Document:

Unassociated Document

    
      Exhibit
        10.1 Employment Agreement

      

      EMPLOYMENT
        AGREEMENT

      

      

      This
        Agreement is made and is effective as of January 1, 2005, by and between
        Heritage Oaks Bank, a California state chartered bank (“Bank”), Heritage Oaks
        Bancorp, a California corporation (“Bancorp”) and Lawrence P. Ward
        (“Executive”).

      

      WHEREAS,
        the Bank and Bancorp wish to employ Executive as their respective President
        and
        Chief Executive Officer as specified herein and to benefit from Executive's
        services for the period provided in this Agreement, and Executive wishes
        to
        serve in such positions on a full-time basis solely in accordance with the
        terms
        hereof for such purposes; and

      

      WHEREAS,
        the Board of Directors of the Bank and Bancorp determined that the best
        interests of the Bank and Bancorp would be served by Executive's employment
        with
        the Bank and Bancorp under the terms of this Agreement; 

      

      NOW,
        THEREFORE, in order to effect the foregoing, the parties hereto wish to enter
        into an employment agreement on the terms and conditions set forth below.
        Accordingly, in consideration of the premises and the respective covenants
        and
        agreements of the parties herein contained, and intending to be legally bound
        hereby, the parties hereto agree as follows:

      

      1.   Definitions.

      

      (a)
        "Agreement"
        means
        this employment agreement and any amendments hereto complying with Section
        20(a)
        hereof.

      

      (b)
        "Board"
        means
        the Board of Directors of the Bank and/or the Board of Directors of Bancorp
        as
        the context requires.

      

      (c)
        "Cause"
        means:

       

      (i)   Executive's
        personal dishonesty, incompetence or willful misconduct;

       

      (ii)   Executive's
        breach of fiduciary duty involving personal profit;

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

          
          

        

      

       

      (iii)   Executive's
        intentional failure to perform Executive's duties for the Bank
        or
        Bancorp after a written demand for performance is given to Executive by the
        Board which demand specifically identifies the manner in which the Board
        believes that Executive has not performed his duties;

       

      
        (iv)   Executive's
          willful violation of any law, rule, regulation or final cease and desist
          order
          (other than traffic violations or similar minor offenses) to the extent
          detrimental to the Bank's or Bancorp’s business or reputation;

         

      

      (v)   Executive
        engages, or is alleged to have engaged, in activity which, in the opinion
        of the
        Board, could materially adversely affect the Bank’s or Bancorp’s reputation in
        the community or which evidences the lack of Executive’s fitness or ability to
        perform Executive’s duties as determined by the Board, in good faith;
        or

       

      (vi)   Executive's
        material breach of any provision of this Agreement.

      

      (d)
        "Change
        in Control"
        means a
        change of control of the Bank or Bancorp of a nature that would be required
        to
        be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or
        in
        response to any similar item on any similar schedule or form) promulgated
        under
        the Securities Exchange Act, whether or not Bancorp is then subject to such
        reporting requirement; provided, however, that without limitation, a Change
        in
        Control shall be deemed to have occurred if:

       

      
        (i)   there
          is
          a transfer, voluntarily or by hostile takeover, by proxy contest (or similar
          action), operation of law, or otherwise, of Control of
          Bancorp;

      

       

      
        (ii)   any
          Person is or becomes the "beneficial owner" (as defined in Rules 13d-3
          and
          13d-5 under the Securities Exchange Act or any successor provisions thereof),
          directly or indirectly, of securities of the Bank (except for Bancorp)
          or
          securities of Bancorp representing 25% or more of the respective voting
          power of
          the Bank's or Bancorp’s then outstanding securities;

         

      

      (iii)   the
        individuals who were members of Bancorp’s Board immediately prior to a meeting
        of the shareholders of Bancorp, which meeting involves a contest for the
        election of directors, do not constitute a majority of the Board following
        such
        meeting or election;

      

      (iv)   a
        merger
        or consolidation of Bancorp (in which Bancorp is not the surviving entity
        and in
        which the shareholders of Bancorp immediately prior to such merger or
        consolidation do not own a majority of the outstanding voting stock of such
        merged or consolidated entity immediately after such merger or consolidation),
        or sale of all or substantially all of the assets of the Bank or Bancorp;
        or

       

      
        (v)   there
          is
          a change, during any period of two consecutive years, of a majority of
          Bancorp’s
          Board as constituted as of the beginning of such period, unless the election
          of
          each director who is not a director at the beginning of such period was
          approved
          by a vote of at least two-thirds of the directors then in office who were
          directors at the beginning of such period.

      

       

      
        
          
          

        

        
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        (e)
          "Code”
          shall
          mean the Internal Revenue Code of 1986, as amended.

      

       

      (f)
        "Control”
        means
        the
        possession, direct or indirect, by any Person or "group" (as defined in Section
        13(d) of the Securities Exchange Act) of the power to direct or cause the
        direction of the management policies of the Bank or Bancorp, whether through
        ownership of voting securities, by contract or otherwise, and in any case
        means
        the ability to determine the election of a majority of the directors of the
        Bank
        or Bancorp.

      

      (g)
        "Disability"
        means
        physical or mental illness resulting in Executive's absence on a full-time
        basis
        from Executive's duties with the Bank or Bancorp for 180 calendar days, subject
        to the procedure described in Section 7(a).

      

      (h)
        "Expiration"
        means
        the termination of this Agreement (including Executive's employment hereunder)
        and of any further obligations of the parties (except as specified in this
        Agreement) upon completion of the Term.

      

      (i)
        "Person"
        means an
        individual, a group acting in concert, a corporation, a partnership, an
        association, a joint stock company, a trust, any unincorporated organization,
        a
        government or political subdivision thereof, or any other entity
        whatsoever.

      

      (j)
        "Resign
        for Good Reason" or "Resignation for Good Reason"
        has the
        meaning found in Section 7(e).

      

      (k)
        “Salary
        Continuation Agreement”
        means
        the Executive Salary Continuation Agreement by and between Executive and
        the
        Bank dated as of March 7, 2001 as the same may be amended from time to
        time.

      

      (l)
        "Term"
        means
        the initial term of this Agreement and any extensions hereof, as provided
        in
        Section 4, whether prior to or following a Change in Control.

      

      (m)
        "Termination"
        or "Terminate(d)"
        means
        the termination of Executive's employment hereunder for any of the following
        reasons unless the context indicates otherwise:

      

      (i)   Retirement
        by Executive;

       

      (ii)    Death
        of
        Executive;

       

      (iii)    Disability;

       

      (iv)    Expiration;

       

      (v)    Resignation
        for Good
        Reason;

       

      (vi)    Resignation
        other than
        Resignation for Good Reason;

       

      (vii)    Termination
        Without
        Cause; and

       

      (viii)    Termination
        for
        Cause.

      

      
        
          
          

        

        
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      (n)
        "Termination
        Without Cause" or "Terminate(d) Without Cause"
        means
        the cessation of Executive's employment hereunder for any reason
        except:

       

      
        (i)   A
          resignation by Executive;

      

       

      (ii)   Termination
        for Cause;

       

      (iii)   Retirement;

       

      (iv)   Disability;

       

      (v)   Death;
        or

       

      (vi)   Expiration.

      

      2.   Employment.   Notwithstanding
        any other
        provision to the contrary contained herein, it is agreed by the parties hereto
        that the Executive’s employment by the Bank and Bancorp hereunder shall be
        at-will, and that the Bank or Bancorp may at any time elect to terminate
        this
        Agreement and Executive’s employment for any reason by action of its Board the
        affirmative vote of at least a majority of the authorized number of its
        directors. In this Agreement, notwithstanding the foregoing, in the event
        of any
        Termination Without Cause pursuant to Section 7 of this Agreement, all severance
        and other benefits provided for in Section 8 of this Agreement shall be provided
        by the Bank to the Executive and no severance or other benefits shall be
        due or
        owing Executive by Bancorp.

      

      3.   Position
        and Responsibilities.   The
        Executive shall serve
        as President and Chief Executive Officer of the Bank and Bancorp as specified
        herein, and subject to the provisions of Section 5 below, shall have such
        responsibilities, duties and authority set forth in the Articles of
        Incorporation and Bylaws of the Bank and Bancorp, respectively, and as are
        generally associated with such positions and as may from time to time be
        assigned to the Executive by the Board that are consistent with such
        responsibilities, duties and authority. 

       

      4.   Term
        of Agreement.   Subject
        to the terms and
        provisions of this Agreement, this Agreement and the period of Executive's
        employment shall be deemed to have commenced as of January 1, 2005, and shall
        continue for an initial term of three (3) calendar years thereafter, expiring
        on
        December 31, 2007, unless extended as provided herein. The initial term shall
        automatically be extended for an additional one (1) full calendar year without
        further action by the parties on January 1, 2006, and on each succeeding
        January
        1 thereafter, such that as of each such January 1, this Agreement shall have
        a
        remaining term of three (3) calendar years. Each party, Bank, Bancorp or
        Executive, may stop an automatic calendar year extension, however, by serving
        written notice ("Notice of Non-Renewal") upon the other within 90 calendar
        days
        prior to January 1, 2006, or within 90 calendar days prior to January 1 of
        any
        succeeding year, as the case may be, of such party's intention that this
        Agreement shall expire at the end of such Term. In the event the Bank or
        Bancorp
        retains Executive as an employee following the expiration of the Term, such
        employment, absent a written agreement to the contrary, will be on an at-will
        basis with such compensation and upon such terms as the parties may then
        agree,
        subject to termination at any time with or without cause, and without liability.
        If the Bank or Bancorp does not retain Executive as an employee after the
        Expiration of the Term, Executive's employment shall cease without further
        liability of the parties to each other. Executive's employment shall also
        terminate, and the Term of this Agreement will expire, upon Executive's
        resignation (unless resignation is for Good Reason after a Change in Control),
        retirement, death or Disability, or upon Executive's Termination for Cause
        or
        Termination Without Cause.

      

      
        
          
          

        

        
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      5.   Duties.

      

      (a)   The
        Bank or Bancorp and
        Executive hereby agree that, subject to the provisions of this Agreement,
        the
        Bank or Bancorp shall employ Executive, and Executive shall serve the Bank
        and
        Bancorp (from date of appointment) as President and Chief Executive Officer
        for
        the Term of this Agreement.

      

      (b)   During
        the Term hereof,
        Executive shall devote substantially all of his or her business time, attention,
        skill and efforts to the faithful performance of the business of the Bank
        and
        Bancorp to the fullest extent necessary to properly discharge his or her
        duties
        and responsibilities hereunder. Executive's position and duties with the
        Bank
        and Bancorp shall be as identified from time to time by the Boards of Directors
        of the Bank and Bancorp. Further, with the prior approval of the Board, from
        time to time, Executive may serve, or continue to serve, on the boards of
        directors of, and hold any other offices or positions in charitable, political
        or civic organizations, which, in such Board’s judgment, will not present any
        material conflict of interest with the Bank and Bancorp and will not unfavorably
        affect the performance of Executive’s duties pursuant to this Agreement. Subject
        to the provisions of the Bank’s and Bancorp’s code of conduct,
        nothing
        contained herein will be deemed to limit the ability of Executive to make
        passive investments.

       

      (c)   In
        addition, to the
        extent permitted by law and consistent with the oversight responsibilities
        of
        the Board of Directors , Executive shall have the full authority and support
        of
        the Board of Directors to hire and fire all officers and employees of the
        Bank
        and Bancorp from time to time.

      

      (d)   Further,
        Executive shall
        have the full authority of the Bank and Bancorp and the Board to execute
        contracts, leases and other related documents for the purchase of capital
        equipment and improvements, provided such expenditures and obligations are
        contained in and within the respective annual budgets for the Bank and Bancorp,
        which has been adopted or approved by the Boards of Directors.

      

      6.   Salary,
        Bonus Payments and Related Matters.
        

      

      (a)   Salary.   During
        the period of the
        Executive's employment as President and Chief Executive Officer hereunder,
        the
        Bank shall pay to the Executive a base salary of Two Hundred and Forty-Nine
        Thousand Six Hundred Dollars ($249,600). All base salary of Executive shall
        be
        payable at regular intervals in accordance with the Bank's normal payroll
        practices now or hereafter in effect. Executive's salary shall be reviewed
        at
        least annually by the Board or a committee designated by the Board and shall
        be
        adjusted based upon Executive's job performance and the Bank's financial
        condition and performance. The first such salary review shall be undertaken
        no
        later than January 1, 2006 and completed no later than March 31, 2006. If
        there
        is a Change in Control, Executive's salary shall not be less than Executive’s
        annual salary for the year immediately preceding the Change in Control. It
        is
        agreed to by Bank, Bancorp and Executive that all compensation earned and
        payable to Executive under this Agreement be paid by Bank and not by
        Bancorp.

      

      
        
          
          

        

        
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      (b)   Bonuses.   Executive
        may receive
        certain annual bonus compensation during the Term of this Agreement as
        follows:

       

      (i)   1997
        Bonus Plan.
        During
        each year of the Term, Executive shall be
        eligible to participate in the 1997 Bonus Plan and to receive a bonus from
        such
        bonus plan in an amount to be determined by the Board’s compensation committee.

       

      (ii)   Discretionary
        Bonus.
        Executive may also, in the discretion of the Board,
        receive an additional bonus based on individual merit and performance. The
        amount of this bonus, if any, in any such year shall be determined by the
        Board,
        in its sole discretion. 

      

      (c)   Expenses.   During
        the period of the
        Executive's employment hereunder, the Executive shall be entitled to receive
        prompt reimbursement for all reasonable and customary expenses incurred by
        the
        Executive in performing services hereunder in accordance with the general
        policies and procedures established by the Bank.

      

      (d)   Employee
        Benefits and Perks.   During
        the period of the
        Executive's employment hereunder, the Executive shall be entitled to participate
        in all employee benefits plans or arrangements of the Bank or Bancorp on
        the
        same basis as other employees of the Bank including, without limitation,
        plans
        or arrangements providing medical insurance, dental insurance, life insurance,
        disability insurance, sick leave, or retirement. Executive shall also be
        entitled to (i) the use of a Bank owned automobile to be replaced at the
        discretion of the Board, (ii) the use of the Bank provided credit card(s),
        car
        telephone(s), pager(s) and such other perks (if such is (are) being so provided)
        upon the terms and conditions previously in effect, and (iii) the reimbursement
        for the premiums paid by Executive on the life insurance policy and the
        disability insurance policy identified on Exhibit A hereto. Executive shall
        also
        be entitled to 20 days paid vacation for each year of the Term. Executive
        shall
        comply with Bank’s standard employee policies and practices in scheduling and
        taking vacations.

       

      7.   Termination.
        

      

      (a)   Resignation,
        Retirement, Death or Disability.   Executive's
        employment
        hereunder shall cease at any time by Executive's resignation (other than
        a
        resignation for Good Reason as provided in Section 7(e)), or by Executive's
        retirement, death or Disability. Disability shall be deemed to have occurred
        only after the following procedure has been satisfied: If within 30 days
        after a
        written notice of proposed Termination for Disability is given to Executive
        by
        the Bank and Bancorp, Executive has not returned to the full-time performance
        of
        his duties, the Bank and Bancorp may end Executive's employment by giving
        written notice of Termination for Disability. Such notice may be given by
        the
        Bank and Bancorp following Executive's absence from Executive's duties by
        reason
        of physical or mental disability for one hundred and fifty (150) consecutive
        calendar days.

      

      
        
          
          

        

        
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      (b)   Termination
        for Cause.   Executive's
        employment
        shall cease upon a good faith finding of Cause by the Board; provided, however,
        that Executive shall be given written notice of the Board's finding of conduct
        by Executive amounting to Cause for such termination. Said notice shall be
        accompanied by a copy of a resolution duly adopted by the affirmative vote
        of
        not less than a majority of a quorum of the Board at a duly-noticed meeting
        of
        the Board, finding that in the good faith opinion of the Board, Executive
        was
        guilty of conduct amounting to Cause and specifying the particulars thereof;
        provided, however, that after a Change in Control, such resolution may be
        adopted only by the affirmative vote of not less than a majority of a committee
        composed of at least three (3) disinterested outside directors of the Bank
        and
        Bancorp. In the absence of at least three (3) disinterested outside directors,
        a
        determination of Cause shall be submitted to and made by an arbitrator(s)
        pursuant to Section 19 hereof.

      

      (c)   Termination
        Without Cause.   Executive's
        employment
        may be terminated Without Cause pursuant to this Section 7(c) upon 30 days'
        notice for any reason, subject to the payment of all amounts required by
        Section
        8 hereof.

      

      (d)   Expiration.   Executive's
        employment
        shall cease, or shall continue on an at-will basis as provided in Section
        4
        hereof, upon the expiration of the Term of this Agreement as provided in
        Section
        4 hereof.

      

      (e)   Resignation
        for Good Reason.   Following
        a Change in
        Control during the Term hereof, Executive may, under the following
        circumstances, regard Executive's employment as being constructively terminated
        by the Bank or Bancorp (and in such case Executive's employment shall terminate)
        and may, therefore, Resign for Good Reason within 90 days of Executive's
        discovery of the occurrence of one or more of the following events, any of
        which
        shall constitute "Good Reason" for such Resignation for Good
        Reason:

      

      (i)   Without
        Executive's express written consent, the assignment to Executive of any duties
        materially inconsistent with Executive's position, duties, responsibilities
        and
        status with the Bank immediately prior to the Change in Control, or any
        subsequent removal of Executive from or any failure to re-elect him to any
        such
        position;

      

        (ii)   Without
        Executive's express written consent, the termination and/or material reduction
        in Executive's facilities (including office space and general location) and
        staff reporting and available to Executive immediately prior to the Change
        in
        Control;

      

      (iii)   A
        material reduction (ten percent or greater) by the Bank of Executive's base
        salary or of any bonus compensation applicable to him as in effect immediately
        prior to the Change in Control;

      

      (iv)   A
        failure
        by the Bank to maintain any of the employee benefits and perks to which
        Executive was entitled immediately prior to the Change in Control at a level
        substantially equal to or greater than the value of those employee benefits
        and
        perks in effect immediately prior to the Change in Control; or the taking
        of any
        action by the Bank which would materially affect Executive's participation
        in or
        reduce Executive's benefits under any such benefits or ‘perks’ plans, programs
        or policies, or deprive Executive of any material fringe benefits enjoyed
        by him
        immediately prior to the Change in Control;

      

      
        
          
          

        

        
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      (v)   The
        Bank
        or Bancorp requiring Executive to be based anywhere other than San Luis Obispo
        county, except for required travel on the Bank's or Bancorp’s behalf to an
        extent substantially consistent with Executive's present business travel
        obligations;

      

      (vi)   Any
        purported Termination of Executive's employment by the Bank or Bancorp other
        than those effected in good faith pursuant to Sections 7(a) and
        7(b);

      

      (vii)   The
        failure of the Bank or Bancorp to obtain the assumption of this Agreement
        by any
        successor; or

       

      (viii)   Receipt
        by Executive of a
        Notice of Non-Renewal.

      

      (f)   Supervisory
        Suspension.   If
        the Executive is
        suspended and/or temporarily prohibited from participating in the conduct
        of the
        Bank's or Bancorp’s affairs by a notice served under Sections 8(e) or (g) of the
        Federal Deposit Insurance Act or similar statute, rule or regulation, the
        Bank's
        or Bancorp’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 shall, (i) pay the Executive 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.

      

      (g)   Regulatory
        Removal.   If
        the Executive is
        removed and/or permanently prohibited from participating in the conduct of
        the
        Bank's or Bancorp’s affairs by an order issued under Sections 8(e) or (g) of the
        Federal Deposit Insurance Act or similar statute, rule or regulation, all
        obligations of the Bank and Bancorp under this Agreement shall terminate
        as of
        the effective date of the order.

      

      8.   Payments
        to Executive Upon Termination.

      

      (a)   Death,
        Disability or Retirement.   In
        the event of
        Termination of this Agreement due to Executive's death, Disability or
        retirement, Executive or Executive's spouse and/or estate shall be entitled
        to
        (i) all benefits generally available to Bank and Bancorp employees, or their
        spouses and/or estates, as of the date of such death, Disability or retirement
        and (ii) the benefits provided in Executive’s Salary Continuation
        Agreement.

      

      (b)   Resignation
        Without Good Reason or Expiration.   In
        the event of
        Executive's resignation (other than a Resignation for Good Reason), or upon
        Expiration, the Bank and Bancorp shall have no further obligations to Executive
        under this Agreement or otherwise, except as may be expressly required by
        law.

      

      (c)   Termination
        for Cause.   In
        the event Executive is
        Terminated for Cause, the Bank or Bancorp shall have no further obligations
        to
        Executive under this Agreement or otherwise, except as may be expressly required
        by law.

      

      
        
          
          

        

        
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      (d)   Termination
        Without Cause Prior to a Change in Control.   Upon
        the occurrence of a
        Termination Without Cause prior to a Change in Control, as severance pay
        and in
        lieu of damages for breach of this Agreement, the Bank on its behalf and
        on
        behalf of Bancorp shall pay to Executive commencing on the first day of the
        seventh month following Executive’s termination and on the first day of the next
        11 successive months a payment equal to Executive’s monthly base salary then in
        effect, less applicable state and federal withholdings. During the 12 month
        period during which Executive would receive payments pursuant to this provision,
        Executive shall also be entitled to the continuation of insurance and other
        benefits as set forth herein; provided, however, (i) such benefits shall
        not
        include participation in the 1997 Bonus Plan and (ii) such insurance benefits
        shall be provided only to the extent permissible under applicable policies.
        

       

      (e)   Termination
        Without Cause or Resignation for Good Reason, After a Change in
        Control.   If
        in the 24 month period
        following a Change in Control, Executive (i) Resigns for Good Reason or (ii)
        is
        otherwise Terminated Without Cause, the Bank and Bancorp shall pay to Executive,
        in the aggregate, a lump sum payment equal to (A) 24 months base salary then
        in
        effect and (B) two times the amount of Executive’s bonus for the year preceding
        the Change in Control. Such lump sum shall be paid not later than the tenth
        (10th) day of the seventh month following the date of Termination Without
        Cause
        or a Resignation for Good Reason. The parties acknowledge that the foregoing
        payment is for services to be rendered in the event of a Change in Control
        over
        and above those normally and reasonably expected of the Executive.

      

      (f)   Source
        of Payments.   All
        payments provided in
        Section 8 shall be paid in cash from the general funds of the Bank, and no
        special or separate fund need be established and no other segregation of
        assets
        need be made to assure payment.

      

      (g)   Consistent
        Returns.   The
        Bank, Bancorp and
        Executive agree that the payments being made under this Agreement represent
        reasonable compensation for services and that neither the Bank nor Executive
        will file any returns or reports which take a contrary position.

       

      
        (h)   Reduction
          or Limitation on Payments.

         

      

      (i)   Notwithstanding
        anything
        in the foregoing to the contrary, if the payments made to Executive following
        a
        Termination Without Cause or Resignation For Good Reason or any of the other
        payments provided for in this Agreement, together with any other payments
        which
        Executive has the right to receive from the Bank or Bancorp would constitute
        a
        "parachute payment" (as defined in Section 280G of the Code), the payments
        pursuant to this Agreement shall be reduced to the largest amount as will
        result
        in no portion of such payments being subject to the excise tax imposed by
        Section 4999 of the Code; provided, however, that
        (A)
        the
        parties acknowledge that the foregoing payment is for services to be rendered
        in
        the event of a Change in Control over and above those normally and reasonably
        expected of the Executive, and (B) the determination as to whether any reduction
        in the payments under this Agreement pursuant to this proviso is necessary
        shall
        be made in good faith by the Bank’s and Bancorp’s independent auditors or if
        such firm is no longer providing tax services to Bank or Bancorp to such
        other
        tax advisor as shall be mutually acceptable to Bank, Bancorp and Executive,
        and
        such determination shall be conclusive and binding on the Bank, Bancorp and
        Executive with respect to the treatment of the payment for tax reporting
        purposes.

      

      
        
          
          

        

        
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      (ii)   This
        Agreement, and any payments or benefits hereunder, are made expressly subject
        to
        and conditioned upon compliance with all federal and state law, regulations
        and
        policies relating to the subject matter of this Agreement, including but
        not
        limited to the provisions of law codified at 12 U.S.C. §1828(k), the regulations
        of the FDIC codified as 12 C.F.R. Part 359, and any successor or similar
        federal
        or state law or regulation applicable to the Bank or Bancorp. Employee
        acknowledges that he understands the sections of law and regulations cited
        above
        and that the Bank’s and Bancorp’s obligations to make payments hereunder are
        expressly relieved if such payments violate any federal or state law or
        regulation applicable to the Bank or Bancorp.

      

      (i)   Sole
        Remedy.   The
        receipt of the
        amounts described in this Section 8 shall constitute Executive’s sole remedy for
        breach of this Agreement against the Bank or Bancorp and its respective
        officers, directors, employees and agents.

      

        9.  Nondisclosure
        of Confidential Information.   Executive
        acknowledges
        that, in the course of employment with the Bank and Bancorp, Executive will
        have
        access to confidential information. “Confidential Information” includes, but is
        not limited to, information about the Bank and Bancorp, its affiliates and
        its
        customer, pricing information, financing arrangements, research materials,
        manuals, computer programs, formulas, techniques, data, marketing plans and
        tactics, technical information, lists of asset sources and customers, the
        processes and practices of the Bank and Bancorp, and their affiliates, all
        information contained in electronic or computer files, all financial
        information, salary and wage information, and any other information that
        is
        designated by the Bank and Bancorp, or their affiliates as confidential or
        that
        Executive knows or should know is confidential. Confidential Information
        also
        includes information provided by third parties that the Bank and Bancorp,
        or
        their affiliates are obligated to keep confidential; and all other proprietary
        information of the Bank and Bancorp, or their affiliates. Executive acknowledges
        that all Confidential Information is and shall continue to be the exclusive
        property of the Bank and Bancorp or their affiliates, as applicable, whether
        or
        not prepared in whole or in part by Executive and whether or not disclosed
        to or
        entrusted to Executive in connection with employment by the Bank and Bancorp.
        Executive agrees not to disclose Confidential Information, directly or
        indirectly, under any circumstances or by any means, to any third persons
        without the prior written consent of the Bank and Bancorp or their affiliates,
        as applicable, both during his employment with the Bank and Bancorp and after
        his employment has ended. Executive agrees that he will not copy, transmit,
        reproduce, summarize, quote, or make any commercial or other use whatsoever
        of
        Confidential Information, except as may be necessary to perform work done
        by
        Executive for the Bank and Bancorp. Executive agrees to exercise the highest
        degree of care in safeguarding Confidential Information against loss, theft
        or
        other inadvertent disclosure and agrees generally to take all steps necessary
        or
        requested by the Bank and Bancorp or their affiliates to ensure maintenance
        of
        the confidentiality of the Confidential Information. Executive agrees that,
        unless compelled by law, Executive shall not, during or after employment
        with
        the Bank and Bancorp, make any comments or other communications contrary
        to the
        interests of, or disparaging the goodwill or reputation of, the Bank and
        Bancorp, their business or any of their products, services, controlling persons,
        affiliates, officers, directors, or executives. Executive agrees, in addition
        to
        the specific covenants contained herein, to comply with all of Bank’s and
        Bancorp’s policies and procedures for the protection of Confidential
        Information.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

         

      

      10.    Exclusions.   Paragraph
        9 shall not
        apply to the following information: (a) information now and hereafter
        voluntarily disseminated by the Bank or Bancorp to the public or which otherwise
        becomes part of the public domain through lawful means; (b) information already
        known to Executive as documented by written records which predate Executive’s
        employment with the Bank but that was not subject to any obligation of
        confidentiality; (c) information subsequently and rightfully received from
        third
        parties and not subject to any obligation of confidentiality; and (d)
        information independently developed by Executive after termination of his
        employment.

       

        11.  Confidential,
        Proprietary and Trade Secret Information of Others.   Executive
        represents and
        warrants that he is not under any pre-existing obligation that conflicts
        or is
        in any way inconsistent with the provisions of this Agreement. Executive
        represents and warrants that he has not granted any rights or licenses to
        any
        intellectual property or technology that would conflict with Executive’s
        obligations under this Agreement. Executive further represents and warrants
        that
        he has disclosed to the Bank and Bancorp any agreement to which Executive
        is or
        has been a party regarding the confidential information of others and Executive
        understands that Executive’s employment by the Bank and Bancorp will not require
        Executive to breach any such agreement. Executive will not disclose protected
        confidential information of third parties to the Bank or Bancorp nor induce
        the
        Bank and Bancorp to use any such protected confidential information received
        from another under an agreement or understanding prohibiting such use or
        disclosure. 

       

        12.  No
        Unfair Competition.   Executive
        hereby
        acknowledges that the sale or unauthorized use or disclosure of any of the
        Bank’s or Bancorp’s Confidential Information obtained by Executive by any means
        whatsoever, at any time before, during, or after the Term shall constitute
        unfair competition. Executive shall not engage in any unfair competition
        with
        the Bank or Bancorp either during the Term or at any time
        thereafter.

       

        13.  Ownership
        of Copyrights.   Executive
        agrees that all
        original works of authorship not otherwise within the scope of Paragraph
        14 that
        are conceived or developed during Executive’s employment with the Bank, either
        alone or jointly with others, if on the Bank’s or Bancorp’s time, using Bank or
        Bancorp facilities, or relating to the Bank and Bancorp are “works for hire” to
        the greatest extent permitted by law and shall be owned exclusively by the
        Bank
        and Bancorp, and Executive hereby assigns to the Bank or Bancorp all of
        Executive’s right, title, and interest in all such original works of authorship
        and mask works. Executive agrees that the Bank and Bancorp shall be the sole
        owner of all rights pertaining thereto, and further agrees to execute all
        documents that the Bank and Bancorp reasonably determines to be necessary
        or
        convenient for establishing in the Bank’s or Bancorp’s name the copyright to any
        such original works of authorship. Executive shall claim no interest in any
        inventions, copyrighted material, patents, or patent applications unless
        Executive demonstrates that any such invention, copyrighted material, patent,
        or
        patent application was developed before he began any employment with the
        Bank or
        Bancorp. This provision is intended to apply only to the extent permitted
        by
        applicable law.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

         

      

      14.  Ownership
        of Records.   Any
        written record that
        Executive may maintain of inventions, discoveries, improvements, trade secrets,
        formulae, processes, or know-how, whether or not patentable and whether or
        not
        reduced to practice, and any such records relating to original works of
        authorship or mask works made by Executive, alone or jointly with others,
        in the
        course of Executive’s employment with the Bank and Bancorp shall remain the
        property of the Bank and Bancorp. Executive shall furnish the Bank and Bancorp
        any and all such records immediately upon request.

       

      15.  Return
        of Bank’s Property and Materials.   Upon
        termination of
        employment with the Bank and Bancorp, Executive shall deliver to the Bank
        and
        Bancorp all Bank and Bancorp property and materials that are in Executive’s
        possession or control, including all of the information described as
        Confidential Information in Paragraph 9 of this Agreement and including all
        other information relating to any inventions, discoveries, improvements,
        trade
        secrets, formulae, processes, know-how, original works of authorship, or
        mask
        works of the Bank or Bancorp.

       

      16.   Waivers
        not to be Continued.   Any
        waiver by a party of
        any breach of this Agreement
        by the other party shall not be construed as a continuing waiver or as consent
        to any subsequent breach by the other party.

      

      17.   Notices.   All
        notices, requests,
        demands and other communications hereunder shall be in writing and shall
        be
        deemed to have been duly given if delivered by hand or mailed, certified
        or
        registered mail, return receipt requested, with postage prepaid, to the
        following addresses or to such other address as either party may designate
        by
        like notice.

      

      
        	 	 	
                A.

              	
                If
                  to the Bank, to:

              

      

      

      Heritage
        Oaks Bank

      545
        12th
        Street

      Paso
        Robles, California 93446

      Attn:
        Chairman of the Board

       

      B.    If
        to
        Bancorp, to:

      

      Heritage
        Oaks Bancorp

      545
        12th
        Street

      Paso
        Robles, California 93446

      Attn:
        Chairman of the Board

       

      C.    If
        to
        Executive, to:

      

      Lawrence
        P. Ward

      c/o
        Heritage Oaks Bank

      545
        12th
        Street

      Paso
        Robles, California 93446

      

      and
        to
        such other or additional person or persons as either party shall have designated
        to the other party in writing by like notice.

      

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

         

      

      18.   Indemnification.   To
        the maximum extent and
        when permitted by applicable law, the Articles of Incorporation and Bylaws
        of
        Bank and Bancorp, respectively, and resolutions of the Boards of Directors
        of
        the Bank and Bancorp in effect from time to time (except as limited below),
        the
        Bank and Bancorp shall indemnify Executive against liability or loss arising
        out
        of Executive’s actual or asserted misfeasance or non-feasance in the performance
        of Executive’s duties or out of any actual or asserted wrongful act against, or
        by, the Bank or Bancorp including but not limited to judgments, fines,
        settlements and expenses incurred in the defense of actions, proceedings
        and
        appeals therefrom. In the event there is any conflict between the provisions
        governing indemnification for the Bank or Bancorp, it is intended by the
        parties
        that the broadest protections of each be afforded to Executive. However,
        the
        Bank and Bancorp shall have not duty to indemnify Executive with respect
        to any
        claim, issue or matter as to which Executive has been finally adjudged to
        be
        liable to the Bank or Bancorp in the performance of his duties, unless and
        only
        to the extent that the court in which such action was brought shall determine
        upon application that, in view of all of the circumstances of the case,
        Executive is fairly and reasonably entitled to indemnification for the expenses
        which such court shall determine. The Bank and Bancorp shall endeavor to
        maintain Directors and Officers Liability Insurance to indemnify and insure
        the
        Bank, Bancorp and Executive from and against the aforesaid liabilities. The
        provisions of this Section 18 shall apply and inure to the benefit of the
        estate, executor, administrator, heirs, legatees or devisees of
        Executive.

       

      19.   Arbitration.   The
        parties agree that any and all disputes, controversies or claims of any kind
        or
        nature, including but not limited to any arising out of or in any way related
        to
        Employee’s employment with or separation from the Bank or Bancorp, shall be
        submitted to binding arbitration under the auspices and rules of the American
        Arbitration Association (“AAA”) in Fresno, California. Included within this
        provision are any claims alleging fraud in the inducement of this Agreement,
        or
        relating to the general validity or enforceability of this Agreement, or
        claims
        based on a violation of any local, state or federal law, such as claims for
        discrimination or civil rights violations under Title VII of the Civil Rights
        Act of 1964, the California Fair Employment and Housing Act, the Age
        Discrimination in Employment Act and the Americans with Disabilities Act.
        The
        parties shall each bear their own costs and attorneys’ fees incurred in
        conducting the arbitration and, except for such disputes where Employee asserts
        a claim under a state or federal statute prohibiting discrimination in
        employment (“a Statutory Claim”), or unless required otherwise by applicable
        law, shall split equally the fees and administrative costs charged by the
        arbitrator and AAA. In disputes where Employee asserts a Statutory Claim
        against
        the Bank, Employee shall be required to pay only the AAA filing fee to the
        extent such filing fee does not exceed the fee to file a complaint in state
        or
        federal court. The Bank shall pay the balance of the arbitrator’s fees and
        administrative costs. The prevailing party in the arbitration, as determined
        by
        the arbitrator, shall be entitled to recover his or its reasonable attorneys’
        fees and costs, including the costs or fees charged by the arbitrator and
        AAA.
        In disputes where the Employee asserts a Statutory Claim, reasonable attorneys’
        fees shall be awarded by the arbitrator based on the same standard as such
        fees
        would be awarded if the Statutory Claim had been asserted in state or federal
        court. Judgment upon an award rendered by the arbitrator may be entered in
        any
        competent court having jurisdiction over the dispute. Employee understands
        that
        arbitration is in lieu of any and all other civil legal proceedings and that
        he
        is waiving any right he may have to resolve disputes through court or trial
        by
        jury.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

         

      

      20.   General
        Provisions.

      

      (a)   Entire
        Agreement.   This
        Agreement
        constitutes the entire agreement by the parties with respect to the subject
        matter hereof, and supersedes and replaces all prior agreements among or
        between
        the parties, including but not limited to Executive’s Employment Agreement dated
        as of February 1, 2004. No amendment, waiver or termination of any of the
        provisions hereof shall be effective unless in writing and signed by the
        party
        against whom it is sought to be enforced. Any written amendment, waiver,
        or
        termination hereof executed by the Bank, Bancorp and Executive shall be binding
        upon them and upon all other Persons, without the necessity of securing the
        consent of any other Person, and no Person shall be deemed to be a third-party
        beneficiary under this Agreement.

      

      (b)   Counterparts.   This
        Agreement may be
        executed in one or more counterparts, each of which shall be deemed an original,
        but all of which taken together shall constitute one and the same
        Agreement.

      

      (c)   Headings.   The
        headings of the
        Sections of this Agreement have been inserted for convenience of reference
        only
        and shall in no way restrict or modify any of the terms or provisions
        hereof.

      

      (d)   Severability.   If
        for any reason any
        provision of this Agreement is held invalid or unenforceable, such invalidity
        or
        unenforceability shall not affect the validity or enforceability of any other
        provision of this Agreement. If any provision of this Agreement shall be
        held
        invalid or unenforceable in part, such invalidity or unenforceability shall
        in
        no way affect the rest of such provision not held so invalid, and the rest
        of
        such provision, together with all other provisions of this Agreement, shall
        to
        the full extent consistent with law continue in full force and
        effect.

      

      (e)   Governing
        Law.   This
        Agreement shall be
        governed and construed and the legal relationships of the parties determined
        in
        accordance with the laws of the State of California applicable to contracts
        executed and to be performed solely in the State of California.

       

      (f)   Assumption.
        The
        Bank and Bancorp shall require any successor in interest (whether
        direct or indirect or as a result of purchase, merger, consolidation, Change
        in
        Control or otherwise) to all or substantially all of the business and/or
        assets
        of the Bank or Bancorp to expressly assume and agree to perform the obligations
        under this Agreement in the same manner and to the same extent that the Bank
        or
        Bancorp would be required to perform it if no such succession had taken
        place.

      

      (g)   Advice
        of Counsel.   Executive
        acknowledges
        that he has been encouraged to consult with legal counsel of his choosing
        concerning the terms of this Agreement prior to executing this Agreement.
        Executive acknowledges that this Agreement has been prepared by Reitner &
        Stuart, which has served as counsel to the Bank and Bancorp in this matter
        and
        not as counsel to Executive. Any failure by Executive to consult with competent
        counsel prior to executing this Agreement shall not be a basis for rescinding
        or
        otherwise avoiding the binding effect of this Agreement. The parties acknowledge
        that they are entering into this Agreement freely and voluntarily, with full
        understanding of the terms of this Agreement. Interpretation of the terms
        and
        provisions of this Agreement shall not be construed for or against either
        party
        on the basis of the identity of the party who drafted the terms or provisions
        in
        question.

      

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

         

      

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

      

      
        	ATTEST:	HERITAGE OAKS BANK
	 	 
	/s/ Margaret Torres 	By:/s/
                Gwen Pelfrey
	Witness	Its: Chief Administrative
                Officer
	 	Print Name: Gwen Pelfrey
	 	 
	 	HERITAGE OAKS BANCORP
	 	 
	/s/ Dee Lacey	By:/s/
                B.R. Bryant
	Witness	Its:
                Chairman
	 	Print Name: B.R. Bryant
	 	 
	 	THE EXECUTIVE
	 	 
	/s/ Merle Miller	/s/ Lawrence P. Ward 
	Witness	Lawrence P. Ward
	 	President/Chief Executive
                Officer

      

            

       

      
        
          
          

        

        
          15ADVANCED COMMUNICATIONS TECHNOLOGIES, INC

                                 2005 STOCK PLAN

The purpose of the Advanced  Communications  Technologies,  Inc. 2005 Stock Plan
(the "Plan") is to provide (i) designated  employees of Advanced  Communications
Technologies,   Inc.  (the  "Company")  and  its   subsidiaries,   (ii)  certain
consultants   and  advisors  who  perform   services  for  the  Company  or  its
subsidiaries  and (iii)  non-employee t 6 0 members of the Board of Directors of
the Company (the "Board") with the  opportunity  to receive  grants of incentive
stock options and  nonqualified  stock  options  (collectively,  "Options")  and
restricted  stock  (together  with the Options,  referred to as  "Grants").  The
Company  believes that the Plan will  encourage the  participants  to contribute
materially  to the  growth of the  Company,  thereby  benefiting  the  Company's
stockholders,  and will align the economic  interests of the  participants  with
those of the stockholders.

1.    Administration

      (a) Board or Committee.  The Plan shall be administered and interpreted by
a  committee  of the Board,  which may  consist of two or more  persons  who are
"outside directors" as defined under Section 162(m) of the Internal Revenue Code
of  1986,  as  amended  (the  "Code"),  and  related  Treasury  regulations  and
"non-employee  directors"  as  defined  under Rule  16b-3  under the  Securities
Exchange Act of 1934, as amended (the "Exchange  Act").  However,  the Board may
ratify or  approve  any grants as it deems  appropriate.  If a  committee  or an
individual  administers the Plan, references in the Plan to the "Board" shall be
deemed to refer to the committee.

      (b)  Board  Authority.  The Board  shall  have the sole  authority  to (i)
determine  the  individuals  to whom Grants  shall be made under the Plan,  (ii)
determine  the  type,  size and  terms  of the  Grants  to be made to each  such
individual,  (iii)  determine  the  time  when the  Grants  will be made and the
duration  of  any  applicable  exercise  period,   including  the  criteria  for
exercisability and the acceleration of  exercisability,  (iv) amend the terms of
any  previously  issued Grant and (v) deal with any other matters  arising under
the Plan.

      (c)  Delegation.  The Board may  delegate  certain of its duties to one or
more of its members or to one or more agents as it may deem advisable. The Board
may employ attorneys,  agents,  consultants,  accountants or other persons,  and
shall be  entitled  to rely upon the  advice,  opinions  or  valuations  of such
persons.

      (d) Board Determinations. The Board shall have full power and authority to
administer and interpret the Plan, to make factual  determinations  and to adopt
or amend such rules,  regulations,  agreements and instruments for  implementing
the Plan and for the conduct of its business as it deems necessary or advisable,
in its  sole  discretion.  The  Board's  interpretations  of the  Plan  and  all
determinations  made by the Board  pursuant to the powers vested in it hereunder
shall be conclusive  and binding on all persons  having any interest in the Plan
or in any awards granted hereunder. All powers of the Board shall be executed in
its sole  discretion,  in the best interest of the Company,  not as a fiduciary,
and in  keeping  with the  objectives  of the Plan and need not be uniform as to
similarly situated individuals.

      (e)  Grants  Generally.  Awards  under the Plan may  consist of Options as
described  in  Section  4,  or  restricted  stock  as  described  in  Section  7
("Restricted  Stock").  All Grants shall be subject to the terms and  conditions
set forth  herein and to such other terms and  conditions  consistent  with this
Plan as the Board deems appropriate and as are specified in writing by the Board
to the individual in a Grant  instrument or an amendment to the Grant instrument
(the each an "Option Agreement" or "Grant Instrument").  The Board shall approve
the form and provisions of each Option Agreement or Grant Instrument.

                                      -1-
<PAGE>

2.    Shares Subject to the Plan

      (a) Shares  Authorized.  Subject to  adjustment  as described  below,  the
aggregate number of shares of common stock of the Company ("Company Stock") that
may be issued or transferred  under the Plan or upon which awards under the Plan
may be granted is 700,000,000  shares, (i) 500,000,000 of which may be issued as
Restricted  Stock and (ii) 200,000,000 of which may be issued as incentive stock
options or  non-incentive  stock options,  some of all of which may be incentive
stock options when issued to  individuals  entitled to receive  incentive  stock
options.  The shares may be authorized  but unissued  shares of Company Stock or
reacquired shares of Company Stock, including shares purchased by the Company on
the open market for purposes of the Plan. If and to the extent  Options  granted
under the Plan  terminate,  expire,  or are  canceled,  forfeited,  exchanged or
surrendered  without  having  been  exercised,  or if any  Restricted  Stock  is
forfeited,  the shares  subject to such  Grants  shall  again be  available  for
purposes of the Plan, unless otherwise provided by the Board.

      (b) Adjustments. If there is any change in the number or kind of shares of
Company  Stock   outstanding   by  reason  of  (i)  stock   dividend,   spinoff,
recapitalization, stock split or combination or exchange of shares, (ii) merger,
reorganization or consolidation,  (iii)  reclassification or change in par value
or (iv) any other  extraordinary  or unusual  event  affecting  the  outstanding
Company Stock as a class without the Company's receipt of  consideration,  or if
the value of outstanding  shares of Company Stock is substantially  reduced as a
result of a spinoff or the  Company's  payment of an  extraordinary  dividend or
distribution,  the maximum number of shares of Company Stock available under the
Plan,  the  maximum  number of  shares  of  Company  Stock  that any  individual
participating  in the Plan may be  granted  in any  year,  the  number of shares
covered by outstanding Grants, the kind of shares issued under the Plan, and the
price  per  share  or  the  applicable  market  value  of  such  Grants  may  be
appropriately  adjusted by the Board to reflect any  increase or decrease in the
number of, or change in the kind or value of,  issued shares of Company Stock to
preclude,  to the extent practicable,  the enlargement or dilution of rights and
benefits  under such  Grants;  provided,  however,  that any  fractional  shares
resulting from such adjustment shall be eliminated.  Any adjustments  determined
by the Board shall be final, binding and conclusive.

3.    Eligibility for Participation

      (a) Eligible  Persons.  All employees of the Company and its  subsidiaries
("Employees")  and  members  of the Board who are not  Employees  ("Non-Employee
Directors")  shall be  eligible  to  participate  in the Plan.  Consultants  and
advisors who perform services for the Company or any of its  subsidiaries  ("Key
Advisors")  shall be eligible  to  participate  in the Plan if the Key  Advisors
render bona fide services to the Company or its  subsidiaries,  the services are
not in connection  with the offer and sale of  securities  in a  capital-raising
transaction  and the Key  Advisors  do not  directly  or  indirectly  promote or
maintain a market for the Company's securities.

      (b)  Selection  of  Grantees.   The  Board  shall  select  the  Employees,
Non-Employee  Directors and Key Advisors to receive  Grants and shall  determine
the number of shares of Company  Stock  subject  to a  particular  Grant in such
manner  as the  Board  determines.  Employees,  Key  Advisors  and  Non-Employee
Directors who receive Grants under this Plan shall hereinafter be referred to as
"Grantees."

                                      -2-
<PAGE>

4.    Granting of Options

      (a) Number of Shares.  The Board shall  determine  the number of shares of
Company Stock that will be subject to each Option.

      (b) Type of Option and Price.

            (i) The Board may grant  Options  that are  intended  to  qualify as
"incentive  stock  options"  within  the  meaning  of  Section  422 of the  Code
("Incentive  Stock  Options")  or Options  that are not  intended  so to qualify
("Nonqualified Stock Options") or any combination of Incentive Stock Options and
Nonqualified Stock Options,  all in accordance with the terms and conditions set
forth  herein.  Incentive  Stock Options may be granted only to Employees of the
Company or a parent or subsidiary  (within the meaning of Section  424(f) of the
Code).  Nonqualified  Stock  Options may be granted to  Employees,  Non-Employee
Directors and Key Advisors.  Unless otherwise  provided in the Option Agreement,
any Option granted under this Plan to an Employee is intended to be an Incentive
Stock Option.

            (ii) The  purchase  price (the  "Exercise  Price") of Company  Stock
subject to an Option shall be  determined  by the Board.  The Exercise  Price of
Options shall be equal to the Fair Market Value (as defined below) of a share of
Company  Stock on the date the Option is  granted;  provided,  however,  that an
Incentive  Stock  Option may not be granted to an  Employee  who, at the time of
grant,  owns stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Company or any parent or  subsidiary of the
Company,  unless the Exercise  Price per share is not less than 110% of the Fair
Market Value of Company Stock on the date of grant. In addition,  should counsel
advise the Board that due to changes in law or  regulations,  it is necessary or
desirable for the Exercise  Price of  Nonqualified  Stock Options to be at least
equal to Fair Market Value,  thereafter  the Exercise Price of all Options shall
be at least Fair Market Value on the date of grant.

            (iii) If the Company Stock is publicly traded,  then the Fair Market
Value per share shall be  determined as follows:  (x) if the  principal  trading
market for the  Company  Stock is a national  securities  exchange or the Nasdaq
National  Market,  the closing  price  thereof on the relevant date or (if there
were no trades on that  date) the  latest  preceding  date upon which a sale was
reported, or (y) if the Company Stock is not principally traded on such exchange
or market,  the mean  between  the last  reported  "bid" and  "asked"  prices of
Company  Stock on the  relevant  date,  as  reported  on  Nasdaq  or,  if not so
reported,  as reported by the NASDAQ OTC  Bulletin  Board,  the  National  Daily
Quotation  Bureau,  Inc.  or as  reported  in a  customary  financial  reporting
service, as applicable and as the Board determines.  If the Company Stock is not
publicly traded or, if publicly traded, is not subject to reported  transactions
or "bid" or "asked"  quotations  as set forth  above,  the Fair Market Value per
share shall be as determined by the Board.

      (c) Option Term.  The Board shall  determine the term of each Option.  The
term of any Option shall not exceed ten years from the date of grant, which date
of grant is determined by the Board.  However, an Incentive Stock Option that is
granted to an Employee  who, at the time of grant,  owns stock  possessing  more
than ten percent of the total  combined  voting power of all classes of stock of
the Company,  or any parent or  subsidiary  of the Company,  may not have a term
that exceeds five years from the date of grant.

                                      -3-
<PAGE>

      (d)  Exercisability  of  Options.  Options  shall  become  exercisable  in
accordance with such terms and  conditions,  consistent with the Plan, as may be
determined  by the  Board  and  specified  in the  Option  Agreement.  Unless  a
different  vesting  schedule is specified  by the Board in an Option  Agreement,
Options  granted  under this Plan shall vest in three equal annual  installments
beginning with the first anniversary of grant. The Board may accelerate, and may
provide in the Option Agreement for the acceleration of, the  exercisability  of
any or all outstanding Options at any time for any reason.

      (e) Reload Options.  In the event that shares of Company Stock are used to
exercise  an  Option,  the terms of such  Option  may  provide  for the grant of
additional  Options,  or the Board may grant additional  Options,  to purchase a
number of shares of Company  Stock  equal to the number of whole  shares used to
exercise the Option and the number of whole shares,  if any, withheld in payment
of any taxes.  Such Options shall be granted with an Exercise Price equal to the
Fair Market Value of the Company  Stock on the date of grant of such  additional
Options, or at such other Exercise Price as the Board may establish,  for a term
not longer than the  unexpired  term of the  exercised  Option and on such other
terms as the Board shall determine.

      (f) Dividend  Equivalents.  The Board may grant  dividend  equivalents  in
connection with Options granted under the Plan. Dividend equivalents may be paid
currently or accrued as contingent  cash  obligations and may be payable in cash
or shares of  Company  Stock,  and upon such  terms as the Board may  establish,
including,  without limitation,  the achievement of specific  performance goals.
Dividend  equivalents  credited to an Grantee's  account shall not be subject to
forfeiture,  except as the Board may determine,  and may bear amounts equivalent
to interest as the Board may determine.

      (g) Limit on Incentive  Stock Options.  Each Incentive  Stock Option shall
provide that, if the aggregate Fair Market Value of the stock on the date of the
grant with respect to which  Incentive  Stock  Options are  exercisable  for the
first time by an Grantee during any calendar  year,  under the Plan or any other
stock option plan of the Company or a parent or  subsidiary,  exceeds  $100,000,
then the Option,  as to the  excess,  shall be treated as a  Nonqualified  Stock
Option.

5.    Termination of Employment, Disability or Death

      (a)  General  Rule.  Except  as  provided  below,  an  Option  may only be
exercised while the Grantee is employed by, or providing service to, the Company
as an Employee,  Key Advisor or member of the Board. In the event that a Grantee
ceases to be  employed  by, or provide  service  to, the  Company for any reason
other than (i) termination by the Company without Cause (as defined below), (ii)
voluntary  termination  by the Grantee,  (iii)  Disability (as defined below) or
(iv) death, any Option held by the Grantee shall terminate  immediately  (unless
the Board specifies otherwise). In addition, notwithstanding any other provision
of this Plan,  if the Board  determines  that the Grantee has engaged in conduct
that  constitutes  Cause at any time  while  the  Grantee  is  employed  by,  or
providing  service  to,  the  Company  or after  the  Grantee's  termination  of
employment  or  service,  any  Option  held  by the  Grantee  shall  immediately
terminate and the Grantee shall automatically  forfeit all shares underlying any
exercised  portion of an Option for which the Company has not yet  delivered the
share certificates, upon refund by the Company of the Exercise Price paid by the
Grantee  for such  shares.  Upon any  exercise  of an Option,  the  Company  may
withhold delivery of share  certificates  pending  resolution of an inquiry that
could lead to a finding resulting in a forfeiture.

                                      -4-
<PAGE>

      (b) Termination Without Cause; Voluntary Termination. In the event that an
Grantee ceases to be employed by, or provide service to, the Company as a result
of (i)  termination  by the Company  without  Cause (as  defined  below) or (ii)
voluntary  termination by the Grantee, any Option which is otherwise exercisable
by the Grantee shall terminate unless exercised within 90 days after the date on
which the Grantee  ceases to be employed by, or provide  service to, the Company
(or within such other period of time as may be  specified by the Board),  but in
any event no later than the date of  expiration  of the Option  term.  Except as
otherwise  provided  by the Board,  any of the  Grantee's  Options  that are not
otherwise  exercisable as of the date on which the Grantee ceases to be employed
by, or provide service to, the Company shall terminate as of such date.

      (c) Termination  Because  Disabled.  In the event the Grantee ceases to be
employed by, or provide service to, the Company because the Grantee is Disabled,
any Option which is otherwise  exercisable by the Grantee shall terminate unless
exercised  within  one year  after  the date on which the  Grantee  ceases to be
employed by, or provide  service to, the Company (or within such other period of
time as may be specified by the Board),  but in any event no later than the date
of expiration of the Option term. Except as otherwise provided by the Board, any
of the Grantee's  Options which are not otherwise  exercisable as of the date on
which the Grantee  ceases to be employed by, or provide  service to, the Company
shall terminate as of such date.

      (d) Death. If the Grantee dies while employed by, or providing service to,
the Company or within 90 days after the date on which the  Grantee  ceases to be
employed or provide  service on account of a  termination  specified  in Section
5(b)  above (or  within  such other  period of time as may be  specified  by the
Board), any Option that is otherwise  exercisable by the Grantee shall terminate
unless  exercised  within one year after the date on which the Grantee ceases to
be employed by, or provide  service to, the Company (or within such other period
of time as may be  specified  by the Board),  but in any event no later than the
date of  expiration  of the Option  term.  Except as  otherwise  provided by the
Board, any of the Grantee's Options that are not otherwise exercisable as of the
date on which the Grantee  ceases to be employed by, or provide  service to, the
Company shall terminate as of such date.

      (e) Board  Discretion.  The Board shall have the discretion to vary any of
the  provisions  of the  foregoing  in an Option  Agreement  for a  Nonqualified
Option, including, without limitation, by providing that the Nonqualified Option
shall not be affected by the termination of employment or service of a Grantee.

      (f) Definitions.

            (i) The term  "Company"  shall mean the  Company  and its parent and
subsidiary corporations or other entities, as determined by the Board.

            (ii)  "Employed by, or provide  service to, the Company"  shall mean
employment  or service as an  Employee,  Key  Advisor or member of the Board (so
that an Grantee shall not be considered to have terminated employment or service
until the  Grantee  ceases to be an  Employee,  Key  Advisor  and  member of the
Board), unless the Board determines otherwise.

                                      -5-
<PAGE>

            (iii)  "Disability"  shall mean a Grantee's  becoming disabled under
the Company's long-term disability plan, or, if the Grantee is not covered under
such plan or no such plan is maintained,  and in the case of an Incentive  Stock
Option,  "Disability"  shall  mean an  Grantee's  becoming  disabled  within the
meaning of Section 22(e)(3) of the Code.

            (iv) "Cause" shall mean, except to the extent specified otherwise by
the Board,  a finding by the Board that the Grantee has: (i) breached his or her
employment or service  contract with the Company;  (ii) engaged in disloyalty to
the  Company,  including,  without  limitation,   fraud,  embezzlement,   theft,
commission  of a  felony  or  proven  dishonesty  in  the  course  of his or her
employment or service; (iii) disclosed trade secrets or confidential information
of the  Company to  persons  not  entitled  to receive  such  information;  (iv)
breached  any  written  confidentiality,   non-competition  or  non-solicitation
agreement between the Grantee and the Company;  or (v) has engaged in such other
behavior detrimental to the interests of the Company as the Board determines.

6.    Exercise of Options.

      (a) Notice of  Exercise.  A Grantee may exercise an Option that has become
exercisable,  in whole or in part,  by  delivering  a notice of  exercise to the
Company.

      (b)  Payment of Exercise  Price.  Along with the notice of  exercise,  the
Grantee shall pay the Exercise Price for an Option as specified by the Board (i)
in cash,  (ii) with the approval of the Board,  by delivering  shares of Company
Stock owned by the Grantee  (including Company Stock acquired in connection with
the  exercise  of an Option,  subject to such  restrictions  as the Board  deems
appropriate) valued at Fair Market Value on the date of exercise, (iii) with the
approval of the Board, by surrender of outstanding awards under the Plan or (iv)
by such other method as the Board may approve.  Shares of Company  Stock used to
exercise an Option shall have been held by the Grantee for the requisite  period
of time to avoid adverse accounting  consequences to the Company with respect to
the Option.

      (c) Payment of Tax.  The Grantee  shall pay the amount of any  withholding
tax due at the time of exercise.

7.    Restricted Stock

      The Board may grant Restricted Stock to an Employee, Non-Employee Director
or Key Advisor,  upon such terms as the Board deems  appropriate.  The following
provisions are applicable to Restricted Stock:

      (a) General  Requirements.  Shares of Company Stock issued or  transferred
pursuant  to a Grant of  Restricted  Stock  may be  issued  or  transferred  for
consideration  or  for no  consideration,  and  subject  to  restrictions  or no
restrictions,  as  determined  by the  Board.  The Board  may,  but shall not be
required to, establish  conditions under which  restrictions on Restricted Stock
shall  lapse over a period of time or  according  to such other  criteria as the
Board deems appropriate,  including, without limitation, restrictions based upon
the achievement of specific performance goals. In addition,  the Board may grant
restricted stock for which there is no Restriction  Period.  The period of time,
if any,  during which the Restricted  Stock will remain subject to  restrictions
will be designated in the Grant Instrument as the "Restriction Period."

                                      -6-
<PAGE>

      (b) Number of Shares.  The Board shall  determine  the number of shares of
Company Stock to be issued or  transferred  and the  restrictions  applicable to
such shares.

      (c)  Requirement  of  Employment or Service.  If the Grantee  ceases to be
employed  by, or provide  service to, the  Company (as defined in Section  5(e))
during a period designated in the Grant Instrument as the Restriction Period, or
if other specified  conditions are not met, the Restricted Stock shall terminate
as to all  shares  covered  by the Grant as to which the  restrictions  have not
lapsed,  and those shares of Company Stock must be  immediately  returned to the
Company.  The Board may, however,  provide for complete or partial exceptions to
this requirement as it deems appropriate.

      (d) Restrictions on Transfer and Legend on Stock  Certificate.  During the
Restriction  Period,  a  Grantee  may not  sell,  assign,  transfer,  pledge  or
otherwise  dispose  of the  shares of  Restricted  Stock  except to a  Successor
Grantee under Section  11(a).  A stock  certificate  representing  the shares of
Restricted  Stock shall be registered in the Grantee's name but shall be held in
the custody of the Company for the Grantee's account.

      (e) Right to Vote and to Receive  Dividends.  Unless the Board  determines
otherwise,  during the Restriction  Period,  the Grantee shall have the right to
vote  shares  of  Restricted  Stock  and  to  receive  any  dividends  or  other
distributions  paid  on  such  shares,   subject  to  any  restrictions   deemed
appropriate by the Board,  including,  without  limitation,  the  achievement of
specific performance goals or that any dividends or other distributions shall be
held for the Grantee's  account and credited with interest  instead of currently
paid.

      (f) Lapse of Restrictions.  All  restrictions  imposed on Restricted Stock
shall lapse upon the  expiration of the  applicable  Restriction  Period and the
satisfaction of all conditions imposed by the Board. The Board may determine, as
to any or all Restricted Stock, that the restrictions shall lapse without regard
to any Restriction Period.

7.    Withholding of Taxes

      (a)  Required  Withholding.  All Grants under the Plan shall be subject to
applicable   federal   (including   FICA),   state  and  local  tax  withholding
requirements.  The Company  shall have the right to deduct from any amounts paid
to the Grantee, any federal, state or local taxes required by law to be withheld
with respect to such  Grants.  The Company may require that the Grantee or other
person  receiving  or  exercising  Grants pay to the  Company  the amount of any
federal,  state or local taxes that the  Company is  required  to withhold  with
respect to such  Grants,  or the Company may deduct from other wages paid by the
Company the amount of any withholding taxes due with respect to such Grants.

      (b) Election to Withhold  Shares.  If the Board so permits,  a Grantee may
elect, in the form and manner  prescribed by the Board, to satisfy the Company's
income tax withholding  obligation  with respect to Options or Restricted  Stock
paid in Company  Stock by having  shares  withheld up to an amount that does not
exceed  the  Grantee's  minimum  applicable  withholding  tax rate  for  federal
(including FICA), state and local tax liabilities.

8.    Transferability of Grants

      (a)  Nontransferability  of Grants.  Except as  provided  below,  only the
Grantee may exercise  rights under an Option  during the Grantee's  lifetime.  A
Grantee  may not  transfer  those  rights  except  (i) by will or by the laws of
descent and distribution or (ii) with respect to Nonqualified Stock Options,  if
permitted in any specific  case by the Board,  pursuant to a domestic  relations
order or otherwise as permitted by the Board. When an Grantee dies, the personal
representative  or other person entitled to succeed to the rights of the Grantee
("Successor Grantee") may exercise such rights. A Successor Grantee must furnish
proof  satisfactory  to the  Company of his or her right to  receive  the Option
under  the  Grantee's  will  or  under  the  applicable   laws  of  descent  and
distribution.

                                      -7-
<PAGE>

      (b) Transfer of Nonqualified Stock Options. Notwithstanding the foregoing,
the Board may  provide,  in an Option  Agreement,  that an Grantee may  transfer
Nonqualified  Stock  Options to family  members,  or one or more trusts or other
entities  for the  benefit of or owned by family  members,  consistent  with the
applicable  securities laws, according to such terms as the Board may determine;
provided  that the Grantee  receives  no  consideration  for the  transfer of an
Option and the transferred Option shall continue to be subject to the same terms
and conditions as were applicable to the Option immediately before the transfer.

9.    Change of Control of the Company

      As used herein, a "Change of Control" shall be deemed to have occurred if:

      (a) Unless the Board approves such acquisition, any "person" (as such term
is used in Sections  13(d) and 14(d) of the Exchange  Act) becomes a "beneficial
owner"  (as  defined  in  Rule  13d-3  under  the  Exchange  Act),  directly  or
indirectly,  in a single transaction,  of securities of the Company representing
more than 50 percent of the voting power of the then  outstanding  securities of
the Company; provided that a Change of Control shall not be deemed to occur as a
result of a change of ownership resulting from the death of a stockholder, and a
Change of Control shall not be deemed to occur as a result of a  transaction  in
which the Company  becomes a subsidiary of another  corporation and in which the
stockholders  of  the  Company,  immediately  prior  to  the  transaction,  will
beneficially  own,  immediately  after the  transaction,  shares  entitling such
stockholders  to more than 50 percent of all votes to which all  stockholders of
the parent  corporation would be entitled in the election of directors  (without
consideration  of the  rights  of any  class of stock  to elect  directors  by a
separate class vote);

      (b)  Unless  the Board  approves  such  acquisition,  if in any  series of
acquisitions  any "person" (as such term is used in Sections  13(d) and 14(d) of
the Exchange Act) becomes a  "beneficial  owner" (as defined in Rule 13d-3 under
the  Exchange  Act),  directly  or  indirectly,  of  securities  of the  Company
representing  more  than  2/3 of  the  voting  power  of  the  then  outstanding
securities of the Company; provided that a Change of Control shall not be deemed
to occur as a result  of a change  of  ownership  resulting  from the death of a
stockholder, and a Change of Control shall not be deemed to occur as a result of
a transaction in which the Company  becomes a subsidiary of another  corporation
and  in  which  the  stockholders  of  the  Company,  immediately  prior  to the
transaction,  will beneficially own,  immediately after the transaction,  shares
entitling  such  stockholders  to  more  than  2/3 of all  votes  to  which  all
stockholders  of the parent  corporation  would be entitled  in the  election of
directors  (without  consideration  of the rights of any class of stock to elect
directors by a separate class vote); or

      (c) The  consummation of (i) a merger or consolidation of the Company with
another corporation where the stockholders of the Company,  immediately prior to
the merger or consolidation,  will not beneficially  own,  immediately after the
merger or  consolidation,  shares  entitling such  stockholders  to more than 50
percent  of all votes to which all  stockholders  of the  surviving  corporation
would be entitled in the election of  directors  (without  consideration  of the
rights of any class of stock to elect directors by a separate class vote),  (ii)
a sale or other  disposition  of all or  substantially  all of the assets of the
Company or (iii) a liquidation or dissolution of the Company.

                                      -8-
<PAGE>

      (d)  Notwithstanding  the  foregoing,  a Public  Offering of the Company's
stock shall not be deemed to result in a Change of Control.

11.   Consequences of a Change of Control

      (a) Notice and Acceleration.  30 days prior to a Change of Control, unless
the Board determines otherwise, all outstanding Options shall become exercisable
in full and all  restrictions on all outstanding  Restricted  Stock shall lapse.
The Board shall  provide  notice to Grantees of the Change of Control as soon as
practicable prior to the Change of Control.

      (b) Assumption of Grants Upon a Change of Control where the Company is not
the  surviving  corporation  (or  survives  only  as  a  subsidiary  of  another
corporation),  unless the Board determines  otherwise,  all outstanding  Options
that are not exercised shall be assumed by, or replaced with comparable  options
or rights  by,  the  surviving  corporation  (or a parent or  subsidiary  of the
surviving corporation).

      (c)  Other  Alternatives.   Notwithstanding  the  foregoing,   subject  to
subsection  (d) below,  in the event of a Change of Control,  the Board may take
one or both of the  following  actions  with  respect to any or all  outstanding
Options:  (i) the Board may require that Grantees  surrender  their  outstanding
Options in exchange  for a payment by the Company,  in cash or Company  Stock as
determined by the Board, in an amount equal to the amount by which the then Fair
Market Value of the shares of Company Stock subject to the Grantee's unexercised
Options exceeds the Exercise Price of the Options;  or (ii) the Board may, after
giving Grantees an opportunity to exercise their outstanding Options,  terminate
any or all unexercised Options at such time as the Board deems appropriate. Such
surrender or  termination  or settlement  shall take place as of the date of the
Change of Control or such other date as the Board may specify.

      (d) Limitations.  Notwithstanding anything in the Plan to the contrary, in
the event of a Change of Control, the Board shall not have the right to take any
actions described in the Plan (including without limitation actions described in
subsection  (c) above)  that would  make the  Change of Control  ineligible  for
pooling  of  interests  accounting  treatment  or that  would make the Change of
Control ineligible for desired tax treatment if, in the absence of such right or
action,  the Change of Control would qualify for such treatments and the Company
intends to use such treatments with respect to the Change of Control.

11.   Requirements for Issuance or Transfer of Shares

      (a) Stockholder's Agreement. The Board may require that an Grantee execute
a stockholder's agreement, with such terms as the Board deems appropriate,  with
respect to any Company  Stock  issued or  distributed  before a Public  Offering
pursuant to this Plan.

      (b) Limitations on Issuance or Transfer of Shares.  No Company Stock shall
be issued or transferred in connection with any Grant hereunder unless and until
all legal  requirements  applicable  to the issuance or transfer of such Company
Stock have been complied with to the  satisfaction of the Board. The Board shall
have the right to  condition  any Grant made to any  Grantee  hereunder  on such
Grantee's  undertaking in writing to comply with such restrictions on his or her
subsequent  disposition  of such shares of Company Stock as the Board shall deem
necessary  or  advisable,  and  certificates  representing  such  shares  may be
legended to reflect any such restrictions.  Certificates  representing shares of
Company  Stock  issued or  transferred  under the Plan will be  subject  to such
stop-transfer  orders and other  restrictions  as may be required by  applicable
laws,  regulations and interpretations,  including any requirement that a legend
be placed thereon.

                                      -9-
<PAGE>

      (c) Lock-Up Period.  If so requested by the Company or any  representative
of  the  underwriters  (the  "Managing  Underwriter")  in  connection  with  any
underwritten  offering of securities of the Company under the  Securities Act of
1933, as amended (the "Securities Act"), an Grantee (including any successors or
assigns) shall not sell or otherwise  transfer any shares or other securities of
the Company during the 30-day period  preceding and the 180-day period following
the effective  date of a  registration  statement of the Company filed under the
Securities Act for such underwritten  offering (or such shorter period as may be
requested by the Managing Underwriter and agreed to by the Company) (the "Market
Standoff  Period").  The  Company  may impose  stop-transfer  instructions  with
respect to  securities  subject to the foregoing  restrictions  until the end of
such Market Standoff Period.

12.   Cancellation and Rescission of Options or Restricted Stock

      (a) Unless the Option Agreement specifies otherwise, the Board may cancel,
rescind, suspend, withhold or otherwise limit or restrict any unexpired,  unpaid
or  deferred  Options or  Restricted  Stock at any time if the Grantee is not in
compliance with all applicable  provisions of the Grant Instrument and the Plan,
or if the Grantee  engages in any  "Detrimental  Activity." For purposes of this
Section, "Detrimental Activity" shall include: (i) the rendering of services for
any organization or engaging  directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business,  or the
rendering of services to such organization or business,  is or becomes otherwise
prejudicial  to or in  conflict  with the  interests  of the  Company;  (ii) the
disclosure to anyone outside the Company, or the use in other than the Company's
business,   without  prior  written  authorization  from  the  Company,  of  any
confidential  information or material,  in violation of the Company's applicable
agreement  with the  Grantee or of the  Company's  applicable  policy  regarding
confidential information and intellectual property; (iii) the failure or refusal
to disclose  promptly  and to assign to the Company,  pursuant to the  Company's
applicable  agreement  with the Grantee or to the  Company's  applicable  policy
regarding  confidential  information and intellectual property, all right, title
and interest in any  invention or idea,  patentable or not, made or conceived by
the Grantee  during  employment  by the  Company,  relating in any manner to the
actual or anticipated business,  research or development work of the Company, or
the failure or refusal to do anything reasonably necessary to enable the Company
to  secure  a  patent  where  appropriate  in the  United  States  and in  other
countries; (iv) activity that results in termination of the Grantee's employment
for cause; (v) a violation of any rules,  policies,  procedures or guidelines of
the  Company,  including  (but not limited to) the  Company's  business  conduct
guidelines;  (vi) any attempt (directly or indirectly) to induce any employee of
the  Company  to be  employed  or  perform  services  elsewhere  or any  attempt
(directly  or  indirectly)  to solicit  the trade or  business of any current or
prospective  customer,  supplier or partner of the Company;  (vii) the Grantee's
being convicted of, or entering a guilty plea with respect to, a crime,  whether
or not connected with the Company; or (viii) any other conduct or act determined
to be injurious, detrimental or prejudicial to any interest of the Company.

      (b) Upon exercise,  payment or delivery  pursuant to a Grant,  the Grantee
shall  certify  in a  manner  acceptable  to the  Company  that  he or she is in
compliance  with the terms and  conditions  of the Plan. In the event an Grantee
fails to comply with the provisions of paragraphs  (a)(i)-(viii) of this Section
prior to, or during the six months  after,  any  exercise,  payment or  delivery
pursuant to a Grant, such exercise,  payment or delivery may be rescinded within
two years thereafter. In the event of any such rescission, the Grantee shall pay
to the Company the amount of any gain  realized or payment  received as a result
of the rescinded exercise, payment or delivery, in such manner and on such terms
and conditions as may be required,  and the Company shall be entitled to set-off
against  the  amount  of any such gain any  amount  owed to the  Grantee  by the
Company.

                                      -10-
<PAGE>

      (c) The  Board,  in its  sole  discretion,  may  grant to an  Grantee,  in
exchange for the surrender and cancellation of a Grant previously granted to the
Grantee,  a new Grant in the same or different form and  containing  such terms,
including  without  limitation  a price  that is higher or lower  than any price
provided in the award so surrendered or cancelled.

13.   Amendment and Termination of the Plan

      (a)  Amendment.  The  Board  may  amend  the Plan at any  time;  provided,
however, that the Board shall not amend the Plan without stockholder approval if
such approval is required in order to comply with the Code or  applicable  laws,
or to comply with applicable stock exchange requirements.

      (b)  Termination  of Plan.  No Incentive  Stock Option may be granted more
than ten years from the Plan's effective date. The Plan may be terminated by the
Board at any time.

      (c)  Termination  and Amendment of  Outstanding  Grants.  A termination or
amendment  of the Plan that occurs  after an Grant is made shall not  materially
impair the rights of an Grantee unless the Grantee  consents or unless the Board
acts under Section 20(b). The termination of the Plan shall not impair the power
and authority of the Board with respect to an outstanding Grant.  Whether or not
the Plan has terminated, an outstanding Grant may be terminated or amended under
Section  20(b) or may be amended by  agreement  of the  Company  and the Grantee
consistent with the Plan.

      (d) Governing  Document.  The Plan shall be the controlling  document.  No
other statements,  representations,  explanatory materials or examples,  oral or
written,  may amend the Plan in any manner.  The Plan shall be binding  upon and
enforceable against the Company and its successors and assigns.

14.   Funding of the Plan

      This  Plan  shall be  unfunded.  The  Company  shall  not be  required  to
establish  any  special or  separate  fund or to make any other  segregation  of
assets to assure the payment of any Options  under this Plan.  In no event shall
interest  be paid or accrued on any Option,  including  unpaid  installments  of
Grants.

15.   Rights of Participants

      Nothing in this Plan shall entitle any Employee, Key Advisor, Non-Employee
Director or other  person to any claim or right to be granted a Grant under this
Plan.  Neither  this Plan nor any action taken  hereunder  shall be construed as
giving  any  individual  any  rights to be  retained  by or in the employ of the
Company or any other employment rights.

                                      -11-
<PAGE>

16.   No Fractional Shares

      No  fractional  shares of  Company  Stock  shall be  issued  or  delivered
pursuant to the Plan or any Grant. The Board shall determine whether cash, other
awards or other  property  shall be  issued  or paid in lieu of such  fractional
shares  or  whether  such  fractional  shares  or any  rights  thereto  shall be
forfeited or otherwise eliminated.

17.   Headings

      Section  headings  are for  reference  only.  In the  event of a  conflict
between a title and the content of a Section,  the content of the Section  shall
control.

18.   Effective Date of the Plan

      (a) Effective Date. Subject to approval by the Company's stockholders, the
Plan shall be effective on ____________________ ___, 2005.

19.   Miscellaneous

      (a)  Grants in  Connection  with  Corporate  Transactions  and  Otherwise.
Nothing  contained in this Plan shall be construed to (i) limit the right of the
Board to make Grants  under this Plan in  connection  with the  acquisition,  by
purchase,  lease, merger,  consolidation or otherwise, of the business or assets
of any corporation,  firm or association,  including Grants to employees thereof
who become Employees of the Company, or for other proper corporate purposes,  or
(ii) limit the right of the Company to grant stock  options or make other awards
outside of this Plan.  Without  limiting  the  foregoing,  the Board may make an
Option to an employee of another  corporation  who becomes an Employee by reason
of  a  corporate  merger,  consolidation,  acquisition  of  stock  or  property,
reorganization  or liquidation  involving the Company or any of its subsidiaries
in  substitution  for a  stock  option  or  stock  awards  grant  made  by  such
corporation. The terms and conditions of the substitute Grants may vary from the
terms and  conditions  required  by the Plan and from  those of the  substituted
stock  incentives.  The Board shall  prescribe the  provisions of the substitute
grants.

      (b)  Compliance  with  Law.  The Plan,  the  exercise  of  Grants  and the
obligations  of the Company to issue or transfer  shares of Company  Stock under
Grants  shall  be  subject  to  all  applicable  laws  and to  approvals  by any
governmental  or regulatory  agency as may be required.  With respect to persons
subject to Section 16 of the Exchange  Act, it is the intent of the Company that
all  transactions  under the Plan comply with all applicable  provisions of Rule
16b-3 or its successors under the Exchange Act. In addition, it is the intent of
the Company that the Plan and  applicable  Grants under the Plan comply with the
applicable provisions of Sections 162(m) and 422 of the Code. To the extent that
any legal requirement of Section 16 of the Exchange Act or Section 162(m) or 422
of the Code as set forth in the Plan ceases to be required  under  Section 16 of
the Exchange Act or Section 162(m) or 422 of the Code, that Plan provision shall
cease to apply.  The  Board may  revoke  any Grant if it is  contrary  to law or
modify  an Grant  to bring it into  compliance  with  any  valid  and  mandatory
government regulation.  The Board may also adopt rules regarding the withholding
of taxes on payments to Grantees.  The Board may, in its sole discretion,  agree
to limit its authority under this Section.

      (c) Governing Law. The validity,  construction,  interpretation and effect
of the Plan and Grant  Instruments  issued  under the Plan shall be governed and
construed by and determined in accordance with the laws of the Florida,  without
giving effect to the conflict of laws provisions thereof.

                                      -12-

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