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                                                                    EXHIBIT 10.1
 
                        DIGITAL GENERATION SYSTEMS, INC.
 
                             1992 STOCK OPTION PLAN
                          (AS AMENDED JANUARY 23, 1997)
 
     1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
 
     Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
 
     2. DEFINITIONS. As used herein, the following definitions shall apply:
 
          (a) "Board" shall mean the Committee, if one has been appointed, or
     the Board of Directors of the Company, if no Committee is appointed.
 
          (b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
 
          (c) "Committee" shall mean the Committee appointed by the Board of
     Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
     is appointed.
 
          (d) "Common Stock" shall mean the Common Stock of the Company.
 
          (e) "Company" shall mean Digital Generation Systems, Inc., a
     California corporation.
 
          (f) "Consultant" shall mean any person who is engaged by the Company
     or any Parent or Subsidiary to render consulting services and is
     compensated for such consulting services, and any director of the Company
     whether compensated for such services or not.
 
          (g) "Continuous Status as an Employee or Consultant" shall mean the
     absence of any interruption or termination of service as an Employee or
     Consultant. Continuous Status as an Employee or Consultant shall not be
     considered interrupted in the case of sick leave, military leave, or any
     other leave of absence approved by the Board; provided that such leave is
     for a period of not more than 90 days or reemployment upon the expiration
     of such leave is guaranteed by contract or statute.
 
          (h) "Employee" shall mean any person, including officers and
     directors, employed by the Company or any Parent or Subsidiary of the
     Company. The payment of a director's fee by the Company shall not be
     sufficient to constitute "employment" by the Company.
 
          (i) "Executive Officer" shall mean an officer of the Company at or
     above the level of vice president.
 
          (j) "Incentive Stock Option" shall mean an Option intended to qualify
     as an incentive stock option within the meaning of Section 422A of the
     Code.
 
          (k) "Nonstatutory Stock Option" shall mean an Option not intended to
     qualify as an Incentive Stock Option.
 
          (l) "Option" shall mean a stock option granted pursuant to the Plan.
 
          (m) "Optioned Stock" shall mean the Common Stock subject to an Option.
 
          (n) "Optionee" shall mean an Employee or Consultant who receives an
     Option.
 
          (o) "Parent" shall mean a "parent corporation", whether now or
     hereafter existing, as defined in Section 424(e) of the Code.
 
          (p) "Plan" shall mean this 1992 Stock Option Plan.
 
          (q) "Share" shall mean a share of the Common Stock, as adjusted in
     accordance with Section 11 of the Plan.
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          (r) "Subsidiary" shall mean a "subsidiary corporation", whether now or
     hereafter existing, as defined in Section 424(f) of the Code.
 
     3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 2,450,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
 
     If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. Notwithstanding any other provision of the Plan, shares
issued under the Plan and later repurchased by the Company shall not become
available for future grant or sale under the Plan.
 
     4. ADMINISTRATION OF THE PLAN.
 
     (a) Procedure.
 
          (i) Multiple Administrative Bodies. The Plan may be administered by
     different Committees with respect to different groups of Employees and
     Consultants.
 
          (ii) Section 162(m). To the extent that the Board determines it to be
     desirable to qualify Options granted hereunder as "performance-based
     compensation" within the meaning of Section 162(m) of the Code, the Plan
     shall be administered by a Committee of two or more "outside directors"
     within the meaning of Section 162(m) of the Code.
 
          (iii) Rule 16b-3. To the extent desirable to qualify transactions
     hereunder as exempt under Rule 16b-3, the transactions contemplated
     hereunder shall be structured to satisfy the requirements for exemption
     under Rule 16b-3.
 
          (iv) Other Administration. Other than as provided above, the Plan
     shall be administered by (A) the Board or (B) a Committee, which committee
     shall be constituted to satisfy applicable laws.
 
     (b) Powers of the Board. Subject to the provisions of the Plan, the Board
shall have the authority, in its discretion: (i) to grant Incentive Stock
Options or Nonstatutory Stock Options; (ii) to determine, upon review of
relevant information, the fair market value of the Common Stock; (iii) to
determine the exercise price per share of Options to be granted, which exercise
price shall be determined in accordance with Section 8 of the Plan; (iv) to
determine the Employees or Consultants to whom, and the time or times at which,
Options shall be granted and the number of shares to be represented by each
Option; (v) to interpret the Plan; (vi) to prescribe, amend and rescind rules
and regulations relating to the Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical) and, with the
consent of the holder thereof, modify or amend each Option; (viii) to accelerate
or defer (with the consent of the Optionee) the exercise date of any Option,
consistent with the provisions of Section 5 of the Plan; (ix) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an Option previously granted by the Board; (x) to reduce the
exercise price of any Option to the then current Fair Market Value if the Fair
Market Value of the Common Stock covered by such Option shall have declined
since the date the Option was granted; (xi) to allow Optionees to satisfy
withholding tax obligations by electing to have the Company withhold from the
Shares to be issued upon exercise of an Option that number of Shares having a
Fair Market Value equal to the amount required to be withheld. The Fair Market
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Board may deem necessary or advisable; and (xii) to make
all other determinations deemed necessary or advisable for the administration of
the Plan.
 
     (c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
 
                                       (2)
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     5. ELIGIBILITY; LIMITATIONS.
 
     (a) Nonstatutory Stock Options may be granted only to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
 
     (b) No Incentive Stock Option may be granted to an Employee which, when
aggregated with all other incentive stock options granted to such Employee by
the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the Option covering such Share) in excess of $100,000 becoming first
available for purchase upon exercise of one or more incentive stock options
during any calendar year.
 
     (c) Section 5(b) of the Plan shall apply only to an Incentive Stock Option
evidenced by an "Incentive Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall qualify as an
incentive stock option. Section 5(b) of the Plan shall not apply to any Option
evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall be a
Nonstatutory Stock Option.
 
     (d) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.
 
     (e) The following limitations shall apply to grants of Options:
 
          (i) No Employee or Consultant shall be granted, in any fiscal year of
     the Company, Options to purchase more than 250,000 Shares.
 
          (ii) In connection with his or her initial service, an Employee or
     Consultant may be granted Options to purchase up to an additional 500,000
     Shares which shall not count against the limit set forth in subsection (i)
     above.
 
          (iii) The foregoing limitations shall be adjusted proportionately in
     connection with any change in the Company's capitalization as described in
     Section 11(a).
 
          (iv) If an Option is cancelled in the same fiscal year of the Company
     in which it was granted (other than in connection with a transaction
     described in Section 11(a)), the cancelled Option will be counted against
     the limits set forth in subsections (i) and (ii) above. For this purpose,
     if the exercise price of an Option is reduced, the transaction will be
     treated as a cancellation of the Option and the grant of a new Option.
 
     6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 17 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 13 of the
Plan.
 
     7. TERM OF OPTION. The term of each Incentive Stock Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. The term of each Nonstatutory
Stock Option shall be ten (10) years and one (1) day from the date of grant
thereof or such shorter term as may be provided in the Nonstatutory Stock Option
Agreement. However, in the case of an Option granted to an Optionee who, at the
time the Option is granted, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, (a) if the Option is an Incentive Stock Option, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Incentive Stock Option Agreement, or (b) if the
Option is a Nonstatutory Stock Option, the term of the Option shall be five (5)
years and one (1) day from the date of grant thereof or such shorter term as may
be provided in the Nonstatutory Stock Option Agreement.
 
                                       (3)
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     8. EXERCISE PRICE AND CONSIDERATION.
 
     (a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
 
          (i) In the case of an Incentive Stock Option
 
             (A) granted to an Employee who, at the time of the grant of such
        Incentive Stock Option, owns stock representing more than ten percent
        (10%) of the voting power of all classes of stock of the Company or any
        Parent or Subsidiary, the per Share exercise price shall be no less than
        110% of the Fair Market Value (as defined in Section 8(b)) per Share on
        the date of grant.
 
             (B) granted to any Employee, the per Share exercise price shall be
        no less than 100% of the Fair Market Value (as defined in Section 8(b))
        per Share on the date of grant.
 
          (ii) In the case of a Nonstatutory Stock Option
 
             (A) In the case of a Nonstatutory Stock Option, the per Share
        exercise price shall be determined by the Board. In the case of a
        Nonstatutory Stock Option intended to qualify as "performance-based
        compensation" within the meaning of Section 162(m) of the Code, the per
        Share exercise price shall be no less than 100% of the Fair Market Value
        (as defined in Section 8(b)) per Share on the date of grant.
 
             (B) Notwithstanding the foregoing, Options may be granted with a
        per Share exercise price of less than 100% of the Fair Market Value (as
        defined in Section 8(b)) per Share on the date of grant pursuant to a
        merger or other corporate transaction.
 
     (b) The fair market value of the Common Stock (the "Fair Market Value")
shall be determined by the Board as follows:
 
          (i) If the Common Stock is listed on any established stock exchange or
     a national market system, including without limitation the Nasdaq National
     Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair
     Market Value shall be the closing sales price for such stock (or the
     closing bid, if no sales were reported) as quoted on such exchange or
     system for the last market trading day prior to the time of determination,
     as reported in The Wall Street Journal or such other source as the Board
     deems reliable;
 
          (ii) If the Common Stock is regularly quoted by a recognized
     securities dealer but selling prices are not reported, the Fair Market
     Value of a Share of Common Stock shall be the mean between the high bid and
     low asked prices for the Common Stock on the last market trading day prior
     to the day of determination, as reported in The Wall Street Journal or such
     other source as the Board deems reliable; or
 
          (iii) In the absence of an established market for the Common Stock,
     the Fair Market Value shall be determined in good faith by the Board.
 
     (c) Form of Consideration. The Board shall determine the acceptable form of
consideration for exercising an Option, including the method of payment. In the
case of an Incentive Stock Option, the Board shall determine the acceptable form
of consideration at the time of grant. Such consideration may consist entirely
of:
 
        (i) cash;
 
        (ii) check;
 
        (iii) promissory note;
 
          (iv) other Shares which (A) in the case of Shares acquired upon
     exercise of an option, have been owned by the Optionee for more than six
     months on the date of surrender, and (B) have a Fair Market Value on the
     date of surrender equal to the aggregate exercise price of the Shares as to
     which said Option shall be exercised;
 
                                       (4)
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          (v) consideration received by the Company under a cashless exercise
     program implemented by the Company in connection with the Plan;
 
          (vi) a reduction in the amount of any Company liability to the
     Optionee, including any liability attributable to the Optionee's
     participation in any Company-sponsored deferred compensation program or
     arrangement;
 
          (vii) any combination of the foregoing methods of payment; or
 
          (viii) such other consideration and method of payment for the issuance
     of Shares to the extent permitted by applicable laws.
 
     9. EXERCISE OF OPTION.
 
     (a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
 
     An Option may not be exercised for a fraction of a Share.
 
     An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8 of the Plan. Until
the issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
 
     Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
 
     (b) Termination of Status as an Employee or Consultant. In the event of
termination of an Optionee's Continuous Status as an Employee or Consultant (as
the case may be), such Optionee may, but only within thirty (30) days (or such
other period of time, not exceeding three (3) months in the case of an Incentive
Stock Option or six (6) months in the case of a Nonstatutory Stock Option, as is
determined by the Board, with such determination in the case of an Incentive
Stock Option being made at the time of grant of the Option) after the date of
such termination (but in no event later than the date of expiration of the term
of such Option as set forth in the Option Agreement), exercise his Option to the
extent that he was entitled to exercise it at the date of such termination. To
the extent that he was not entitled to exercise the Option at the date of such
termination, or if he does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall terminate.
 
     (c) Disability of Optionee. Notwithstanding the provisions of Section 9(b)
above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), he may, but only within six (6) months
(or such other period of time not exceeding twelve (12) months as is determined
by the Board, with such determination in the case of an Incentive Stock Option
being made at the time of grant of the Option) from the date of such termination
(but in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), exercise his Option to the extent he was
entitled to exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of termination, or if he
does not exercise such Option (which he was entitled to exercise) within the
time specified herein, the Option shall terminate.
 
                                       (5)
<PAGE>   6
 
     (d) Death of Optionee. In the event of the death of an Optionee:
 
          (i) during the term of the Option who is at the time of his death an
     Employee or Consultant of the Company and who shall have been in Continuous
     Status as an Employee or Consultant since the date of grant of the Option,
     the Option may be exercised, at any time within six (6) months following
     the date of death (but in no event later than the date of expiration of the
     term of such Option as set forth in the Option Agreement), by the
     Optionee's estate or by a person who acquired the right to exercise the
     Option by bequest or inheritance, but only to the extent of the right to
     exercise that would have accrued had the Optionee continued living and
     remained in Continuous Status as an Employee or Consultant six (6) months
     after the date of death, subject to the limitation set forth in Section
     5(b); or
 
          (ii) within thirty (30) days (or such other period of time not
     exceeding three (3) months as is determined by the Board, with such
     determination in the case of an Incentive Stock Option being made at the
     time of grant of the Option) after the termination of Continuous Status as
     an Employee or Consultant, the Option may be exercised, at any time within
     six (6) months following the date of death (but in no event later than the
     date of expiration of the term of such Option as set forth in the Option
     Agreement), by the Optionee's estate or by a person who acquired the right
     to exercise the Option by bequest or inheritance, but only to the extent of
     the right to exercise that had accrued at the date of termination.
 
     10. NON-TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the
Board, an Option may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the life time of the Optionee, only by
the Optionee. If the Board makes an Option transferable, such Option shall
contain such additional terms and conditions as the Board deems appropriate.
 
     11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION DISSOLUTION, LIQUIDATION,
MERGER, ASSET SALE OR CHANGE IN CONTROL.
 
     (a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
 
     (b) Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Board shall notify the Optionee at least fifteen
(15) days prior to such proposed action. To the extent an Option has not been
previously exercised, such Option shall terminate prior to consummation of such
proposed dissolution or liquidation.
 
     (c) Merger or Asset Sale. Subject to the provisions of Section 11(d)
hereof, in the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, each
outstanding Option shall be assumed or an equivalent option substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute for the
Option, the Board shall notify the Optionee that the Option shall be exercisable
to the extent that the Optionee is otherwise entitled to exercise the Option for
a period of fifteen (15) days from the date of such notice, and the Option shall
terminate upon the expiration of such period. For the purposes of
 
                                       (6)
<PAGE>   7
 
this paragraph, the Option shall be considered assumed if, following the merger
or sale of assets, the option confers the right to purchase or receive, for each
Share of Optioned Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets was not solely
common stock of the successor corporation or its Parent, the Board may, with the
consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
 
     (d) Change in Control. In the event of a "Change in Control" of the
Company, as defined in Subsection (e) below, then the following provisions shall
apply:
 
          (i) For each Optionee who is an Executive Officer and has any Option
     outstanding on the date of such Change in Control which is not yet fully
     exercisable and fully vested as of the date of such Change in Control, such
     Option shall become exercisable and vested on the date of such Change in
     Control with respect to fifty percent (50%) of the Shares covered by such
     Option which are not exercisable or vested on the date of such Change in
     Control without reference to this subsection (an "Outstanding Option");
 
          (ii) Each Outstanding Option held by an Executive Officer which is
     vested and exercisable on the date of such Change in Control shall be
     assumed by the successor corporation (if any) or by a Parent or Subsidiary
     of the successor corporation (if any);
 
          (iii) Each Outstanding Option held by an Executive Officer which is
     vested and exercisable on the date of such Change in Control shall remain
     exercisable by the Optionee for a period of at least fifteen (15) days from
     the date of the Change in Control;
 
          (iv) Each Optionee who is an Executive Officer with an Outstanding
     Option which is vested and exercisable on the date of such Change in
     Control shall be provided with written notice of the period of
     exercisability provided for in subsection (d)(iii) above promptly after the
     date of the Change in Control by the Company or by the entity surviving
     after the Change in Control.
 
     (e) Definition of "Change in Control". For purposes of this Section 11, a
"Change in Control" means the happening of any of the following:
 
          (i) when any "person" or "group" of persons, as such terms are used in
     Sections 13(d) and 14(d) of the Exchange Act (other than the Company, a
     Subsidiary or a Company employee benefit plan, including any trustee of
     such plan acting as trustee) is or becomes the "beneficial owner" (as
     defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
     securities of the Company representing more than fifty percent (50%) of the
     combined voting power of the Company's then outstanding securities entitled
     to vote generally in the election of directors; provided that "person"
     shall not include any person (or any person acting as a group) which, as of
     the date of the adoption of this 1992 Stock Option Plan, is the "beneficial
     owner" of securities of the Company representing more than fifty percent
     (50%) of the combined voting power of the Company's outstanding securities
     entitled to vote generally in the election of directors; or
 
          (ii) a merger or consolidation of the Company with any other
     corporation, other than a merger or consolidation which would result in the
     voting securities of the Company outstanding immediately prior thereto
     continuing to represent (either by remaining outstanding or by being
     converted into voting securities of the surviving entity) at least fifty
     percent (50%) of the total voting power represented by the voting
     securities of the Company or such surviving entity outstanding immediately
     after such merger or consolidation; or
 
          (iii) a change in the composition of the Board of Directors of the
     Company, during any twenty-four month period, as a result of which fewer
     than a majority of the directors are Incumbent Directors.
 
                                       (7)
<PAGE>   8
 
     "Incumbent Directors" shall mean directors who either (A) are directors of
     the Company as of the date the Plan is approved by the shareholders, or (B)
     are elected, or nominated for election, to the Board of Directors of the
     Company with the affirmative votes of at least a majority of the Incumbent
     Directors at the time of such election or nomination (but shall not include
     an individual not otherwise an Incumbent Director whose election or
     nomination is in connection with an actual or threatened proxy contest
     relating to the election of directors to the Company).
 
     12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
 
     13. AMENDMENT AND TERMINATION OF THE PLAN.
 
     (a) Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable; provided
that, the following revisions or amendments shall require approval of the
shareholders of the Company in the manner described in Section 17 of the Plan:
 
          (i) any increase in the number of Shares subject to the Plan, other
     than in connection with an adjustment under Section 11 of the Plan;
 
          (ii) any change in the designation of the class of persons eligible to
     be granted Options; or
 
     (b) Shareholder Approval. If any amendment requiring shareholder approval
under Section 13(a) of the Plan is made subsequent to the first registration of
any class of equity securities by the Company under Section 12 of the Exchange
Act, such shareholder approval shall be solicited as described in Section 17 of
the Plan.
 
     (c) Effect of Amendment or Termination. Any such amendment or termination
of the Plan shall not affect Options already granted and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the Board,
which agreement must be in writing and signed by the Optionee and the Company.
 
     14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
 
     As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
 
     15. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
 
     The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
 
     16. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
 
     17. SHAREHOLDER APPROVAL.
 
     (a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted.
 
                                       (8)
<PAGE>   9
 
     (b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required approval of
the shareholders of the Company obtained after such registration shall be
solicited substantially in accordance with Section 14(a) of the Exchange Act and
the rules and regulations promulgated thereunder.
 
     (c) If any required approval by the shareholders of the Plan itself or of
any amendment thereto is solicited at any time otherwise than in the manner
described in Section 17(b) hereof, then the Company shall, at or prior to the
first annual meeting of shareholders held subsequent to the later of (1) the
first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act or (2) the granting of an Option hereunder to an
officer or director after such registration, do the following:
 
          (i) furnish in writing to the holders entitled to vote for the Plan
     substantially the same information which would be required (if proxies to
     be voted with respect to approval or disapproval of the Plan or amendment
     were then being solicited) by the rules and regulations in effect under
     Section 14(a) of the Exchange Act at the time such information is
     furnished; and
 
          (ii) file with, or mail for filing to, the Securities and Exchange
     Commission four copies of the written information referred to in subsection
     (i) hereof not later than the date on which such information is first sent
     or given to shareholders.
 
     18. INFORMATION TO OPTIONEES.  The Company shall provide to each optionee,
durnig the period for which such optionee has one or more options outstanding,
copies of all annual reports and other information which are provided to all 
shareholders of the Company.  The Company shall not be required to provide such 
information if the issuance of options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
 
                                       (9)