Document:

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                                                                    EXHIBIT 10.3

PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT. SUCH PORTIONS ARE DESIGNATED "***".

                              SEPARATION AGREEMENT

         Daisytek International Corporation ("Daisytek") and *** enter the
following agreement ("Agreement"), effective December 4, 2002 ("Effective
Date"), for the purpose of completely resolving any and all issues, disputes and
claims related to ***'s employment with Daisytek, the termination of ***'s
employment with Daisytek, and all other matters related in any way to, or
resulting in any way from, the relationship between *** and Daisytek.

         1. PAYMENTS AND BENEFITS. As consideration to *** for ***'s promises,
releases and representations in this Agreement, Daisytek agrees to provide the
following payments and benefits to ***:

                  a.       ***

                  b.       ***

                  c.       ***

                  d.       ***

         2. RESIGNATION BY ***. *** agrees to voluntarily resign ***'s
employment with Daisytek effective January 1, 2003, and Daisytek agrees to
accept ***'s resignation effective January 1, 2003. *** agrees that his decision
to resign his employment is purely voluntary, and that he has not been
discriminated or retaliated against during his employment with Daisytek.

         3. RELEASE BY ***. In return for the payments, releases and other
consideration described herein, ***, for himself and his heirs and assigns,
hereby releases and waives all claims and causes of action of any and every sort
against Daisytek, its parents, subsidiaries, affiliates, partners, limited
partners, successors, shareholders, directors, officers, employees, agents,
attorneys and assigns, which *** has, has had, or may have in the future arising
in any way from any event, act or omission which occurred at any time from the
beginning of time to the Effective Date, including, but not limited to ***'s
employment with Daisytek, the termination of ***'s employment with Daisytek, and
all other matters related in any way to the relationship between *** and
Daisytek. This release includes, but is not limited to, claims in tort,
contract, under statute, in equity or otherwise, and claims for compensation,
severance, retaliation, bonuses, stock, stock options, performance incentives,
payments as the result of a sale merger or business combination, benefits,
vehicle payments or expenses, incidental and consequential damages, expense
reimbursement of any sort, injuries, or any other sort of damages or relief
whatsoever. This release also includes, but is not limited to, claims under the
Americans With Disabilities Act, Age Discrimination in Employment Act, Family
and Medical Leave Act, Title VII of the Civil Rights Act of 1964, the Fair Labor
Standards Act, the Texas Commission on Human Rights Act, the Texas Payday Act,
any workers' compensation statute, and any other federal, state or local act or
ordinance pertaining to employment. The intent of *** and Daisytek is that this
release will be interpreted in as broad a fashion as possible and that it is
intended to be a total and complete release of all claims of any sort
whatsoever.

         4.       ***

         5. TRADE SECRETS/CONFIDENTIAL INFORMATION. *** acknowledges that
Daisytek's Confidential Information is uniquely valuable to Daisytek and agrees
that during ***'s lifetime, *** will not disclose Confidential Information to
any other person or entity without Daisytek's prior written consent and will not
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duplicate, copy, disseminate or attempt to duplicate, copy or disseminate
Confidential Information or any part or portion of it or allow or permit any
person or entity within ***'s control to do so. "Confidential Information" as
used in this Agreement includes the following: all trade secrets of Daisytek and
any information or item that does not qualify under applicable law as a trade
secret but to which Daisytek limits access, to any extent, either internally or
externally. Confidential Information includes but is not limited to information
and items related to plans, strategies, inventions, devices, services, products,
processes, properties, assets, customers, customer lists, customer preferences,
markets, marketing strategies, rebate programs, incentive programs, promotions,
management, employees, technology, know-how, financial conditions or prospects,
employee compensation, fee information, cost information, pricing information,
business development plans and strategies, marketing plans and strategies,
instructional methodology and techniques, computer software, specifications and
code, sources of supply, products or services, designs, analyses, drawings,
photographs and reports, computer operating systems, applications and program
listings, flow charts, manuals, documentation, databases, accounting and
business methods, production procedures, or merchandising systems.

         6. RETURN OF PROPERTY. On or before the Effective Date, *** will return
to Daisytek's counsel all property, tangible or intangible, that Daisytek
provided to *** during the course of or as the result of ***'s employment with
Daisytek, as well as all property, tangible or intangible, that *** developed or
produced as the result of or in the course of ***'s employment with Daisytek.
This includes, but is not limited to, all keys, computers, computer passwords,
equipment, and originals and all copies of computer discs, emails, schedules,
worksheets, spreadsheets, files or other stored information, documents, and
voice, video or data recordings of any sort that are within his possession or
control.

         7. COVENANT NOT TO COMPETE.

                  a. *** agrees that for the *** period immediately following
the Effective Date or for *** from the date of any court order enforcing all or
part of this Agreement, whichever is later, *** will not in the ***, or ***,

                           (i) Either directly or indirectly, for ***'s own
behalf or on behalf of any other person or entity, engage in or carry on any
business or in any way become associated with any business that distributes or
provides corporate supplies, peripherals, professional tape products, office
products, customer care, logistics, distribution, fulfillment, or demand
generation services similar to those that Daisytek offered or planned to offer
while *** was employed by Daisytek ("Business of Daisytek");

                           (ii) Either directly or indirectly attempt in any
manner to solicit, from any person or entity that is or was a client of
Daisytek, business of the type performed or formerly performed by Daisytek for
such client or to persuade any such client to cease to do business or to reduce
the amount of business which any such client has customarily done with Daisytek
or contemplates doing with Daisytek (as used herein the noun "client" shall mean
anyone who is a client or customer, supplier, trading group, dealer, trader,
venture partner or sales representative or affiliate of any of the above who
purchases Daisytek product or services or otherwise does business with Daisytek
at any time during the *** period immediately preceding the Effective Date and
any prospective persons to whom Daisytek had made a formal presentation (or
similar offering of services) within a period of *** immediately preceding the
Effective Date);

                           (iii) Either directly or indirectly, for ***'s own
behalf or on behalf of any other person or entity, be or become an employee,
agent, consultant or representative of or become a director or officer of any
person, firm, corporation, association or other entity that is engaged in or
currently intends to become engaged in, or is carrying on any business that is
in direct or indirect competition with the Business of Daisytek; or

                           (iv) Either directly or indirectly be or become a
shareholder, joint venturer in or owner (in whole or in part) of or be a partner
of or associated with or have any proprietary or financial interest, in any
firm, corporation, joint venture, partnership or association or other entity
that is engaged

                                      -2-
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in, or currently intends to become engaged in or is carrying on any business
that is in direct or indirect competition with the Business of Daisytek.

Nothing in this Section will prevent *** from owning less than five percent (5%)
of the stock of any publicly traded corporation as long as *** is not a
participant in the management or affairs of the corporation in a manner that
would otherwise violate any prohibition contained in this Section.

                  b. It is understood and agreed that the scope of the covenants
contained in this Section are reasonable as to time, area and scope of activity
restrained and are necessary to protect Daisytek's legitimate business
interests. Specifically, *** has considered the covenants in light of the
benefits *** will obtain by means of this Agreement and has concluded that the
covenants leave *** with a reasonable number and variety of permitted avenues
for engaging in employment in a number of locations and a number of occupations
during the period of restriction.

                  c. If the restrictions contained in this Section regarding
time, geography, or scope of activity are determined by a court to be
unenforceable, Daisytek and *** agree that said court may substitute a provision
it believes to be enforceable for the one it believes to be unenforceable, and
this Agreement may be enforced as amended.

         8. NON-DISPARAGEMENT. *** and Daisytek agree not to make any negative
or disparaging remarks of any sort regarding one another.

         9. RESPONSIBILITY FOR TAXES. *** assumes responsibility for all taxes,
if any, due by him on or as a result of any payment made to him under this
Agreement, with the sole exception of any mandatory payroll withholding and
employer contribution required by local, state or federal law. Daisytek makes no
representations of any kind relating to the taxability or non-taxability of any
payments made or consideration given under this Agreement. *** acknowledges that
he should seek independent advice regarding the taxability of the payments made
hereunder, to the extent he desires such advice. *** also acknowledges that a
report of the payments herein may or may not be made by Daisytek or Daisytek's
representatives to the Internal Revenue Service depending upon applicable tax
laws. *** acknowledges that he must pay all of his own legal or tax advice fees,
taxes and COBRA continuation premiums out of the proceeds of the consideration
described in this Agreement.

         10. COOPERATION WITH DAISYTEK'S AUDIT COMMITTEE. *** agrees that he has
been given a full and fair opportunity to express concerns about Daisytek's
alleged practices and financial and accounting improprieties to Daisytek's Audit
Committee. *** further agrees that he has done so and that he has no material
concerns that he has not brought to the attention of the Audit Committee. ***
agrees to continue to make himself reasonably available to confer with, report
to, and/or assist Daisytek's Audit Committee with regard to the Audit
Committee's investigation of any practices or alleged improprieties of Daisytek.
If *** fails to do so, in addition to all other remedies that Daisytek may have
for ***'s breach of this Agreement, Daisytek may cancel all remaining payments
due to *** by Daisytek under this Agreement.

         11. CONFIDENTIALITY. Maney agrees to keep amounts, terms and conditions
of this Agreement strictly confidential. Except as required by law or legal
process issued by a court or government agency with competent jurisdiction, ***
agrees that he shall not disclose the amounts, terms and conditions of this
Agreement to any person or entity except for his attorneys or tax advisors, and
spouse. *** additionally agrees that he will inform his attorneys, tax advisors,
and spouse that the amounts, terms and conditions of this Agreement are to be
kept strictly confidential, and that they are bound to this confidentiality
provisions as ***'s agents.

         12. DUTY TO REPORT. *** and Daisytek agree that notwithstanding the
provisions regarding nondisparagement and confidentiality contained in
paragraphs 7 and 10 of this Agreement, *** may report facts known by him about
Daisytek which he has a duty to report by law or public policy to any
governmental entity or agency.

                                      -3-
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         13. REAPPLICATION FOR EMPLOYMENT. *** agrees that he shall neither seek
nor accept reemployment with or through Daisytek, whether such employment be
directly with Daisytek or a parent, subsidiary or affiliate of Daisytek.

         14. SEVERABILITY. If any provision of this Agreement is declared to be
illegal, invalid or unenforceable, such provision(s) will be severed from this
Agreement and this Agreement shall be construed as if such illegal, invalid or
unenforceable provision was never part of this Agreement. Any such illegal,
invalid or unenforceable provision will not affect the validity or the
enforceability of this Agreement or its remaining provisions.

         15. GOVERNING LAW/LEGAL FEES AND COSTS. This Agreement is made under,
and will be construed in accordance with the laws of the State of Texas. In the
event that any legal action is necessary to enforce this Agreement, the
prevailing party will be entitled to recover his, its reasonable attorneys' fees
and costs.

         IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
of the date first written above.

DAISYTEK INTERNATIONAL CORPORATION          ***

By:
     ------------------------------
     Its /s/ President/CEO                  By:  /s/ ***
         --------------------------              ------------------------------

Date:                                      Date: /s/ 12/4/02
     ------------------------------              ------------------------------

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                                                                    EXHIBIT 10.1

         PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN

SECTION 1. INTRODUCTION

         1.1 Establishment. Effective as provided in Section 17, Prime Rate
Income & Dividend Enterprises, Inc., a Colorado corporation (the "Company"),
hereby establishes this plan of stock-based compensation incentives for selected
Eligible Participants of the Company and its affiliated corporations. This Plan
shall be known as the Prime Rate Income & Dividend Enterprises, Inc. 2003 Stock
Plan (the "Plan").

         1.2 Purpose. The purpose of this Plan is to promote the best interest
of the Company, and its stockholders by providing a means of non-cash
remuneration to selected Eligible Participants.

SECTION 2. DEFINITIONS

         The following definitions shall be applicable to the terms used in this
Plan:

         2.1 "Affiliated Corporation" means any corporation that is either a
parent corporation with respect to the Company or a subsidiary corporation with
respect to the Company (within the meaning of Sections 424(e) and (f),
respectively, of the Internal Revenue Code).

         2.2 "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.

         2.3 "Committee" means a committee designated by the Board of Directors
to administer this Plan or, if no committee is so designated, the Board of
Directors. Any Committee member who is also an Eligible Participant may receive
an Option or Stock Award only if he abstains from voting in favor of a grant to
himself, and the grant is determined and approved by the remaining Committee
members. The Board of Directors, in its sole discretion, may at any time remove
any member of the Committee and appoint another Director to fill any vacancy on
the Committee.

         2.4 "Common Stock" means the Company's no par value common stock.

         2.5 "Company" means Prime Rate Income & Dividend Enterprises, Inc., a
Colorado corporation.

         2.6 "Effective Date" means the effective date of this Plan, as set
forth in Section 17 hereof.

         2.7 "Eligible Participant" means any employee, director, officer,
consultant, or advisor of the Company who is determined (in accordance with the
provisions of Section 4 hereof) to be eligible to receive an Option or Stock
Award hereunder.

         2.8 "Option" means the grant to an Eligible Participant of a right to
acquire shares of Common Stock.

         2.9 "Plan" means this Prime Rate Income & Dividend Enterprises, Inc.
2003 Stock Plan dated February 10, 2003.

         2.10 "Stock Award" means the grant to an Eligible Participant of shares
of Common Stock issuable directly under this Plan rather than upon exercise of
an Option.

         Wherever appropriate, words used in this Plan in the singular may mean
the plural, the plural may mean the singular, and the masculine may mean the
feminine.

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PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN      PAGE 1 OF 6

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SECTION 3. ADOPTION AND ADMINISTRATION OF THIS PLAN

         Upon adoption by the Company's Board of Directors, this Plan became
effective as of February 10, 2003. In the absence of contrary action by the
Board of Directors, and except for action taken by the Committee pursuant to
Section 4 in connection with the determination of Eligible Participants, any
action taken by the Committee or by the Board of Directors with respect to the
implementation, interpretation or administration of this Plan shall be final,
conclusive and binding.

SECTION 4. ELIGIBILITY AND AWARDS

         The Committee shall determine at any time and from time to time after
the effective date of this Plan: (i) the Eligible Participants; (ii) the number
of shares of Common Stock issuable directly or to be granted pursuant to an
Option; (iii) the price per share at which each Option may be exercised, in cash
or cancellation of fees for services for which the Company is liable, if
applicable, or the value per share if a direct issue of stock pursuant to a
Stock Award; and (iv) the terms on which each Option may be granted. Such
determination, as may from time to time be amended or altered at the sole
discretion of the Committee. Notwithstanding the provisions of Section 3 hereof,
no such determination by the Committee shall be final, conclusive and binding
upon the Company unless and until the Board of Directors has approved the same;
provided, however, that if the Committee is composed of a majority of the
persons then comprising the Board of Directors of the Company, such approval by
the Board of Directors shall not be necessary.

SECTION 5. GRANT OF OPTION OR STOCK AWARD

         Subject to the terms and provisions of this Plan, the terms and
conditions under which an Option or Stock Award may be granted to an Eligible
Participant shall be set forth in a written agreement (i.e., a Consulting
Agreement, Services Agreement, Fee Agreement, or Employment Agreement) or, if an
Option, a written Grant of Option in the form attached hereto as Exhibit A
(which may contain such modifications thereto and such other provisions as the
Committee, in its sole discretion, may determine).

SECTION 6. TOTAL NUMBER OF SHARES OF COMMON STOCK

         The total number of shares of Common Stock reserved for issuance by the
Company either directly as Stock Awards or underlying Options granted under this
Plan shall not be more than 1,000,000. The total number of shares of Common
Stock reserved for such issuance may be increased only by a resolution adopted
by the Board of Directors and amendment of this Plan. Such Common Stock may be
authorized and unissued or reacquired Common Stock of the Company.

SECTION 7. PURCHASE OF SHARES OF COMMON STOCK

         7.1 As soon as practicable after the determination by the Committee and
approval by the Board of Directors (if necessary, pursuant to Section 4 hereof)
of the Eligible Participants and the number of shares an Eligible Participant
may be issued directly as a Stock Award or eligible to purchase pursuant to an
Option, the Committee shall give written notice thereof to each Eligible
Participant, which notice may be accompanied by the Grant of Option, if
appropriate, to be executed by such Eligible Participant.

         7.2 The negotiated cost basis of stock issued directly as a Stock Award
or the exercise price for each Option to purchase shares of Common Stock
pursuant to paragraph 7.1 shall be as determined by the Committee, it being
understood that the price so determined by the Committee may vary from one
Eligible Participant to another. In computing the negotiated direct issue price
as a Stock Award or the Option exercise price per share of Common Stock, the
Committee shall take into consideration, among other factors, the restrictions
set forth in Section 11 hereof.

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PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN      PAGE 2 OF 6

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SECTION 8. TERMS AND CONDITIONS OF OPTIONS

         The Committee shall determine the terms and conditions of each Option
granted to Eligible Participants, which terms shall be set forth in writing. The
terms and conditions so set by the Committee may vary from one Eligible
Participant to another. In the event that all the Committee approves an Option
permitting deferred payments, the Eligible Participant's obligation to pay for
such Common Stock may be evidenced by a promissory note executed by such
Eligible Participant and containing such modifications thereto and such other
provisions as the Committee, in its sole discretion, may determine.

SECTION 9. DELIVERY OF SHARES OF COMMON STOCK UPON EXERCISE OF OPTION

         The Company shall deliver to each Eligible Participant such number of
shares of Common Stock as such Eligible Participant is entitled to receive
pursuant to a Stock Award or elects to purchase upon exercise of the Option.
Such shares, which shall be fully paid and nonassessable upon the issuance
thereof (unless a portion or all of the purchase price shall be paid on a
deferred basis) shall be represented by a certificate or certificates registered
in the name of the Eligible Participant and stamped with an appropriate legend
referring to the restrictions thereon, if any. Subject to the terms and
provisions of the Colorado Business Corporation Act and the written agreement to
which he is a party, an Eligible Participant shall have all the rights of a
stockholder with respect to such shares, including the right to vote the shares
and to receive all dividends or other distributions paid or made with respect
thereto (except to the extent such Eligible Participant defaults under a
promissory note, if any, evidencing the deferred purchase price for such
shares), provided that such shares shall be subject to the restrictions
hereinafter set forth. In the event of a merger or consolidation to which the
Company is a party, or of any other acquisition of a majority of the issued and
outstanding shares of Common Stock of the Company involving an exchange or a
substitution of stock of an acquiring corporation for Common Stock of the
Company, or of any transfer of all or substantially all of the assets of the
Company in exchange for stock of an acquiring corporation, a determination as to
whether the stock of the acquiring corporation so received shall be subject to
the restrictions set forth in Section 11 shall be made solely by the acquiring
corporation.

SECTION 10. RIGHTS OF EMPLOYEES; ELIGIBLE PARTICIPANTS

         10.1 Employment. Nothing contained in this Plan or in any Option or
Stock Award granted under this Plan shall confer upon any Eligible Participant
any right with respect to the continuation of his or her employment by the
Company or any Affiliated Corporation, or interfere in any way with the right of
the Company or any Affiliated Corporation, subject to the terms of any separate
employment agreement to the contrary, at any time to terminate such employment
or to increase or decrease the compensation of the Eligible Participant from the
rate in existence at the time of the grant of an Option or Stock Award. Whether
an authorized leave of absence, or absence in military or government service,
shall constitute termination of employment shall be determined by the Committee
at the time.

         10.2 Non-transferability. No right or interest of any Eligible
Participant in an Option or Stock Award shall be assignable or transferable
during the lifetime of the Eligible Participant, either voluntarily or
involuntarily, or subjected to any lien, directly or indirectly, by operation of
law, or otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. However, the Board of Directors may, in its sole discretion, permit
transfers to family members if and to the extent such transfers are permissible
under applicable securities laws. In the event of an Eligible Participant's
death, an Eligible Participant's rights and interest in an Option or Stock Award
shall be transferable by testamentary will or the laws of descent and
distribution, and delivery of any shares of Common Stock due under this Plan
shall be made to, and exercise of any Options may be made by, the Eligible
Participant's legal representatives, heirs or legatees. If in the opinion of the
Committee a person entitled to payments or to exercise rights with respect to
this Plan is unable to care for his or her affairs because of mental condition,
physical condition, or age, payment due such person may be made to, and such
rights shall be exercised by, such person's guardian, conservator or other legal
personal representative upon furnishing the Committee with evidence satisfactory
to the Committee of such status.

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PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN      PAGE 3 OF 6

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SECTION 11. GENERAL RESTRICTIONS

         11.1 Representations. The Company may require any Eligible Participant
to whom an Option or Stock Award is granted, as a condition of exercising such
Option, or receiving such Stock Award, to give written assurances in substance
and form satisfactory to the Company and its counsel to the effect that such
person is acquiring the Common Stock subject to the Option or Stock Award for
his or her own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws.

         11.2 Restrictions on Transfer of Common Stock. The shares of Common
Stock issuable directly as a Stock Award or upon exercise of an Option may not
be offered for sale, sold or otherwise transferred except pursuant to an
effective registration statement or pursuant to an exemption from registration,
the availability of which is to be established to the satisfaction of the
Company, and any certificates representing shares of Common Stock will bear a
legend to that effect. However, the Company may, in the sole discretion of the
Board of Directors, register with the Securities and Exchange Commission some or
all of the shares of Common Stock reserved for issuance under this Plan. Special
resale restrictions may, however, continue to apply to officers, directors,
control shareholders and affiliates of the Company and such persons will be
required to obtain an opinion of counsel as regards their ability to resell
shares received pursuant to this Plan.

         11.3 Compliance with Securities Laws. Each Option or Stock Award shall
be subject to the requirement that if at any time counsel to the Company shall
determine that the listing, registration or qualification of the shares of
Common Stock subject to such Option or Stock Award upon any securities exchange
or under any state or federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance or purchase of shares thereunder, such Option or
Stock Award may not be accepted or exercised in whole or in part unless such
listing, registration, qualification, consent or approval shall have been
effected or obtained on conditions acceptable to the Committee. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration or qualification.

         11.4 Changes in Accounting Rules. Notwithstanding any other provision
of this Plan to the contrary, if, during the term of this Plan, any changes in
the financial or tax accounting rules applicable to Options or Stock Awards
shall occur that, in the sole judgment of the Committee, may have a material
adverse effect on the reported earnings, assets or liabilities of the Company,
the Committee shall have the right and power to modify as necessary, or cancel,
any then outstanding and unexercised Options.

SECTION 12. COMPLIANCE WITH TAX REQUIREMENTS

         Each Eligible Participant shall be liable for payment of all applicable
federal, state and local income taxes incurred as a result of the receipt of a
Stock Award or an Option, the exercise of an Option, and the sale of any shares
of Common Stock received pursuant to a Stock Award or upon exercise of an
Option. The Company may be required, pursuant to applicable tax regulations, to
withhold taxes for an Eligible Participant, in which case the Company's
obligations to deliver shares of Common Stock upon the exercise of any Option
granted under this Plan or pursuant to any Stock Award, shall be subject to the
Eligible Participant's satisfaction of all applicable federal, state and local
income and other income tax withholding requirements.

SECTION 13. PLAN BINDING UPON ASSIGNS OR TRANSFEREES

         In the event that, at any time or from time to time, any Option or
Stock Award is assigned or transferred to any party (other than the Company)
pursuant to the provisions of Section 10.2 hereof, such party shall take such
Option or Stock Award pursuant to all provisions and conditions of this Plan,
and, as a condition precedent to the transfer of such interest, such party shall
agree (for and on behalf of himself or itself, his or its legal representatives
and his or its transferees and assigns) in writing to be bound by all provisions
of this Plan.

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PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN      PAGE 4 OF 6

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SECTION 14. COSTS AND EXPENSES

         All costs and expenses with respect to the adoption, implementation,
interpretation and administration of this Plan shall be borne by the Company.

SECTION 15. CHANGES IN CAPITAL STRUCTURE OF THE COMPANY

         Appropriate adjustments shall be made to the number of shares of Common
Stock issuable pursuant to an incomplete or pending Stock Award that has not yet
been delivered or upon exercise of any Options and the exercise price thereof in
the event of: (i) a subdivision or combination of any of the shares of capital
stock of the Company; (ii) a dividend payable in shares of capital stock of the
Company; (iii) a reclassification of any shares of capital stock of the Company;
or (iv) any other change in the capital structure of the Company.

SECTION 16. PLAN AMENDMENT, MODIFICATION AND TERMINATION

         The Board, upon recommendation of the Committee or at its own
initiative, at any time may terminate and at any time and from time to time and
in any respect, may amend or modify this Plan, including:

                  (a) Increase the total amount of Common Stock that may be
         awarded under this Plan, except as provided in Section 15 of this Plan;

                  (b) Change the classes of persons from which Eligible
         Participants may be selected or materially modify the requirements as
         to eligibility for participation in this Plan;

                  (c) Increase the benefits accruing to Eligible Participants;
         or

                  (d) Extend the duration of this Plan.

         Any Option or other Stock Award granted to a Eligible Participant prior
to the date this Plan is amended, modified or terminated will remain in effect
according to its terms unless otherwise agreed upon by the Eligible Participant;
provided, however, that this sentence shall not impair the right of the
Committee to take whatever action it deems appropriate under Section 11 or
Section 15. The termination or any modification or amendment of this Plan shall
not, without the consent of a Eligible Participant, affect his rights under an
Option or other Stock Award previously granted to him.

SECTION 17. EFFECTIVE DATE OF THIS PLAN

         17.1 Effective Date. This Plan is effective as of February 10, 2003,
the date it was adopted by the Board of Directors of the Company.

         17.2 Duration of this Plan. This Plan shall terminate at midnight on
February 9, 2008, which is the day before the fifth anniversary of the Effective
Date, and may be extended thereafter or terminated prior thereto by action of
the Board of Directors; and no Option or Stock Award shall be granted after such
termination. Options and Stock Awards outstanding at the time of this Plan
termination may continue to be exercised, or become free of restrictions, in
accordance with their terms.

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PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN      PAGE 5 OF 6

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SECTION 18. BURDEN AND BENEFIT

         The terms and provisions of this Plan shall be binding upon, and shall
inure to the benefit of, each Eligible Participant, his executives or
administrators, heirs, and personal and legal representatives.

         Dated as of the 10th day of February 2003.

                                PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.

                                By: /s/ Peter G. Futro
                                    -------------------------------------------
                                Peter G. Futro, President

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PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN      PAGE 6 OF 6

<PAGE>

                                    EXHIBIT A

                                     FORM OF
                         GRANT OF OPTION PURSUANT TO THE
         PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN

         Prime Rate Income & Dividend Enterprises, Inc., a Colorado corporation
(the "Company"), hereby grants to ________________________________ ("Optionee")
an Option to purchase ___________ shares of common stock, no par value (the
"Shares") of the Company at the purchase price of $______ per share (the
"Purchase Price"), in accordance with and subject to the terms and conditions of
the Prime Rate Income & Dividend Enterprises, Inc. 2003 Stock Plan (the "Plan").
This option is exercisable in whole or in part, and upon payment in cash or
cancellation of fees, or other form of payment acceptable to the Company, to the
principal office of the Company. This Grant of Option supersedes and replaces
any prior notice of option grant, description of vesting terms or similar
documents previously delivered to Optionee for options granted on the date
stated below.

         Unless otherwise set forth in a separate written agreement, in the
event that Optionee's employee or consultant status with the Company or any of
its subsidiaries ceases or terminates for any reason whatsoever, including, but
not limited to, death, disability, or voluntary or involuntary cessation or
termination, this Grant of Option shall terminate with respect to any portion of
this Grant of Option that has not vested prior to the date of cessation or
termination of employee or consultant status, as determined in the sole
discretion of the Company. In the event of termination for cause, this Grant of
Option shall immediately terminate in full with respect to any un-exercised
options, and any vested but un-exercised options shall immediately expire and
may not be exercised. Unless otherwise set forth in a separate written
agreement, vested options must be exercised within six months after the date of
termination (other than for cause), notwithstanding the Expiration Date set
forth below.

         Subject to the preceding paragraph, this Grant of Option, or any
portion hereof, may be exercised only to the extent vested per the attached
schedule, and must be exercised by Optionee no later than
____________________________ (the "Expiration Date") by (i) notice in writing,
signed by Optionee; and (ii) payment of the Purchase Price of a minimum of
$1,000 (unless the Purchase Price for the exercise of all vested options
available to be exercised totals less than $1,000) pursuant to the terms of this
Grant of Option and the Plan. Any portion of this Grant of Option that is not
exercised on or before the Expiration Date shall lapse. The notice must refer to
this Grant of Option, and it must specify the number of shares being purchased,
and recite the consideration being paid therefor. Notice shall be deemed given
on the date on which the notice is received by the Company.

         This Option shall be considered validly exercised once payment therefor
has cleared the banking system or the Company has issued a credit memo for
services in the appropriate amount, or receives a duly executed acceptable
promissory note, if the Option is granted with deferred payment, and the Company
has received written notice of such exercise. If payment is not received within
two business days after the date the notice is received, the Company may deem
the notice to be invalid.

         If Optionee fails to exercise this Option in accordance with this Grant
of Option, then this Grant of Option shall terminate and have no force and
effect, in which event the Company and Optionee shall have no liability to each
other with respect to this Grant of Option.

         This Option may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

         The validity, construction and enforceability of this Grant of Option
shall be construed under and governed by the laws of the State of Colorado,
without regard to its rules concerning conflicts of laws, and any action brought
to enforce this Grant of Option or resolve any controversy, breach or
disagreement

--------------------------------------------------------------------------------
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN         PAGE A-1
<PAGE>

relative hereto shall be brought only in a court of competent jurisdiction
within the state and county of the Company's principal office.

         The shares of common stock issuable upon exercise of the Option (the
"Underlying Shares") may not be sold, exchanged, assigned, transferred or
permitted to be transferred, whether voluntarily, involuntarily or by operation
of law, delivered, encumbered, discounted, pledged, hypothecated or otherwise
disposed of until (i) the Underlying Shares have been registered with the
Securities and Exchange Commission pursuant to an effective registration
statement on Form S-8, or such other form as may be appropriate, in the
discretion of the Company; or (ii) an Opinion of Counsel, satisfactory to the
Company, has been received, which opinion sets forth the basis and availability
of any exemption for resale or transfer from federal or state securities
registration requirements.

         This Grant of Option relates to options granted on
____________________, _____.

                                PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC.

                                BY THE BOARD OF DIRECTORS
                                OR A SPECIAL COMMITTEE THEREOF

                                    NOT FOR EXECUTION
                                By:
                                   -------------------------------------------

OPTIONEE:

NOT FOR EXECUTION

----------------------------

--------------------------------------------------------------------------------
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN         PAGE A-2
<PAGE>

GRANT OF OPTION PURSUANT TO THE
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK
PLAN

OPTIONEE:
                         -------------------
OPTIONS GRANTED:
                         -------------------
PURCHASE PRICE:          $       per Share
                          -------
DATE OF GRANT:
                         -------------------

EXERCISE PERIOD:                  to
                         --------    -------

VESTING SCHEDULE:         OPTION ON     DATE VESTED
                          #SHARES       (ASSUMING CONTINUED EMPLOYMENT, ETC.)

                         --------       --------

                         --------       --------

                         --------       --------

                         --------       --------

                         --------       --------

EXERCISED TO DATE:                 INCLUDING THIS EXERCISE
                         --------
BALANCE TO BE EXERCISED:
                         --------

================================================================================

                               NOTICE OF EXERCISE
                 (TO BE SIGNED ONLY UPON EXERCISE OF THE OPTION)

TO:      Prime Rate Income & Dividend Enterprises, Inc. ("Optionor")

         The undersigned, the holder of the Option described above, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, _________________ shares of the Common Stock of
Prime Rate Income & Dividend Enterprises, Inc., and herewith makes payment of
__________________________________ therefor. Optionee requests that the
certificates for such shares be issued in the name of Optionee and be delivered
to Optionee at the address of _______________________________________________,
and if such shares shall not be all of the shares purchasable hereunder,
represents that a new Notice of Exercise of like tenor for the appropriate
balance of the shares, or a portion thereof, purchasable under the Grant of
Option pursuant to the Prime Rate Income & Dividend Enterprises, Inc. 2003 Stock
Plan, be delivered to Optionor when and as appropriate.

                                        OPTIONEE:

                                        NOT FOR EXECUTION
Dated:
       -------------------------        ---------------------------------------

--------------------------------------------------------------------------------
PRIME RATE INCOME & DIVIDEND ENTERPRISES, INC. 2003 STOCK PLAN         PAGE A-3

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