SRC VISION, INC.
                       NONQUALIFIED 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 a
nonqualified  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,   upon  and  subject  to  the  terms  and   conditions  of  the  Plan,
________________  shares of Common Stock of the Company  ("Shares") at the price
of $______________ per share.

     2. Term.  This  Option  shall  expire on the day  before  the tenth  (10th)
anniversary  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  (the "IPO") of the Company's  Common Stock or  securities  convertible
into Common Stock, 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 (the "Sale") with another entity that
is not at least 50% owned by its  parent  company  (currently  ARC  Capital)  or
another 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 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.  Irrespective of the form of payment of the exercise price
of an Option, the delivery of shares pursuant to the exercise of an 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 the 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 (or, in the case of a nonemployee, shall
cease performing services for 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 under Section 7 in the absence of Administrator action for each type
of  termination of employment or cessation of services  described  therein shall
apply 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  personal
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 such
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 such 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 certificate issued upon exercise of
this  Option  may  bear  a  legend  indicating  that  their  transferability  is
restricted in accordance with applicable  state and 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 that Plan, as it may be construed by the
Administrator. 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  notice 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.  If Optionee at any time  contemplates  the
disposition (whether by sale, gift, exchange,  or other form or transfer) of any
Shares  acquired  by exercise of this  option,  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 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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