Document:

EXHIBIT 10.10

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                          2000 STOCK COMPENSATION PLAN

                                       of

                              AVATAR SYSTEMS, INC.
                       f/k/a HCI Acquisition 1998-2, Inc.

                              (a Texas corporation)

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                                Table of Contents

                                                                            Page
                                                                            ----

1.       Purpose of the Plan...................................................1
2.       Definitions...........................................................1
         (a)      "Affiliate"..................................................1
         (b)      "Applicable Laws"............................................1
         (c)      "Award"......................................................1
         (d)      "Award Agreement"............................................1
         (e)      "Board"......................................................1
         (f)      "Code".......................................................1
         (g)      "Committee"..................................................1
         (h)      "Common Stock"...............................................2
         (i)      "Company"....................................................2
         (j)      "Director"...................................................2
         (k)      "Disability".................................................2
         (l)      "Exchange Act"...............................................2
         (m)      "Holder".....................................................2
         (n)      "Incentive Option"...........................................2
         (o)      "Non-Employee Director"......................................2
         (p)      "Nonqualified Option"........................................2
         (q)      "Option".....................................................2
         (r)      "Option Agreement"...........................................2
         (s)      "Optionee"...................................................2
         (t)      "Parent".....................................................2
         (u)      "Person".....................................................3
         (v)      "Plan".......................................................3
         (w)      "Rule 16b-3".................................................3
         (x)      " Reload Option".............................................3
         (y)      "SAR"........................................................3
         (z)      "Subsidiary".................................................3
3.       Maximum Shares of Common Stock Subject to the Plan....................3
         (a)      Maximum Shares Available Under Plan..........................3
         (b)      Determination of Shares Available Under Plan.................4
4.       Administration of the Plan............................................4
         (a)      General......................................................4
         (b)      Plan Interpretation and Administration.......................4
         (c)      Changes in Applicable Law....................................5
5.       Types of Awards Under the Plan........................................6
6.       Persons to Whom Options Shall be Granted..............................6
         (a)      Nonqualified Options.........................................6
         (b)      Incentive Options............................................6
7.       Factors to Be Considered in Granting Awards...........................6
8.       Time of Granting Awards...............................................6
9.       Terms and Conditions of Options.......................................6

                                      -i-

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         (a)      Number of Shares.............................................7
         (b)      Type of Option...............................................7
         (c)      Option Period................................................7
         (d)      Option Prices...............................................10
         (e)      Exercise of Options.........................................10
         (f)      Nontransferability of Options...............................10
         (g)      Limitations on 10% Shareholders.............................11
         (h)      Limits on Vesting of Incentive Options......................11
         (i)      Compliance with Securities Laws.............................11
         (j)      Additional Provisions.......................................12
10.      Medium and Time of Payment...........................................12
11.      Alternate Stock Appreciation Rights..................................13
         (a)      Award of Alternate Stock Rights.............................13
         (b)      Alternate Stock Rights Agreement............................13
         (c)      Exercise....................................................13
         (d)      Amount of Payment...........................................13
         (e)      Form of Payment.............................................13
         (f)      Termination of SAR..........................................14
         (g)      Effect of Exercise of SAR...................................14
         (h)      Effect of Exercise of Related Option........................14
         (i)      Nontransferability of SAR...................................14
         (j)      No Interest in Company Assets...............................14
12.      Reload Options.......................................................14
         (a)      Authorization of Reload Options.............................14
         (b)      Reload Option Amendment.....................................15
         (c)      Reload Option Price.........................................15
         (d)      Term and Exercise...........................................15
         (e)      Termination of Employment...................................15
         (f)      Applicability of Other Sections.............................15
13.      Rights as a Shareholder..............................................15
14.      Optionee's Agreement to Serve........................................15
15.      Adjustments on Changes in Capitalization.............................16
         (a)      Changes in Capitalization...................................16
         (b)      Reorganization, Dissolution or Liquidation..................16
         (c)      Change in Par Value.........................................17
         (d)      Notice of Adjustments.......................................17
         (e)      Effect Upon Holders of Options and SARs.....................17
         (f)      Right of Company to Make Adjustments........................18
16.      Investment Purpose...................................................18
17.      No Obligation to Exercise Option or SAR..............................18
18.      Modification, Extension, and Renewal of Options and SARs.............19
19.      Effective Date of the Plan...........................................19
20.      Termination of the Plan..............................................19
21.      Amendment of the Plan................................................19
22.      Tax Withholding......................................................20
23.      Other Benefits.......................................................20
24.      Indemnification of Committee.........................................20
25.      Application of Funds.................................................20
26.      Notices..............................................................20
27.      Severability.........................................................21
28.      Governing Law........................................................21

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                          2000 STOCK COMPENSATION PLAN
                                       of
                              AVATAR SYSTEMS, INC.

         1. Purpose of the Plan. This 2000 Stock  Compensation  Plan is intended
to  encourage  ownership of the common  stock of AVATAR  SYSTEMS,  INC., a Texas
corporation,  by certain  officers,  directors,  employees  and  advisors of the
Company,  including,  without  limitation,  any division of the Company,  or any
Subsidiary  or  Subsidiaries  of the  Company,  in order to  provide  additional
incentive  for such  persons to promote  the  success  and the  business  of the
Company or its Subsidiaries and to encourage them to remain in the employ of the
Company or its  divisions  or its  Subsidiaries  by  providing  such  persons an
opportunity to benefit from any  appreciation of the common stock of the Company
through the issuance of stock options and related stock  appreciation  rights to
such persons in accordance  with the terms of the Plan.  It is further  intended
that options granted  pursuant to this Plan shall  constitute  either  incentive
stock options within the meaning of Section 422 of the Internal  Revenue Code of
1986,  as amended,  or options which do not  constitute  Incentive  Options,  as
determined by the Committee at the time of issuance of such options.

         2. Definitions.  As used herein, each of the following terms shall have
the meaning given to it below:

                  (a) "Affiliate"  means, with respect to any Person, any Parent
         or Subsidiary of such Person,  whether such Parent or Subsidiary is now
         or hereafter existing.

                  (b)  "Applicable  Laws" means all applicable  federal,  state,
         local or foreign laws,  regulations and legal  requirements,  including
         without   limitation   the   legal   requirements   relating   to   the
         administration  of stock option plans and equity  incentive  plans (and
         the issuance of shares of capital stock thereunder) under United States
         state corporate laws,  United States federal and state securities laws,
         and the Code.

                  (c) "Award" means an award of Incentive Options,  Nonqualified
         Options,  Reload Options or Stock Appreciation  Rights, under the Plan,
         whether singly, in combination or in tandem.

                  (d) "Award Agreement" means the agreement (including an Option
         Agreement)  between the Company and the Holder  setting forth the terms
         and conditions of an Award under the Plan.

                  (e) "Board" means the Board of Directors of the Company.

                  (f)  "Code"  means  the  Internal  Revenue  Code of  1986,  as
         amended.

                  (g) "Committee"  means (a) the  Compensation  Committee of the
         Board of  Directors  (or in the event that there is not a  Compensation
         Committee,  then the Board of Directors) with respect to Awards granted
         to  all  employees  and   consultants   of  the  Company   (other  than
         Non-Employee  Directors  of the  Company)  and (b) the entire  Board of
         Directors  (regardless  of whether there is a  Compensation  Committee)
         with  respect  to  Awards  granted  to  Non-Employee  Directors  of the
         Company.

STOCK COMPENSATION PLAN-Page 1

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                  (h) "Common  Stock" means the common  stock,  par value $0.001
         per share, of the Company.

                  (i) "Company" means Avatar Systems, Inc., a Texas corporation.

                  (j) "Director" means a member of the Board of Directors of the
         Company.

                  (k)  "Disability"  shall  have  the  meaning  given  it or any
         similar term in the employment agreement of the Holder with the Company
         or an  Affiliate;  provided,  however,  that if that Holder has no such
         employment  agreement or if the employment  agreement applicable to the
         Holder does not specify  the meaning of such term,  "Disability"  shall
         mean the inability of the Holder to fulfill such  Holder's  obligations
         to the  Company or an  Affiliate  by reason of any  physical  or mental
         impairment  which  can be  expected  to  result  in death or which  has
         endured or can be  expected  to endure for a  continuous  period of not
         less than 12 months as  determined  by a  physician  acceptable  to the
         Committee in its sole discretion.

                  (l) "Exchange Act" means the Securities  Exchange Act of 1934,
         as amended.

                  (m)  "Holder"  means a Person who has  received an Award under
         the Plan.

                  (n) "Incentive  Option" means an Option intended to qualify as
         an  incentive  stock  option  within the  meaning of Section 422 of the
         Code.

                  (o)  "Non-Employee  Director" means a "Non-Employee  Director"
         within the meaning of Rule 16b-3.

                  (p) "Nonqualified Option" means an Option that is not intended
         to qualify as an Incentive Option.

                  (q)  "Option"  means any option to  purchase  shares of Common
         Stock  which is granted  pursuant  to the Plan and  includes  Incentive
         Options, Nonqualified Options and Reload Options.

                  (r) "Option  Agreement"  means the written option agreement in
         the form  approved by the  Committee for use under the Plan between the
         Company and Holder evidencing the grant of an Option.

                  (s)  "Optionee"  means the Person who receives an Option under
         the Plan.

                  (t)  "Parent"  means a "parent  corporation,"  whether  now or
         hereafter  existing,  which is a  corporation  (other than the employer
         corporation)  in an  unbroken  chain of  corporations  ending  with the
         employee  corporation  if, at the time of the  granting  of the option,
         each of the corporations other than the employer corporation owns stock
         possessing  50% or more  of the  total  combined  voting  power  of all
         classes of stock in one of the other corporations in such chain.

STOCK COMPENSATION PLAN-Page 2

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                  (u) "Person" means any individual,  corporation,  partnership,
         limited liability company, joint venture, estate, trust, unincorporated
         association, or any other entity.

                  (v)  "Plan"  means this 2000  Stock  Compensation  Plan of the
         Company.

                  (w)  "Rule  16b-3"  means  Rule  16b-3  promulgated  under the
         Exchange Act or any successor rule thereto.

                  (x) " Reload Option" means any option granted under Section 12
         as a result of the payment of the  exercise  price of an Option  and/or
         the  withholding  tax related thereto in the form of Common Stock owned
         by the Holder or the withholding of Common Stock by the Company.

                  (y) "SAR" means the award of stock appreciation rights granted
         under Section 1 hereof.

                  (z) "Subsidiary" means a "subsidiary corporation," whether now
         or hereafter existing,  which is a corporation (other than the employer
         corporation)  in an unbroken chain of  corporations  beginning with the
         employer  corporation  if, at the time of the  granting  of the option,
         each  of the  corporations  other  than  the  last  corporation  in the
         unbroken chain owns stock  possessing 50% or more of the total combined
         voting  power of all classes of stock in one of the other  corporations
         in such chain.

         3. Maximum Shares of Common Stock Subject to the Plan.

                  (a) Maximum Shares Available Under Plan. Subject to adjustment
         as  provided in Section 15 hereof,  there will be reserved  for the use
         upon the  exercise of Options to be granted from time to time under the
         Plan shares of the common stock (the "Common  Stock"),  of the Company,
         which  shares in whole or in part shall be  authorized,  but  unissued,
         shares of the Common Stock or issued shares of Common Stock which shall
         have been  reacquired by the Company as determined from time to time by
         the Board of Directors of the Company (the "Board of  Directors").  The
         maximum  aggregate  number  of  shares  of  Common  Stock  which may be
         optioned,  sold,  granted,  or  otherwise  issued  under the Plan shall
         initially be 400,000 which amount may, at the  discretion of the Board,
         be  increased  from time to time to a number  such  that the  number of
         shares of Common Stock available for issuance pursuant to Options to be
         granted  pursuant to this Plan equals 5% of the total  number of shares
         of Common  Stock of the Company and shares of any other class of Common
         Stock of the Company outstanding from time to time; provided,  however,
         subject  to  adjustment  under  Section  15 of the Plan,  the number of
         shares  of  Common  Stock  which  may be  optioned,  sold,  granted  or
         otherwise  issued  under the Plan  shall  never be less  than  400,000.
         Notwithstanding  the foregoing,  subject to adjustment under Section 15
         of the Plan,  no more than  1,500,000  shares of Common  Stock  will be
         available  for the granting of Incentive  Stock Options under the Plan.
         Subject to  adjustment  pursuant to the  provisions  of Section 15, the
         maximum  aggregate  number of shares of Common  Stock  with  respect to
         which  Options  may be  granted  during  the term of the Plan shall not
         exceed  1,500,000  shares.  The maximum  aggregate  number of shares of
         Common  stock  with  respect  to which  Options  during the term may be
         granted  to any  Optionee  during the term of the Plan shall not exceed
         ten percent (10%) of the shares eligible for issuance under the Plan.

STOCK COMPENSATION PLAN-Page 3

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                  (b) Determination of Shares Available Under Plan. To determine
         the  number of shares of  Common  Stock  available  at any time for the
         granting of Options  under the Plan,  there shall be deducted  from the
         total number of reserved  shares of Common Stock,  the number of shares
         of Common Stock in respect of which Options have been granted  pursuant
         to the Plan which remain  outstanding or which have been exercised.  If
         and to the extent that any Option to purchase reserved shares shall not
         be  exercised  by an  Optionee  for any  reason  or if such  Option  to
         purchase shall terminate as provided herein, such shares which have not
         been so  purchased  hereunder  shall  again  become  available  for the
         purposes  of the Plan unless the Plan shall have been  terminated,  but
         such  unpurchased  shares shall not be deemed to increase the aggregate
         number of shares  specified  above to be reserved  for  purposes of the
         Plan  (subject to  adjustment  as  provided in Section 15 hereof).  The
         grant of SARs shall not affect the number of shares available for grant
         of Awards under the Plan.

         4. Administration of the Plan.

                  (a) General. The Plan shall be administered by a the Committee
         appointed by the Board.  During any period of time in which the Company
         is subject to the  reporting  requirements  of the  Exchange  Act,  the
         Committee shall be comprised solely of not less than two members,  each
         of whom shall be (i) a Non-Employee Director, and (ii) unless otherwise
         determined by the Board,  an "outside  director"  within the meaning of
         Treasury Regulation Section 1.162-27(e)(3)), except that if at any time
         there shall be less than two (2)  Directors  who are qualified to serve
         on the  Committee,  then the Plan  shall  be  administered  by the full
         Board.  All references in this Plan to the Committee shall be deemed to
         refer  instead to the full  Board at any time there is not a  Committee
         consisting  of at least two (2) members of the Board  qualified  to act
         hereunder.  The  Board  may from time to time  appoint  members  of the
         Committee  in  substitution  for or in addition  to members  previously
         appointed and may fill vacancies,  however caused, in the Committee. If
         the Board does not designate a Chairman of the Committee, the Committee
         shall select one of its members as its Chairman.  The  Committee  shall
         hold its meetings at such times and places as it shall deem  advisable.
         A majority of its members shall constitute a quorum.  Any action of the
         Committee shall be taken by a majority vote of its members at a meeting
         at which a quorum is present. Notwithstanding the preceding, any action
         of the Committee  may be taken  without a meeting by a written  consent
         signed by all of the  members,  and any action so taken shall be deemed
         fully as  effective  as if it had been  taken by a vote of the  members
         present in person at the meeting  duly called and held.  The  Committee
         may appoint a Secretary,  shall keep minutes of its meetings, and shall
         make such rules and  regulations  for the conduct of its business as it
         shall deem advisable.

                  (b) Plan  Interpretation  and  Administration.  The  Committee
         shall  have  the sole  authority  and  power,  subject  to the  express
         provisions  and  limitations  of the Plan, to construe the Plan and the
         Awards granted hereunder,  and to adopt, prescribe,  amend, and rescind
         rules  and   regulations   relating  to  the  Plan,  and  to  make  all
         determinations  necessary  or  advisable  for  administering  the Plan,
         including, but not limited to, (i) the designated Person or Persons who
         shall be granted  Awards under the Plan,  (ii) the term of each Option,
         (iii) the number of shares  covered by such  Option,  (iv) whether such
         Option shall constitute an Incentive Option or a Nonqualified Option or
         a Reload Option,  (v) the exercise price for the purchase of the shares
         of Common Stock  covered by such Option,  (vi) the period  during which
         the Option may be  exercised,  (vii)  whether the right to purchase the
         number  of  shares  covered  by the  Option  shall be fully  vested  on
         issuance of the Option so that such shares may be  purchased in full at
         one time or whether the right to  purchase  such  shares  shall  become
         vested over a period of time so that such shares may only be  purchased
         in  installments,  (viii) the time or times at which  Options  shall be
         granted,  (ix) amend the terms of any Option previously granted in such
         a manner that the amended Option  contains such terms and conditions as
         the Committee  could have determined and set forth in the Option at the
         time it was originally granted, (x) determine and grant alternate stock
         appreciation rights, including,  without limitation, the recipients and
         the related terms and conditions thereof consistent with the applicable
         provisions of the Plan,  (xi)  prescribe  the form of Award  Agreements
         embodying  Awards  granted under the Plan,  (xii) grant waivers of Plan
         terms, conditions, restrictions and limitations to the extent permitted
         under the Plan, (xiii)  accelerate the exercise,  vesting or payment of
         an Award when such action or actions would be in the best  interests of
         the Company,  and (xiv)  determine  the fair market value of a share of
         Common  Stock as of the date of grant  of an  Option.  The  Committee's
         determinations   under  the  Plan,   including  the  above   enumerated
         determinations,  need not be uniform and may be made by it  selectively
         among the  persons who  receive,  or are  eligible to receive,  Options
         under the Plan, whether or not such persons are similarly situated.

STOCK COMPENSATION PLAN-Page 4

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                           The  interpretation by the Committee of any provision
                  of the Plan or of any Option  Agreement  entered into pursuant
                  to the Plan with respect to any  Incentive  Option shall be in
                  accordance  with  Section 422 of the Code and the  regulations
                  issued  thereunder,  and as such section or regulations may be
                  amended  from time to time,  in order that the rights  granted
                  hereunder  and  pursuant  to  such  Option   Agreements  shall
                  constitute  "incentive  stock  options"  within the meaning of
                  such  section.  The  interpretation  and  construction  by the
                  Committee of any provision of the Plan or of any Award granted
                  hereunder  shall be final  and  conclusive,  unless  otherwise
                  determined  by the Board.  The  decisions of the Board and its
                  actions  with  respect to the Plan shall be final,  conclusive
                  and  binding on all  Persons  having or  claiming  to have any
                  right or  interest in or under the Plan,  including  Optionees
                  and  their  respective   estates,   beneficiaries   and  legal
                  representatives. No member of the Board or the Committee shall
                  be liable for any action or  determination  made in good faith
                  with respect to the Plan or any Award granted  pursuant to the
                  Plan.  Upon  issuing an Award  under the Plan,  the  Committee
                  shall report to the Board the name of the person  granted such
                  Award, and if such Award is an Option,  whether such Option is
                  an Incentive  Option or a Nonqualified  Option,  the number of
                  shares of Common  Stock  covered by the Option,  and the terms
                  and conditions of such Option.

                  (c)  Changes  in  Applicable  Law.  If the  laws  relating  to
         Incentive  Options or  Nonqualified  Options  are  changed,  altered or
         amended  during  the  term of the  Plan,  the  Board  shall  have  full
         authority  and  power  to  alter or amend  the  Plan  with  respect  to
         Incentive Options or Nonqualified Options,  respectively, to conform to
         such  changes in  Applicable  Law without the  necessity  of  obtaining
         further shareholder  approval thereof,  unless the changes require such
         approval.

STOCK COMPENSATION PLAN-Page 5

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         5. Types of Awards Under the Plan. Subject to the applicable provisions
of the  Plan,  awards  under the Plan may be in the form of  Incentive  Options,
Nonqualified  Options,  alternate  stock  appreciation  rights (as  described in
Section 11 hereof),  Reload  Options (as  described in Section 12 hereof),  or a
combination  thereof.  Awards under a particular Section of the Plan need not be
uniform,  and Awards under two or more Sections of the Plan may be combined into
a single Award Agreement.

         6. Persons to Whom Options Shall be Granted.

                  (a)  Nonqualified  Options.   Nonqualified  Options  shall  be
         granted only to officers,  directors (including Non-Employee Directors)
         of the Company or a  Subsidiary,  employees and advisors of the Company
         or a Subsidiary who, in the judgment of the Committee,  are responsible
         for or  contribute  to the  management  or success of the  Company or a
         Subsidiary  and who, at the time of the  granting  of the  Nonqualified
         Options, are either officers,  directors,  employees or advisors of the
         Company or a Subsidiary.

                  (b) Incentive Options. Incentive Options shall be granted only
         to employees of the Company or a Subsidiary who, in the judgment of the
         Committee,  are  responsible  for or  contribute  to the  management or
         success of the  Company  or a  Subsidiary  and who,  at the time of the
         granting of the Incentive  Option are either an employee of the Company
         or a  Subsidiary.  Except  as set  forth in  Section  9(g)  hereof,  no
         individual shall be granted an Incentive Option who, immediately before
         such  Incentive  Option was  granted,  would own more than ten  percent
         (10%) of the total  combined  voting  power or value of all  classes of
         stock of the Company (a "10% Shareholder").

         7.  Factors  to  Be  Considered  in  Granting  Awards.  In  making  any
determination  as to persons to whom  Awards  shall be granted and the number of
shares to be covered by  Options,  the  Committee  shall take into  account  the
duties and responsibilities of the respective officers, directors, employees, or
advisors,  their  current  and  potential  contributions  to the  success of the
Company or a  Subsidiary,  and such other  factors as the  Committee  shall deem
relevant in connection with accomplishing the purpose of the Plan.

         8. Time of Granting Awards. Neither any provision contained in the Plan
nor any resolution  adopted or to be adopted by the Board or the Shareholders of
the  Company  or a  Subsidiary  nor any  action  taken  by the  Committee  shall
constitute the granting of any Award. The granting of an Award shall be effected
only when a written  Award  Agreement  acceptable  in form and  substance to the
Committee,  subject to the terms and conditions  hereof,  including if the Award
consists of an Option, those set forth in Section 9 hereof, shall have been duly
executed  and  delivered  by or on behalf of the  Company and the person to whom
such Option  shall be granted.  No person  shall have any rights  under the Plan
until such  time,  if any,  as a written  Award  Agreement  shall have been duly
executed and delivered as set forth in this Section 8.

         9. Terms and  Conditions of Options.  All Options  granted  pursuant to
this  Plan  must be  granted  within  ten (10)  years  from the date the Plan is
adopted  by the  Board.  Each  Option  Agreement  governing  an  Option  granted
hereunder shall be subject to at least the following  terms and conditions,  and
shall contain such other terms and conditions,  not inconsistent therewith, that
the Committee shall deem appropriate:

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                  (a) Number of Shares.  Each  Option  shall state the number of
         shares of Common Stock which it represents.

                  (b) Type of Option.  Each  Option  shall  state  whether it is
         intended to be an Incentive Option or a Nonqualified Option.

                  (c) Option Period.

                           (1)  General.  Each Option  shall state the date upon
                  which it is granted. Each Option shall be exercisable in whole
                  or in part during  such period as is provided  under the terms
                  of the Option,  subject to any vesting period set forth in the
                  Option,  but in no event shall an Option be exercisable either
                  in whole or in part  after the  expiration  of ten (10)  years
                  from the  date of  grant  thereof;  provided,  however,  if an
                  Incentive  Option  is  granted  to  a  10%  Shareholder,  such
                  Incentive  Option shall not be exercisable  more than five (5)
                  years from the date of grant thereof.

                           (2)  Termination of  Employment.  Except as otherwise
                  provided in case of Disability, death or Change of Control (as
                  hereinafter  defined), no Option shall be exercisable after an
                  Optionee  who is an employee  of the  Company or a  Subsidiary
                  ceases  to  be  employed  by  the  Company  or  a  Subsidiary;
                  provided,  however, that the Committee shall have the right in
                  its sole  discretion,  but not the  obligation,  to extend the
                  exercise  period  of any  Incentive  Option  for not more than
                  three (3) months  following  the date of  termination  of such
                  Optionee's   employment   and  to  extend   the  term  of  any
                  Nonqualified  Option for a period  determined by the Committee
                  provided  such  period may not exceed  the  original  exercise
                  period set forth in the Option  Agreement;  provided  further,
                  however,  that  no  Option  shall  be  exercisable  after  the
                  expiration of ten (10) years from the date it is granted,  and
                  provided  further,  that no Incentive  Option granted to a 10%
                  Shareholder  shall be exercisable after the expiration of five
                  (5) years from the date it is granted.  To the extent that the
                  Optionee  was not  entitled to exercise the Option at the date
                  of such termination,  or if the Optionee does not exercise the
                  Option to the extent so  entitled  within  the time  specified
                  herein,  the Option shall  terminate  and the shares of Common
                  Stock covered by such Option shall revert to the Plan.

                           (3)  Cessation  of Service as  Director  or  Advisor.
                  Except as otherwise  provided in case of Disability,  death or
                  Change of Control,  no Option  shall be  exercisable  after an
                  Optionee  who was a director  or  advisor of the  Company or a
                  Subsidiary  ceases to be a director  or advisor of the Company
                  or a Subsidiary;  provided,  however, that the Committee shall
                  have the right in its sole discretion, but not the obligation,
                  to extend the exercise  period of any such Option for a period
                  determined  by the  Committee  provided  such  period  may not
                  exceed the  original  exercise  period set forth in the Option
                  Agreement;  provided further, however, that no Option shall be
                  exercisable  after the  expiration  of ten (10) years from the
                  date it is granted.  To the extent that the  Optionee  was not
                  entitled  to   exercise   the  Option  at  the  date  of  such
                  termination,  or if the Optionee  does not exercise the Option
                  to the extent so entitled  within the time  specified  herein,
                  the Option  shall  terminate  and the  shares of Common  Stock
                  covered by such Option shall revert to the Plan.

STOCK COMPENSATION PLAN-Page 7

<PAGE>

                           (4)  Disability.   If  an  Optionee's  employment  is
                  terminated by reason of the permanent and total  Disability of
                  such  Optionee or if an Optionee  who is a director or advisor
                  of the Company or a  Subsidiary  ceases to serve as a director
                  or advisor by reason of the permanent and total  Disability of
                  such Optionee,  the Committee shall have the right in its sole
                  discretion,  but not the  obligation,  to extend the  exercise
                  period of any Option then held by such  Optionee  for not more
                  than one (1) year  following  the date of  termination  of the
                  Optionee's employment or the date such Optionee ceases to be a
                  director  or advisor of the  Company or a  Subsidiary,  as the
                  case may be,  subject to the condition that no Option shall be
                  exercisable  after the  expiration  of ten (10) years from the
                  date it is granted and subject to the further  condition  that
                  no  Incentive  Option  granted to a 10%  Shareholder  shall be
                  exercisable  after the  expiration  of five (5) years from the
                  date it is granted.  To the extent that the  Optionee  was not
                  entitled  to   exercise   the  Option  at  the  date  of  such
                  termination,  or if the Optionee  does not exercise the Option
                  to the extent so entitled  within the time  specified  herein,
                  the Option  shall  terminate  and the  shares of Common  Stock
                  covered by such Option shall revert to the Plan.

                           (5) Death. If an Optionee dies while in the employ of
                  the Company or a Subsidiary, or while serving as a director or
                  advisor of the Company or such Subsidiary,  and shall not have
                  fully  exercised  Options  granted  pursuant to the Plan, such
                  Options  may be  exercised  in  whole  or in part at any  time
                  within  one  (1)  year  after  the  Optionee's  death,  by the
                  executors or administrators of the Optionee's estate or by any
                  person or persons who shall have acquired the Options directly
                  from the  Optionee  by bequest  or  inheritance  (the  "Option
                  Beneficiary"),  but only to the extent that the  Optionee  was
                  entitled  to  exercise   such  Option  at  the  date  of  such
                  Optionee's  death,  subject  to the  condition  that no Option
                  shall be  exercisable  after the  expiration of ten (10) years
                  from  the  date  it is  granted  and  subject  to the  further
                  condition   that  no  Incentive   Option   granted  to  a  10%
                  Shareholder  shall be exercisable after the expiration of five
                  (5) years from the date it is granted.  To the extent that, at
                  the time of death,  the  Optionee was not entitled to exercise
                  the Option, or if the Option Beneficiary does not exercise the
                  Option  within the time  specified  herein,  the Option  shall
                  terminate  and the  shares of  Common  Stock  covered  by such
                  Option shall revert to the Plan.

                           (6) Acceleration and Exercise Upon Change of Control.
                  Notwithstanding the preceding provisions of this Section 9(c),
                  if any Option  granted  under the Plan provides for either (a)
                  an incremental  vesting period whereby such Option may only be
                  exercised in installments as such  incremental  vesting period
                  is  satisfied  or (b) a delayed  vesting  period  whereby such
                  Option may only be  exercised  after the lapse of a  specified
                  period of time,  such as after the expiration of one (1) year,
                  such vesting period shall be  accelerated  upon the occurrence
                  of a Change of Control of the Company,  or a threatened Change
                  of Control of the Company as determined by the  Committee,  so
                  that  such   Option   shall   thereupon   become   exercisable
                  immediately in part or its entirety by the holder thereof,  as
                  such holder  shall  elect.  For the  purposes of this Plan,  a
                  "Change of Control" shall be deemed to have occurred if:

STOCK COMPENSATION PLAN-Page 8

<PAGE>

                                    (i) Any  "person",  including  a "group"  as
                           determined in accordance with Section 13(d)(3) of the
                           Exchange   Act  and   the   Rules   and   Regulations
                           promulgated thereunder, is or becomes, through one or
                           a series of related  transactions  or through  one or
                           more intermediaries,  the beneficial owner,  directly
                           or   indirectly,   of   securities   of  the  Company
                           representing 20% or more of the combined voting power
                           of the Company's then outstanding  securities,  other
                           than a person who is such a  beneficial  owner on the
                           Effective  Date of the Plan and any affiliate of such
                           person;

                                    (ii) As a result of, or in connection  with,
                           any tender offer or exchange  offer,  merger or other
                           business  combination,  sale of assets  or  contested
                           election,   or  any   combination  of  the  foregoing
                           transactions (a "Transaction"),  the persons who were
                           Directors of the Company before the Transaction shall
                           cease  to  constitute  a  majority  of the  Board  of
                           Directors  of the  Company  or any  successor  to the
                           Company;

                                    (iii)  Following the  Effective  Date of the
                           Plan,  the  Company  is merged or  consolidated  with
                           another corporation and as a result of such merger or
                           consolidation less than 40% of the outstanding voting
                           securities of the surviving or resulting  corporation
                           shall  then be owned in the  aggregate  by the former
                           shareholders of the Company, other than (x) any party
                           to  such   merger  or   consolidation,   or  (y)  any
                           affiliates of any such party;

                                    (iv) A  tender  offer or  exchange  offer is
                           made and  consummated for the ownership of securities
                           of  the  Company  representing  20%  or  more  of the
                           combined   voting   power  of  the   Company's   then
                           outstanding voting securities; or

                                    (v) The Company  transfers  more than 50% of
                           its  assets,  or the  last of a series  of  transfers
                           results  in the  transfer  of  more  than  50% of the
                           assets of the Company, to another corporation that is
                           not a wholly-owned  corporation  of the Company.  For
                           purposes   of   this   subsection   9(c)(6)(v),   the
                           determination  of what  constitutes  more than 50% of
                           the assets of the Company shall be  determined  based
                           on the  sum  of  the  values  attributed  to (i)  the
                           Company's   real   property  as   determined   by  an
                           independent  appraisal thereof, and (ii) the net book
                           value  of  all  other  assets  of the  Company,  each
                           determined   as  of  the  date  of  the   Transaction
                           involved.

                           In  addition,  upon a Change of Control,  any Options
                  previously  granted  under the Plan, to the extent not already
                  exercised,  may be  exercised  in  whole  or in  part,  either
                  immediately  or at any time during the term of the Option,  as
                  such holder shall elect.

STOCK COMPENSATION PLAN-Page 9

<PAGE>

                  (d) Option Prices.  The purchase price or prices of the shares
         of the Common Stock which shall be offered to any person under the Plan
         and  covered by an Option  shall be one hundred  percent  (100%) of the
         fair  market  value of the Common  Stock at the time of  granting  such
         Option  or such  greater  purchase  price as may be  determined  by the
         Committee at the time of granting such Option; provided, however, if an
         Incentive Option is granted to a 10% Shareholder, the purchase price of
         the shares of the Common Stock covered by such Incentive Option may not
         be less than one hundred ten percent (110%) of the fair market value of
         the shares on the date such  Incentive  Option is granted.  During such
         time as the  Common  Stock  is not  listed  upon an  established  stock
         exchange,  the fair  market  value per share  shall be deemed to be the
         closing sales price of the Common Stock on the NASDAQ  National  Market
         ("NASDAQ") on the date the Option is granted, as reported by NASDAQ, if
         the Common Stock is so quoted,  and if not so quoted,  the mean between
         dealer  "bid" and  "ask"  prices  of the  Common  Stock in the New York
         over-the-counter  market on the date the Option is granted, as reported
         by the National  Association of Securities Dealers,  Inc. If the Common
         Stock is listed upon an established  stock exchange or exchanges,  such
         fair market  value shall be deemed to be the highest  closing  price of
         the Common  Stock on such stock  exchange or  exchanges on the date the
         Option is  granted  or, if no sale of the Common  Stock of the  Company
         shall have been made on an  established  stock exchange on such day, on
         the next  preceding  day on which  there was a sale of such  stock.  If
         there is no market price for the Common  Stock,  then the Board and the
         Committee  may,  after  taking all relevant  facts into  consideration,
         determine the fair market value of the Common Stock.

                  (e)  Exercise  of  Options.  To the extent that a holder of an
         Option has a current  right to  exercise,  the Option may be  exercised
         from time to time by written  notice to the  Company  at its  principal
         place of business. Such notice shall state the election to exercise the
         Option,  the  number of whole  shares in  respect  of which it is being
         exercised,  shall be signed by the Person or Persons so exercising  the
         Option,  and shall contain any  investment  representation  required by
         Section 9(i) hereof. Such notice shall be accompanied by payment of the
         full  purchase  price  of  such  shares  and  by the  Option  Agreement
         evidencing the Option.  In addition,  if the Option shall be exercised,
         pursuant to either Section 9(c)(4) or Section  9(c)(5)  hereof,  by any
         person or persons  other than the  Optionee,  such notice shall also be
         accompanied  by  appropriate  proof of the right and  authority of such
         person or persons to exercise the Option.  The Company  shall deliver a
         certificate  or  certificates  representing  such  shares  as  soon  as
         practicable after the aforesaid notice and payment of such shares shall
         be received. The certificate or certificates for the shares as to which
         the Option shall have been so exercised shall be registered in the name
         of the Person or Persons so  exercising  the  Option.  In the event the
         Option  shall not be exercised  in full,  the  Secretary of the Company
         shall  endorse  or cause to be  endorsed  on the  Option  the number of
         shares  which has been  exercised  thereunder  and the number of shares
         that  remain  exercisable  under the  Option  and  return  such  Option
         Agreement to the holder thereof.

                  (f)  Nontransferability of Options. An Option granted pursuant
         to the Plan shall be exercisable only by the Optionee or the Optionee's
         court appointed  guardian as set forth in Section 9(c)(4) hereof during
         the Optionee's  lifetime and shall not be assignable or transferable by
         the  Optionee  otherwise  than  by  Will or the  laws  of  descent  and
         distribution.  An  Option  granted  pursuant  to the Plan  shall not be
         assigned,  pledged or  hypothecated in any way (whether by operation of
         law or  otherwise  other  than  by  Will or the  laws  of  descent  and
         distribution)  and shall not be subject to  execution,  attachment,  or
         similar   process.   Any  attempted   transfer,   assignment,   pledge,
         hypothecation,  or  other  disposition  of an  Award  or of any  rights
         granted thereunder contrary to the foregoing provisions of this Section
         9(f), or the levy of any attachment or similar process upon an Award or
         such rights, shall be null and void.

STOCK COMPENSATION PLAN-Page 10

<PAGE>

                  (g) Limitations on 10%  Shareholders.  No Incentive Option may
         be  granted  under  the  Plan to any 10%  Shareholder  unless  (i) such
         Incentive  Option  is  granted  at an  option  price  not less than one
         hundred  ten percent  (110%) of the fair market  value of the shares on
         the date such  Incentive  Option  is  granted  and (ii) such  Incentive
         Option  expires  on a date not later  than five (5) years from the date
         the Incentive Option is granted.

                  (h) Limits on Vesting of Incentive Options.  An individual may
         be granted one or more Incentive  Options,  provided that the aggregate
         fair market value (as determined at the time such  Incentive  Option is
         granted) of the Common  Stock with respect to which  Incentive  Options
         are  exercisable  for the  first  time by such  individual  during  any
         calendar  year shall not exceed  $100,000.  To the extent the  $100,000
         limitation in the preceding sentence is exceeded,  such Option shall be
         treated as an Option which is not an Incentive Option.

                  (i) Compliance  with  Securities  Laws. The Plan and the grant
         and exercise of the rights to purchase of Common Stock  hereunder,  and
         the Company's  obligations  to sell and deliver  shares of Common Stock
         upon the exercise of rights to purchase shares, shall be subject to all
         applicable  federal and state laws, rules and regulations,  and to such
         approvals  by any  regulatory  or  governmental  agency as may,  in the
         opinion of counsel  for the  Company,  be  required,  and shall also be
         subject to all applicable  rules and  regulations of any stock exchange
         upon which the Common  Stock of the Company may then be listed.  At the
         time of exercise of any Option, the Company may require the Optionee to
         execute any documents or take any action which may be then necessary to
         comply with the  Securities  Act of 1933,  as amended (the  "Securities
         Act"),  and the rules and regulations  promulgated  thereunder,  or any
         other applicable federal or state laws regulating the sale and issuance
         of securities,  and the Company may, if it deems it necessary,  include
         provisions  in the Option  Agreements  to assure such  compliance.  The
         Company may, from time to time, change its requirements with respect to
         enforcing  compliance with federal and state securities laws, including
         the request for and enforcement of letters of investment  intent,  such
         requirements to be determined by the Company, acting in the judgment of
         and through the  Committee,  as necessary  from time to time during the
         term of the Plan to assure  compliance with said laws. Such changes may
         be made with  respect to any  particular  Option or Common Stock issued
         upon  exercise   thereof.   Without  limiting  the  generality  of  the
         foregoing,  if the Common  Stock  issuable  upon  exercise of an Option
         granted under the Plan is not registered  under the Securities Act, the
         Company at the time of exercise will require that the registered  owner
         execute  and  deliver an  investment  representation  agreement  to the
         Company in form  acceptable  to the  Company and its  counsel,  and the
         Company will place a legend on the  certificate  evidencing such Common
         Stock  restricting  the  transfer   thereof,   which  legend  shall  be
         substantially as follows:

STOCK COMPENSATION PLAN-Page 11

<PAGE>

                  "THE SHARES OF COMMON STOCK  REPRESENTED  BY THIS  CERTIFICATE
                  HAVE NOT BEEN REGISTERED  UNDER THE SECURITIES ACT OF 1933, AS
                  AMENDED,  OR ANY APPLICABLE STATE SECURITIES LAW BUT HAVE BEEN
                  ACQUIRED FOR THE PRIVATE  INVESTMENT  OF THE HOLDER HEREOF AND
                  MAY NOT BE OFFERED,  SOLD OR  TRANSFERRED  UNTIL  EITHER (i) A
                  REGISTRATION  STATEMENT  UNDER  SUCH  SECURITIES  ACT OR  SUCH
                  APPLICABLE  STATE  SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE
                  WITH REGARD  THERETO,  OR (ii) THE COMPANY SHALL HAVE RECEIVED
                  AN  OPINION  OF  COUNSEL  ACCEPTABLE  TO THE  COMPANY  AND ITS
                  COUNSEL THAT  REGISTRATION  UNDER SUCH  SECURITIES ACT OR SUCH
                  APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN CONNECTION
                  WITH SUCH PROPOSED OFFER, SALE OR TRANSFER."

                  (j) Additional  Provisions.  The Option Agreements  authorized
         under the Plan shall  contain such other  provisions  as the  Committee
         shall deem advisable, including, without limitation,  restrictions upon
         the exercise of the Option.  Any such Option  Agreement with respect to
         an Incentive  Option shall contain such  limitations  and  restrictions
         upon the  exercise of the  Incentive  Option as shall be  necessary  in
         order that the Option will be an "incentive stock option" as defined in
         Section 422 of the Code.

         10. Medium and Time of Payment. The purchase price of the shares of the
Common  Stock as to which an  Option  shall be  exercised  shall be paid in full
either (i) in cash at the time of exercise of the Option,  (ii) by  tendering to
the Company previously  acquired  nonforfeitable,  unrestricted shares of Common
Stock having an  aggregate  fair market value (as of the date of receipt of such
shares by the Company)  equal to the purchase  price for the number of shares of
Common Stock  purchased,  or (iii) partly in cash and partly in shares of Common
Stock  valued at fair  market  value as of the date of receipt of such shares by
the  Company.  Cash payment for the shares of the Common  Stock  purchased  upon
exercise  of any  Option  shall be in the  form of  either  a  cashier's  check,
certified check or money order.  Personal checks may be submitted,  but will not
be  considered  as  payment  for the  shares of Common  Stock  purchased  and no
certificate  evidencing  such shares  will be issued  until the  personal  check
clears payment through normal banking channels.  If a personal check is not paid
upon presentment by the Company,  then the attempted exercise of the Option will
be deemed  null and void.  In the event the  Optionee  tenders  shares of Common
Stock in full or partial  payment  for the shares  being  purchased  pursuant to
exercise  of an  Option,  the  shares  of  Common  Stock  so  tendered  shall be
accompanied by fully  executed  stock power(s)  endorsed in favor of the Company
with the  signature  on such stock  power(s)  being  guaranteed.  If an Optionee
tenders   shares,   such  Optionee   shall   thereupon   assume  sole  and  full
responsibility  for  the tax  consequences,  if any,  to such  Optionee  arising
therefrom,  including the possible  application of Code Section  424(c),  or its
successor Code section,  which negates  nonrecognition of income with respect to
such transferred  shares, if such transferred  shares have not been held for the
minimum statutory holding period to qualify for preferential tax treatment.

STOCK COMPENSATION PLAN-Page 12

<PAGE>

         11. Alternate Stock Appreciation Rights.

                  (a) Award of  Alternate  Stock  Rights.  Concurrently  with or
         subsequent to the award of any Option to purchase one or more shares of
         Common Stock, the Committee may in its sole discretion,  subject to the
         provisions  of the Plan and such  other  terms  and  conditions  as the
         Committee  may  prescribe,  award to the Optionee  with respect to each
         share of Common Stock  covered by an Option (the "Related  Option"),  a
         related  alternate  SAR,  permitting  such  Optionee  to  be  paid  the
         appreciation  on the Related  Option in lieu of exercising  the Related
         Option.  A SAR  granted  with  respect to an  Incentive  Option must be
         granted together with the Related Option. A SAR granted with respect to
         a Nonqualified Option may be granted together with or subsequent to the
         grant of such Related Option.

                  (b)  Alternate  Stock Rights  Agreement.  Each SAR shall be on
         such  terms  and  conditions  not  inconsistent  with  this Plan as the
         Committee may  determine and shall be evidenced by a written  agreement
         executed by the Company and the Optionee receiving the Related Option.

                  (c)  Exercise.  An SAR  may be  exercised  only  if and to the
         extent that its Related  Option is eligible to be exercised on the date
         of  exercise  of the SAR.  To the  extent  that a holder of a SAR has a
         current right to exercise,  the SAR may be exercised  from time to time
         by written  notice to the Company at its  principal  place of business.
         Such notice shall state the election to exercise the SAR, the number of
         shares in  respect of which it is being  exercised,  shall be signed by
         the  person  so  exercising  the SAR and  shall be  accompanied  by the
         agreement  evidencing the SAR and the Related Option.  In the event the
         SAR shall not be exercised in full,  the Secretary of the Company shall
         endorse or cause to be endorsed  on the SAR and the Related  Option the
         number of shares which have been exercised thereunder and the number of
         shares that remain  exercisable  under the SAR and the Related  Option,
         respectively,  and  return  such SAR and  Related  Option to the holder
         thereof.

                  (d)  Amount of  Payment.  The  amount of  payment  to which an
         Optionee  shall be  entitled to receive  upon the  exercise of each SAR
         shall be equal to 100% of the amount,  if any, by which the fair market
         value of a share of Common Stock on the exercise  date exceeds the fair
         market value of a share of Common Stock on the date the Option  related
         to said  SAR was  granted  or  became  effective,  as the  case may be;
         provided,  however,  the Company may, in its sole discretion,  withhold
         from such cash payment any amount  necessary  to satisfy the  Company's
         obligation for withholding taxes with respect to such payment. For this
         purpose,  the fair  market  value of a share of Common  Stock  shall be
         determined in the manner set forth in Section 9(d) hereof.

                  (e) Form of Payment.  The amount  payable by the Company to an
         Optionee  upon exercise of a SAR may be paid in shares of Common Stock,
         cash or a combination  thereof. The number of shares of Common Stock to
         be paid to an Optionee upon such Optionee's  exercise of a SAR shall be
         determined  by dividing  the amount of payment  determined  pursuant to
         Section  11(d)  hereof  by the fair  market  value of a share of Common
         Stock on the exercise date of such SAR. For purposes of this Plan,  the
         exercise date of a SAR shall be the date the Company  receives  written
         notification from the Optionee of the exercise of the SAR in accordance
         with the  provisions of Section 11(c)  hereof.  As soon as  practicable
         after  exercise,  the Company shall either  deliver to the Optionee the
         amount of cash due such Optionee or a certificate or  certificates  for
         such shares of Common Stock. All such shares shall be issued subject to
         the applicable rights and restrictions specified herein.

STOCK COMPENSATION PLAN-Page 13

<PAGE>

                  (f) Termination of SAR.  Except as otherwise  provided in case
         of Disability or death,  no SAR shall be exercisable  after an Optionee
         ceases to be an  employee,  director  or  advisor  of the  Company or a
         Subsidiary;  provided, however, that the Committee shall have the right
         in its sole discretion,  but not the obligation, to extend the exercise
         period  for not more than  three  (3)  months  following  the date such
         Optionee  ceases to be an employee,  director or advisor of the Company
         or a Subsidiary;  provided  further,  that the Committee may not extend
         the period  during  which an Optionee  may  exercise a SAR for a period
         greater  than the period  during  which an Optionee  may  exercise  the
         Option  related to said SAR. If an Optionee's  position as an employee,
         director or advisor of the Company is terminated  due to the Disability
         or death of such Optionee,  the Committee  shall have the right, in its
         sole discretion,  but not the obligation, to extend the exercise period
         applicable  to the SAR for a period  not to exceed  the period in which
         the Optionee may exercise the Option  related to said SAR, as set forth
         in Sections 9(c)(4) and 9(c)(5) hereof, respectively.

                  (g) Effect of Exercise of SAR.  The  exercise of any SAR shall
         cancel and  terminate  the right to purchase an equal  number of shares
         covered by the Related Option.

                  (h) Effect of Exercise of Related Option. Upon the exercise or
         termination of any Related Option, the SAR with respect to such Related
         Option shall  terminate to the extent of the number of shares of Common
         Stock as to which the Related Option was exercised or terminated.

                  (i)  Nontransferability of SAR. A SAR granted pursuant to this
         Plan shall be exercisable  only by the Optionee or the Optionee's court
         appointed  guardian as set forth in Section  9(c)(4)  hereof during the
         Optionee's  lifetime  and,  subject to the  provisions of Section 11(f)
         hereof,  shall not be assignable or transferable by the Optionee. A SAR
         granted  pursuant  to the  Plan  shall  not  be  assigned,  pledged  or
         hypothecated  in any way (whether by operation of law or otherwise) and
         shall not be subject to execution,  attachment, or similar process. Any
         attempted  transfer,  assignment,   pledge,  hypothecation,   or  other
         disposition of any SAR or of any rights granted thereunder  contrary to
         the  foregoing  provisions  of this Section  11(i),  or the levy of any
         attachment or similar process upon a SAR or such rights,  shall be null
         and void.

                  (j) No  Interest in Company  Assets.  To the extent any Person
         acquires a right to receive  payments  from the Company under the Plan,
         such  rights  shall be no  greater  than  the  rights  of an  unsecured
         creditor of the  Company,  and such Person shall not have any rights in
         or against any specific assets of the Company.

         12. Reload Options.

                  (a)  Authorization  of Reload Options.  Concurrently  with the
         award of any  Nonqualified  Option  and/or  the award of any  Incentive
         Option to any  participant  in the Plan,  the Committee may authorize a
         Reload  Option to purchase  for cash or shares that number of shares of
         Common Stock equal to the sum of:

STOCK COMPENSATION PLAN-Page 14

<PAGE>

                           (1) The  number of shares  of  Common  Stock  used to
                  exercise  the  underlying  Nonqualified  Option  or  Incentive
                  Option; and

                           (2) To the extent  authorized by the  Committee,  the
                  number  of  shares of Common  Stock  used to  satisfy  any tax
                  withholding  requirement  incident  to  the  exercise  of  the
                  underlying Nonqualified Option or Incentive Option.

                  The grant of a Reload  Option will become  effective  upon the
         exercise of the underlying  Nonqualified  Option,  Incentive  Option or
         Reload  Option  through  the use of shares of Common  Stock held by the
         Optionee  for at least 12  months.  Notwithstanding  the fact  that the
         underlying  option may be an Incentive  Option,  a Reload Option is not
         intended to qualify as an "incentive stock option" under Section 422 of
         the Code.

                  (b) Reload Option Amendment. Each Option Agreement shall state
         whether the Committee has authorized Reload Options with respect to the
         underlying  Nonqualified  Option  and/or  Incentive  Option.  Upon  the
         exercise of an underlying  Nonqualified Option or Incentive Option, the
         Reload  Option will be  evidenced  by an  amendment  to the  underlying
         Option Agreement.

                  (c) Reload Option Price.  The option price per share of Common
         Stock  deliverable  upon the  exercise of a Reload  Option shall be the
         fair market  value of a share of Common  Stock on the date the grant of
         the Reload Option becomes effective, determined in the manner set forth
         in Section 9(d) hereof.

                  (d) Term  and  Exercise.  Each  Reload  Option  shall be fully
         exercisable  six months from the effective  date of grant.  The term of
         each  Reload  Option  shall  be  equal  to the  remaining  term  of the
         underlying Nonqualified Option and/or Incentive Option.

                  (e)  Termination of Employment.  No additional  Reload Options
         shall be granted to  Optionees  when  Nonqualified  Options,  Incentive
         Options  and/or Reload  Options are exercised  pursuant to the terms of
         this Plan following termination of the Optionee's employment.

                  (f)  Applicability  of  Other  Sections.  To  the  extent  not
         inconsistent with the foregoing  provisions of this Section,  the other
         Sections of this Plan pertaining to Options,  including  Sections 6, 7,
         8, 9 and 10,  are  incorporated  herein by this  reference  thereto  as
         though fully set forth herein.

         13.  Rights as a  Shareholder.  The  holder of an Option or a SAR shall
have no rights as a shareholder with respect to the shares covered by the Option
or SAR until the due exercise of the Option, Related Option, or SAR and the date
of issuance of one or more stock certificates to such holder for such shares. No
adjustment shall be made for dividends  (ordinary or  extraordinary,  whether in
cash,  securities or other property) or  distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
provided in Section 15 hereof.

         14. Optionee's  Agreement to Serve.  Each employee  receiving an Option
shall,  as one of the terms of the Option  Agreement,  agree that such  employee
will  remain in the  employ of the  Company or a  Subsidiary  for a period of at
least one (1) year from the date on which the  Option  shall be  granted to such
employee;  and that such  employee  will,  during such  employment,  devote such
employee's  entire  time,  energy,  and skill to the service of the Company or a
Subsidiary as may be required by the management  thereof,  subject to vacations,
sick leaves, and military absences.  Such employment,  subject to the provisions
of any written  contract  between the Company or a Subsidiary and such employee,
shall  be at the  pleasure  of the  Board  of  Directors  of  the  Company  or a
Subsidiary,  and at such  compensation  as the  Company  or a  Subsidiary  shall
reasonably  determine.  Any termination of such employee's employment during the
period which the employee has agreed  pursuant to the  foregoing  provisions  of
this Section 14 to remain in employment that is either for cause or voluntary on
the part of the  employee  shall be deemed a violation  by the  employee of such
employee's agreement. In the event of such violation, any Option or Options held
by such  employee,  to the extent not  theretofore  exercised,  shall  forthwith
terminate,  unless otherwise  determined by the Committee.  Notwithstanding  the
preceding,  neither the action of the Company in  establishing  the Plan nor any
action taken by the Company,  a Subsidiary or the Committee under the provisions
hereof  shall be  construed as granting the Optionee the right to be retained in
the employ of the Company or a Subsidiary,  or to limit or restrict the right of
the Company or a Subsidiary,  as applicable,  to terminate the employment of any
employee of the Company or a Subsidiary, with or without cause.

STOCK COMPENSATION PLAN-Page 15

<PAGE>

         15. Adjustments on Changes in Capitalization.

                  (a) Changes in Capitalization.  Subject to any required action
         by the  Shareholders  of the  Company,  the  number of shares of Common
         Stock covered by the Plan, the number of shares of Common Stock covered
         by each  outstanding  Option,  the  exercise  price per  share  thereof
         specified in each such Option, and the rights and privileges  attendant
         to any  outstanding  SARs  shall be  proportionately  adjusted  for any
         increase  or decrease  in the number of issued  shares of Common  Stock
         resulting from a subdivision or  consolidation of shares or the payment
         of a  stock  dividend  (but  only on the  Common  Stock)  or any  other
         increase  or decrease  in the number of such  shares  effected  without
         receipt of  consideration  by the Company after the date such Option or
         such SAR is  granted,  so that upon  exercise of such Option or related
         SAR, if any,  the Optionee  shall  receive the same number of shares or
         same SARs,  as  applicable,  the Optionee  would have  received had the
         Optionee  been the  holder of all  shares  subject  to such  Optionee's
         outstanding  Options  immediately  before  the  effective  date of such
         change in the number of issued shares of the Common Stock.

                  (b) Reorganization, Dissolution or Liquidation. Subject to any
         required  action by the  Shareholders  of the  Company,  if the Company
         shall be the surviving corporation in any merger or consolidation, each
         outstanding  Option and SAR, if any,  shall pertain to and apply to the
         securities  to which a holder of the  number of shares of Common  Stock
         subject to such  Option or related  SARs  would have been  entitled.  A
         dissolution or liquidation of the Company or a merger or  consolidation
         in which the Company is not the surviving corporation, shall cause each
         outstanding  Option and each  outstanding SAR to terminate as of a date
         to be fixed by the Committee (which date shall be as of or prior to the
         effective  date of any such  dissolution  or  liquidation  or merger or
         consolidation);  provided,  that not less than thirty (30) days written
         notice of the date so fixed as such  termination date shall be given to
         each Optionee,  and each Optionee shall, in such event, have the right,
         during the such period of thirty (30) days preceding  such  termination
         date, to exercise such Optionee's  Options and SARs, as applicable,  in
         whole or in part in the manner  herein  set forth.  In the event of any
         recapitalization,    reorganization,    extraordinary    dividend    or
         distribution or restructuring  transaction  (including any distribution
         of shares of stock of any  Subsidiary  or other  property to holders of
         shares of Common  Stock)  affecting  the  Common  Stock,  the number of
         shares  issuable under this Plan shall be subject to such adjustment as
         the Committee may deem  appropriate,  and the number of shares issuable
         pursuant  to any  Option  or  rights  related  to any SARs  theretofore
         granted (whether or not then exercisable) and/or the exercise price per
         share of such  Option  and/or  the  rights  related  to such  SARs,  as
         applicable,  shall be subject to such  adjustment  as the Committee may
         deem  appropriate  with a view toward  preserving the value any of such
         Option and any such SARs, respectively.

STOCK COMPENSATION PLAN-Page 16

<PAGE>

                  (c)  Change  in Par  Value.  In the  event of a change  in the
         Common Stock of the Company as presently  constituted,  which change is
         limited to a change of all of its authorized shares with par value into
         the same  number of shares  with a  different  par value or without par
         value,  the shares  resulting from any change shall be deemed to be the
         Common Stock within the meaning of the Plan.

                  (d) Notice of Adjustments.  To the extent that the adjustments
         set forth in the foregoing  paragraphs of this Section 15 relate to the
         capital stock or securities of the Company,  such adjustments,  if any,
         shall be made by the  Committee,  whose  determination  in that respect
         shall be final,  binding and  conclusive,  provided that each Incentive
         Option granted  pursuant to this Plan shall not be adjusted in a manner
         that causes the  Incentive  Option to fail to continue to qualify as an
         "incentive stock option" within the meaning of Section 422 of the Code.
         The Company  shall give timely notice of any  adjustments  made to each
         holder of an Option and related SAR, if applicable, under this Plan and
         such adjustments shall be effective and binding on the Optionee.

                  (e)  Effect  Upon  Holders  of  Options  and  SARs.  Except as
         hereinbefore  expressly  provided in this  Section 15, the holder of an
         Option or an SAR shall have no rights by reason of any  subdivision  or
         consolidation  of shares of stock of any  class or the  payment  of any
         stock  dividend  or any other  increase  or  decrease  in the number of
         shares of stock of any class by reason of any dissolution, liquidation,
         merger,  reorganization,  or  consolidation,  or  spin-off of assets or
         stock of another corporation, and any issue by the Company of shares of
         stock of any class, or securities  convertible  into shares of stock of
         any class,  shall not affect, and no adjustment by reason thereof shall
         be made with  respect to, the number or price of shares of Common Stock
         subject to the Option or related SARs.  Without limiting the generality
         of the  foregoing,  no  adjustment  shall be made with  respect  to the
         number  or  price  of  shares  subject  to any  Option  or SAR  granted
         hereunder upon the occurrence of any of the following events:

                           (1) The grant or  exercise  of any other  options  or
                  SARs which may be granted or exercised  under this Plan or any
                  other qualified or nonqualified stock option plan or under any
                  other employee benefit plan of the Company whether or not such
                  options or SARs were  outstanding  on the date of grant of the
                  Option or SAR or thereafter granted;

                           (2) The sale of any  shares  of  Common  Stock in any
                  public  offering  of  securities  by the  Company,  including,
                  without  limitation,  shares  sold  upon the  exercise  of any
                  overallotment  option  granted to  underwriters  in connection
                  with such offering;

STOCK COMPENSATION PLAN-Page 17

<PAGE>

                           (3) The issuance, sale or exercise of any warrants to
                  purchase  shares of Common Stock  whether or not such warrants
                  were  outstanding on the date of grant of the Option or SAR or
                  thereafter  issued;

                           (4) The issuance or sale of rights,  promissory notes
                  or other securities convertible into shares of Common Stock in
                  accordance with the terms of such securities (the "Convertible
                  Securities")  whether or not such Convertible  Securities were
                  outstanding  on the date of grant of the Option or SAR or were
                  thereafter issued or sold;

                           (5)  The  issuance  or  sale  of  Common  Stock  upon
                  conversion or exchange of any Convertible Securities,  whether
                  or not  any  adjustment  in the  purchase  price  was  made or
                  required  to be  made  upon  the  issuance  or  sale  of  such
                  Convertible  Securities  and  whether or not such  Convertible
                  Securities were outstanding on the date of grant of the Option
                  or were thereafter issued or sold; or

                           (6) Upon any  amendment  to or change in the terms of
                  any  rights or  warrants  to  subscribe  for or  purchase,  or
                  options  for the  purchase  of,  Common  Stock or  Convertible
                  Securities  or in the  terms  of any  Convertible  Securities,
                  including, but not limited to, any extension of any expiration
                  date of any such right,  warrant or option,  any change in any
                  exercise or  purchase  price  provided  for in any such right,
                  warrant or option, any extension of any date through which any
                  Convertible  Securities are  convertible  into or exchangeable
                  for  Common  Stock or any  change  in the  rate at  which  any
                  Convertible  Securities are  convertible  into or exchangeable
                  for Common Stock.

                  (f)  Right of  Company  to Make  Adjustments.  The grant of an
         Option and  related  SARs  pursuant to the Plan shall not affect in any
         way  the  right  or  power  of  the   Company   to  make   adjustments,
         reclassifications,  reorganizations,  or  changes  of  its  capital  or
         business  structure  or to  merge  or to  consolidate  or to  dissolve,
         liquidate  or sell,  or  transfer  all or any part of its  business  or
         assets or to suspend, terminate, amend or modify the Plan.

         16. Investment Purpose.  Each Option under the Plan shall be granted on
the condition that the purchase of the shares of Common Stock  thereunder  shall
be for  investment  purposes,  and not  with a view to  resale  or  distribution
thereof;  provided,  however,  that in the event the shares of stock  subject to
such Option are registered  under the Securities Act or in the event a resale of
such shares of stock without such  registration  would otherwise be permissible,
such condition shall be inoperative if in the opinion of counsel for the Company
such condition is not required under the Securities Act or any other  applicable
law or regulation, or rule of any governmental agency.

         17. No Obligation to Exercise  Option or SAR. The granting of an Option
or SAR  pursuant to the Plan shall  impose no  obligation  upon the  Optionee to
exercise such Option or SAR.

STOCK COMPENSATION PLAN-Page 18

<PAGE>

         18. Modification,  Extension,  and Renewal of Options and SARs. Subject
to the terms  and  conditions  and  within  the  limitations  of the  Plan,  the
Committee  and the Board may  modify,  extend or renew  outstanding  Options and
related  SARs granted  under the Plan,  or accept the  surrender of  outstanding
Options and related  SARs,  if  applicable,  each to the extent not  theretofore
exercised.  Notwithstanding the foregoing, however, no modification of an Option
or SAR shall, without the consent of the Optionee, alter or impair any rights or
obligations under any Option or SAR theretofore granted under the Plan.

         19.  Effective Date of the Plan. The Plan shall become effective on the
date of execution hereof,  which date is the date the Board approved and adopted
the Plan (the "Effective Date");  provided,  however, if the Shareholders of the
Company  shall  not  have  approved  the  Plan  by  the  requisite  vote  of the
Shareholders  within twelve (12) months after the Effective  Date, then the Plan
shall  terminate  and all Options and SARs  theretofore  granted  under the Plan
shall terminate and be null and void.

         20.  Termination  of the Plan.  This  Plan  shall  terminate  as of the
expiration of ten (10) years from the Effective Date.  Options and related SARs,
as applicable,  may be granted under this Plan at any time and from time to time
prior to its termination. Any Option and related SAR, if applicable, outstanding
under the Plan at the time of its  termination  shall remain in effect until the
Option and related SAR, if  applicable,  shall have been exercised or shall have
expired.

         21.  Amendment of the Plan.  The Plan may be  terminated at any time by
the Board. The Board may at any time and from time to time without obtaining the
approval of the Shareholders of the Company or a Subsidiary, modify or amend the
Plan (including  such form of Award Agreement as hereinabove  mentioned) in such
respects as it shall deem  advisable;  provided,  however,  any amendment to the
Plan shall be approved by the Shareholders of the Company if the amendment would
(i) materially  increase the benefits  accruing to participants  under the Plan,
(ii) materially  increase the number of securities which may be issued under the
Plan,  except as provided in Section 15 hereof,  or (iii) materially  modify the
requirements as to eligibility for  participation in the Plan.  Without limiting
the generality of the foregoing, the Board may at any time and from time to time
without  obtaining  the approval of the  Shareholders  of the Company  modify or
amend  the  Plan  (including  such  form  of  Award  Agreements  as  hereinabove
mentioned)  to (i) comport  with changes in the Code,  the  Employee  Retirement
Income Security Act of 1974 ("ERISA"),  or the rules and regulations  thereunder
or other  applicable  laws,  (ii) increase the number of securities  issuable to
investors  under the Plan by less than ten percent  (10%) based on the amount of
securities   issuable  under  the  Plan  as  last  expressly   approved  by  the
Shareholders of the Company, (iii) amend the Plan to adjust the terms of Options
and  SARs,  if  applicable,   previously  granted  to  reflect  a  restructuring
transaction, such as a holding company formation, stock split or stock dividend,
extraordinary   dividend,   spin-off  or  issuance  of  repurchase  rights.  The
termination or any  modification or amendment of the Plan shall not, without the
consent of the  Optionee,  affect  such  Optionee's  rights  under any Option or
related SAR, if any,  theretofore granted to such Optionee.  With the consent of
the  Optionee to whom such  Option and related  SAR,  if any,  was  granted,  an
outstanding Option and related SAR, if applicable, may be modified or amended by
the Committee in such manner as it may deem  appropriate and consistent with the
requirements  of the Plan  applicable  to the grant of a new Option and  related
SAR, if applicable, on the date of modification or amendment.

STOCK COMPENSATION PLAN-Page 19

<PAGE>

         22. Tax Withholding.  Whenever an Optionee shall recognize compensation
income as a result of the exercise of any Option or SAR granted  under the Plan,
such  Optionee  shall remit in cash to the Company or a  Subsidiary  the minimum
amount of federal  income and employment  tax  withholding  which the Company or
Subsidiary  is required to remit to the Internal  Revenue  Service in accordance
with the then  applicable  provisions  of the  Code.  The  full  amount  of such
withholding  shall be paid by the  Optionee  simultaneously  with  the  award or
exercise of an Option or SAR, as applicable.

         23. Other Benefits. No Award granted under the Plan shall be considered
compensation  for  purposes of  computing  benefits or  contributions  under any
retirement plan of the Company or any Affiliates now or subsequently in effect.

         24.  Indemnification of Committee.  In addition to such other rights of
indemnification  as they may have as Directors  or as members of the  Committee,
the members of the Committee shall be indemnified by the Company against all the
reasonable expenses,  including,  without limitation,  attorneys' fees, actually
and necessarily  incurred in connection with the defense of any action,  suit or
proceeding,  or in connection with any appeal  therein,  to which they or any of
them may be a party by reason of any action  taken or failure to act under or in
connection  with the Plan or any Option or SAR granted  thereunder,  and against
all amounts paid by them in  settlement  thereof  (provided  such  settlement is
approved by independent  legal counsel  selected by the Company) or paid by them
in satisfaction of a judgment in any such action, suit or proceeding,  except in
relation  to matters as to which it shall be adjudged  in such  action,  suit or
proceeding that such Committee  member is liable for negligence or misconduct in
the  performance  of his  duties;  provided  that  within  sixty (60) days after
institution of any such action,  suit or proceeding a Committee  member shall in
writing  offer the Company the  opportunity,  at its own expense,  to pursue and
defend the same.

         25. Application of Funds. The proceeds received by the Company from the
sale of Common  Stock  pursuant to Options  granted  hereunder  will be used for
general corporate purposes.

         26.  Notices.  All notices  required or  permitted  to be given or made
under the Plan or any Award Agreement shall be in writing and shall be deemed to
have been duly given or made if (i) delivered  personally,  (ii)  transmitted by
first class registered or certified United States mail, postage prepaid,  return
receipt requested, (iii) sent by prepaid overnight courier service, or (iv) sent
by telecopy or facsimile transmission,  answer back requested, to the Person who
is to receive it at the address  that such person has  theretofore  specified by
written notice delivered in accordance herewith. Such notices shall be effective
(i) if delivered  personally or sent by courier service,  upon actual receipt by
the intended recipient,  (ii) if mailed, upon the earlier of five (5) days after
deposit  in the mail or the date of  delivery  as  shown by the  return  receipt
therefore,  or (iii) if sent by telecopy  or  facsimile  transmission,  when the
answer back is received.  The Company or an Optionee may change, at any time and
from time to time, by written  notice to the other,  the address that it or such
Optionee had theretofore, specified for receiving notices. Until such address is
changed in accordance  herewith,  notices  hereunder or under an Award Agreement
shall be  delivered  or sent (i) to an  Optionee at the  Optionee's  address set
forth in the  records  of the  Company or (ii) to the  Company at the  principal
executive  offices  of  the  Company  clearly  marked  "Attention:   Stock  Plan
Administration."

STOCK COMPENSATION PLAN-Page 20

<PAGE>

         27.  Severability.  If any provision of the Plan or any Award Agreement
is held to be illegal or invalid for any reason,  the  illegality  or invalidity
shall not affect the remaining provisions of the Plan or such agreement,  as the
case may be, but such  provision  shall be fully  severable and the Plan or such
agreement, as the case may be, shall be construed and enforced as if the illegal
or invalid provision had never been included herein or therein.

         28.  Governing  Law.  Except to the extent  governed by the  applicable
provisions of the Code or Federal  securities  laws, this Plan shall be governed
by and construed in accordance with the laws of the State of Texas.

         IN WITNESS WHEREOF,  this Plan is executed by the undersigned  officers
of AVATAR SYSTEMS,  INC., each being hereunto duly empowered and authorized,  on
this Ninth day of October, 2000.

                                              HCI ACQUISITION 1998-2, INC.

                                              By: /s/ Timothy P. Halter
                                                 ------------------------
                                                 Timothy P. Halter, President

ATTEST:

/s/ Greg Allen
----------------------
Gregg Allen, Secretary

STOCK COMPENSATION PLAN-Page 21EXHIBIT 10.11

<PAGE>

                       AMENDED AND RESTATED LOAN AGREEMENT

                                  July 10, 2000

Avatar Systems, Inc.
5728 LBJ Freeway, Suite 270
Dallas, Texas 75240

Gentlemen:

         This Amended and Restated Loan  Agreement (the "Loan  Agreement")  will
serve to set forth the terms of the financing transactions by and between Avatar
Systems, Inc., a Texas corporation f/k/a Avatar International,  Inc. ("Borrower"
), and Bank One, Texas, N.A. ("Bank").  Pursuant to a Loan Agreement dated as of
August 26, 1998 between the Bank and Avatar Systems,  Ltd. (the  "Partnership").
the Partnership  borrowed $520,000 in a single advance from the Bank (the "Prior
Loan"). The Prior Loan has been partially paid, and the current principal amount
owing is  S288,888.96.  The  Partnership  has been  dissolved  and  Borrower has
assumed all  liabilities of the  Partnership  (the  "Reorganization").  Borrower
guaranteed  the Prior Loan and Borrower is executing  this Agreement to evidence
Borrower's direct liability on the Prior Loan.

         1. Credit Facilities.  Subject to the terms and conditions set forth in
this  Loan  Agreement  and  the  other  agreements,  instruments  and  documents
evidencing, securing, governing, guaranteeing and/or pertaining to the Loans, as
hereinafter defined (collectively, together with the Loan Agreement, referred to
hereinafter  as the  "Loan  Documents"),  Bank  has made a  credit  facility  or
facilities   available  to  the  Partnership  and  Borrower  has  assumed  those
liabilities (the "Credit Facilities"):

                  (a) Term Loan.  Subject to the terms and  conditions set forth
         herein,  Borrower  agrees to pay Bank, the amount of  $288,888.96  (the
         "Term Loan" or the "Loans").

         2.  Promissory  Notes.  The  Loans  shall be  evidenced  by one or more
promissory  notes (whether one or more,  together with any renewals,  extensions
and increases thereof, the "Notes") duly executed by Borrower and payable to the
order of Bank, in form and substance  acceptable to Bank.  Interest on the Notes
shall accrue at the rate set forth therein. The principal of and interest on the
Notes shall be due and payable in accordance  with the terms and  conditions set
forth in the Notes and in this Loan Agreement.

         3.  Collateral.   As  collateral  and  security  for  the  indebtedness
evidenced by the Notes and any and all other  indebtedness  or obligations  from
time to time owing by Borrower to Bank, Borrower shall grant, and hereby grants,
to Bank,  its  successors  and  assigns,  a first  and prior  lien and  security
interest in and to the property  described in the Security Agreement executed as
of  even  date  herewith  by  and  between  Borrower  and  Bank  (the  "Security
Agreement").

         4.  Guarantors.  Borrower  agrees to cause  Charles T.  Allen,  Orville
Gregory Allen and Robert C. Shreve, Jr. (referred to herein  collectively as the
"Guarantors",  and each,  individually,  as a  "Guarantor")  to each execute and
deliver  to  Bank  contemporaneously  herewith  a  guaranty  agreement  (each  a
"Guaranty"), inform and substance satisfactory to Bank.

                                       1
<PAGE>

         5.  Representations  and  Warranties.  Borrower  hereby  represents and
warrants to Bank as follows:

                  (a)  Existence.  Borrower  is a  corporation  duly  organized,
         validly  existing and in good  standing  under the laws of the State of
         Texas  and all other  states  where it is doing  business,  and has all
         requisite   power  and  authority  to  execute  and  deliver  the  Loan
         Documents.

                  (b)  Binding   Obligation.   The  execution,   delivery,   and
         performance  of this Loan Agreement and all of the other Loan Documents
         by  Borrower  have  been duly  authorized  by all  necessary  action by
         Borrower,  and  constitute  legal,  valid and  binding  obligations  of
         Borrower, enforceable in accordance with their respective terms, except
         as  limited  by  bankruptcy,  insolvency  or  similar  laws of  general
         application relating to the enforcement of creditors' rights and except
         to the extent  specific  remedies may generally be limited by equitable
         principles.

                  (c) No Consent.  The  execution,  delivery and  performance of
         this Loan Agreement and the other Loan Documents,  and the consummation
         of the  transactions  contemplated  hereby  and  thereby,  do  not  (i)
         conflict with,  result in a violation of, or constitute a default under
         (A) any provision of its certificate or articles of  incorporation,  or
         any agreement or other  instrument  binding upon  Borrower,  or (B) any
         law,  governmental  regulation,  court  decree or order  applicable  to
         Borrower, or (ii) require the consent, approval or authorization of any
         third party.

                  (d) Financial Condition.  Each financial statement of Borrower
         supplied to the Bank truly  discloses  and fairly  presents  Borrower's
         financial  condition as of the date of each such  statement.  There has
         been no material adverse change in such financial  condition or results
         of  operations  of Borrower  subsequent to the date of the most recent,
         financial statement supplied to the Bank.

                  (e)  Litigation.  There are no actions,  suits or proceedings,
         pending  or,  to the  knowledge  of  Borrower,  threatened  against  or
         affecting  Borrower or the properties of Borrower,  before any court or
         governmental  department,  commission  or board,  which,  if determined
         adversely  to  Borrower,  would have a material  adverse  effect on the
         financial condition, proper-ties, or operations of Borrower.

                  (f)  Taxes,  Governmental  Charges.  Borrower  has  filed  all
         federal, state and local tax reports and returns required by any law or
         regulation to be filed by it and has either duly paid all taxes, duties
         and charges indicated due on the basis of such returns and reports,  or
         made adequate provision for the payment thereof,  and the assessment of
         any  material  amount of  additional  taxes in excess of those paid and
         reported is not reasonably expected.

                  (g) Year 2000 Compliance.  Borrower represents and warrants to
         Bank that:  (i) as of the date  hereof,  and (ii) as of the date of any
         renewal, extension or modification of the Loan Agreement:

                                       2
<PAGE>

                           (1)  All  devices,  systems,  machinery,  information
                  technology,  computer  software and  hardware,  and other date
                  sensitive  technology  jointly and  severally  the  "Systems")
                  necessary  for  Borrower to carry on its business as presently
                  conducted  and as  contemplated  to be conducted in the future
                  are Year 2000 Compliant or will be Year 2000 Compliant  within
                  a  period  of  time   calculated  to  result  in  no  material
                  disruption  of  any of  Borrower's  business  operations.  For
                  purposes of these provisions, "Year 2000 Compliant" means that
                  such  Systems  are  designed  to be used prior to,  during and
                  after the  Gregorian  calendar year 2000 A.D. and will operate
                  during each such time period  without  error  relating to date
                  data,  specifically  including  any error  relating to, or the
                  product of, date data which represents or references different
                  centuries or. more than one century.

                           (2)   Borrower   has:   (A)   undertaken  a  detailed
                  inventory,  review,  and  assessment  of all areas  within its
                  business and  operations  that could be adversely  affected by
                  the failure of Borrower to be Year 2000  Compliant on a timely
                  basis;  (B)  developed  a  detailed  plan  and  time  line for
                  becoming Year 2000  Compliant on a timely basis;  (C) to date,
                  implemented that plan in accordance with that timetable in all
                  material respects.

                           (3) Borrower has made written  inquiry of each of its
                  key suppliers,  vendors,  and  customers,  and has obtained in
                  writing  confirmations  from all such  persons,  as to whether
                  such  persons  have  initiated  programs  to become  Year 2000
                  Compliant  and on the  basis of such  confirmations.  Borrower
                  reasonably believes that all such persons will be or become so
                  compliant.  For purposes hereof, key suppliers,  vendors,  and
                  customers" refers to those suppliers,  vendors,  and customers
                  of Borrower whose  business  failure  would,  with  reasonable
                  probability,  result  in a  material  adverse  change  in  the
                  business,  properties,  condition (financial or otherwise), or
                  prospects of Borrower.  For purposes of this paragraph,  Bank,
                  as a lender of funds  under  the terms of the Loan  Agreement,
                  confirms  to  Borrower   that  Bank  has   initiated  its  own
                  corporate-wide  Year 2000  program with respect to its lending
                  activities.

                           (4) The fair  market  value of all real and  personal
                  property,  if any, pledged to Bank as Collateral to secure the
                  Term  Loan  is not  and  shall  not  be  less  than  currently
                  anticipated  or subject to  deterioration  in value because of
                  the failure of such Collateral to be Year 2000 Compliant.

         6.  Conditions  Precedent  to  Closing.  This Loan  Agreement  shall be
effective upon the satisfaction of each of the following conditions:

                                       3
<PAGE>

                  (a) Loan Documents. Each of the Loan Documents shall have been
         duly executed and delivered by the respective parties thereto.

                  (b) Reorganization Documents. Borrower shall have delivered to
         Bank certified copies of all documents evidencing the Reorganization.

                  (c)  Payment of Fees and  Expenses.  Borrower  shall have paid
         Bank a $5,000 closing fee, and shall have  reimbursed Bank for, or paid
         directly,  all fees,  costs and expenses  incurred by Bank's counsel in
         connection with closing of the transactions contemplated hereby.

                  (d)  Opinion.  Bank shall have  received a legal  opinion from
         counsel to Borrower, in form and substance acceptable to Bank.

         7. Affirmative Covenants. Until the Notes and all other obligations and
liabilities  of Borrower  under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, Borrower agrees and covenants that it will, unless
Bank shall otherwise consent in writing:

                  (a) Accounts  and  Records.  Maintain its books and records in
         accordance with generally accepted accounting principles.

                  (b) Right of  Inspection.  Permit Bank to visit its properties
         and installations  and to examine,  audit and make and take away copies
         or  reproductions  of Borrower's  books and records,  at all reasonable
         times.

                  (c) Right to  Additional  Information.  Furnish Bank with such
         additional information and statements, lists of assets and liabilities,
         tax returns,  and other  reports with respect to  Borrower's  financial
         condition  and  business  operations  as Bank may request  from time to
         time.

                  (d) Compliance  with Laws.  Conduct its business in an orderly
         and  efficient  manner  consistent  with good business  practices,  and
         perform  and  comply  with  all  statutes,  rules,  regulations  and/or
         ordinances   imposed  by  any  governmental   unit  upon  Borrower  its
         businesses,  operations and properties  (including without  limitation,
         all  applicable   environmental   statutes,   rules,   regulations  and
         ordinances).

                  (e) Taxes.  Pay and discharge when due all of its indebtedness
         and obligations,  including without limitation, all assessments, taxes,
         governmental  charges,  levies  and liens,  of every  kind and  nature,
         imposed upon Borrower or its properties,  income, or profits,  prior to
         the date on which penalties  would attach,  and all lawful claims that,
         if  unpaid,  might  become  a lien or  charge  upon  any of  Borrower's
         properties, income, or profits; provided, however, Borrower will not be
         required to pay and discharge any such assessment,  tax, charge,  levy,
         lien or  claim  so  long  as (i) the  legality  of the  same  shall  be
         contested  in good faith by  appropriate  judicial,  administrative  or
         other legal  proceedings,  and (ii) Borrower shall have  established on
         its books adequate reserves with respect to such contested  assessment,
         tax, charge,  levy, lien or claim in accordance with generally accepted
         accounting principles, consistently applied.

                                       4
<PAGE>

                  (f) Insurance.  Maintain insurance,  including but not limited
         to, fire insurance,  comprehensive  property damage,  public liability,
         worker's compensation, business interruption and other insurance deemed
         necessary or otherwise required by Bank.

                  (g)  Notice  of  Indebtedness.  Promptly  inform  Bank  of the
         creation,  incurrence  or  assumption  by  Borrower  of any  actual  or
         contingent liabilities not permitted under this Loan Agreement.

                  (h)  Notice of  Litigation.  Promptly  after the  commencement
         thereof,  notify Bank of all actions,  suits and proceedings before any
         court or any  governmental  department.  commission or board  affecting
         Borrower or any of its properties.

                  (i) Notice of Material Adverse Change. Promptly inform Bank of
         (i)  any and all  material  adverse  changes  in  Borrower's  financial
         condition,  and (ii) all  claims  made  against  Borrower  which  could
         materially affect the financial condition of Borrower.

                  (j) Year 2000  Compatibility.  Borrower  covenants  and agrees
         with Bank that, while any Loan is in effect, Borrower will: (i) furnish
         such additional information,  statements and other reports with respect
         to  Borrower's  activities,  course  of  action  and  progress  towards
         becoming Year 2000 Compliant as Bank may request from time to time; and
         (ii) in the event of any change in  circumstances  that  causes or will
         likely cause any of  Borrower's  representations  and  warranties  with
         respect to its being or becoming  Year 2000  Compliant  to no longer be
         true  (hereinafter,  referred to as a "Change in  Circumstances")  then
         Borrower  shall  promptly,  and in any  event  within  ten (10) days of
         receipt of  information  regarding a Change in  Circumstances,  provide
         Bank with written  notice (the  "Notice")  that describes in reasonable
         detail the Change in Circumstances and how such change in Circumstances
         caused or will likely cause Borrower's  representations  and warranties
         with respect to being or becoming  Year 2000  Compliant no longer to be
         true. Borrower shall,  within ten (10) days of a request,  also provide
         Bank with any  additional  information  Bank  requests  of  Borrower in
         connection  with the  Notice  and/or a Change  in  Circumstances-,  and
         promptly upon its becoming available,  furnish to Bank one copy of each
         financial statement, report, notice or proxy statement sent by Borrower
         to  stockholders  generally  and of each  regular or  periodic  report,
         registration  statement  or  prospectus  filed  by  Borrower  with  any
         securities  exchange or the Securities  and Exchange  Commission or any
         successor agency, and of any order issued by any governmental Authority
         in any  proceeding  to which  Borrower is a party.  For purposes of the
         provisions,  "Governmental Authority" shall mean any government (or any
         political subdivision or jurisdiction  thereof),  court, bureau, agency
         or other  governmental  entity  having or asserting  jurisdiction  over
         Borrower or any of its  business,  operations or  properties.  Further,
         Borrower  shall  give any  representative  of Bank  access  during  all
         business hours to, -and permit such representative to examine,  copy or
         make  excerpts  from,  any and all books,  records and documents in the
         possession of Borrower and relating to its affairs,  and to inspect any
         of -the  properties  and Systems of  Borrower,  and to project test the
         Systems to determine if they are Year 2000  Compliant in an  integrated
         environment, all at the sole cost and expense of Bank.

                                       5
<PAGE>

                  (k) Additional Documentation. Execute and deliver, or cause to
         be executed and delivered, any and all other agreements, instruments or
         documents which Bank may reasonably  request in order to give effect to
         the transactions  contemplated  under this Loan Agreement and the other
         Loan Documents.

         8. Negative  Covenants.  Until the Notes and all other  obligations and
liabilities  of Borrower  under this Loan Agreement and the other Loan Documents
are fully paid and  satisfied,  Borrower  will not,  without  the prior  written
consent of Bank:

                  (a) Nature of Business. Make any material change in the nature
         of its business as carried on as of the date hereof.

                  (b) Liquidations, Mergers, Consolidations. Liquidate, merge or
         consolidate with or into any other entity.

                  (c) Sale of Assets. Sell, transfer or otherwise dispose of any
         of its  assets or  properties,  other  than in the  ordinary  course of
         business.

                  (d) Liens.  Create, incur or assume any lien or encumbrance on
         any of its assets or properties.  including  without  limitations,  the
         Collateral;  provided,  however,  that  Borrower  shall be permitted to
         create  purchase  money  liens up to an  aggregate  amount  of  $50,000
         ("Permitted Purchase Money Liens").

                  (e) Indebtedness. Create, incur or assume any indebtedness for
         borrowed  money or issue or assume any other note,  debenture,  bond or
         other evidences of indebtedness,  or guarantee any such indebtedness or
         such  evidences of  indebtedness  of others,  other than (i) borrowings
         from Bank, (ii) indebtedness secured by Permitted Purchase Money Liens,
         and (iii)  borrowings  outstanding  on the date hereof and disclosed in
         writing to Bank.

                  (f) Transfer of Ownership.  Permit the sale or other  transfer
         of any ownership  interest in Borrower if, as a result of any such sale
         or transfer,  Charles T, Allen and Orville  Gregory Allen  collectively
         cease  to own  at  least  fifty-one  percent  (5 1 %) of the  ownership
         interest in Borrower.

                  (g) Change in  Management/Change in Articles of Incorporation.
         Permit a change in the senior management of Borrower,  permit Robert C.
         Shreve,  Jr. to cease serving as President of Avatar  Systems,  Inc. or
         pen-nit any amendment,  restatement or other modification to Borrower's
         articles of incorporation.

                  (h)  Loans and  Investments.  The  Borrower  will not make any
         advance,  loan,  extension  of credit,  or capital  contribution  to or
         investment in, or purchase,  any stock,  bonds, notes,  debentures,  or
         other securities of, any person or entity, except:

                           (i)  readily  marketable  direct  obligations  of the
                  United States of America or any agency thereof with maturities
                  of one year or less from the date of acquisition; and

                                       6
<PAGE>

                           (ii)  fully  insured  certificates  of  deposit  with
                  maturities  of one year or less  from the date of  acquisition
                  issued by Bank.

                  (i) Transactions with Affiliates.  Enter into any transaction,
         including,  without  limitation,  the  purchase,  sale or  exchange  of
         property  or the  rendering  of any  service,  with any  Affiliate  (as
         hereinafter defined) of Borrower,  except in the ordinary course of and
         pursuant to the reasonable requirements of Borrower's business and upon
         fair and  reasonable  terms no less favorable to Borrower than would be
         obtained  in a  comparable  arm's-length  transaction  with a person or
         entity  not  an  Affiliate  of  Borrower.  As  used  herein,  the  term
         "Affiliate"  means any  individual  or entity  directly  or  indirectly
         controlling,  controlled  by, or under  common  control  with,  another
         individual or entity.

                  (j) Distributions.  Make any distributions to any shareholder,
         or make any other  distributions with respect to any payment on account
         of the purchase,  redemption, or other acquisition or retirement of any
         ownership interest of Borrower,  or make any other distribution,  sale,
         transfer  or  lease  of any of  Borrower's  assets  other  than  in the
         ordinary  course of  business,  unless any such  amounts  are  directly
         utilized for the payment of principal or interest on  indebtedness  and
         obligations owing from time to time by Borrower to Bank.

         9. Intentionally Deleted.

         10. Reporting  Requirements.  Until the Notes and all other obligations
and  liabilities  of  Borrower  under  this Loan  Agreement  and the other  Loan
Documents  are fully  paid and  satisfied,  Borrower  will,  unless  Bank  shall
otherwise consent in writing, furnish to Bank:

                  (a) Annual Financial  Statements.  As soon as available and in
         any event within  ninety (90) days after the end of each fiscal year of
         Borrower,  a balance  sheet and income  statement of Borrower as of the
         end of such  fiscal  year,  in each case in form and  substance  and in
         reasonable detail  satisfactory to Bank and duly certified by the chief
         financial  officer of  Borrower  (i) as being  true and  correct in all
         material  respects  to the  best of his or her  knowledge  and  (ii) as
         having been prepared in accordance with generally  accepted  accounting
         principles,  consistently  applied. In addition to the above, each such
         annual   financial   statement  shall  include   sufficient   financial
         information to demonstrate,  and a certification by the chief financial
         officer of Borrower,  that as of the date of such  statement,  Borrower
         has not breached any financial  covenant set forth in Section 9 of this
         Agreement.

                  (b) Quarterly Financial Statement.  As soon as available,  and
         in any  event  within  sixty  (60) days  after  the end of each  fiscal
         quarter of Borrower,  a balance sheet and income  statement of Borrower
         as of the end of  such  fiscal  quarter,  in  each  case  in  form  and
         substance  and in  reasonable  detail  satisfactory  to Bank  and  duly
         certified  (subject  to  year-end  review  adjustments)  by  the  chief
         financial  officer of  Borrower  (i) as being  true and  correct in all
         material  aspects  to the  best of his or her  knowledge,  and  (ii) as
         having been prepared in accordance with generally  accepted  accounting
         principles,  consistently  applied. In addition to the above, each such
         quarterly financial  statement shall include sufficient  information to
         demonstrate,  and a  certification  by the chief  financial  officer of
         Borrower,  that  as of the  date of such  statement,  Borrower  has not
         breached  any  financial  covenant  set  forth  in  Section  9 of  this
         Agreement.  In addition to the above,  Borrower shall deliver (together
         with the quarterly financial  statements) a listing and detailed report
         in form acceptable to Bank of all accounts receivable of Borrower as of
         the last day of each fiscal  quarter,  and the period of time which has
         elapsed with  respect to such  accounts  receivable  since the original
         invoice date with respect thereto.

                                       7
<PAGE>

                  (c)  Borrower's  Tax Returns.  Borrower  shall provide to Bank
         copies of Borrower's  federal  income tax returns  within  fifteen (15)
         days following the filing thereof with the Internal Revenue Service and
         in any event no less frequently than annually.

                  (d) Guarantor's Financial Statement.  As soon as available and
         in any event within (i) ninety (90) days after the end of each calendar
         year,  or other  period as  otherwise  required by a  Guaranty,  annual
         financial  statements (balance sheet, cash flow statement and statement
         of  contingent  liabilities)  of each  Guarantor  as of the end of such
         calendar  year,  and (ii)  thirty (30) days after the date of this Loan
         Agreement, financial statements of Charles T. Allen and Orville Gregory
         Allen as of January 1, 2000.

                  (e) Liabilities.  As soon as incurred or known, information of
         any material actual or contingent liability of Borrower.

         11. Events of Default. Each of the following shall constitute an "Event
of Default" under this Loan Agreement:

                  (a) The  failure,  refusal or neglect of  Borrower to pay when
         due any part of the  principal  of, or  interest  on,  the Notes or any
         other  indebtedness or obligations  owing to Bank by Borrower from time
         to time.

                  (b) The failure of Borrower or any Obligated Party (as defined
         below) to timely and properly  observe,  keep or perform any  covenant,
         agreement, warranty or condition required herein or in any of the other
         Loan Documents.

                  (c) The  occurrence  of an event of  default  under any of the
         other Loan  Documents  or under any other  agreement  now  existing  or
         hereafter arising between Bank and Borrower.

                  (d) Any representation contained herein or in any of the other
         Loan  Documents  made by  Borrower or any  Obligated  Party is false or
         misleading in any material respect.

                  (e) The occurrence of any event which permits the acceleration
         of the  maturity  of any  indebtedness  owing by  Borrower to any third
         party under any agreement or understanding.

                  (f) If Borrower or any Obligated Party: (i) becomes insolvent,
         or makes a transfer in fraud of creditors,  or makes an assignment  for
         the benefit of creditors, or admits in writing its inability to pay its
         debts as they become  due;  (ii)  generally  is not paying its debts as
         such debts  become  due;  (iii) has a  receiver,  trustee or  custodian
         appointed for, or take possession of, all or  substantially  all of the
         assets of such party,  either in a proceeding  brought by such party or
         in a proceeding  brought against such party and such appointment is not
         discharged or such possession is not terminated  within sixty (60) days
         after  the  effective  date  thereof  or  such  party  consents  to  or
         acquiesces in such  appointment or  possession;  (iv) -files a petition
         for relief under the United States Bankruptcy Code or any other present
         or future federal or state insolvency,  bankruptcy or similar laws (all
         of the foregoing hereinafter collectively called "Applicable Bankruptcy
         Law") or an involuntary petition for relief is filed against such party
         under any Applicable  Bankruptcy Law and such  involuntary  petition is
         not dismissed  within sixty (60) days after the filing  thereof,  or an
         order for relief  naming  such party is  entered  under any  Applicable
         Bankruptcy   Law,  or  any   composition,   rearrangement,   extension,
         reorganization or other relief of debtors now or hereafter  existing is
         requested or consented to by such party;  (v) fails to have  discharged
         within a period of thirty (30) days any  attachment,  sequestration  or
         similar writ levied upon any  property of such party;  or (vi) fails to
         pay within thirty (30)days any final money judgment against such party.

                                       8
<PAGE>

                  (g) If  Borrower  or any  Obligated  Party is an  entity,  the
         liquidation,  dissolution,  merger or  consolidation of any such entity
         or, if Borrower or any Obligated  Party is an individual,  the death or
         legal incapacity of any such individual.

                  (h) The entry of any judgment against Borrower or the issuance
         or entry of any attachment or other lien against any of the property of
         Borrower for an amount in ' excess of 10,000, if undischarged, unbonded
         or undismissed within thirty (30) days after such entry.

                  (i) The failure of Guarantors to cash  collateralize the Loans
         as requested by Bank pursuant to any Guaranty.

Nothing  contained in this Loan Agreement shall be construed to limit the events
of default  enumerated in any of the other Loan Documents and all such events of
default shall be cumulative.  The term "Obligated Party", as used herein,  shall
mean any party other than Borrower who secures,  guarantees  and/or is otherwise
obligated to pay all or any portion of the indebtedness evidenced by the Notes.

         12. Remedies/Late  Charge Penalties.  Upon the occurrence of any one or
more of the  foregoing  Events of  Default,  (a) the  entire  unpaid  balance of
principal of the Notes,  together with all accrued but unpaid interest  thereon,
and all other  indebtedness owing to Bank by Borrower at such time shall, at the
option of Bank,  become  immediately  due and payable  without  further  notice,
demand, presentation, notice of dishonor, notice of intent to accelerate, notice
of  acceleration,  protest or notice of  protest  of any kind,  all of which are
expressly  waived by Borrower,  and (b) Bank may, at its option,  cease  further
advances  under  any  of  the  Notes;   provided,   however,   concurrently  and
automatically  with the occurrence of an Event of Default under subparagraph (f)
in the  immediately  preceding  paragraph (i) further  advances  under the Notes
shall  cease,  and (ii) the Notes and all  other  indebtedness  owing to Bank by
Borrower at such time shall, without any action by Bank, become due and payable,
without  further notice,  demand,  presentation,  notice of dishonor,  notice of
acceleration,  notice of intent to  accelerate,  protest or notice of protest of
any kind, all of which are expressly waived by Borrower. All rights and remedies
of Bank set forth in this Loan  Agreement and in any of the other Loan Documents
may also be  exercised  by  Bank,  at its  option  to be  exercised  in its sole
discretion, upon the occurrence of an Event of Default.

                                       9
<PAGE>

In the event that any amount due from  Borrower to Bank under this  Agreement or
under the Notes remains unpaid for a period of ten days or more, then Bank shall
be entitled to a late charge  penalty for each such  incident in an amount equal
to the  greater of (a) five  percent  (5%) of the  amount  due,  or (b)  $25.00;
provided, however, that the late charge penalty for each such incident shall not
exceed $1,500.

         13. Rights Cumulative.  All rights of Bank under the terms of this Loan
Agreement  shall be cumulative  of, and in addition to, the rights of Bank under
any and all other  agreements  between  Borrower  and Bank  (including,  but not
limited to, the other Loan Documents),  and not in substitution or diminution of
any rights now or hereafter held by Bank under the terms of any other agreement,

         14. Waiver and Agreement. Neither the failure nor any delay on the part
of Bank to exercise  any right,  power or  privilege  herein or under any of the
other Loan Documents shall operate as a waiver thereof,  nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise  thereof or the exercise of any other  right,  power or  privilege.  No
waiver of any  provision  in this  Loan  Agreement  or in any of the other  Loan
Documents and no departure by Borrower  therefrom shall be effective  unless the
same shall be in writing and signed by Bank, and then shall be effective only in
the  specific  instance  and for the  purpose  for which given and to the extent
specified in such writing.  No  modification or amendment to this Loan Agreement
or to any of the other Loan  Documents  shall be valid or  effective  unless the
same is signed by the party against whom it is sought to be enforced.

         15.  Benefits.  This Loan Agreement  shall be binding upon and inure to
the benefit of Bank and Borrower,  and their respective  successors and assigns,
provided,  however,  that Borrower may not, without the prior written consent of
Bank, assign any rights, powers, duties or obligations under this Loan Agreement
or any of the other Loan Documents.

         16. Notices.  All notices,  requests,  demands or other  communications
required or permitted to be given pursuant to this Agreement shall be in writing
and given by (i) personal  delivery,  (ii) expedited delivery service with proof
of  delivery,  or (iii) United  States mail,  postage  prepaid..  registered  or
certified mail, return receipt requested,  sent to the intended addressee at the
address set forth on the signature  page hereof and shall be deemed to have been
received either, in the case of expedited  delivery  service,  as of the date of
first attempted delivery at the address and in the manner provided herein, or in
the case of mail,  upon  deposit in a depository  receptacle  under the care and
custody of the United States Postal  Service.  Either party shall have the right
to change its  address for notice  hereunder  to any other  location  within the
continental  United  States by notice to the other  party of such new address at
least thirty (30) days prior to the effective date of such new address.

         17. Construction. This Loan Agreement and the other Loan Documents have
been  executed  and  delivered  in the State of Texas,  shall be governed by and
construed  in  accordance  with the laws of the  State of  Texas,  and  shall be
performable  by the  parties  hereto  in the  county in Texas  where the  Bank's
address set forth on the signature page hereof is located.

                                       10
<PAGE>

         18. Invalid Provisions.  If any provision of this Loan Agreement or any
of the other Loan  Documents  is held to be  illegal,  invalid or  unenforceable
under present or future laws,  such provision  shall be fully  severable and the
remaining  provisions of this Loan  Agreement or any of the other Loan Documents
shall  remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.

         19.  Expenses.  Borrower  shall pay all costs and expenses  (including,
without  limitation,  reasonable  attorneys'  fees) in  connection  with (i) any
action  required  in  the  course  of  administration  of the  indebtedness  and
obligations  evidenced  by the  Loan  Documents,  and  (ii)  any  action  in the
enforcement of Bank's rights upon the occurrence of an Event of Default.

         20.  Participation of the Loans.  Borrower agrees that Bank may, at its
option,  sell interests in the Loans and its rights under this Loan Agreement to
a financial  institution or institutions and, in connection with each such sale,
Bank  may  disclose  any  financial  and  other  information  available  to Bank
concerning Borrower to each perspective purchaser.

         21. Entire Agreement. This Loan Agreement (together with the other Loan
Documents) contains the entire agreement among the parties regarding the subject
matter  hereof  and  supersedes  all  prior  written  and  oral  agreements  and
understandings among the parties hereto regarding same.

         22.   Conflicts.   In  the  event  any  term  or  provision  hereof  is
inconsistent  with or conflicts with any provision of the other Loan  Documents,
the terms and provisions contained in this Loan Agreement shall be controlling.

         23. Counterparts. This Loan Agreement may be separately executed in any
number of  counterparts,  each of which shall be an original,  but all of which,
taken together, shall be deemed to constitute one and the same instrument.

                                       11
<PAGE>

         If the foregoing  correctly sets forth our mutual agreement,  please so
acknowledge by signing and returning this Loan Agreement to the undersigned.

                                         Very truly yours,

                                         BANK ONE, TEXAS, N.A.

                                         By:  /s/ Reed V. Thompson
                                             -----------------------------------
                                         Name:    Reed V. Thompson
                                         Title:   Vice President

                                         Bank's Address:

                                         1717 Main Street, 4th Floor
                                         Dallas, Texas 75201

ACCEPTED as of the date first written above.

AVATAR SYSTEMS, INC.                                Borrower's Address:

                                                    Avatar Systems, Inc.
                                                    5728 LBJ Freeway, Suite 270
By:   /s/ Robert C. Shreve, Jr.                     Dallas, Texas 75240
    ----------------------------------------
Name:    Robert C. Shreve, Jr.                   Attn: Mr. Robert C. Shreve, Jr.
Title:   President

                                       12

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