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                                                                    Exhibit 10.5


                             1997 STOCK OPTION PLAN

                                       OF

                              THORATEC CORPORATION

         1.       PURPOSES OF THE PLAN

                  The purposes of the 1997 Stock Option Plan (the "Plan") of
Thoratec Corporation, a California corporation (the "Company"), are to:

                  (a) Encourage selected directors, employees and consultants to
improve operations and increase profits of the Company;

                  (b) Encourage selected directors, employees and consultants to
accept or continue employment or association with the Company or its Affiliates;
and

                  (c) Increase the interest of selected directors, employees and
consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").

                  Options granted under this Plan ("Options") may be "incentive
stock options" ("ISOs") intended to satisfy the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or "nonqualified
options" ("NQOs").

         2.       ELIGIBLE PERSONS

                  Every person who at the date of grant of an Option is a
full-time employee of the Company or of any Affiliate (as defined below) of the
Company is eligible to receive NQOs or ISOs under this Plan. Every person who at
the date of grant is a consultant or non-employee director to the Company or any
Affiliate (as defined below) of the Company is eligible to receive NQOs under
this Plan. The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee, of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.

         3.       STOCK SUBJECT TO THIS PLAN

                  Subject to the provisions of Section 6.1.1 of the Plan, the
total number of shares of stock which may be issued under options granted
pursuant to this Plan shall not exceed 9,200,000 shares of Common Stock. The
shares covered by the portion of any grant under the Plan which expires
unexercised shall become available again for grants under the Plan.
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         4.       ADMINISTRATION

                  (a) This Plan shall be administered by the Board of Directors
of the Company (the "Board") or, either in its entirety or only insofar as
required pursuant to Section 4(b) hereof, by a committee (the "Committee") of at
least two Board members to which administration of the Plan, or of any portion
of the Plan, is delegated (in either case, the "Administrator").

                  (b) From and after such time as the Company registers a class
of equity securities under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), it is intended that this Plan shall be
administered in accordance with the requirements of Rule 16b-3 promulgated by
the Securities and Exchange Commission ("Rule 16b-3"), or any successor rule
thereto.

                  (c) Subject to the other provisions of this Plan, the
Administrator shall have the authority, in its discretion: (i) to grant Options;
(ii) to determine the fair market value of the Common Stock subject to Options;
(iii) to determine the exercise price of Options granted; (iv) to determine the
persons to whom, and the time or times at which, Options shall be granted, and
the number of shares subject to each Option; (v) to interpret this Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to this Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical), including but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.

                  (d) All questions of interpretation, implementation, and
application of this Plan shall be determined by the Administrator. Such
determinations shall be final and binding on all persons.

                  (e) With respect to persons subject to Section 16 of the
Exchange Act, if any, transactions under this Plan are intended to comply with
the applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent any provision of this Plan or action by the Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.


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         5.       GRANTING OF OPTIONS; OPTION AGREEMENT

                  (a) No Options shall be granted under this Plan after ten
years from the date of adoption of this Plan by the Board.

                  (b) Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Company, executed by the Company and the
person to whom such Option is granted; provided, however, that the failure by
the Company, the optionee, or both to execute such an agreement shall not
invalidate the granting of an Option, although the exercise of each option shall
be subject to Section 6.1.3.

                  (c) The stock option agreement shall specify whether each
Option it evidences is a NQO or an ISO.

                  (d) Subject to Section 6.2.3 with respect to ISOs, the
Administrator may approve the grant of Options under this Plan to persons who
are expected to become directors, employees or consultants of the Company, but
are not directors, employees or consultants at the date of approval.

         6.       TERMS AND CONDITIONS OF OPTIONS

                  Each Option granted under this Plan shall be subject to the
terms and conditions set forth in Section 6.1. ISOs shall also be subject to the
terms and conditions set forth in Section 6.2.

                  6.1 Terms and Conditions to Which All Options Are Subject. All
Options granted under this Plan shall be subject to the following terms and
conditions:

                           6.1.1 Changes in Capital Structure. Subject to
Section 6.1.2, if the stock of the Company is changed by reason of a stock
split, reverse stock split, stock dividend, or recapitalization, combination or
reclassification, appropriate adjustments shall be made by the Board in (a) the
number and class of shares of stock subject to this Plan and each Option
outstanding under this Plan, and (b) the exercise price of each outstanding
Option; provided, however, that the Company shall not be required to issue
fractional shares as a result of any such adjustments. Each such adjustment
shall be subject to approval by the Board in its sole discretion.

                           6.1.2 Corporate Transactions. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each optionee at least 30 days prior to such proposed action. To the
extent not previously exercised, all Options shall terminate immediately prior
to the consummation of such proposed action. In the event of a merger or
consolidation of the Company with or into another corporation or entity in which
the Company does not survive, or in the event of a sale of all or substantially
all of the assets of the Company in which the shareholders of the Company
receive securities of the acquiring entity or an affiliate thereof, all Options
shall be assumed or equivalent options shall be substituted by the successor
corporation (or other entity) or a parent or subsidiary of such successor
corporation (or other entity). In the


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event that such successor does not agree to assume the Options or to substitute
equivalent options therefor, unless the Administrator shall determine otherwise,
the Options shall expire upon such event.

                           6.1.3 Time of Option Exercise. Subject to Section 5,
Options granted under this Plan shall be exercisable (a) immediately as of the
effective date of the stock option agreement granting the Option, or (b) in
accordance with a schedule related to the date of the grant of the Option, the
date of first employment, or such other date as may be set by the Administrator
(in any case, the "Vesting Base Date") and specified in the written stock option
agreement relating to such Option; provided, however, that the right to exercise
an Option must vest at the rate of at least 20% per year over five years from
the date the option was granted. In any case, no Option shall be exercisable
until a written stock option agreement in form satisfactory to the Company is
executed by the Company and the optionee.

                           6.1.4 Option Grant Date. Except in the case of
advance approvals described in Section 5(d), the date of grant of an Option
under this Plan shall be the date as of which the Administrator approves the
grant.

                           6.1.5 Nonassignability of Option Rights. No Option
granted under this Plan shall be assignable or otherwise transferable by the
optionee except (i) by shall or by the laws of decent and distribution, (ii) in
the case of a NQO, to a fully-revocable trust established by the optionee for
estate and tax planning purposes, or (iii) in the case of an ISO, to a trust
established by the optionee for estate and tax planning purposes which does not
result in a "disqualifying disposition" of the ISO. A "disqualifying
disposition" means a transfer of the ISO which shall result in the ISO being
treated as a NQO. Prior to any transfer pursuant to clause (iii), the optionee
must notify the Company in writing and the writing must state that (A) the
Optionee has obtained written advice from the optionee's professional tax
advisor that the proposed transfer shall not result in a "disqualifying
disposition," and (B) the optionee is not in any way relying on the Company in
deciding whether to transfer the ISO and that the Company shall not be
responsible for any adverse tax consequence of any such transfer.

                           6.1.6 Payment. Except as provided below, payment in
full, in cash, shall be made for all stock purchased at the time written notice
of exercise of an Option is given to the Company, and proceeds of any payment
shall constitute general funds of the Company. At the time an Option is granted
or exercised, the Administrator, in the exercise of its absolute discretion
after considering any tax or accounting consequences, may authorize any one or
more of the following additional methods of payment:

                                    (a) Acceptance of the optionee's full
recourse promissory note for all or part of the Option price, payable on such
terms and bearing such interest rate as determined by the Administrator (but in
no event less than the minimum interest rate specified under the Code at which
no additional interest would be imputed), which promissory note may be either
secured or unsecured in such manner as the Administrator


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shall approve (including, without limitation, by a security interest in the
shares of the Company); and

                                    (b) Delivery by the optionee of Common Stock
already owned by the optionee for all or part of the Option price, provided the
value (determined as set forth in Section 6.1.11) of such Common Stock is equal
on the date of exercise to the Option price, or such portion thereof as the
optionee is authorized to pay by delivery of such stock; provided, however, that
if an optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator.

                           6.1.7 Termination of Employment. Except as otherwise
approved by the Administrator in its absolute discretion, if for any reason
other than death or permanent and total disability, an optionee ceases to be
employed by the Company or any of its Affiliates (such event being called a
"Termination"), Options held at the date of Termination (to the extent then
exercisable) may be exercised in whole or in part at any time within three
months of the date of such Termination, (but in no event after the Expiration
Date); provided, that if such exercise of the Option would result in liability
for the optionee under Section 16(b) of the Exchange Act, such Option shall
terminate at such later date as is fixed by the Administrator (but in no event
after the Expiration Date). If an optionee dies or becomes permanently and
totally disabled (within the meaning of Section 22(e)(3) of the Code) while
employed by the Company or an Affiliate or within the period that the Option
remains exercisable after Termination, Options then held (to the extent then
exercisable) may be exercised, in whole or in part, by the optionee, by the
optionee's personal representative or by the person to whom the Option is
transferred by devise or the laws of descent and distribution, at any time
within six months after the death or six months after the permanent and total
disability of the optionee (but in no event after the Expiration Date). For
purposes of this Section 6.1.7, "employment" includes service as a director or
consultant. For purposes of this Section 6.1.7, an optionee's employment shall
not be deemed to terminate by reason of sick leave, military leave or other
leave of absence approved by the Administrator, if the period of any such leave
does not exceed 90 days or, if longer, if the optionee's right to reemployment
by the Company or any Affiliate is guaranteed either contractually or by
statute.

                           6.1.8 Repurchase of Stock. At the option of the
Administrator, the stock to be delivered pursuant to the exercise of any Option
granted to a director, employee or consultant under this Plan may be subject to
a right of repurchase in favor of the Company with respect to any director,
employee or consultant whose director, employment, or consulting relationship
with the Company is terminated. Such right of repurchase shall be at the Option
exercise price and (i) shall lapse at the rate of at least 20% per year over
five years from the date the Option is granted (without regard to the date it
becomes exercisable), and must be exercised for cash or cancellation of purchase
money indebtedness within 90 days of such termination and (ii) if the right is
assignable by the Company, the assignee must pay the Company upon assignment of
the right (unless


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the assignee is a 100% owned subsidiary of the Company or is an Affiliate) cash
equal to the difference between the Option exercise price and the value
(determined as set forth in Section 6.1.11) of the stock to be purchased if the
Option exercise price is less than such value. Shares repurchased by the Company
pursuant to the Company's right of repurchase are not again available for grant
under the Plan.

                  Determination of the number of shares subject to any such
right of repurchase shall be made as of the date the director's director
relationship with, employee's employment by, or consultant's consulting
relationship with, the Company terminates, not as of the date that any Option
granted to such director, employee or consultant is thereafter exercised.

                           6.1.9 Withholding and Employment Taxes. At the time
of exercise of an Option or at such other time as the amount of such obligations
becomes determinable (the "Tax Date"), the optionee shall remit to the Company
in cash all applicable federal and state withholding and employment taxes. If
authorized by the Administrator in its sole discretion after considering any tax
or accounting consequences, an optionee may elect to (i) deliver a promissory
note on such terms as the Administrator deems appropriate, (ii) tender to the
Company previously owned shares of Stock or other securities of the Company, or
(iii) have shares of Common Stock which are acquired upon exercise of the Option
withheld by the Company to pay some or all of the amount of tax that is required
by law to be withheld by the Company as a result of the exercise of such Option.

                  Any limitations may be waived (or additional limitations may
be imposed) by the Administrator, in its sole discretion, if the Administrator
determines that limitations are not required (or that such additional
limitations are required) in order that the transaction shall be exempt from
Section 16(b) of the Exchange Act pursuant to Rule 16b-3, or any successor rule
thereto. In addition, any limitations may be waived by the Administrator, in its
sole discretion, if the Administrator determines that Rule 16b-3, or any
successor rule thereto, is not applicable to the exercise of the Option by the
optionee or for any other reason.

                  Any securities tendered or withheld in accordance with this
Section 6.1.9 shall be valued by the Company as of the Tax Date.

                           6.1.10 Other Provisions. Each Option granted under
this Plan may contain such other terms, provisions, and conditions not
inconsistent with this Plan as may be determined by the Administrator, and each
ISO granted under this Plan shall include such provisions and conditions as are
necessary to qualify the Option as an "incentive stock option" within the
meaning of Section 422 of the Code.

                           6.1.11 Determination of Value. For purposes of the
Plan, the value of Common Stock or other securities of the Company shall be
determined as follows:


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                                    (a) If the stock of the Company is listed on
any established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, 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 system or exchange (or the largest such exchange) for the date
the value is to be determined (or if there are no sales for such date, then for
the last preceding business day on which there were sales), as reported in The
Wall Street Journal or similar publication.

                                    (b) If the stock of the Company is regularly
quoted by a recognized securities dealer but selling prices are not reported,
its fair market value shall be the mean between the high bid and low asked
prices for the stock on the date the value is to be determined (or if there are
no quoted prices for the date of grant, then for the last preceding business day
on which there were quoted prices).

                                    (c) In the absence of an established market
for the stock, the fair market value thereof shall be determined in good faith
by the Administrator, with reference to the Company's net worth, prospective
earning power, dividend-paying capacity, and other relevant factors, including
the goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.

                           6.1.12 Option Term. Subject to Section 6.2.4, no
Option shall be exercisable more than ten years after the date of grant, or such
lesser period of time as is set forth in the stock option agreement (the end of
the maximum exercise period stated in the stock option agreement is referred to
in this Plan as the "Expiration Date").

                           6.1.13 Exercise Price. The exercise price of any
Option granted to any person who owns, directly or by attribution under the Code
currently Section 424(d), stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of any Affiliate
(a "Ten Percent Shareholder") shall in no event be less than 110% of the fair
market value (determined in accordance with Section 6.1.11) of the stock covered
by the Option at the time the Option is granted. The exercise price of any
Option granted to any person that is not a Ten Percent Shareholder shall in no
event be less than the fair market value (determined in accordance with Section
6.1.11) of the stock covered by the Option at the time the Option is granted.
The exercise price of any Option previously granted under the Plan may not be
reduced, either directly by reducing the exercise price or indirectly by
regranting or replacing options with a lower exercise price, unless shareholder
approval of such reduction is obtained prior to such reduction.

                  6.2 Terms and Conditions to Which Only ISOs Are Subject.
Options granted under this Plan which are designated as ISOs shall be subject to
the following terms and conditions:


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                           6.2.1 Exercise Price. Except as set forth in Section
6.1.13, the exercise price of an ISO shall be determined in accordance with the
applicable provisions of the Code and shall in no event be less than the fair
market value (determined in accordance with Section 6.1.11) of the stock covered
by the Option at the time the Option is granted.

                           6.2.2 Disqualifying Dispositions. If stock acquired
by exercise of an ISO granted pursuant to this Plan is disposed of in a
"disqualifying disposition" within the meaning of Section 422 of the Code, the
holder of the stock immediately before the disposition shall promptly notify the
Company in writing of the date and terms of the disposition and shall provide
such other information regarding the Option as the Company may reasonably
require.

                           6.2.3 Grant Date. If an ISO is granted in
anticipation of employment as provided in Section 5(d), the Option shall be
deemed granted, without further approval, on the date the grantee assumes the
director, employment or consultancy relationship forming the basis for such
grant, and, in addition, satisfies all requirements of this Plan for Options
granted on that date.

                           6.2.4 Term. Notwithstanding Section 6.1.12, no ISO
granted to any Ten Percent Shareholder shall be exercisable more than five years
after the date of grant.

         7.       RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person shares that are subject to restrictions.
The Committee shall determine to whom an offer shall be made, the number of
shares the person may purchase, the purchase price, the restrictions to which
the shares shall be subject, and all other terms and conditions of the
Restricted Stock Award, subject to the following:

                  7.1 Form of Restricted Stock Award. All purchases under a
Restricted Stock Award made pursuant to this Plan shall be evidenced by an award
agreement (a "Restricted Stock Purchase Agreement") that shall be in such form
(which need not be the same for each participant) as the Committee shall from
time to time approve, and shall comply with and be subject to the terms and
conditions of this Plan. The Restricted Stock Award shall be accepted by the
participant's execution and delivery of the Restricted Stock Purchase Agreement
and full payment for the shares to the Company within thirty (30) days after the
date the Restricted Stock Purchase Agreement is delivered to the person. If such
person does not execute and deliver the Restricted Stock Purchase Agreement
along with full payment for the shares to the Company within thirty (30) days,
then the offer shall terminate, unless otherwise determined by the Committee.

                  7.2 Purchase Price. The purchase price of shares sold pursuant
to a Restricted Stock Award shall be determined by the Committee and shall be at
least eighty-five (85%) of the fair market value of the shares on the date the
Restricted Stock Award is granted or at the time the purchase is consummated,
except in the case of a sale to a Ten Percent Shareholder, in which case the
purchase price shall be one hundred


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percent (100%) of the fair market value on the date the Restricted Stock Award
is granted or at the time the purchase is consummated. Payment of the purchase
price for the shares purchased may be made in accordance with Section 6.1.6
hereof.

                  7.3 Restrictions. At the option of the Administrator, the
stock to be delivered pursuant to the any Restricted Stock Award granted to a
director, employee or consultant under this Plan may be subject to a right of
repurchase in favor of the Company with respect to any director, employee or
consultant whose director, employment, or consulting relationship with the
Company is terminated. Such right of repurchase shall be at the original
purchase price of such shares and shall lapse at the rate of at least 20% per
year over five years from the date the shares are purchased or such other date
as the Committee specifies, and must be exercised for cash or cancellation of
purchase money indebtedness within 90 days of such termination, and (b) if the
right is assignable by the Company, the assignee must pay the Company upon
assignment of the right (unless the assignee is a 100% owned subsidiary of the
Company or is an Affiliate) cash equal to the difference between the Option
exercise price and the value (determined as set forth in Section 6.1.11) of the
stock so purchased if the original purchase price is less than such value.
Shares repurchased by the Company pursuant to the Company's right of repurchase
are not again available for grant under the Plan.

                  Determination of the number of shares subject to any such
right of repurchase shall be made as of the date the director's director
relationship with, employee's employment by, or consultant's consulting
relationship with, the Company terminates, not as of the date that of purchase
by such individual of the relevant shares.

         8.       STOCK BONUSES.

                  8.1 Awards of Stock Bonuses. A Stock Bonus is an award of
shares (which may consist of Restricted Stock) for services rendered to the
Company or any parent or subsidiary of the Company. A Stock Bonus may be awarded
for past services already rendered to the Company, or any Parent or Subsidiary
of the Company pursuant to an Award Agreement (a "Stock Bonus Agreement") that
shall be in such form (which need not be the same for each participant) as the
Committee shall from time to time approve, and shall comply with and be subject
to the terms and conditions of this Plan. A Stock Bonus may be awarded upon
satisfaction of such performance goals as are set out in advance in the
participant's individual Award Agreement (a "Performance Stock Bonus Agreement")
that shall be in such form (which need not be the same for each participant) as
the Committee shall from time to time approve, and shall comply with and be
subject to the terms and conditions of this Plan. Stock Bonuses may vary from
participant to participant and between groups of participants, and may be based
upon the achievement of the Company, parent or subsidiary and/or individual
performance factors or upon such other criteria as the Committee may determine;
provided, however, that performance-based bonuses shall be restricted to
individuals earning at least $60,000.00 per year and of adequate sophistication
and sufficiently empowered to achieve the performance goals.


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                  8.2 Terms of Stock Bonuses. The Committee shall determine the
number of shares to be awarded to the participant and whether such shares shall
be Restricted Stock. If the Stock Bonus is being earned upon the satisfaction of
performance goals pursuant to a Performance Stock Bonus Agreement, then the
Committee shall determine: (a) the nature, length and starting date of any
period during which performance is to be measured (the "Performance Period") for
each Stock Bonus; (b) the performance goals and criteria to be used to measure
the performance, if any; (c) the number of shares that may be awarded to the
participant; and (d) the extent to which such Stock Bonuses have been earned.
Performance Periods may overlap and participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Committee. The Committee may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as the Committee deems
necessary or appropriate to reflect the impact of extraordinary or unusual
items, events or circumstances to avoid windfalls or hardships.

                  8.3 Form of Payment. The earned portion of a Stock Bonus may
be paid currently or on a deferred basis with such interest or dividend
equivalent, if any, as the Committee may determine. Payment may be made in the
form of cash, whole shares, including Restricted Stock, or a combination
thereof, either in a lump sum payment or in installments, all as the Committee
shall determine.

                  8.4 Termination During Performance Period. If a participant is
terminated during a Performance Period for any reason, then such participant
shall be entitled to payment (whether in shares, cash or otherwise) with respect
to the Stock Bonus only to the extent earned as of the date of termination in
accordance with the Performance Stock Bonus Agreement, unless the Committee
determines otherwise.

         9.       MANNER OF EXERCISE

                  9.1 An optionee wishing to exercise an Option shall give
written notice to the Company at its principal executive office, to the
attention of the officer of the Company designated by the Administrator,
accompanied by payment of the exercise price as provided in Section 6.1.6. The
date the Company receives written notice of an exercise hereunder accompanied by
payment of the exercise price shall be considered as the date such Option was
exercised.

                  9.2 Promptly after receipt of written notice of exercise of an
Option, the Company shall, without stock issue or transfer taxes to the optionee
or other person entitled to exercise the Option, deliver to the optionee or such
other person a certificate or certificates for the requisite number of shares of
stock. An optionee or permitted transferee of an optionee shall not have any
privileges as a shareholder with respect to any shares of stock covered by the
Option until the date of issuance (as evidenced by the


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appropriate entry on the books of the Company or a duly authorized transfer
agent) of such shares.

         10.      RELATIONSHIP OF PARTICIPANT

                  Neither the adoption of this Plan nor the grant of any Option
hereunder shall (i) confer upon any employee any right to continued employment
nor shall it interfere in any way with the right of the Company or an Affiliate
to terminate the employment of any employee at any time; or (ii) confer upon any
consultant any right to a continued consultancy relationship nor shall it
interfere in any way with the right of the Company or an Affiliate to terminate
the consultancy relationship of any consultant at any time; or (ii) confer upon
any participant any right with respect to continuation of the participant's
membership on the Board or shall interfere in any way with provisions in the
Company's Articles of Incorporation and Bylaws relating to the election,
appointment, terms of office, and removal of members of the Board.

         11.      FINANCIAL INFORMATION

                  The Company shall provide to each optionee during the period
such optionee holds an outstanding Option, and to each holder of Common Stock
acquired upon exercise of Options granted under the Plan for so long as such
person is a holder of such Common Stock, a balance sheet and income statement of
the Company at least annually as prepared either by the Company or independent
certified public accountants of the Company. Such financial statements shall be
delivered as soon as practicable following the end of the Company's fiscal year.

         12.      CONDITIONS UPON ISSUANCE OF SHARES

                  Shares of Common Stock 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 "Securities Act").

         13.      NONEXCLUSIVITY OF THE PLAN

                  The adoption of the Plan shall not be construed as creating
any limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.

         14.      AMENDMENTS TO PLAN

                  The Board may at any time amend, alter, suspend or discontinue
this Plan or any Option. Without the consent of an optionee, no amendment,
alteration, suspension or discontinuance may adversely affect outstanding
Options except to conform this Plan and ISOs granted under this Plan to the
requirements of federal or other tax laws relating to


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incentive stock options. No amendment, alteration, suspension or discontinuance
shall require shareholder approval unless (a) shareholder approval is required
to preserve incentive stock option treatment for federal income tax purposes,
(b) for so long as the Company has a class of equity securities registered under
Section 12 of the Exchange Act, shareholder approval is required to meet the
exceptions provided by Rule 16b-3, or any successor rule thereto, (c) such
action relates to outstanding Options as provided in the final sentence of
Section 6.1.13 or (d) the Board otherwise concludes that shareholder approval is
advisable.

         15.      EFFECTIVE DATE OF PLAN

                  This Plan shall become effective upon adoption by the Board,
provided, however, that no Option shall be exercisable unless and until written
consent of the shareholders of the Company, or approval of shareholders of the
Company voting at a validly called shareholders' meeting, is obtained within 12
months after adoption by the Board. If such shareholder approval is not obtained
within such time, Options granted hereunder shall terminate and be of no force
and effect from and after expiration of such 12 month period. Options may be
granted and exercised under this Plan only after there has been compliance with
all applicable federal and state securities laws.

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Plan adopted by the Board of Directors on March 12, 1997.

Plan approved by Shareholders on May 16, 1997.

Plan amended by the Board of Directors on February 19, 1999.

Plan amended by the Board of Directors on May 13, 1999 to increase the
authorized shares under the Plan from 1,000,000 to 2,800,000. This Amendment was
approved by shareholders on May 14, 1999.

Plan amended by the Board of Directors on November 18, 1999.

Plan amended by the Board of Directors on October 10, 2000 to increase the
authorized shares under the Plan from 2,800,000 by an aggregate of 6,400,000
shares to 9,200,000. The Amendments were approved by shareholders on February
13, 2001.

Plan amended by the Board of Directors on February 23, 2001.

Plan amended by the Board of Directors effective as November 6, 2001, to add
Sections 7 and 8 as to Restricted Stock Awards and Stock Bonuses, respectively,
and to renumber subsequent Sections accordingly.


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