Document:

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                                                                   EXHIBIT 10.04

                              MORTGAGE INVESTMENTS
                            SUB-MANAGEMENT AGREEMENT

         THIS AGREEMENT is made and entered into as of February 14, 2000, by and
between FIXED INCOME DISCOUNT ADVISORY COMPANY, INC. (the "Sub-Manager") and
FRIEDMAN, BILLINGS, RAMSEY INVESTMENT MANAGEMENT, INC. (the "Manager").

                                   RECITALS

         WHEREAS, FBR Asset Investment Corporation (the "Company") has retained
the Manager to manage its business and affairs including the investment of
assets of the Company; and

         WHEREAS, the Sub-Manager has expertise in managing a portfolio of
mortgage loans and mortgage securities ("mortgage investments"); and

         WHEREAS, the Company conducts its business and intends to continue to
conduct its business in a manner that will permit it to qualify for the tax
benefits accorded by Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"); and

         WHEREAS, the Manager with the consent of the Company desires to retain
the Sub-Manager to manage a portfolio of mortgage investments for the account of
the Company in such amounts from time to time as may be determined by the
Manager in consultation with the Sub-Manager; and

         WHEREAS, the Sub-Manager is willing to provide such services on the
terms and conditions set forth below;

         NOW THEREFORE, in consideration of the mutual agreements herein set
forth, the parties hereto agree as follows:

         SECTION 1.   Appointment and Acceptance.
                      --------------------------

         The Manager hereby appoints the Sub-Manager as an "Investment Manager."
The Manager represents and warrants that (a) it has all requisite authority to
appoint the Sub-Manager hereunder, (b) the terms of the Agreement do not
conflict with any obligations by which the Manager or the Company is bound,
whether arising by contract, operation of law or otherwise and (c) this
Agreement has been duly authorized by appropriate corporate action. The
Sub-Manager does hereby accept said appointment and by its execution of this
Agreement the Sub-Manager represents and warrants that it is registered as an
investment adviser under the Investment Advisers Act of 1940.
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         SECTION 2.  Duties of the Sub-Manager.
                     -------------------------

         (a) The Sub-Manager at all times will be subject to the supervision of
the Manager and will have only such functions and authority as the Manager may
delegate to it. The Sub-Manager will be responsible for the day-to-day
operations of the Company with respect to its mortgage investments. The
Sub-Manager will be responsible for the investment and reinvestment of those
assets designated by the Manager as subject to the Sub-Manager's management
(which assets, together with all additions, substitutions, and alterations
thereto are hereinafter called the "Portfolio"). The Portfolio may include
investments and instruments described in the guidelines for mortgage investments
for the account of the Company. Until modified by the Manager, these guidelines
shall be those set forth in Appendices A and A-1. The Company and the Manager
hereby delegate to the Sub-Manager all of its powers, duties and
responsibilities with regard to such investment and reinvestment and hereby
appoints the Sub-Manager as its agent in fact with full authority to buy, sell
or otherwise effect investment transactions involving investments in its name
for the Portfolio. Said powers, duties and responsibilities shall be exercised
by the Sub-Manager pursuant to and in accordance with this Agreement.
Sub-Manager's authority to buy, sell or otherwise effect investment transactions
involving investments in its name for the Portfolio shall be evidenced by a
Trading Authorization in the form attached hereto as Appendix C, which
Sub-Manager may show to third parties and on which third parties may rely,
provided that in no event shall the actions of Sub-Manager made pursuant to such
Trading Authorization modify, amend, diminish or otherwise alter the respective
rights, duties and obligations of the Company, Sub-Manager and Manager
hereunder. Notwithstanding the foregoing, the Manager shall have full authority
to direct the Sub-Manager with respect to the investments in the Portfolio.

         (b) The Sub-Manager will perform (or cause to be performed) such
services and activities relating to mortgage investments of the Company as may
be appropriate, including:

             (i)     serving as the Company's consultant with respect to
         formulation of mortgage investment criteria and preparation of mortgage
         investment policy guidelines;

             (ii)    furnishing reports to the Manager regarding the Company's
         mortgage investments and the services performed for the account of the
         Company by the Sub-Manager;

             (iii)   monitoring and providing to the Manager on an ongoing basis
         price information and other data, obtained from certain nationally
         recognized dealers that maintain markets in mortgage investments from
         time to time, and providing data and advice to the Manager in
         connection with the identification of such dealers;

             (iv)    performing and supervising the performance of such
         administrative functions necessary in the management of the Company's
         mortgage investments as may be agreed upon by the Sub-Manager and the
         Manager, including the maintenance of appropriate computer services to
         perform such administrative functions;

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             (v)    to the extent not otherwise subject to an agreement
         executed by the Manager or the Company, designating a servicer for
         mortgage loans sold to the Company by originators and arranging for the
         monitoring and supervision of such servicers;

             (vi)   counseling the Manager in connection with policy decisions
         relating to mortgage investments to be made by the Company;

             (vii)  consulting with the Manager regarding the maintenance of
         the Company's status as a REIT and assisting the Manager in monitoring
         compliance with the various REIT qualification tests and other rules
         set out in the Code and regulations thereunder;

             (viii) engaging in hedging activities relating to the Company's
         mortgage investments and consulting with the Manager to assure that
         such activities are consistent with maintaining the Company's status as
         a REIT;

             (ix)   upon request by and in accordance with the mortgage
         investment policy guidelines or with the direction of the Manager,
         investing or reinvesting any money of the Company; and

             (x)    consulting with the Manager regarding the maintenance of
         the Company's exemption from the Investment Company Act and assisting
         the Manager in monitoring compliance with the various requirements for
         such exemption.

         (c) Portfolio Management. The Sub-Manager will perform portfolio
management services on behalf of the Manager with respect to the Company's
mortgage investments. Such services will include, but not be limited to,
consulting with the Manager on purchase and sale policies, collection of
information and submission of reports pertaining to the Company's mortgage
investments, periodic review and evaluation of the performance of the Company's
portfolio of mortgage investments, acting as liaison between the Company and
banking, mortgage banking, investment banking and other parties with respect to
the purchase, financing and disposition of mortgage investments, and other
customary functions related to mortgage investment portfolio management.

         (d) Reasonable Best Efforts. The Manager agrees to use its reasonable
best efforts at all times in performing services for the Manager and the Company
hereunder.

         SECTION 3. Additional Activities of Sub-Manager. Nothing herein shall
                    ------------------------------------
prevent the Sub-Manager or any of its Affiliates from engaging in other
businesses or from rendering services of any kind to any other person or entity,
including investment in, or advisory service to others investing in, any type of
mortgage investment, including investments that meet the principal investment
objectives of the Company. It is specifically understood and agreed that the
Sub-Manager may directly or indirectly supply services of any nature, including
investment advice and portfolio administration, to other companies seeking to
qualify as a REIT, including companies sponsored or organized by it, that may be
in direct or indirect competition with the Company. The Sub-Manager will not be
required to resolve any conflicts of interest that may arise in connection with
such competing services in favor of the Company, although employees

                                      -3-
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performing services for multiple accounts will seek to allocate investment and
disposition opportunities available to and appropriate for the accounts in a
manner that is reasonably fair over time to each such account. The Manager
agrees that the Sub-Manager may refrain from rendering any advice or services
concerning securities of companies of which any of the Sub-Manager's, or
affiliates of the Sub-Manager's officers, directors, or employees are directors
or officers, or companies for which the Sub-Manager or any of the Manager's
affiliates or the officers, directors and employees of any of them has any
substantial economic interest, unless the Sub-Manager either determines in good
faith that it may appropriately do so without disclosing such conflict to the
Manager or discloses such conflict to the Manager prior to rendering such advice
or services with respect to the Company's mortgage investments. From time to
time, when determined by the Sub-Manager in its capacity of a fiduciary to be in
the best interest of the Company, the Sub-Manager may on behalf of the Company
purchase securities from or sell securities to an account managed by the Sub-
Manager at prevailing market levels in accordance with the procedure under
section 17(a)(7) of the Investment Company Act of 1940.

         SECTION 4. Commitments. In order to meet the investment requirements of
                    -----------
the Company, as determined by the Manager from time to time, the Sub-Manager
agrees, at the direction of the Manager, to issue on behalf of the Company
commitments for the purchase of mortgage investments.

         SECTION 5. Bank Accounts. At the direction of the Manager, the
                    -------------
Sub-Manager may establish and maintain one or more bank accounts in the name of
the Company, and may collect and deposit into any such account or accounts, and
disburse funds from any such account or accounts, under such terms and
conditions as the Manager may approve; and the Sub-Manager shall from time to
time render appropriate accountings of such collections and payments to the
Manager, the Company and, upon request, to the auditors of the Manager and the
Company.

         SECTION 6. Records; Confidentiality. The Sub-Manager shall maintain
                    ------------------------
appropriate books of accounts and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection by representatives of the Manager and the Company at any time during
normal business hours. The Sub-Manager shall keep confidential any and all
information obtained in connection with the services rendered hereunder and
shall not disclose any such information to nonaffiliated third parties except
with the prior written consent of the Manager.

         SECTION 7. Obligations of Sub-Manager.
                    --------------------------

         (a) At the sole cost and expense of the Company, the Sub-Manager shall
require each seller or transferor of mortgage investments to the Company to make
such representations and warranties regarding such investments as may, in the
judgment of the Sub-Manager, be necessary and appropriate. In addition, the
Sub-Manager shall take such other action as it deems necessary or appropriate
with regard to the protection of the Company's mortgage investments.

         (b) The Sub-Manager shall refrain from any action that would adversely
affect the status of the Company as a REIT or that, to the best of its
knowledge, would violate any law, rule or regulation of any governmental body or
agency having jurisdiction over the Company or the

                                      -4-
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Manager or that would otherwise not be permitted by the Company's charter or by-
laws. If the Sub-Manager is ordered to take any such action by the Manager, the
Sub-Manager shall promptly notify the Manager of the Sub-Manager's judgment that
such action would adversely affect such status or violate any such law, rule or
regulation, or the Company's charter or by-laws and shall not be required to
take such action. Notwithstanding the foregoing, the Sub-Manager, its directors,
officers, stockholders and employees shall not be liable to the Manager, the
Company, or the Company's stockholders for any act or omission by the Sub-
Manager, its directors, officers, stockholders or employees except as provided
in Section 10 of this Agreement.

         SECTION 8. Compensation. For services hereunder, the Manager shall be
                    ------------
compensated in accordance with Exhibit B, attached hereto. If this agreement
terminates at any time other than the end of a calendar quarter, the last
quarterly fee shall be prorated based on the portion of such calendar quarter
during which this Agreement was in force.

         SECTION 9. Custodian. Securities representing Company mortgage
                    ---------
investments shall be held by a custodian duly appointed by the Company, and the
Sub-Manager is authorized to give instructions to the custodian with respect to
all investment decisions regarding such mortgage investments. Except as provided
in Paragraph 2 above, nothing contained herein shall be deemed to authorize the
Sub-Manager to take or receive physical possession of any of the mortgage
investments for the account of the Company, it being intended that sole
responsibility for safekeeping thereof (in such investments as the Sub-Manager
may direct) and the consummation of all purchases, sales, deliveries and
investments made pursuant to the Sub-Manager's direction shall rest upon the
custodian.

         The Sub-Manager is authorized to enter into Tri-Party Repurchase
Agreements and sign the standard PSA tri-party agreement (the "Tri-Party
Agreement") on behalf of the Company and the subcustodian thereunder is
authorized to act as a subcustodian for the Company mortgage investments
involved in any tri-party repurchase agreement pursuant to such Tri-Party
agreement.

         SECTION 10. Limits of Sub-Manager Responsibility. The Sub-Manager
                     ------------------------------------
assumes no responsibility under this Agreement other than to render the services
called for hereunder in good faith and shall not be responsible for any action
of the Manager or the Company in following or declining to follow any advice or
recommendations of the Sub-Manager, including as set forth in Section 7 of this
Agreement. The Sub-Manager, its directors, officers, stockholders and employees
will not be liable to the Manager, the Company, or the Company's or any
subsidiary's shareholders for any acts or omissions by the Sub-Manager, its
directors, officers, stockholders or employees under or in connection with this
Agreement, except by reason of acts constituting bad faith, willful misconduct,
negligence or reckless disregard of their duties. The Manager shall reimburse,
indemnify and hold harmless the Sub-Manager, its stockholders, directors,
officers and employees of and from any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever, (including
attorneys' fees) in respect of or arising from any acts or omissions of the
Sub-Manager, its stockholders, directors, officers and employees made

                                      -5-
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in good faith in the performance of the Sub-Manager's duties under this
Agreement and not constituting bad faith, willful misconduct, negligence or
reckless disregard of its duties.

         SECTION 11. No Joint Venture. The Manager and the Sub-Manager are not
                     ----------------
partners or joint venturers with each other and nothing herein shall be
construed to make them such partners or joint venturers or impose any liability
as such on either of them.

         SECTION 12. Resignation or Removal of the Sub-Manager. The Sub-Manager
                     -----------------------------------------
may be removed by the Manager or may resign upon 30 days' notice in writing. On
the effective date of the removal or resignation of the Sub-Manager or as close
to such date as is reasonably possible, the Sub-Manager shall provide the
Manager with a final report containing such information concerning the Company's
mortgage investments as the Manager may reasonably request.

         SECTION 13. Assignment, Changes in Organization of Sub-Manager. Unless
                     --------------------------------------------------
the Manager expressly consents thereto in writing, any assignment (as defined in
the Investment Advisers Act of 1940) by the Sub-Manager of this Agreement shall
automatically terminate this Agreement. If the Sub-Manager hereunder is
converted into, merges or consolidates with or sells or transfers substantially
all of its assets or business to another entity, the resulting entity or the
entity to which such sale or transfer has been made shall notify the Manager of
such sale or transfer and shall become the Sub-Manager hereunder only if the
Manager specifically so consents in writing.

         SECTION 14. Release of Money or Other Property Upon Written Request.
                     -------------------------------------------------------
The Sub-Manager agrees that any money or other property of the Company held by
the Sub-Manager under this Agreement shall be held by the Sub-Manager as
custodian for the Company, and the Sub-Manager's records shall be appropriately
marked clearly to reflect the ownership of such money or other property by the
Company. Upon the receipt by the Sub-Manager of a written request signed by a
duly authorized officer of the Company or the Manager requesting the Sub-Manager
to release to the Company any money or other property then held by the
Sub-Manager for the account of the Company under this Agreement, the Sub-Manager
shall release such money or other property to the Company within a reasonable
period of time, but in no event later than 30 days following such request. The
Sub-Manager shall not be liable to the Manager, Company, or the Company's or a
subsidiary's stockholders for any acts performed or omissions to act by the
Company or the Manager in connection with the money or other property released
to the Company in accordance with this Section. The Company shall indemnify the
Sub-Manager, its directors, officers, stockholders and employees against any and
all expenses, losses, damages, liabilities, demands, charges and claims of any
nature whatsoever, which arise in connection with the Sub-Manager's release of
such money or other property to the Company in accordance with the terms of this
Section 14. Indemnification pursuant to this provision shall be in addition to
any right of the Sub-Manager to indemnification under Section 10 of this
Agreement.

         SECTION 15. Notices. Unless expressly provided otherwise herein, all
                     -------
notices, requests, demands and other communications required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given,
made and received when delivered against

                                      -6-
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receipt or upon actual receipt of registered or certified mail, postage prepaid,
return receipt requested, addressed as set forth below:

                  (a)   If to the Manager or the Company:

                        Friedman, Billings, Ramsey Investment Management, Inc.
                        1001 Nineteenth Street, North
                        Arlington, Virginia 22209
                        Attention:   Robert S. Smith, Esq.

                        or by facsimile to (703) 312-9756

                  (b)   If to the Sub-Manager:

                        Fixed Income Discount Advisory Company, Inc.
                        12 East 41st Street
                        New York, NY 10017
                        Attention:  Michael A.J. Farrell, Chairman and CEO

                        or by facsimile to (212) __________

         Either party may alter the address to which communications or copies
are to be sent by giving notice of such change of address in conformity with the
provisions of this Section 19 for the giving of notice.

         SECTION 16. Binding Nature of Agreement; Successors and Assigns. This
                     ---------------------------------------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns as
provided herein.

         SECTION 17. Entire Agreement. This Agreement contains the entire
                     ----------------
agreement and understanding among the parties hereto with respect to the subject
matter hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof. The express
terms hereof control and supersede any course of performance and/or usage of the
trade inconsistent with any of the terms hereof. This Agreement may not be
modified or amended other than by an agreement in writing.

         SECTION 18. Controlling Law. This Agreement and all questions relating
                     ---------------
to its validity, interpretation, performance and enforcement shall be governed
by and construed, interpreted and enforced in accordance with the laws of the
Commonwealth of Virginia, notwithstanding any Virginia or other conflict-of-law
provisions to the contrary.

         SECTION 19. Indulgences, Not Waivers. Neither the failure nor any delay
                     ------------------------
on the part of a party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege

                                      -7-
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preclude any other or further exercise of the same or of any other right,
remedy, power or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such right,
remedy, power or privilege with respect to any other occurrence. No waiver shall
be effective unless it is in writing and is signed by the party asserted to have
granted such waiver.

         SECTION 20. Costs and Expenses. Each party hereto shall bear its own
                     ------------------
costs and expenses incurred in connection with the negotiations and preparation
of and the closing under this Agreement, and all matters incident thereto.

         SECTION 21. Titles Not to Affect Interpretation. The titles of
                     -----------------------------------
paragraphs and subparagraphs contained in this Agreement are for convenience
only, and they neither form a part o f this Agreement nor are they to be used in
the construction or interpretation hereof.

         SECTION 22. Execution in Counterparts. This Agreement may be executed
                     -------------------------
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.

         SECTION 23. Provisions Separable. The provisions of this Agreement are
                     --------------------
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.

         SECTION 24. Investment Manager Brochure. The Manager hereby
                     ---------------------------
acknowledges that it has received from the Sub-Manager a copy of the ADV Form,
Part II, as currently filed, at least forty-eight hours prior to entering into
this Agreement.

                             SIGNATURE PAGE FOLLOWS

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         IN WITNESS WHEREOF, the parties hereto have executed this Management
Agreement as of the date first written above.

                                      FIXED INCOME DISCOUNT
                                      ADVISORY COMPANY, INC.

                                      By:________________________________
                                      Name:______________________________
                                      Title:_____________________________

                                      FRIEDMAN, BILLINGS, RAMSEY
                                      INVESTMENT MANAGEMENT, INC.

                                      By:________________________________
                                      Name:______________________________
                                      Title:_____________________________

                                      Agreed to:

                                      FBR ASSET INVESTMENT CORPORATION

                                      By:________________________________
                                      Name:______________________________
                                      Title:_____________________________

                                      -9-
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                                  Appendix A
                            MORTGAGE LOAN PORTFOLIO

                        Proposed Investment Guidelines

The Portfolio..................................   The Mortgage Loan Portfolio
                                                  (the Portfolio) is a separate
                                                  account managed by Fixed
                                                  Income Discount Advisory
                                                  Company, Inc. (FIDAC) for the
                                                  benefit of the FBR Asset
                                                  Investment Corporation (the
                                                  Corporation).

Investment Objective...........................   The Portfolio will consist of
                                                  qualifying REIT mortgage
                                                  assets that will earn both a
                                                  positive spread to their
                                                  funding costs and an
                                                  attractive return on capital.
                                                  Approximately 4-15% of the
                                                  Corporation's total equity
                                                  will be allocated to the
                                                  Portfolio. This equity will be
                                                  levered in order to meet the
                                                  55% qualifying "Non-RIC" asset
                                                  requirement.

Duration Guidelines............................   The Portfolio will be managed
                                                  with a very low duration
                                                  target.

Asset Guidelines...............................   Following are eligible
                                                  investments:

                                                  Loans secured by residential
                                                  properties and agency and non-
                                                  agency mortgage-backed
                                                  securities backed by loans
                                                  secured by residential and
                                                  multifamily properties
                                                  including, but not limited to
                                                  1) pass-throughs, 2) project
                                                  loans, and 3) adjustable rate
                                                  mortgages (further details
                                                  follow in Appendix A1);

                                                  The Portfolio may only invest
                                                  in U.S. dollar denominated
                                                  securities.

                                                  The Portfolio may use interest
                                                  swaps and/or exchange traded
                                                  options for purposes of yield
                                                  curve management and
                                                  maintaining a target duration.

                                                  The Portfolio may purchase
                                                  private placement or Rule 144A
                                                  securities.

Credit Criteria...............................    Securities must be rated
                                                  investment grade or

                                      A-1

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                                              better by a national recognized
                                              credit rating agency at the time
                                              of purchase.

                                              In the event that a Portfolio
                                              investment is downgraded below
                                              these credit quality guidelines,
                                              the Investment Manager shall
                                              notify the Corporation and provide
                                              an evaluation and a recommended
                                              course of action.

Leverage....................................  The Portfolio may enter into
                                              reverse repurchase agreements.
                                              Other financing strategies will be
                                              used from time to time with the
                                              prior approval of the Company.

Reinvestment of Income......................  All investment income of the
                                              Portfolio and capital gains, if
                                              any, will be added to the assets
                                              of the Portfolio.

Custodian...................................  As selected by the Corporation.

                                      A-2

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                                  Appendix A1

                    DESCRIPTION OF MORTGAGE LOAN PORTFOLIO

Overview
--------

Fixed Income Discount Advisory Company, Inc. (FIDAC) will be the sub-advisor on
the Mortgage Portfolio. The investment objective of the Mortgage Portfolio is to
manage a portfolio of qualifying REIT mortgage assets that will earn both a
positive spread to their funding costs and an attractive return on capital.

FIDAC intends to invest primarily in the following three sectors of the mortgage
market:

     1.  Whole-pool agency pass-through securities
     2.  Non-conforming residential mortgage loans
     3.  Project loans.

These sectors are described below.

Agency Pass-Through Securities
------------------------------

FIDAC will buy agency pass-through securities that represent 100% interest in
the underlying conforming mortgage loans ("whole pools"). Most of the loans will
fully amortize over the terms of their mortgages, but some may require a
"balloon" payment upon maturity. Conforming loans comply with the underwriting
requirements for purchase by one of the following agencies: Federal Home Loan
Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA), and
Government National Mortgage Association (GNMA). Under current requirements,
conforming loans must be secured by first liens on single-family residential
properties that comply with requirements governing original outstanding
principal balances, loan-to-value ratios, and various other underwriting
criteria.

These securities do not bear the risk of credit loss due to defaults as they are
guaranteed by the agencies. GNMA is a wholly owned corporate instrumentality of
the U.S. Government within the U.S. Department of Housing and Urban Development
(HUD) and, therefore, its guarantee is backed by the full faith and credit of
the U.S. Government. FNMA and FHLMC are government-sponsored agencies that are
not backed by the full faith and credit of the U.S. Government, although they
have implicit government guarantees.

Agency securities may be collateralized by either fixed or adjustable coupons.
Fixed-rate mortgage loans have a constant coupon over the life of the loan,
generally 15 or 30 years. FIDAC will generally buy seasoned, short
weighted-average maturity ("WAM"), fixed-rate securities. FIDAC will also invest
in securities backed by adjustable-rate mortgage ("ARM") loans, which provide
for the periodic adjustment of the coupon. The coupon is set as the sum of a
fixed margin and an index, subject to certain periodic and life-time
interest-rate caps. The most

                                     A1-1

                                      -12-
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common reference indices for ARMs are the Constant-Maturity Treasury Indices
(CMT), LIBOR, and the CD rate. Agency securities may also include hybrid ARMs,
which are securities that have an adjustable coupon for an initial period and
thereafter a fixed coupon.

Mortgage loans are subject to prepayment risk. The rate at which prepayments
occur on mortgage loans will be affected by a variety of factors, including
current interest rates and economic, demographic, tax, social, legal, and other
factors. Generally, prepayments increase when interest rates fall and decrease
when interest rates rise. To the extent that actual prepayment rates are
different than originally anticipated, the yield on and duration of investments
in mortgage loans may be adversely affected. This may adversely affect the
expected rate of return on the investments. FIDAC will seek to manage this risk
through constant monitoring of the portfolio and an active funding and hedging
program.

The markets for all of these assets are very liquid and FIDAC intends to
purchase them from various Wall Street broker/dealers.

Non-Conforming or "Whole-Loan" Mortgages
----------------------------------------

FIDAC will also buy non-conforming adjustable-rate and hybrid mortgage loans and
securities collateralized by such loans. Non-conforming mortgage loans are loans
secured by first liens on single-family residential properties that do not
qualify for purchase by FHLMC, FNMA, or GNMA. Non-conforming loans generally
have outstanding principal balances in excess of agency-program guidelines or
are issued based upon different underwriting criteria than those required by the
agencies.

Pass-through securities collateralized by non-conforming loans (private
pass-through securities) are issued by originators of and investors in mortgage
loans, including savings and loan associations, mortgage banks, commercial
banks, investment banks, and special-purpose subsidiaries of those instruments.
Although these securities are generally structured similarly to the GNMA, FNMA,
and FHLMC securities, they typically are not guaranteed by an entity having the
credit status of one of the agencies and, therefore, generally offer higher
yield than their agency counterparts. Although some credit risk does exist for
both whole loans and whole loan-backed securities, historical losses from
well-underwritten loan packages are extremely small.

While less liquid, there are active markets for both whole loans and securities
collateralized by these loans. FIDAC intends to purchase these assets from
various Wall Street dealers and mortgage originators. As an example, FIDAC has
identified for purchase loans originated by Merrill Lynch as an attractive
source of product. These loans are uncapped adjustable-rate mortgage loans that
Merrill Lynch offers to its brokerage clients ("Prime First" Program).

Putable and Non-Putable FHA/GNMA Project Loans
----------------------------------------------

Project loans are government-insured (via FHA insurance or GNMA guarantee)
two-part

                                     A1-2

                                      -13-
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financing vehicles that (i) finance the construction or rehabilitation of
multifamily residential housing and healthcare facilities and (ii) provide
permanent financing for the project once construction is completed. The loans
can have final maturities as long as forty years and, unlike single-family
mortgage loans, often contain explicit call protection in the form of prepayment
lock-outs or prepayment penalties that can last up to ten years. Project loans
are sold as either single-loan participation or multiple-loan pools. Many
project loans issued prior to 1984 contain a put-option provision which permits
the loans to be assigned to HUD after twenty years .

Project loans are administratively complex, demanding significant knowledge of
the project loans and the mortgage market in general. As a result of their
complexity and various operational concerns, the market for these loans is less
liquid than traditional mortgage loans.

Default risk is largely mitigated with project loans, since the FHA and GNMA
insures the loans against default. FHA-insured project loans are effectively 99%
insured, while GNMA-backed project loans are 100% insured.

One major advantage of these securities, relative to residential loans and
securities, is that their cash flows are generally more stable. Non-putable
project loans exhibit very stable cash flows over the first ten years of their
term, owing to the explicit call protection of the loans. At the end of the
call-protection period, the loans are fully prepayable. However, the greater
costs associated with refinancing multifamily housing are a disincentive, even
for loans at above market rates. The long maturity of the loans poses extension
risk in the event of a significant rise in rates.

Putable project loans do not possess significant extension risk due to the
ability to assign the loans to HUD. However, the loans generally do not possess
significant call protection, because most of the loans are seasoned and,
therefore, well into their lock-out period. Most putable project loans are
lower-coupon issues, providing little incentive for the mortgagor to refinance
based on changes in interest rates.

Project loans offer a significantly higher yield than single-family mortgage
loans and, as mentioned above, these loans offer more stable cash flows than
single-family mortgage loans due to their explicit prepayment protection, making
them a unique asset class in the mortgage market.

The value of the call-protection feature has increased as the single-family
market has become more efficient in exercising imbedded refinancing options. On
an option-adjusted-spread (OAS) basis, project loans are estimated to be at
least thirty basis points cheaper than single-family mortgage loans.

FIDAC intends to purchase these assets from various Wall Street broker/dealers
and mortgage originators.

                                     A1-3

                                      -14-
<PAGE>

Sample Portfolio of December 31, 1999
-------------------------------------

================================================================================
                                         ALLOCATION        YIELD       DURATION
          ASSET CLASS                       RANGE          RANGE         RANGE
--------------------------------------------------------------------------------
   Short-WAM Pools                           8-12%       6.25-6.75%    2.00-2.50
--------------------------------------------------------------------------------
   Agency ARMs                              15-25%       6.00-6.50%    0.50-1.00
--------------------------------------------------------------------------------
   Hybrid ARMs                               8-12%       6.75-7.25%    1.75-2.25
--------------------------------------------------------------------------------
   Whole-Loan ARMs (ML Prime First)          8-12%       6.75-7.25%    0.25-0.75
--------------------------------------------------------------------------------
   Whole-Loan ARMs                          15-25%       6.25-6.75%    0.50-1.00
--------------------------------------------------------------------------------
   Putable Project Loans                     8-12%       6.25-6.75%    2.50-3.50
--------------------------------------------------------------------------------
   Non-Putable Project Loans                15-25%       6.50-7.50%    4.50-5.50
================================================================================
   Total Portfolio                            100%       6.25-7.00%    1.50-2.50
================================================================================

Timing of Investments
---------------------

It is anticipated that once the Company is fully invested in equity REIT
securities, approximately 15% of the Company's total equity capital will be
allocated to the Mortgage Loan Portfolio. This equity will be levered in order
to meet the 55% qualifying "Non-RIC" asset requirement. Assuming total equity
capital of $300 million, approximately $45 million will be allocated to the
Mortgage Loan portfolio. Once fully invested, the portfolio will typically have
leverage in the range of 6:1 to 9:1 (debt to equity), implying a total Mortgage
Loan Portfolio of $300 million to $450 million.

In order to build a portfolio of this size, FIDAC will begin to invest in these
securities as soon as possible after the closing date. While all of the sectors
discussed above have fairly liquid markets, FIDAC would begin by investing in
the most liquid sectors (agency securities), and slowly building toward our
target allocations over a six-to-nine month time frame. The timing of
investments and the amount of leverage in the portfolio will ultimately be a
function of not only the availability of appropriate product, but also the
timing and leverage of the non-Mortgage Loan Portfolio.

Funding/Hedging Strategy
------------------------

The portfolio will be funded with equity, as well as with LIBOR-based
collateralized borrowings. Derivatives may be used to effectively lock in
longer-term funding costs to better match the maturities of the liabilities with
the maturities of the assets. FIDAC will seek to manage the interest-rate risk
of the portfolio's mark-to-market and net interest margin through the use of
derivatives, as well as the asset-liability structure of the portfolio. One such
measure of this risk is "duration," which measures the portfolio's sensitivity
to changes in interest rates. The duration target of the portfolio's net assets
(total assets less liabilities) will generally be set

                                     A1-4

                                      -15-
<PAGE>

at very low levels.

Some of the derivatives used to manage interest-rate risk will include
interest-rate swaps and caps. Interest-rate swaps are arrangements whereby
parties "swap" interest payments. The most common type of swap is one in which
the two parties exchange fixed- for floating-rate payments. For example, if the
rate to swap 5-year fixed for 3-month LIBOR is ten percent, the fixed payer will
make fixed payments equal to ten percent per annum and receive 3-month LIBOR.
Swaps will be used for asset-liability management in that they will allow
investors to swap floating-rate liabilities into a fixed rate.

Interest-rate caps, also referred to as interest-rate ceilings, allow the
purchaser to "cap" the contractual rate associated with a floating-rate
liability. The seller of the cap pays the purchaser any amount above the
periodic capped rate on the settlement date. As mentioned above, the coupons of
adjustable-rate mortgages are usually subject to certain periodic and life-time
interest-rate caps. Purchasing caps allows the investor to effectively uncap the
portfolio's ARM positions or, alternatively, to cap the portfolio's liability
costs.

Sample Asset-Liability Position as of December 31, 1999
-------------------------------------------------------

Leverage Ratio:   [7:1] (debt to equity)

     -------------------------------------------------------------------------
                                 AMOUNT              NET YIELD      DURATION
     -------------------------------------------------------------------------
     Assets                     $360,000               6.40%          2.00

     Liabilities                $[315,000              6.00%          0.25
                             including hedge           6.25%          2.00
     -------------------------------------------------------------------------
     Net Assets                  $45,000               7.45%          0.00
     -------------------------------------------------------------------------

                                     A1-5

                                      -16-
<PAGE>

                                   Appendix B

                           COMPENSATION OF SUB-MANAGER

As compensation for rendering services under the Mortgage Investment
Sub-Management Agreement, the Sub-Manager shall be paid a quarterly management
fee in arrears at the annual rate of 0.20% based on the average gross asset
value of each calendar quarter (calculated as the average of the beginning and
ending gross asset value of the calendar quarter) with a minimum annual fee of
$100,000. The Sub-Manager will be reimbursed for reasonable out-of-pocket
expenses incurred in connection with managing the Mortgage Assets, including
travel, meals, hotels, and other miscellaneous expenses. The Sub-Manager agrees
that the aggregate amount of such expenses shall not exceed $15,000 annually,
without the prior approval of the Manager.

                                      B-1

                                      -17-
<PAGE>

                                                                      Appendix C

                          FORM OF TRADING AUTHORIZATION

To:      Fixed Income Discount Advisory Company, Inc. (FIDAC)

Ladies and Gentlemen:

         Pursuant to that certain Mortgage Investments Sub-Management Agreement
(the "Sub-Management Agreement") by and between Friedman, Billings, Ramsey
Investment Management, Inc. (the "Undersigned") and Fixed Income Discount
Advisory Company, Inc. ("Authorized Agent"), the Undersigned hereby authorizes
Authorized Agent to act as its agent and attorney to buy, sell and trade in
bonds and other securities for the Undersigned's account(s) and risk and in the
Undersigned's name or number on your books.

         You may follow the express instructions of the Undersigned in every
respect concerning the Undersigned's account(s) with you, and make deliveries of
securities and/or payment of moneys to the Undersigned or otherwise as the
Undersigned may order and direct. In all matters and things aforementioned, as
well as in all other things necessary or incidental to the furtherance or
conduct of the account of the Undersigned permitted under the Sub-Management
Agreement, the Authorized Agent is authorized to act for the Undersigned and on
the Undersigned's behalf in the same manner and with the same force and effect
as the Undersigned might or could do. Third parties are permitted to rely on
this authorization as evidence of your authority to act as the Undersigned's
agent, but no such reliance by a third party shall have any affect on the rights
and obligation of you or the Undersigned under the Sub-Management Agreement.

         The Undersigned hereby ratifies and confirms any and all transactions
heretofore made by the Authorized Agent for the Undersigned's account which have
been disclosed to the Undersigned.

         This authorization is made pursuant to the Sub-Management Agreement and
does not modify, amend, restrict or limit any rights or obligations you or the
Undersigned may have under the Sub-Management Agreement or any other agreement
between you and the Undersigned.

         This authorization shall continue and remain in full force and effect
until revoked by the Undersigned by a written notice addressed to you and
delivered to your principal office (via mail or facsimile), but such revocation
shall not affect any liability either you or the Undersigned may have resulting
from transactions initiated prior to such revocation.

         This authorization and its enforcement shall be governed by the laws of
the State of New York. This authorization may not be assigned by you to any
successor firm or firms without the express prior written consent of the
Undersigned, which may given or withheld in the sole and absolute discretion of
the Undersigned. The provisions hereof shall inure to the benefit of you or, to

                                      C-1

                                      -18-
<PAGE>

the extent consented to in writing by the Undersigned, any assignee,
irrespective of any change or changes at any time in the personnel thereof for
any cause whatsoever, and shall be binding upon the Undersigned, and/or the
estate executors, administrators and assigns of the Undersigned.

         If any provision of this authorization shall be rendered invalid for
any reason, the provisions of this agreement so affected shall be deemed
modified or superseded, as the case may be, and all other provisions, and the
provisions so modified or superseded shall in all respects continue and be in
full force and effect.

INITIAL APPROPRIATE LINES IF AUTHORITY IS BEING GRANTED TO EFFECT MARGIN
TRANSACTIONS OR WITHDRAW MONEY AND/OR SECURITIES.

Agent shall be authorized to purchase on margin:  _____    _____   __________
                                                   Yes      No     Initials

Agent shall be authorized to wire money and/or securities to the designated
accounts only:

                                                  _____    _____   __________
                                                   Yes      No     Initials

                                                  Very truly yours,

                                                  FRIEDMAN, BILLINGS, RAMSEY
                                                  INVESTMENT MANAGEMENT, INC.

                                                  By:___________________________
                                                  William R. Swanson, Chief
                                                  Operating Officer

                                                  Dated:________________________

                                      C-2

                                      -19-EXHIBIT 10.4

                            Employment Contract with
                               Richard Storm, Jr.

                                       14

<PAGE>
                              EMPLOYMENT AGREEMENT

                                       FOR

                               RICHARD STORM, JR.

         THIS EMPLOYMENT AGREEMENT  ("Agreement") is being entered into this 9th
day of February,  2000, by and among CITIZENS COMMUNITY BANCORP,  INC. ("CCBI"),
CITIZENS COMMUNITY BANK OF FLORIDA ("Bank") and RICHARD STORM, JR. ("Employee").
CCBI,  the Bank  and the  subsidiaries  of CCBI  and the  Bank are  collectively
referred  to  herein  as  the  "Company."   CCBI,  the  Bank  and  Employee  are
collectively referred to herein as the "Parties."

                                    RECITALS

         WHEREAS,  CCBI and the Bank  wish to  retain  Employee  as their  Chief
Executive Officer to perform the duties and responsibilities as are described in
this  Agreement and as the  respective  Boards of Directors  (collectively,  the
"Board") may assign to Employee from time to time; and

         WHEREAS,  Employee  desires to define the terms of his employment  with
CCBI and the Bank.

         NOW,  THEREFORE,  in consideration of the mutual  agreements  contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto represent, warrant, undertake,
covenant and agree as follows:

                                 OPERATIVE TERMS

         1. Employment and Term. The Company shall employ Employee, and Employee
shall be  employed,  pursuant  to the terms of this  Agreement  to  perform  the
services  specified in Section 2 herein. The term of employment shall be for one
(1) year,  commencing on January 1, 2000 (the "Effective  Date").  Upon each new
day of the one (1) year period of employment  from the Effective  Date until the
Employee's  65th  (sixty-fifth)  birthday,  the term of this Agreement  shall be
automatically extended for one (1) additional day, to be added to the end of the
then-existing  one (1) year  term.  Accordingly,  at all times  prior to (i) the
Employee's  attaining  age  sixty-five  (65) or (ii) the delivery of a Notice Of
Termination,  as defined in  Section 11 (or an actual  termination)  the term of
this Agreement shall be one (1) full year.  However,  either Party may terminate
the automatic  renewals by giving the other Party written notice of their intent
not to renew.  The  automatic  extensions  of the term of this  Agreement  shall
immediately  be suspended  upon an employment  termination by reason of death or
disability or retirement,  or an employment  termination made voluntarily by the
Employee   (other  than  for  good  reason  as  defined  in  Section   9[d],  or
involuntarily  for just cause as defined in  Section  9[b]).  Additionally,  the
Board shall,  on an annual basis,  review  Employee's  performance  to determine
whether this Agreement  should continue to be extended.  The Board's action will
be reflected in the Board Meeting Minutes.

                                       1
<PAGE>

         In the event the Employee  gives a Notice Of  Termination,  the term of
this  Agreement   shall  expire  upon  the  date  indicated  in  the  Notice  Of
Termination, subject to the provisions of Section 11 herein. Except as otherwise
provided in the following paragraph with respect to a voluntary
termination for good reason, a voluntary employment  termination by the Employee
shall result in the  termination  of the rights and  obligations  of the parties
under  this  Agreement;  provided,  however,  that the terms and  provisions  of
Sections 12 and 13 shall continue to apply.

         In the  event  the  Company  desires  to  involuntarily  terminate  the
employment of Employee (for purposes of this Agreement,  a voluntary  employment
termination  by the Employee for good reason shall be treated as an  involuntary
termination of the Employee's  employment without just cause), the Company shall
deliver to the Employee a Notice Of  Termination,  and the following  provisions
shall apply:

                  (a)      In the event the  involuntary  termination is forjust
                           cause,  this Agreement  shall  terminate  immediately
                           upon  delivery  to the  Employee  of such  Notice  Of
                           Termination.  Such a tennination  forjust cause shall
                           result  in  the   termination   of  all   rights  and
                           obligations  of the  Parties  under  this  Agreement;
                           provided,  however,  that the terms and provisions of
                           Sections 12 and 13 shall continue to apply.

                  (b)      In the event the  involuntary  termination is without
                           just cause, the Employee shall be entitled to receive
                           the severance benefits set forth in Sections 9(f) and
                           9(g) herein and the terms and  provisions of Sections
                           12 and 13 shall continue to apply.

         2.       Position, Responsibilities and Duties. During the term of this
Agreement, Employee shall serve in the following capacities and shall fulfill
the following responsibilities and duties:

                  (a)  Specific  Duties:  Employee  shall  serve  as  the  Chief
         Executive Officer of CCB1 and the Bank,  through election by the Board.
         In such  capacity,  Employee  shall  have the same  powers,  duties and
         responsibilities  of supervision and management usually accorded to the
         Chief  Executive  Officer  of  a  bank  holding  company  or  financial
         institution.  In  addition,  Employee  shall  use his best  efforts  to
         perform the duties and responsibilities described in this Agreement and
         any other  duties  assigned to Employee by the Board and to utilize and
         develop  contacts and customers to enhance the business of the Company.
         Specifically,   Employee  shall  devote  his  full  business  time  and
         attention  and use his best  efforts  to  accomplish  and  fulfill  the
         following duties and responsibilities, as well as other duties assigned
         to Employee from time to time by the Board:

                           (i)      serve as Chief Executive Officer of CCBI and
                                    the Bank;

                           (ii)     serve as the Chairman of the Boards of CCBI
                                    and the Bank, if and when elected to such
                                    positions;

                           (iii)    serve on such committees as appointed by the
                                    Board from time to time;

                           (iv)     coordinate all management contact with the
                                    members of the Board;

                                        2

<PAGE>

                           (v)      have  the  ultimate  responsibility  for the
                                    preparation  and approval of the agendas for
                                    all  meetings  of the Board and Chair  those
                                    meetings,  emphasizing  participation by the
                                    Board and efficient time usage;

                           (vi)     work  in  close  coordination  with  the
                                    Presidents  of  CCBI,  the  Bank  and their
                                    subsidiaries  on  the  strategic  planning
                                    process for the Company;

                           (vii)    develop, review and monitor all compensation
                                    systems in the Company, with particular
                                    emphasis on officers and supervisors;

                           (viii)   coordinate  the  budgeting  process  for the
                                    Company  with the  President/CFO  to  insure
                                    that  budgetary  goals and  projections  are
                                    being met;

                           (ix)     lead the strategic  planning process of the
                                    Company  (including  the  identification,
                                    development  and  implementation of approved
                                    complementary business activities and
                                    subsidiaries;

                           (x)      monitor daily financial statements for the
                                    Company;

                           (xi)     assess the developmental needs and career
                                    paths of all officers of the Company and
                                    make recommendations to the respective
                                    Executive Committee members;

                           (xii)    establish and implement marketing efforts to
                                    increase the business of the Company; and

                           (xiii)   coordinate with the Company's  attorneys and
                                    accountants,  and other service providers to
                                    the extent necessary to further the business
                                    of the Company,  keeping in compliance  with
                                    government    laws   and   regulations   and
                                    otherwise  keeping  the Company in as good a
                                    financial and legal posture as possible.

                  (b)  GeneralDuties:  During  the term of this  Agreement,  and
         except for illness,  vacation periods and leaves of absences,  Employee
         shall  devote a minimum  of 120 hours  per month of his  working  time,
         attention,  skill and best efforts to accomplish and faithfully perform
         all of the duties assigned to Employee.  Such working time may be on or
         off site at the discretion of Employee.  Employee  shall, at all times,
         conduct  himself  in a manner  that will  reflect  positively  upon the
         Company.   Employee   shall   obtain   such   licenses,   certificates,
         accreditations  and  professional  memberships and  designations as the
         Company may reasonably require.

                                       3
<PAGE>

         3.       Compensation. During the term of this Agreement, Employee
shall be compensated as follows:

                  (a) Base Salary:  Employee  shall  receive an annual salary of
         Sixty-Three Thousand Dollars ($63,000) (the "Base Salary"),  payment of
         which shall be allocated between CCBI and the Bank as determined by the
         Board.  The Base  Salary  shall be  payable in equal  installments,  in
         accordance  with the  Company's  standard  payroll  practices,  reduced
         appropriately  by  deductions  for federal  income  withholding  taxes,
         social security taxes and other deductions required by applicable laws.
         The Company  may adjust the Base  Salary from time to time,  based upon
         the Board's evaluation of Employee's performance. In no event, however,
         will the Base Salary be reduced without Employee's written concurrence.

                  (b)  Performance  Bonus:  In  each  year,  in  the  event  the
         Company's year end pretax earnings are $ 1.0 million or less,  Employee
         shall  receive  a  performance  bonus of 2% of the  Company's  pre-tax
         earnings.  Should the Company's  pre-tax  earnings at year end exceed $
         1.0 million, Employee's performance bonus shall be 1 % of the Company's
         pre-tax earnings

                  (c)  Profit Sharing Plan: Employee shall be entitled to share
         with the Bank's President, as allocated by the Board, a percentage of
         the Bank's profit sharing pool as determined by the Board, at its sole
         discretion.

                  (d) Stock  Appreciation  Incentive Bonus: Each year,  Employee
         shall be entitled  to a cash bonus  equal to the  increase in the "Fair
         Market  Value" of 25,000  shares of CCBI common stock from January 1 of
         that year to December 31 of that year ("SAI  bonus").  The Board of the
         Company may,  from year to year,  increase the number of shares of CCBI
         common stock on which the SAI bonus is predicated.

                  For  purposes of this  Section 3, the Fair  Market  Value of a
         share of CCBI common  stock shall be the closing  sale price of a share
         on the date in  question  (or,  if such day is not a trading day in the
         U.S.  markets,  on the nearest preceding trading day), as reported with
         respect to the principal  market (or the  composite of the markets,  if
         more than one) or  national  quotation  system in which such shares are
         then  traded,  or if no such  closing  prices  are  reported,  the mean
         between  the high bid and low asked  prices  that day on the  principal
         market  or  national  quotation  system  then  in  use,  or if no  such
         quotations  are  available,  the  price  furnished  by  a  professional
         securities  dealer  making a market in such  shares as  selected by the
         Board. In the absence of any  over-the-counter  transactions,  the Fair
         Market Value means the highest  price at which the stock has sold in an
         arms length  transaction  during the 90 days immediately  preceding the
         date in question.  In the absence of an arms length  transaction during
         such 90 days,  Fair  Market  Value  means the book  value of a share of
         common stock.

                  Notwithstanding   the   provisions   of  the   preceding   two
         paragraphs,  in the event of a change in control (as defined in Section
         9[e] of this  Agreement),  Employee  shall be  immediately  entitled to
         receive his SAI bonus for that year.  In this  instance,  the amount of
         the SAI bonus shall be equal to the  increase in the Fair Market  Value
         of the number of SAI shares from December 31 of the  preceding  year to
         the price paid for the number of shares of CCBI  common  stock equal to
         the number of SAI shares in the transaction  that effects the change in
         control; the SAI bonus shall be paid simultaneously with that closing.

                                        4

<PAGE>

                  (e) Stock and Other  Benefit  Plans:  During  the term of this
         Agreement,  the Employee will be entitled to participate in and receive
         the  benefits  of  any  stock  option  plans,  stock  ownership  plans,
         profit-sharing  plans, 401 (k) plans,  deferred  compensation plans, or
         other plans,  benefits and privileges given to employees and executives
         of the Company  which are  currently in effect at the execution of this
         Agreement or which may come into existence thereafter to the extent the
         Employee is otherwise  eligible and qualifies to so  participate in and
         receive such  benefits or  privileges.  The Company  shall not make any
         changes in such plans,  benefits or  privileges  which would  adversely
         affect the Employee's rights or benefits thereunder, unless such change
         occurs pursuant to a program applicable to all executive officers (Vice
         President  or above) and does not result in a  proportionately  greater
         adverse change in the rights of or benefits to the Employee as compared
         with any other  executive  officer of the Company.  Nothing paid to the
         Employee  under  any plan or  arrangement  presently  in effect or made
         available  in the  future  shall  be  deemed  to be in lieu of the Base
         Salary payable to the Employee pursuant to Section 3(a) herein.

         4.     Payment of Business  Expenses.  Employee is authorized to incur
reasonable  expenses in performing  his duties.  The Company will reimburse
Employee  for  authorized  expenses,  according  to  the  Company's  established
policies,  promptly after Employee's presentation of an itemized account of such
expenditures.

         5.       Vacation.   Employee is entitled to three (3) weeks paid
vacation time per year on a non-cumulative basis.

         6.       Fringe Benefits.

                  (a) Medical  Benefits:  Employee is entitled to participate in
         all medical and health care benefit  plans  through  health  insurance,
         corporate funds,  medical  reimbursement  plans or other plans, if any,
         provided, or to be provided, by the Company for its employees.

                  (b) Automobile  Allowance:  The Company will provide  Employee
         with a $600 per month automobile  allowance  during  Employee's term of
         employment.  All expenses and upkeep of the automobile  will be bome by
         the Employee.  Employee shall be responsible for  apportioning the time
         allocated for personal use for purposes of compliance with the Internal
         Revenue Code of 1986, as amended.

                  (c) Country Club  Membership:  The Company will pay for a full
         membership  for  Employee  at the Marco  Island  Yacht Club  located in
         Collier  County,  Florida.  Employee  shall comply with all  applicable
         federal income tax laws and regulations  governing  Employee's personal
         use of this membership. The Company will also pay Employee's membership
         costs in other clubs or organizations when such membership will benefit
         the  Company as  determined  in advance  by the Board.  Employee  shall
         maintain  records of both business and personal use of such  facilities
         and shall submit those records to CCBI monthly.

                                       5
<PAGE>

         7.       Disability/Illness.

                  (a) Illness:  Employee  shall be paid his full Base Salary for
         any period of his illness or incapacity,  provided that such illness or
         incapacity  does not render Employee unable to perform his duties under
         this Agreement for a period longer than sixty (60) consecutive days. At
         the end of such sixty (60) day period, the Company may terminate
         Employee's employment and this Agreement.

                  (b) Disability:  Regardless of whether the Company  terminates
         Employee's  employment  and this  Agreement  pursuant  to Section  7(a)
         herein,  if an illness or  incapacity  lasts for longer than sixty (60)
         consecutive days,  Employee shall receive payments under the disability
         insurance plan provided by the Company and not his full Base Salary.

                  (c) Continuation of Coverages: During any period of illness or
         disability,  the  Company  may  continue  any other  life,  health  and
         disability  coverages  that  Employee  was entitled to  participate  in
         immediately  prior to the date of receiving  benefits or payments under
         any disability insurance plan; provided,  however,  that the Employee's
         continued  participation  is  possible  under  the  general  terms  and
         provisions of such plans and programs, and that:

                           (i)      such coverages shall cease upon the earlier
                                    of. (A) sixty (60) days after the date of
                                    any termination of employment hereunder
                                    (with the exception of disability insurance
                                    coverage); or (B) the date of Employee's
                                    death; and

                           (ii)     the  continuation  of such  coverages is not
                                    violative of any disability insurance policy
                                    that  Employee  is  receiving   benefits  or
                                    payments under.

                  (d) No Reduction  in Base  Salary:  During the period in which
         Employee is disabled or subject to illness or incapacity, other than as
         described  in Section  7(b)  herein,  there  shall be no  reduction  in
         Employee's Base Salary.

                  (e) Annual Physical: Once a year, Employee agrees to undergo a
         routine physical examination. The costs of the examination will be
         reimbursed by the Company.  The results of the physical examination, or
         a summary thereof, shall be made part of Employee's personnel file.

         8. Death During Employment. In the event of Employee's death during the
term of this Agreement, the Company's obligation to Employee shall be limited to
the portion of  Employee's  compensation  which would be payable up to the first
working day of the first month after Employee's  death,  except that any accrued
compensation  payable to  Employee  under any  benefit  plan  maintained  by the
Company will be paid pursuant to its tenns.

         9.       Termination.

                    (a)  Illness,  Incapacity  or Death:  This  Agreement  shall
               terminate  upon  Employee's  illness,   incapacity  or  death  in
               accordance with the provisions of Sections 7 and 8 herein.

                                        6

<PAGE>

                  (b)  Termination  for Just Cause:  The Company  shall have the
         right at anytime,  upon prior written notice of termination  satisfying
         the  requirements  of Section 11 herein,  to terminate  the  Employee's
         employment  hereunder,  including  termination  forjust cause.  For the
         purpose of this  Agreement,  termination  for "just  cause"  shall mean
         termination for personal dishonesty,  incompetence, willful misconduct,
         material breach of fiduciary duty,  intentional  failure to perform the
         duties stated in this Agreement,  willful violation of any law, rule or
         regulation (other than traffic violations or similar offenses), willful
         violation of a final  cease-and-desist  order,  willful or  intentional
         breach or negligence or misconduct in the performance of such duties or
         material  breach of any provision of this  Agreement as determined by a
         court of competent  jurisdiction or in final agency action by a federal
         or state regulatory agency having  jurisdiction  over the Company.  For
         purposes of this Section,  no act, or failure to act, on the Employee's
         part shall be considered  "willful" unless done, or omitted to be done,
         by him not in good faith and without  reasonable belief that his action
         or omission was in the best interest of the Company;  provided that any
         act or omission to act by the Employee in  reasonable  reliance upon an
         opinion of Corporate  Counsel to the Company  shall not be deemed to be
         willful.  In the event Employee is terminated for just cause,  Employee
         shall have no right to  compensation  or other  benefits for any period
         after such date of termination.

                  (c) Involuntary Termination:  If the Employee is terminated by
         the Company other than for just cause or in connection with a change in
         control of the Company (as defined in Section 9[e] herein),  Employee's
         right to compensation  and other benefits under this Agreement shall be
         as set forth in  Sections  9(f)(i)  and 9(g)  herein.  In the event the
         Employee is terminated  by the Company in  connection  with a change in
         control of the  Company,  Employee's  right to  compensation  and other
         benefits  under  this  Agreement  shall  be as set  forth  in  Sections
         9(f)(ii) and 9(g) herein.

                  (d)  Termination  for Good Reason:  Employee may terminate his
         employment  hereunder for good reason.  For purposes of this Agreement,
         "good  reason"  shall mean (i) a failure by the  Company to comply with
         any material  provision of this  Agreement,  which failure has not been
         cured within fifteen (15) days after a notice of such noncompliance has
         been given by the  Employee to the  Company;  or (ii)  subsequent  to a
         change in control as defined in Section 9(e) herein.

                  (e) Change in  Control:  For  purposes  of this  Agreement,  a
         "change in control"  shall mean a change in  ownership of stock of CCB1
         or the Bank whereby a person:  (i) acquires  50%, plus one share of the
         outstanding  shares of voting stock of CCBI or the Bank through  direct
         or  indirect  ownership  or proxy;  or (ii)  controls in any manner the
         election of a majority of the directors of the Board.

                  (b)      Severance Payment:

                           (i)      If  the   Employee   shall   terminate   his
                                    employment  for good reason as defined in of
                                    Section 9(d)  herein,  or if the Employee is
                                    terininated   by  the   Company   for  other
                                    thanjust  cause  pursuant  to  Section  9(c)
                                    herein,  then in lieu of any further  salary
                                    payments   to  the   Employee   for  periods
                                    subsequent to the date of  termination,  the
                                    Employee  shall be paid,  as  severance,  an
                                    amount which would equal the Employee's

                                        7

<PAGE>

                                    total Base Salary for the  remainder  of the
                                    term  of  the  Agreement,  plus  any  bonus,
                                    profit  sharing,  or incentive  compensation
                                    that the Employee  would have been  entitled
                                    to hereunder;

                           (ii)     In the event  Employee's  employment  is
                                    terminated  as  a  result  of  a  change in
                                    control or a change in  control  of the Bank
                                    occurs  within  twelve  (12) months  of  the
                                    Employees'  involuntary   termination   or
                                    termination   for   good   reason,  Employee
                                    shall be  entitled  to a  severance  payment
                                    equal  to  two (2)  times  his  current Base
                                    Salary  and  any  bonus,  profit  sharing or
                                    incentive  compensation  that  would  then
                                    be  due Employee. Any payment under Section
                                    9(f)(i) and  9(f)(ii) shall  be  made  in
                                    substantially    equal    semi-monthly
                                    installments on the fifteenth and last days
                                    of each month until paid in full.

                  (g)  Additional  Severance  Benefits:  Unless the  Employee is
         terminated for just cause pursuant to Section 9(b) herein,  pursuant to
         Section  10(b) herein,  pursuant to Section 7 herein,  or pursuant to a
         termination  of  employment by the Employee for other than good reason,
         the Company shall maintain in full force and effect,  for the continued
         benefit of the Employee for the remaining  term of this  Agreement,  or
         twelve (12) months  (whichever is longer),  all employee  benefit plans
         and  programs in which the  Employee  was  entitled to  participate  in
         immediately prior to the date of termination;  provided,  however, that
         the Employee's  continued  participation  is possible under the general
         terms and provisions of such plans and programs.  Further,  the Company
         shall  pay for the  same  or  similar  benefits  if such  benefits  are
         available to the employee on an  individual  or group basis as a result
         of contractual  or statutory  provisions  requiring or permitting  such
         availability  including,  but not limited to, health insurance  covered
         under COBRA.

                  (h) Mitigation: Employee shall not be required to mitigate the
         amount of any payment  provided  for in Sections  9(f) and 9(g) of this
         Agreement by seeking other employment or otherwise.

         10.      Required Provisions by Regulation.   The Company and Employee
acknowledge that the laws and regulations  governing the  Parties  require  that
certain provisions be provided in each employment  agreement  with  officers and
employees  of  the  Bank.  The  Parties,  therefore,  agree  to  be bound by the
following provisions:

                  (a)  Suspension:  If the  Employee  is  suspended  from office
         and/or temporarily  prohibited from participating in the conduct of the
         Bank's  affairs  pursuant to notice  served  under  Section  8(e)(3) or
         Section  8(g)(1) of the Federal  Deposit  Insurance  Act  ("FDIA")  (12
         U.S.C.   Section  1818[e][3]  and  Section   1818[g][1]),   the  Bank's
         obligations  under this Agreement  shall be suspended as of the date of
         service,  unless stayed by appropriate  proceedings.  If the charges in
         the notice are dismissed, the Bank may, in its discretion:  (i) pay the
         Employee all or part of the compensation withheld while its obligations
         under this Agreement were suspended, and (ii) reinstate (in whole or in
         part) any of its obligations which were suspended.

                                        8

<PAGE>

                  (b)  Permanent  Prohibition:  If the  Employee is removed from
         office and/or permanently  prohibited from participating in the conduct
         of the Bank's affairs by an order issued under Section 655.037, Florida
         Statutes,  or Section 8(e)(4) or Section 8(g)(1) of the FDIA (12 U.S.C.
         Sections 1818[e](4] and [g][1]), all obligations of the Bank under this
         Agreement  shall  terminate as of the effective date of the order,  but
         vested  rights  of  the  Employee  and  the  Bank  as of  the  date  of
         termination shall not be affected.

                  (c) Default Under FDIA: If the Bank is in default,  as defined
         in  Section  3(x)(1) of the FDIA (12 U.S.C.  Section  1813[x][1]),  all
         obligations  under this  Agreement  shall  terminate  as of the date of
         default,  but vested rights of the Employee and the Bank as of the date
         of termination shall be not affected.

                  (d) Regulatory Termination:  All obligations of the Bank under
         this  Agreement  shall  be  terminated,  except  to the  extent  that a
         determination  has been made that  continuation  of this  Agreement  is
         necessary for continued operation of the Bank:

                           (i)      by  the  Director  of  the  Federal  Deposit
                                    Insurance   Corporation   (or   his  or  her
                                    designee)  (the "FDIC") at the time the FDIC
                                    enters   into  an   agreement   to   provide
                                    assistance to or on behalf of the Bank under
                                    the  authority to contained in Section 13(c)
                                    of the Federal Deposit Insurance Act; or

                           (ii)     by the Department or the Director (or his or
                                    her designee) at the time the  Department or
                                    the  Director  (or  his  or  her   designee)
                                    approves  a  supervisory  merger to  resolve
                                    problems related to operation of the Bank or
                                    when the Bank's  determined  by the Director
                                    to be in unsafe or unsound condition.

         Any of Employee's rights that have already vested,  however,  shall not
         be affected by such action.

         11.      Notice of Termination.

                  (a) Employee's  Notice:  Employee  shall have the right,  upon
         prior written  notice of  termination of not less than sixty (60) days,
         to terminate his employment  hereunder.  In such event,  Employee shall
         have no right after the date of  termination to  compensation  or other
         benefits as provided in this Agreement,  unless such termination is for
         "good  reason",  as defined in Section  9(d)  herein.  If the  Employee
         provides  a  notice  of  termination  for  good  reason,  the  date  of
         termination  shall be the date on which the  notice of  termination  is
         given.

                  (b) Specificity:Any  termination of the Employee's  employment
         by the Company or by Employee shall be  communicated  by written notice
         of  termination  to the  other  party  hereto.  For  purposes  of  this
         Agreement,  a "notice of  termination"  shall mean a dated notice which
         shall: (i) indicate the specific termination provision in the Agreement
         relied  upon;  (ii) set  forth  in  reasonable  detail  the  facts  and
         circumstances  claimed  to  provide  a  basis  for  termination  of the
         Employee's employment under the provision so indicated; and

                                        9

<PAGE>

         (iii) set forth the date of  termination,  which shall be not less than
         thirty (30) days nor more than  forty-five  (45) days after such notice
         of  termination  is  given,   except  in  the  case  of  the  Company's
         termination of the Employee's  employment  forjust cause, in which case
         date of  termination  shall be the date such notice of  termination  is
         given.

                  (c) Delivery of Notices:  All notices  given or required to be
         given herein  shall be in writing,  sent by United  States  first-class
         certified or  registered  mail,  postage  prepaid,  by way of overnight
         carrier or by hand  delivery.  If to the Employee (or to the Employee's
         spouse or estate upon the  Employee's  death)  notice  shall be sent to
         Employee's  last-known address, and if to the Company,  notice shall be
         sent to the  corporate  headquarters  of CCBL All such notices shall be
         effective when deposited in the mail if sent via first-class  certified
         or  registered  mail,  or upon delivery if by hand delivery or sent via
         overnight  carrier.  Either Party, by notice in writing,  may change or
         designate the place for receipt of all such notices.

         12.  Post-Termination  Obligations.  The Company  shall pay to Employee
such compensation as is required pursuant to this Agreement;  provided, however,
any such payment  shall be subject to Employee's  post-termination  cooperation.
Such cooperation shall include the following:

                  (i)      Employee   shall   furnish   such   information   and
                           assistance  as  may  be  reasonably  required  by the
                           Company,  or its  attorneys,  in connection  with any
                           litigation or  settlement of any dispute  between the
                           Company,  a borrower  and/or any other third  parties
                           (including without limitation serving as a witness in
                           court or other proceedings); and

                  (ii)     Employee shall provide such information or assistance
                           as may be  reasonably  required  by  the  Company  in
                           connection  with any  regulatory  examination  by any
                           state or federal regulatory agency.

         13. Maintenance of Trade Secrets and Confidential Information. Employee
shall use his best efforts and utmost  diligence to guard and protect all of the
Company's trade secrets and confidential information. Employee shall not, either
during the term or after  tennination of this  Agreement,  for whatever  reason,
use, in any capacity,  or divulge or disclose in any manner, to any Person,  the
identity  of  the  Company's  customers,  or  its  customer  lists,  methods  of
operation,  marketing and promotional methods, processes,  techniques,  systems,
formulas,  programs or other trade secrets or confidential  information relating
to the Company's business.

         14.  Competitive  Activities.  Employee  agrees that during the term of
this Agreement, except with the express consent of the Board, Employee will not,
directly or  indirectly,  engage or  participate  in,  become a director  of, or
render  advisory or other  services  for,  or in  connection  with,  or make any
financial  investment in any financial  institution that directly  competes with
the business of the Bank in Collier County,  Florida;  provided,  however,  that
Employee shall not be precluded or prohibited  from owning passive  investments,
including investments in the securities of other financial institutions.

                                       10

<PAGE>

         3.       Remedies for Breach.

                  (a)  Arbitration:  The  Parties  agree  that,  except  for the
         specific  remedies for  injunctive  relief and other  equitable  relief
         contained in Sections 15(b) and 15(c) herein,  any controversy or claim
         arising  out of or relating to this  Agreement  or any breach  thereof,
         including,  without  limitation,  any claim that this  Agreement or any
         portion  thereof is invalid,  illegal or otherwise  voidable,  shall be
         submitted  to binding  arbitration  before and in  accordance  with the
         rules of the American  Arbitration  Association  and judgment  upon the
         determination  and/or  award of such  arbitrator  may be entered in any
         court having jurisdiction thereof-, provided, however, that this clause
         shall not be  construed  to permit  the award of  punitive  damages  to
         either  party.  The  prevailing  party  to said  arbitration  shall  be
         entitled  to an award  of  reasonable  Attorneys'  Fees.  The  venue of
         arbitration shall be in Collier County, Florida.

                  (b) Injunctive Relief. The Parties  acknowledge and agree that
         the  services to be  performed  by Employee  are special and unique and
         that money damages cannot fully  compensate the Company in the event of
         Employee's violation of the provisions of Section 14 of this Agreement.
         Thus,  in the  event  of a  breach  of any of the  provisions  of  such
         Section,  Employee agrees that the Company, upon application to a court
         of  competent   jurisdiction,   shall  be  entitled  to  an  injunction
         restraining Employee from any further breach of the terms and provision
         of such  Section.  Should the Company  prevail in an action  seeking an
         injunction  restraining  Employee,  Employee  shall  pay all  costs and
         reasonable  Attorneys'  Fees incurred by the Company in and relating to
         obtaining  such  injunction.  Such  injunctive  relief may be  obtained
         without bond and Employee's  sole remedy,  in the event of the improper
         entry of such injunction,  shall be the dissolution of such injunction.
         Employee  hereby waives any and all claims for damages by reason of the
         wrongful issuance of any such injunction.

                  (c) Cumulative  Remedies:  Notwithstanding any other provision
         of this  Agreement,  the injunctive  relief  described in Section 15(b)
         herein and all other remedies  provided for in this Agreement which are
         available  to the  Company  as a result  of  Employee's  breach of this
         Agreement,  are in addition to and shall not limit any and all remedies
         existing at or in equity which may also be available to the Company.

         16.  Assignment.  This  Agreement  shall inure to the benefit of and be
binding upon the Employee,  and to the extent  applicable,  his heirs,  assigns,
executors,  and  personal  representatives,  and to the Bank,  and to the extent
applicable,  its successors,  and assigns,  including,  without limitation,  any
person,  partnership,  or corporation which may acquire all or substantially all
of the  Bank's  assets  and  business,  or with or into  which  the  Bank may be
consolidated  or  merged,  and this  provision  shall  apply in the event of any
subsequent   merger,   consolidation,   or  transfer,   unless  such  merger  or
consolidation or subsequent merger or consolidation is a transaction of the type
which would result in termination under Sections 1 O(c) and 1 O(d) herein.

         17.      Miscellaneous.

                  (a)      Amendments to the Agreement: Unless as otherwise
         provided herein, this Agreement may not be modified or amended except
         in writing signed by the Parties.

                                       11

<PAGE>

                  (b)      Certain Definitions: For purposes of this Agreement,
         the following terms whenever capitalized herein shall have the
         following meanings:

                           (i)      "Person"  shall  mean  any  natural  person,
                                    corporation,    partnership    (general   or
                                    limited),  trust,  association  or any other
                                    business entity.

                           (ii)     "Attorneys'  Fees"  shall  include the legal
                                    fees and disbursements  charged by attorneys
                                    and  their   related   travel  and   lodging
                                    expenses,  court costs, paralegal fees, etc.
                                    incurred in settlement,  trial, appeal or in
                                    bankruptcy proceedings.

                  (c)  Headings for Reference Only: The headings of the Sections
          and  the  Subsections   herein  are  included  solely  for  convenient
          reference and shall not control the meaning or the  interpretation  of
          any of the provisions of this Agreement.

                  (d)  Governing  LawlJurisdiction:   This  Agreement  shall  be
         construed in  accordance  with and governed by the laws of the State of
         Florida.  Any  litigation  involving  the Parties and their  rights and
         obligations hereunder shall be brought in the appropriate courts in and
         for Collier County, Florida.

                  (e)  Severability:  If any of the provisions of this Agreement
         shall be held invalid for any reason,  the remainder of this  Agreement
         shall not be affected thereby and shall remain in full force and effect
         in accordance with the remainder of its terms.

                  (f) Entire  Agreement:  This Agreement and all other documents
         incorporated or referred to herein, contain the entire agreement of the
         Parties   and   there   are   no   representations,    inducements   or
         otherprovisions  other than those  expressed  in writing  herein.  This
         Agreement amends, supplants and supersedes any and all prior agreements
         between  the  Parties.  No  modification,  waiver or  discharge  of any
         provision or any breach of this Agreement shall be effective  unless it
         is in writing  signed by both  Parties.  A Party's  waiver of the other
         Party's breach of any provision of this  Agreement,  shall not operate,
         or be construed, as a waiver of any subsequent breach of that provision
         or of any other provision of this Agreement.

                  (g)  Waiver:  No course of conduct by the  Company or Employee
         and no delay or omission  of the  Company or  Employee to exercise  any
         right or power  given  under  this  Agreement  shall:  (i)  impair  the
         subsequent exercise of any right or power, or (ii) be construed to be a
         waiver of any default or any  acquiescence  in or consent to the curing
         of any default while any other default shall  continue to exist,  or be
         construed  to be a waiver of such  continuing  default  or of any other
         right or power that shall  theretofore  have  arisen.  Any power and/or
         remedy  granted by law and by this Agreement to any party hereto may be
         exercised from time to time,  and as often as may be deemed  expedient.
         All such rights and powers shall be  cumulative  to the fullest  extent
         permitted by law.

                  (h) Pronouns: As used herein, words in the singular include
         the plural, and the masculine include the feminine and neutral gender,
         as appropriate.

                  (i) Recitals:  The Recitals set forth at the beginning of this
         Agreement  shall 1~ deemed to be  incorporated  into this  Agreement by
         this reference as if fully set forth herein,  and this Agreement  shall
         be interpreted with reference to and in light of such Recitals.

                                       12

<PAGE>

         IN WITNESS WHEREOF,  the Parties hereto have executed this Agreement as
of the day and year first written above.

                                  CITIZENS COMMUNITY BANCORP, INC.

/s/ Richard Storm, Jr.            By:/s/ Joel M. Cox
-----------------------------        ---------------------
Richard Storm, Jr.                   Joel M. Cox
                                     Chairman of the Executive Committee

/s/ Gregory E. Smith                 /s/ Gregory E. Smith
-----------------------------        --------------------
Witness                              Witness

                                  CITIZENS COMMUNITY BANK OF FLORIDA

/s/ Richard Storm, Jr.            By:/s/ Diane M. Beyer
-----------------------------        -------------------
Richard Storm, Jr.                  Diane M. Beyer
                                    Chairman of the Executive Committee

/s/ Gregory E. Smith                /s/ Gregory E. Smith
-----------------------------       --------------------
Witness                             Witness

                                       13

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