EXHIBIT 10.1

# WILSHIRE
FINANCIAL SERVICES GROUP INC.

# 2002 EQUITY
PARTICIPATION PLAN

1.   Purposes of the Plan.  The purposes of this Plan are:

(a)      to attract and retain the best available personnel for positions of substantial responsibility,

(b)      to provide additional incentive to selected key Employees, Consultants and Directors, and

(c)      to promote the success of the Company's business.

2.   Definitions.  For the purposes of this Plan, the following terms will have the following meanings:

(a)      Administrator means the Board or any of its Committees that administer the Plan, in accordance with Section 4.

(b) Applicable
Laws means the legal requirements relating to the administration of
and issuance of securities under stock option plans, including, without
limitation, the requirements of state corporations law, federal and state
securities law, federal and state tax law, and the requirements of any stock
exchange or quotation system upon which the Shares may then be listed or quoted.
For all purposes of this Plan, references to statutes and regulations shall be
deemed to include any successor statutes and regulations, to the extent
reasonably appropriate as determined by the Administrator.

(c) Board means the Board of Directors of the Company.

(d)
Cause shall have the meaning set forth in a Grantees
employment or consulting agreement with the Company (if any), or if not defined
therein, shall mean (i) acts or omissions by the Grantee which constitute
intentional material misconduct or a knowing violation of a material policy of
the Company or any of its subsidiaries, (ii) the Grantee personally receiving a
benefit in money, property or services from the Company or any of its
subsidiaries or from another person dealing with the Company or any of its
subsidiaries, in material violation of applicable law or Company policy, (iii)
an act of fraud, conversion, misappropriation, or embezzlement by the Grantee or
his conviction of, or entering a guilty plea or plea of no contest with respect
to, a felony, or the equivalent thereof (other than DUI), or (iv) any material
misuse or improper disclosure of confidential or proprietary information of the
Company.

(e) Code
means the Internal Revenue Code of 1986, as amended. For all purposes of this
Plan, references to Code sections shall be deemed to include any successor Code
sections, to the extent reasonably appropriate as determined by the
Administrator.

(f) Committee means a Committee appointed by the Board in accordance with Section 4.

(g) Common Stock means the common stock, $0.01 par value per share, of the Company.

(h) Company means Wilshire Financial Services Group Inc., a Delaware corporation.

(i)
Consultant means any natural person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render bona fide services
and who is compensated for such services, provided that the term
Consultant does not include (i) Employees, (ii) Directors who are
paid only a directors fee by the Company or who are not compensated by the
Company for their services as Directors, (iii) any person who provides services
in connection with the offer or sale of securities in a capital-raising
transaction, or who directly or indirectly promotes or maintains a market for
the securities of the Company.

(j) Continuous
Status as an Employee, Director or Consultant means that the
employment, director or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary, or by the Employee, Director or
Consultant. Continuous Status as an Employee, Director or Consultant will not be
considered interrupted in the case of: (i) any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave,
provided, that for purposes of Incentive Stock Options, any such leave
may not exceed 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract (including certain Company policies) or statute; (ii)
transfers between locations of the Company or between the Company, its Parent,
its Subsidiaries or its successor, or (iii) in the case of a Nonqualified Stock
Option or Stock Award, the ceasing of a person to be an Employee while such
person remains a Director or Consultant, the ceasing of a person to be a
Director while such person remains an Employee or Consultant, or the ceasing of
a person to be a Consultant while such person remains an Employee or Director.

(k) Director means a member of the Board or of the board of directors of any Parent or Subsidiary.

(l) Disability means total and permanent disability as defined in Section 22(e)(3) of the Code.

(m)
Employee means any person, including Officers and Directors
employed as a common law employee by the Company or any Parent or Subsidiary of
the Company. Neither service as a Director nor payment of a directors fee
by the Company will be sufficient, in and of itself, to constitute
employment by the Company.

(n) Exchange Act means the Securities Exchange Act of 1934, as amended.

(o) Fair Market Value means, as of any date, the value of Common Stock determined as follows:

|(i) |  | If the Common Stock is listed on any established stock exchange or a national
market system, including without limitation, the National Market System of
NASDAQ, the Fair Market Value of a Share of Common Stock will be (A) the closing
sales price for such stock (or the closing bid, if no sales are reported) as
quoted on that system or exchange (or the system or exchange with the greatest
volume of trading in Common Stock) on the last market trading day prior to the
day of determination, or (B) any sales price for such stock (or the closing bid,
if no sales are reported) as quoted on that system or exchange (or the system or
exchange with the greatest volume of trading in Common Stock) on the day of
determination, as the Administrator may select, in each case as reported in the
Wall Street Journal or any other source the Administrator considers
reliable.
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|(ii) |  | If the Common Stock is quoted on the NASDAQ System (but not on the NASDAQ
National Market System) or is regularly quoted by recognized securities dealers
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock will be the mean between the high bid and low asked prices for the Common
Stock on (A) the last market trading day prior to the day of determination, or
(B) the day of determination, as the Administrator may select, in each case as
reported in the Wall Street Journal or any other source the Administrator
considers reliable.
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|(iii) |  | If the Common Stock is not traded as set forth above, the Fair Market Value will
be determined in good faith by the Administrator with reference to the earnings
history, book value and prospects of the Company in light of market conditions
generally, and any other factors the Administrator considers appropriate, such
determination by the Administrator to be final, conclusive and binding.
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(p) Grant Notice shall mean a written notice  evidencing  certain terms and conditions of an individual  Option grant. The Grant
Notice is part of the Option Agreement.

(q)
Grantee shall mean (i) any Optionee or (ii) any Employee,
Consultant or Director to whom a Stock Award has been granted pursuant to this
Plan.

(r) 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.

(s) NASDAQ means the National Association of Securities Dealers, Inc. Automated Quotation System.

(t) Nonqualified Stock Option means an Option not intended to qualify as an Incentive Stock Option.

(u)
Officer means 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.

(v) Option means a stock option granted under this Plan.

(w) Option
Agreement means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant. Each
Option Agreement is subject to the terms and conditions of this Plan.

(x) Option
Exchange Program means a program in which outstanding Options are
surrendered in exchange for Options with a lower exercise price.

(y) Optioned Stock means the Common Stock subject to an Option.

(z) Optionee means an Employee, Consultant or Director who holds an outstanding Option.

(aa)
Parent means a parent corporation with respect to
the Company, whether now or later existing, as defined in Section 424(e) of the
Code.

(bb) Plan means this 2002 Equity Participation Plan.

(cc) Publicly
Traded means that the Shares are traded on an established stock
exchange or on the National Market System of NASDAQ.

(dd) Section means, except as otherwise specified, a section of this Plan.

(ee) Share means a share of the Common Stock, as adjusted in accordance with Section 15.

(ff) Stock
Award shall mean a grant or sale by the Company of a specified number
of Shares upon terms and conditions determined by the Administrator.

(gg)
Subsidiary means a subsidiary corporation with
respect to the Company, whether now or later existing, as defined in Section
424(f) of the Code.

3.   Stock Subject to the
Plan. Subject to the provisions of Section 15 of the Plan, the maximum
aggregate number of Shares which may be issued under the Plan will be
1,000,000Shares of Common Stock; provided, however, that
while the Shares are not Publicly Traded the total number of Shares issuable
upon the exercise of all outstanding Options and the total number of Shares
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage permitted pursuant to Rule 260.140.45
promulgated under the California Corporations Code unless a higher percentage is
approved by two-thirds of the outstanding shares eligible to vote. The Shares
may be authorized, but unissued, or reacquired Common Stock.

If
an Option expires or becomes unexercisable without having been exercised in
full, or is surrendered pursuant to an Option Exchange Program, or if a Stock
Award shall be cancelled or surrendered or expire for any reason without having
been received in full, the Shares that were not purchased or received which were
subject thereto will become available for future grant or sale under the Plan
(unless the Plan has terminated). If the Company reacquires Shares which were
issued pursuant to the exercise of an Option or grant of a Stock Award, however,
those reacquired Shares will not be available for future grant under the Plan.

4.   Administration of the Plan.

(a) Procedure.

|(i) |  | Composition of the Administrator. The Plan will be administered by (A)
the Board, or (B) a Committee designated by the Board, which Committee will be
constituted to satisfy Applicable Laws. Once appointed, a Committee will serve
in its designated capacity until otherwise directed by the Board. The Board may
increase the size of the Committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the Committee and thereafter
directly administer the Plan. Notwithstanding the foregoing, unless the Board
expressly resolves to the contrary, from and after such time as the Company is
registered pursuant to Section 12 of the Exchange Act, the Plan will be
administered only by a Committee, which will then consist solely of persons who
are both non-employee directors within the meaning of Rule 16b-3
promulgated under the Exchange Act and outside directors within the
meaning of Section 162(m) of the Code; provided, however, the failure of the
Committee to be composed solely of individuals who are both non-employee
directors and outside directors shall not render ineffective
or void any awards or grants made by, or other actions taken by, such Committee.
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|(ii) |  | Multiple  Administrative  Bodies.  The Plan may be  administered by different  bodies with respect to Directors,  Officers who
are not Directors, and Employees and Consultants who are neither Directors nor Officers.
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(b) Powers of the
Administrator. Subject to the provisions of the Plan, and in the case of a
Committee, subject to the specific duties delegated by the Board to that
Committee, the Administrator will have the authority, in its discretion:

|(i) |  | to determine the Fair Market Value of the Common Stock, in accordance with Section 2(o);
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|(ii) |  | to select the Consultants, Employees or Directors to whom Options or Stock Awards may be granted;
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|(iii) |  | to determine whether and to what extent Options or Stock Awards are granted, and
whether Options are intended as Incentive Stock Options or Nonqualified Stock
Options;
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|(iv) |  | to determine the number of Shares to be covered by each Option or Stock Award granted;
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|(v) |  | to approve forms of Grant Notices, Option Agreements and agreements governing Stock Awards;
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|(vi) |  | to determine the terms and conditions, not inconsistent with the terms of this
Plan, of any grant of Options or Stock Awards, including, but not limited to,
(A) the Options exercise price, (B) the time or times when
Options may be exercised or Stock Awards will be vested, which may be based on
performance criteria or other reasonable conditions such as Continuous Status as
an Employee, Director or Consultant; provided, however, that while
the Shares are not Publicly Traded, Options or Stock Awards granted to an
Employee who is neither a Director nor an Officer will vest at a rate of at
least 20% per year over five years from the date of grant, subject to reasonable
conditions such as Continuous Status as an Employee, (C) any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option, Optioned Stock or Stock Award, based in each
case on factors that the Administrator determines in its sole discretion,
including but not limited to a requirement subjecting the Optioned Stock or
Shares to (1) certain restrictions on transfer (including without
limitation a prohibition on transfer for a specified period of time and/or a
right of first refusal in favor of the Company), and (2) a right of
repurchase in favor of the Company upon termination of the Grantees
Continuous Status as an Employee, Director or Consultant, which right will
terminate no later than the date on which the Companys securities become
Publicly Traded and will satisfy, if applicable, the requirements of Rule
260.140.41(k) promulgated under the California Corporations Code, as amended;
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|(vii) |  | to construe and interpret the terms of this Plan;
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|(viii) |  | to prescribe, amend, and rescind rules and regulations relating to the administration of this Plan;
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|(ix) |  | to modify or amend each Option or Stock Award, subject to Section 17(c);
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|(x) |  | to  authorize  any  person to  execute  on behalf of the  Company  any  instrument  required  to effect the grant of an Option
previously granted by the Administrator;
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|(xi) |  | to institute an Option Exchange Program;
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|(xii) |  | to accelerate the vesting or exercisability of an Option or Stock Award;
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|(xiii) |  | to determine the terms and restrictions applicable to Options or Stock Awards; and
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|(xiv) |  | to make all other
determinations it considers necessary or advisable for administering this Plan.
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Notwithstanding the
foregoing, the Administrator shall not have the power to reduce the exercise
price of any Option to the Fair Market Value at the time of the reduction, if
the Fair Market Value of the Common Stock covered by that Option has declined
since the date it was granted.

(c) Effect of Administrator's  Decision.  The  Administrator's  decisions,  determinations and  interpretations  will be final and
binding on all holders of Options or Stock Awards.

5.   Eligibility.  Options granted under this Plan may be Incentive Stock Options or Nonqualified  Stock Options,  as determined by
the  Administrator  at the time of grant.  Nonqualified  Stock  Options and Stock Awards may be granted to Employees,  Consultants  and
Directors.  Incentive Stock Options may be granted only to Employees.  If otherwise eligible,  an Employee,  Consultant or Director who
has been granted an Option or a Stock Award may be granted additional Options or Stock Awards.

6.   Limitations on Grants
of Incentive Stock Options. Each Option will be designated in the Grant
Notice as either an Incentive Stock Option or a Nonqualified Stock Option.
However, notwithstanding such designations, if the Shares subject to an
Optionees Incentive Stock Options (granted under all plans of the Company
or any Parent or Subsidiary), which become exercisable for the first time during
any calendar year, have a Fair Market Value in excess of $100,000, the Options
accounting for this excess will be treated as Nonqualified Stock Options. For
purposes of this Section 6, Incentive Stock Options will be taken into account
in the order in which they were granted, and the Fair Market Value of the Shares
will be determined as of the time of grant.

7.   Limit on Annual
Grants to Individuals. From and after such time as the Company is required
to be registered pursuant to Section 12 of the Exchange Act, no Optionee may
receive grants, during any fiscal year of the Company or portion thereof, of
Options which, in the aggregate, cover more than 1,000,000Shares,
subject to adjustment as provided in Section 15. If an Option expires or
terminates for any reason without having been exercised in full, the unpurchased
shares subject to that expired or terminated Option will continue to count
against the maximum numbers of shares for which Options may be granted to an
Optionee during any fiscal year of the Company or portion thereof.

8.   Term of the Plan.
Subject to Section 21, this Plan will become effective upon the earlier to occur
of its adoption by the Board or its approval by the shareholders of the Company
as described in Section 21. It will continue in effect for a term of ten years
unless terminated earlier under Section 17. Unless otherwise provided in this
Plan, its termination will not affect the validity of any Option or Stock Award
outstanding at the date of termination.

9.   Term of Option.
The term of each Option will be stated in the Option Agreement; provided,
however, that in no event may the term be more than ten years from the
date of grant. In addition, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent of the voting power of all classes of capital
stock of the Company or any Parent or Subsidiary, the term of the Incentive
Stock Option will be five years from the date of grant or any shorter term
specified in the Option Agreement.

10.   Option Exercise Price and Consideration.

(a) Exercise Price of
Incentive Stock Options. The exercise price for Shares to be issued pursuant
to exercise of an Incentive Stock Option will be determined by the Administrator
provided that the per Share exercise price will be no less than 100% of the Fair
Market Value per Share on the date of grant; provided, further that in the case
of an Incentive Stock Option granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
of the voting power of all classes of capital stock of the Company or any Parent
or Subsidiary, the per Share exercise price will be no less than 110% of the
Fair Market Value per Share on the date of grant.

(b) Exercise Price of
Nonqualified Stock Options. In the case of a Nonqualified Stock Option
granted while the Shares are not Publicly Traded, the exercise price will be
determined by the Administrator provided that the per Share exercise price will
be no less than 85% of the Fair Market Value per Share on the date of grant;
provided, further that in the case of an Option granted to an Optionee who, at
the time the Option is granted, owns stock representing more than ten percent of
the voting power of all classes of capital stock of the Company or any Parent or
Subsidiary, the per Share exercise price will be no less than 110% of the Fair
Market Value per Share on the date of grant.

(c) Waiting Period and
Exercise Dates. At the time an Option is granted, the Administrator will fix
the period within which the Option may be exercised and will determine any
conditions which must be satisfied before the Option may be exercised. Exercise
of an Option may be conditioned upon performance criteria or other reasonable
conditions such as Continuous Status as an Employee, Director or Consultant.

(d) Form of  Consideration.  The  Administrator  will determine the  acceptable  form of  consideration  for exercising an Option,
including the method of payment.  Such consideration may consist partially or entirely of:

|(i) |  | cash;
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|(ii) |  | a promissory note made by the Optionee in favor of the Company;
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|(iii) |  | other Shares which have a Fair Market Value on the date of surrender equal to
the aggregate exercise price of the Shares as to which an Option will be
exercised;
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|(iv) |  | delivery of a properly executed exercise notice together with any other
documentation as the Administrator and the Optionees broker, if
applicable, require to effect an exercise of the Option and delivery to the
Company of the sale or loan proceeds required to pay the exercise price; or
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|(v) |  | any other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.
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11.   Exercise of Option.

(a) Procedure for
Exercise; Rights as a Shareholder. Any Option granted hereunder will be
exercisable according to the terms of the Plan and at times and under conditions
determined by the Administrator and set forth in the Option Agreement;
provided, however, that an Option may not be exercised for a
fraction of a Share.

An
Option will be deemed exercised when the Company receives: (i) written notice of
exercise (in accordance with the Option Agreement) from the person entitled to
exercise the Option, (ii) full payment for the Shares with respect to which the
Option is exercised, and (iii) all representations, indemnifications and
documents reasonably requested by the Administrator. Full payment may consist of
any consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and this Plan. Shares issued upon exercise of
an Option will be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder will exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. Subject to the provisions of Sections 13(c), 18, and 19,
the Company will issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 15 of the Plan. Notwithstanding the
foregoing, the Administrator in its discretion may require the Company to retain
possession of any certificate evidencing Shares of Common Stock acquired upon
exercise of an Option, if those Shares remain subject to repurchase under the
provisions of the Option Agreement or any other agreement between the Company
and the Optionee, or if those Shares are collateral for a loan or obligation due
to the Company.

Exercising
an Option in any manner will decrease the number of Shares thereafter available,
both for purposes of this Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.

(b) Termination of
Employment or Consulting Relationship or Directorship. If an Optionee holds
exercisable Options on the date his or her Continuous Status as an Employee,
Director or Consultant terminates (other than because of termination due to
Cause, death or Disability), the Optionee may exercise the Options that were
vested and exercisable as of the date of termination for a period of 90 days
following such termination (or such other period as is set forth in the Option
Agreement or determined by the Administrator); provided, however, in no event
shall such period expire before the 30th day following the date of termination.
If the Optionee is not entitled to exercise his or her entire Option at the date
of such termination, the Shares covered by the unexercisable portion of the
Option will revert to the Plan, unless otherwise set forth in the Option
Agreement or determined by the Administrator. The Administrator may determine in
its sole discretion that such unexercisable portion of the Option will become
exercisable at such times and on such terms as the Administrator may determine
in its sole discretion. If the Optionee does not exercise an Option within the
time specified above after termination, that Option will expire, and the Shares
covered by it will revert to the Plan, unless otherwise set forth in the Option
Agreement or determined by the Administrator.

(c) Disability of
Optionee. If an Optionee holds exercisable Options on the date his or her
Continuous Status as an Employee, Director or Consultant terminates because of
Disability, the Optionee may exercise the Options that were vested and
exercisable as of the date of termination for a period of twelve months
following such termination (or such other period as is set forth in the Option
Agreement or determined by the Administrator); provided, however, in no event
shall such period expire prior to 6 months following the date of termination. If
the Optionee is not entitled to exercise his or her entire Option at the date of
such termination, the Shares covered by the unexercisable portion of the Option
will revert to the Plan, unless otherwise set forth in the Option Agreement or
determined by the Administrator. The Administrator may determine in its sole
discretion that such unexercisable portion of the Option will become exercisable
at such times and on such terms as the Administrator may determine in its sole
discretion. If the Optionee does not exercise an Option within the time
specified above after termination, that Option will expire, and the Shares
covered by it will revert to the Plan, unless otherwise set forth in the Option
Agreement or determined by the Administrator.

(d) Death of
Optionee. If an Optionee holds exercisable Options on the date his or her
death, the Optionees estate or a person who acquired the right to exercise
the Option by bequest or inheritance may exercise the Options that were vested
and exercisable as of the date of death for a period of twelve months following
the date of death (or such other period as is set forth in the Option Agreement
or determined by the Administrator); provided, however, in no event shall such
period expire prior to 6 months following the date of death. If the Optionee is
not entitled to exercise his or her entire Option at the date of death, the
Shares covered by the unexercisable portion of the Option will revert to the
Plan, unless otherwise set forth in the Option Agreement or determined by the
Administrator. The Administrator may determine in its sole discretion that such
unexercisable portion of the Option will become exercisable at such times and on
such terms as the Administrator may determine in its sole discretion. If the
Optionees estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise an Option within the time specified
above after termination, that Option will expire, and the Shares covered by it
will revert to the Plan, unless otherwise set forth in the Option Agreement or
determined by the Administrator.

(e) Termination for
Cause. If an Optionees Continuous Status as an Employee, Director or
Consultant is terminated for Cause, then all Options (including any vested
Options) held by Optionee shall immediately be terminated and cancelled.

(f) Disqualifying
Dispositions of Incentive Stock Options. If Common Stock acquired upon
exercise of any Incentive Stock Option is disposed of in a disposition that,
under Section 422 of the Code, disqualifies the holder from the application of
Section 421(a) of the Code, the holder of the Common Stock immediately before
the disposition will comply with any requirements imposed by the Company in
order to enable the Company to secure the related income tax deduction to which
it is entitled in such event.

12.   Non-Transferability of Options.

(a) No Transfer. An
Option may not be sold, pledged, assigned, hypothecated, transferred, or
disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Optionee, only by
the Optionee. Notwithstanding the foregoing, to the extent that the
Administrator so authorizes at the time a Nonqualified Stock Option is granted
or amended, (i) such Option may be assigned, in whole or in part, during the
Optionees lifetime by gift to one or more members of Optionees
immediate family as defined in the rules adopted pursuant to Section
16 of the Exchange Act. Rights under the assigned portion may be exercised by
the family member(s) who acquire a proprietary interest in such Option pursuant
to the assignment, and (ii) after the Shares are Publicly Traded, such Option
may be assigned pursuant to a qualified domestic relations order as defined in
the Code, and exercised by the spouse of the Optionee who obtained such Option
pursuant to such qualified domestic relations order. The terms applicable to the
assigned portion shall be the same as those in effect for the Option immediately
before such assignment and shall be set forth in such documents issued to the
assignee as the Administrator deems appropriate.

(b) Designation of
Beneficiary. An Optionee may file a written designation of a beneficiary who
is to receive any Options that remain unexercised in the event of the
Optionees death. If a participant is married and the designated
beneficiary is not the spouse, spousal consent will be required for the
designation to be effective. The Optionee may change such designation of
beneficiary at any time by written notice to the Administrator, subject to the
above spousal consent requirement.

(c) Effect of No
Designation. If an Optionee dies and there is no beneficiary validly
designated and living at the time of the Optionees death, the Company will
deliver such Optionees Options to the executor or administrator of his or
her estate, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its discretion, may deliver such
Options to the spouse or to any one or more dependents or relatives of the
Optionee, or if no spouse, dependent or relative is known to the Company, then
to such other person as the Company may designate.

(d) Death of Spouse or
Dissolution of Marriage. If an Optionee designates his or her spouse as
beneficiary, that designation will be deemed automatically revoked if the
Optionees marriage is later dissolved. Similarly, any designation of a
beneficiary will be deemed automatically revoked upon the death of the
beneficiary if the beneficiary predeceases the Optionee. Without limiting the
generality of the preceding sentence, the interest in Options of a spouse of an
Optionee who has predeceased the Optionee or (except as provided in Section
12(a) regarding qualified domestic relations orders) whose marriage has been
dissolved will automatically pass to the Optionee, and will not be transferable
by such spouse in any manner, including but not limited to such spouses
will, nor will any such interest pass under the laws of intestate succession.

13.   Stock Awards.

(a) Grant. Subject
to the express provisions and limitations of the Plan, the Administrator, in its
sole and absolute discretion, may grant Stock Awards to Employees, Consultants
or Directors for a number of shares of Common Stock on such terms and conditions
and to such Employees, Consultants or Directors as it deems advisable and
specifies in the respective grants. Subject to the limitations and restrictions
set forth in the Plan, an Employee, Consultant or Director who has been granted
an Option or Stock Award may, if otherwise eligible, be granted additional
Options or Stock Awards if the Administrator shall so determine. Notwithstanding
the foregoing, while the Shares are not Publicly Traded, no Stock Award shall be
made unless such Stock Award provides that the Grantee will pay an amount not
less than 85% of the Fair Market Value per Share on the date of grant of the
Stock Award in exchange for the Shares awarded pursuant to such Stock Award
(and, in the case of a Grantee who, at the time the Stock Award is granted, owns
stock representing more than ten percent of the voting power of all classes of
capital stock of the Company or any Parent or Subsidiary, such amount shall be
no less than 110% of the Fair Market Value per Share on the date of grant of the
Stock Award).

(b) Restrictions.
The Administrator, in its sole and absolute discretion, may impose restrictions
in connection with any Stock Award, including without limitation, (i) imposing a
restricted period during which all or a portion of the Common Stock subject to
the Stock Award may not be sold, assigned, transferred, pledged or otherwise
encumbered (the Restricted Period), (ii) providing for a
vesting schedule with respect to such Common Stock such that if a Grantee ceases
to be an Employee, Consultant or Director during the Restricted Period, some or
all of the shares of Common Stock subject to the Stock Award shall be
immediately forfeited and returned to the Company. The Administrator may, at any
time, reduce or terminate the Restricted Period. Each certificate issued in
respect of shares of Common Stock pursuant to a Stock Award which is subject to
restrictions shall be registered in the name of the Grantee, shall be deposited
by the Grantee with the Company together with a stock power endorsed in blank
and shall bear an appropriate legend summarizing the restrictions imposed with
respect to such shares of Common Stock.

(c) Rights As
Shareholder. Subject to the terms of any agreement governing a Stock Award,
the Grantee of a Stock Award shall have all the rights of a shareholder with
respect to the Common Stock issued pursuant to a Stock Award, including the
right to vote such Shares; provided, however, that dividends or distributions
paid with respect to any such Shares which have not vested shall be deposited
with the Company and shall be subject to forfeiture until the underlying Shares
have vested unless otherwise released by the Administrator in its sole
discretion. A Grantee shall not be entitled to interest with respect to the
dividends or distributions so deposited.

14.   Withholding
Taxes. The Company will have the right to take whatever steps the
Administrator deems necessary or appropriate to comply with all applicable
federal, state, local, and employment tax withholding requirements, and the
Companys obligations to deliver Shares upon the exercise of an Option or
in connection with a Stock Award will be conditioned upon compliance with all
such withholding tax requirements. Without limiting the generality of the
foregoing, upon the exercise of an Option, the Company will have the right to
withhold taxes from any other compensation or other amounts which it may owe to
the Optionee, or to require the Optionee to pay to the Company the amount of any
taxes which the Company may be required to withhold with respect to the Shares
issued on such exercise. Without limiting the generality of the foregoing, the
Administrator in its discretion may authorize the Grantee to satisfy all or part
of any withholding tax liability by (a) having the Company withhold from the
Shares which would otherwise be issued in connection with a Stock Award or on
the exercise of an Option that number of Shares having a Fair Market Value, as
of the date the withholding tax liability arises, equal to or less than the
amount of the Companys withholding tax liability, or (b) by delivering to
the Company previously-owned and unencumbered Shares of the Common Stock having
a Fair Market Value, as of the date the withholding tax liability arises, equal
to or less than the amount of the Companys withholding tax liability.

15.   Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.

(a) Changes in
Capitalization. Subject to any required action by the shareholders of the
Company, if the outstanding shares of Common Stock are increased, decreased,
changed into or exchanged for a different number or kind of shares or securities
of the Company or a successor entity, or for other property (including without
limitation, cash), through reorganization, recapitalization, reclassification,
stock combination, stock dividend, stock split, reverse stock split, spin off or
other similar transaction, an appropriate and proportionate adjustment will be
made in the maximum number and kind of shares as to which Options and Stock
Awards may be granted under this Plan. A corresponding adjustment changing the
number or kind of shares allocated to Stock Awards or unexercised Options which
have been granted prior to any such change will likewise be made. Any such
adjustment in the outstanding Options will be made without change in the
aggregate purchase price applicable to the unexercised portion of the Options
but with a corresponding adjustment in the price for each share or other unit of
any security covered by the Option. Such adjustment will be made by the
Administrator, whose determination in that respect will be final, binding, and
conclusive.

Where
an adjustment under this Section 15(a) is made to an Incentive Stock Option, the
adjustment will be made in a manner which will not be considered a
modification under the provisions of subsection 424(h)(3) of the
Code.

(b) Dissolution or
Liquidation. In the event of the proposed dissolution or liquidation of the
Company, to the extent that an Option had not been previously exercised or a
Stock Award had not previously vested, it will terminate immediately prior to
the consummation of such proposed dissolution or liquidation. In such instance,
the Administrator may, in the exercise of its sole discretion, declare that any
Stock Award shall become vested or any Option will terminate as of a date fixed
by the Administrator and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.

(c) Corporate
Transaction. Upon the happening of a merger, reorganization or sale of
substantially all of the assets of the Company, the Administrator, may, in its
sole discretion, do one or more of the following: (i) shorten the period during
which Options are exercisable (provided they remain exercisable for at least 30
days after the date notice of such shortening is given to the Optionees); (ii)
accelerate any vesting schedule to which an Option or Stock Award is subject;
(iii) arrange to have the surviving or successor entity or any parent entity
thereof assume the Stock Awards and the Options or grant replacement options
with appropriate adjustments in the option prices and adjustments in the number
and kind of securities issuable upon exercise or adjustments so that the Options
or their replacements represent the right to purchase the shares of stock,
securities or other property (including cash) as may be issuable or payable as a
result of such transaction with respect to or in exchange for the number of
Shares of Common Stock purchasable and receivable upon exercise of the Options
had such exercise occurred in full prior to such transaction; or (iv) cancel
Options or Stock Awards upon payment to the Optionees or Grantees in cash, with
respect to each Option or Stock Award to the extent then exercisable or vested
(including, if applicable, any Options or Stock Awards as to which the vesting
schedule has been accelerated as contemplated in clause (ii) above), of an
amount that is the equivalent of the excess of the Fair Market Value of the
Common Stock (at the effective time of the merger, reorganization, sale or other
event) over (in the case of Options) the exercise price of the Option. The
Administrator may also provide for one or more of the foregoing alternatives in
any particular Option Agreement or agreement governing a Stock Award.

16.   Date of Grant.
The date of grant of an Option or Stock Award will be, for all purposes, the
date as of which the Administrator makes the determination granting such Option
or Stock Award, or any other, later date determined by the Administrator and
specified in the Option Agreement. Notice of the determination will be provided
to each Grantee within a reasonable time after the date of grant.

17.   Amendment and Termination of the Plan.

(a) Amendment and Termination.  The Board may at any time amend, alter or suspend or terminate the Plan.

(b) Shareholder
Approval. The Company will obtain shareholder approval of any Plan amendment
that increases the number of Shares for which Options or Stock Awards may be
granted, or to the extent necessary and desirable to comply with Section 422 of
the Code (or any successor statute) or other Applicable Laws, or the
requirements of any exchange or quotation system on which the Common Stock is
listed or quoted. Such shareholder approval, if required, will be obtained in
such a manner and to such a degree as is required by the Applicable Law or
requirement.

(c) Effect of Amendment
or Termination. No amendment, alteration, suspension or termination of the
Plan will impair the rights of a Grantee, unless mutually agreed otherwise
between the Grantee and the Administrator. Any such agreement must be in writing
and signed by the Grantee and the Company.

18.   Conditions Upon Issuance of Shares.

(a) Legal
Compliance. Shares will not be issued in connection with a Stock Award or
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares will comply with all Applicable Laws, and
will be further subject to the approval of counsel for the Company with respect
to such compliance. Any securities delivered under the Plan will be subject to
such restrictions, and the person acquiring such securities will, if requested
by the Company, provide such assurances and representations to the Company as
the Company may deem necessary or desirable to assure compliance with all
Applicable Laws. To the extent permitted by Applicable Laws, the Plan and
Options and Stock Awards granted hereunder will be deemed amended to the extent
necessary to conform to such laws, rules and regulations.

(b) Investment
Representation. As a condition to the exercise of an Option or grant of a
Stock Award, the Company may require the person exercising such Option or
receiving such Stock Award to represent and warrant at the time of any such
exercise or receipt that the Shares are being acquired only for investment and
without any present intention to sell, transfer, or distribute such Shares.

19.   Liability of Company.

(a) Inability to Obtain
Authority. If the Company cannot, by the exercise of commercially reasonable
efforts, obtain authority from any regulatory body having jurisdiction for the
sale of any Shares under this Plan, and such authority is deemed by the
Companys counsel to be necessary to the lawful issuance of those Shares,
the Company will be relieved of any liability for failing to issue or sell those
Shares.

(b) Grants Exceeding
Allotted Shares. If the Optioned Stock covered by an Option or Shares
subject to a Stock Award exceed, as of the date of grant, the number of Shares
which may be issued under the Plan without additional shareholder approval, that
Option or Stock Award will be contingent with respect to such excess Shares,
unless and until shareholder approval of an amendment sufficiently increasing
the number of Shares subject to this Plan is timely obtained in accordance with
Section 17(b).

(c) Rights of
Participants and Beneficiaries. The Company will pay all amounts payable
under this Plan only to the Grantee, or beneficiaries entitled thereto pursuant
to this Plan. The Company will not be liable for the debts, contracts, or
engagements of any Grantee or his or her beneficiaries, and rights to cash
payments under this Plan may not be taken in execution by attachment or
garnishment, or by any other legal or equitable proceeding while in the hands of
the Company.

20.   Reservation of Shares.    The Company will at all times  reserve and keep  available  for issuance a number of Shares
sufficient to satisfy this Plan's requirements during its term.

21.   Shareholder
Approval. Continuance of this Plan will be subject to approval by the
shareholders of the Company within 12 months before or after the date of its
adoption. Such shareholder approval will be obtained in the manner and to the
degree required under Applicable Laws. Options or Stock Awards may be granted
but Options may not be exercised prior to shareholder approval of the Plan. If
any Options or Stock Awards are so granted and shareholder approval is not
obtained within 12 months of the date of adoption of this Plan by the Board,
those Options or Stock Awards will terminate retroactively as of the date they
were granted.

22.   Information to
Optionees. While the Shares are not Publicly Traded, each Optionee will be
provided with a copy of financial statements of the Company at least annually,
and, in any event, prior to his or her acquisition of Common Stock pursuant to
the exercise of an Option. The provisions of this Section 22 are intended to
comply with the requirements of Rule 260.140.46 promulgated under the California
Corporations Code.

23.   Legending Stock
Certificates. In order to enforce any restrictions imposed upon Common Stock
issued in connection with a Stock Award or upon exercise of an Option granted
under this Plan or to which such Common Stock may be subject, the Administrator
may cause a legend or legends to be placed on any certificates representing such
Common Stock, which legend or legends will make appropriate reference to such
restrictions, including, but not limited to, a restriction against sale of such
Common Stock for any period of time as may be required by Applicable Laws.
Additionally, and not by way of limitation, the Administrator may impose such
restrictions on any Common Stock issued pursuant to the Plan as it may deem
advisable.

24.   No Employment
Rights. Neither this Plan nor any Option or Stock Award will confer upon a
Grantee any right with respect to continuing the Grantees employment or
consulting relationship with the Company, or continuing service as a Director,
nor will they interfere in any way with the Grantees right or the
Companys right to terminate such employment or consulting relationship or
directorship at any time, with or without cause.

25.   Governing Law.    The Plan will be governed by, and  construed in accordance  with the laws of the State of Delaware  (without
giving effect to conflicts of law principles).