DIGICORP
                     STOCK OPTION AND RESTRICTED STOCK PLAN

1. PURPOSE OF THE PLAN

      The purpose of this Stock Option and  Restricted  Stock Plan (this "Plan")
is to advance the interests of Digicorp (the "Company") and its  subsidiaries by
providing  to key  employees  of the  Company  and  its  subsidiaries  who  have
substantial  responsibility for the direction and management of the Company,  as
well as certain directors and consultants of the Company, additional incentives,
to the extent  permitted  by law, to exert  their best  efforts on behalf of the
Company,  to increase their proprietary  interest in the success of the Company,
to reward  outstanding  performance and to provide a means to attract and retain
persons of outstanding  ability to the service of the Company.  It is recognized
that the  Company  cannot  attract  or retain  these  individuals  without  this
compensation.  Options  granted  under this Plan may qualify as incentive  stock
options  ("ISOs"),  as defined in Section 422 of the  Internal  Revenue  Code of
1986, as amended (the "Code").

2. ADMINISTRATION

      This Plan shall be administered by a committee (the "Committee") comprised
of at least two (2) members of the  Company's  Board of Directors  ("Board") who
each  shall  (a)  be  a  "non-employee  director,"  as  defined  in  Rule  16b-3
promulgated  under the  Securities  Exchange  Act of 1934,  as  amended,  unless
administration of the Plan by "non-employee  directors" is not then required for
transactions  under the Plan to be exempt from the requirements of Rule 16b, and
(b) be an "outside director" as defined under Section 162(m) of the Code, unless
the action  taken  pursuant to the Plan is not  required to be taken by "outside
directors" to qualify for tax  deductibility  under Section  162(m) of the Code.
The  Committee  shall  interpret  this Plan and, to the extent and in the manner
contemplated herein, shall exercise the discretion reserved to it hereunder. The
Committee may  prescribe,  amend and rescind rules and  regulations  relating to
this Plan and to make all other determinations necessary for its administration.
The  decision  of  the  Committee  on  any   interpretation   of  this  Plan  or
administration  hereof,  if in  compliance  with the  provisions  of the Act and
regulations promulgated  thereunder,  shall be final and binding with respect to
the Company, any optionee,  warrant holder or any person claiming to have rights
as, or on behalf of, any optionee or warrant holder.

3. SHARES SUBJECT TO THE PLAN

      The shares  subject to option,  warrant grant and the other  provisions of
this Plan shall be shares of the Company's  common  stock,  par value $0.001 per
share ("shares").  Subject to the provisions hereof concerning  adjustment,  the
total number of shares that may be  purchased  upon the exercise or surrender of
stock  options  granted  under this Plan shall not exceed the  greater of thirty
percent (30%) of the total number of shares authorized and outstanding as of the
most recent quarterly period ended or 15,000,000 REDUCED BY the number of shares
with respect to which  restricted  stock is awarded.  The total number of shares
that may be awarded as restricted shares under this Plan shall not exceed twenty
percent (20%) of the total number of shares subject to the Plan. Any shares that
are  authorized  for issuance  pursuant to the exercise of options may be issued
upon the exercise of ISOs.  In the event any option or warrant shall cease to be
exercisable in whole or in part for any reason, the shares which were covered by
such  option or  warrant,  but as to which the  option or  warrant  had not been
exercised,  shall again be available under this Plan. Similarly, any shares that
were granted  pursuant to an award of restricted  stock under this Plan but that
are  forfeited  pursuant  to the terms of the Plan or an award  agreement  shall
again be  available  under this Plan.  In  addition,  shares  not  delivered  to
participants  in connection  with the  stock-for-stock  exercise of an option or
warrant shall again be available  under this Plan.  Shares may be made available
from authorized, un-issued or reacquired stock or partly from each.


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4. PARTICIPANTS

      (A)  Key  Employees,   Directors  and  Consultants.  The  Committee  shall
determine and  designate  from time to time those key  employees,  directors and
consultants  of the  Company  and its  subsidiaries  who  shall be  eligible  to
participate  in this Plan.  The  Committee  shall also  determine  the number of
shares to be offered from time to time to each  participant,  either pursuant to
an option, pursuant to a warrant or pursuant to an award of restricted stock, or
either.  In making these  determinations,  the Committee shall take into account
the past  service  of each such key  employee,  director  or  consultant  to the
Company and its  subsidiaries,  the present and potential  contributions of such
key  employee,  director  or  consultant  to the  success of the Company and its
subsidiaries  and such other  factors as the  Committee  shall deem  relevant in
connection  with   accomplishing  the  purposes  of  this  Plan.  The  agreement
documenting  the  award of any  option,  warrant  or  restricted  stock  granted
pursuant to this Plan shall  contain such terms and  conditions as the Committee
shall deem advisable,  including but not limited to being vested or exercisable,
as the case may be, only in such installments as the Committee may determine.

      (B) Award Agreements.  All options,  warrants and restricted stock granted
under the Plan will be evidenced by an agreement.  Agreements  evidencing awards
made to different  participants  or at different  times need not contain similar
provisions. Options that are intended to be ISOs will be designated as such; any
option not so designated will be treated as a nonqualified stock option.

5. OPTION/WARRANT PRICE

      Each  agreement  representing  an award of options or warrants shall state
the price at which the subject  option or warrant may be exercised,  which shall
not be less than the  current  fair  market  value of the  shares at the date of
issuance of an option or warrant; provided,  however, that the exercise price of
any option  that is intended to be an ISO and that is granted to a holder of 10%
or more of the Company's shares shall not be less than 110% of such current fair
market value.  For purposes of this Plan,  the fair market value of any Share as
of any date  shall be the  average  of the high and low  trading  prices  of the
shares on that date.

6. OPTION/WARRANT PERIOD

      Each  agreement  representing  an award of options or warrants shall state
the period or periods of time at and within which the subject  option or warrant
may be exercised,  in whole or in part, by the optionee or warrant holder, which
shall be such period or periods as may be determined by the Committee; provided,
however,  that the option or warrant  period shall not exceed ten years from the
date of issuance of the option or warrant  and, in the case of an option that is
intended  to be an ISO and that is  granted  to a  holder  of 10% or more of the
Company's  shares,  shall not exceed five years.  Unless  specifically  provided
otherwise in an agreement evidencing the award of options, any option awarded to
a participant  shall become  exercisable over four years, with 25% of the option
becoming  exercisable on each of the first four anniversaries of the date of the
award.

7. PAYMENT FOR SHARES

      Full payment for shares  purchased  pursuant to an option or warrant shall
be made at the time of  exercising  the  option or  warrant in whole or in part.
Payment of the purchase price shall be made in cash (including check, bank draft
or money  order),  unless the Company  provides to any or all  participants  the
ability to effect a stock-for-stock exercise of his or her options or warrants.

8. RESTRICTED STOCK

      Each agreement  representing an award of restricted  stock shall state the
number of shares subject to the award and the terms and  conditions  pursuant to
which the  recipient of the award shall  acquire a  nonforfeitable  right to the
shares awarded as restricted stock. Unless specifically provided otherwise in an
agreement  evidencing the award of restricted stock, a participant shall acquire
a nonforfeitable  right to the shares subject to the award over four years, with
25% of  the  restricted  stock  becoming  vested  on  each  of  the  first  four
anniversaries  of the date of the award,  and shares  that are not vested upon a
participant's termination of employment with, or cessation of providing services
to, the Company shall be forfeited.


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9. TRANSFERABILITY OF OPTIONS, WARRANTS AND RESTRICTED STOCK

      Options,  warrants and restricted  stock shall not be  transferable  other
than to the spouse or lineal  descendants  (including  adopted  children) of the
participant,  any trust for the benefit of the participant or the benefit of the
spouse or lineal descendants (including adopted children) of the participant, or
the guardian or conservator of the participant ("Permitted Transferees").

10. TERMINATION OF OPTIONS, WARRANTS AND RESTRICTED STOCK AWARDS

      All rights to exercise  options and warrants  shall  terminate  sixty days
after any optionee or warrant holder ceases to be a director of the Company or a
key employee or  consultant of the Company and any of its  subsidiaries,  and no
options  or  warrants  will  vest  after  an  optionee's  or  warrant   holder's
termination date.  Notwithstanding  the foregoing,  however, if an optionee's or
warrant  holder's  service  as a director  of the  Company  or key  employee  or
consultant terminates as a result of the optionee's or warrant holder's death or
his total and  permanent  disability,  the  optionee  or  warrant  holder or the
executors or  administrators  or legatees or distributees of the estate,  as the
case may be and to the extent  they are  Permitted  Transferees,  shall have the
right,  from time to time  within  one year  after  the  optionee's  or  warrant
holder's total and permanent  disability or death and prior to the expiration of
the term of the option or  warrant,  to  exercise  any  portion of the option or
warrant  not  previously  exercised,  in whole or in part,  as  provided  in the
respective  agreement  evidencing  the  award  of the  options  or  warrants.  A
participant's  rights to shares  awarded as  restricted  stock shall,  under all
circumstances,  be set forth in the agreement evidencing the award of restricted
stock.

11. EFFECT OF CHANGE IN STOCK SUBJECT TO THE PLAN

      Subject to any required action by the  shareholders of the Company and the
provisions of applicable  corporate law, the number of shares represented by the
unexercised portion of an option or warrant,  the number of shares that has been
authorized or reserved for issuance hereunder,  and the number of Shares covered
by any applicable vesting schedule hereunder,  as well as the exercise price for
a share represented by the unexercised portion of an option or warrant, shall be
proportionately adjusted for (a) a division,  combination or reclassification of
any of the shares of common  stock of the  Company or (b) a dividend  payable in
shares of common stock of the Company.

12. GENERAL RESTRICTION

      Each award shall be subject to the  requirement  that,  if at any time the
Board shall  determine,  at its  discretion,  that the listing,  registration or
qualification  of the  shares  subject  to  such  option  or  warrant  upon  any
securities  exchange  or under any  state or  federal  law,  or the  consent  or
approval of any  government  regulatory  body,  is  necessary  or desirable as a
condition of, or in connection  with, the granting of such award or the issue or
purchase of the shares  thereunder,  such option or warrant 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.  Subject to the limitations of paragraph 6, no option
or warrant  shall  expire  during any period  when  exercise  of such  option or
warrant has been prohibited by the Board, but shall be extended for such further
period so as to afford the optionee or warrant  holder a reasonable  opportunity
to exercise his option or warrant.

13. MISCELLANEOUS PROVISIONS

      (A) No optionee or warrant holder shall have rights as a shareholder  with
respect to shares covered by his option or warrant until the date of exercise of
his option or warrant.

      (B) The  granting  of any award  under the Plan shall not impose  upon the
Company any  obligation to appoint or to continue to appoint as a director,  key
employee or  consultant  any  participant,  and the right of the Company and its
subsidiaries  to terminate the  employment of any key employee or other employee
or consultant,  or service of any director,  shall not be diminished or affected
by  reason  of the fact  that an  award  has been  made  under  the Plan to such
participant.


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      (C) Awards under the Plan shall be evidenced by award  agreements  in such
form and subject to the terms and conditions of this Plan as the Committee shall
approve from time to time,  consistent  with the  provisions of this Plan.  Such
award  agreements  may contain such other  provisions,  as the  Committee in its
discretion may deem advisable.  In the case of any discrepancy between the terms
of the Plan and the  terms of any award  agreement,  the Plan  provisions  shall
control.

      (D) The aggregate fair market value (determined as of the date of issuance
of an option) of the Shares with respect to which an option, or portion thereof,
intended to be an ISO is exercisable  for the first time by any optionee  during
any  calendar  year (under all  incentive  stock option plans of the Company and
subsidiary corporations) shall not exceed $100,000.

      (E) All awards  under  this Plan  shall be made  within ten years from the
earlier of the date of adoption of this Plan (or any amendment thereto requiring
shareholder  approval  pursuant  to the  Code)  or the  date  this  Plan (or any
amendment  thereto  requiring  shareholder  approval  pursuant  to the  Code) is
approved by the shareholders of the Company.

      (F) A leave of  absence  granted to an  employee  does not  constitute  an
interruption  in continuous  employment for purposes of this Plan as long as the
leave of absence does not extend beyond one year.

      (G) Any notices  given in writing  shall be deemed  given if  delivered in
person or by  certified  mail;  if given to the Company  addressed  to Corporate
Secretary,   Digicorp,  100  Wilshire  Boulevard,   Suite  1750,  Santa  Monica,
California  90401;  and,  if to an optionee  or warrant  holder,  in care of the
optionee or warrant holder at his or her last known address.

      (H) This Plan and all actions  taken by those acting under this Plan shall
be governed by the  substantive  laws of  Delaware  without  regard to any rules
regarding conflict-of-law or choice-of-law.

      (I) All costs and expenses incurred in the operation and administration of
this Plan shall be borne by the Company.

14. AMENDMENT AND TERMINATION

      The Board may modify,  revise or terminate  this Plan at any time and from
time to  time,  subject  to such  supermajority  voting  requirements  as may be
contained in the Company's  certificate of incorporation  or by-laws.  While the
Board may seek  shareholder  approval of an action  modifying a provision of the
Plan where it is determined  that such  shareholder  approval is advisable under
the provisions of applicable  law, the Board of Directors  shall be permitted to
make  any  modification  or  revision  to any  provision  of this  Plan  without
shareholder  approval.  This Plan shall  terminate when all Shares  reserved for
issuance hereunder have been issued upon the exercise of options or warrants and
all  restricted  stock  awards have fully  vested,  or by action of the Board of
Directors pursuant to this paragraph, whichever shall first occur.

15. EFFECTIVE DATE OF THE PLAN

      The Plan shall become effective upon the adoption by the Board.


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