SRC VISION, INC.
                        INCENTIVE STOCK OPTION AGREEMENT


     THIS  AGREEMENT is made as of the ____ day of  _______________  19__ by and
between  SRC  VISION,  INC.  (the  "Company"),  and  ___________________________
("Optionee").

                                  R E C I T A L

     Pursuant to the SRC VISION,  INC. 1997 Stock Option Plan (the "Plan"),  the
Administrator (the  "Administrator")  has authorized the granting to Optionee of
an  incentive  stock  option to purchase the number of shares of Common Stock of
the Company  specified in Paragraph 1 hereof,  at the price  specified  therein,
such  option to be for the term and upon the terms  and  conditions  hereinafter
stated.

                                A G R E E M E N T

     NOW, THEREFORE, in consideration of the promises and of the undertakings of
the parties hereto contained herein, it is hereby agreed:

     1.  Number  of  Shares;  Option  Price.  Pursuant  to  said  action  of the
Administrator,  the Company  hereby grants to Optionee the option  ("Option") to
purchase subject to the terms and conditions of the Plan,  ______________ shares
of Common Stock of the Company ("Shares") at the price of $______ per share.

     2.  Terms.  This  Option  shall  expire on the day before the tenth  (10th)
anniversary  (fifth  anniversary  if  Optionee  owns more than 10% of the voting
stock of the Company, a Parent or a Subsidiary on the date of this Agreement) of
the date hereof unless such Option shall have been terminated prior to that date
in  accordance  with  the  provisions  of the Plan or this  Agreement.  The term
"Subsidiary" herein means a subsidiary  corporation,  as such term is defined in
the Plan.

     3. Shares Subject to Exercise.  Shares subject to exercise shall be 100% on
or after the ninth anniversary of the date hereof.  Notwithstanding  the vesting
schedule in the preceding  sentence,  (A) upon  completion of an initial  public
offering of the  Company's  Common Stock or securities  convertible  into Common
Stock (the "IPO"), vesting shall be accelerated so that 100% shall become vested
on the third (3rd) anniversary of the IPO; and (B) if the Company, or its parent
company  (currently ARC Capital)  consummates an agreement to sell a majority of
the Company's  business or assets, or merge ("Sale") with another entity that is
not at least 50% owned by its parent company or other affiliated entity owned by
its  parent  company,  100%  of the  Shares  shall  immediately  become  vested;
provided,  however, that Optionee remains an employee of the Company at the time
of vesting.  All Shares shall thereafter remain subject to exercise for the term
specified  in  Paragraph  2  hereof,  provided  that  Optionee  is then  and has
continuously  been in the  employ  of the  Company,  a Parent  or a  Subsidiary,
subject, however, to the provisions of Paragraph 5 hereof.

     4.  Method and Time of  Exercise.  The Option may be  exercised  by written
notice  delivered  to the Company  stating the number of shares with  respect to
which the Option is being  exercised,  together  with cash or by delivery by the
Optionee of Common Stock already  owned by the Optionee,  for all or part of the
aggregate  exercise  price  of the  shares  as to  which  the  Option  is  being
exercised,  provided that the Fair Market Value of such Common Stock is equal on
the date of exercise to the aggregate  exercise  price of the shares as to which
the Option is being exercised. In this regard, consecutive book-entry exercises,
or  so-called   pyramiding,   shall  be  permitted  in  the  discretion  of  the
Administrator. At the time an Option is granted or exercised, the Administrator,
in its discretion, may authorize one or more of the following additional methods
of payment:

          (a) acceptance of the Optionee's  full recourse  promissory note for a
     portion  of the  aggregate  exercise  price of the  shares  as to which the
     Option is being exercised,  payable on such terms and bearing such interest
     as determined by the  Administrator,  which  promissory  note may be either
     secured or  unsecured  in such manner as the  Administrator  shall  approve
     (including,  without  limitation,  by a security  interest in the shares of
     Common  Stock so  acquired);  provided,  however,  that  not less  than the
     aggregate  par value of the  shares of Common  Stock to be issued  shall be
     paid in cash;

          (b) any other  property,  so long as such property  constitutes  valid
     consideration  under  Applicable Laws for the shares as to which the Option
     is being exercised and is surrendered in good form for transfer; and

          (c) by  means of  so-called  cashless  exercises  as  permitted  under
     applicable rules and regulations of the Securities and Exchange  Commission
     and the Federal Reserve Board.

     Any shares of Common  Stock used to  exercise an option must have been held
by  the  Optionee  for  at  least  six  months  prior  to  exercise  unless  the
Administrator in its sole and absolute discretion permits shares of Common Stock
with a shorter  holding  period  to be used.  Not less  than 100  shares  may be
purchased  at any one time  unless  the  number  purchased  is the total  number
purchasable under such Option at the time. Only whole shares may be purchased.

     5. Withholding.  In the event that this Option shall lose its qualification
as an  incentive  stock  option,  irrespective  of the  form of  payment  of the
exercise price of this Option,  the delivery of shares  pursuant to the exercise
of this Option shall be conditioned  upon payment by the Optionee to the Company
of amounts sufficient to enable the Company to pay all federal, state, and local
withholding taxes applicable, in the Company's judgment, to the exercise. In the
sole  discretion  of the  Administrator,  such  payment  to the  Company  may be
effected  through  (a) the  Company's  withholding  from the number of shares of
Common Stock that would otherwise be delivered to the Optionee by the Company on
exercise  of this  Option a number of shares of Common  Stock equal in value (as
determined  by the Fair Market Value of Common Stock on the date of exercise) to
the aggregate  withholding  taxes, (b) payment by the Optionee to the Company of
the aggregate  withholding  taxes in cash,  (c)  withholding by the Company from
other amounts contemporaneously owed by the Company to the Optionee, or (iv) any
combination of these three methods.

     6. Exercise on  Termination  of  Employment.  If Optionee shall cease to be
employed by the Company or a Subsidiary,  Optionee's  right, if any, to exercise
his options will be limited to installments  accrued under Paragraph 3 hereof on
the date of termination (unless the Administrator accelerates the exercisability
of the Option  pursuant  to Section  7.1(b) of the Plan) and will be governed by
Section 7 of the Plan. The maximum  period  permissible  for an incentive  stock
option under  Section 7 in the absence of  Administrator  action shall apply for
each  type  of   termination   of  employment   described   therein  unless  the
Administrator has made other provision herein.

     7.  Nontransferability.  This  Option may not be  assigned  or  transferred
except by will or by the laws of descent and distribution,  and may be exercised
only by Optionee during his lifetime and after his death, by his  representative
or by the  person  entitled  thereto  under  his will or the  laws of  intestate
succession.

     8.  Optionee  Not  a  Shareholder.  Optionee  shall  have  no  rights  as a
shareholder  with  respect to the  Common  Stock of the  Company  covered by the
Option until the date of issuance of a stock  certificate or stock  certificates
to him upon exercise of the Option.  No adjustment will be made for dividends or
other  rights  for  which  the  record  date is  prior to the  date  such  stock
certificate or certificates  are issued,  except as provided in Section 9 of the
Plan.

     9. No Right to  Employment.  Nothing in this Option  shall  confer upon the
Optionee  any right to  continue  in the employ of the Company or to continue to
perform  services for the Company or any Subsidiary,  or shall interfere with or
restrict  in any way the rights of the Company to  discharge  or  terminate  any
officer,  director,  employee,  independent contractor or consultant at any time
for any reason whatsoever, with or without good cause.

     10.  Modification  and  Termination.  The rights of Optionee are subject to
modification  and  termination in certain events as provided in Sections 7 and 9
of the Plan.

     11.  Restrictions on Sale of Shares.  Optionee  represents and agrees that,
upon his  exercise of the Option in whole or in part,  unless there is in effect
at that time under the Securities Act of 1933 a registration  statement relating
to the shares  issued to him, he will acquire the shares  issuable upon exercise
of this Option for the purpose of investment and not with a view to their resale
or further distribution,  and that upon each exercise thereof he will furnish to
the Company a written  statement to such effect,  satisfactory to the Company in
form and substance.  Optionee agrees that any certificates  issued upon exercise
of this  Option  may bear a legend  indicating  that  their  transferability  is
restricted in accordance  with applicable  state or federal  securities law. Any
person or persons  entitled to  exercise  this option  under the  provisions  of
Paragraphs  5 and 6  hereof  shall,  upon  each  exercise  of the  option  under
circumstances  in which  Optionee  would be required  to furnish  such a written
statement,  also furnish to the Company a written  statement to the same effect,
satisfactory to the Company in form and substance.

     12. Plan Governs.  This Agreement and the Option  evidenced hereby are made
and granted  pursuant to the Plan and are in all respects limited by and subject
to the express  terms and  provisions of the Plan, as it may be construed by the
Administrator.  It is intended  that this option  shall  qualify as an incentive
stock option as defined by Section 422 of the Code, and this Agreement  shall be
construed in a manner which will enable this Option to be so qualified. Optionee
hereby acknowledges receipt of a copy of the Plan.

     13.  Notices.  All  notices  to  the  Company  shall  be  addressed  to the
Administrator  at the principal  office of the Company at 2067  Commerce  Drive,
Medford,  Oregon  97504,  and all  notices to  Optionee  shall be  addressed  to
Optionee   at  the  address  of  Optionee  on  file  with  the  Company  or  its
Subsidiaries,  or to such other  address as either may designate to the other in
writing.  A notice  shall be deemed to be duly given if and when  enclosed  in a
properly addressed sealed envelope deposited,  postage prepaid,  with the United
States Postal  Service.  In lieu of giving notice by mail as aforesaid,  written
notices under this Agreement may be given by personal delivery to Optionee or to
the Administrator (as the case may be).

     14. Sale or Other  Disposition.  Optionee  understands  that, under current
law, beneficial tax treatment resulting from the exercise of this Option will be
available  only if certain  requirements  of the Code are  satisfied,  including
without  limitation,  the  requirement  that no disposition  of Shares  acquired
pursuant to exercise of this Option be made within two years from the grant date
or within one year after the  transfer  of Shares to him or her.  If Optionee at
any time contemplates the disposition (whether by sale, gift, exchange, or other
form of transfer) of any such Shares, he or she will first notify the Company in
writing of such proposed disposition and cooperate with the Company in complying
with all applicable  requirements of law, which, in the judgment of the Company,
must be  satisfied  prior to such  disposition.  In addition  to the  foregoing,
Optionee  hereby agrees that if Optionee  disposes  (whether by sale,  exchange,
gift, or otherwise) of any Shares acquired by exercise of this Option within two
years of the grant date or within one year after the  transfer of such Shares to
Optionee upon exercise of this Option, then Optionee shall notify the Company of
such  disposition in writing  within 30 days from the date of such  disposition.
Said written notice shall state the date of such  disposition,  and the type and
amount of the  consideration  received  for such Share or Shares by  Optionee in
connection  therewith.  In the event of any such disposition,  the Company shall
have the right to require  Optionee to immediately pay the Company the amount of
taxes (if any) which the Company is required to withhold  under  federal  and/or
state  law as a  result  of the  granting  or  exercise  of the  Option  and the
disposition of the Shares.

         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as
of the date and year first above written.


                                                    SRC VISION, INC.


                                                    By__________________________


                                                    OPTIONEE


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                                                            (Signature)


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                                                      (Typed or Printed Name)


                                                    Address:

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