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                                                                EXHIBIT 10.2.1.1

                         LUMINENT MORTGAGE CAPITAL, INC.
                            2003 STOCK INCENTIVE PLAN

1.   PURPOSE OF PLAN

        The purpose of the Luminent Mortgage Capital, Inc. 2003 Stock Incentive
        Plan (this "Plan") is to promote the success of the Corporation and to
        increase stockholder value by providing an additional means through the
        grant of awards to attract, motivate, retain and reward selected
        employees and other eligible persons of the Company and to attract,
        motivate and retain experienced and knowledgeable independent directors.
        As used herein, "Corporation" means Luminent Mortgage Capital, Inc., a
        Maryland corporation; "Subsidiary" means any corporation or other entity
        a majority of whose outstanding voting stock or voting power is
        beneficially owned directly or indirectly by the Corporation; and
        "Company" means the Corporation and its Subsidiaries, collectively.

2.   ELIGIBILITY

        2.1     Eligible Persons. The Administrator (as such term is defined in
                Section 3.1) may grant awards under this Plan only to those
                persons that the Administrator determines to be Eligible
                Persons. An "Eligible Person" is any person who is either: (a)
                an officer (whether or not a director) or employee of the
                Company; (b) a director of the Company; or (c) an individual
                consultant or advisor who renders or has rendered bona fide
                services (other than services in connection with the offering or
                sale of securities of the Company in a capital-raising
                transaction or as a market maker or promoter of the Company's
                securities) to the Company and who is selected to participate in
                this Plan by the Administrator; provided, however, that a person
                who is otherwise an Eligible Person under clause (c) above may
                participate in this Plan only if such participation would not
                adversely affect either the Corporation's eligibility to use
                Form S-8 to register under the Securities Act of 1933, as
                amended (the "Securities Act"), the offering of shares issuable
                under this Plan by the Company or the Corporation's compliance
                with any other applicable laws. An Eligible Person who has been
                granted an award (a "participant") may, if otherwise eligible,
                be granted additional awards if the Administrator shall so
                determine.

        2.2     Ownership Limit. Notwithstanding anything else contained herein
                or in any award hereunder to the contrary, no Person may receive
                Common Stock upon the grant, exercise or payment of an award to
                the extent that it will cause such Person to Beneficially Own or
                Constructively Own Capital Stock in excess of the Ownership
                Limit. If a Person would be entitled to receive or acquire
                shares of Common Stock but for the limitation of the preceding
                sentence, the Corporation shall have the right to deliver to the
                Person, in lieu of Common Stock, a check or cash in the amount
                equal to the value of the Common Stock otherwise deliverable,
                subject to any applicable tax withholding or other authorized
                deductions. For purposes of this limitation, the terms "Person,"
                "Beneficially Own," "Constructively Own," "Capital Stock," and
                "Ownership Limit" are used as defined in the Corporation's
                Articles of Incorporation.

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3.   PLAN ADMINISTRATION

        3.1     The Administrator. This Plan shall be administered by and all
                awards under this Plan shall be authorized by the Administrator.
                The "Administrator" means the Board of Directors of the
                Corporation (the "Board") or one or more committees appointed by
                the Board or another committee (within its delegated authority)
                to administer all or certain aspects of this Plan. Any such
                committee shall be comprised solely of one or more directors or
                such number of directors as may be required under applicable
                law. A committee may delegate some or all of its authority to
                another committee so constituted. The Board or a committee
                comprised solely of directors may also delegate, to the extent
                permitted by the Maryland General Corporation Law and any other
                applicable law, to one or more officers of the Corporation, its
                powers under this Plan (a) to designate the officers and
                employees of the Company who will receive grants of rights or
                options to purchase shares of Common Stock (as defined in
                Section 4.1), and (b) to determine the number of rights or
                options to be received by them, pursuant to a resolution that
                specifies the total number of rights or options that may be
                granted under the delegation, provided that no officer may be
                delegated the power to designate himself or herself as a
                recipient of such options or rights. The Board may delegate
                different levels of authority to different committees with
                administrative and grant authority under this Plan.
                Notwithstanding the foregoing, only the Board (and not any
                delegate of the Board) may approve an award grant to a member of
                the Board who is not employed by the Corporation or one of its
                Subsidiaries. Unless otherwise provided in the Bylaws of the
                Corporation or the applicable charter of any Administrator: (a)
                a majority of the members of the acting Administrator shall
                constitute a quorum, and (b) the vote of a majority of the
                members present assuming the presence of a quorum or the
                unanimous written consent of the members of the Administrator
                shall constitute action by the acting Administrator.

        3.2     Powers of the Administrator. Subject to the express provisions
                of this Plan and compliance with Section 2-203 of the Maryland
                General Corporation Law, the Administrator is authorized and
                empowered to do all things necessary or desirable in connection
                with the authorization of awards and the administration of this
                Plan (in the case of a committee or delegation to one or more
                officers, within the authority delegated to that committee or
                person(s)), including, without limitation, the authority to:

                (a)     determine eligibility and, from among those persons
                        determined to be eligible, the particular Eligible
                        Persons who will receive an award under this Plan;

                (b)     grant awards to Eligible Persons, determine the price at
                        which securities will be offered or awarded and the
                        number of securities to be offered or awarded to any of
                        such persons, determine the other specific terms and
                        conditions of such awards consistent with the express
                        limits of this Plan, establish the installments (if any)
                        in which such awards shall become exercisable or shall
                        vest (which may include, without limitation, performance
                        and/or time-based schedules), or determine that no
                        delayed

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                        exercisability or vesting is required, establish any
                        applicable performance targets, and establish the events
                        of termination or reversion of such awards;

                (c)     approve the forms of award agreements (which need not be
                        identical either as to type of award or among
                        participants);

                (d)     construe and interpret this Plan and any agreements
                        defining the rights and obligations of the Company and
                        participants under this Plan, further define the terms
                        used in this Plan, and prescribe, amend and rescind
                        rules and regulations relating to the administration of
                        this Plan or the awards granted under this Plan;

                (e)     cancel, modify, or waive the Corporation's rights with
                        respect to, or modify, discontinue, suspend, or
                        terminate any or all outstanding awards, subject to any
                        required consent under Section 8.6.5;

                (f)     accelerate or extend the vesting or exercisability or
                        extend the term of any or all such outstanding awards
                        (in the case of options or stock appreciation rights,
                        within the maximum ten-year term of such awards) in such
                        circumstances as the Administrator may deem appropriate
                        (including, without limitation, in connection with a
                        termination of employment or services or other events of
                        a personal nature) subject to any required consent under
                        Section 8.6.5;

                (g)     adjust the number of shares of Common Stock subject to
                        any award, adjust the price of any or all outstanding
                        awards, reprice any or all outstanding awards (by
                        amendment, exchange, or other means) or otherwise change
                        previously imposed terms and conditions, in such
                        circumstances as the Administrator may deem appropriate,
                        in each case subject to Sections 4 and 8.6;

                (h)     determine the date of grant of an award, which may be a
                        designated date after but not before the date of the
                        Administrator's action (unless otherwise designated by
                        the Administrator, the date of grant of an award shall
                        be the date upon which the Administrator took the action
                        granting an award);

                (i)     determine whether, and the extent to which, adjustments
                        are required pursuant to Section 7 hereof and authorize
                        the termination, conversion, substitution or succession
                        of awards upon the occurrence of an event of the type
                        described in Section 7;

                (j)     acquire or settle (subject to Sections 7 and 8.6) rights
                        under awards in cash, stock of equivalent value, or
                        other consideration; and

                (k)     determine the fair market value of the Common Stock or
                        awards under this Plan from time to time and/or the
                        manner in which such value will be determined.

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        3.3     Binding Determinations. Any action taken by, or inaction of, the
                Corporation, any Subsidiary, or the Administrator relating or
                pursuant to this Plan and within its authority hereunder or
                under applicable law shall be within the absolute discretion of
                that entity or body and shall be conclusive and binding upon all
                persons. Neither the Board nor any Board committee, nor any
                member thereof or person acting at the direction thereof, shall
                be liable for any act, omission, interpretation, construction or
                determination made in good faith in connection with this Plan
                (or any award made under this Plan), and all such persons shall
                be entitled to indemnification and reimbursement by the Company
                in respect of any claim, loss, damage or expense (including,
                without limitation, attorneys' fees) arising or resulting
                therefrom to the fullest extent permitted by law and/or under
                any directors and officers liability insurance coverage that may
                be in effect from time to time.

        3.4     Reliance on Experts. In making any determination or in taking or
                not taking any action under this Plan, the Board or a committee,
                as the case may be, may obtain and may rely upon the advice of
                experts, including employees and professional advisors to the
                Corporation. No director, officer or agent of the Company shall
                be liable for any such action or determination taken or made or
                omitted in good faith.

        3.5     Delegation. The Administrator may delegate ministerial,
                non-discretionary functions to individuals who are officers or
                employees of the Company or to third parties.

4.   SHARES OF COMMON STOCK SUBJECT TO THE PLAN; SHARE LIMITS

        4.1     Shares Available. Subject to the provisions of Section 7.1, the
                capital stock that may be delivered under this Plan shall be
                shares of the Corporation's authorized but unissued Common Stock
                and any shares of its Common Stock held as treasury shares. For
                purposes of this Plan, "Common Stock" shall mean the common
                stock of the Corporation and such other securities or property
                as may become the subject of awards under this Plan, or may
                become subject to such awards, pursuant to an adjustment made
                under Section 7.1.

        4.2     Share Limits. The maximum number of shares of Common Stock that
                may be delivered pursuant to awards granted to Eligible Persons
                under this Plan (the "Share Limit") is equal to (a) 1,000,000
                shares, minus (b) the number of any shares of Common Stock
                issued under (and not reacquired pursuant to) the Corporation's
                2003 Outside Advisors Stock Incentive Plan. The maximum number
                of shares of Common Stock that may be delivered pursuant to
                options qualified as incentive stock options granted under this
                Plan is 1,000,000 shares. Each of the foregoing numerical limits
                is subject to adjustment as contemplated by Section 4.3, Section
                7.1, and Section 8.10.

        4.3     Awards Settled in Cash, Reissue of Awards and Shares. To the
                extent that an award is settled in cash or a form other than
                shares of Common Stock, the shares that would have been
                delivered had there been no such cash or other settlement shall
                not be counted against the shares available for issuance under
                this Plan. In the event that shares are delivered in respect of
                a dividend equivalent, stock

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                appreciation right, or other award, only the actual number of
                shares delivered with respect to the award shall be counted
                against the share limits of this Plan. Shares that are subject
                to or underlie awards which expire or for any reason are
                cancelled or terminated, are forfeited, fail to vest, or for any
                other reason are not paid or delivered under this Plan shall
                again be available for subsequent awards under this Plan. Shares
                that are exchanged by a participant or withheld by the
                Corporation as full or partial payment in connection with any
                award under this Plan, as well as any shares exchanged by a
                participant or withheld by the Company to satisfy the tax
                withholding obligations related to any award under this Plan,
                shall be available for subsequent awards under this Plan. Refer
                to Section 8.10 for application of the foregoing share limits
                with respect to assumed awards.

        4.4     Reservation of Shares; No Fractional Shares; Minimum Issue. The
                Corporation shall at all times reserve a number of shares of
                Common Stock sufficient to cover the Corporation's obligations
                and contingent obligations to deliver shares with respect to
                awards then outstanding under this Plan (exclusive of any
                dividend equivalent obligations to the extent the Corporation
                has the right to settle such rights in cash). No fractional
                shares shall be delivered under this Plan. The Administrator may
                pay cash in lieu of any fractional shares in settlements of
                awards under this Plan. No fewer than one hundred (100) shares
                may be purchased on exercise of any award (or, in the case of
                stock appreciation or purchase rights, no fewer than one hundred
                (100) rights may be exercised at any one time) unless the total
                number purchased or exercised is the total number at the time
                available for purchase or exercise under the award.

5.   AWARDS

        5.1     Type and Form of Awards. The Administrator shall determine the
                type or types of award(s) to be made to each selected Eligible
                Person. Awards may be granted singly, in combination or in
                tandem. Awards also may be made in combination or in tandem
                with, in replacement of, as alternatives to, or as the payment
                form for grants or rights under any other employee or
                compensation plan of the Company. The types of awards that may
                be granted under this Plan are:

                5.1.1 Stock Options. A stock option is the grant of a right to
                purchase a specified number of shares of Common Stock during a
                specified period as determined by the Administrator. An option
                may be intended as an incentive stock option (an "ISO") within
                the meaning of Section 422 of the Code or a nonqualified stock
                option (an option not intended to be an ISO). The award
                agreement for an option will indicate if the option is intended
                as an ISO, otherwise it will be deemed to be a nonqualified
                stock option. The maximum term of each option (ISO or
                nonqualified) shall be ten (10) years. The per share exercise
                price for each option shall be determined by the Administrator
                and set forth in the applicable award agreement and, in the case
                of an ISO, shall not be less than 100% of the fair market value
                of a share of Common Stock on the date of grant of the option.
                When an option is exercised, the exercise price for the shares
                to be purchased shall be paid in full in cash or such other
                method permitted by the Administrator consistent with Section
                5.4.

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                5.1.2 Additional Rules Applicable to ISOs. To the extent that
                the aggregate fair market value (determined at the time of grant
                of the applicable option) of stock with respect to which ISOs
                first become exercisable by a participant in any calendar year
                exceeds $100,000, taking into account both Common Stock subject
                to ISOs under this Plan and stock subject to ISOs under all
                other plans of the Company (or any parent or predecessor
                corporation to the extent required by and within the meaning of
                Section 422 of the Code and the regulations promulgated
                thereunder), such options shall be treated as nonqualified stock
                options. In reducing the number of options treated as ISOs to
                meet the $100,000 limit, the most recently granted options shall
                be reduced first. To the extent a reduction of simultaneously
                granted options is necessary to meet the $100,000 limit, the
                Administrator may, in the manner and to the extent permitted by
                law, designate which shares of Common Stock are to be treated as
                shares acquired pursuant to the exercise of an ISO. ISOs may
                only be granted to employees of the Corporation or one of its
                subsidiaries (for this purpose, the term "subsidiary" is used as
                defined in Section 424(f) of the Code, which generally requires
                an unbroken chain of ownership of at least 50% of the total
                combined voting power of all classes of stock of each subsidiary
                in the chain beginning with the Corporation and ending with the
                subsidiary in question). There shall be imposed in any award
                agreement relating to ISOs such other terms and conditions as
                from time to time are required in order that the option be an
                "incentive stock option" as that term is defined in Section 422
                of the Code. No ISO may be granted to any person who, at the
                time the option is granted, owns (or is deemed to own under
                Section 424(d) of the Code) shares of outstanding Common Stock
                possessing more than 10% of the total combined voting power of
                all classes of stock of the Corporation, unless the exercise
                price of such option is at least 110% of the fair market value
                of the stock subject to the option and such option by its terms
                is not exercisable after the expiration of five years from the
                date such option is granted.

                5.1.3 Stock Appreciation Rights. A stock appreciation right or
                "SAR" is a right to receive a payment, in cash and/or Common
                Stock, equal to the excess of the fair market value of a
                specified number of shares of Common Stock on the date the SAR
                is exercised over a per share amount (the "base price")
                determined by the Administrator and set forth in the applicable
                award agreement. The maximum term of an SAR shall be ten (10)
                years. The Administrator may grant limited SARs which are
                exercisable only upon a change in control or other specified
                event and may be payable based on the spread between the base
                price of the SAR and the fair market value of a share of Common
                Stock during a specified period or at a specified time within a
                specified period before, after or including the date of such
                event.

                5.1.4 Other Awards. The other types of awards that may be
                granted under this Plan include: (a) stock bonuses, restricted
                stock, performance stock, stock units, phantom stock, dividend
                equivalents, or similar rights to purchase or acquire shares,
                whether at a fixed or variable price or ratio related to the
                Common Stock, upon the passage of time, the occurrence of one or
                more events, or the satisfaction of performance criteria or
                other conditions, or any combination thereof; or (b) any similar
                securities with a value derived from the value of or related to
                the Common Stock and/or returns thereon.

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        5.2     Award Agreements. Each award shall be evidenced by a written
                award agreement in the form approved by the Administrator and
                executed on behalf of the Corporation and, if required by the
                Administrator, executed by the recipient of the award. The
                Administrator may authorize any officer of the Corporation
                (other than the particular award recipient) to execute any or
                all award agreements on behalf of the Corporation. The award
                agreement shall set forth the material terms and conditions of
                the award as established by the Administrator consistent with
                the express limitations of this Plan.

        5.3     Deferrals and Settlements. Payment of awards may be in the
                form of cash, Common Stock, other awards or combinations thereof
                as the Administrator shall determine, and with such restrictions
                as it may impose. The Administrator may also require or permit
                participants to elect to defer the issuance of shares or the
                settlement of awards in cash under such rules and procedures as
                it may establish under this Plan. The Administrator may also
                provide that deferred settlements include the payment or
                crediting of interest or other earnings on the deferral amounts,
                or the payment or crediting of dividend equivalents where the
                deferred amounts are denominated in shares.

        5.4     Consideration for Common Stock or Awards. The purchase price
                for any award granted under this Plan or the Common Stock to be
                delivered pursuant to an award, as applicable, may be paid by
                means of any lawful consideration as determined by the
                Administrator, including, without limitation, one or a
                combination of the following methods:

                .       services rendered by the recipient of such award;

                .       cash, check payable to the order of the Corporation, or
                        electronic funds transfer;

                .       notice and third party payment in such manner as may be
                        authorized by the Administrator;

                .       the delivery of previously owned shares of Common Stock;

                .       by a reduction in the number of shares otherwise
                        deliverable pursuant to the award;

                .       by delivery of one or more promissory notes from the
                        Eligible Person, provided that any such note shall be
                        subject to terms and conditions established by the
                        Administrator and the requirements of applicable law; or

                .       subject to such procedures as the Administrator may
                        adopt, pursuant to a "cashless exercise" with a third
                        party who provides financing for the purposes of (or who
                        otherwise facilitates) the purchase or exercise of
                        awards.

                In no event shall any shares newly-issued by the Corporation be
                issued for less than the minimum lawful consideration for such
                shares or for consideration other than consideration permitted
                by applicable state law. In the event that the

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                Administrator allows a participant to exercise an award by
                delivering shares of Common Stock previously owned by such
                participant and unless otherwise expressly provided by the
                Administrator, any shares delivered which were initially
                acquired by the participant from the Corporation (upon exercise
                of a stock option or otherwise) must have been owned by the
                participant at least six months as of the date of delivery.
                Shares of Common Stock used to satisfy the exercise price of an
                option shall be valued at their fair market value on the date of
                exercise. The Corporation will not be obligated to deliver any
                shares unless and until it receives full payment of the exercise
                or purchase price therefor and any related withholding
                obligations under Section 8.5 and any other conditions to
                exercise or purchase have been satisfied. Unless otherwise
                expressly provided in the applicable award agreement, the
                Administrator may at any time eliminate or limit a participant's
                ability to pay the purchase or exercise price of any award or
                shares by any method other than cash payment to the Corporation.

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        5.5     Definition of Fair Market Value. For purposes of this Plan,
                "fair market value" shall mean, unless otherwise determined or
                provided by the Administrator in the circumstances: (a) the
                closing price of a share of Common Stock as reported on the
                composite tape of the principal national securities exchange on
                which the Common Stock is listed or admitted to trade (the
                "Exchange") for the date in question or, if no sales of Common
                Stock were made on the Exchange on that date (or if the market
                has not closed at the applicable time), the closing price of a
                share of Common Stock as reported on the composite tape of the
                Exchange for the next preceding day on which sales of Common
                Stock were made on the Exchange; or (b) if the stock is not
                listed or admitted to trade on a national securities exchange,
                then the last trading price for a share of Common Stock for the
                date in question (or as of the most recent trading date if there
                were no sales of Common Stock on the date in question or if the
                market has not closed at the applicable time) as furnished by
                the National Association of Securities Dealers, Inc. ("NASD").
                The Administrator may, however, provide with respect to one or
                more awards that the fair market value shall equal the last
                closing or trading price of a share of Common Stock as reported
                on the composite tape of the Exchange or by the NASD available
                on the date in question or the average of the high and low
                prices, or the average of the bid and asked prices, of a share
                of Common Stock as reported on the composite tape of the
                Exchange or by the NASD (or by a similar organization if the
                NASD is no longer reporting such information) for the date in
                question or the most recent trading day. If the Common Stock is
                not listed or admitted to trade on a national securities
                exchange and if prices for the Common Stock are not furnished by
                the NASD, or if the Common Stock is not actively traded as of
                the applicable date, the fair market value of the Common Stock
                shall be the value as reasonably determined by the Administrator
                for purposes of the award in the circumstances. The
                Administrator also may adopt a different methodology for
                determining fair market value with respect to one or more awards
                if a different methodology is necessary or advisable to secure
                any intended favorable tax, legal or other treatment for the
                particular award(s) (for example, and without limitation, the
                Administrator may provide that fair market value for purposes of
                one or more awards will be based on an average of closing prices
                (or the average of high and low daily trading prices) for a
                specified period preceding the relevant date).

        5.6     TRANSFER RESTRICTIONS.

                5.6.1 Limitations on Exercise and Transfer. Unless otherwise
                expressly provided in (or pursuant to) this Section 5.6, by
                applicable law and by the award agreement, as the same may be
                amended, (a) all awards are non-transferable and shall not be
                subject in any manner to sale, transfer, anticipation,
                alienation, assignment, pledge, encumbrance or charge; (b)
                awards shall be exercised only by the participant; and (c)
                amounts payable or shares issuable pursuant to any award shall
                be delivered only to (or for the account of) the participant.

                5.6.2 Further Exceptions to Limits on Transfer. The exercise and
                transfer restrictions in Section 5.6.1 shall not apply to:

                (a)     transfers to the Corporation,

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                (b)     the designation of a beneficiary to receive benefits in
                        the event of the participant's death or, if the
                        participant has died, transfers to or exercise by the
                        participant's beneficiary, or, in the absence of a
                        validly designated beneficiary, transfers by will or the
                        laws of descent and distribution,

                (c)     transfers by gift to "immediate family" as that term is
                        defined in Rule 16a-1(e) promulgated under the
                        Securities Exchange Act of 1934, as amended,

                (d)     if the participant has suffered a disability, permitted
                        transfers or exercises on behalf of the participant by
                        his or her legal representative, or

                (e)     the authorization by the Administrator of "cashless
                        exercise" procedures with third parties who provide
                        financing for the purpose of (or who otherwise
                        facilitate) the exercise of awards consistent with
                        applicable laws and the express authorization of the
                        Administrator.

                Notwithstanding the foregoing or anything in Section 5.6.1, ISOs
                and restricted stock awards shall be subject to any and all
                additional transfer restrictions under the Code to the extent
                necessary to maintain the intended tax consequences of such
                awards. Notwithstanding clause (c) above but subject to
                compliance with all applicable laws, any contemplated transfer
                by gift to "immediate family" as referenced in clause (c) above
                is subject to the condition precedent that the transfer be
                approved by the Administrator in order for it to be effective.

        5.7     International Awards. One or more awards may be granted to
                Eligible Persons who provide services to the Company outside of
                the United States. Any awards granted to such persons may be
                granted pursuant to the terms and conditions of any applicable
                sub-plans, if any, appended to this Plan and approved by the
                Administrator.

        5.8     Certain Minimum Requirements That May Apply Under California
                Securities Laws. The following limitations shall apply with
                respect to awards under this Plan or, as the case may be, the
                Administrator's authority with respect thereto; provided that
                the following limitations shall apply only to the extent
                required in order to satisfy applicable securities laws:

                (a)     Subject to any applicable termination of employment
                        rules, each option and restricted stock award granted
                        under this Plan shall vest and become exercisable at a
                        rate of less than 20% per year over five years after the
                        date the option is granted, except that an option or
                        restricted stock award granted to an officer, director,
                        or consultant of the Company shall not be subject to
                        this minimum vesting requirement.

                (b)     Subject to any greater amount that may be required
                        pursuant to the terms hereof, in no case will the per
                        share exercise price of an option or the purchase price
                        of a share of restricted stock granted under this Plan
                        be less than 85% of fair market value of the Common
                        Stock on the date of grant of the award.

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                (c)     Subject to any greater amount that may be required
                        pursuant to the terms hereof, in no case will the per
                        share exercise price of an option or the purchase price
                        of a share of restricted stock granted under this Plan
                        to a 10% stockholder described in Section 5.1.2 be less
                        than 110% of fair market value of the Common Stock on
                        the date of grant in the case of an option or, in the
                        case of a restricted stock grant, 100% of the fair
                        market value of the Common Stock on the date of grant.

                (d)     The Corporation shall provide the recipients of awards
                        under this Plan with financial statements of the
                        Corporation at least annually.

                (e)     Subject to such longer period as the Administrator may
                        provide in the circumstances, each option granted under
                        this Plan, to the extent exercisable on the date the
                        option holder's employment by or service to the Company
                        terminates, shall continue to be exercisable for at
                        least six months after such date of termination if the
                        termination is the result of the option holder's death
                        or disability, or shall continue to be exercisable for
                        at least thirty (30) days after such date of termination
                        if the termination is caused by any other reason (other
                        than a termination for cause as defined in the
                        applicable award agreement). In no case, however, may an
                        option be exercised after the expiration of its stated
                        maximum term and in all cases awards remain subject to
                        earlier termination pursuant to Section 7.

6.   EFFECT OF TERMINATION OF EMPLOYMENT OR SERVICE ON AWARDS

        6.1     General. The Administrator shall establish the effect of a
                termination of employment or service on the rights and benefits
                under each award under this Plan and in so doing may make
                distinctions based upon, inter alia, the cause of termination
                and type of award. If the participant is not an employee or
                director of the Company and provides other services to the
                Company, the Administrator shall be the sole judge for purposes
                of this Plan (unless a contract or the award otherwise provides)
                of whether the participant continues to render services to the
                Company and the date, if any, upon which such services shall be
                deemed to have terminated.

        6.2     Events Not Deemed Terminations of Employment. Unless Company
                policy or the Administrator otherwise provides, the employment
                relationship shall not be considered terminated in the case of
                (a) sick leave, (b) military leave, or (c) any other leave of
                absence authorized by the Company or the Administrator; provided
                that unless reemployment upon the expiration of such leave is
                guaranteed by contract or law, such leave is for a period of not
                more than ninety (90) days. In the case of any employee of the
                Company on an approved leave of absence, continued vesting of
                the award while on leave from the employ of the Company may be
                suspended until the employee returns to service, unless the
                Administrator otherwise provides or applicable law otherwise
                requires. In no event shall an award be exercised after the
                expiration of the term set forth in the award agreement.

                                       11

<PAGE>

        6.3     Effect of Change of Subsidiary Status. For purposes of this Plan
                and any award, if an entity ceases to be a Subsidiary of the
                Corporation a termination of employment or service shall be
                deemed to have occurred with respect to each Eligible Person in
                respect of such Subsidiary who does not continue as an Eligible
                Person in respect of another entity within the Company after
                giving effect to the Subsidiary's change in status.

7.   ADJUSTMENTS; ACCELERATION

        7.1     Adjustments. Upon or in contemplation of: any reclassification,
                recapitalization, stock split (including a stock split in the
                form of a stock dividend) or reverse stock split ("stock
                split"); any merger, combination, consolidation, or other
                reorganization; any spin-off, split-up, or similar extraordinary
                dividend distribution in respect of the Common Stock (whether in
                the form of securities or property); any exchange of Common
                Stock or other securities of the Corporation, or any similar,
                unusual or extraordinary corporate transaction in respect of the
                Common Stock; or a sale of all or substantially all the business
                or assets of the Corporation as an entirety; then the
                Administrator shall, in such manner, to such extent (if any) and
                at such time as it deems appropriate and equitable in the
                circumstances:

                (a)     proportionately adjust any or all of (1) the number and
                        type of shares of Common Stock (or other securities)
                        that thereafter may be made the subject of awards
                        (including the specific share limits, maximums and
                        numbers of shares set forth elsewhere in this Plan), (2)
                        the number, amount and type of shares of Common Stock
                        (or other securities or property) subject to any or all
                        outstanding awards, (3) the grant, purchase, or exercise
                        price (which term includes the base price of any SAR or
                        similar right) of any or all outstanding awards, (4) the
                        securities, cash or other property deliverable upon
                        exercise or payment of any outstanding awards, or (5)
                        (subject to Section 7.7) the performance standards
                        applicable to any outstanding awards, or

                (b)     make provision for a cash payment or for the assumption,
                        substitution or exchange of any or all outstanding
                        share-based awards or the cash, securities or property
                        deliverable to the holder of any or all outstanding
                        share-based awards, based upon the distribution or
                        consideration payable to holders of the Common Stock
                        upon or in respect of such event.

                The Administrator may adopt such valuation methodologies for
                outstanding awards as it deems reasonable in the event of a cash
                or property settlement and, in the case of options, SARs or
                similar rights, but without limitation on other methodologies,
                may base such settlement solely upon the excess if any of the
                per share amount payable upon or in respect of such event over
                the exercise or base price of the award. With respect to any
                award of an ISO, the Administrator may make such an adjustment
                that causes the option to cease to qualify as an ISO without the
                consent of the affected participant.

                                       12

<PAGE>

                In any of such events, the Administrator may take such action
                prior to such event to the extent that the Administrator deems
                the action necessary to permit the participant to realize the
                benefits intended to be conveyed with respect to the underlying
                shares in the same manner as is or will be available to
                stockholders generally. In the case of any stock split or
                reverse stock split, if no action is taken by the Administrator,
                the proportionate adjustments contemplated by clause (a) above
                shall nevertheless be made.

        7.2     Automatic Acceleration of Awards. Upon a dissolution of the
                Corporation or other event described in Section 7.1 that the
                Corporation does not survive (or does not survive as a public
                company in respect of its Common Stock), then each then
                outstanding option and SAR shall become fully vested, all shares
                of restricted stock then outstanding shall fully vest free of
                restrictions, and each other award granted under this Plan that
                is then outstanding shall become payable to the holder of such
                award; provided that such acceleration provision shall not
                apply, unless otherwise expressly provided by the Administrator,
                with respect to any award to the extent that the Administrator
                has made a provision for the substitution, assumption, exchange
                or other continuation or settlement of the award, or the award
                would otherwise continue in accordance with its terms, in the
                circumstances.

        7.3     Possible Acceleration of Awards. Without limiting Section 7.2,
                in the event of a Change in Control Event (as defined below),
                the Administrator may, in its discretion, provide that any
                outstanding option or SAR shall become fully vested, that any
                share of restricted stock then outstanding shall fully vest free
                of restrictions, and that any other award granted under this
                Plan that is then outstanding shall be payable to the holder of
                such award. The Administrator may take such action with respect
                to all awards then outstanding or only with respect to certain
                specific awards identified by the Administrator in the
                circumstances. For purposes of this Plan, "Change in Control
                Event" means any of the following:

                (a)     The acquisition by any individual, entity or group
                        (within the meaning of Section 13(d)(3) or 14(d)(2) of
                        the Securities Exchange Act of 1934, as amended (a
                        "Person")) of beneficial ownership (within the meaning
                        of Rule 13d-3 promulgated under the Securities Exchange
                        Act of 1934, as amended) of 20% or more of either (1)
                        the then-outstanding shares of common stock of the
                        Corporation (the "Outstanding Company Common Stock") or
                        (2) the combined voting power of the then-outstanding
                        voting securities of the Corporation entitled to vote
                        generally in the election of directors (the "Outstanding
                        Company Voting Securities"); provided, however, that,
                        for purposes of this definition, the following
                        acquisitions shall not constitute a Change in Control
                        Event; (A) any acquisition directly from the
                        Corporation, (B) any acquisition by the Corporation, (C)
                        any acquisition by any employee benefit plan (or related
                        trust) sponsored or maintained by the Corporation or any
                        affiliate of the Corporation or a successor, or (D) any
                        acquisition by any entity pursuant to a transaction that
                        complies with Sections (c)(1), (2) and (3) below;

                                       13

<PAGE>

                (b)     Individuals who, as of the Effective Date, constitute
                        the Board (the "Incumbent Board") cease for any reason
                        to constitute at least a majority of the Board;
                        provided, however, that any individual becoming a
                        director subsequent to the Effective Date whose
                        election, or nomination for election by the
                        Corporation's stockholders, was approved by a vote of at
                        least two-thirds of the directors then comprising the
                        Incumbent Board (including for these purposes, the new
                        members whose election or nomination was so approved,
                        without counting the member and his predecessor twice)
                        shall be considered as though such individual were a
                        member of the Incumbent Board, but excluding, for this
                        purpose, any such individual whose initial assumption of
                        office occurs as a result of an actual or threatened
                        election contest with respect to the election or removal
                        of directors or other actual or threatened solicitation
                        of proxies or consents by or on behalf of a Person other
                        than the Board;

                (c)     Consummation of a reorganization, merger, statutory
                        share exchange or consolidation or similar corporate
                        transaction involving the Corporation or any of its
                        Subsidiaries, a sale or other disposition of all or
                        substantially all of the assets of the Corporation, or
                        the acquisition of assets or stock of another entity by
                        the Corporation or any of its Subsidiaries (each, a
                        "Business Combination"), in each case unless, following
                        such Business Combination, (1) all or substantially all
                        of the individuals and entities that were the beneficial
                        owners of the Outstanding Company Common Stock and the
                        Outstanding Company Voting Securities immediately prior
                        to such Business Combination beneficially own, directly
                        or indirectly, more than 50% of the then-outstanding
                        shares of common stock and the combined voting power of
                        the then-outstanding voting securities entitled to vote
                        generally in the election of directors, as the case may
                        be, of the entity resulting from such Business
                        Combination (including, without limitation, an entity
                        that, as a result of such transaction, owns the
                        Corporation or all or substantially all of the
                        Corporation's assets directly or through one or more
                        subsidiaries (a "Parent")) in substantially the same
                        proportions as their ownership immediately prior to such
                        Business Combination of the Outstanding Company Common
                        Stock and the Outstanding Company Voting Securities, as
                        the case may be, (2) no Person (excluding any entity
                        resulting from such Business Combination or a Parent or
                        any employee benefit plan (or related trust) of the
                        Corporation or such entity resulting from such Business
                        Combination or Parent) beneficially owns, directly or
                        indirectly, 20% or more of, respectively, the
                        then-outstanding shares of common stock of the entity
                        resulting from such Business Combination or the combined
                        voting power of the then-outstanding voting securities
                        of such entity, except to the extent that the ownership
                        in excess of 20% existed prior to the Business
                        Combination, and (3) at least a majority of the members
                        of the board of directors or trustees of the entity
                        resulting from such Business Combination or a Parent
                        were members of the Incumbent Board at the time of the
                        execution of the initial agreement or of the action of
                        the Board providing for such Business Combination; or

                                       14

<PAGE>

                (d)     Approval by the stockholders of the Corporation of a
                        complete liquidation or dissolution of the Corporation
                        other than in the context of a transaction that does not
                        constitute a Change in Control Event under clause (c)
                        above.

        7.4     Early Termination of Awards. Any award that has been accelerated
                as required or contemplated by Section 7.2 or 7.3 (or would have
                been so accelerated but for Section 7.5, 7.6 or 7.7) shall
                terminate upon the related event referred to in Section 7.2 or
                7.3, as applicable, subject to any provision that has been
                expressly made by the Administrator, through a plan of
                reorganization or otherwise, for the survival, substitution,
                assumption, exchange or other continuation or settlement of such
                award and provided that, in the case of options and SARs that
                will not survive, be substituted for, assumed, exchanged, or
                otherwise continued or settled in the transaction, the holder of
                such award shall be given reasonable advance notice of the
                impending termination and a reasonable opportunity to exercise
                his or her outstanding options and SARs in accordance with their
                terms before the termination of such awards (except that in no
                case shall more than ten days' notice of accelerated vesting and
                the impending termination be required and any acceleration may
                be made contingent upon the actual occurrence of the event).

        7.5     Other Acceleration Rules. Any acceleration of awards pursuant to
                this Section 7 shall comply with applicable legal requirements
                and, if necessary to accomplish the purposes of the acceleration
                or if the circumstances require, may be deemed by the
                Administrator to occur a limited period of time not greater than
                thirty (30) days before the event. Without limiting the
                generality of the foregoing, the Administrator may deem an
                acceleration to occur immediately prior to the applicable event
                and/or reinstate the original terms of an award if an event
                giving rise to an acceleration does not occur. The Administrator
                may override the provisions of Section 7.2, 7.3, 7.4 and/or 7.6
                by express provision in the award agreement and may accord any
                Eligible Person a right to refuse any acceleration, whether
                pursuant to the award agreement or otherwise, in such
                circumstances as the Administrator may approve. The portion of
                any ISO accelerated in connection with a Change in Control Event
                or any other action permitted hereunder shall remain exercisable
                as an ISO only to the extent the applicable $100,000 limitation
                on ISOs is not exceeded. To the extent exceeded, the accelerated
                portion of the option shall be exercisable as a nonqualified
                stock option under the Code.

        7.6     Possible Rescission of Acceleration. If the vesting of an award
                has been accelerated expressly in anticipation of an event or
                upon stockholder approval of an event and the Administrator
                later determines that the event will not occur, the
                Administrator may rescind the effect of the acceleration as to
                any then outstanding and unexercised or otherwise unvested
                awards.

        7.7     Golden Parachute Limitation. Notwithstanding anything else
                contained in this Section 7 to the contrary, in no event shall
                an award be accelerated under this Plan to an extent or in a
                manner which would not be fully deductible by the Company for
                federal income tax purposes because of Section 280G of the Code,
                nor shall any payment hereunder be accelerated to the extent any
                portion of such accelerated payment would not be deductible by
                the Company because of Section

                                       15

<PAGE>

                280G of the Code. If a participant would be entitled to benefits
                or payments hereunder and under any other plan or program that
                would constitute "parachute payments" as defined in Section 280G
                of the Code, then the participant may by written notice to the
                Company designate the order in which such parachute payments
                will be reduced or modified so that the Company is not denied
                federal income tax deductions for any "parachute payments"
                because of Section 280G of the Code. Notwithstanding the
                foregoing, an employment or other agreement with the participant
                may expressly provide for benefits in excess of amounts
                determined by applying the foregoing Section 280G limitations.

8.   OTHER PROVISIONS

        8.1     Compliance with Laws. This Plan, the granting and vesting of
                awards under this Plan, the offer, issuance and delivery of
                shares of Common Stock, the acceptance of promissory notes
                and/or the payment of money under this Plan or under awards are
                subject to compliance with all applicable federal and state
                laws, rules and regulations (including but not limited to state
                and federal securities law, federal margin requirements) and to
                such approvals by any listing, regulatory or governmental
                authority as may, in the opinion of counsel for the Company, be
                necessary or advisable in connection therewith. The person
                acquiring any securities under this Plan will, if requested by
                the Company, provide such assurances and representations to the
                Company as the Administrator may deem necessary or desirable to
                assure compliance with all applicable legal and accounting
                requirements.

        8.2     Employment Status. No person shall have any claim or rights to
                be granted an award (or additional awards, as the case may be)
                under this Plan, subject to any express contractual rights (set
                forth in a document other than this Plan) to the contrary.

        8.3     No Employment/Service Contract. Nothing contained in this Plan
                (or in any other documents under this Plan or in any award)
                shall confer upon any Eligible Person or other participant any
                right to continue in the employ or other service of the Company,
                constitute any contract or agreement of employment or other
                service or affect an employee's status as an employee at will,
                nor shall interfere in any way with the right of the Company to
                change a person's compensation or other benefits, or to
                terminate his or her employment or other service, with or
                without cause. Nothing in this Section 8.3, however, is intended
                to adversely affect any express independent right of such person
                under a separate employment or service contract other than an
                award agreement.

        8.4     Plan Not Funded. Awards payable under this Plan shall be payable
                in shares or from the general assets of the Corporation, and no
                special or separate reserve, fund or deposit shall be made to
                assure payment of such awards. No participant, beneficiary or
                other person shall have any right, title or interest in any fund
                or in any specific asset (including shares of Common Stock,
                except as expressly otherwise provided) of the Company by reason
                of any award hereunder. Neither the provisions of this Plan (or
                of any related documents), nor the creation or adoption of this
                Plan, nor any action taken pursuant to the provisions of this
                Plan

                                       16

<PAGE>

                shall create, or be construed to create, a trust of any kind or
                a fiduciary relationship between the Company and any
                participant, beneficiary or other person. To the extent that a
                participant, beneficiary or other person acquires a right to
                receive payment pursuant to any award hereunder, such right
                shall be no greater than the right of any unsecured general
                creditor of the Company.

        8.5     Tax Withholding. Upon any exercise, vesting, or payment of any
                award or upon the disposition of shares of Common Stock acquired
                pursuant to the exercise of an ISO prior to satisfaction of the
                holding period requirements of Section 422 of the Code, the
                Company shall have the right at its option to:

                (a)     require the participant (or the participant's personal
                        representative or beneficiary, as the case may be) to
                        pay or provide for payment of at least the minimum
                        amount of any taxes which the Company may be required to
                        withhold with respect to such award event or payment; or

                (b)     deduct from any amount otherwise payable in cash to the
                        participant (or the participant's personal
                        representative or beneficiary, as the case may be) the
                        minimum amount of any taxes which the Company may be
                        required to withhold with respect to such cash payment.

                In any case where a tax is required to be withheld in connection
                with the delivery of shares of Common Stock under this Plan, the
                Administrator may in its sole discretion (subject to Section
                8.1) grant (either at the time of the award or thereafter) to
                the participant the right to elect, pursuant to such rules and
                subject to such conditions as the Administrator may establish,
                to have the Corporation reduce the number of shares to be
                delivered by (or otherwise reacquire) the appropriate number of
                shares, valued in a consistent manner at their fair market value
                or at the sales price in accordance with authorized procedures
                for cashless exercises, necessary to satisfy the minimum
                applicable withholding obligation on exercise, vesting or
                payment. In no event shall the shares withheld exceed the
                minimum whole number of shares required for tax withholding
                under applicable law. The Corporation may, with the
                Administrator's approval, accept one or more promissory notes
                from any Eligible Person in connection with taxes required to be
                withheld upon the exercise, vesting or payment of any award
                under this Plan; provided that any such note shall be subject to
                terms and conditions established by the Administrator and the
                requirements of applicable law.

        8.6     EFFECTIVE DATE, TERMINATION AND SUSPENSION, AMENDMENTS.

                8.6.1 Effective Date. This Plan is effective as of June 4, 2003,
                the date of its approval by the Board (the "Effective Date").
                This Plan shall be submitted for and subject to stockholder
                approval no later than twelve months after the Effective Date.
                Unless earlier terminated by the Board, this Plan shall
                terminate at the close of business on the day before the tenth
                anniversary of the Effective Date. After the termination of this
                Plan either upon such stated expiration date or its earlier
                termination by the Board, no additional awards may be granted
                under this Plan, but previously granted awards (and the
                authority of the Administrator with respect thereto, including
                the authority to amend such awards) shall remain

                                       17

<PAGE>

                outstanding in accordance with their applicable terms and
                conditions and the terms and conditions of this Plan.

                8.6.2 Board Authorization. The Board may, at any time, terminate
                or, from time to time, amend, modify or suspend this Plan, in
                whole or in part. No awards may be granted during any period
                that the Board suspends this Plan.

                8.6.3 Stockholder Approval. To the extent then required by
                applicable law or any applicable listing agency or required
                under Sections 422 or 424 of the Code to preserve the intended
                tax consequences of this Plan, or deemed necessary or advisable
                by the Board, any amendment to this Plan shall be subject to
                stockholder approval.

                8.6.4 Amendments to Awards. Without limiting any other express
                authority of the Administrator under (but subject to) the
                express limits of this Plan, the Administrator by agreement or
                resolution may waive conditions of or limitations on awards to
                participants that the Administrator in the prior exercise of its
                discretion has imposed, without the consent of a participant,
                and (subject to the requirements of Sections 3.2 and 8.6.5) may
                make other changes to the terms and conditions of awards. Any
                amendment or other action that would constitute a repricing of
                an award is subject to the limitations set forth in Section
                3.2(g).

                8.6.5 Limitations on Amendments to Plan and Awards. No
                amendment, suspension or termination of this Plan or change of
                or affecting any outstanding award shall, without written
                consent of the participant, affect in any manner materially
                adverse to the participant any rights or benefits of the
                participant or obligations of the Company under any award
                granted under this Plan prior to the effective date of such
                change. Changes, settlements and other actions contemplated by
                Section 7 shall not be deemed to constitute changes or
                amendments for purposes of this Section 8.6.

        8.7     Privileges of Stock Ownership. Except as otherwise expressly
                authorized by the Administrator or this Plan, a participant
                shall not be entitled to any privilege of stock ownership as to
                any shares of Common Stock not actually delivered to and held of
                record by the participant. No adjustment will be made for
                dividends or other rights as a stockholder for which a record
                date is prior to such date of delivery.

        8.8     GOVERNING LAW; SEVERABILITY.

                8.8.1 Choice of Law. This Plan, the awards, all documents
                evidencing awards and all other related documents shall be
                governed by, and construed in accordance with the laws of the
                State of Maryland.

                8.8.2 Severability. If a court of competent jurisdiction holds
                any provision invalid and unenforceable, the remaining
                provisions of this Plan shall continue in effect.

        8.9     Captions. Captions and headings are given to the sections and
                subsections of this Plan solely as a convenience to facilitate
                reference. Such headings shall not be

                                       18

<PAGE>

                deemed in any way material or relevant to the construction or
                interpretation of this Plan or any provision thereof.

        8.10    Stock-Based Awards in Substitution for Stock Options or Awards
                Granted by Other Corporation. Awards may be granted to Eligible
                Persons under this Plan in substitution for or in connection
                with an assumption of employee stock options, SARs, restricted
                stock or other stock-based awards granted by other entities to
                persons who are or who will become Eligible Persons in respect
                of the Company, in connection with a distribution, merger or
                other reorganization by or with the granting entity or an
                affiliated entity, or the acquisition by the Company, directly
                or indirectly, of all or a substantial part of the stock or
                assets of the employing entity. The awards so granted need not
                comply with other specific terms of this Plan, provided the
                awards reflect only adjustments giving effect to the assumption
                or substitution consistent with the conversion applicable to the
                Common Stock in the transaction and any change in the issuer of
                the security. Any shares that are delivered and any awards that
                are granted by, or become obligations of, the Corporation, as a
                result of the assumption by the Corporation of, or in
                substitution for, outstanding awards previously granted by an
                acquired company (or previously granted by a predecessor
                employer (or direct or indirect parent thereof) in the case of
                persons that become employed by the Company in connection with a
                business or asset acquisition or similar transaction) shall not
                be counted against the Share Limit or other limits on the number
                of shares available for issuance under this Plan.

        8.11    Non-Exclusivity of Plan. Nothing in this Plan shall limit or be
                deemed to limit the authority of the Board or the Administrator
                to grant awards or authorize any other compensation, with or
                without reference to the Common Stock, under any other plan or
                authority.

        8.12    No Corporate Action Restriction. The existence of this Plan, the
                award agreements and the awards granted hereunder shall not
                limit, affect or restrict in any way the right or power of the
                Board or the stockholders of the Corporation to make or
                authorize: (a) any adjustment, recapitalization, reorganization
                or other change in the capital structure or business of the
                Corporation or any subsidiary, (b) any merger, amalgamation,
                consolidation or change in the ownership of the Corporation or
                any subsidiary, (c) any issue of bonds, debentures, capital,
                preferred or prior preference stock ahead of or affecting the
                capital stock (or the rights thereof) of the Corporation or any
                subsidiary, (d) any dissolution or liquidation of the
                Corporation or any subsidiary, (e) any sale or transfer of all
                or any part of the assets or business of the Corporation or any
                subsidiary, or (f) any other corporate act or proceeding by the
                Corporation or any subsidiary. No participant, beneficiary or
                any other person shall have any claim under any award or award
                agreement against any member of the Board or the Administrator,
                or the Corporation or any employees, officers or agents of the
                Corporation or any subsidiary, as a result of any such action.

        8.13    Other Company Benefit and Compensation Programs. Payments and
                other benefits received by a participant under an award made
                pursuant to this Plan shall not be deemed a part of a
                participant's compensation for purposes of the

                                       19

<PAGE>

                determination of benefits under any other employee welfare or
                benefit plans or arrangements, if any, provided by the
                Corporation or any subsidiary, except where the Administrator
                expressly otherwise provides or authorizes in writing. Awards
                under this Plan may be made in addition to, in combination with,
                as alternatives to or in payment of grants, awards or
                commitments under any other plans or arrangements of the Company
                or its subsidiaries.

                                       20<PAGE>

                                                                EXHIBIT 10.2.1.2

                         LUMINENT MORTGAGE CAPITAL, INC.
                            2003 STOCK INCENTIVE PLAN
                        INCENTIVE STOCK OPTION AGREEMENT

        THIS INCENTIVE STOCK OPTION AGREEMENT (this "Option Agreement") by and
between Luminent Mortgage Capital, Inc., a Maryland corporation (the
"Corporation"), and _____________________________ (the "Participant") evidences
the incentive stock option (the "Option") granted by the Corporation to the
Participant as to the number of shares of the Corporation's Common Stock, $0.001
par value, first set forth below.

   Number of Shares of Common Stock:/1/ ________ Award Date:  __________________

   Exercise Price per Share:/1/ $________ Expiration Date:/1/,/2/ _____________

   Vesting/1/,/2/ [The Option shall become vested as to one-third of the total
   number of shares of Common Stock subject to the Option on each of the first,
   second and third anniversaries of the Award Date.]

        The Option is granted under the Luminent Mortgage Capital, Inc. 2003
Stock Incentive Plan (the "Plan") and subject to the Terms and Conditions of
Incentive Stock Option (the "Terms") attached to this Option Agreement
(incorporated herein by this reference) and to the Plan. The Option has been
granted to the Participant in addition to, and not in lieu of, any other form of
compensation otherwise payable or to be paid to the Participant. The Option is
intended as an incentive stock option within the meaning of Section 422 of the
Code (an "ISO"). Capitalized terms are defined in the Plan if not defined
herein. The parties agree to the terms of the Option set forth herein. The
Participant acknowledges receipt of a copy of the Terms and the Plan,
specifically acknowledges and agrees to Section 14 of the Terms, and agrees to
maintain in confidence all information provided to him/her in connection with
the Option.

"PARTICIPANT"                               LUMINENT MORTGAGE CAPITAL, INC.,
                                            a Maryland corporation

---------------------------------
Signature

                                            By:
---------------------------------              ---------------------------------
Print Name                                  Its:
                                               ---------------------------------
---------------------------------
Address

---------------------------------
City, State, Zip Code

                                CONSENT OF SPOUSE

        In consideration of the Corporation's execution of this Option
Agreement, the undersigned spouse of the Participant agrees to be bound by all
of the terms and provisions hereof and of the Plan.

----------------------------------                   ----------------------
Signature of Spouse                                  Date

----------
/1/  Subject to adjustment under Section 7 of the Plan.
/2/  Subject to early termination under Section 7 of the Plan and Section 4 of
     the Terms.

<PAGE>

                 TERMS AND CONDITIONS OF INCENTIVE STOCK OPTION

1.      VESTING; LIMITS ON EXERCISE.

        As set forth on the cover page of this Option Agreement, the Option
shall vest and become exercisable in percentage installments of the aggregate
number of shares of Common Stock subject to the Option. The Option may be
exercised only to the extent the Option is vested and exercisable.

        .       Cumulative Exercisability. To the extent that the Option is
                vested and exercisable, the Participant has the right to
                exercise the Option (to the extent not previously exercised),
                and such right shall continue, until the earlier of (a)
                expiration of the Option on the close of business on the
                Expiration Date set forth on the cover page of this Option
                Agreement (or, if the Expiration Date is not a business day, on
                the close of business on the last business day preceding the
                Expiration Date) or (b) the termination of the Option pursuant
                to Section 7 of the Plan or Section 4 of these Terms.

        .       No Fractional Shares. Fractional share interests shall be
                disregarded, but may be cumulated.

        .       Minimum Exercise. No fewer than 1001 shares of Common Stock may
                be purchased at any one time, unless the number purchased is the
                total number at the time exercisable under the Option.

        .       ISO Value Limit. If the aggregate fair market value of the
                shares with respect to which ISOs (whether granted under the
                Option or otherwise) first become exercisable by the Participant
                in any calendar year exceeds $100,000, as measured on the
                applicable Award Dates, the limitations of Section 5.1.2 of the
                Plan shall apply and to such extent the Option will be rendered
                a Nonqualified Stock Option.

2.      CONTINUANCE OF EMPLOYMENT/SERVICE REQUIRED; NO EMPLOYMENT/SERVICE
        COMMITMENT.

        The vesting schedule requires continued employment by or service to the
Company through each applicable vesting date as a condition to the vesting of
the applicable installment of the Option and the rights and benefits under this
Option Agreement. Employment or service for only a portion of the vesting
period, even if a substantial portion, will not entitle the Participant to any
proportionate vesting or avoid or mitigate a termination of rights and benefits
upon or following a termination of employment or services as provided in Section
4 below or under the Plan.

        Nothing contained in this Option Agreement or the Plan constitutes an
employment or service commitment by the Corporation or any Subsidiary, affects
the Participant's status, if he or she is an employee, as an employee at will
who is subject to termination without cause, confers upon the Participant any
right to remain employed by or in service to the Corporation or any Subsidiary,
interferes in any way with the right of the Corporation or any Subsidiary at any
time to terminate such employment or service, or affects the right of the
Corporation or any Subsidiary to increase or decrease the Participant's other
compensation.

                                        1

<PAGE>

3.      METHOD OF EXERCISE OF OPTION.

        The Option shall be exercisable by the delivery to the Chief Financial
Officer of the Corporation of a written notice stating the number of shares of
Common Stock to be purchased pursuant to the Option and accompanied by:

        .       delivery of an executed Exercise Agreement in substantially the
                form attached hereto as Exhibit A or such other form as the
                Committee may require from time to time (the "Exercise
                Agreement");

        .       payment in full for the Exercise Price of the shares to be
                purchased, in cash or by electronic funds transfer to the
                Corporation, or by certified or cashier's check payable to the
                order of the Corporation subject to such specific procedures or
                directions as the Committee may establish;

        .       satisfaction of the tax withholding provisions of Section 8.5 of
                the Plan; and

        .       any written statements or agreements required pursuant to
                Section 6 below.

The Committee also may, but is not required to, authorize a non-cash payment
alternative specified below at or prior to the time of exercise. In which case,
the Exercise Price and/or applicable withholding taxes, to the extent so
authorized, may be paid in full or in part by delivery to the Corporation of:

        .       shares of Common Stock already owned by the Participant, valued
                at their fair market value (as such term is defined in the Plan)
                on the exercise date, provided, however, that any shares
                acquired directly from the Corporation (upon exercise of a stock
                option or otherwise) must have been owned by the Participant for
                at least six (6) months before the date of such exercise;

        .       if the Common Stock is then registered under the Exchange Act
                and listed or quoted on a recognized national securities
                exchange or in the NASDAQ National Market Quotation System,
                irrevocable instructions to a broker to, upon exercise of the
                Option, promptly sell a sufficient number of shares of Common
                Stock acquired upon exercise of the Option and deliver to the
                Corporation the amount necessary to pay the Exercise Price (and,
                if applicable, the amount of any related tax withholding
                obligations); and/or

        .       a note meeting the requirements of Section 5.4 of the Plan (or,
                in the case of tax loans, Section 8.5 of the Plan).

The Option will qualify as an ISO only if it meets all of the applicable
requirements of the Code. The Option may be rendered a Nonqualified Stock Option
if the Committee permits the use of one or more of the non-cash payment
alternatives referenced above.

                                        2

<PAGE>

4.      EARLY TERMINATION OF OPTION.

        4.1     Dismissal for Cause. If the Participant's employment by or
service to the Company terminates (the date of such termination is referred to
as the Participant's "Severance Date"), and such termination is a termination by
the Corporation or a Subsidiary for Cause (as defined below), the Option will
terminate on the date of such termination, whether or not the Option is then
vested and/or exercisable.

        4.2     Other Terminations of Employment. If the Participant's
employment by or service to the Company terminates for any reason other than a
termination by the Corporation or a Subsidiary for Cause, the Option, to the
extent not vested and exercisable on the Participant's Severance Date, will
terminate on the Participant's Severance Date. To the extent that the Option is
vested and exercisable as of the Participant's Severance Date in such
circumstances, then:

        .       if the Participant's employment by or service to the Company
                terminates for any reason other than the Participant's death or
                Disability (and other than a termination by the Company for
                Cause), the Participant will have 90 days following the
                Participant's Severance Date to exercise the portion of his or
                her Option that was vested on his or her Severance Date, and
                such portion of the Option shall terminate at the close of
                business on the last business day of such 90-day period to the
                extent not theretofore exercised.

        .       if the Participant's employment by or service to the Company
                terminates due to the Participant's death or Disability, the
                Participant (or his or her personal representative or
                beneficiary, as the case may be) will have 12 months following
                the Participant's Severance Date to exercise the portion of the
                Participant's Option that was vested on the Participant's
                Severance Date, and such portion of the Option shall terminate
                at the close of business on the last business day of such
                12-month period to the extent not theretofore exercised.

In no case, however, will any portion of the Option continue to be exercisable
following the termination of the Option on its stated Expiration Date and in all
cases the Option remains subject to earlier termination pursuant to Section 7 of
the Plan.

        For purposes of this Agreement, "Cause" means a termination of
employment or service based on a finding by the Company, acting in good faith
and based on its reasonable belief at the time, that the Participant either: (a)
has failed to perform his or her job duties in a material respect without proper
cause and, if a cure is reasonably possible in the circumstances, has failed to
cure within a reasonable period of time after written notice of such conduct (or
lack thereof); (b) has materially breached a fiduciary duty, or willfully and
materially violated any other duty, law, regulation or policy of the Company in
a manner injurious to the Company; (c) has been convicted of or pled nolo
contendere to a felony, or (d) has materially breached any of the provisions of
any agreement with the Company and, if a cure is reasonably possible in the
circumstances, has failed to cure within a reasonable period of time after
written notice of the breach. For purposes of this Agreement, "Disability" means
a total disability within the meaning of Section 22(e)(3) of the Code. Also
refer to the provisions of Section 6 of the Plan which apply with respect to the
Option and a termination of employment or services.

        4.3     Additional Limitation on ISOs. Notwithstanding any
post-termination exercise period provided for herein or in the Plan, the Option
will qualify as an ISO only

                                        3

<PAGE>

if it is exercised within the applicable exercise periods for ISOs under, and
meets all of the other requirements of, the Code. If the Option is not exercised
within the applicable exercise periods for ISOs or does not meet such other
requirements, the Option will be rendered a Nonqualified Stock Option.

5.      NON-TRANSFERABILITY AND OTHER RESTRICTIONS.

        The Option and any other rights of the Participant under this Option
Agreement or the Plan are nontransferable and exercisable only by the
Participant, except as set forth in Section 5.6 of the Plan. Any shares of
Common Stock issued on exercise of the Option are subject to substantial
restrictions on transfer, and are subject to call, rights of first refusal, and
other rights in favor of the Corporation as set forth herein and in the Exercise
Agreement.

        The Articles of Incorporation and Bylaws of the Corporation, as either
of them may be amended from time to time, may provide for additional
restrictions and limitations with respect to the Common Stock (including
additional restrictions and limitations on the transfer of shares). To the
extent that these restrictions and limitations are more restrictive than those
set forth in this Agreement, such restrictions and limitations shall apply to
the shares of Common Stock acquired upon exercise of the Option. Such
restrictions and limitations are not, however, in lieu of, nor shall they in any
way reduce or minimize, any limitation or restriction on the shares of Common
Stock acquired upon exercise of the Option imposed under this Agreement.

6.      SECURITIES LAWS.

        6.1     Participant's Representations. The Participant acknowledges that
the Option and the shares of Common Stock are not being registered under the
Securities Act of 1933 ("Securities Act"), based, in part, in reliance upon an
exemption from registration under Securities and Exchange Commission Rule 701
promulgated under the Securities Act, and a comparable exemption from
qualification under applicable state securities laws, as each may be amended
from time to time. The Participant, by executing this Option Agreement, hereby
makes the following representations to the Corporation and acknowledges that the
Corporation's reliance on federal and state securities law exemptions from
registration and qualification is predicated, in substantial part, upon the
accuracy of these representations:

     .    No Intent to Sell. The Participant is acquiring the Option and, if and
          when he/she exercises the Option, will acquire the shares of Common
          Stock solely for the Participant's own account, for investment
          purposes only, and not with a view to or an intent to sell, or to
          offer for resale in connection with any unregistered distribution, all
          or any portion of the shares within the meaning of the Securities Act
          or other applicable state securities laws.

     .    Information; No Reliance on Company. The Participant has had an
          opportunity to ask questions and receive answers from the Corporation
          regarding the terms and conditions of the Option and the restrictions
          imposed on any shares of Common Stock purchased upon exercise of the
          Option. The Participant has been furnished with, and/or has access to,
          such information as he or she considers necessary or appropriate for
          deciding whether to exercise the Option and purchase shares of Common
          Stock. However, in evaluating the merits and risks of an investment in
          the Common Stock, the Participant has and will rely upon the advice of
          his/her

                                        4

<PAGE>

          own legal counsel, tax advisors, and/or investment advisors and is not
          relying on any representations made by the Company, or any of its
          agents, other than those expressly set forth in this Option Agreement.

     .    Risk of Loss. The Participant is aware that the Option may be of no
          practical value, that any value it may have depends on its vesting and
          exercisability as well as an increase in the Fair Market Value of the
          underlying shares of Common Stock to an amount in excess of the
          Exercise Price, and that any investment in common shares of a closely
          held corporation such as the Corporation is non-marketable,
          non-transferable and could require capital to be invested for an
          indefinite period of time, possibly without return, and at substantial
          risk of loss.

     .    Restrictions on Shares. The Participant understands that any shares of
          Common Stock acquired on exercise of the Option will be characterized
          as "restricted securities" under the federal securities laws, and
          that, under such laws and applicable regulations, such securities may
          be resold without registration under the Securities Act only in
          certain limited circumstances, including in accordance with the
          conditions of Rule 144 promulgated under the Securities Act, as
          presently in effect, and represents that he or she is familiar with
          such rule, and understands the resale limitations imposed thereby and
          by the Securities Act and applicable state securities laws.

     .    Additional Restrictions. The Participant has read and understands the
          restrictions and limitations set forth in the Plan, the Corporation's
          Articles of Incorporation and Bylaws, this Option Agreement (including
          these Terms), and the Exercise Agreement, which are imposed on the
          Option and any shares of Common Stock which may be acquired upon
          exercise of the Option. The Participant acknowledges having received
          and reviewed copies of the Articles of Incorporation and Bylaws of the
          Corporation.

     .    No Company Representations. At no time was an oral representation made
          to the Participant relating to the Option or the purchase of shares of
          Common Stock and the Participant was not presented with or solicited
          by any promotional meeting or material relating to the Option or the
          Common Stock.

     .    Share Certificate Legend. The Participant understands and acknowledges
          that any certificate evidencing the shares of Common Stock acquired
          pursuant to the Option when issued shall bear, in addition to any
          other legends which may be provided for under the Corporation's
          Articles of Incorporation and/or required by applicable state
          securities laws, the legends set forth in Section 6.3.

     .    Tax Matters. The Participant has obtained and is relying upon the
          advice of his or her own tax advisors with respect to the tax
          consequences of the grant, vesting, and/or exercise of the Option and
          any acquisition or sale of the shares of Common Stock subject to the
          Option. The Participant is not relying on any representations by the
          Company or any of its agents with respect to such matters.

        6.2     Compliance with Securities Laws. Neither the Participant nor any
permitted transferee shall sell, pledge or otherwise transfer shares of Common
Stock acquired pursuant to the Option or any interest in such shares except in
accordance with the express terms of the Plan and this Agreement. Any attempted
transfer in violation of this Section 6.2 shall be void and of no effect.
Without in any way limiting the

                                        5

<PAGE>

provisions set forth above, the Participant (or permitted transferee) shall not
make any disposition of all or any portion of shares of Common Stock acquired or
to be acquired pursuant to the Option, except in compliance with all applicable
federal and state securities laws and unless and until:

        (a)     there is then in effect a registration statement under the
                Securities Act covering such proposed disposition and such
                disposition is made in accordance with such registration
                statement; or

        (b)     such disposition is made in accordance with Rule 144 under the
                Securities Act; or

        (c)     the Participant notifies the Corporation of the proposed
                disposition and furnishes the Corporation with a statement of
                the circumstances surrounding the proposed disposition, and, if
                requested by the Corporation, furnishes to the Corporation an
                opinion of counsel acceptable to the Corporation's counsel, that
                such disposition will not require registration under the
                Securities Act and will be in compliance with all applicable
                state securities laws.

Notwithstanding anything else herein to the contrary, the Corporation has no
obligation to register the Common Stock or file any registration statement under
either federal or state securities laws, nor does the Corporation make any
representation concerning the likelihood of a public offering of the Common
Stock or any other securities of the Corporation.

        6.3     Share Legends. All certificates evidencing shares of Common
Stock issued or delivered under this Agreement shall bear substantially the
following legends, as well as the legends provided for under the Corporation's
Articles of Incorporation and/or any other appropriate or required legends under
applicable laws:

        "BY ITS ACQUISITION HEREOF, THE HOLDER AGREES TO BE BOUND BY THE
        PROVISIONS OF THE INCENTIVE STOCK OPTION AGREEMENT DATED AS OF
        ______________, 2003, AND RELATED EXERCISE AGREEMENT (TOGETHER, THE
        "AGREEMENT"), BY AND BETWEEN THE CORPORATION AND THE HOLDER. THE
        AGREEMENT CONTAINS SUBSTANTIAL RESTRICTIONS ON TRANSFER, INCLUDING
        RESTRICTIONS ON SALE, ASSIGNMENT, PLEDGE, TRANSFER OR OTHER DISPOSITION.
        THE AGREEMENT ALSO CONTAINS THE CORPORATION'S RIGHT OF FIRST REFUSAL AND
        CALL RIGHTS TO REPURCHASE THESE SECURITIES."

        "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
        1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED OR SOLD
        EXCEPT (A) TO THE CORPORATION OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO
        AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, OR (C) IN
        A TRANSACTION EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL
        SATISFACTORY TO THE CORPORATION AND THE INITIAL PURCHASER)."

                                        6

<PAGE>

        6.4     Delivery of Financial Statements. The Corporation shall deliver
annually to the Participant such financial statements of the Corporation as are
required to satisfy applicable securities laws.

        6.5     Confidential Information. Any financial or other information
relating to the Corporation obtained by the Participant in connection with or as
a result of the Plan or Awards thereunder shall be treated as confidential.

7.      LOCK-UP AGREEMENT.

        Neither the Participant (nor any permitted transferee) may, directly or
indirectly, offer, sell or transfer or dispose of any of the shares of Common
Stock acquired upon exercise of the Option (the "Shares") or any interest
therein (or agree to do any thereof) (collectively, a "Transfer") during the
period commencing as of 14 days prior to and ending one year, or such lesser
period of time as the relevant underwriters may permit, after the effective date
of a registration statement covering any public offering of the Corporation's
securities of which the Participant has notice. (The term "Participant"
includes, where the context so requires, any permitted direct or indirect
transferee of the Participant.) The Participant shall agree and consent to the
entry of stop transfer instructions with the Corporation's transfer agent
against the Transfer of the Corporation's securities beneficially owned by the
Participant and shall conform the limitations hereunder and under the Exercise
Agreement by agreement with and for the benefit of the relevant underwriters by
a lock-up agreement or other agreement in customary form. Notwithstanding
anything else herein to the contrary, this Section 7 shall not be construed so
as to prohibit the Participant from participating in a registration or a public
offering of the Common Stock with respect to any shares which he or she may hold
at that time, provided, however, that such participation shall be at the sole
discretion of the Board.

8.      LIMITED CALL RIGHT; MANDATORY SALE; TRANSFER RESTRICTIONS.

        8.1     Corporation's Call Right. Subject to the terms and conditions of
this Section 8.1, the Corporation shall have the right (the "Call Right") (but
not the obligation) to repurchase in one or more transactions in connection with
the termination of the Participant's employment by or service to the Company,
and the Participant (or any permitted transferee) shall be obligated to sell any
of the Shares acquired upon exercise of the Option, at the Repurchase Price. To
exercise the Call Right, the Corporation must give written notice thereof to the
Participant (the "Call Notice"). The Call Notice is irrevocable by the
Corporation and must (a) be in writing and signed by an authorized officer of
the Corporation, (b) set forth the Corporation's intent to exercise the Call
Right and contain the total number of Shares to be sold to the Corporation
pursuant to the Call Right, (c) be mailed or delivered in accordance with
Section 11, and (d) be so mailed or delivered during the Notice Period
(determined in accordance with the following sentence). The "Notice Period"
shall:

        (a)     commence on the Participant's Severance Date; and

        (b)     terminate on the earlier of: (1) the Public Offering Date; or
                (2) the later of (i) the date that is ninety (90) days after the
                Participant's Severance Date or (ii) the date that is ninety
                (90) days after the Participant first acquired the Shares upon
                exercise of the Option.

                                        7

<PAGE>

        8.2     Repurchase Price. The price per Share to be paid by the
Corporation upon settlement of the Corporation's Call Right (the "Repurchase
Price") shall equal the fair market value (as such term is defined in the Plan)
of a Share determined as of the later of (a) the Participant's Severance Date or
(b) the date that the Participant first acquired the Share upon exercise of the
Option.

        8.3     Closing. The closing of any repurchase under this Section 8
shall be at a date to be specified by the Corporation, such date to be no later
than ninety (90) days after the later of (a) the date that is ninety (90) days
after the Participant's Severance Date or (b) the date that is ninety (90) days
after the Participant first acquired the Shares upon exercise of the Option. The
purchase price shall be paid at the closing in the form of a check or by
cancellation of money purchase indebtedness against surrender by the Participant
of a stock certificate evidencing the Shares with duly endorsed stock powers. No
adjustments (other than pursuant to Section 7 of the Plan) shall be made to the
purchase price for fluctuations in the fair market value of the Common Stock
after the relevant date, determined pursuant to Section 8.2, for determining the
fair market value of the Shares to be repurchased.

        8.4     Termination of Call Right. The Corporation's Call Right shall
terminate to the extent that it is not exercised prior to the Public Offering
Date.

        8.5     Assignment. Notwithstanding anything to the contrary, the
Corporation may assign any or all of its rights under this Section 8 to one or
more stockholders of the Corporation.

9.      RIGHT OF FIRST REFUSAL.

        The Corporation shall have a right of first refusal, as set forth below,
to purchase the Shares acquired upon exercise of the Option before the Shares
(or any interest in them) can be validly transferred to any other person or
entity.

        9.1     Notice of Intent to Sell. Before there can be a valid sale or
transfer of any Shares (or any interest in them) by any holder thereof, the
holder shall first give notice in writing to the Corporation, mailed or
delivered in accordance with the provisions of Section 11, of his or her
intention to sell or transfer such Shares (the "Option Notice").

        The Option Notice shall specify the identity of the proposed transferee,
the number of Shares to be sold or transferred to the transferee, the price per
Share and the terms upon which such holder intends to make such sale or
transfer. If the payment terms for the Shares described in the Option Notice
differ from delivery of cash or a check at closing, the Corporation shall have
the option, as set forth herein, of purchasing the Shares for cash (or a cash
equivalent) at closing in an amount which the Corporation determines is a fair
value equivalent of that payment. The determination of a fair value equivalent
shall be made in the Corporation's best judgment and such determination shall be
mailed or delivered to the selling or transferring stockholder (the
"Corporation's Notice") within ten (10) days of its receipt of the Option
Notice. Should the selling or transferring stockholder disagree with the
Corporation's determination of a fair value equivalent, he or she shall have the
right (the "Retraction Right") to retract the proposed sale or transfer to a
third party and the offer of Shares to the Corporation pursuant to the Option
Notice (such retraction to be made in writing and mailed or delivered in
accordance with the provisions of Section 11). If the stockholder again proposes
to sell

                                        8

<PAGE>

or transfer the Shares, the stockholder shall again offer such Shares to the
Corporation pursuant to the terms of this Section 9 prior to any sale or
transfer.

        9.2     Option to Purchase. Subject to the selling stockholder's
Retraction Right, during the 60-day period commencing upon receipt of the Option
Notice by the Corporation (the "Option Period"), the Corporation shall have an
option to purchase any or all of the Shares specified in the Option Notice at
the price offered therein (the "Right of First Refusal").

        9.3     Purchase of Shares. Not more than thirty (30) days after receipt
of the Option Notice, the Corporation shall give written notice to the
stockholder desiring to sell or transfer Shares of the number of such Shares to
be purchased (or, if no Shares are to be purchased, stating such fact) by the
Corporation pursuant to the terms of this Section 9 (the "Purchase Notice").
Purchases pursuant to this Section 9 shall be consummated within thirty (30)
days after delivery of the Purchase Notice to the selling stockholder, but in no
event later than the expiration of the Option Period. The purchase price shall
be paid at the closing in cash, by check, by cancellation of money purchase
indebtedness, or, if the payment terms set forth in the Option Notice differ
from payment in cash or by check at closing, in accordance with the payment
terms set forth in the Option Notice (or payment of the amount set forth in the
Corporation's Notice in cash, by cancellation of money purchase indebtedness, or
by check). The purchase price shall be paid against surrender by the selling
stockholder of a stock certificate evidencing the number of Shares specified in
the Option Notice, with duly endorsed stock powers.

        9.4     Ability to Sell Unpurchased Shares. Unless all of the Shares
referred to in the Option Notice are to be purchased as indicated in the
Purchase Notice, the stockholder desiring to sell or transfer may dispose of any
Shares referred to in the Option Notice that are not to be purchased by the
Corporation to the person or persons specified in the Option Notice during a
period of twenty (20) days commencing upon his or her receipt of the Purchase
Notice; provided, however, that he or she shall not sell or transfer such Shares
(a) at a lower price or on terms more favorable to the Participant or transferee
than those specified in the Option Notice, and (b) to a person other than the
person or persons specified in the Option Notice; and provided further that such
transfer is consistent with the other provisions and limitations of the Plan,
this Option Agreement (including these Terms), and the Exercise Agreement. If
the transfer is not consummated within such twenty (20) day period, the
stockholder shall again offer such Shares to the Corporation pursuant to the
terms of this Section 9 prior to any sale or transfer to the same or any other
person.

        9.5     Assignment. Notwithstanding anything to the contrary, the
Corporation may assign any or all of its rights under this Section 9 to one or
more stockholders of the Corporation.

        9.6     Termination of Right of First Refusal. The Corporation's Right
of First Refusal shall terminate to the extent that it is not exercised prior to
the Public Offering Date.

10.     NO STOCKHOLDER RIGHTS FOLLOWING EXERCISE OF A CALL OR REPURCHASE.

        If the Participant (or any permitted transferee) holds Shares as to
which the Call Right or the Right of First Refusal has been exercised (in
connection with the termination of the Participant's employment or otherwise),
the Participant shall be entitled to the

                                        9

<PAGE>

value of such shares in accordance with the provisions of Section 8 or 9, as
applicable, but (unless otherwise required by law) shall no longer be entitled
to participation in the Corporation or other rights as a stockholder with
respect to the shares subject to the call or repurchase. To the maximum extent
permitted by law, the Participant's rights following the exercise of the Call
Right or Right of First Refusal shall, with respect to the call or repurchase
and the Shares covered thereby, be solely the rights that he or she has as a
general creditor of the Corporation to receive payment of the amount specified
in Section 8 or 9, as applicable.

11.     NOTICES.

        Any notice to be given under the terms of this Option Agreement or the
Exercise Agreement shall be in writing and addressed to the Corporation at its
principal office to the attention of the Chief Financial Officer, and to the
Participant at the address reflected or last reflected on the Corporation's
payroll records. Any notice shall be delivered in person or shall be enclosed in
a properly sealed envelope, addressed as aforesaid, registered or certified, and
deposited (postage and registry or certification fee prepaid) in a post office
or branch post office regularly maintained by the United States Government. Any
such notice shall be given only when received, but if the Participant is no
longer an Eligible Person, shall be deemed to have been duly given as of the
date mailed in accordance with the foregoing provisions of this Section 11.

12.     PLAN.

        The Option and all rights of the Participant under this Option Agreement
are subject to, and the Participant agrees to be bound by, all of the terms and
conditions of the Plan, incorporated herein by this reference. In the event of a
conflict or inconsistency between the terms and conditions of this Option
Agreement and of the Plan, the terms and conditions of the Plan shall govern.
The Participant acknowledges receipt of a copy of the Plan and agrees to be
bound by the terms thereof and of this Option Agreement. The Participant
acknowledges reading and understanding the Plan and this Option Agreement.
Unless otherwise expressly provided in other sections of this Option Agreement,
provisions of the Plan that confer discretionary authority on the Board or the
Committee do not and shall not be deemed to create any rights in the Participant
unless such rights are expressly set forth herein or are otherwise in the sole
discretion of the Board or the Committee so conferred by appropriate action of
the Board or the Committee under the Plan after the date hereof.

13.     ENTIRE AGREEMENT.

        This Option Agreement (including these Terms and together with the form
of Exercise Agreement attached hereto) and the Plan together constitute the
entire agreement and supersede all prior understandings and agreements, written
or oral, of the parties hereto with respect to the subject matter hereof.

        The Corporation's Articles of Incorporation and Bylaws are outside of
the scope of the integration provision of the preceding paragraph.

        The Plan, this Option Agreement and the Exercise Agreement may be
amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing
and signed by the Corporation. The Corporation may, however, unilaterally waive
any provision hereof or of the Exercise Agreement in writing to the extent such
waiver does not adversely

                                       10

<PAGE>

affect the interests of the Participant hereunder, but no such waiver shall
operate as or be construed to be a subsequent waiver of the same provision or a
waiver of any other provision hereof. The Corporation's Articles of
Incorporation and Bylaws may be amended in accordance with their respective
terms.

14.     SATISFACTION OF ALL RIGHTS TO EQUITY.

        The Option is in complete satisfaction of any and all rights that the
Participant may have (under an employment, consulting, or other written or oral
agreement with the Company, or otherwise) to receive (1) stock options or a
restricted stock award with respect to the Company's securities, and/or (2) any
other equity or derivative security in or with respect to the Company. This
Option Agreement supersedes the terms of all prior understandings and
agreements, written or oral, of the parties with respect to such matters. The
Participant shall have no further rights or benefits under any prior agreement
conveying any right with respect to any security or derivative security in or
with respect to the Company. The foregoing notwithstanding, this Section 14
shall not adversely affect the Participant's rights under any prior option or
restricted stock agreement under the Plan (provided such agreement is expressly
labeled as an option, restricted stock, or award agreement under the Plan and is
similar in form to this Option Agreement) which has been signed by an authorized
officer of the Corporation.

15.     GOVERNING LAW; LIMITED RIGHTS; SEVERABILITY.

        15.1. Maryland Law; Construction. This Option Agreement and the Exercise
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Maryland without regard to conflict of law principles
thereunder. The terms of the Option grant have resulted from the negotiations of
the parties and each of the parties has had an opportunity to obtain and consult
with its own counsel. The language of all parts of the Plan, this Option
Agreement (including these Terms) and the Exercise Agreement shall in all cases
be construed as a whole, according to its fair meaning, and not strictly for or
against either of the parties. Captions and headings are given to the sections
and subsections of this Option Agreement (including these Terms) and the
Exercise Agreement solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of such document or any provision hereof or thereof.

        15.2. Limited Rights. The Participant has no rights as a stockholder of
the Corporation with respect to the Option as set forth in Section 8.7 of the
Plan. The Option does not place any limit on the corporate authority of the
Corporation as set forth in Section 8.12 of the Plan.

        15.3. Severability. If a court of competent jurisdiction determines that
any portion of this Option Agreement, the Plan, or the Exercise Agreement is in
violation of any statute or public policy, then only the portions of this Option
Agreement, the Plan, or the Exercise Agreement, as applicable, which violate
such statute or public policy shall be stricken, and all portions of this Option
Agreement, the Plan, and the Exercise Agreement which do not violate any statute
or public policy shall continue in full force and effect. Furthermore, it is the
parties' intent that any court order striking any portion of this Option
Agreement, the Plan, and/or the Exercise Agreement should modify the stricken
terms as narrowly as possible to give as much effect as possible to the
intentions of the parties hereunder.

                                       11

<PAGE>

        (Remainder of Page Intentionally Left Blank)

                                       12

<PAGE>

                                                                       EXHIBIT A

                         LUMINENT MORTGAGE CAPITAL, INC.
                            2003 STOCK INCENTIVE PLAN
                            OPTION EXERCISE AGREEMENT

        The undersigned (the "Purchaser") hereby irrevocably elects to exercise
his/her right, evidenced by that certain Incentive Stock Option Agreement dated
as of ____________________ (the "Option Agreement") under the Luminent Mortgage
Capital, Inc. 2003 Stock Incentive Plan (the "Plan"), as follows:

        .       the Purchaser hereby irrevocably elects to purchase
                __________________ shares of Common Stock, par value $0.001 per
                share (the "Shares"), of Luminent Mortgage Capital, Inc., a
                Maryland corporation (the "Corporation"), and

        .       such purchase shall be at the price of $__________________ per
                share, for an aggregate amount of $__________________ (subject
                to applicable withholding taxes pursuant to Section 8.5 of the
                Plan).

        Capitalized terms are defined in the Plan if not defined herein.

        1.      Delivery of Share Certificate. The Purchaser requests that a
                certificate representing the Shares be registered to Purchaser
                and delivered to: _______________________

        2.      Investment Representations. The Purchaser acknowledges that the
sale of the Shares by the Purchaser is restricted by SEC Rule 701. The Purchaser
hereby affirms as made as of the date hereof the representations in Section 6.1
of the "Terms and Conditions of Incentive Stock Option" (which are attached to
and a part of the Option Agreement, the "Terms") and such representations are
incorporated herein by this reference. The Purchaser represents that he/she has
no need for liquidity in this investment, has the ability to bear the economic
risk of this investment, and can afford a complete loss of the purchase price
for the Shares.

        The Purchaser acknowledges receipt of the Corporation's condensed
consolidated financial information.

        The Purchaser also understands and acknowledges (a) that the
certificates representing the Shares will be legended as provided for in Section
6.3 of the Terms, and (b) that the Corporation has no obligation to register the
Shares or file any registration statement under federal or state securities
laws.

        3.      Limitation on Disposition and Other Restrictions. The Shares are
subject to and the Purchaser hereby agrees to the following terms and conditions
of the sale of the Shares to the Purchaser:

        .       any transfer of the Shares must comply with all applicable laws
                as set forth in Section 6 of the Terms;

        .       the Shares are subject to restrictions on transfer under Section
                5.6 of the Plan, under Section 5 of the Terms, and under the
                Corporation's Articles of Incorporation and Bylaws;

                                        1

<PAGE>

        .       the Shares are subject to, and following any otherwise permitted
                transfer of the Shares, the Shares shall remain subject to and
                the transferee shall be bound by, the lock-up provisions set
                forth in Section 7 of the Terms, the Corporation's call right
                and right of first refusal set forth in Sections 8 and 9 of the
                Terms, the share legend requirements of Section 6.3 of the
                Terms, and the foregoing provisions of this Section 3; and

        .       as a condition to any otherwise permitted transfer of the
                Shares, the Corporation may require the transferee to execute a
                written agreement, in a form acceptable to the Committee, that
                the transferee acknowledges and agrees to the foregoing terms
                and restrictions imposed on the Shares.

        4.      Plan and Option Agreement. The Purchaser acknowledges that all
of his/her rights are subject to, and the Purchaser agrees to be bound by, all
of the terms and conditions of the Plan and the Option Agreement (including the
Terms), both of which are incorporated herein by this reference. If a conflict
or inconsistency between the terms and conditions of this Exercise Agreement and
of the Plan or the Option Agreement shall arise, the terms and conditions of the
Plan and/or the Option Agreement shall govern. The Purchaser acknowledges
receipt of a copy of all documents referenced herein (including the Terms, a
disclosure statement, and the Corporation's Articles of Incorporation and
Bylaws) and acknowledges reading and understanding these documents and having an
opportunity to ask any questions that he/she may have had about them.

        5.      Entire Agreement. This Exercise Agreement, the Option Agreement
(including the Terms), and the Plan together constitute the entire agreement and
supersede all prior understandings and agreements, written or oral, of the
parties hereto with respect to the subject matter hereof.

        The Corporation's Articles of Incorporation and Bylaws are outside of
the scope of the integration provision of the preceding paragraph.

        The Plan, the Option Agreement and this Exercise Agreement may be
amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing
and signed by the Corporation. The Corporation may, however, unilaterally waive
any provision hereof or of the Option Agreement in writing to the extent such
waiver does not adversely affect the interests of the Participant hereunder, but
no such waiver shall operate as or be construed to be a subsequent waiver of the
same provision or a waiver of any other provision hereof. The Corporation's
Articles of Incorporation and Bylaws maybe amended in accordance with their
respective terms.

        6.      Notice of Sale. Upon any sale or other transfer of the Shares
within either one year of the date that they are acquired by the Purchaser or
two years after the Award Date set forth in the Option Agreement, the Purchaser
agrees to provide the notice required under Section 1 of the Terms.

"PURCHASER"                              ACCEPTED BY:
                                         LUMINENT MORTGAGE CAPITAL, INC.

---------------------------------
Signature                                By:
                                             -----------------------------------
---------------------------------        Its:
Print Name
                                             -----------------------------------
                                         (To be completed by the corporation
---------------------------------         after the price (including applicable
Date                                      withholding taxes), value (if
                                          applicable) and receipt of funds is
                                          verified.)

                                        2

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