EXHIBIT 10.5

                              GULFWEST ENERGY, INC.

                            2005 STOCK INCENTIVE PLAN

    1. PURPOSE; ELIGIBILITY.

         1.1 GENERAL PURPOSE. The name of this plan is the GulfWest Energy, Inc.
2005 Stock  Incentive  Plan (the  "Plan").  The purpose of the Plan is to enable
GulfWest Energy, Inc., a Texas corporation (the "COMPANY"), and any Affiliate to
obtain  and retain  the  services  of the types of  Employees,  Consultants  and
Directors who will contribute to the Company's long range success and to provide
incentives  which are linked  directly  to  increases  in share value which will
inure to the benefit of all Shareholders of the Company.

         1.2 ELIGIBLE AWARD  RECIPIENTS.  The persons eligible to receive Awards
are the Employees, Consultants and Directors of the Company and its Affiliates.

         1.3 AVAILABLE AWARDS.  The purpose of the Plan is to provide a means by
which eligible  recipients of Awards may be given an opportunity to benefit from
increases  in value of the Common  Stock  through the granting of one or more of
the following  Awards:  (a) Incentive  Stock  Options,  (b)  Nonstatutory  Stock
Options, (c) Restricted Awards, (d) Unrestricted Awards, (e) Performance Awards,
(f) Stock Appreciation Rights and (g) Dividend Equivalent Rights.

    2. DEFINITIONS.

         2.1  "409A  AWARD"  means  a  grant  or an  award  that  is  considered
"nonqualified  deferred  compensation" within the meaning of Section 409A of the
Code and Section 8 of this Plan.

         2.2  "ADMINISTRATOR"  means the Board or the Committee appointed by the
Board in accordance with Section 3.5.

         2.3 "AFFILIATE" means any parent corporation or subsidiary  corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

         2.4  "AWARD"  means any right  granted  under  the Plan,  including  an
Option, a Restricted Award, an Unrestricted  Award, a Performance Award, a Stock
Appreciation Right and a Dividend Equivalent Right.

         2.5 "AWARD AGREEMENT" means a written agreement between the Company and
a holder of an Award  evidencing the terms and conditions of an individual Award
grant.  Each Award Agreement shall be subject to the terms and conditions of the
Plan.

         2.6  "BENEFICIAL  OWNER" has the meaning  assigned to such term in Rule
13d-3 and Rule 13d-5 under the  Exchange  Act,  except that in  calculating  the
beneficial ownership of any particular "person" (as that term is used in Section
13(d)(3) of the Exchange Act),  such "person" shall be deemed to have beneficial
ownership  of all  securities  that such  "person"  has the right to  acquire by
conversion  or exercise of other  securities,  whether  such right is  currently
exercisable  or is  exercisable  only  after  the  passage  of time.  The  terms
"Beneficially Owns" and "Beneficially Owned" have a corresponding meaning.


                                        1
<PAGE>

         2.7 "BOARD" means the Board of Directors of the Company.

         2.8 "CAUSE" means,  (a) with respect to any  Participant who is a party
to an  employment  or service  agreement or  employment  policy  manual with the
Company or its  Affiliates  and such  agreement or policy manual  provides for a
definition  of Cause,  as  defined  therein  and (b) with  respect  to all other
Participants,  (i) the  commission  of, or plea of guilty  or no  contest  to, a
felony or a crime  involving  moral turpitude or the commission of any other act
involving willful  malfeasance or material  fiduciary breach with respect to the
Company  or an  Affiliate,  (ii)  conduct  tending  to bring  the  Company  into
substantial public disgrace, or disrepute,  or (iii) gross negligence or willful
misconduct with respect to the Company or an Affiliate.  The  Administrator,  in
its absolute discretion, shall determine the effect of all matters and questions
relating to whether a Participant has been discharged for Cause.

         2.9 "CHANGE IN CONTROL" shall mean

                  (a) the direct or indirect sale, transfer, conveyance or other
disposition (other than by way of merger or  consolidation),  in one or a series
of related transactions, of all or substantially all of the properties or assets
of the Company to any "person" (as that term is used in Section  13(d)(3) of the
Exchange Act) other than the Permitted Holders;

                  (b) the  adoption  of a plan  relating to the  liquidation  or
dissolution of the Company;

                  (c) the  consummation of any transaction  (including,  without
limitation,  any  merger  or  consolidation)  the  result  of  which is that any
"person"  or "group"  (as such terms are used in Section  13(d) of the  Exchange
Act) other than  Permitted  Holders,  becomes the  Beneficial  Owner directly or
indirectly of more than 50% of the voting power of the Company; or

                  (d) Incumbent  Directors cease for any reason to constitute at
least a majority of the Board; and

                  (e) The foregoing  notwithstanding,  a  transaction  shall not
constitute a Change in Control if (1) its sole purpose is to change the state of
the Company's incorporation or to create a holding company that will be owned in
substantially  the same  proportions  by the  persons  who  held  the  Company's
securities  immediately before such transaction or (2) it constitutes an initial
public  offering or a secondary  public offering that results in any security of
the Company being listed (or approved for listing) on any securities exchange or
designated (or approved for  designation)  as a national  market  security on an
interdealer quotation system.

         2.10 "CODE" means the Internal Revenue Code of 1986, as amended.


                                        2
<PAGE>

         2.11 "COMMITTEE"  means a committee of one or more members of the Board
appointed by the Board to administer the Plan in accordance with Section 3.5.

         2.12 "COMMON  STOCK" means the Class A Common  Stock,  $0.001 par value
per share of the Company.

         2.13 "COMPANY" means GulfWest Energy, Inc., a Texas corporation.

         2.14 "CONSULTANT" means any person,  including an advisor,  (a) engaged
by the Company or an Affiliate to render consulting or advisory services and who
is  compensated  for such  services or who  provides  bona fide  services to the
Company or an Affiliate  pursuant to a written  agreement or (b) who is a member
of the Board of Directors of an Affiliate;  PROVIDED  THAT,  except as otherwise
permitted  in  Section  5.4  hereof,  such  person is a natural  person and such
services are not in connection with the offer or sale of securities in a capital
raising  transaction  and do not  directly or  indirectly  promote or maintain a
market for the Company's securities.

         2.15 "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate,  whether as an Employee, Director or Consultant, is not
interrupted or terminated.  The  Participant's  Continuous  Service shall not be
deemed to have  terminated  merely  because of a change in the capacity in which
the  Participant  renders service to the Company or an Affiliate as an Employee,
Consultant  or  Director  or a change in the  entity  for which the  Participant
renders such service,  provided that there is no  interruption or termination of
the Participant's  Continuous  Service.  For example, a change in status from an
Employee of the Company to a Consultant  of an Affiliate or a Director  will not
constitute an interruption of Continuous Service. The Administrator or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether  Continuous  Service shall be considered  interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.

         2.16 "COVERED  EMPLOYEE" means the chief executive officer and the four
other highest compensated officers of the Company for whom total compensation is
required to be reported to  Shareholders  under the Exchange  Act, as determined
for purposes of Section 162(m) of the Code.

         2.17 "DATE OF GRANT" means the date on which the Administrator adopts a
resolution  expressly  granting and fixing the  relevant  terms of an Award to a
Participant  or, if a different date is set forth in such resolution as the Date
of Grant, then such date as is set forth in such resolution.

         2.18  "DEFERRAL  ELIGIBLE  PARTICIPANT"  means  a  Participant  who  is
employed by the Company or an Affiliate as a key executive, managerial or highly
compensated  employee and who is determined by the  Administrator to qualify for
inclusion in a "select group of management or highly  compensated  employees" as
described  in  Sections  201(2),  301(a)(3),  401(a)(1)  and  4021(b)(6)  of the
Employee  Retirement Income Security Act of 1974, as amended  ("ERISA"),  who is
designated  by the  Administrator  in its  discretion  to be eligible to make an
elective Unrestricted Stock deferral election pursuant to Section 7.2(b).



                                        3
<PAGE>

         2.19  "DIRECTOR"  means a  member  of the  Board  of  Directors  of the
Company.

         2.20  "DISABILITY"  means that the  Optionee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment; PROVIDED, HOWEVER, for purposes of determining the term of an
Incentive  Stock Option  pursuant to Section 6.12  hereof,  the term  Disability
shall  have  the  meaning  ascribed  to it  under  Code  Section  22(e)(3).  The
determination  of whether an  individual  has a Disability  shall be  determined
under  procedures  established by the Plan  Administrator.  Except in situations
where the Plan Administrator is determining  Disability for purposes of the term
of an Incentive  Stock Option pursuant to Section 6.12 hereof within the meaning
of Code Section 22(e)(3),  the Plan  Administrator may rely on any determination
that a  Participant  is disabled  for purposes of benefits  under any  long-term
disability  plan  maintained  by  the  Company  or  any  Affiliate  in  which  a
Participant participates.

         2.21  "DIVIDEND  EQUIVALENT  RIGHT" means an Award granted  pursuant to
Section 7.5.

         2.22 "EFFECTIVE DATE" shall mean February 25, 2005.

         2.23  "EMPLOYEE"  means  any  person  employed  by  the  Company  or an
Affiliate.  Mere  service as a Director  or payment of a  director's  fee by the
Company or an Affiliate  shall not be sufficient to constitute  "employment"  by
the Company or an Affiliate.

         2.24  "EXCHANGE  ACT" means the  Securities  Exchange  Act of 1934,  as
amended.

         2.25 "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock as determined in good faith by the Administrator;  PROVIDED, HOWEVER, that
(i) if the Common Stock is admitted to quotation on the National  Association of
Securities Dealers Automated Quotation System ("NASDAQ"),  the Fair Market Value
on any given date  shall not be less than the  average  of the  highest  bid and
lowest asked prices of the Common Stock reported for such date or, if no bid and
asked prices were reported for such date,  for the last day preceding  such date
for which such prices were  reported or (ii) if the Common  Stock is admitted to
trading on a national  securities  exchange  or the  Nasdaq  National  Market or
Nasdaq  Small Cap Market,  the Fair  Market  Value on any date shall not be less
than the closing price  reported for the Common Stock on such exchange or system
for such date or, if no sales were  reported  for such  date,  for the last date
preceding the date for such a sale was reported.

         2.26 "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive  stock  option  within the  meaning of Section 422 of the Code and the
regulations promulgated thereunder.

         2.27  "INCUMBENT  DIRECTORS"  means  individuals  who, on the Effective
Date,  constitute the Board,  provided that any  individual  becoming a Director
subsequent to the Effective  Date whose  election or nomination  for election to
the  Board  was  approved  by a vote of at  least  two-thirds  of the  Incumbent
Directors  then on the Board  (either by a specific  vote or by  approval of the
proxy  statement  of the  Company in which such person is named as a nominee for
Director without objection to such nomination)  shall be an Incumbent  Director.
No individual  initially  elected or nominated as a director of the Company as a
result of an actual or threatened  election contest with respect to Directors or
as a result of any other actual or threatened  solicitation  of proxies by or on
behalf of any person other than the Board shall be an Incumbent Director.

                                        4
<PAGE>

         2.28 "LISTING DATE" means the first date upon which any security of the
Company is listed (or  approved  for  listing)  upon  notice of  issuance on any
securities  exchange or designated (or approved for designation)  upon notice of
issuance as a national market security on an interdealer quotation system.

         2.29  "NON-EMPLOYEE  DIRECTOR"  means a Director who is a "non-employee
director" within the meaning of Rule 16b-3.

         2.30  "NONSTATUTORY  STOCK  OPTION"  means an Option  not  intended  to
qualify as an Incentive Stock Option.

         2.31 "OFFICER" means (a) before the Listing Date, any person designated
by the Company as an officer and (b) on and after the Listing Date, a person who
is an officer of the Company  within the  meaning of Section 16 of the  Exchange
Act and the rules and regulations promulgated thereunder.

         2.32 "OPTION" means an Incentive  Stock Option or a Nonstatutory  Stock
Option granted pursuant to the Plan.

         2.33 "OPTION  AGREEMENT" means a written  agreement between the Company
and an Optionholder  evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan and need not be identical.

         2.34  "OPTIONHOLDER"  means  a  person  to whom an  Option  is  granted
pursuant  to the  Plan  or,  if  applicable,  such  other  person  who  holds an
outstanding Option.

         2.35 "OUTSIDE  DIRECTOR" means a Director who is an "outside  director"
within  the  meaning  of  Section  162(m) of the Code and  Treasury  Regulations
Section 1.162-27(e)(3).

         2.36 "PARTICIPANT"  means a person to whom an Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Award.

         2.37 "PERFORMANCE AWARD" means Awards granted pursuant to Section 7.3.

         2.38 "PERMITTED HOLDERS" means Oaktree Capital Management,  LLC, OCM GW
Holdings, LLC, and the Related Parties.

         2.39 "PLAN" means this GulfWest Energy, Inc. 2005 Stock Incentive Plan.

         2.40 "RELATED  PARTY" means (1) any controlling  Shareholder,  partner,
member or 51% (or more) owned subsidiary of Oaktree Capital  Management,  LLC or
OCM GW  Holdings,  LLC;  or (2) any  trust,  corporation,  partnership,  limited
liability company or other entity,  the beneficiaries,  Shareholders,  partners,
members, owners or persons beneficially holding (directly or through one or more
subsidiaries) a 51% or more  controlling  interest of which consist of either or
both of Oaktree  Capital  Management,  LLC or OCM GW  Holdings,  LLC and/or such
other persons  referred to in the  immediately  preceding  clause or this clause
(2).

                                        5
<PAGE>

         2.41  "RESTRICTED  AWARD" means any Award  granted  pursuant to Section
7.1.

         2.42 "RIGHT OF  REPURCHASE"  means the  Company's  option to repurchase
unvested Common Stock acquired under the Plan upon the Participant's termination
of Continuous Service pursuant to Section 11.8.

         2.43 "RULE 16B-3" means Rule 16b-3  promulgated  under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.

         2.44 "SEC" means the Securities and Exchange Commission.

         2.45 "SECURITIES ACT" means the Securities Act of 1933, as amended.

         2.46 "STOCK  APPRECIATION  RIGHT" means the right  pursuant to an award
granted under  Section 7.4 to receive an amount equal to the excess,  if any, of
(A) the Fair  Market  Value,  as of the date such  Stock  Appreciation  Right or
portion thereof is surrendered,  of the shares of stock covered by such right or
such portion thereof, over (B) the aggregate SAR exercise price of such right or
such portion thereof.

         2.47 "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section  424(d) of the Code) stock  possessing  more than 10% of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates.

         2.48  "UNRESTRICTED  AWARD" means any Award granted pursuant to Section
7.2.

    3. ADMINISTRATION.

         3.1  ADMINISTRATION  BY BOARD.  The Plan shall be  administered  by the
Board unless and until the Board  delegates  administration  to a Committee,  as
provided in Section 3.5 (the group that  administers  the Plan is referred to as
the "ADMINISTRATOR").

         3.2 POWERS OF ADMINISTRATOR. The Administrator shall have the power and
authority to select and grant to  Participants,  Awards pursuant to the terms of
the Plan.

         3.3 SPECIFIC POWERS. In particular,  the  Administrator  shall have the
authority: (i) to construe and interpret the Plan and apply its provisions; (ii)
to  promulgate,  amend  and  rescind  rules  and  regulations  relating  to  the
administration of the Plan; (iii) to authorize any person to execute,  on behalf
of the Company,  any instrument  required to carry out the purposes of the Plan;
(iv) to determine when Awards are to be granted under the Plan; (v) from time to
time to  select,  subject  to the  limitations  set  forth in this  Plan,  those
Participants  to whom Awards shall be granted;  (vi) to determine  the number of
shares of Common  Stock to be made  subject to each  Award;  (vii) to  determine
whether  each  Stock  Option is to be an ISO or a  Non-Statutory  Stock  Option;
(viii) to prescribe the terms and conditions of each Award,  including,  without
limitation,  the exercise  price and medium of payment,  vesting  provisions and
Right of  Repurchase  provisions,  and to specify  the  provisions  of the Award
Agreement  relating to such grant or sale; (ix) to amend any outstanding  Awards
for the purpose of modifying the time or manner of vesting,  the purchase  price
or exercise price, as the case may be, subject to applicable legal restrictions;
PROVIDED,  HOWEVER, that if any such amendment impairs a Participant's rights or
increases a  Participant's  obligations  under his or her Award,  such amendment
shall  also be  subject  to the  Participant's  consent  (PROVIDED,  HOWEVER,  a
cancellation of an Award where the Participant receives a payment equal in value
to the Fair Market Value of the vested Award or, in the case of vested  Options,
the  difference  between the Fair Market Value of the Common Stock  subject to a
Stock Option and the exercise  price,  shall not constitute an impairment of the
Participant's  rights that requires consent);  (x) to determine the duration and
purpose of leaves of  absences  which may be granted  to a  Participant  without
constituting  termination of their  employment for purposes of the Plan; (xi) to
make  decisions  with  respect  to  outstanding  Stock  Options  that may become
necessary  upon  a  change  in  corporate  control  or an  event  that  triggers
anti-dilution adjustments;  and (xii) to exercise discretion to make any and all
other  determinations  which it  determines  to be necessary  or  advisable  for
administration of the Plan.

                                        6
<PAGE>

         3.4 DECISIONS FINAL. All decisions made by the  Administrator  pursuant
to the  provisions of the Plan shall be final and binding on the Company and the
Participants,   unless  such  decisions  are  determined  to  be  arbitrary  and
capricious.

         3.5 THE COMMITTEE.


                  (a) GENERAL. The Board may delegate administration of the Plan
to a Committee or Committees  of one or more members of the Board,  and the term
"COMMITTEE" shall apply to any person or persons to whom such authority has been
delegated.  If administration  is delegated to a Committee,  the Committee shall
have, in connection with the  administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the  administrative   powers  the  Committee  is  authorized  to  exercise  (and
references in this Plan to the Board or the Plan Administrator  shall thereafter
be to the Committee or subcommittee), subject, however, to such resolutions, not
inconsistent  with the  provisions  of the Plan,  as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the  administration of the Plan. The members of the Committee shall be
appointed by and to serve at the pleasure of the Board.  From time to time,  the
Board may increase or decrease the size of the Committee, add additional members
to,  remove  members  (with or  without  cause)  from,  appoint  new  members in
substitution therefor, and fill vacancies, however caused, in the Committee. The
Committee shall act pursuant to a vote of the majority of its members or, in the
case of a committee comprised of only two members,  the unanimous consent of its
members,  whether  present or not, or by the written  consent of the majority of
its members and minutes shall be kept of all of its meetings and copies  thereof
shall be provided to the Board.  Subject to the  limitations  prescribed  by the
Plan and the Board,  the  Committee  may  establish  and  follow  such rules and
regulations for the conduct of its business as it may determine to be advisable.

                  (b)  COMMITTEE  COMPOSITION  WHEN  COMMON  STOCK  IS  PUBLICLY
TRADED.  At such time as the Common Stock is publicly traded,  in the discretion
of the  Board,  a  Committee  may  consist  solely  of two or more  Non-Employee
Directors  who are also Outside  Directors.  The Board shall have  discretion to
determine whether or not it intends to comply with the exemption requirements of
Rule 16b-3 of the Exchange Act and/or  Section 162(m) of the Code.  However,  if
the Board intends to satisfy such exemption requirements, with respect to awards
to any Covered Employee and with respect to any insider subject to Section 16 of
the Exchange Act, the Committee  shall be a compensation  committee of the Board
that at all times consists solely of two or more Non-Employee  Directors who are
also Outside  Directors.  Within the scope of such  authority,  the Board or the
Committee  may (i)  delegate to a committee  of one or more members of the Board
who are not Outside  Directors  the  authority to grant Stock Rights to eligible
persons who are either (A) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such Stock
Award or (B) not persons with respect to whom the Company  wishes to comply with
Section  162(m)  of the  Code or (ii)  delegate  to a  committee  of one or more
members of the Board who are not  Non-Employee  Directors the authority to grant
Stock  Awards to eligible  persons who are not then subject to Section 16 of the
Exchange Act.

                                        7
<PAGE>

         3.6   INDEMNIFICATION.   In   addition   to  such   other   rights   of
indemnification  as they may have as Directors or members of the Committee,  and
to the extent  allowed by  applicable  law,  the  Administrator  and each of the
Administrator's  consultants  shall be  indemnified  by the Company  against the
reasonable expenses,  including attorney's fees, actually incurred in connection
with any action, suit or proceeding or in connection with any appeal therein, to
which the  Administrator or any of its consultants may be party by reason of any
action  taken or  failure  to act  under or in  connection  with the Plan or any
option granted under the Plan, and against all amounts paid by the Administrator
or any of its  consultants in settlement  thereof  (PROVIDED THAT the settlement
has been  approved by the  Company,  which  approval  shall not be  unreasonably
withheld) or paid by the Administrator or any of its consultants in satisfaction
of a judgment  in any such  action,  suit or  proceeding,  except in relation to
matters as to which it shall be adjudged in such action, suit or proceeding that
such  Administrator or any of its consultants did not act in good faith and in a
manner which such person reasonably  believed to be in the best interests of the
Company, and in the case of a criminal proceeding, had no reason to believe that
the conduct complained of was unlawful;  PROVIDED,  HOWEVER, that within 60 days
after institution of any such action, suit or proceeding,  such Administrator or
any of its consultants  shall, in writing,  offer the Company the opportunity at
its own expense to handle and defend such action, suit or proceeding.

    4. SHARES SUBJECT TO THE PLAN.

         4.1 SHARE  RESERVE.  Subject to the provisions of Section 12.1 relating
to  adjustments  upon  changes in Common  Stock,  the shares  that may be issued
pursuant to Awards shall consist of the Company's authorized but unissued Common
Stock, and the maximum aggregate amount of such Common Stock which may be issued
upon exercise of all Awards under the Plan shall not exceed  28,525,000  shares,
all of which may be used for  Incentive  Stock  Options.  The maximum  amount of
Common Stock that may be issued under the Plan specified  above shall be reduced
by 1,525,000,  the total number of shares underlying  options and awards granted
and  outstanding  on the Effective Date ("Prior  Outstanding  Awards") under the
terms of the GulfWest Energy Inc. 2004 Stock Option and  Compensation  Plan (the
"2004  Plan").  If, prior to the  termination  of the Plan, a Prior  Outstanding
Award shall expire, be forfeited or terminate for any reason without having been
exercised in full, the shares  subject to such expired,  forfeited or terminated
rights  shall  again be  available  for  purposes of this Plan and the number of
shares of Common Stock which may be issued upon the exercise of Awards under the
Plan shall be increased by the number of shares of Common Stock  underlying such
expired,  forfeited or terminated Prior Outstanding  Awards that become eligible
for Award under this Plan.  In no event,  however,  will the  maximum  aggregate
amount of Common  Stock  which may be issued  upon  exercise  of all  grants and
awards under the Plan,  including  Incentive Stock Options and Prior Outstanding
Awards that terminate and become  available under this Plan,  exceed  28,525,000
shares of Common Stock,  subject to  adjustment in accordance  with Section 12.1
hereof.


                                        8
<PAGE>

         4.2  REVERSION OF SHARES TO THE SHARE  RESERVE.  If any Award shall for
any reason expire or otherwise  terminate,  in whole or in part,  without having
been exercised in full, the shares of Common Stock not acquired under such Award
shall  revert to and again become  available  for  issuance  under the Plan.  If
Common Stock  issued under the Plan is reaquired by the Company  pursuant to the
terms of a Right of Repurchase  or other  forfeiture  provision,  such shares of
Common Stock shall again be available for issuance under the Plan.

         4.3 SOURCE OF SHARES.  The shares of Common  Stock  subject to the Plan
may be authorized but unissued Common Stock or reacquired  Common Stock,  bought
on  the  market,  pursuant  to any  Right  of  Repurchase  or  other  forfeiture
provision, or otherwise.

    5. ELIGIBILITY.

         5.1 ELIGIBILITY FOR SPECIFIC AWARDS.  Eligible Award recipients who are
selected by the Administrator shall be eligible for Awards hereunder, subject to
limitations set forth in this Plan; provided,  however,  Incentive Stock Options
may be granted only to Employees.  Awards other than Incentive Stock Options may
be granted to Employees,  Directors and  Consultants  who are  designated by the
Administrator.

         5.2 TEN PERCENT  SHAREHOLDERS.  A Ten Percent  Shareholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least 110% of the Fair Market Value of the Common Stock at the Date of Grant and
the Option is not  exercisable  after the expiration of five years from the Date
of Grant.

         5.3 SECTION  162(M)  LIMITATION.  Subject to the  provisions of Section
12.1  relating to  adjustments  upon changes in the shares of Common  Stock,  no
Employee shall be eligible to be granted  Options or Stock  Appreciation  Rights
covering more than  5,000,000  shares of Common Stock during any calendar  year.
This  Section 5.3 shall not apply prior to the Listing Date and,  following  the
Listing  Date,  this  Section 5.3 shall not apply until (a) the earliest of: (i)
the first  material  modification  of the Plan  (including  any  increase in the
number of  shares  of  Common  Stock  reserved  for  issuance  under the Plan in
accordance  with Section 4.1);  (ii) the issuance of all of the shares of Common
Stock reserved for issuance under the Plan; (iii) the expiration of the Plan; or
(iv) the first meeting of Shareholders at which Directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first  registration of an equity security under Section 12 of
the Exchange Act; or (b) such other date required by Section  162(m) of the Code
and the rules and regulations promulgated thereunder.

                                        9
<PAGE>

         5.4  CONSULTANTS.  From and after the Listing Date, a Consultant  shall
not be eligible  for the grant of an Award if, at the time of grant,  a Form S-8
Registration Statement under the Securities Act ("FORM S-8") is not available to
register  either  the  offer or the  sale of the  Company's  securities  to such
Consultant  because  of the  nature  of the  services  that  the  Consultant  is
providing to the Company,  or because the Consultant is not a natural person, or
as otherwise  provided by the rules  governing  the use of Form S-8,  unless the
Company  determines  both (i) that such grant (1) shall be registered in another
manner under the Securities Act (E.G., on a Form S-3 Registration  Statement) or
(2) does not require  registration  under the  Securities Act in order to comply
with the  requirements of the Securities Act, if applicable,  and (ii) that such
grant complies with the securities laws of all other relevant jurisdictions.

5.5  DIRECTORS.  Each  Director  of the  Company  shall be  eligible  to receive
discretionary grants of Awards under the Plan.

    6. OPTION PROVISIONS.

         Each  Option  shall be in such form and shall  contain  such  terms and
conditions as the  Administrator  shall deem  appropriate.  All Options shall be
separately  designated  Incentive Stock Options or Nonstatutory Stock Options at
the time of grant,  and, if certificates are issued,  a separate  certificate or
certificates  will be issued for shares of Common Stock purchased on exercise of
each type of Option.  Notwithstanding  the foregoing,  the Company shall have no
liability to any  Participant or any other person if an Option  designated as an
Incentive  Stock  Option fails to qualify as such at any time or if an Option is
determined to constitute "nonqualified deferred compensation" within the meaning
of  Section  409A of the Code and the terms of such  Option do not  satisfy  the
additional  conditions  applicable to nonqualified  deferred  compensation under
Section 409A of the Code and Section 8 of the Plan.  The  provisions of separate
Options  need  not  be  identical,   but  each  Option  shall  include  (through
incorporation of provisions  hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

         6.1 TERM.  Subject to the  provisions  of  Section  5.2  regarding  Ten
Percent  Shareholders,  no Incentive Stock Option shall be exercisable after the
expiration of 10 years from the date it was granted.

         6.2  EXERCISE  PRICE  OF AN  INCENTIVE  STOCK  OPTION.  Subject  to the
provisions of Section 5.2 regarding Ten Percent Shareholders, the exercise price
of each  Incentive  Stock  Option shall be not less than 100% of the Fair Market
Value of the  Common  Stock  subject  to the  Option  on the date the  Option is
granted. Notwithstanding the foregoing, an Incentive Stock Option may be granted
with an exercise  price lower than that set forth in the  preceding  sentence if
such Option is granted  pursuant to an  assumption or  substitution  for another
option in a manner satisfying the provisions of Section 424(a) of the Code.

         6.3 EXERCISE PRICE OF A NONSTATUTORY  STOCK OPTION.  The exercise price
of each Nonstatutory  Stock Option shall be not less than 35% of the Fair Market
Value of the  Common  Stock  subject  to the  Option  on the date the  Option is
granted; provided, however, any Nonstatutory Stock Option with an exercise price
less than the Fair Market Value of the Common Stock subject to the Option on the
date the  Option is  granted  shall be a 409A  Award and shall be subject to the
additional   requirements  of  Section  8.  Notwithstanding  the  foregoing,   a
Nonstatutory  Stock Option may be granted with an exercise price lower than that
set forth in the  preceding  sentence if such  Option is granted  pursuant to an
assumption  or  substitution  for  another  option  in a manner  satisfying  the
provisions of Section 424(a) of the Code.

                                       10
<PAGE>

         6.4 CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent  permitted by applicable  statutes and
regulations,  either (i) in cash or by  certified  or bank check at the time the
Option is exercised or (ii) or in the discretion of the Administrator, upon such
terms as the Administrator shall approve, the exercise price may be paid: (1) by
delivery to the Company of other Common Stock, duly endorsed for transfer to the
Company,  with a Fair Market Value on the date of delivery equal to the exercise
price (or portion  thereof) due for the number of shares being  acquired,  or by
means of attestation  whereby the Participant  identifies for delivery  specific
shares of Common  Stock  that have been held for more than six  months  (or such
longer or shorter  period of time  required  to avoid a charge to  earnings  for
financial  accounting  purposes)  that have a Fair  Market  Value on the date of
attestation  equal to the  exercise  price (or portion  thereof)  and receives a
number of shares of Common Stock equal to the  difference  between the number of
shares  thereby  purchased  and the number of identified  attestation  shares of
Common Stock (a "STOCK FOR STOCK EXCHANGE"); (2) during any period for which the
Common  Stock is  publicly  traded  (I.E.,  the  Common  Stock is  listed on any
established  stock  exchange  or a national  market  system,  including  without
limitation the Nasdaq National  Market,  or if the Common Stock is quoted on the
Nasdaq  System (but not on the Nasdaq  National  Market) or any  similar  system
whereby the Common Stock is regularly quoted by a recognized  securities  dealer
but closing sale prices are not reported), by a copy of instructions to a broker
directing  such  broker  to sell the  Common  Stock  for  which  such  Option is
exercised,  and to remit to the Company  the  aggregate  Exercise  Price of such
Options (a "CASHLESS  EXERCISE");  (3) in any other form of legal  consideration
that may be acceptable to the Administrator, including without limitation with a
full-recourse  promissory note;  PROVIDED,  HOWEVER, if applicable law requires,
the par value (if any) of Common Stock,  if newly issued,  shall be paid in cash
or cash equivalents. The interest rate payable under the terms of the promissory
note  shall not be less than the  minimum  rate (if any)  required  to avoid the
imputation of additional interest under the Code. Subject to the foregoing,  the
Administrator  (in its sole discretion)  shall specify the term,  interest rate,
amortization requirements (if any) and other provisions of such note. Unless the
Administrator determines otherwise,  shares of Common Stock having a Fair Market
Value at least equal to the  principal  amount of any such loan shall be pledged
by the holder to the  Company as security  for payment of the unpaid  balance of
the loan and such pledge shall be evidenced by a pledge agreement,  the terms of
which shall be determined by the  Administrator,  in its  discretion;  PROVIDED,
HOWEVER,  that each loan shall comply with all applicable laws,  regulations and
rules of the Board of  Governors  of the  Federal  Reserve  System and any other
governmental agency having jurisdiction.  Unless otherwise specifically provided
in the Option, the purchase price of Common Stock acquired pursuant to an Option
that is paid by delivery (or  attestation)  to the Company of other Common Stock
acquired,  directly or indirectly from the Company, shall be paid only by shares
of the Common  Stock of the Company that have been held for more than six months
(or such longer or shorter period of time required to avoid a charge to earnings
for financial  accounting  purposes).  Notwithstanding the forgoing,  during any
period for which the Common Stock is publicly traded (I.E.,  the Common Stock is
listed on any established stock exchange or a national market system,  including
without  limitation the Nasdaq National Market, or if the Common Stock is quoted
on the Nasdaq  System  (but not on the Nasdaq  National  Market) or any  similar
system whereby the Common Stock is regularly  quoted by a recognized  securities
dealer but closing sale prices are not reported), a Cashless Exercise,  exercise
with a promissory note or other  transaction by a Director or executive  officer
that  involves  or may  involve  a direct  or  indirect  extension  of credit or
arrangement  of an  extension  of  credit by the  Company,  or an  Affiliate  in
violation of Section 402(a) of the Sarbanes-Oxley Act (codified as Section 13(k)
of the  Securities  Exchange  Act of  1934,  15  U.S.C.  ss.  78m(k))  shall  be
prohibited with respect to any Award under this Plan.

                                       11
<PAGE>

         6.5  TRANSFERABILITY  OF AN INCENTIVE STOCK OPTION.  An Incentive Stock
Option  shall not be  transferable  except by will or by the laws of descent and
distribution  and shall be exercisable  during the lifetime of the  Optionholder
only by the Optionholder.  Notwithstanding the foregoing,  the Optionholder may,
by  delivering  written  notice to the Company,  in a form  satisfactory  to the
Company,  designate  a  third  party  who,  in the  event  of the  death  of the
Optionholder, shall thereafter be entitled to exercise the Option.

         6.6  TRANSFERABILITY  OF A  NONSTATUTORY  STOCK OPTION.  A Nonstatutory
Stock Option may, in the sole discretion of the  Administrator,  be transferable
to a permitted  transferee  upon written  approval by the  Administrator  to the
extent provided in the Option Agreement.  A permitted transferee includes: (1) a
transfer by gift or domestic  relations order to a member of the  Optionholder's
immediate family (child, stepchild, grandchild, parent, stepparent, grandparent,
spouse, former spouse,  sibling,  niece, nephew,  mother-in-law,  father-in-law,
son-in-law,   daughter-in-law,   brother-in-law,  or  sister-in-law,   including
adoptive relationships,  any person sharing the Optionholder's  household (other
than a tenant or employee), a trust in which these persons have more than 50% of
the  beneficial   interest,   a  foundation  in  which  these  persons  (or  the
Optionholder)  control the  management of assets,  and any other entity in which
these persons (or the  Optionholder)  own more than 50% of the voting interests;
(2) third parties  designated by the  Administrator in connection with a program
established and approved by the Administrator pursuant to which Participants may
receive a cash payment or other  consideration in consideration for the transfer
of such  Nonstatutory  Stock Option;  and (3) such other  transferees  as may be
permitted by the Administrator in its sole discretion. If the Nonstatutory Stock
Option does not provide for transferability,  then the Nonstatutory Stock Option
shall  not be  transferable  except  by  will  or by the  laws  of  descent  and
distribution  and shall be exercisable  during the lifetime of the  Optionholder
only by the Optionholder.  Notwithstanding the foregoing,  the Optionholder may,
by  delivering  written  notice to the Company,  in a form  satisfactory  to the
Company,  designate  a  third  party  who,  in the  event  of the  death  of the
Optionholder, shall thereafter be entitled to exercise the Option.

         6.7 VESTING GENERALLY. The Option may, but need not, vest and therefore
become  exercisable in periodic  installments  that may, but need not, be equal.
The Option may be subject  to such  other  terms and  conditions  on the time or
times  when it may be  exercised  (which  may be based on  performance  or other
criteria) as the Administrator may deem appropriate.  The vesting  provisions of
individual  Options  may vary.  No Option may be  exercised  for a fraction of a
share of Common  Stock.  The  Administrator  may,  but shall not be required to,
provide for an  acceleration of vesting and  exercisability  in the terms of any
Option Agreement upon the occurrence of a Change in Control of the Company.

                                       12
<PAGE>

         6.8 TERMINATION OF CONTINUOUS SERVICE.  Unless otherwise provided in an
Option  Agreement  or in an  employment  agreement  the terms of which have been
approved by the Administrator, in the event an Optionholder's Continuous Service
terminates  (other  than  upon  the   Optionholder's   death  or  Disability  or
termination by the Company for Cause),  the Optionholder may exercise his or her
Option (to the extent that the Optionholder was entitled to exercise such Option
as of the date of termination) but only within such period of time ending on the
earlier  of  (a)  the  date  three  months  following  the  termination  of  the
Optionholder's  Continuous  Service,  or (b) the  expiration  of the term of the
Option  as set  forth  in the  Option  Agreement.  If,  after  termination,  the
Optionholder  does not exercise his or her Option  within the time  specified in
the Option Agreement,  the Option shall terminate.  Outstanding Options that are
not exercisable at the time an Optionholder's  Continuous Service terminates for
any  reason  other  than  for  Cause  (including  an  Optionholder's   death  or
Disability)  shall be forfeited  and expire at the close of business on the date
of such termination.  If the  Optionholder's  Continuous  Service terminates for
Cause,  all outstanding  Options shall be forfeited  (whether or not vested) and
expire as of the  beginning  of  business  on the date of such  termination  for
Cause.

         6.9 EMPLOYMENT BY A COMPETITOR.  Unless otherwise provided in an Option
Agreement or in an employment agreement the terms of which have been approved by
the Administrator,  in the event an Optionholder (i) voluntarily  resigns his or
her  employment  with the  Company and its  Affiliates  and (ii)  thereafter  is
employed  by any person or entity  that is engaged  in any line of  business  in
which the Company or any Affiliate is engaged as of the date of such resignation
(a "COMPETITOR"), then all Options held by such Optionholder shall expire on the
later of the 30th day  following  the  Optionholders  termination  of Continuous
Service  or  the  commencement  of  such  Optionholder's  employment  with  such
Competitor,  irrespective  of whether such  Optionholder's  employment  with the
Competitor continues through such 30-day period.

         6.10 EXTENSION OF TERMINATION DATE. An Optionholder's  Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service for any reason other than Cause (including
upon the  Optionholder's  death or  Disability)  would be prohibited at any time
because the  issuance of shares of Common Stock would  violate the  registration
requirements  under the Securities Act or any other state or federal  securities
law, then the Option shall terminate on the earlier of (a) the expiration of the
term of the Option in  accordance  with Section 6.1 or (b) the  expiration  of a
period after termination of the Participant's  Continuous  Service that is three
months after the end of the period during which the exercise of the Option would
be in violation of such registration or other securities law requirements.

         6.11 DEATH OF  OPTIONHOLDER.  Unless  otherwise  provided  in an Option
Agreement,  in the event an Optionholder's  Continuous  Service  terminates as a
result of the  Optionholder's  death,  then the Option may be exercised  (to the
extent the  Optionholder  was entitled to exercise such Option as of the date of
death) by the  Optionholder's  estate,  by a person  who  acquired  the right to
exercise  the Option by  bequest or  inheritance  or by a person  designated  to
exercise the Option upon the  Optionholder's  death,  but only within the period
ending on the earlier of (a) the date 12 months  following  the date of death or
(b) the  expiration  of the  term of such  Option  as set  forth  in the  Option
Agreement.  If,  after  death,  the  Option  is not  exercised  within  the time
specified herein, the Option shall terminate.



                                       13
<PAGE>

         6.12 DISABILITY OF OPTIONHOLDER. Unless otherwise provided in an Option
Agreement, in the event that an Optionholder's  Continuous Service terminates as
a result of the Optionholder's  Disability, the Optionholder may exercise his or
her Option (to the extent that the  Optionholder  was entitled to exercise  such
Option  as of the date of  termination),  but only  within  such  period of time
ending on the earlier of (a) the date 12 months  following  such  termination or
(b) the  expiration  of the  term  of the  Option  as set  forth  in the  Option
Agreement. If, after termination,  the Optionholder does not exercise his or her
Option within the time specified herein, the Option shall terminate.

         6.13 EARLY EXERCISE.  The Option may, but need not, include a provision
whereby  the  Optionholder  may  elect at any  time  before  the  Optionholder's
Continuous  Service  terminates  to exercise the Option as to any part or all of
the shares of Common  Stock  subject to the Option  prior to the full vesting of
the Option.  In such case, the shares of Common Stock acquired on exercise shall
be subject to the vesting  schedule that otherwise  would apply to determine the
exercisability  of the Option.  Any unvested shares of Common Stock so purchased
may be subject to a Right of  Repurchase in favor of the Company or to any other
restriction the Administrator determines to be appropriate. The Company will not
be required to exercise  its Right of  Repurchase  until at least six months (or
such longer or shorter period of time required to avoid a charge to earnings for
financial  accounting  purposes) have elapsed  following  exercise of the Option
unless the Administrator otherwise specifically provides in the Option.

         6.14 RELOAD OPTIONS. At the discretion of the Administrator, the Option
may include a "reload" feature  pursuant to which an Optionholder  exercising an
option by the delivery of a number of shares of Common Stock in accordance  with
Section 6.4 hereof would  automatically be granted an additional Option (with an
exercise  price equal to the Fair Market  Value of the Common  Stock on the date
the  additional  Option  is  granted  and with the same  expiration  date as the
original Option being exercised,  and with such other terms as the Administrator
may  provide)  to purchase  that  number of shares of Common  Stock equal to the
number delivered in a Stock For Stock Exercise of the original Option.

         6.15 ADDITIONAL  REQUIREMENTS UNDER SECTION 409A. Each Option agreement
shall include a provision whereby,  notwithstanding any provision of the Plan or
the Option  agreement to the contrary,  the Option shall satisfy the  additional
conditions  applicable to nonqualified  deferred compensation under Section 409A
of the Code, in accordance with Section 8 hereof,  in the event any Option under
this Plan is granted  with an exercise  price less than Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted (regardless
of whether or not such exercise price is intentionally or unintentionally priced
at less than Fair Market  Value,  or is  materially  modified at a time when the
Fair Market Value  exceeds the exercise  price),  or is otherwise  determined to
constitute  "nonqualified  deferred  compensation" within the meaning of Section
409A of the Code.

         6.16 INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate  Fair Market Value  (determined  at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates)  exceeds $100,000,  the Options or portions thereof which exceed
such limit  (according to the order in which they were granted) shall be treated
as Nonstatutory Stock Options.

                                       14
<PAGE>

    7. PROVISIONS OF AWARDS OTHER THAN OPTIONS.

         7.1 RESTRICTED  AWARDS.  The  Administrator may from time to time award
(or sell at a purchase price determined by the Administrator)  restricted Common
Stock  under the Plan to  eligible  Participants.  Restricted  Awards may not be
sold, assigned, transferred or otherwise disposed of, pledged or hypothecated as
collateral  for a loan or as security for the  performance  of any obligation or
for  any  other  purpose  for  such  period  (the  "RESTRICTED  PERIOD")  as the
Administrator shall determine. Each restricted stock purchase agreement shall be
in such form and shall contain such terms,  conditions and Restricted Periods as
the  Administrator  shall  deem  appropriate.  The terms and  conditions  of the
restricted stock purchase agreements may change from time to time, and the terms
and  conditions of separate  restricted  stock purchase  agreements  need not be
identical,  but each restricted stock purchase  agreement shall include (through
incorporation  of provisions  hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

                  (a) PURCHASE  PRICE.  The purchase price of restricted  Awards
shall be determined by the Administrator, and may be stated as cash, property, a
contract for future services or prior services.

                  (b) CONSIDERATION. The consideration for Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase;  or (ii) in any other form of legal  consideration
that may be acceptable to the Administrator in its discretion including, without
limitation,  a recourse promissory note, property or a Stock For Stock Exchange,
a  contract  for  future  services  or prior  services  that  the  Administrator
determines  have a value at least equal to the Fair Market  Value of such Common
Stock.

                  (c)  VESTING.  Shares  of  Common  Stock  acquired  under  the
restricted  stock  purchase  agreement  may,  but  need  not,  be  subject  to a
Restricted  Period that  specifies a Right of Repurchase in favor of the Company
in accordance with a vesting schedule to be determined by the Administrator,  or
forfeiture  in the  event the  consideration  was in the form of prior or future
services. The Administrator in its discretion may provide for an acceleration of
vesting in the terms of any restricted  stock purchase  agreement in the event a
Change in Control occurs.

                  (d) TERMINATION OF PARTICIPANT'S  CONTINUOUS  SERVICE.  Unless
otherwise  provided  in an  Option  Agreement  or a  restricted  stock  purchase
agreement or in an employment agreement the terms of which have been approved by
the  Administrator,  in the event a Participant's  Continuous Service terminates
for any reason,  the Company may exercise its Right of  Repurchase  or otherwise
reacquire,  or  the  Participant  shall  forfeit  unvested  shares  acquired  in
consideration  of prior or  future  services,  and any or all of the  shares  of
Common  Stock  held by the  Participant  which have not vested as of the date of
termination under the terms of the Option Agreement or restricted stock purchase
agreement  shall be  forfeited  and the  Participant  shall have no rights  with
respect to the Award.

                  (e) TRANSFERABILITY.  Rights to acquire shares of Common Stock
under the  restricted  stock purchase  agreement  shall be  transferable  by the
Participant  only  upon  such  terms  and  conditions  as are set  forth  in the
restricted stock purchase agreement, as the Administrator shall determine in its
discretion,  so long as Common Stock awarded under the restricted stock purchase
agreement  remains subject to the  restrictions of the restricted stock purchase
agreement.


                                       15
<PAGE>

                  (f) CONCURRENT  TAX PAYMENT.  The  Administrator,  in its sole
discretion,  may (but  shall  not be  required  to)  provide  for  payment  of a
concurrent  cash award in an amount equal, in whole or in part, to the estimated
after tax amount  required  to satisfy  applicable  federal,  state or local tax
withholding   obligations  arising  from  the  receipt  and  deemed  vesting  of
restricted  stock for which an election  under  Section 83(b) of the Code may be
required.

                  (g) LAPSE OF RESTRICTIONS.  Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions prescribed
by the Administrator,  the restrictions applicable to the restricted Award shall
lapse and a stock  certificate  for the  number of shares of Common  Stock  with
respect to which the  restrictions  have lapsed shall be delivered,  free of any
restrictions  except those that may be imposed by law, to the Participant or the
Participant's  beneficiary or estate,  as the case may be. The Company shall not
be  required to deliver any  fractional  share of Common  Stock but will pay, in
lieu  thereof,  the Fair Market  Value of such  fractional  share in cash to the
Participant or the Participant's  beneficiary or estate, as the case may be. The
Common Stock certificate shall be issued and delivered and the Participant shall
be entitled to the  beneficial  ownership  rights of such Common Stock not later
than  (i) the date  that is  2-1/2  months  after  the end of the  Participant's
taxable  year for which the  Restricted  Period ends and the  Participant  has a
legally  binding  right to such  amounts;  or (ii) the date that is 2-1/2 months
after the end of the Company's taxable year for which the Restricted Period ends
and the Participant  has a legally  binding right to such amounts,  whichever is
later.

    7.2 UNRESTRICTED AWARDS.

                  (a) GRANT OR SALE OF  UNRESTRICTED  STOCK.  The  Administrator
may, in its sole  discretion,  award (or sell at a purchase price  determined by
the Administrator) an Unrestricted  Award to any Participant,  pursuant to which
such  individual  may  receive  shares  of  Common  Stock  free  of any  vesting
restriction  ("UNRESTRICTED  STOCK") under the Plan.  Unrestricted Awards may be
granted  or sold as  described  in the  preceding  sentence  in  respect of past
services or other valid  consideration,  or in lieu of any cash compensation due
to such  individual.  Except as elected  pursuant to Section 7.2(b),  the Common
Stock  certificate for Unrestricted  Stock shall be issued and delivered and the
Participant shall be entitled to the beneficial  ownership rights of such Common
Stock not  later  than (i) the date  that is 2-1/2  months  after the end of the
Participant's  taxable year for which services  rendered as  consideration  were
provided  and in which  the  Participant  has a  legally  binding  right to such
amounts;  or (ii) the date that is 2-1/2 months  after the end of the  Company's
taxable year for which services  rendered as consideration  were provided and in
which the Participant has a legally binding right to such amounts,  whichever is
later.

                  (b)  DEFERRAL  OF  AWARDS.  Each  Participant  who has made an
election to receive  shares of  Unrestricted  Stock under this  Section 7.2 will
have the right to defer  receipt  of up to 100% of such  shares of  Unrestricted
Stock payable to such  Participant in accordance  with such rules and procedures
as may from time to time be  established  by the Company for that  purpose.  The
deferred  Unrestricted  Stock shall be entitled to receive  Dividend  Equivalent
Rights settled in shares of Common Stock.  A deferral  election must satisfy the
election timing  requirements of Section  7.2(b)(1) or Section 7.2(b)(2) and the
409A Award conditions of Section 8 in addition to the additional requirements of
this Section7.2(b).


                                       16
<PAGE>

                  (1)  The   Participant's   election   to  defer  an  Award  of
Unrestricted  Stock must be filed  with the  Administrator  during the  election
period  ending not later than the close of the  preceding  calendar  year (or at
such other time as may be  permitted  by the  Administrator  that is provided in
regulations  under Section 409A of the Code).  In the case of the first calendar
year in which a  Participant  becomes  a  Deferral  Eligible  Participant,  such
election may be made with respect to services to be performed  subsequent to the
election  within 30 days  after  the date the  Participant  becomes  a  Deferral
Eligible Participant.

                  (2) The  Participant's  election to defer a  performance-based
Unrestricted  Stock Award  determined with respect to services  performed over a
period of at least 12 months,  must be filed with the  Administrator  during the
election  period  ending  not  later  than  six  months  before  the  end of the
performance  measurement  period,  or such other  period as is  permitted  under
Section 409A of the Code.

                  (3) A deferral  election shall be irrevocable  once filed with
the  Administrator,  except as otherwise provided herein. The Administrator may,
but is not required to, permit a subsequent  election to further defer or change
(but not accelerate) the timing or form of distribution.  However,  a subsequent
election  will not be  permitted  unless (i) the  subsequent  election  does not
become effective until at least 12 months after the date on which the subsequent
election  is  filed  with  the  Administrator;  (ii)  except  in the  case  of a
distribution  on account  of the  Participant's  death,  becoming  Disabled  (as
defined in Section 8.3(b)), or an Unforeseeable Emergency (as defined in Section
8.3(c)),  the subsequent  election must defer the payment for not less than five
years from the date such distribution  would otherwise have been made; and (iii)
any subsequent  election to defer the time or form of a  distribution  scheduled
for a fixed  date or  pursuant  to a fixed  schedule  specified  in the  initial
election  may not be made  less  than 12  months  prior to the date of the first
scheduled distribution.

                  (4)  CONTINUING  ELECTION.   An  Unrestricted  Stock  deferral
election  shall  continue  in  effect  from year to year  while the  Participant
continues to be a Deferral Eligible Participant unless it is revoked or modified
during an election period permitted under Section 7.2(b)(1).

                  (5)  BOOKKEEPING  ACCOUNT.  At  such  time  or  times  as  the
Participant would have been, but for the Unrestricted  Stock deferral  election,
entitled to purchase or receive shares of Common Stock, the Administrator  shall
credit the  Participant's  notional stock account with an appropriate  number of
shares of Common Stock  determined  by dividing the deferred  amount by the Fair
Market Value of a share of Common Stock on such date. If the amount  withheld is
insufficient to credit the  Participant  with a whole number of shares of Common
Stock,  any residual credit shall be credited to the  Participant's  account and
carried forward until such credits can be combined with any subsequent deferrals
to credit the  Participant's  notional stock account with  additional  shares of
Common Stock.


                                       17
<PAGE>

                  (6) VESTING.  Each Participant who enters into an Unrestricted
Stock deferral  election shall have a fully vested  non-forfeitable  interest in
all amounts covered by the Stock Purchase  Deferral  Election under the Plan and
the earnings, losses and dividend equivalents credited thereto.  Notwithstanding
the foregoing,  all amounts credited to the Participant's notional stock account
shall be unfunded,  payable from the Company's general assets and subject to the
claims of the Company's  creditors.  The  Unrestricted  Stock deferral  election
constitutes  a mere  promise by the  Company  to make  benefit  payments  in the
future,  shall not constitute  Common Stock,  and shall not be deemed to be held
under any trust,  escrow or other secured or segregated fund, but shall remain a
general unpledged, unrestricted asset of the Company at all times subject to the
claims of general  creditors of the Company.  Benefits shall not be transferable
and shall  not be  subject  in any  manner to  anticipation,  alienation,  sale,
transfer,  assignment,  pledge or encumbrance by any  Participant or beneficiary
and any attempt to do so shall be null and void,  nor may the same be subject to
attachment or seizure by any creditor of any Participant or any beneficiary.

                  (7) DISTRIBUTIONS.  Distribution of the Participants  notional
stock  account  shall be made only in the form of shares of Common Stock (except
for any residual credit where the amount withheld was insufficient to credit the
Participant  with the  equivalent of a whole number of shares of Common  Stock).
All distributions shall be subject to the 409A Award conditions of Section 8.

                  (8)   RESTRICTIONS   ON   TRANSFERS.   The  right  to  receive
Unrestricted Stock on a deferred basis may not be sold,  assigned,  transferred,
pledge or  otherwise  encumbered,  other than by will or the laws of descent and
distribution.

    7.3 PERFORMANCE AWARDS.

                  (a) NATURE OF PERFORMANCE  AWARDS.  A Performance  Award is an
Award  entitling  the  recipient  to acquire  actual  shares of Common  Stock or
hypothetical Common Stock units having a value equal to the Fair Market Value of
an identical  number of shares of Common Stock upon the  attainment of specified
performance  goals. The Administrator may make Performance Awards independent of
or in  connection  with  the  granting  of  any  other  Award  under  the  Plan.
Performance  Awards may be granted under the Plan to any Participant,  including
those who qualify for awards under other performance  plans of the Company.  The
Administrator  in its  sole  discretion  shall  determine  whether  and to  whom
Performance  Awards shall be made, the performance  goals  applicable under each
Award,  the periods during which  performance  is to be measured,  and all other
limitation and conditions applicable to the awarded shares;  PROVIDED,  HOWEVER,
that the  Administrator  may rely on the  performance  goals and other standards
applicable  to other  performance  unit  plans of the  Company  in  setting  the
standards  for  Performance  Awards under the Plan.  Performance  goals shall be
based on a  pre-established  objective  formula or standard  that  specifies the
manner of  determining  the  number of  Performance  Award  shares  that will be
granted or will vest if the performance goal is attained. Performance goals will
be determined by the  Administrator  prior to the time 25% of the service period
has elapsed and may be based on one or more  business  criteria  that apply to a
Participant,  a business unit or the Company and its  Affiliates.  Such business
criteria  may  include,  by way of  example  and  without  limitation,  revenue,
earnings before interest,  taxes,  depreciation and amortization (EBITDA), funds


                                       18
<PAGE>

from operations, funds from operations per share, operating income, pre or after
tax income, cash available for distribution, cash available for distribution per
share,  net earnings,  earnings per share,  return on equity,  return on assets,
share price  performance,  improvements  in the Company's  attainment of expense
levels, and implementing or completion of critical  projects,  or improvement in
cash-flow  (before or after tax).  A  performance  goal may be  measured  over a
performance period on a periodic, annual, cumulative or average basis and may be
established on a corporate-wide basis or established with respect to one or more
operating  units,  divisions,   subsidiaries,   acquired  businesses,   minority
investments,  partnerships or joint ventures. More than one performance goal may
be  incorporated  in a performance  objective,  in which case  achievement  with
respect to each performance goal may be assessed  individually or in combination
with each other. The Administrator  may, in connection with the establishment of
performance  objectives  for a performance  period,  establish a matrix  setting
forth the relationship  between performance on two or more performance goals and
the amount of the Performance  Award payable for that  performance  period.  The
level or levels of performance  specified with respect to a performance goal may
be established in absolute terms, as objectives relative to performance in prior
periods,  as an objective  compared to the performance of one or more comparable
companies  or  an  index  covering  multiple  companies,  or  otherwise  as  the
Administrator may determine.  Performance  objectives shall be objective and, if
the Company is publicly traded, shall otherwise meet the requirements of Section
162(m) of the Code.  Performance  objectives may differ for  Performance  Awards
granted to any one Participant or to different Participants. A Performance Award
to a  Participant  who is a Covered  Employee  shall  (unless the  Administrator
determines otherwise) provide that in the event of the Participant's termination
of Continuous Service prior to the end of the performance period for any reason,
such Award will be payable only (i) if the applicable performance objectives are
achieved and (ii) to the extent, if any, as the  Administrator  shall determine.
Such  objective  performance  goals do not have to be  based on  increases  in a
specific  business  criteria,  but may be based on maintaining the status quo or
limiting economic losses.

                  (b)  RESTRICTIONS  ON  TRANSFER.  Performance  Awards  and all
rights  with  respect  to such  Performance  Awards  may not be sold,  assigned,
transferred, pledged or otherwise encumbered.

                  (c)  RIGHTS  AS  A  SHAREHOLDER.  A  Participant  receiving  a
Performance  Award  shall  have the  rights of a  Shareholder  only as to shares
actually  received  by the  Participant  under the Plan and not with  respect to
shares  subject to the Award but not  actually  received by the  Participant.  A
Participant  shall be entitled  to receive a stock  certificate  evidencing  the
acquisition  of shares of  Common  Stock  under a  Performance  Award  only upon
satisfaction of all conditions  specified in the written  instrument  evidencing
the Performance  Award (or in a performance plan adopted by the  Administrator).
The Common Stock  certificate  shall be issued and delivered and the Participant
shall be entitled to the  beneficial  ownership  rights of such Common Stock not
later than (i) the date that is 2-1/2 months after the end of the  Participant's
taxable year for which the  Administrator  certifies that the Performance  Award
conditions  have been satisfied and the  Participant has a legally binding right
to such  amounts;  or (ii) the date  that is 2-1/2  months  after the end of the
Company's  taxable  year  for  which  the   Administrator   certifies  that  the
Performance  Award  conditions  have been  satisfied and the  Participant  has a
legally binding right to such amounts, whichever is later.

                                       19
<PAGE>

                  (d)  TERMINATION.  Except as may  otherwise be provided by the
Administrator  at any time, a  Participant's  rights in all  Performance  Awards
shall automatically  terminate upon the Participant's  termination of employment
(or business relationship) with the Company and its Affiliates for any reason.

                  (e)  ACCELERATION,  WAIVER,  ETC.  At any  time  prior  to the
Participant's  termination of employment (or other business relationship) by the
Company  and  its  Affiliates,  the  Administrator  may in its  sole  discretion
accelerate,  waive or,  subject  to Section  13,  amend any or all of the goals,
restrictions   or  conditions   imposed  under  any   Performance   Award.   The
Administrator  in its discretion may provide for an  acceleration  of vesting in
the terms of any Performance Award in the event a Change in Control occurs.

                  (f)   CERTIFICATION.   Following   the   completion   of  each
performance  period, the Administrator  shall certify in writing,  in accordance
with the  requirements  of Section 162(m) of the Code,  whether the  performance
objectives and other material terms of a Performance Award have been achieved or
met. Unless the Administrator determines otherwise, Performance Awards shall not
be settled until the Administrator  has made the  certification  specified under
this Section 7.3(f).

    7.4 STOCK APPRECIATION RIGHTS.

                  (a) GENERAL.  Stock Appreciation  Rights may be granted either
alone ("FREE STANDING  RIGHTS") or, provided the  requirements of Section 7.4(b)
are  satisfied,  in tandem with all or part of any Option granted under the Plan
("RELATED RIGHTS").  In the case of a Nonstatutory Stock Option,  Related Rights
may be granted either at or after the time of the grant of such Stock Option. In
the case of an Incentive Stock Option, Related Rights may be granted only at the
time of the grant of the Incentive Stock Option.

                  (b) GRANT REQUIREMENTS. A Stock Appreciation Right may only be
granted if the Stock  Appreciation  Right: (1) does not provide for the deferral
of compensation within the meaning of Section 409A of the Code; or (2) satisfies
the  requirements of Section 7.4(h) and Section 8 hereof.  A Stock  Appreciation
Right does not  provide  for a deferral  of  compensation  if: (i) the floor for
determining the appreciation component of the Stock Appreciation Right that will
be paid to the Participant  (i.e., the amount used to determine the appreciation
in  excess of the value of the  Common  Stock  that the  holder is  entitled  to
receive upon exercise (hereinafter, the "SAR EXERCISE PRICE")) may never be less
than the Fair Market Value of the underlying  Common Stock on the date the right
is  granted,  (ii)  the  Common  Stock  subject  to the  right is  traded  on an
established  securities  market,  (iii)  only such  traded  Common  Stock may be
delivered in settlement of the right upon exercise,  and (iv) the right does not
include any feature for the deferral of compensation  other than the deferral of
recognition of income until the exercise of the right.

                  (c) EXERCISE AND PAYMENT. Upon exercise thereof, the holder of
a Stock  Appreciation  Right shall be entitled to receive from the  Company,  an
amount equal to the product of (i) the excess of the Fair Market  Value,  on the
date of such written request, of one share of Common Stock over the SAR exercise
price  per share  specified  in such  Stock  Appreciation  Right or its  related
Option,   multiplied  by  (ii)  the  number  of  shares  for  which  such  Stock
Appreciation Right shall be exercised. Payment with respect to the exercise of a
Stock  Appreciation  Right that satisfies the requirements of Section  7.4(b)(1)
shall be paid on the date of exercise  and made in shares of Common  Stock (with
or   without   restrictions   as  to   substantial   risk  of   forfeiture   and
transferability,  as determined by the  Administrator  in its sole  discretion),
valued at Fair Market Value on the date of exercise. Payment with respect to the
exercise of a Stock Appreciation Right that does not satisfy the requirements of
Section 7.4(b)(1) shall be paid at the time specified in the Award in accordance
with the  provisions of Section 7.4(h) and Section 8. Payment may be made in the
form of shares of Common Stock (with or without  restrictions  as to substantial
risk of forfeiture and  transferability,  as determined by the  Administrator in
its sole  discretion),  cash or a  combination  thereof,  as  determined  by the
Administrator.

                                       20
<PAGE>

                  (d)  EXERCISE  PRICE.  The exercise  price of a Free  Standing
Stock Appreciation Right shall be determined by the Administrator, but shall not
be less than 100% of the Fair Market  Value of one share of Common  Stock on the
Date of Grant of such Stock  Appreciation  Right.  A Related Stock  Appreciation
Right granted simultaneously with or subsequent to the grant of an Option and in
conjunction therewith or in the alternative thereto shall have the same exercise
price as the related Option,  shall be transferable only upon the same terms and
conditions  as the related  Option,  and shall be  exercisable  only to the same
extent as the  related  Option;  PROVIDED,  HOWEVER,  that a Stock  Appreciation
Right,  by its terms,  shall be exercisable  only when the Fair Market Value per
share of Common Stock subject to the Stock Appreciation Right and related Option
exceeds the exercise  price per share thereof and no Stock  Appreciation  Rights
may be granted in tandem with an Option unless the Administrator determines that
the requirements of Section 7.4(b)(1) are satisfied.

                  (e)  REDUCTION  IN THE  UNDERLYING  OPTION  SHARES.  Upon  any
exercise of a Stock Appreciation Right, the number of shares of Common Stock for
which any related Option shall be exercisable  shall be reduced by the number of
shares for which the Stock  Appreciation  Right shall have been  exercised.  The
number of shares of Common Stock for which a Stock  Appreciation  Right shall be
exercisable  shall be reduced  upon any  exercise of any  related  Option by the
number of  shares  of  Common  Stock  for  which  such  Option  shall  have been
exercised.

                  (f)  WRITTEN  REQUEST.  Any  election  by an  Optionholder  to
receive cash in full or partial  settlement of a Stock  Appreciation  Right, and
any exercise of such Stock  Appreciation  Right for cash,  may be made only by a
written  request  filed with the Corporate  Secretary of the Company  during the
period  beginning on the third  business day  following  the date of release for
publication by the Company of quarterly or annual summary statements of earnings
and ending on the twelfth  business day following  such date.  Within 30 days of
the  receipt  by the  Company of a written  request  to receive  cash in full or
partial  settlement  of a Stock  Appreciation  Right or to  exercise  such Stock
Appreciation  Right for cash, the  Administrator  shall, in its sole discretion,
either consent to or disapprove,  in whole or in part, such written  request.  A
written  request  to  receive  cash  in full or  partial  settlement  of a Stock
Appreciation  Right  or to  exercise  a Stock  Appreciation  Right  for cash may
provide  that,  in the event the  Administrator  shall  disapprove  such written
request,  such written  request  shall be deemed to be an exercise of such Stock
Appreciation Right for shares of Common Stock.


                                       21
<PAGE>

                  (g)  DISAPPROVAL  BY   ADMINISTRATOR.   If  the  Administrator
disapproves in whole or in part any election by an  Optionholder to receive cash
in full or partial  settlement of a Stock Appreciation Right or to exercise such
Stock  Appreciation  Right for cash,  such  disapproval  shall not  affect  such
Optionholder's  right to exercise such Stock Appreciation Right at a later date,
to the extent that such Stock Appreciation Right shall be otherwise exercisable,
or to elect the form of payment at a later  date,  provided  that an election to
receive  cash upon such later  exercise  shall be subject to the approval of the
Administrator.   Additionally,   such   disapproval   shall  not   affect   such
Optionholder's right to exercise any related Option.

                  (h)  ADDITIONAL  REQUIREMENTS  UNDER  SECTION  409A.  A  Stock
Appreciation  Right that is not intended to or fails to satisfy the requirements
of Section  7.4(b)(1) shall satisfy the  requirements of this Section 7.4(h) and
the additional conditions applicable to nonqualified deferred compensation under
Section 409A of the Code, in accordance with Section 8 hereof.  The requirements
herein shall apply in the event any Stock  Appreciation Right under this Plan is
granted  with an SAR  exercise  price less than Fair Market  Value of the Common
Stock underlying the award on the date the Stock  Appreciation  Right is granted
(regardless  of  whether  or not such SAR  exercise  price is  intentionally  or
unintentionally priced at less than Fair Market Value, or is materially modified
at a time when the Fair Market Value exceeds the SAR exercise  price),  provides
that  it  is  settled  in  cash,  or  is  otherwise   determined  to  constitute
"nonqualified  deferred  compensation" within the meaning of Section 409A of the
Code.  Any such Stock  Appreciation  Right may provide that it is exercisable at
any time permitted  under the governing  written  instrument,  but such exercise
shall be limited to fixing the  measurement of the amount,  if any, by which the
Fair Market Value of a share of Common Stock on the date of exercise exceeds the
SAR exercise  price (the "SAR  AMOUNT").  However,  once the Stock  Appreciation
Right is exercised,  the SAR Amount may only be paid on the fixed time,  payment
schedule or other event  specified in the  governing  written  instrument  or in
Section 8.1 hereof.

         7.5 DIVIDEND EQUIVALENT RIGHTS. A Dividend Equivalent Right is an Award
entitling the recipient to receive credits based on cash dividends that would be
paid on the shares of Common Stock  specified in the Dividend  Equivalent  Right
(or other award to which it relates) if such shares were held by the  recipient.
A Dividend  Equivalent  Right may be granted  hereunder to any  Participant as a
component of another Award or as a freestanding  award. The terms and conditions
of  Dividend  Equivalent  Rights  shall  be  specified  in the  grant.  Dividend
equivalents  credited to the holder of a Dividend  Equivalent  Right may be paid
currently  or,  subject to  satisfaction  of the  requirements  of Section 8 and
Section 409A of the Code, may be deemed to be reinvested in additional shares of
Common  Stock as of the  dividend  payment  date,  which may  thereafter  accrue
additional  equivalents.  Any such reinvestment shall be at Fair Market Value on
the date of  reinvestment or such other price as may then apply under a dividend
reinvestment plan sponsored by the Company,  if any. Dividend  Equivalent Rights
may be settled in cash or shares of Common Stock or a combination  thereof, in a
single installment or installments. A Dividend Equivalent Right shall be settled
upon  exercise,  settlement,  or payment of, or lapse of  restrictions  on, such
other award, and such Dividend  Equivalent Right shall expire or be forfeited or
annulled under the same  conditions as such other Award.  A Dividend  Equivalent
Right  granted  as a  component  of  another  Award may also  contain  terms and
conditions different from such other award.

                                       22
<PAGE>

         7.6 INTEREST EQUIVALENTS.  Any Award under this Plan that is settled in
whole or in part in cash on a  deferred  basis  may  provide  in the  Award  for
interest equivalents to be credited with respect to such cash payment.  Interest
equivalents  may be compounded  and shall be paid upon such terms and conditions
as may be specified by the Award.

    8.   ADDITIONAL   CONDITIONS   APPLICABLE  TO   NONQUALIFIED   DEFERRED
         COMPENSATION UNDER SECTION 409A OF THE CODE.

         In the event  any grant or award  under  this Plan is  granted  with an
exercise  price less than Fair Market Value of the Common  Stock  subject to the
grant or award on the Grant Date  (regardless  of  whether or not such  exercise
price is intentionally or unintentionally priced at less than Fair Market Value,
or such grant is  materially  modified and deemed a new grant at a time when the
Fair Market Value  exceeds the exercise  price),  or is otherwise  determined to
constitute  "nonqualified  deferred  compensation" within the meaning of Section
409A of the Code (a "409A AWARD"),  the following  additional  conditions  shall
apply and shall  supersede any contrary  provisions of this Plan or the terms of
any 409A Award agreement.

         8.1 EXERCISE AND  DISTRIBUTION.  No 409A Award shall be  exercisable or
distributable earlier than upon one of the following:

                  (a) SPECIFIED  TIME. A specified  time or a fixed schedule set
forth in the written  instrument  evidencing the 409A Award,  but not later than
after the  expiration  of 10 years  from the Award  Date or Grant  Date.  If the
written grant  instrument  does not specify a fixed time or schedule,  such time
shall be the date that is the fifth anniversary of the Award Date or Grant Date.

                  (b) SEPARATION  FROM SERVICE.  Separation from service (within
the meaning of Section 409A of the Code) by the 409A Award  recipient;  PROVIDED
HOWEVER,  if the 409A Award recipient is a "key employee" (as defined in Section
416(i) of the Code  without  regard to  paragraph  (5)  thereof)  and any of the
Company's  stock is  publicly  traded  on an  established  securities  market or
otherwise,  exercise or  distribution  under this Section 8.1(b) may not be made
before the date which is six months after the date of separation from service.

                  (c) DEATH. The date of death of the 409A Award recipient.

                  (d)  DISABILITY.  The date the 409A  Award  recipient  becomes
disabled (within the meaning of Section 8.3(b) hereof).

                  (e)   UNFORESEEABLE    EMERGENCY.   The   occurrence   of   an
unforeseeable  emergency (within the meaning of Section 8.3(c) hereof), but only
if the net value (after  payment of the exercise  price) of the number of shares
of Common Stock that become  issuable  does not exceed the amounts  necessary to
satisfy  such  emergency  plus  amounts   necessary  to  pay  taxes   reasonably
anticipated as a result of the exercise, after taking into account the extent to
which the emergency is or may be relieved through  reimbursement or compensation
by insurance or otherwise or by  liquidation of the  participant's  other assets
(to the  extent  such  liquidation  would  not  itself  cause  severe  financial
hardship).


                                       23
<PAGE>

                  (f) CHANGE IN CONTROL  EVENT.  The  occurrence  of a Change in
Control  Event  (within the meaning of Section  8.3(a)  hereof),  including  the
Company's  discretionary  exercise  of the right to  accelerate  vesting of such
grant upon a Change in Control  Event or to terminate the Plan or any 409A Award
granted hereunder within 12 months of the Change in Control Event.

         8.2 TERM.  Notwithstanding anything to the contrary in this Plan or the
terms of any 409A Award  agreement,  the term of any 409A Award shall expire and
such award shall no longer be  exercisable on the date that is the later of: (a)
2-1/2 months after the end of the Company's taxable year in which the 409A Award
first becomes  exercisable or distributable  pursuant to Section 8 hereof and is
not subject to a substantial  risk of forfeiture;  or (b) 2-1/2 months after the
end of the 409A Award  recipient's  taxable  year in which the 409A Award  first
becomes  exercisable  or  distributable  pursuant to Section 8 hereof and is not
subject to a substantial  risk of forfeiture,  but not later than the earlier of
(i) the expiration of 10 years from the date the 409A Award was granted, or (ii)
the term specified in the 409A Award agreement.

                  (a) NO  ACCELERATION.  A 409A Award may not be  accelerated or
exercised prior to the time specified in Section 8 hereof, except in the case of
one of the following events:

                  (b) DOMESTIC  RELATIONS  ORDER.  The 409A Award may permit the
acceleration of the exercise or  distribution  time or schedule to an individual
other than the  Participant  as may be  necessary  to comply with the terms of a
domestic relations order (as defined in Section 414(p)(1)(B) of the Code).

                  (c)  CONFLICTS  OF  INTEREST.  The 409A  Award may  permit the
acceleration  of  the  exercise  or  distribution  time  or  schedule  as may be
necessary to comply with the terms of a certificate of  divestiture  (as defined
in Section 1043(b)(2) of the Code).

                  (d) CHANGE IN CONTROL EVENT.  The  Administrator  may exercise
the  discretionary  right to  accelerate  the  vesting of such 409A Award upon a
Change in  Control  Event or to  terminate  the Plan or any 409A  Award  granted
thereunder  within 12 months of the Change in Control  Event and cancel the 409A
Award  for  compensation.  In  addition,  the  Administrator  may  exercise  the
discretionary  right to accelerate  the vesting of such 409A Award provided that
the such  acceleration  does not change the time or  schedule of payment of such
Award and otherwise satisfies the requirements of this 8 and the requirements of
Section 409A of the Code.

         8.3  DEFINITIONS.  Solely for  purposes  of this  Section 8 and not for
other  purposes of the Plan,  the following  terms shall be defined as set forth
below:

                  (a) "CHANGE IN CONTROL EVENT" means the occurrence of a change
in the ownership of the Company,  a change in effective  control of the Company,
or a change in the  ownership  of a  substantial  portion  of the  assets of the
Company (as defined in IRS Notice 2005-1, Q&A-11, Q&A-12, Q&A-13 and Q&A-14).

                  (b) "DISABLED"  means a Participant (i) is unable to engage in
any  substantial  gainful  activity  by  reason  of any  medically  determinable
physical or mental impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12 months, or (ii) is,
by reason of any medically  determinable physical or mental impairment which can
be  expected  to result  in death or can be  expected  to last for a  continuous
period of not less than 12 months,  receiving income replacement  benefits for a
period of not less than three months under an accident and health plan  covering
Employees.

                                       24
<PAGE>

                  (c)   "UNFORESEEABLE   EMERGENCY"  means  a  severe  financial
hardship  to the  Participant  resulting  from an  illness  or  accident  of the
Participant,  the  Participant's  spouse,  or a dependent (as defined in Section
152(a) of the Code) of the Participant,  loss of the Participant's  property due
to casualty, or similar extraordinary and unforeseeable circumstances arising as
a result of events beyond the control of the Participant.

    9. COVENANTS OF THE COMPANY.

         9.1 AVAILABILITY OF SHARES. During the terms of the Awards, the Company
shall keep  available at all times the number of shares of Common Stock required
to satisfy such Awards.

         9.2 SECURITIES LAW  COMPLIANCE.  Each Stock Option  Agreement and Award
Agreement  shall  provide  that no shares of Common  Stock shall be purchased or
sold thereunder  unless and until (i) any then applicable  requirements of state
or federal laws and  regulatory  agencies shall have been fully complied with to
the satisfaction of the Company and its counsel and (ii) if required to do so by
the Company,  the Participant shall have executed and delivered to the Company a
letter of investment  intent in such form and containing  such provisions as the
Administrator may require.  The Company shall use reasonable  efforts to seek to
obtain from each regulatory  commission or agency having  jurisdiction  over the
Plan such  authority  as may be required  to grant  Awards and to issue and sell
shares of Common Stock upon exercise of the Awards; PROVIDED, HOWEVER, that this
undertaking  shall not require the Company to register  under the Securities Act
the Plan, any Award or any Common Stock issued or issuable  pursuant to any such
Award.  If, after reasonable  efforts,  the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the Plan,
the Company  shall be relieved  from any liability for failure to issue and sell
Common  Stock upon  exercise of such Awards  unless and until such  authority is
obtained.

    10. USE OF PROCEEDS FROM STOCK.

         Proceeds  from  the sale of  Common  Stock  pursuant  to  Awards  shall
constitute general funds of the Company.

    11. MISCELLANEOUS.

         11.1  ACCELERATION OF  EXERCISABILITY  AND VESTING.  The  Administrator
shall  have the  power to  accelerate  the time at which an Award  may  first be
exercised  or the time during  which an Award or any part  thereof  will vest in
accordance  with the Plan,  notwithstanding  the provisions in the Award stating
the time at which it may first be  exercised  or the time  during  which it will
vest.

                                       25
<PAGE>

         11.2  SHAREHOLDER  RIGHTS.  No  Participant  shall be  deemed to be the
holder of, or to have any of the rights of a holder with  respect to, any shares
of Common  Stock  subject to such Award  unless and until such  Participant  has
satisfied all  requirements  for exercise of the Award pursuant to its terms and
no adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash,  securities or other property) or  distributions of other rights for which
the record date is prior to the date such Common  Stock  certificate  is issued,
except as provided in Section 12.1, hereof.

         11.3 NO EMPLOYMENT OR OTHER SERVICE RIGHTS.  Nothing in the Plan or any
instrument  executed or Award  granted  pursuant  thereto  shall confer upon any
Participant  any right to continue to serve the Company or an  Affiliate  in the
capacity in effect at the time the Award was  granted or shall  affect the right
of the Company or an Affiliate to terminate  (a) the  employment  of an Employee
with or  without  notice  and  with or  without  Cause,  (b)  the  service  of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate  or (c) the service of a Director  pursuant to the Bylaws of the
Company or an Affiliate,  and any applicable  provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.

         11.4 TRANSFER,  APPROVED LEAVE OF ABSENCE. For purposes of the Plan, no
termination  of employment by an Employee  shall be deemed to result from either
(a) a transfer to the  employment  of the Company  from an Affiliate or from the
Company to an Affiliate,  or from one  Affiliate to another;  or (b) an approved
leave of absence for  military  service or  sickness,  or for any other  purpose
approved by the Company,  if the employee's right to re-employment is guaranteed
either by a statute or by  contract  or under the policy  pursuant  to which the
leave of absence was granted or if the  Administrator  otherwise  so provides in
writing.

         11.5 INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring  Common Stock under any Award,  (a) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and  experience in financial and business  matters  and/or to employ a purchaser
representative  reasonably  satisfactory to the Company who is knowledgeable and
experienced  in financial and business  matters and that he or she is capable of
evaluating, alone or together with the purchaser representative,  the merits and
risks of exercising the Award; and (b) to give written  assurances  satisfactory
to the Company stating that the Participant is acquiring Common Stock subject to
the Award for the  Participant's  own account and not with any present intention
of  selling  or  otherwise   distributing   the  Common  Stock.   The  foregoing
requirements,  and any assurances given pursuant to such requirements,  shall be
inoperative  if (i) the issuance of the shares of Common Stock upon the exercise
or acquisition of Common Stock under the Award has been registered  under a then
currently effective  registration  statement under the Securities Act or (ii) as
to any  particular  requirement,  a  determination  is made by  counsel  for the
Company that such  requirement  need not be met in the  circumstances  under the
then applicable  securities laws. The Company may, upon advice of counsel to the
Company,  place  legends  on stock  certificates  issued  under the Plan as such
counsel  deems  necessary  or  appropriate  in order to comply  with  applicable
securities laws, including, but not limited to, legends restricting the transfer
of the Common Stock.



                                       26
<PAGE>

         11.6 WITHHOLDING OBLIGATIONS. To the extent provided by the terms of an
Award  Agreement  and  subject  to  the  discretion  of the  Administrator,  the
Participant may satisfy any federal,  state or local tax withholding  obligation
relating to the exercise or acquisition of Common Stock under an Award by any of
the  following  means (in addition to the  Company's  right to withhold from any
compensation paid to the Participant by the Company) or by a combination of such
means:  (a) tendering a cash payment;  (b)  authorizing  the Company to withhold
shares of Common Stock from the shares of Common Stock otherwise issuable to the
Participant as a result of the exercise or acquisition of Common Stock under the
Award,  PROVIDED,  HOWEVER,  that no shares of Common Stock are withheld  with a
value  exceeding  the minimum  amount of tax required to be withheld by law; (c)
delivering to the Company  previously  owned and  unencumbered  shares of Common
Stock of the Company or (d) by execution of a recourse promissory note.

         11.7 TRANSFER OF STOCK ACQUIRED UNDER PLAN. Notwithstanding anything to
the contrary  herein, a Participant may not transfer Common Stock acquired under
this Plan to the  Company  within six months  after the  purchase of such Common
Stock (the "SIX  MONTHS  HOLDING  PERIOD"),  other  than,  if  permitted  by the
Administrator   in  its   discretion,   to  satisfy   minimum  tax   withholding
requirements.

         11.8  RIGHT OF  REPURCHASE.  Each Award  Agreement  may  provide  that,
following a termination of the Participant's Continuous Service, the Company may
repurchase the  Participant's  unvested  Common Stock acquired under the Plan as
provided  in this  Section  11.8  (the  "RIGHT OF  REPURCHASE").  In the case of
unvested Common Stock,  the Right of Repurchase  shall be exercisable at a price
equal to the  lesser  of the  purchase  price at which  such  Common  Stock  was
acquired under the Plan or the Fair Market Value of such Common Stock. The Award
Agreement  may  specify  the  period  of time  following  a  termination  of the
Participant's  Continuous  Service  during which the Right of Repurchase  may be
exercised,  provided  that such  exercise may in any event be extended to a date
that is within 60 days  after the date the Six  Months  Holding  Period has been
satisfied.  In the case of unvested  Common  Stock  purchased  in  exchange  for
services,  the Company shall be entitled to forfeit such  Unvested  Common Stock
without regard to the exercise of its Right of Repurchase and without payment of
any consideration.

    12. ADJUSTMENTS UPON CHANGES IN STOCK.

         12.1  CAPITALIZATION  ADJUSTMENTS.  If any change is made in the Common
Stock  subject to the Plan,  or subject to any  Award,  without  the  receipt of
consideration  by the Company (through  merger,  consolidation,  reorganization,
recapitalization,  reincorporation,  stock dividend,  dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares,  change in corporate  structure or other  transaction  not involving the
receipt of  consideration  by the  Company),  then (i) the  aggregate  number of
shares of Common  Stock or class of shares  which may be  purchased  pursuant to
Awards granted hereunder; (ii) the aggregate number of shares of Common Stock or
class of shares  which may be  purchased  pursuant to  Incentive  Stock  Options
granted  hereunder;  (iii) the  number  and/or  class of shares of Common  Stock
covered by outstanding  Options and Awards; (iv) the maximum number of shares of
Stock with respect to which Options may be granted to any single Optionee during
any  calendar  year;  and (v) the  exercise  price of any Stock Option in effect
prior to such change shall be  proportionately  adjusted by the Administrator to
reflect any increase or decrease in the number of issued  shares of Common Stock
or change in the Fair Market  Value of such  Common  Stock  resulting  from such
transaction;  PROVIDED,  HOWEVER,  that any fractional shares resulting from the
adjustment shall be eliminated.  The Administrator  shall make such adjustments,
and its determination shall be final, binding and conclusive.  The conversion of
any convertible  securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.


                                       27
<PAGE>

         12.2  DISSOLUTION  OR  LIQUIDATION.  In the event of a  dissolution  or
liquidation  of  the  Company,  then  all  outstanding  Awards  shall  terminate
immediately prior to such event.

         12.3 CHANGE IN CONTROL AND OTHER CORPORATE  TRANSACTIONS.  In the event
of a Change in  Control,  dissolution  or  liquidation  of the  Company,  or any
corporate separation or division,  including,  but not limited to, a split-up, a
split-off  or a spin-off,  or a sale of  substantially  all of the assets of the
Company;  a merger or  consolidation  in which the Company is not the  surviving
entity;  or a reverse merger in which the Company is the surviving  entity,  but
the shares of Common  Stock  outstanding  immediately  preceding  the merger are
converted  by virtue of the merger into other  property,  whether in the form of
securities, cash or otherwise (collectively,  a "CORPORATE TRANSACTION"),  then,
the Company,  to the extent  permitted by  applicable  law, but otherwise in the
sole discretion of the  Administrator  may provide for: (i) the  continuation of
outstanding grants by the Company (if the Company is the surviving entity); (ii)
the assumption of the Plan and such  outstanding  grants by the surviving entity
or its parent;  (iii) the  substitution by the surviving entity or its parent of
grants with substantially the same terms (including an award to acquire the same
consideration  paid to the  shareholders  in the  transaction  described in this
Section 12.3) for such  outstanding  grants and, if appropriate,  subject to the
equitable adjustment provisions of Section 12.1 hereof; (iv) the cancellation of
such  outstanding  grants in  consideration  for a payment equal in value to the
Fair Market Value of vested grants, or in the case of an Option,  the difference
between the Fair Market  Value and the  exercise  price for all shares of Common
Stock subject to exercise  (i.e.,  to the extent  vested) under any  outstanding
Option;  or (v) the cancellation of such  outstanding  grants without payment of
any  consideration.  Any  such  payment  may be  paid  in  cash  or  such  other
consideration  payable to the holders of  outstanding  shares of Common Stock of
the Company in  connection  with such  Corporate  Transaction.  If vested Awards
would be canceled without  consideration,  the Participant shall have the right,
exercisable during the later of the ten-day period ending on the fifth day prior
to such Corporate  Transaction or ten days after the Administrator  provides the
grant holder a notice of  cancellation,  to exercise  such grants in whole or in
part  without  regard  to any  installment  exercise  provisions  in  the  Award
Agreement.  In addition, the Administrator,  in its discretion,  may provide for
acceleration  of  unvested  awards in  connection  with any of the  alternatives
described above.

         12.4  ISSUANCE  OF  COMMON  STOCK  UPON   CONVERSION   OF   CONVERTIBLE
SECURITIES.  Each Award  Agreement  may provide  that,  upon  conversion  of any
security of the Company into  additional  shares of Common Stock,  the number of
shares of Common  Stock  issuable  pursuant  to any Award may be adjusted by the
appropriate  number such that the percentage of Common Stock  outstanding of the
Company on a fully diluted basis  attributable to the Award immediately prior to
such conversion  will be equal to the percentage of Common Stock  outstanding of
the  Company on a fully  diluted  basis  attributable  to the Award  immediately
following such conversion.

                                       28
<PAGE>

    13. AMENDMENT OF THE PLAN AND AWARDS.

         13.1  AMENDMENT OF PLAN.  The Board at any time, and from time to time,
may amend or  terminate  the Plan.  However,  except as provided in Section 12.1
relating to  adjustments  upon changes in Common  Stock,  no amendment  shall be
effective  unless  approved  by the  Shareholders  of the  Company to the extent
Shareholder approval is necessary to satisfy any applicable law or any Nasdaq or
securities  exchange listing  requirements.  At the time of such amendment,  the
Board shall determine,  upon advice from counsel, whether such amendment will be
contingent on Shareholder approval.

         13.2  SHAREHOLDER  APPROVAL.  The Board  may,  in its sole  discretion,
submit any other amendment to the Plan for Shareholder approval,  including, but
not limited to,  amendments to the Plan intended to satisfy the  requirements of
Section  162(m)  of the  Code  and  the  regulations  thereunder  regarding  the
exclusion  of  performance-based   compensation  from  the  limit  on  corporate
deductibility of compensation paid to certain executive officers.

         13.3  CONTEMPLATED  AMENDMENTS.  It is expressly  contemplated that the
Board may amend the Plan in any respect the Board deems  necessary  or advisable
to provide  eligible  Employees  with the  maximum  benefits  provided  or to be
provided  under  the  provisions  of the  Code and the  regulations  promulgated
thereunder  relating to Incentive  Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.

         13.4 NO  IMPAIRMENT OF RIGHTS.  Rights under any Award  granted  before
amendment of the Plan shall not be impaired by any  amendment of the Plan if (a)
the Company  requests  the consent of the  Participant  and (b) the  Participant
consents in writing.  However,  a cancellation of an Award where the Participant
receives a payment  equal in value to the Fair Market  Value of the vested Award
or, in the case of vested Options,  the difference between the Fair Market Value
and the exercise price,  shall not be an impairment of the Participant's  rights
that requires consent of the Participant.

         13.5 AMENDMENT OF AWARDS.  The Administrator at any time, and from time
to time, may amend the terms of any one or more Awards; PROVIDED,  HOWEVER, that
the Administrator may not effect any amendment which would otherwise  constitute
an impairment of the rights under any Award unless (a) the Company  requests the
consent of the Participant and (b) the Participant  consents in writing. For the
avoidance of doubt, the cancellation of an Award where the Participant  receives
a payment equal in value to the Fair Market Value of the vested Award or, in the
case of vested  Options,  the  difference  between the Fair Market  Value of the
shares of Common Stock  underlying the Option and the aggregate  exercise price,
shall not be an impairment of the Participant's  rights that requires consent of
the Participant.

    14. GENERAL PROVISIONS.

         14.1 OTHER  COMPENSATION  ARRANGEMENTS.  Nothing contained in this Plan
shall  prevent  the  Board  from  adopting  other  or  additional   compensation
arrangements,  subject to Shareholder approval if such approval is required; and
such  arrangements  may be either  generally  applicable or  applicable  only in
specific cases.

                                       29
<PAGE>

         14.2 RECAPITALIZATIONS. Each Stock Option Agreement and Award Agreement
shall contain provisions required to reflect the provisions of Section 12.1.

         14.3  DELIVERY.  Upon exercise of a Right granted under this Plan,  the
Company  shall issue Stock or pay any amounts due within a reasonable  period of
time thereafter.  Subject to any statutory obligations the Company may otherwise
have,  for purposes of this Plan,  thirty days shall be  considered a reasonable
period of time.

         14.4 OTHER PROVISIONS. The Stock Option Agreements and Award Agreements
authorized  under the Plan may contain such other  provisions  not  inconsistent
with this Plan, including, without limitation, restrictions upon the exercise of
the Awards, as the Administrator may deem advisable.

         14.5  DISQUALIFYING  DISPOSITIONS.  Any  Participant  who shall  make a
"disposition"  (as  defined in Section 424 of the Code) of all or any portion of
shares of Common  Stock  acquired  upon  exercise of an  Incentive  Stock Option
within two years from the Date of Grant of such Incentive Stock Option or within
one year after the issuance of the shares of Common Stock acquired upon exercise
of such  Incentive  Stock  Option  shall be required to  immediately  advise the
Company in writing as to the  occurrence of the sale and the price realized upon
the sale of such shares of Common Stock.

    15. MARKET STAND-OFF.

         Each Stock Option  Agreement and Award Agreement shall provide that, in
connection  with any  underwritten  public offering by the Company of its equity
securities  pursuant  to an  effective  registration  statement  filed under the
Securities  Act of 1933, as amended,  the  Participant  shall agree not to sell,
make any short  sale of,  loan,  hypothecate,  pledge,  grant any option for the
repurchase  of,  transfer  the economic  consequences  of ownership or otherwise
dispose  or  transfer  for  value or  otherwise  agree to  engage  in any of the
foregoing  transactions  with  respect to any Stock  without  the prior  written
consent of the  Company or its  underwriters,  for such  period of time from and
after the effective date of such  registration  statement as may be requested by
the Company or such underwriters (the "MARKET  STAND-OFF").  In order to enforce
the Market  Stand-Off,  the Company may impose  stop-transfer  instructions with
respect  to the  shares of Stock  acquired  under this Plan until the end of the
applicable stand-off period. If there is any change in the number of outstanding
shares of Stock by reason of a stock split, reverse stock split, stock dividend,
recapitalization,  combination, reclassification,  dissolution or liquidation of
the Company, any corporate  separation or division  (including,  but not limited
to, a split-up, a split-off or a spin-off), a merger or consolidation; a reverse
merger  or  similar  transaction,   then  any  new,  substituted  or  additional
securities which are by reason of such  transaction  distributed with respect to
any shares of Stock subject to the Market  Stand-Off,  or into which such shares
of Stock thereby become convertible,  shall immediately be subject to the Market
Stand-Off.


                                       30
<PAGE>

    16. EFFECTIVE DATE OF PLAN.

         The Plan shall become  effective as of the Effective Date, but no Award
shall be exercised (or, in the case of a stock bonus,  shall be granted)  unless
and until the Plan has been approved by the  Shareholders of the Company,  which
approval  shall be within 12 months before or after the date the Plan is adopted
by the Board.

    17. TERMINATION OR SUSPENSION OF THE PLAN.

         The Plan shall  terminate  automatically  on February 24, 2015,  but no
later than the day before the 10th  anniversary of the Effective  Date. No Award
shall be granted  pursuant to the Plan after such date,  but Awards  theretofore
granted may extend beyond that date. The Board may suspend or terminate the Plan
at any earlier date  pursuant to Section  13.1 hereof.  No Awards may be granted
under the Plan while the Plan is suspended or after it is terminated.

    18. CHOICE OF LAW.

         The law of the State of Texas shall govern all questions concerning the
construction,  validity and  interpretation of this Plan, without regard to such
state's conflict of law rules.

    19. EXECUTION.

         To record the adoption of the Plan by the Board, the Company has caused
its authorized officer to execute the Plan as of the date specified below.

                            [SIGNATURE PAGE FOLLOWS]




                                       31
<PAGE>




                  IN  WITNESS  WHEREOF,  upon  authorization  of  the  Board  of
Directors,  the  undersigned  has caused the GulfWest  Energy,  Inc.  2005 Stock
Incentive Plan to be executed effective as of the 28th day of February, 2005.


                                               GULFWEST ENERGY, INC.


                                               By: /S/ ALLAN D. KEEL
                                               --------------------------
                                               Name: ALLAN D. KEEL
                                               --------------------------
                                               Title: PRESIDENT AND CEO
                                               --------------------------



                                       32