shall be accompanied by payment in full of the Option Price of the
shares for which the Option is being exercised.  The minimum number of shares of
Stock with respect to which an Option may be exercised,  in whole or in part, at
any time shall be the lesser of (i) 100 shares or such  lesser  number set forth
in the applicable  Stock Option  Agreement and (ii) the maximum number of shares
available for purchase under the Option at the time of exercise.  Payment of the
Option  Price for the shares  purchased  pursuant  to the  exercise of an Option
shall be made (i) in cash or in cash equivalents; (ii) through the tender to the
Company of shares of Stock,  which  shares  shall be  valued,  for  purposes  of
determining the extent to which the Option Price has been paid thereby, at their
Fair Market  Value on the date of  exercise;  or (iii) by a  combination  of the
methods  described in (i) and (ii).  The Committee may provide,  by inclusion of
appropriate  language in a Stock Option  Agreement,  that payment in full of the
Option  Price need not  accompany  the written  notice of exercise  provided the
notice of exercise  directs that the certificate or certificates  for the shares
of Stock for which the Option is exercised  be  delivered  to a licensed  broker
acceptable to the Company as the agent for the individual  exercising the Option
and, at the time such  certificate or  certificates  are  delivered,  the broker
tenders to the Company  cash (or cash  equivalents  acceptable  to the  Company)
equal to the Option  Price for the  shares of Stock  purchased  pursuant  to the
exercise  of the Option plus the amount (if any) of federal  and/or  other taxes
which the Company may in its  judgment,  be required to withhold with respect to
the exercise of the Option.  An attempt to exercise any Option granted hereunder
other  than as set forth  above  shall be  invalid  and of no force and  effect.
Unless otherwise stated in the applicable Stock Option Agreement,  an individual
holding or  exercising  an Option shall have none of the rights of a shareholder

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(for example,  the right to receive cash or dividend  payments or  distributions
attributable  to the  subject  shares  of Stock or to direct  the  voting of the
subject  shares of Stock ) until the shares of Stock  covered  thereby are fully
paid and issued to him.  Except as provided in Section 16 below,  no  adjustment
shall be made for dividends,  distributions or other rights for which the record
date is prior to the date of such issuance.

        10.9  Transfer  of  Shares  of Stock to  Optionees.  Promptly  after the
exercise  of an Option by an  Optionee,  and the  payment  in full of the Option
Price of the shares of Stock covered thereby, such Optionee shall be entitled to
the  issuance  of a Stock  certificate  or  certificates  evidencing  his or her
ownership of such shares of Stock.

        11.     NON-TRANSFERABILITY OF OPTIONS

        Each Option  granted  pursuant to this Plan shall,  during an Optionee's
lifetime,  be exercisable  only by the Optionee,  and neither the Option nor any
right  thereunder  shall be  transferable by the Optionee by operation of law or
otherwise other than by will or the laws of descent and  distribution  and shall
not be pledged or hypothecated  (by operation of law or otherwise) or subject to
execution, attachment or similar processes.

        12.     USE OF PROCEEDS

        Cash  proceeds  realized  from the sale of shares of Stock  pursuant  to
Options granted under the Plan shall constitute general funds of the Company.

        13.     PARACHUTE LIMITATIONS

        Notwithstanding  any  other  provision  of  this  Plan  or of any  other
agreement,  contract,  or understanding  heretofore or hereafter entered into by
the Optionee with the Company or any Subsidiary, except an agreement,  contract,
or  understanding  hereafter  entered into that  expressly  modifies or excludes
application of this paragraph (an "Other  Agreement"),  and  notwithstanding any
formal  or  informal  plan or  other  arrangement  for the  direct  or  indirect
provision  of  compensation  to the  Optionee  (including  groups or  classes of
participants or beneficiaries of which the Optionee is a member), whether or not
such compensation is deferred,  is in cash, or is in the form of a benefit to or
for the Optionee (a "Benefit  Arrangement"),  if the Optionee is a "disqualified
individual,"  as defined in Section 280G(c) of the Code, any Option held by that
Optionee and any right to receive any payment or other  benefit  under this Plan
shall not become  exercisable  or vested  (i) to the  extent  that such right to
exercise,  vesting,  payment, or benefit,  taking into account all other rights,
payments,  or  benefits  to or for the  Optionee  under  this  Plan,  all  Other
Agreements, and all Benefit Arrangements,  would cause any payment or benefit to
the Optionee under this Plan to be considered a "parachute  payment"  within the
meaning  of  Section  280G(b)(2)  of the Code as then in  effect  (a  "Parachute
Payment")  and (ii) if,  as a result  of  receiving  a  Parachute  Payment,  the
aggregate after-tax amounts received by the Optionee from the Company under this
Plan, all Other Agreements,  and all Benefit Arrangements would be less than the
maximum  after-tax amount that could be received by Optionee without causing any
such payment or benefit to be considered a Parachute Payment.  In the event that
the receipt of any such right to exercise,  vesting,  payment,  or benefit under
this Plan, in conjunction with all other rights, payments, or benefits to or for
the Optionee under any Other  Agreement or any Benefit  Arrangement  would cause
the Optionee to be considered  to have  received a Parachute  Payment under this
Plan that would have the effect of decreasing the after-tax  amount  received by
the  Optionee as described in clause (ii) of the  preceding  sentence,  then the
Optionee shall have the right, in the Optionee's sole  discretion,  to designate

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those rights,  payments, or benefits under this Plan, any Other Agreements,  and
any Benefit  Arrangements  that should be reduced or  eliminated  so as to avoid
having the payment or benefit to the Optionee  under this Plan be deemed to be a
Parachute Payment.

        14.     REQUIREMENTS OF LAW

        14.1  General.  The  Company  shall not be required to sell or issue any
shares of Stock under any Grant if the sale or  issuance  of such  shares  would
constitute a violation by the Optionee, the individual exercising the Option, or
the  Company of any  provisions  of any law or  regulation  of any  governmental
authority,  including without limitation any federal or state securities laws or
regulations. If at any time the Company shall determine, in its discretion, that
the listing,  registration or  qualification of any shares subject to the Option
upon any  securities  exchange or under any  governmental  regulatory  body,  is
necessary or desirable as a condition of, or in connection with, the issuance or
purchase of shares  hereunder,  the Option may not be  exercised  in whole or in
part unless such listing, registration, qualification, consent or approval shall
have been  effected or obtained  free of any  conditions  not  acceptable to the
Company,  and any  delay  caused  thereby  shall  in no way  affect  the date of
termination of the Option.  Specifically  in connection  with the 1933 Act, upon
the exercise of any Option, unless a registration statement under such act is in
effect with respect to the shares of Stock covered by Option,  the Company shall
not be required to sell or issue such shares  unless the  Committee has received
evidence  satisfactory  to it that the holder of such  Option,  may acquire such
shares  pursuant  to  an  exemption  from  registration   under  such  act.  Any
determination in this connection by the Committee shall be final,  binding,  and
conclusive. The Company may, but shall in no event be obligated to, register any
securities  covered  hereby  pursuant to the 1933 Act. The Company  shall not be
obligated  to take any  affirmative  action in order to cause the exercise of an
Option or the  issuance of shares of Stock  pursuant  thereto to comply with any
law or regulation of any governmental  authority.  As to any  jurisdiction  that
expressly  imposes the requirement that an Option shall not be exercisable until
the shares of Stock  covered by such  Option are  registered  or are exempt from
registration, the exercise of such Option (under circumstances in which the laws
of such jurisdiction  apply) shall be deemed  conditioned upon the effectiveness
of such registration or the availability of such an exemption.

        14.2 Rule 16b-3.  It is the intent of the  Company  that this Plan is to
qualify for the exemption  provided by Rule 16b-3 under the Exchange Act. To the
extent any provision of the Plan or action by the Committee does not comply with
the  requirements of Rule 16b-3, it shall be deemed  inoperative,  to the extent
permitted by law and deemed advisable by the Committee, and shall not affect the
validity of the Plan. In the event Rule 16b-3 is revised or replaced,  the Board
may  exercise  its  discretion  to modify this Plan in any respect  necessary to
satisfy the requirements of the revised exemption or its replacement.

        15.     AMENDMENT AND TERMINATION OF THE PLAN

        The Board may,  at any time and from time to time,  amend,  suspend,  or
terminate  the Plan as to any shares of Stock as to which  Grants  have not been
made;  provided,  however,  that the Board  shall not,  without  approval of the
Company's  shareholders,  amend the Plan such that it does not comply  with Rule
16b-3  under  the  Exchange  Act (or any  successor  rule  or  other  regulatory
requirements)  or the Code, or amend the Plan  provisions  relating to Grants to
Outside  Directors more often than once every six months,  other than to comport
with changes in the Code, the Employee  Retirement  Income  Security Act, or the
rules  thereunder.  The Company may retain the right in a Stock Option Agreement
to cause a  forfeiture  of the gain  realized  by an  Optionee on account of the
Optionee  taking  actions in  "competition  with the Company," as defined in the
applicable Stock Option Agreement.  Furthermore, the Company may annul the grant
of an Option if the Optionee was an employee of the Company or an affiliate  and
is terminated "for cause," as defined in the applicable Stock Option  Agreement.
Except as permitted  under this Section 15 or Section 16 hereof,  no  amendment,

                                        9
<PAGE>

suspension,  or termination of the Plan shall, without the consent of the holder
of the Option, alter or impair rights or obligations under any Grant theretofore
awarded under the Plan.

        16.     EFFECT OF CHANGES IN CAPITALIZATION

        16.1 Changes in Stock.  If the number of outstanding  shares of Stock is
increased or decreased or the shares of Stock are changed into or exchanged  for
a  different  number or kind of shares or other  securities  of the  Company  on
account of any recapitalization,  reclassification,  stock split, reverse split,
combination of shares,  exchange of shares, stock dividend or other distribution
payable in capital stock,  or other increase or decrease in such shares effected
without receipt of  consideration  by the Company  occurring after the Effective
Date of the Plan,  the number and kinds of shares for the  acquisition  of which
Options  may be granted  under the Plan shall be  adjusted  proportionately  and
accordingly by the Company. In addition, the number and kind of shares for which
Options are  outstanding  shall be adjusted  proportionately  and accordingly so
that the proportionate interest of the Optionee immediately following such event
shall, to the extent practicable,  be the same as immediately before such event.
Any such adjustment in outstanding Options shall not change the aggregate Option
Price payable with respect to shares that are subject to the unexercised portion
of the  Option  outstanding  but  shall  include a  corresponding  proportionate
adjustment in the Option Price per share.

        16.2  Reorganization in Which the Company Is the Surviving Entity and in
Which No Change of  Control  Occurs.  Subject  to Section  16.3  hereof,  if the
Company  shall  be the  surviving  entity  in  any  reorganization,  merger,  or
consolidation  of the  Company  with  one or more  other  entities,  any  Option
theretofore  granted  pursuant  to the Plan  shall  pertain  to and apply to the
securities  to which a holder of the  number of shares of Stock  subject to such
Option  would have been  entitled  immediately  following  such  reorganization,
merger, or consolidation,  with a corresponding  proportionate adjustment of the
Option Price per share so that the aggregate  Option Price  thereafter  shall be
the same as the aggregate  Option Price of the shares  remaining  subject to the
Option immediately prior to such reorganization, merger, or consolidation.

        16.3  Reorganization,  Sale of Assets or Sale of Stock Which  Involves a
Change of Control.  Subject to the  exceptions set forth in the last sentence of
this Section 16.3, fifteen days prior to the scheduled  consummation of a Change
of  Control,   all  Options  outstanding   hereunder  shall  become  immediately
exercisable  and shall  remain  exercisable  for a period of fifteen  days.  Any
exercise of an Option during such  fifteen-day  period shall be conditioned upon
the  consummation  of  the  Change  of  Control  and  shall  be  effective  only
immediately before the consummation of the Change of Control.  Upon consummation
of any Change of Control,  the Plan and all outstanding but unexercised  Options
shall  terminate.  The Committee shall send written notice of an event that will
result in such a termination to all  individuals who hold Options not later than
the time at which the Company  gives  notice  thereof to its  shareholders.  For
purposes of this Section  16.3,  a "Change of Control"  shall be deemed to occur
upon  (i) the  dissolution  or  liquidation  of the  Company  or upon a  merger,
consolidation,  or reorganization of the Company with one or more other entities
in which the Company is not the surviving  entity,  (ii) a sale of substantially
all of the assets of the  Company to another  entity,  or (iii) any  transaction
(including without limitation a merger or reorganization in which the Company is
the surviving  corporation) which results in any person or entity (other than B.
Wayne Hughes and members of his family and their affiliates)  owning 50% or more
of the  combined  voting  power of all  classes  of stock of the  Company.  This
Section  16.3 shall not apply to any  Change of  Control to the extent  that (A)
provision is made in writing in  connection  with such Change of Control for the
continuation of the Plan or the assumption of the Options  theretofore  granted,
or for the  substitution for such Options of new options covering the stock of a
successor  corporation,  or a parent,  subsidiary  or  affiliate  thereof,  with
appropriate adjustments as to the number and kind of shares and exercise prices,

                                       10
<PAGE>

in which event the Plan and Options  theretofore  granted shall  continue in the
manner  and under the terms so  provided  or (B) a  majority  of the full  Board
determines  that such  Change of Control  shall not trigger  application  of the
provisions of this Section 16.3.

        16.4 Adjustments. Adjustments under this Section 16 related to shares of
Stock  or  securities  of the  Company  shall  be made by the  Committee,  whose
determination  in that  respect  shall be final,  binding,  and  conclusive.  No
fractional  shares  or other  securities  shall be issued  pursuant  to any such
adjustment,  and any  fractions  resulting  from  any such  adjustment  shall be
eliminated in each case by rounding downward to the nearest whole share.

        16.5 No  Limitations  on Company.  The Grant of Options  pursuant to the
Plan shall not  affect or limit in any way the right or power of the  Company to
make adjustments, reclassifications,  reorganizations, or changes of its capital
or business structure or to merge,  consolidate,  dissolve, or liquidate,  or to
sell or transfer all or any part of its business or assets.

        17.     DISCLAIMER OF RIGHTS

        No  provision  in the  Plan or in any  Grant  awarded  or  Stock  Option
Agreement  entered  into  pursuant to the Plan shall be construed to confer upon
any  individual  the right to remain in the employ or service of the  Company or
any affiliate, or to interfere in any way with any contractual or other right or
authority of the Company or any Service  Provider either to increase or decrease
the  compensation  or  other  payments  to any  individual  at any  time,  or to
terminate any  employment or other  relationship  between any individual and the
Company or a Service Provider.  No provision in the Plan or in any Grant awarded
or Stock Option  Agreement  entered into pursuant to the Plan shall be construed
to confer upon any  individual the right to remain in the service of the Company
as a director  (including as an Outside  Director),  or shall  interfere with or
restrict  in any way the  rights of the  Company's  shareholders  to remove  any
director pursuant to the provisions of the California  General  Corporation Law,
as from time to time amended. In addition, notwithstanding anything contained in
the Plan to the contrary, unless otherwise stated in the applicable Stock Option
Agreement,  no Grant  awarded  under the Plan shall be affected by any change of
duties or position of the Optionee  (including a transfer to or from the Company
or a Service  Provider),  so long as such  Optionee  continues to be a director,
officer, consultant, employee, or independent contractor (as the case may be) of
the  Company or a Service  Provider.  The  obligation  of the Company to pay any
benefits pursuant to this Plan shall be interpreted as a contractual  obligation
to pay only  those  amounts  described  herein,  in the  manner  and  under  the
conditions prescribed herein. The Plan shall in no way be interpreted to require
the Company to transfer any amounts to a third party  trustee or otherwise  hold
any amounts in trust or escrow for  payment to any  participant  or  beneficiary
under the terms of the  Plan.  No  Optionee  shall  have any of the  rights of a
shareholder  with respect to the shares of Stock  subject to an Option except to
the extent the certificates for such shares of Stock shall have been issued upon
the exercise of the Option.

        18.     NONEXCLUSIVITY OF THE PLAN

        Neither the adoption of the Plan nor the  submission  of the Plan to the
shareholders  of the Company for  approval  shall be  construed  as creating any
limitations  upon the  right and  authority  of the  Board to adopt  such  other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes of individuals or  specifically  to a particular
individual or particular  individuals) as the Board in its discretion determines
desirable,   including,  without  limitation,  the  granting  of  stock  options
otherwise than under the Plan.

                                       11
<PAGE>

        19.     WITHHOLDING TAXES

        19.1 Withholding.  The Company,  a Subsidiary or a Service Provider,  as
the case may be,  shall  have the  right to  deduct  from  payments  of any kind
otherwise  due to an Optionee  any  Federal,  state,  or local taxes of any kind
required by law to be withheld  with  respect to any shares of Stock issued upon
the exercise of an Option under the Plan. At the time of exercise,  the Optionee
shall pay to the Company,  the Subsidiary or the Service  Provider,  as the case
may be, any amount that the Company,  the Subsidiary or the Service Provider may
reasonably  determine to be necessary  to satisfy such  withholding  obligation.
Subject to the prior  approval of the  Company,  the  Subsidiary  or the Service
Provider,  which may be withheld by the Company,  the  Subsidiary or the Service
Provider, as the case may be, in its sole discretion,  the Optionee may elect to
satisfy such obligations,  in whole or in part, (i) by causing the Company,  the
Subsidiary  or the  Service  Provider  to  withhold  shares  of Stock  otherwise
issuable  pursuant  to the  exercise of an Option or (ii) by  delivering  to the
Company, the Subsidiary or the Service Provider shares of Stock already owned by
the  Optionee.  The shares of Stock so delivered  or withheld  shall have a Fair
Market Value equal to such withholding obligations. The Fair Market Value of the
shares of Stock used to satisfy such withholding  obligation shall be determined
by the Company,  the Subsidiary or the Service  Provider as of the date that the
amount of tax to be withheld is to be  determined.  An Optionee  who has made an
election  pursuant to this Section 19.1 may only satisfy his or her  withholding
obligation  with  shares  of  Stock  that  are not  subject  to any  repurchase,
forfeiture, unfulfilled vesting, or other similar requirements.

        19.2 Limitations for Reporting Person. Notwithstanding the foregoing, in
the case of a  Reporting  Person,  no  election  to use Stock for the payment of
withholding  taxes  shall  be  effective  unless  made in  compliance  with  any
applicable  requirements  under Rule  16b-3(e) or any  successor  rule under the
Exchange Act.

        20.     CAPTIONS

        The use of captions in this Plan or any Stock  Option  Agreement  is for
the  convenience  of  reference  only and shall not  affect  the  meaning of any
provision of the Plan or such Stock Option Agreement.

        21.     OTHER PROVISIONS

        Each Grant  awarded  under the Plan may  contain  such  other  terms and
conditions not inconsistent with the Plan as may be determined by the Committee,
in its sole discretion.

        22.     NUMBER AND GENDER

        With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine  gender,  etc.,
as the context requires.

        23.     SEVERABILITY

        If any  provision  of the Plan or any Stock  Option  Agreement  shall be
determined  to  be  illegal  or  unenforceable  by  any  court  of  law  in  any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable  in accordance  with their terms,  and all  provisions  shall remain
enforceable in any other jurisdiction.

                                       12
<PAGE>

        24.     GOVERNING LAW

        The  validity  and   construction  of  this  Plan  and  the  instruments
evidencing  the Grants  awarded  hereunder  shall be governed by the laws of the
State of California.

                                      * * *

  [Attestations of the Secretary of the Company as to approval of the Plan by
     the Board of Directors and the Shareholders appear on following page.]

                                       13
<PAGE>

        The Plan was duly  adopted and approved by the Board of Directors of the
Company as of the 28th day of June, 1994.


                                        /S/ SARAH HASS
                                        ---------------------------------
                                        Sarah Hass
                                        Secretary of the Company

        The  Plan  was  duly  approved  by the  shareholders  on the 21st day of
September, 1994.


                                        /S/ SARAH HASS
                                        ---------------------------------
                                        Sarah Hass
                                        Secretary of the Company

        The Plan was duly  amended by the Board of  Directors  of the Company on
the 21st day of September, 1994.


                                        /S/ SARAH HASS
                                        ---------------------------------
                                        Sarah Hass
                                        Secretary of the Company

        The Plan was duly  amended by the Board of  Directors  of the Company on
the 9th day of May, 1995.


                                        /S/ SARAH HASS
                                        ---------------------------------
                                        Sarah Hass
                                        Secretary of the Company

        The Plan was duly  amended by the Board of  Directors  of the Company on
the 9th day of May, 1996.


                                        /S/ SARAH HASS
                                        ---------------------------------
                                        Sarah Hass
                                        Secretary of the Company

        The Plan was duly  amended by the Board of  Directors  of the Company on
the 11th day of November, 1997.


                                        /S/ SARAH HASS
                                        ---------------------------------
                                        Sarah Hass
                                        Secretary of the Company

                                       14