Document:

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                                                                    EXHIBIT 10.6

                                 CHEROKEE INC.

                        INCENTIVE STOCK OPTION AGREEMENT

  THIS AGREEMENT, dated as of ________________, is made by and between Cherokee
Inc., a Delaware corporation hereinafter referred to as the "Company," and
                  an employee of the Company or a Parent Corporation or
Subsidiary of the Company, hereinafter referred to as the "Employee":

  WHEREAS, the Company maintains the Cherokee Inc. 1995 Incentive Stock Option
Plan (the "Plan");

  WHEREAS, the Company wishes to afford the Employee the opportunity to
purchase shares of its $.02 par value Common Stock (the "Common Stock")
pursuant to the Plan (the terms of which are hereby incorporated by reference
and made a part of this Agreement); and

  WHEREAS, the Plan Administrator, appointed to administer the Plan, has
determined that it would be to the advantage and best interest of the Company
and its shareholders to grant the Incentive Stock Option provided for herein to
the Employee as an inducement to enter into or remain in the service of the
Company, its Parent Corporation or its Subsidiaries and as an incentive for
increased efforts during such service, and has advised the Company thereof and
instructed the undersigned Officers to issue said Option;

  NOW, THEREFORE, in consideration of the mutual covenants herein contained and
other good and valuable consideration, receipt of which is hereby acknowledged,
the parties hereto do hereby agree as follows:

                                   ARTICLE I.

                                  DEFINITIONS

  Whenever the following terms are used in this Agreement, they shall have the
meaning specified below unless the context clearly indicates to the contrary.
The masculine pronoun shall include the feminine and neuter, and the singular
the plural, where the context so indicates.

Section 1.1. Board

  "Board" shall mean the Board of Directors of the Company.

Section 1.2. Code

  "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.

Section 1.3. Company

  "Company" shall mean Cherokee Inc., a Delaware corporation.

Section 1.4. Disability

  "Disability" shall mean the inability of the Employee to engage in any
substantial gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
twelve (12) consecutive months. The determination of whether the Employee has a
Disability shall be determined in accordance with Section 22(e)(3) of the Code
under procedures established by the Plan Administrator.

                                       1
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Section 1.5. Exchange Act

  "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.

Section 1.6. Officer

  "Officer" shall mean an officer of the Company, as defined in Rule 1 6a- 1(f)
under the Exchange Act, as such Rule may be amended in the future.

Section 1.7. Option

  "Option" shall mean the incentive stock option to purchase Common Stock of
the Company granted under this Agreement.

Section 1.8. Parent Corporation

  "Parent Corporation" shall mean any corporation in an unbroken chain of
corporations ending with the Company if each of the corporations other than the
Company then owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one (1) of the other
corporations in such chain.

Section 1.9. Plan

  "Plan" shall mean the Cherokee Inc. 1995 Incentive Stock Option Plan, as
amended from time to time.

Section 1.10 Administrator

  "Plan Administrator" shall have the meaning ascribed to such term in the
Plan.

Section 1.11 Rule 16b-3

  "Rule l6b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended in the future.

Section 1.12. Secretary

  "Secretary" shall mean the Secretary of the Company.

Section 1.13. Securities Act

  "Securities Act" shall mean the Securities Act of 1933, as amended.

Section 1.14. Subsidiary

  "Subsidiary" shall mean any corporation in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain then owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
(1) of the other corporations in such chain.

Section 1.15. Termination of Employment

  "Termination of Employment" shall mean the time when the employee-employer
relationship between the Employee and the Company, a Parent Corporation or a
Subsidiary is terminated for any reason, with or without cause, including, but
not by way of limitation, a termination by resignation, discharge, death or
retirement, but excluding any termination where there is a simultaneous
reemployment by the Company, a Parent Corporation or a Subsidiary. The Plan
Administrator, in its absolute discretion, shall determine the effect of all
other matters and questions relating to Termination of Employment, including,
but not by way of limitation, the question of whether a Termination of
Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
provided, however, that a leave of absence shall constitute a Termination of
Employment if, and to the extent that, such leave of absence interrupts
employment for purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section.

                                       2
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                                  ARTICLE II.

                                GRANT OF OPTION

Section 2.1. Grant of Option

  In consideration of the Employee's agreement to remain in the employ of the
Company, its Parent Corporations or its Subsidiaries and for other good and
valuable consideration, on the date hereof the Company irrevocably grants to
the Employee the Option to purchase any part or all of an aggregate of _________
shares of its $.02 par value Common Stock upon the terms and conditions set
forth in this Agreement.

Section 2.2. Option Price

  The purchase price of the shares of stock covered by the Option shall be
$     per share without commission or other charge.

Section 2.3. Consideration to Company

  In consideration of the granting of this Option by the Company, the Employee
agrees to render faithful and efficient services to the Company, a Parent
Corporation or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least one (1)
year from the date this Option is granted. Nothing in this Agreement or in the
Plan shall confer upon the Employee any right to continue in the employ of the
Company, any Parent Corporation or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company, its parent Corporations and its
Subsidiaries, which are hereby expressly reserved, no discharge the Employee at
any time for any reason whatsoever, with or without cause.

Section 2.4. Adjustments in Option

    (a) The event of a merger, consolidation, recapitalization,
  reorganization, reclassification, separation, stock dividend (but only on
  Common Stock), extraordinary cash dividend, stock split, reverse stock
  split, combination of shares, or like change in the corporate or capital
  structure of the Company, the Plan Administrator shall make an appropriate
  and equitable adjustment in the number and kind of shares as to which the
  Option, or portions thereof then unexercised, shall be exercisable, and/or
  in the Option price per share, to the end that after such event the
  Employee's proportionate interest shall be maintained as before the
  occurrence of such event, [Such adjustment in the Option shall be made
  without change in the total price applicable to the unexercised portion of
  thc Option (except for any change in the aggregate price resulting from
  rounding-off of share quantities or prices)]; provided however, that each
  such adjustment shall be made in such manner as not to constitute a
  "modification" within the meaning of Section 424(h)(3) of the Code. Any
  such adjustment made by the Plan Administrator shall be final and binding
  upon the Employee, the Company and all other interested persons.

                                       3
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                                  ARTICLE III.

Section 3.1. Commencement of Exercisability

  a) (a) If the Optionee has continued to serve in the capacity of an officer,
employee, or director with the Company (or a subsidiary thereof, as the case
may be) on the following dates, the Optionee may, subject to Section 13 hereof,
exercise this Option for the portion of the total number of shares subject to
this Option set opposite the applicable date below the ("Accrued
Installments"):

<TABLE>
   <S>                                                            <C>
   Less than one year from the date hereof.......................    -0- shares
   One year but less than two years from the date hereof.........        shares
   Two years but less than three years from the date hereof......        shares
   Three years but less than four years from the date hereof.....        shares
</TABLE>

  The Accrued Installments are cumulative and, while the Optionee continues to
serve as an officer, director or employee of the Company (or a subsidiary
thereof, as the case may be), the Accrued Installments may be exercised up to
and including the date which is ten years from the date this Option is granted
(the "Anniversary Date"). All of the foregoing rights are subject to Sections 3
and 4 hereof, as appropriate, if the Optionee ceases to serve as an officer,
director or employee of the Company (or a subsidiary thereof, as the case may
be) or becomes disabled or dies while serving as an officer, director or
employee of the Company (or a subsidiary thereof, as the case may be).

    (b) No portion of the Option which is unexercisable at Termination of
  Employment shall thereafter become exercisable.

Section 3.2. Duration of Exercisability

  The installments provided for in Section 3.1 are cumulative. Each such
installment which becomes exercisable pursuant to Section 3.1 shall remain
exercisable until it becomes unexercisable under Section 3.3.

Section 3.3. Expiration of Option

  The Option may not be exercised to any extent by anyone after the first to
occur of the following events:

    (a) The expiration of ten (10) years from the date the Option was
  granted; or

    (b) If the Employee owned (within the meaning of Section 424(d) of the
  Code), at the time the Option was granted, more than ten percent (10%) of
  the total combined voting power of all classes of stock of the Company, any
  Subsidiary or any Parent Corporation, the expiration of five (5) years from
  the date the Option was granted; or

    (c) The time of the Employee's Termination of Employment unless such
  Termination of Employment results from his death, his retirement, his
  Disability or his being discharged not for good cause; or

    (d) The expiration of three (3) months from the date of the Employee's
  Termination of Employment by reason of his retirement or his being
  discharged not for good cause, unless the Employee dies within said three-
  month period; or

    (e) The expiration of one (1) year from the date of the Employee's
  Termination of Employment by reason of his Disability; or

    (f) The expiration of one (1) year from the date of the Employee's death;
  or

    (g) The effective date of (i) the merger, reorganization or consolidation
  of the Company with or into another corporation, (ii) the acquisition by
  another corporation or person of all or substantially all of the Company's
  assets or eighty percent (80%) or more of the Company's then outstanding
  voting stock, or (iii) the liquidation or dissolution of the Company (in
  each case in which the Company is not the surviving corporation or the
  Company becomes a wholly owned subsidiary of another corporation), unless
  the Plan

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  Administrator waives this provision in connection with such transaction. At
  least fifteen (15) days prior to the effective date of such merger,
  reorganization, consolidation, acquisition, liquidation or dissolution, the
  Plan Administrator shall give the Employee notice of such event if the
  Option has then neither been fully exercised nor become unexercisable under
  this Section 3.3.

Section 3.4. Acceleration of Exercisability

  In the event of (i) the merger, reorganization or consolidation of the
Company with or into another corporation, (ii) the acquisition by another
corporation or person of all or substantially all of the Company's assets or
eighty percent (80%) or more of the Company's then outstanding voting stock, or
(iii) the liquidation or dissolution of the Company (in each case in which the
Company is not the surviving corporation or the Company becomes a wholly owned
subsidiary of either corporation), the Option shall, for a ten-day period
ending on the fifth day immediately preceding the effective date of such event,
be exercisable as to all the shares covered hereby, notwithstanding that the
Option may not yet have become fully exercisable under Section 3.1 (a);
provided, however, that this acceleration of exercisability shall not take
place if:

    (a) The Option becomes unexercisable under Section 3.3 prior to said
  effective date; or

    (b) In connection with such an event, provision is made for an assumption
  of the Option or a substitution therefor of a new option by an employer
  corporation, or a parent or subsidiary of such corporation, so that such
  assumption or substitution complies with the provisions of Section 424(a)
  of the Code; and

  provided, further, that nothing in this Section 3.4 shall make this Option
  exercisable if it is otherwise unexercisable by reason of Section 3.5.

  Notwithstanding the foregoing, in the event that the transaction causing an
acceleration of exercisability under this Section is not consummated, (i) any
vested installment that was exercised pursuant to this Section may, at the
election of the Employee, be rescinded, and (ii) any unvested installment that
became exercisable solely by reason of the provisions of this Section shall
again become unvested and unexercisable as of the termination of the
transaction, subject to the regular terms and provisions of this Agreement. The
Plan Administrator may make such determinations and adopt such other ru1es and
conditions as it, in its absolute discretion, deems appropriate in connection
with such acceleration of exercisability, including, but not by way of
limitation, provisions to ensure that any such acceleration and resulting
exercise shall be conditioned upon the consummation of the contemplated
corporate transaction, and determinations regarding whether provisions for
assumption or substitution have been made as defined in subsection (b) above.

Section 3.5. Special Tax Consequences

  The Employee acknowledges that, to the extent that the aggregate fair market
value of stock with respect to which "incentive stock options" (within the
meaning of Section 422 of the Code, but without regard to Section 422(d) of the
Code), including the Option are exercisable for the first time by the Employee
during any calendar year (under the Plan and all other incentive stock option
plans of the Company, any Subsidiary and any Parent Corporation) exceeds
$100,000, such options shall be treated as not qualifying under Section 422 of
the Code but rather shall be taxed as non-qualified options. The Employee
further acknowledges that the rule set forth in the preceding sentence shall be
applied by taking options into account in the order in which they were granted.
For purposes of these rules, the fair market value of stock shall be determined
as of the time the option with respect to such stock is granted.

                                       5
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                                  ARTICLE IV.

                               EXERCISE OF OPTION

Section 4.1. Person Eligible to Exercise

  During the lifetime of the Employee, only he may exercise the Option or any
portion thereof. After the death of the Employee, any exercisable portion of
the Option may, prior to the time when the Option becomes unexercisable under
Section 3.3, be exercised by his personal representative or by any person
empowered to do so under the Employee's will or under the then applicable laws
of descent and distribution.

Section 4.2. Partial Exercise

  Any exercisable portion of the Option or the entire Option, if then wholly
exercisable, may be exercised in whole or in part at any time prior to the time
when the Option or portion thereof becomes unexercisable under Section 3.3;

Section 4.3. Manner of Exercise

  The Option, or any exercisable portion thereof, may be exercised solely by
delivery to the Secretary or his office of all of the following prior to the
time when the Option or such portion becomes unexercisable under Section 3.3:

    (a) Notice in writing signed by the Employee or the other person then
  entitled to exercise the Option or portion, stating that the Option or
  portion is thereby exercised and stating the number of shares with respect
  to which the Option or portion is exercised, such notice complying with all
  applicable rules established by the Plan Administrator; and

    (b) (i) Full payment (in cash or by check) for the shares with respect to
  which such Option or portion is exercised; or

      (ii) With the consent of the Plan Administrator, a copy of
    instructions to a broker directing such broker to sell the number of
    shares of Common Stock for which such Option is exercised, and to remit
    to the Company the aggregate exercise price under such Option for such
    shares (a "cashless exercise"); or

      (iii) With the consent of the Plan Administrator, shares of the
    Company's Common Stock owned by the Employee duly endorsed for transfer
    to the Company with a fair market value (as determined under Section
    2.6 of the Plan) on the date of delivery equal to the aggregate
    purchase price of the shares with respect to which such Option or
    portion is exercised; or

      (iv) With the consent of the Plan Administrator, a full recourse
    promissory note bearing interest (at no less than such rate as shall
    then preclude the imputation of interest under the Code or successor
    provision) and payable upon such terms as may be prescribed by the Plan
    Administrator. The Plan Administrator may also prescribe the form of
    such note and the security to be given for such note. The Option may
    not be exercised, however, by delivery of a promissory note or by a
    loan from the Company when or where such loan or other extension of
    credit is prohibited by law; and

    (c) A bona fide written representation and agreement, in a form
  satisfactory to the Plan Administrator, signed by the Employee or other
  person then entitled to exercise such Option or portion, stating that the
  shares of stock are being acquired for his own account, for investment and
  without any present intention of distributing or reselling said shares or
  any of them except as may be permitted under the Securities Act and then
  applicable rules and regulations thereunder, and that the Employee or other
  person then entitled to exercise such Option or portion will indemnify the
  Company against and hold it free and harmless from any loss, damage,
  expense or liability resulting to the Company if any sale or distribution
  of the shares by such person is contrary to the representation and
  agreement referred to above. The Plan Administrator may, in its absolute
  discretion, take whatever additional actions it deems

                                       6
<PAGE>

  appropriate to insure the observance and performance of such representation
  and agreement and to effect compliance with the Securities Act and any
  other federal or state securities laws or regulations. Without limiting the
  generality of the foregoing, the Plan Administrator may require an opinion
  of counsel acceptable to it to the effect that any subsequent transfer of
  shares acquired on an Option exercise does not violate the Securities Act,
  and may issue stop-transfer orders covering such shares. Share certificates
  evidencing stock issued on exercise of this Option shall bear an
  appropriate legend referring to the provisions of this subsection (c) and
  the agreements herein. The written representation arid agreement referred
  to in the first sentence of this subsection (c) shall, however, not be
  required if the shares to be issued pursuant to such exercise have been
  registered under the Securities Act, and such registration is then
  effective in respect of such shares;

    (d) Full payment (in cash or by check) to the Company (or other employer
  corporation) of all amounts which, under federal, state or local tax law,
  it is required to withhold upon exercise of the Option. With the consent of
  the Plan Administrator, (i) a copy of instructions to a broker directing
  such broker to sell a number of shares of Common Stock sufficient to make
  such payment, and to remit to the Company the amount required to satisfy
  such payment, or (ii) shares of the Company's Common Stock owned by the
  Employee duly endorsed for transfer with a fair market value (as determined
  under Section 2.6 of the Plan) on the date of delivery equal to the amount
  required to satisfy such payment, or (iii) a combination of one or more of
  the foregoing payment methods, may be used to make all or part of such
  payment;

    (e) In the event the Option or portion shall be exercised pursuant to
  Section 4.1 by any person or persons other than the Employee, appropriate
  proof of the right of such person or persons to exercise the Option; and

    (f) Delivery of a written notice to the Company requesting that the
  Company direct the transfer agent to issue to the Employee (or his
  designee) a certificate for the number of shares of Common Stock for which
  the Option was exercised or, in the case of a cashless exercise, for any
  such shares that were not sold in the cashless exercise.

Section 4.4. Conditions to Issuance of Stock Certificates

  The shares of stock deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued shares or
issued shares which have then been reacquired by the Company. Such shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for shares of stock purchased upon the
exercise of the Option or portion thereof prior to fulfillment of all of the
following conditions:

    (a) The admission of such shares to listing on all stock exchanges on
  which such class of stock is then listed; and

    (b) The completion of any registration or other qualification of such
  shares under any state or federal law or under rulings or regulations of
  the Securities and Exchange Commission or of any other governmental
  regulatory body, which the Plan Administrator shall, in its absolute
  discretion, deem necessary or advisable; and

    (c) The obtaining of any approval or other clearance from any state or
  federal governmental agency which the Plan Administrator shall, in its
  absolute discretion, determine to be necessary or advisable; and

    (d) The payment to the Company (or other employer Corporation) of all
  amounts which, under federal, state or local tax law, it is required to
  withhold upon exercise of the Option; and

    (e) The lapse of such reasonable period of time following the exercise of
  the Option as the Plan Administrator may from time to time establish for
  reasons of administrative convenience.

                                       7
<PAGE>

Section 4.5. Rights as Shareholder

  The holder of the Option shall not be, nor have any of the rights or
privileges of; a shareholder of the Company in respect of any shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such shares shall have been issued by the Company to
such holder.

                                   ARTICLE V.

                                OTHER PROVISIONS

Section 5.1. Administration

  The Plan Administrator shall have the power to interpret the Plan and this
Agreement and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret or revoke
any such rules. All actions taken and all interpretations and determinations
made by the Plan Administrator in good faith shall be final and binding upon
the Employee, the Company and all other interested persons. No member of the
Plan Administrator shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Option.
Except as set forth in the Plan, the Board shall have no right to exercise any
of the rights or duties of the Plan Administrator under the Plan and this
Agreement.

Section 5.2. Option Not Transferable

  Neither the Option nor any interest or right therein or part thereof shall be
liable for the debts, contracts or engagements of the Employee or his
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect;

provided, however, that this Section 5.2 shall not prevent transfers by will or
by the applicable laws of descent and distribution.

Section 5.3. Shares to Be Reserved

  The Company shall at all times during the term of the Option reserve and keep
available such number of shares of stock as will be sufficient to satisfy the
requirements of this Agreement.

Section 5.4. Notices

  Any notice to be given under the terms of this Agreement to the Company shall
be addressed to the Company in care of its Chief Financial Officer, and any
notice to be given to the Employee shall be addressed to him at the address
given beneath his signature hereto. By a notice given pursuant to this Section
5.4, either party may hereafter designate a different address for notices to be
given to him. Any notice which is required to be given to the Employee shall,
if the Employee is then deceased, be given to the Employee's personal
representative if such representative has previously informed the Company of
his status and address by written notice under this Section 5.4. Any notice
shall be deemed duly given when delivered in person or mailed by first-class
mail (return receipt requested), telex, telecopy or overnight courier to the
other's address. It shall be the obligation of the Employee and each transferee
holding Common Stock purchased pursuant to the exercise of the Option to
provide the Plan Administrator, c/o Vice President--Finance and Reporting of
the Company, by letter mailed as provided above, with written notice of his or
her correct mailing address.

                                       8
<PAGE>

Section 5.5. Titles

  Titles are provided herein for convenience only and are not to serve as a
basis for interpretation or construction of this Agreement.

Section 5.6. Shareholder Approved

  The Plan was approved by the Company's shareholders within twelve (12) months
after the date the Plan was initially adopted by the Board.

Section 5.7. Notification of Disposition

  The Employee shall give prompt notice to thc Company of any disposition or
other transfer of any shares of stock acquired under this Agreement if such
disposition or transfer is made (a) within two (2) years from the date of
granting the Option with respect to such shares or (b) within one (1) year
after the transfer of such shares to him. Such notice shall specify the date of
such disposition or other transfer and the amount realized, in cash, other
property, assumption of indebtedness or other consideration, by the Employee in
such disposition or other transfer.

Section 5.8. Construction

  This Agreement shall be administered, interpreted and enforced under the laws
of the State of California.

Section 5.9. Conformity to Securities Laws

  The Employee acknowledges that the Plan is intended to conform to the extent
necessary with all provisions of the Securities Act and the Exchange Act and
any and all regulations and rules promulgated by the Securities and Exchange
Commission thereunder, including without limitation Rule 16b-3. Notwithstanding
anything herein to the contrary, the Plan shall be administered, and the Option
is granted and may be exercised, only in such a manner as to conform to such
laws, rules and regulations. To the extent permitted by applicable law, the
Plan and this Agreement shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.

  IN WITNESS WHEREOF, this Agreement has been executed and delivered by the
parties hereto.

                                          "COMPANY"

                                          CHEROKEE INC.,
                                          a Delaware corporation

                                          By: _________________________________
                                           Chief Financial Officer & Secretary

"EMPLOYEE"

_____________________________________
[Employee name]

_____________________________________

_____________________________________
Address

Employee's Taxpayer
Identification Number:

_____________________________________

                                       9EXHIBIT 10.4

<PAGE>

                                SUN BANCORP, INC.

                                     FORM OF

                      CHANGE IN CONTROL SEVERANCE AGREEMENT
                      -------------------------------------

         THIS CHANGE IN CONTROL SEVERANCE AGREEMENT  ("Agreement")  entered into
this       day of         ,        ("Effective  Date"),  by and  between Sun
     -------     --------  ------
Bancorp, Inc. (the "Company") and               (the "Executive").
                                  -------------

         WHEREAS,  the  Executive  is  currently  employed  by  the  Company  as
              and is  experienced in all phases of the business of the Company;
-------------
and

         WHEREAS, the parties desire by this writing to set forth the rights and
responsibilities  of the Company and Executive if the Company  should  undergo a
change in control (as defined  hereinafter in the Agreement) after the Effective
Date.

         NOW, THEREFORE, it is AGREED as follows:

         1.   Employment.   The   Executive  is  employed  in  the  capacity  as
              of the Company. The Executive shall render such administrative and
--------------
management  services to the  Company  and Sun  National  Bank  ("Bank"),  as are
currently  rendered and as are  customarily  performed by persons  situated in a
similar  executive  capacity.  The Executive's other duties shall be such as the
Board of  Directors  for the Company (the "Board of  Directors"  or "Board") may
from time to time reasonably  direct,  including  normal duties as an officer of
the Company and the Bank.

         2.  Term of  Agreement.  The  term of this  Agreement  shall be for the
period commencing on the Effective Date and ending         months (1) thereafter
                                                   -------
("Term").  Additionally,  on, or before,  each annual  anniversary date from the
Effective  Date,  the Term of this  Agreement  may be extended for an additional
period  beyond  the then  effective  expiration  date upon a  determination  and
resolution of the Board of Directors  that the  performance of the Executive has
met the  requirements  and  standards  of the  Board,  and that the Term of such
Agreement shall be extended.

         3.  Termination  of Employment  in  Connection  with or Subsequent to a
Change in Control.

         (a) Notwithstanding any provision herein to the contrary,  in the event
of the involuntary termination of Executive's employment with the Company during
the term of this  Agreement  following  any Change in Control of the  Company or
Bank, or within        months (1) thereafter of such   Change in Control, absent
               -------
Cause,  Executive  shall be paid an amount  equal

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

     (1)  Agreements  have been  entered  into by the  Registrant  with  varying
          terms, ranging from eighteen to thirty-six months.

<PAGE>

to the product of         times (2) the Executive's aggregate  compensation paid
                  --------
by the Company as reported,  or to be reported,  on the IRS Form W-2, box 1, for
the most recently completed calendar year ending on, or before, the date of such
Change in Control. Said sum shall be paid by the Company to the Executive in one
(1) lump sum not later than the date of  Executive's  termination  of service to
the extent not otherwise  paid by the Bank.  In addition,  the Executive and his
dependents  shall be eligible to continue  coverage  under the Company's (or its
successor's) medical and dental insurance reimbursement plans similar to that in
effect on the date of  termination of employment at the  participants'  election
and expense.  Notwithstanding the forgoing,  all sums payable hereunder shall be
reduced  in such  manner  and to such  extent  so  that  no such  payments  made
hereunder when aggregated with all other payments to be made to the Executive by
the  Company  or the Bank  shall be  deemed an  "excess  parachute  payment"  in
accordance  with Section 280G of the Internal  Revenue Code of 1986,  as amended
(the "Code") and regulations promulgated thereunder and be subject to the excise
tax provided at Section  4999(a) of the Code. The term "Change in Control" shall
refer  to (i) the sale of all,  or a  material  portion,  of the  assets  of the
Company or the Bank; (ii) the merger or  recapitalization  of the Company or the
Bank whereby the Company or the Bank is not the surviving entity; (iii) a change
in control of the Company or the Bank, as otherwise defined or determined by the
Office of the  Comptroller of the Currency or regulations  promulgated by it; or
(iv) the  acquisition,  directly  or  indirectly,  of the  beneficial  ownership
(within  the  meaning  of  that  term  as it is used  in  Section  13(d)  of the
Securities  Exchange  Act of 1934  and the  rules  and  regulations  promulgated
thereunder)  of  twenty-five  percent  (25%) or more of the  outstanding  voting
securities of the Company or the Bank by any person, trust, entity or group. The
term "person" means an individual  other than the  Executive,  or a corporation,
partnership,   trust,   association,   joint  venture,  pool,  syndicate,   sole
proprietorship,  unincorporated  organization  or any other  form of entity  not
specifically  listed  herein.  The provisions of this Section 3(a) shall survive
the expiration of this Agreement occurring after a Change in Control.

            (b)  Notwithstanding  any  other  provision of this Agreement to the
contrary,  Executive  may  voluntarily  terminate his employment during the term
of this  Agreement  following  a Change in  Control of the  Company or Bank,  or
within        months (3)following  such Change in Control,  and Executive  shall
       -------
thereupon  be entitled to receive the payment  described in Section 3(a) of this
Agreement,  upon the occurrence,  or within six months thereafter, of any of the
following  events,  which have not been consented to in advance by the Executive
in writing: (i) if Executive would be required to move his personal residence or
perform his principal  executive functions more than thirty-five (35) miles from
the Executive's  primary office as of the signing of this Agreement;  (ii) if in
the  organizational  structure  of the Company,  Executive  would be required to
report to a person or persons  other than the Board of  Directors of the Company
or its President;  (iii) if the Company should fail to maintain Executive's base
compensation  in effect as of the date of the Change in Control and the existing
Executive benefits plans,  including  material

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

     (2)  Agreements have been enteredinto by the Registrant with varying terms,
          ranging  from  one and a half to three  times  the  aggregate  taxable
          compensation for the officer.

     (3)  Agreements  have been  entered  into by the  Registrant  with  varying
          terms, ranging from eighteen to thirty-six months.

                                    Page -2-

<PAGE>

fringe benefit,  stock option and retirement  plans;  (iv) if Executive would be
assigned duties and  responsibilities  other than those normally associated with
his  position  as  referenced  at  Section  1,  herein;  or (v)  if  Executive's
responsibilities  or authority  have in any way been  materially  diminished  or
reduced.  The  provisions of this Section 3(b) shall  survive the  expiration of
this Agreement occurring after a Change in Control.

         4. Other  Changes  in  Employment  Status.  Except as  provided  for at
Section  3,  herein,  the  Board of  Directors  may  terminate  the  Executive's
employment at any time, but any termination by the Board of Directors other than
termination  for Just  Cause,  shall  not  prejudice  the  Executive's  right to
compensation or other benefits under the Agreement.  The Executive shall have no
right to receive compensation or other benefits for any period after termination
for Just Cause.  Termination for "Just Cause" shall include  termination because
of the Executive's personal dishonesty, incompetence, willful misconduct, breach
of fiduciary  duty involving  personal  profit,  intentional  failure to perform
stated  duties,  willful  violation of any law, rule or  regulation  (other than
traffic violations or similar offenses) or final  cease-and-desist  order issued
by a federal banking regulatory having regulatory  authority over the Company or
Bank, or a material breach of any provision of the Agreement.

         5. Regulatory  Exclusions.  Notwithstanding  anything   herein  to  the
contrary,  any payments  made to the  Executive  pursuant to the  Agreement,  or
otherwise,  shall  be  subject  to  and  conditioned  upon  compliance  with  12
USCss.1828(k) and any regulations promulgated thereunder.

         6. No Duty to Mitigate. The Executive shall not be required to mitigate
the amount of any payment of severance benefits if he accepts other compensation
for employment with another entity.

         7. Successors and Assigns.

         (a) This  Agreement  shall inure to the benefit of and be binding  upon
any corporate or other successor of the Company which shall acquire, directly or
indirectly,   by  merger,   consolidation,   purchase  or   otherwise,   all  or
substantially all of the assets or stock of the Company.

         (b) The Executive  shall be precluded  from assigning or delegating his
rights or duties  hereunder  without first  obtaining the written consent of the
Company.

         8.  Amendments.  No amendments or additions to this Agreement  shall be
binding  upon the  parties  hereto  unless  made in  writing  and signed by both
parties, except as herein otherwise specifically provided.

         9.  Applicable  Law. This  agreement  shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of New Jersey,  except to the extent that Federal law shall be
deemed to apply.

                                    Page -3-
<PAGE>

         10.  Severability.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions hereof.

         11. Arbitration. Any controversy or claim arising out of or relating to
this  Agreement,  or the breach  thereof,  shall be settled  by  arbitration  in
accordance  with the rules then in effect of the district office of the American
Arbitration  Association ("AAA") nearest to the home office of the Company,  and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof,  except to the extend  that the parties  may  otherwise  reach a mutual
settlement  of  such  issue.  The  Company  shall  reimburse  Executive  for all
reasonable costs and expenses,  including  reasonable  attorneys' fees,  arising
from such  dispute,  proceedings  or  actions,  following  the  delivery  of the
decision of the arbitrator that the Executive's claim has merit,  whether or not
the arbitrator  finds in favor of the Executive.  The provisions of this Section
11 shall survive the  expiration of this Agreement  occurring  after a Change in
Control.

         12.  Non-Disclosure.  Executive  will not,  during or after the Term of
this Agreement,  directly or indirectly,  disseminate or disclose to any person,
firm or entity, except to his legal advisor, the terms of this Agreement without
the written consent of the Company.

         13. Entire Agreement. This Agreement together with any understanding or
modifications  thereof as agreed to in writing by the parties,  shall constitute
the entire agreement between the parties hereto.

         IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and first hereinabove written.

                                            Sun Bancorp, Inc.

ATTEST:                                     By:

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

---------------------------------
Secretary

WITNESS:

----------------------------------              --------------------------------
                                                                 ,Executive
                                                -----------------

                                    Page -4-

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