<PAGE>
 
EXHIBIT 10:  1997 STOCK OPTION PLAN



                             FIRST FINANCIAL BANCORP

                             1997 STOCK OPTION PLAN
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                               TABLE OF CONTENTS

                                                                                                                Page
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<S>     <C>                                                                                                     <C>    
1.       PURPOSE...........................................................................................       17
                                                                                                                  
2.       DEFINITIONS.......................................................................................       17
         (a)      Board of Directors.......................................................................       17
         (b)      Change in Control .......................................................................       17
         (c)      Code.....................................................................................       17
         (d)      Committee................................................................................       17
         (e)      Company..................................................................................       17
         (f)      Employee.................................................................................        1
         (g)      Exchange Act.............................................................................       18
         (h)      Exercise Price...........................................................................       18
         (i)      Fair Market Value........................................................................       18
         (j)      ISO......................................................................................       18
         (k)      Nonstatutory Option......................................................................        2
         (l)      Option...................................................................................        2
         (m)      Optionee.................................................................................       18
         (n)      Plan.....................................................................................       19
         (o)      Service..................................................................................       19
         (p)      Share....................................................................................       19
         (q)      Stock....................................................................................       19
         (r)      Stock Option Agreement...................................................................       19
         (s)      Subsidiary...............................................................................       19
         (t)      Substitute Option........................................................................       19
         (u)      Total and Permanent Disability...........................................................       19
                                                                                                                  
3.       ADMINISTRATION....................................................................................       19
         (a)      Committee Membership.....................................................................       19
         (b)      Committee Procedures.....................................................................       20
         (c)      Committee Responsibilities...............................................................       20
                                                                                                                  
4.       ELIGIBILITY.......................................................................................       21
         (a)      General Rules............................................................................       21
         (b)      Ten-Percent Stockholders.................................................................       21
         (c)      Attribution Rules........................................................................       21
         (d)      Outstanding Stock........................................................................       21
                                                                                                                  
5.       STOCK SUBJECT TO PLAN.............................................................................       21
         (a)      Basic Limitation.........................................................................       21
         (b)      Additional Shares........................................................................       21
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<C>     <S>                                                                                                     <C>    
6.       TERMS AND CONDITIONS OF OPTIONS...................................................................     22
         (a)      Stock Option Agreement...................................................................     22
         (b)      Number of Shares.........................................................................     22
         (c)      Exercise Price...........................................................................     22
         (d)      Withholding Taxes........................................................................     22
         (e)      Exercisability...........................................................................     22
         (f)      Term.....................................................................................     23
         (g)      Transferability..........................................................................     23
         (h)      No Rights as a Stockholder ..............................................................     23
         (i)      Modification, Extension and Renewal of Options...........................................     23
         (j)      Substitute Options.......................................................................      8
                                                                                                                
7.       PAYMENT FOR SHARES................................................................................     24
         (a)      General Rule.............................................................................     24
         (b)      Surrender of Stock.......................................................................     24
         (c)      Exercise/Sale............................................................................     24
         (d)      Exercise/Pledge..........................................................................     25
                                                                                                                
8.       ADJUSTMENT OF SHARES..............................................................................     25
         (a)      General..................................................................................     25
         (b)      Reorganizations..........................................................................     25
         (c)      Reservation of Rights....................................................................     25
                                                                                                                
9.       SECURITIES LAWS...................................................................................     26
                                                                                                                
10.      NO RETENTION RIGHTS...............................................................................     26
                                                                                                                
11.      DURATION AND AMENDMENTS...........................................................................     26
         (a)      Term of the Plan.........................................................................     26
         (b)      Right to Amend or Terminate the Plan.....................................................     26
         (c)      Effect of Amendment or Termination.......................................................     26
                                                                                                                
                                                                                                                
12.      INFORMATION TO OPTIONEES..........................................................................     10

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                 FIRST FINANCIAL BANCORP 1997 STOCK OPTION PLAN

PURPOSE.
-------

         The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, by purchasing Shares of the Company's
Common Stock. The Plan provides both for the grant of Nonstatutory Options as
well as ISOs intended to qualify under section 422 of the Code.

DEFINITIONS.
-----------

         "Board of Directors" shall mean the Board of Directors of the Company,
          ------------------
as constituted from time to time.

         "Change in Control" shall mean the occurrence of either of the 
          ----------------- 
following events:

                  A change in the composition of the Board of Directors, as a
         result of which fewer than one-half of the incumbent directors are
         directors who either:

                           Had been directors of the Company 24 months prior to 
                              such change; or

                           Were elected, or nominated for election, to the Board
                  of Directors with the affirmative votes of at least a majority
                  of the directors who had been directors of the Company 24
                  months prior to such change and who were still in office at
                  the time of the election or nomination; or

                  Any "person" (as such term is used in sections 13(d) and 14(d)
         of the Exchange Act) by the acquisition or aggregation of securities is
         or becomes the beneficial owner, directly or indirectly, of securities
         of the Company representing 50 percent or more of the combined voting
         power of the Company's then outstanding securities. For purposes of
         this Paragraph (ii), the term "person" shall not include an employee
         benefit plan maintained by the Company.

         "Code" shall mean the Internal Revenue Code of 1986, as amended.
          ----

         "Committee" shall mean a committee of the Board of Directors, as
          ---------
described in Section 3(a), or in the absence of such a committee, the Board of
Directors.

         "Company" shall mean First Financial Bancorp, a California corporation.
          -------

         "Employee" shall mean:
          --------

                  Any individual who is a common-law employee of the Company 
          or of a Subsidiary;

                  A member of the Board of Directors; and

                                       1
<PAGE>
 
                   An independent contractor who performs services for the
         Company or a Subsidiary and who is not a member of the Board of
         Directors.

Service as an independent contractor or member of the Board of Directors shall
be considered employment for all purposes of the Plan, except as provided in
Section 4(a).

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as 
          ------------
amended.

         "Exercise Price" as specified by the Committee in the applicable Stock 
          --------------
Option Agreement.

         "Fair Market Value" shall mean the market price of Stock, determined by
          -----------------
the Committee as follows:

                  If Stock was traded over-the-counter on the date in question
         but was not traded on the Nasdaq system or the Nasdaq National Market
         System, then the Fair Market Value shall be equal to the mean between
         the last reported representative bid and asked prices quoted for such
         date by the principal automated inter-dealer quotation system on which
         Stock is quoted or, if Stock is not quoted on any such system, by the
         "Pink Sheets" published by the National Quotation Bureau, Inc.;

                  If Stock was traded over-the-counter on the date in question
         and was traded on the Nasdaq system or the Nasdaq National Market
         System, then the Fair Market Value shall be equal to the
         last-transaction price quoted for such date by the Nasdaq system or the
         Nasdaq National Market System;

                  If Stock was traded on a stock exchange on the date in
         question, then the Fair Market Value shall be equal to the closing
         price reported by the applicable composite-transactions report for such
         date; and

                  If none of the foregoing provisions is applicable, then the
         Fair Market Value shall be determined by the Committee in good faith on
         such basis as it deems appropriate.

In all cases, the determination of Fair Market Value by the Committee shall be
conclusive and binding on all persons.

         "ISO" shall mean an employee incentive stock option described in
          ---
Section 422(b) of the Code.

         "Nonstatutory Option" shall mean a stock option not described in
          -------------------
Sections 422(b) or 423(b) of the Code.

         "Option" shall mean an ISO or Nonstatutory Option granted under the
          ------
Plan and entitling the holder to purchase Shares.

         "Optionee" shall mean an individual who holds an Option.
          --------

                                       2
<PAGE>
 
         "Plan" shall mean this First  Financial  Bancorp 1997 Stock Option 
          ----
Plan, as it may be amended from time to time.

         "Service" shall mean service as an Employee.
          -------

         "Share" shall mean one share of Stock, as adjusted in accordance with
          -----
Section 8 (if applicable).

         "Stock" shall mean the Common Stock of the Company.
          -----

         "Stock Option Agreement" shall mean the agreement between the Company
          ----------------------
and an Optionee which contains the terms, conditions and restrictions pertaining
to his or her Option.

         "Subsidiary" shall mean Bank of Lodi, N.A. and any other corporation,
          ----------
if the Company and/or one or more other Subsidiaries own not less than 50
percent of the total combined voting power of all classes of outstanding stock
of such corporation. A corporation that attains the status of a Subsidiary on a
date after the adoption of the Plan shall be considered a Subsidiary commencing
as of such date.

         "Substitute Option" shall mean an option described in Section 6(j).
          -----------------

         "Total and Permanent Disability" shall mean that the Optionee is unable
          ------------------------------
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than one year.

ADMINISTRATION.
--------------

         Committee Membership. The Board of Directors shall have the authority
         --------------------
to administer the Plan but may delegate its administrative powers under the
Plan, in whole or in part, to one or more committees of the Board of Directors.
With respect to the participation of Employees who are subject to Section 16 of
the Exchange Act, the Plan may be administered by a committee composed solely of
two or more members of the Board of Directors who qualify as "nonemployee
directors" as defined in Securities and Exchange Commission Rule 16b-3 under the
Exchange Act. With respect to the participation of Employees who may be
considered "covered employees" under Section 162(m) of the Code, the Plan may be
administered by a committee composed solely of two or more members of the Board
of Directors who qualify as "outside directors" as defined by the Internal
Revenue Service for plans intended to qualify for an exemption under Section
162(m)(4)(C) of the Code. If the committee members meet both such
qualifications, then one committee may administer the Plan both with respect to
Employees who are subject to Section 16 of the Exchange Act or who are
considered to be "covered employees" under Section 162(m) of the Code.

         The Board of Directors may appoint a separate committee, consisting of
one or more members of the Board of Directors who do not meet such
qualifications. Such committee may administer the Plan with respect to Employees
who are not officers of the Company or members of 

                                       3
<PAGE>
 
the Board of Directors, may grant Options under the Plan to such Employees and
may determine the timing, number of Shares and other terms of such grants.

         Committee Procedures. The Board of Directors shall designate one of the
         --------------------
members of any Committee appointed under paragraph (a) as chairman. Any such
Committee may hold meetings at such times and places as it shall determine. The
acts of a majority of the Committee members present at meetings at which a
quorum exists, or acts reduced to or approved in writing by all Committee
members, shall be valid acts of the Committee.

         Committee  Responsibilities.  Subject to the provisions of the Plan,  
         ---------------------------
any such Committee  shall have full authority and discretion to take the 
following actions:

                  To interpret the Plan and to apply its provisions;

                  To adopt, amend or rescind rules, procedures and forms 
         relating to the Plan;

                  To authorize any person to execute, on behalf of the Company,
         any instrument required to carry out the purposes of the Plan;

                  To determine when Options are to be granted under the Plan;

                  To select the Optionees;

                  To determine the number of Shares to be made subject to each 
         Option;

                  To prescribe the terms and conditions of each Option,
         including (without limitation) the Exercise Price, to determine whether
         such Option is to be classified as an ISO or as a Nonstatutory Option,
         and to specify the provisions of the Stock Option Agreement relating to
         such Option;

                   To amend any outstanding Stock Option Agreement, subject to
         applicable legal restrictions and to the consent of the Optionee who
         entered into such agreement;

                  To prescribe the consideration for the grant of each Option
         under the Plan and to determine the sufficiency of such consideration;
         and

                  To take any other actions deemed necessary or advisable for
         the administration of the Plan.

All decisions, interpretations and other actions of the Committee shall be final
and binding on all Optionees, and all persons deriving their rights from an
Optionee. No member of the Committee shall be liable for any action that he or
she has taken or has failed to take in good faith with respect to the Plan or
any Option.

                                       4
<PAGE>
 
ELIGIBILITY.
-----------

         General Rules. Only Employees shall be eligible for designation as 
         -------------
Optionees by the Committee. In addition, only Employees who are common-law
employees of the Company or a Subsidiary shall be eligible for the grant of 
ISOs.

         Ten-Percent Stockholders. An Employee who owns more than 10 percent of
         ------------------------
the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for the grant of an ISO
unless:

                  The  Exercise  Price is at least 110 percent of the Fair 
         Market  Value of a Share on the date of grant; and

                  Such ISO by its terms is not exercisable after the expiration
         of five years from the date of grant.

         Attribution Rules. For purposes of Subsection (b) above, in determining
         -----------------
stock ownership, an Employee shall be deemed to own the stock owned, directly or
indirectly, by or for such Employee's brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its stockholders, partners or beneficiaries. Stock
with respect to which such Employee holds an option shall not be counted.

         Outstanding Stock. For purposes of Subsection (b) above, "outstanding
         ----------------- 
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.

STOCK SUBJECT TO PLAN.
---------------------

         Basic Limitation. Shares offered under the Plan shall be authorized but
         ----------------
unissued Shares. The aggregate number of Shares which is issued under the Plan
upon exercise of Options shall not exceed 393,207 Shares less the number of
Shares required for issuance pursuant to the exercise of options outstanding
under the Company's 1991 First Financial Bancorp Employee Stock Option Plan and
the Company's 1991 First Financial Bancorp Director Stock Option Plan (together,
the "Prior Plans") as of April 22, 1997, the date on which the Plan was approved
by the shareholders of the Company (the "Effective Date"). (No additional grants
shall be made under the Prior Plans after the Effective Date, although the Prior
Plans will continue to govern the respective outstanding options previously
granted under the Prior Plans.) The number of Shares which are subject to
Options outstanding at any time under the Plan shall not exceed the number of
Shares which then remain available for issuance under the Plan. The Company,
during the term of the Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan.

         Additional Shares. In the event that any outstanding option granted
         -----------------
under this Plan, including Substitute Options, or the Prior Plans, for any
reason expires or is canceled or otherwise 

                                       5
<PAGE>
 
terminated, the Shares allocable to the unexercised portion of such option shall
become available for the purposes of this Plan.

TERMS AND CONDITIONS OF OPTIONS.

         Stock Option Agreement. Each grant of an Option under the Plan shall be
         ----------------------
evidenced by a Stock Option Agreement executed by the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.

         Number of Shares. Each Stock Option Agreement shall specify the number
         ----------------
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 8. The Stock Option Agreement shall also
specify whether the Option is an ISO or a Nonstatutory Option.

         Exercise Price. Each Stock Option Agreement shall specify the Exercise
         --------------
Price. The Exercise Price of an ISO shall not be less than 100 percent of the
Fair Market Value of a Share on the date of grant, except as otherwise provided
in Section 4(b) with respect to ten percent stockholders and in Section 6(j)
with respect to Substitute Options. The Exercise Price of a Nonstatutory Option
shall not be less than 85 percent of the Fair Market Value of a Share on the
date of grant, except as otherwise provided in Section 6(j) with respect to
Substitute Options. The Exercise Price shall be payable in a form described in
Section 7.

         Withholding Taxes. As a condition to the exercise of an Option, the
         -----------------
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state, local or foreign withholding tax obligations that may arise in connection
with the disposition of Shares acquired by exercising an Option. The Committee
may permit the Optionee to satisfy all or part of his or her tax obligations
related to the Option by having the Company withhold a portion of any Shares
that otherwise would be issued to him or her or by surrendering any Shares that
previously were acquired by him or her. Such Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
The payment of taxes by assigning Shares to the Company, if permitted by the
Committee, shall be subject to such restrictions as the Committee may impose.

         Exercisability. Each Stock Option Agreement shall specify the date when
         --------------
all or any installment of the Option is to become exercisable. The vesting of
any Option shall be determined by the Committee at its sole discretion,
provided, however, that each Option shall vest at the rate of at least 20
percent per year over the five years from the date such Option is granted, and
further provided, however, that: (i) each Stock Option Agreement may provide for
other treatment of the entire Option in the event of a Change in Control, in
accordance with Section 8(b); and (ii) in the event that an Optionee's Service
terminates, the Option shall be exercisable only to the extent the 

                                       6
<PAGE>
 
Option was vested as of the date of such termination, unless otherwise specified
in the Optionee's Stock Option Agreement.

         Term. Each Stock Option Agreement shall specify the term of the Option.
         ----
The term of an ISO shall not exceed 10 years from the date of grant, except as
otherwise provided in Section 4(b). Subject to the preceding sentence, the
Committee at its sole discretion shall determine when an Option is to expire. In
the event that the Optionee's Service terminates:

                  As a result of such Optionee's death or Total and Permanent
         Disability, the term of the Option shall expire twelve months (or such
         other period specified in the Optionee's Stock Option Agreement) after
         such death or Total and Permanent Disability but not later than the
         original expiration date specified in the Stock Option Agreement.

                  As a result of termination by the Company for cause, the term
         of the Option shall expire thirty days after the Company's notice or
         advice of such termination is dispatched to Employee, but not later
         than the original expiration date specified in the Stock Option
         Agreement. For purposes of this Paragraph (ii), "cause" shall mean an
         act of embezzlement, fraud, dishonesty, breach of fiduciary duty to the
         Company, or the deliberate disregard of rules of the Company which
         results in loss, damage or injury to the Company, the unauthorized
         disclosure of any of the secrets or confidential information of the
         Company, the inducement of any client or customer of the Company to
         break any contract with the Company, or the inducement of any principal
         for whom the Company acts as agent to terminate such agency
         relationship, the engagement of any conduct which constitutes unfair
         competition with the Company, the removal of Optionee from office by
         any court or bank regulatory agency, or such other similar acts which
         the Committee in its discretion determine to constitute good cause for
         termination of Optionee's Service. As used in this Paragraph (ii),
         Company includes Subsidiaries of the Company.

                  As a result of termination for any reason other than Total and
         Permanent Disability, death or cause, the term of the Option shall
         expire three months (or such other period specified in the Optionee's
         Stock Option Agreement) after such termination, but not later than the
         original expiration date specified in the Stock Option Agreement.

         Transferability. During an Optionee's lifetime, such Optionee's ISO(s)
         ---------------
shall be exercisable only by him or her and shall not be transferable. An
Optionee's Nonstatutory Options shall also not be transferable during the
Optionee's lifetime. In the event of an Optionee's death, such Optionee's
Option(s) shall not be transferable other than by will, by written beneficiary
designation or by the laws of descent and distribution.

         No Rights as a Stockholder. An Optionee, or a transferee of an
         --------------------------
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares. No adjustments shall be made, except as provided in
Section 8.

         Modification, Extension and Renewal of Options. Within the limitations
         ----------------------------------------------
of the Plan, the Committee may modify, extend or renew outstanding Options or
may accept the cancellation of 

                                       7
<PAGE>
 
outstanding Options (to the extent not previously exercised) in return for the
grant of new Options at the same or a different price. The foregoing
notwithstanding, no modification of an Option shall, without the consent of the
Optionee, impair such Optionee's rights or increase his or her obligations under
such Option.

         Substitute Options. If the Company at any time should succeed to the
         ------------------
business of another corporation through merger or consolidation, or through the
acquisition of stock or assets of such corporation, Options may be granted under
the Plan in substitution of options previously granted by such corporation to
purchase shares of its stock which options are outstanding at the date of the
succession ("Surrendered Options"). The Committee shall have discretion to
determine the extent to which such Substitute Options shall be granted, the
persons to receive such Substitute Options, the number of Shares to be subject
to such Substitute Options, and the terms and conditions of such Substitute
Options which shall, to the extent permissible within the terms and conditions
of the Plan, be equivalent to the terms and conditions of the Surrendered
Options. The Exercise Price may be determined without regard to Section 6(c);
provided however, that the Exercise Price of each Substitute Option shall be an
amount such that, in the sole and absolute judgment of the Committee (and if the
Substitute Options are to be ISO's, in compliance with Section 424(a) of the
Code), the economic benefit provided by such Substitute Option is not greater
than the economic benefit represented by the Surrendered Option as of the date
of the succession.

PAYMENT FOR SHARES.
------------------

         General Rule. The entire Exercise Price of Shares issued under the Plan
         ------------
shall be payable in lawful money of the United States of America at the time
when such Shares are purchased, except as follows:

                  ISOs. In the case of an ISO granted under the Plan, payment
                  ----
         shall be made only pursuant to the express provisions of the applicable
         Stock Option Agreement. However, the Committee (at its sole discretion)
         may specify in the Stock Option Agreement that payment may be made
         pursuant to Subsections (b), (c) or (d) below.

                  Nonstatutory Options. In the case of a Nonstatutory Option
                  --------------------
         granted under the Plan, payment shall be made only pursuant to the
         express provisions of the applicable Stock Option Agreement. However,
         the Committee (at its sole discretion) may accept payment pursuant to
         Subsections (b), (c) or (d) below.

         Surrender of Stock. To the extent that this Subsection (b) is
         ------------------
applicable, payment may be made all or in part with Shares which have already
been owned by the Optionee or his or her representative for more than 6 months
and which are surrendered to the Company in good form for transfer. Such Shares
shall be valued at their Fair Market Value on the date when the new Shares are
purchased under the Plan.

         Exercise/Sale. To the extent that this Subsection (c) is applicable,
         -------------
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities 

                                       8
<PAGE>
 
broker approved by the Company to sell Shares and to deliver all or part of the
sales proceeds to the Company in payment of all or part of the Exercise Price
and any withholding taxes.

         Exercise/Pledge. To the extent that this Subsection (d) is applicable,
         ---------------
payment may be made by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved
by the Company, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of all or part of the Exercise Price and any
withholding taxes.

ADJUSTMENT OF SHARES.
--------------------

         General. In the event of a subdivision of the outstanding Stock, a
         -------
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spinoff or a similar occurrence, the Committee shall make
appropriate adjustments in one or more of:

                  The number of Shares available under Section 5 for future 
                  grants;

                  The limit set forth in Section 6(b);

                  The number of Shares covered by each outstanding Option; or

                  The Exercise Price under each outstanding Option.

         Reorganizations. In the event that the Company is a party to a merger
         ---------------
or other reorganization involving a Change in Control, the outstanding Options
shall be subject to the agreement of merger or reorganization. Subject to the
provisions of Section 6(e)(i), such agreement may provide, without limitation,
for the assumption of outstanding Options by the surviving corporation or its
parent, for their continuation by the Company (if the Company is a surviving
corporation), for payment of a cash settlement equal to the difference between
the amount to be paid for one Share under such agreement and the Exercise Price,
or for the acceleration of their exercisability followed by the cancellation of
Options not exercised, in all cases without the Optionees' consent. Any
cancellation shall not occur until after such acceleration is effective and
Optionees have been notified of such acceleration and have had reasonable
opportunity to exercise their Options.

         Reservation of Rights. Except as provided in this Section 8, an
         ---------------------
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make 

                                       9
<PAGE>
 
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.

SECURITIES LAWS.
---------------

         Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on which the
Company's securities may then be listed.

NO RETENTION RIGHTS.
-------------------

         Neither the Plan nor any Option shall be deemed to give any individual
a right to remain an employee or consultant of the Company or a Subsidiary. The
Company and its Subsidiaries reserve the right to terminate the service of any
employee or consultant at any time, with or without cause, subject to applicable
laws and a written employment agreement (if any).

DURATION AND AMENDMENTS.
-----------------------

         Term of the Plan. The Plan, as set forth herein, shall become effective
         ---------------- 
as of the Effective Date, provided that the Plan has been approved by the
shareholders of the Company in the manner required by applicable law or
regulation. The Plan shall terminate automatically on March 20, 2007, which is
ten (10) years after the Plan was adopted by the Board of Directors, and no
Options may be granted under the Plan on or after March 20, 2007. The Plan may
be terminated earlier than such date, pursuant to subsection (b) below.

         Right to Amend or Terminate the Plan. The Board of Directors may amend,
         ------------------------------------
suspend or terminate the Plan at any time and for any reason. An amendment of
the Plan shall be subject to the approval of the Company's shareholders only to
the extent required by applicable laws or regulations.

         Effect of Amendment or Termination. No Shares shall be issued or sold
         ----------------------------------
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Share previously issued or any Option previously
granted under the Plan

INFORMATION TO OPTIONEES.
------------------------

         The Company shall provide to each Optionee, at the same time and in the
same manner as provided to the shareholders of the Company, a copy of the annual
report to shareholders, containing the audited financial statements of the
Company. Upon request of any Optionee, the Company shall also provide to such
Optionee, at no charge to the Optionee, a copy of any Form 10-K Annual Report or
Form 10-Q Quarterly Report filed by the Company with the Securities and Exchange
Commission.

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