EXHIBIT 10.4
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                             STOCK OPTION AGREEMENT
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                 FOR NON-INCENTIVE STOCK OPTIONS PURSUANT TO THE
                             REDWOOD FINANCIAL, INC.
                        1997 DIRECTORS STOCK OPTION PLAN
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         STOCK  OPTIONS for a total of 6,412  shares of Common  Stock of Redwood
Financial,  Inc. (the  "Company") is hereby  granted to ________________________
(the  "Optionee")  at the price  determined  as provided in, and in all respects
subject to the terms,  definitions  and provisions of the 1997  Directors  Stock
Option  Plan (the  "Plan")  adopted  by the  Company  which is  incorporated  by
reference herein, receipt of which is hereby acknowledged. Such Stock Options do
not comply with Options  granted under Section 422 of the Internal  Revenue Code
of 1986, as amended.

         1. Option  Price.  The Option price is $11.0625  for each Share,  being
100% of the fair market value,  in accordance with the Plan as determined by the
Committee,  of the Common  Stock on the date of grant of this Option  (August 1,
1997) ("Date of Grant").

         2. Exercise of Option.

                  (a)  Exercisability.  Such  Options  awarded  herein  shall be
immediately exercisable as of the Date of Grant in accordance with provisions of
the Plan.  Such Options shall  continue to be  exerciseable  for a period of ten
years  from such Date of Grant  without  regard  to the  continued  status as an
employee, director or director's emeritus.

         (b) Method of Exercise.  This Option shall be  exercisable by a written
notice which shall:

                (i) State the  election  to exercise  the Option,  the number of
         Shares with respect to which it is being exercised, the person in whose
         name the stock  certificate or  certificates  for such Shares of Common
         Stock is to be registered,  his address and Social  Security Number (or
         if more than one, the names,  addresses and Social Security  Numbers of
         such persons);

                  (ii) Contain such  representations  and  agreements  as to the
         holder's  investment intent with respect to such shares of Common Stock
         as may be satisfactory to the Company's counsel;

                  (iii) Be signed by the person or persons  entitled to exercise
         the  Option  and,  if the  Option is being  exercised  by any person or
         persons other than the Optionee, be accompanied by proof,  satisfactory
         to counsel for the  Company,  of the right of such person or persons to
         exercise the Option; and

                  (iv) Be in writing  and  delivered  in person or by  certified
         mail to the Treasurer of the Company.

         Payment of the  purchase  price of any Shares with respect to which the
Option is being  exercised  shall be by certified or bank  cashier's or teller's
check.  The certificate or  certificates  for shares of Common Stock as to which
the Option shall be exercised  shall be  registered in the name of the person or
persons exercising the Option.



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                  (c) Restrictions on Exercise. This Option may not be exercised
if the issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities or other law or valid regulation.  As
a condition to the Optionee's  exercise of this Option,  the Company may require
the person exercising this Option to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

         3. Non-transferability of Option. This Option may not be transferred in
any manner otherwise than by will or the laws of descent or distribution and may
be exercised during the lifetime of the Optionee only by the Optionee. The terms
of this  Option  shall be binding  upon the  executors,  administrators,  heirs,
successors and assigns of the Optionee.

         4. Term of Option.  This Option may not be exercised more than ten (10)
years  from the date of grant of this  Option,  as set forth  below,  and may be
exercised  during  such term only in  accordance  with the Plan and the terms of
this Option.

         5. Related  Matters.  Notwithstanding  anything herein to the contrary,
additional  conditions or restrictions  related to such Options may be contained
in the Plan or the resolutions of the Plan Committee  authorizing  such grant of
Options.

         6. Dividend  Equivalent Rights.  The Stock Options  represented by this
Agreement shall include the right of the Optionee to receive payment of dividend
equivalent  rights.  Such rights  shall  provide that upon the payment of a cash
dividend on the Common Stock,  the holder of such Options shall receive  payment
of cash in an amount  equivalent to the cash dividend payable as if such Options
had been  exercised  and such Common Stock held as of the dividend  record date.
Such rights  shall  expire upon the  expiration  or exercise of such  underlying
Options.   Such  rights  are   non-transferable  and  shall  attach  to  Options
represented  by this  Agreement  whether  or not such  Options  are  immediately
exercisable.

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