Document:

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                                                                    EXHIBIT 10.7

                            INDEMNIFICATION AGREEMENT

         This INDEMNIFICATION AGREEMENT (this "Agreement") is made and entered
into this ______ day of February, 2004 by and between Sunset Financial
Resources, Inc., a Maryland corporation (the "Company"), and____________________
(the "Indemnitee").

                                    RECITALS

         WHEREAS, it is essential to the Company to retain and attract as
directors and officers the most capable persons available;

         WHEREAS, the Indemnitee is a director and/or officer of the Company;

         WHEREAS, both the Company and the Indemnitee recognize the increased
risk of litigation and other claims being asserted against directors and
officers of companies in today's environment;

         WHEREAS, the Company's Articles of Incorporation (the "Charter")
provide that the Company may indemnify its officers, and shall indemnify its
directors, to the fullest extent permitted by law and will advance expenses in
connection therewith, and the Indemnitee's willingness to serve as a director
and/or officer of the Company is based in part on the Indemnitee's reliance on
such provisions;

         WHEREAS, the Maryland General Corporation Law (the "Maryland Statute")
expressly recognizes that the indemnification provisions of the Maryland Statute
are not exclusive of any other rights to which a person seeking indemnification
may be entitled under the Charter or Bylaws of the Company, a resolution of
stockholders or directors, an agreement or otherwise, and this Agreement is
being entered into pursuant to and in furtherance of the Charter and Bylaws, as
permitted by the Maryland Statute and as authorized and permitted by the Charter
and the Board of Directors of the Company (the "Board"); and

         WHEREAS, in recognition of the Indemnitee's need for substantial
protection against personal liability in order to enhance the Indemnitee's
continued service to the Company in an effective manner, and the Indemnitee's
reliance on the aforesaid provisions of the Charter, and in part to provide the
Indemnitee with specific contractual assurance that the protection promised by
such provisions (with respect to directors) will be available to the Indemnitee
(regardless of, among other things, any amendment to or revocation of such
provisions or any change in the composition of the Board or any acquisition or
business combination transaction relating to the Company), the Company wishes to
provide in this Agreement for the indemnification of and the advancement of
expenses to the Indemnitee as set forth in this Agreement and, to the extent
insurance is maintained, for the continued coverage of the Indemnitee under the
Company's directors' and officers' liability insurance policies, if any.

         NOW THEREFORE, in consideration of the foregoing premises, the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

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         1. Indemnification.

               (a) In accordance with the provisions of subsection (b) of this
Section 1, the Company shall hold harmless and indemnify the Indemnitee against
any and all reasonable expenses, liabilities and losses (including, without
limitation, investigation expenses and expert witnesses' and attorneys' fees and
expenses, judgments, penalties, fines, ERISA excise taxes and amounts paid or to
be paid in settlement) actually incurred by the Indemnitee (net of any related
insurance proceeds or other amounts received by the Indemnitee or paid by or on
behalf of the Company on the Indemnitee's behalf), in connection with any
action, suit, arbitration or proceeding (or any inquiry or investigation,
whether brought by or in the right of the Company or otherwise, that the
Indemnitee in good faith believes might lead to the institution of any such
action, suit, arbitration or proceeding), whether civil, criminal,
administrative or investigative, or any appeal therefrom, in which the
Indemnitee is a party, is threatened to be made a party, is a witness or is
participating (a "Proceeding") based upon, arising from, relating to or by
reason of the fact that Indemnitee is, was, shall be or shall have been a
director and/or officer of the Company or is or was serving, shall serve, or
shall have served at the request of the Board of Directors of the Company as a
director, officer, partner, trustee, employee or agent ("Affiliate Indemnitee")
of another foreign or domestic corporation or non-profit corporation,
cooperative, partnership, joint venture, trust, other incorporated or
unincorporated enterprise or employee benefit plan (each, a "Company
Affiliate").

               (b) In providing the foregoing indemnification, the Company
shall, with respect to a Proceeding, hold harmless and indemnify the Indemnitee
to the fullest extent required by the Maryland Statute and to the fullest extent
permitted by the Express Permitted Indemnification Provisions (as hereinafter
defined) of the Maryland Statute. For purposes of this Agreement, the "Express
Permitted Indemnification Provisions" of the Maryland Statute shall mean
indemnification as permitted by Section 2-418(b) of the Maryland Statute or by
any amendment thereof or other statuary provisions expressly permitting such
indemnification which is adopted after the date hereof (but, in the case of any
such amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than said law required or permitted the
Company to provide prior to such amendment).

               (c) Without limiting the generality of the foregoing, the
Indemnitee shall be entitled to the rights of indemnification provided in this
Section 1 for any expenses actually incurred in any Proceeding initiated by or
in the right of the Company unless the Indemnitee shall have been adjudged to be
liable to the Company.

               (d) If the Indemnitee is entitled under this Agreement to
indemnification by the Company for some or a portion of the Indemnified Amounts
(as hereinafter defined) but not, however, for all of the total amount thereof,
the Company shall nevertheless indemnify the Indemnitee for the portion thereof
to which Indemnitee is entitled.

               (e) Notwithstanding anything herein to the contrary, if the
Indemnitee (or Affiliate Indemnitee) is unwilling to accept a settlement offer
(the "Settlement Offer") with respect to any Proceeding, under which settlement
offer no civil or criminal liability (or presumption of civil or criminal
liability) is imposed on the Indemnitee (or Affiliate Indemnitee) and the
Company has agreed in writing to pay all costs and expenses associated
therewith, then

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the Company's indemnification obligations hereunder with respect to such
Proceeding shall terminate, provided that Indemnitee shall still be entitled to
receive all rights provided, and amounts payable, under the Settlement Offer.

         2. Other Indemnification Arrangements. The Maryland Statute, the
Charter and the Bylaws of the Company permit the Company to purchase and
maintain insurance or furnish similar protection or make other arrangements,
including, without limitation, providing a trust fund, letter of credit or
surety bond (collectively, the "Indemnity Arrangements") on behalf of the
Indemnitee against any liability asserted against him or incurred by or on
behalf of him in such capacity as a director or officer of the Company or as an
Affiliate Indemnitee, or arising out of his status as such, whether or not the
Company would have the power to indemnify him against such liability under the
provisions of this Agreement or under the Maryland Statute, as it may then be in
effect. The purchase, establishment and maintenance of any such Indemnification
Arrangement shall not in any way limit or affect the rights and obligations of
the Company or of the Indemnitee under this Agreement except as expressly
provided herein, and the execution and delivery of this Agreement by the Company
and the Indemnitee shall not in any way limit or affect the rights and
obligations of the Company or the other party or parties thereto under any such
Indemnification Arrangement. All amounts payable by the Company pursuant to this
Section 2 and Section 1 hereof are herein referred to as "Indemnified Amounts."

         3. Advance Payment of Indemnified Amounts.

               (a) The Indemnitee hereby is granted the right to receive in
advance of a final, non-appealable judgment or other final adjudication of a
Proceeding (a "Final Determination") the amount of any and all expenses,
including, without limitation, investigation expenses, expert witness and
attorneys' fees and other expenses expended or incurred by the Indemnitee in
connection with any Proceeding or otherwise expended or incurred by the
Indemnitee (such amounts so expended or incurred being referred to as "Advanced
Amounts").

               (b) In making any written request for Advanced Amounts, the
Indemnitee shall submit to the Company a schedule setting forth in reasonable
detail the dollar amount expended or incurred and expected to be expended. Each
such listing shall be supported by the bill, agreement or other documentation
relating thereto, each of which shall be appended to the schedule as an exhibit.
In addition, before the Indemnitee may receive Advanced Amounts from the
Company, the Indemnitee shall provide to the Company (i) a written affirmation
of the Indemnitee's good faith belief that the applicable standard of conduct
required for indemnification by the Company has been satisfied by the Indemnitee
and (ii) a written undertaking by or on behalf of the Indemnitee to repay the
Advanced Amount if it shall ultimately be determined that the Indemnitee has not
satisfied any applicable standard of conduct. The written undertaking required
from the Indemnitee shall be an unlimited general obligation of the Indemnitee
but need not be secured. The Company shall pay to the Indemnitee all Advanced
Amounts within ten (10) business days after receipt by the Company of all
information and documentation required to be provided by the Indemnitee pursuant
to this subsection (b).

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         4. Procedure for Payment of Indemnified Amounts.

               (a) To obtain indemnification under this Agreement, the
Indemnitee shall submit to the Company a written request for payment of the
appropriate Indemnified Amounts, including with such request such documentation
and information as is reasonably available to the Indemnitee and reasonably
necessary to determine whether and to what extent the Indemnitee is entitled to
indemnification. The Secretary of the Company shall, promptly upon receipt of
such a request for indemnification, advise the Board in writing that the
Indemnitee has requested indemnification.

               (b) The Company shall pay the Indemnitee the appropriate
Indemnified Amounts unless it is established that the Indemnitee has not met any
applicable standard of conduct of the Express Permitted Indemnification
Provisions. For purposes of determining whether the Indemnitee is entitled to
Indemnified Amounts, in order to deny indemnification to the Indemnitee the
Company has the burden of proof in establishing that the Indemnitee did not meet
the applicable standard of conduct. In this regard, a termination of any
Proceeding by judgment, order or settlement does not create a presumption that
the Indemnitee did not meet the requisite standard of conduct; provided,
however, that the termination of any criminal proceeding by conviction, or a
pleading of nolo contendere or its equivalent, or an entry of an order of
probation prior to judgment, creates a rebuttable presumption that the
Indemnitee did not meet the applicable standard of conduct.

               (c) Any determination that the Indemnitee has not met the
applicable standard of conduct required to qualify for indemnification shall be
made (i) either by the Board by a majority vote of a quorum consisting of
directors who were not parties of such action, suit or proceeding or (ii) by
independent legal counsel (who may be the outside counsel regularly employed by
the Company), provided that the manner in which (and, if applicable, the counsel
by which) the right to indemnification is to be determined shall be approved in
advance in writing by both the highest ranking executive officer of the Company
who is not party to such action (sometimes hereinafter referred to as the
"Senior Officer") and by the Indemnitee. In the event that such parties are
unable to agree on the manner in which any such determination is to be made,
such determination shall be made by independent legal counsel retained by the
Company especially for such purpose, provided that such counsel be approved in
advance in writing by both the Senior Officer and Indemnitee and provided
further, that such counsel shall not be outside counsel regularly employed by
the Company. The fees and expenses of counsel in connection with making said
determination contemplated hereunder shall be paid by the Company, and if
requested by such counsel, the Company shall give such counsel an appropriate
written agreement with respect to the payment of their fees and expenses and
such other matters as may be reasonably requested by counsel.

               (d) The Company will use its best efforts to conclude as soon as
practicable any required determination pursuant to subsection (c) above and
promptly will advise the Indemnitee in writing with respect to any determination
that the Indemnitee is or is not entitled to indemnification, including a
description of any reason or basis for which indemnification has been denied.
Payment of any applicable Indemnified Amounts will be made to the Indemnitee
within ten (10) days after any determination of the Indemnitee's entitlement to
indemnification.

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               (e) Notwithstanding the foregoing, the Indemnitee may, at any
time after sixty (60) days after a claim for Indemnified Amounts has been filed
with the Company (or upon receipt of written notice that a claim for Indemnified
Amounts has been rejected, if earlier) and before three (3) years after a claim
for Indemnified Amounts has been filed, petition a court of competent
jurisdiction to determine whether the Indemnitee is entitled to indemnification
under the provisions of this Agreement, and such court shall thereupon have the
exclusive authority to make such determination unless and until such court
dismisses or otherwise terminates such action without having made such
determination. The court shall, as petitioned, make an independent determination
of whether the Indemnitee is entitled to indemnification as provided under this
Agreement, irrespective of any prior determination made by the Board or
independent counsel. If the court shall determine that the Indemnitee is
entitled to indemnification as to any claim, issue or matter involved in the
Proceeding with respect to which there has been no prior determination pursuant
to this Agreement or with respect to which there has been a prior determination
that the Indemnitee was not entitled to indemnification hereunder, the Company
shall pay all expenses (including attorneys' fees) actually incurred by the
Indemnitee in connection with such judicial determination.

         5. Agreement Not Exclusive; Subrogation Rights, etc.

               (a) This Agreement shall not be deemed exclusive of and shall not
diminish any other rights the Indemnitee may have to be indemnified or insured
or otherwise protected against any liability, loss or expense by the Company,
any subsidiary of the Company or any other person or entity under any charter,
bylaws, law, agreement, policy of insurance or similar protection, vote of
stockholders or directors, disinterested or not, or otherwise, whether or not
now in effect, both as to actions in the Indemnitee's official capacity, and as
to actions in another capacity while holding such office. The Company's
obligations to make payments of Indemnified Amounts hereunder shall be satisfied
to the extent that payments with respect to the same Proceeding (or part
thereof) have been made to or for the benefit of the Indemnitee by reason of the
indemnification of the Indemnitee pursuant to any other arrangement made by the
Company for the benefit of the Indemnitee.

               (b) In the event the Indemnitee shall receive payment from any
insurance carrier or from the plaintiff in any Proceeding against the Indemnitee
in respect of Indemnified Amounts after payments on account of all or part of
such Indemnified Amounts have been made by the Company pursuant hereto, the
Indemnitee shall promptly reimburse to the Company the amount, if any, by which
the sum of such payment by such insurance carrier or such plaintiff and payments
by the Company or pursuant to arrangements made by the Company to Indemnitee
exceeds such Indemnified Amounts; provided, however, that such portions, if any,
of such insurance proceeds that are required to be reimbursed to the insurance
carrier under the terms of its insurance policy, such as deductible or
co-insurance payments, shall not be deemed to be payments to the Indemnitee
hereunder. In addition, upon payment of Indemnified Amounts hereunder, the
Company shall be subrogated to the rights of the Indemnitee receiving such
payments (to the extent thereof) against any insurance carrier (to the extent
permitted under such insurance policies) or plaintiff in respect of such
Indemnified Amounts and the Indemnitee shall execute and deliver any and all
instruments and documents and perform any and all other acts or deeds which the
Company deems necessary or advisable to secure such rights. Such right of

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subrogation shall be terminated upon receipt by the Company of the amount to be
reimbursed by the Indemnitee pursuant to the first sentence of this subsection
(b).

         6. Insurance Coverage. In the event that the Company maintains
directors' and officers' liability insurance to protect itself and any director
or officer of the Company against any expense, liability or loss, such insurance
shall cover the Indemnitee to at least the same extent as any other director or
officer of the Company.

         7. Establishment of Trust. The Company may, in its sole discretion,
create a trust (the "Trust") for the benefit of the Indemnitee and, to the
extent such Trust has been created, from time to time upon written request of
Indemnitee shall fund the Trust in an amount sufficient to satisfy any and all
Indemnified Amounts (including Advanced Amounts) which are actually paid or
which Indemnitee reasonably determines from time to time may be payable by the
Company under this Agreement. The amount or amounts to be deposited in the Trust
pursuant to the foregoing funding obligation shall be determined by the
independent legal counsel appointed under Section 4 hereof. If the Trust is
established, the terms thereof shall provide that (i) the Trust shall not be
revoked or the principal thereof invaded without the written consent of the
Indemnitee; (ii) the trustee of the Trust (the "Trustee") shall advance, within
ten (10) business days of a request by the Indemnitee, any and all Advanced
Amounts to the Indemnitee (and the Indemnitee hereby agrees to reimburse the
Trust under the circumstances which the Indemnitee would be required to
reimburse the Company under Section 3(b)(ii) hereof); the Company shall continue
to fund the Trust from time to time in accordance with the funding obligations
set forth above; (iv) the Trustee shall promptly pay to the Indemnitee all
Indemnified Amounts for which the Indemnitee shall be entitled to
indemnification pursuant to this Agreement; and (v) all unexpended funds in the
Trust shall revert to the Company upon a final determination by a court of
competent jurisdiction in a final decision from which there is no further right
of appeal that the Indemnitee has been fully indemnified under the terms of this
Agreement. The Trustee shall be chosen by the Indemnitee. Nothing in this
Section 7 shall relieve the Company of any of its obligations under this
Agreement.

         8. Continuation of Indemnity. All agreements and obligations of the
Company contained herein shall continue during the period the Indemnitee is a
director or officer of the Company (or is serving at the request of the Company
as an Affiliate Indemnitee) and shall continue thereafter so long as the
Indemnitee shall be subject to any possible Proceeding by reason of the fact
that the Indemnitee was a director or officer of the Company or was serving in
any other capacity referred to herein.

         9. Successors; Binding Agreement. This Agreement shall be binding on
and shall inure to the benefit of and be enforceable by the Company's successors
and assigns and by the Indemnitee's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. The Company shall require any successor or assignee (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by written
agreement form and substance reasonably satisfactory to the Company and to the
Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or assignment had taken place.

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         10. Enforcement. The Company has entered into this Agreement and
assumed the obligations imposed on the Company hereby in order to induce the
Indemnitee to act as a director or officer, as the case may be, of the Company,
and acknowledge that the Indemnitee is relying upon this Agreement in continuing
in such capacity. In the event the Indemnitee is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Company shall reimburse the Indemnitee for all of the
Indemnitee's fees and expenses in bringing and pursuing such action. The
Indemnitee shall be entitled to the advancement of Indemnified Amounts to the
full extent contemplated by Section 3 hereof in connection with such proceeding.

         11. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof, which other provisions shall
remain in full force and effect.

         12. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is approved
by the Board and agreed to in writing signed by the Indemnitee and either the
President of the Company or another officer of the Company specifically
designated by the Board. No waiver by either party at any time of any breach by
the other party of, or of compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same time or at any prior
or subsequent times. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Maryland, without giving effect to the
principles of conflicts of laws thereof. The Indemnitee may bring an action
seeking resolution of disputes or controversies arising under or in any way
related to this Agreement in the state or federal court jurisdiction in which
the Indemnitee resides or in which his place of business is located, and in any
related appellate courts, and the Company consents to the jurisdiction of such
courts and to such venue.

         13. Notices. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows: (i) if
to the Indemnitee, at the address set forth below the Indemnitee's name on the
signature page hereof, and (ii) if to the Company:

                             4231 Walnut Bend
                             Jacksonville, Florida  32257
                             Attention: Secretary

or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

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         14. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

         15. Effectiveness. This Agreement shall be effective as of the date it
is executed.

               [REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK.]

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         IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.

                                            SUNSET FINANCIAL RESOURCES, INC.

                                            By:
                                               -------------------------------

                                            INDEMNITEE

                                            -----------------------------------
                                            [NAME]
                                            Address:
                                                    ---------------------------

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

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                                       9<PAGE>
                                                                    EXHIBIT 10.8

                              AMENDED AND RESTATED

                            2003 SHARE INCENTIVE PLAN

                                       OF

                        SUNSET FINANCIAL RESOURCES, INC.

1.       PURPOSE.

         The purpose of this Plan is to benefit the Company's shareholders by
encouraging high levels of performance by individuals who are key to the success
of the Company and to enable the Company to attract, motivate and retain
talented and experienced individuals essential to its continued success. This is
to be accomplished by providing such individuals an opportunity to obtain or
increase their proprietary interest in the Company's performance and by
providing such individuals with additional incentives to remain with the
Company.

2.       DEFINITIONS.

         The following terms, as used herein, shall have the meaning specified:

         (a) "Affiliate" shall mean any corporation or other entity that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Company or by another
Affiliate of the Company within the meaning of Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended.

         (b) "Award" shall mean an award granted pursuant to Section 6.

         (c) "Board" shall mean the Board of Directors of the Company, as it may
be comprised from time to time.

         (d) "Change in Control" shall means the occurrence of any of the
following:

                  (1) at any time during any 12-month period, the Board of
         Directors of the Company in office at the beginning of such period
         shall have ceased to constitute a majority of the Board without the
         approval of the nomination of such directors by a majority of the Board
         consisting of directors who were serving at the beginning of such
         period;

                  (2) any person (as defined in Section 13(d)(3) or Section
         14(d)(2) of the Exchange Act) (other than the Company, any of its
         subsidiaries or any trustee, fiduciary or other person holding
         securities under any employee share ownership plan or any other
         employee benefit plan of the Company or any of its subsidiaries),
         together with its affiliates and associates (as such terms are defined
         in Rule 12b-2 under the Exchange Act) shall have become the beneficial
         owner (as defined in Rule 13d-3 of the Exchange

<PAGE>

         Act) of securities representing 25% or more of the combined voting
         power of the Voting Shares;

                  (3) the Company shall have filed a schedule, report or proxy
         statement with the Securities and Exchange Commission pursuant to the
         Exchange Act disclosing that a change in control of the Company has
         occurred;

                  (4) a merger or consolidation of the Company shall have been
         consummated, other than (x) a merger or consolidation that would result
         in the Voting Shares outstanding immediately prior thereto continuing
         to represent (either by remaining outstanding or by being converted
         into voting securities of the surviving entity) at least 50% of the
         combined voting power of the voting securities of the surviving entity
         or (y) a merger or consolidation effected to implement a
         recapitalization of the Company (or similar transaction) in which no
         person acquires more than 50% of the Voting Shares;

                  (5) any person, other than a subsidiary of the Company, shall
         have acquired more than 50% of the combined assets of the Company and
         its subsidiaries; or

                  the shareholders of the Company shall have approved the
         complete liquidation or dissolution of the Company.

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

         (f) "Committee" shall mean a committee appointed pursuant to Section
3(a) or, if no such Committee is appointed, the Board.

         (g) "Company" shall mean Sunset Financial Resources, Inc.

         (h) "Director" shall mean any person who shall from time to time serve
as a member of the Board of Directors of the Company or any Affiliate.

         (i) "Dividend Equivalent Right" shall mean an Award granted pursuant to
Section 6(c).

         (j) "Effective Date" shall mean the date this Plan was originally
adopted by the Board, unless otherwise specified by the Board.

         (k) "Election Date" shall mean the date an Independent Director is
first elected to the Board.

         (l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

         (m) "Fair Market Value" shall mean the closing price of the relevant
security as reported on the composite tape of New York Stock Exchange issues (or
such other reporting system as shall be selected by the Committee) on the
relevant date, or if no sale of the security is reported for such date, the next
following day for which there is a reported sale. The Committee

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shall determine the Fair Market Value of any security that is not publicly
traded, using such criteria as it shall determine, in its sole discretion, to be
appropriate for such valuation.

         (n) "Independent Director" shall mean any Director who is (i) (A) a
"non-employee director" within the meaning of Rule 16b3(b)(3)(i) of the Exchange
Act, and (B) an "outside director" within the meaning of Code Section 162(m) and
the regulations promulgated thereunder, and (ii) who is not an employee of the
Company or any Affiliate; provided, that a Director who is (x) a Director or (y)
a consultant, or both, but is not an employee, also may be an Independent
Director.

         (o) "Insider" shall mean any person who is subject to Section 16.

         (p) "ISO" shall mean an incentive stock option within the meaning of
Code Section 422.

         (q) "Mature Shares" shall mean, with respect to an exercise date,
Shares held by a Participant for at least six months prior to such exercise
date.

         (r) "NQO" shall mean a stock option that is not within the meaning of
Code Section 422.

         (s) "Option" shall mean any option granted pursuant to Section 6(a)(1).

         (t) "Outstanding Shares" shall mean, with respect to any date, the
total of the number of Shares outstanding, plus (ii) the number of Shares
reserved for issuance upon conversion of securities convertible into or
exchangeable for Shares, plus (iii) the number of Shares, if any, held as
"treasury stock" by the Company, each as on such date.

         (u) "Participant" shall mean any person who has been granted an Award
pursuant to this Plan.

         (v) "Restricted Shares" shall mean the Shares issued as a result of a
Restricted Share Award.

         (w) "Restricted Share Award" shall mean a grant of the right to
purchase Shares pursuant to Section 6(b). Such Shares, when and if issued, shall
be subject to such transfer restrictions and risk of forfeiture as the Committee
shall determine at the time the Award is granted, until such specific conditions
are met. Such conditions may be based on continuing employment or achievement of
pre-established performance objectives, or both.

         (x) "Rights" shall mean an Award granted pursuant to Section 6.

         (y) "Section 16" shall mean Section 16 of the Exchange Act or any
successor regulation and the rules promulgated thereunder by the Securities and
Exchange Commission, as they may be amended from time to time.

         (z) "Shares" shall mean the Common shares of beneficial interest of the
Company, par value $0.001 per share.

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<PAGE>

         (aa) "Maryland Act" shall mean the Maryland General Corporation Law, as
amended from time to time.

         (bb) "Director" shall mean any person who shall from time to time be a
member of the Board.

3.       ADMINISTRATION AND INTERPRETATION.

         (a) Administration. This Plan shall be administered by a Committee,
which shall consist of three or more Independent Directors. The Board may from
time to time remove and appoint members of the Committee in substitution for, or
in addition to, members previously appointed and may fill vacancies, however
caused, in the Committee. The Committee may prescribe, amend and rescind rules
and regulations for administration of this Plan and shall have full power and
authority to construe and interpret this Plan. A majority of the members of the
Committee shall constitute a quorum, and the act of a majority of the members
present at a meeting or the acts of a majority of the members evidenced in
writing shall be the acts of the Committee. The Committee may correct any defect
or any omission or reconcile any inconsistency in this Plan or in any Award or
grant made hereunder in the manner and to the extent it shall deem desirable.

         The Committee shall have the full and exclusive right to grant all
Awards under this Plan, which may be Options, Restricted Share Awards and
Dividend Equivalent Rights. In granting Awards, the Committee shall take into
consideration the contribution the individual has made or may make to the
success of the Company or its Affiliates and such other factors as the Committee
shall determine. The Committee shall periodically determine the Participants in
this Plan and the nature, amount, pricing, time and other terms of Awards to be
made to such individuals, subject to the other terms and provisions of this
Plan. The Committee shall also have the authority to consult with and receive
recommendations from officers and other individuals of the Company and its
Affiliates with regard to these matters. In no event shall any individual, his
or her legal representative, heirs, legatees, distributees or successors have
any right to participate in this Plan except to such extent, if any, as the
Committee shall determine.

         The Committee may from time to time in granting Awards under this Plan
prescribe such other terms and conditions concerning such Awards as it deems
appropriate, including, without limitation, the achievement of specific goals
established by the Committee, provided that such terms and conditions are not
more favorable to any individual than those expressly set forth in this Plan.

         The Committee may delegate to the officers of or individuals associated
with the Company the authority to execute and deliver such instruments and
documents, to do all such acts and things, and to take all such other steps
deemed necessary, advisable or convenient for the effective administration of
this Plan in accordance with its terms and purpose, except that the Committee
may not delegate any discretionary authority with respect to substantive
decisions or functions regarding this Plan or Awards hereunder as these relate
to Insiders, including but not limited to decisions regarding the timing,
eligibility, pricing, amount or other material term of such Awards.

                                       4
<PAGE>

         (b) Interpretation. The Committee shall have the power to interpret and
administer this Plan. All questions of interpretation with respect to this Plan,
the number of Shares or other security granted hereunder, and the terms of any
Award shall be determined by the Committee and its determination shall be final
and conclusive upon all parties in interest. In the event of any conflict
between an Award and this Plan, the terms of this Plan shall govern. It is the
intent of the Company that this Plan and Awards hereunder satisfy and be
interpreted in a manner that, in the case of participants who are or may be
Insiders, satisfies the applicable requirements of Rule 16b-3 of the Exchange
Act, so that such persons will be entitled to the benefits of Rule 16b-3 or
other exemptive rules under Section 16 and will not be subjected to liability
thereunder. If any provision of this Plan or of any Award would otherwise
frustrate or conflict with the intent expressed in this Section 3(b), that
provision to the extent possible shall be interpreted and deemed amended so as
to avoid such conflict. To the extent of any remaining irreconcilable conflict
with such intent, the provision shall be deemed void as applicable to Insiders.

         (c) Limitation on Liability. Neither the Committee nor any member
thereof shall be liable for any act, omission, interpretation, construction or
determination made in connection with this Plan in good faith, and the members
of the Committee shall be entitled to indemnification and reimbursement by the
Company in respect of any claim, loss, damage or expense (including counsel
fees) arising therefrom to the full extent permitted by law. The members of the
Committee shall be named as insureds under any directors and officers (or
similar) liability insurance coverage which the Company may have in effect from
time to time.

4.       ELIGIBILITY.

         The class of persons who are potential recipients of Awards granted
under this Plan consist of the (i) Independent Directors, (ii) Directors, (iii)
Advisory Board Members, (iv) key employees of the Company or any Affiliate and
(v) consultants to the Company or any Affiliate, in each case (other than in the
case of clause (i)), as determined by the Committee from time to time. The
Independent Directors, Directors, key employees and consultants to whom Awards
are granted under this Plan, and the number of Shares subject to each such
Award, shall be determined by the Committee in its sole discretion, subject,
however, to the terms and conditions of this Plan.

5.       SHARES SUBJECT TO GRANTS UNDER THIS PLAN.

         (a) Limitation on Number of Shares. The Shares subject to grants of
Awards shall be authorized but unissued Shares, Shares purchased in the open
market or privately and such Shares, if any, held as "treasury stock" by the
Company. Subject to adjustment as hereinafter provided, the aggregate number of
Shares with respect to which Awards may be granted under this Plan shall not
exceed 10% of the Outstanding Shares determined immediately following the
consummation of the Company's Initial Public Offering (including the exercise of
any over-allotment options by the underwriters of such Initial Public Offering).

         (b) Shares ceasing to be subject to an Award because of the exercise of
an Option or Right or the vesting of an Award shall no longer be subject to any
further grant under this Plan. However, if any outstanding Option or Right, in
whole or in part, expires or terminates unexercised or is canceled or if any
Award, in whole or in part, expires or is terminated or

                                       5
<PAGE>

forfeited, for any reason prior to the expiration of ten (10) years from the
Effective Date, the Shares allocable to the unexercised, terminated, canceled or
forfeited portion of such Award may again be made the subject of grants under
this Plan; provided, however, that, with respect to any Option or Rights granted
to any Participant who is a "covered person" as defined in Code Section 162(m)
and the regulations promulgated thereunder that is canceled, the number of
Shares subject to such Option and/or Rights shall continue to count against the
maximum number of Shares which may be the subject of Options and for Rights
granted to such Participant.

         For the purposes of computing the total number of Shares granted under
this Plan, the following rules shall apply to Awards payable in Shares:

                  (1) each Option shall be deemed to be the equivalent of the
         maximum number of Shares that may be issued upon exercise of the
         particular Option; and

                  (2) where the number of Shares available under the Award is
         variable on the date it is granted, the number of Shares shall be
         deemed to be the maximum number of Shares that could be received under
         that particular Award.

         (c) Adjustments of Aggregate Number of Shares. The aggregate number of
Shares stated in Section 5(a) shall be subject to appropriate adjustment, from
time to time, in accordance with the provisions of Section 7 hereof.

6.       AWARDS.

         (a) Options and Rights.

                  (1) Grants of Options. Options granted under this Plan may be
         either ISOs or NQOs. At the time an Option is granted, the Committee
         may, in its discretion, designate whether an Option shall be an ISO. No
         Option which is intended to qualify as an ISO shall be granted under
         this Plan to any individual who, at the time of such grant, is not an
         employee of the Company or an Affiliate.

                  Notwithstanding any other provision of this Plan to the
         contrary, to the extent that the aggregate Fair Market Value
         (determined at the date an Option is granted) of the Shares with
         respect to which an Option intended to be an ISO (and any other ISO
         granted to the holder under this Plan or any other plans of the Company
         or an Affiliate) first becomes exercisable during any calendar year
         exceeds $100,000, the portion of such Option which would exceed the
         $100,000 limitation shall be treated as an NQO. Options with respect to
         which no designation is made by the Committee shall be deemed to be
         ISOs to the extent that the $100,000 limitation described in the
         preceding sentence is met. This paragraph shall be applied by taking
         Options into account in the order in which they are granted.

                  No ISO shall be granted to any person who, at the time of the
         grant, owns Shares possessing more than 10% of the total combined
         voting power of the Company or any Affiliate, unless (i) on the date
         such ISO is granted, the Option price is at least 110% of

                                       6
<PAGE>

         the Fair Market Value per Share subject to the ISO and (ii) such ISO by
         its terms is not exercisable after the expiration of five years from
         the date such ISO is granted.

                  The purchase price per Share pursuant to the exercise of any
         Option shall be fixed by the Committee at the time of grant; provided,
         however, that the purchase price per Share (regardless of whether such
         Option is an ISO or an NQO) shall not be less than the Fair Market
         Value of a Share on the date on which the Option is granted. In
         addition, the Committee shall designate the number of Shares, the terms
         and conditions (which may include, without limitation, the achievement
         of specific goals), with respect to Options granted under this Plan.
         Options may be granted by the Committee to any eligible person at any
         time and from time to time.

                  As a condition to the grant of an Option, the Participant
         shall enter into an Option Agreement with the Company upon such terms
         as the Committee may, in its discretion, require.

                  (2) Payment of Option Exercise Price. Upon exercise of an
         Option, the full Option purchase price for the Shares with respect to
         which the Option is being exercised shall be payable to the Company,
         (i) in cash or by a check payable and acceptable to the Company or (ii)
         subject to the approval of the Committee, by tendering to the Company
         Shares owned by the holder for at least six months having an aggregate
         Fair Market Value per Share as of the date of exercise and tender which
         is not greater than the full Option purchase price for the Shares with
         respect to which the Option is being exercised and by paying the
         remainder of the Option purchase price as provided in (i) above;
         however, the Committee may, upon confirming that the holder owns the
         number of additional Shares being tendered, authorize the issuance of a
         new certificate for the number of Shares being acquired pursuant to the
         exercise of the Option less the number of Shares being tendered upon
         the exercise and return to the holder (or not require surrender of) the
         certificate for the Shares being tendered upon the exercise.
         Notwithstanding the preceding, a holder may not use any Shares acquired
         pursuant to an Award granted under this Plan (or any other plan
         maintained by the Company or any Affiliate) unless the holder has
         beneficially owned such Shares for at least six months. Payment
         instruments will be received subject to collection. In addition to the
         foregoing methods of payment, the full Option purchase price for Shares
         with respect to which the Option is being exercised may be payable to
         the Company by such other methods as the Committee may permit from time
         to time.

                  (3) Term. The term of each Option and Right shall be
         determined by the Committee at the date of grant; provided, however,
         that each Option that is an ISO shall, notwithstanding anything in this
         Plan to the contrary, expire not more than ten years from the date the
         Option is granted (or five years from the date of grant to the extent
         required under Section 6(a)(1)) or, if earlier, the date specified in
         the certificate evidencing the grant of such Option. An Option that is
         an NQO shall expire not more than ten years from the date the Option is
         granted, or if earlier, the date specified in the Option Agreement.

                                       7
<PAGE>

                  (4) Termination of Employment or Relationship. In the event
         that a Participant's employment or relationship with the Company and
         its Affiliates shall terminate, for reasons other than (i) retirement
         pursuant to a retirement plan or policy of the Company or one of its
         Affiliates ("retirement"), (ii) permanent disability as determined by
         the Committee based on the opinion of a physician selected or approved
         by the Committee ("permanent disability") or (iii) death, the
         Participant's Options and Rights shall be exercisable by him or her,
         subject to subsection (3) above, only within 90 business days after
         such termination, but only to the extent the Option or Right was
         exercisable immediately prior to such termination.

                  If a Participant shall retire, become permanently disabled or
         die while entitled to exercise an Option or Rights, the Participant or,
         if applicable, the Participant's estate, personal representative or
         beneficiary, as the case may be, shall have the right, subject to the
         provisions of subsection (3) above, to exercise the Option or Rights at
         any time within one year from the date of the Participant's retirement,
         permanent disability or death.

                  Whether any termination is due to retirement or permanent
         disability, and whether an authorized leave of absence on military or
         government service or for other reasons shall constitute a termination
         for the purpose of this Plan, shall be determined by the Committee.

                  If the employment, consulting arrangement or service of any
         Participant with the Company or an Affiliate shall be terminated
         because of the Participant's violation of the duties of such
         employment, consulting arrangement or service with the Company or an
         Affiliate as he or she may from time to time have, the existence of
         which violation shall be determined by the Committee in its sole
         discretion (which determination by the Committee shall be conclusive),
         all unexercised Options and Rights of such Participant shall terminate
         immediately upon such termination of such Participant's employment,
         consulting arrangement or service with the Company and all Affiliates,
         and a Participant whose employment, consulting arrangement or service
         with the Company and Affiliates is so terminated, shall have no right
         after such termination to exercise any unexercised Option or Rights he
         or she might have exercised prior to termination of his or her
         employment, consulting arrangement or service with the Company and
         Affiliates.

                  (5) Options Granted by Other Corporations. Options may be
         granted under this Plan from time to time in substitution for stock
         options held by employees and directors of corporations who become key
         employees or Directors or directors of the Company or of any Affiliate
         as a result of any "corporate transaction" as defined in the Treasury
         Regulations promulgated under Code Section 424.

                                       8
<PAGE>

         (b) Restricted Share Awards.

                  (1) Awards of Restricted Shares. Restricted Share Awards may
         be awarded by the Committee to any individual eligible to receive the
         same, at any time and from time to time before the expiration of ten
         (10) years from the Effective Date. In addition, and without limiting
         the generality of the foregoing, the Committee may grant to any
         individual who is entitled to receive a bonus, a Restricted Share Award
         with respect to Shares having a Fair Market Value on the date of the
         grant of such Restricted Share Award equal to a specified percentage
         determined by the Committee of the amount of such individual's bonus,
         provided that such individual has made an irrevocable election, at
         least six months prior to the date of the grant of such Restricted
         Share Award, to receive such Restricted Share Award in lieu of such
         bonus.

                  (2) Purchase Price under Restricted Share Awards. The purchase
         price of Restricted Shares to be purchased pursuant to a Restricted
         Share Award shall be fixed by the Committee at the time of the grant of
         the Restricted Share Award; provided, however, that such purchase price
         shall not be less than the par value per Share of the Shares subject to
         the Restricted Share Award. The Committee shall specify, within its
         discretion, the time and manner in which payment of such purchase price
         shall be paid.

                  (3) Description of Restricted Shares. All Restricted Shares
         purchased by an eligible person shall be subject to the following
         conditions:

                           (i) Restricted Shares shall be subject to such
                  restrictions, terms and conditions as the Committee may
                  establish, which may include, without limitation, "lapse" and
                  "non-lapse" restrictions (as such terms are defined in
                  regulations promulgated under Code Section 83) and the
                  achievement of specific goals;

                           (ii) the Restricted Shares may not be sold,
                  exchanged, pledged, transferred, assigned or otherwise
                  encumbered or disposed of until the terms and conditions set
                  by the Committee at the time of the grant of the Restricted
                  Share Award have been satisfied;

                           (iii) each certificate representing Restricted Shares
                  issued pursuant to this Plan shall bear a legend making
                  appropriate reference to the following:

                           "the Shares represented by this certificate have been
                           issued pursuant to the terms of the 2003 Share
                           Incentive Plan of Sunset Financial Resources, Inc.
                           and may not be sold, pledged, transferred, assigned
                           or otherwise encumbered in any manner except as is
                           set forth in the terms of such award dated ________."
                  ; and

                                       9
<PAGE>

                           (iv) except as permitted by the Board, no Restricted
                  Shares granted pursuant to this Plan shall be subject to
                  vesting requirements over a period of less than three years.

                  If a certificate representing Restricted Shares is issued to
         an individual (whether or not escrowed as provided below), the
         individual shall be the record owner of such Shares and shall have all
         the rights of a stockholder with respect to such Shares (unless the
         Restricted Share Award specifically provides otherwise), including the
         right to vote and the right to receive dividends made or paid with
         respect to such Shares.

                  In order to enforce the restrictions, terms and conditions
         that may be applicable to a Participant's Restricted Shares, the
         Committee may require the Participant, upon the receipt of a
         certificate or certificates representing such Shares, or at any time
         thereafter, to deposit such certificate or certificates, together with
         stock powers and other instruments of transfer, appropriately endorsed
         in blank, with the Company or an escrow agent designated by the Company
         under an escrow agreement, which may be a part of a Restricted Share
         Award, in such form as shall be determined by the Committee.

                  After the satisfaction of the terms and conditions set by the
         Committee with respect to Restricted Shares issued to an individual,
         and provided the Restricted Shares are not subject to a non-lapse
         restriction, a new certificate, without the legend set forth above, for
         the number of Shares that are no longer subject to such restrictions,
         terms and conditions shall be delivered to the individual. If such
         terms and conditions are satisfied as to a portion, but fewer than all,
         of such Shares, the remaining Shares issued with respect to such Award
         shall either be reacquired by the Company or, if appropriate under the
         terms of the award applicable to such Shares, shall continue to be
         subject to the restrictions, terms and conditions set by the Committee
         at the time of Award.

                  (4) Termination of Employment or Relationship. If the
         employment or relationship with the Company and its Affiliates of a
         holder of a Restricted Share Award is terminated for any reason before
         satisfaction of the terms and conditions for the vesting (within the
         meaning of Code Section 83) of all Shares subject to the Restricted
         Share Award, the number of Restricted Shares not theretofore vested
         shall be reacquired by the Company and forfeited, and the purchase
         price paid for such forfeited Shares by the holder shall be returned to
         the holder. If Restricted Shares issued shall be reacquired by the
         Company and forfeited as provided above, the individual, or in the
         event of his or her death, his or her personal representative, shall
         forthwith deliver to the Secretary of the Company the certificates
         representing such Shares, accompanied by such instrument of transfer,
         if any, as may reasonably be required by the Company.

         (c) Dividends and Dividend Equivalents.

                  (1) General. The Committee shall have the authority to grant
         Dividend Equivalent Rights to Participants upon such terms and
         conditions as it shall establish, subject in all events to the
         following limitations and provisions of general application set

                                       10
<PAGE>

         forth in this Plan. Each Dividend Equivalent Right shall entitle a
         holder to receive, for a period of time to be determined by the
         Committee, a payment equal to the quarterly dividend declared and paid
         by the Company on one Common Share. If the right relates to a specific
         Option, the period shall not extend beyond the earliest of the date the
         Option is exercised, or the expiration date set forth in the Option.

                  (2) Rights and Options. Each right may relate to a specific
         Option granted under this Plan and may be granted to the Participant
         either concurrently with the grant of such Option or at such later time
         as determined by the Committee, or each right may be granted
         independent of any Option.

                  (3) Payments. The Committee shall determine at the time of
         grant whether payment pursuant to a right shall be immediate or
         deferred and if immediate, the Company shall make payments pursuant to
         each right concurrently with the payment of the quarterly dividend to
         holders of Common Shares. If deferred, the payments shall not be made
         until a date or the occurrence of an event specified by the Committee
         and then shall be made within 30 days after the occurrence of the
         specified date or event, unless the right is forfeited under the terms
         of the Plan or applicable Award Agreement.

                  (4) Termination of Employment. In the event of Employment
         Termination, any Dividend Equivalent Right held by such Participant on
         the date of Employment Termination shall be forfeited, unless otherwise
         expressly provided in the Award Agreement.

         (d) Consideration for Awards. Subject to the requirements of the
Maryland Act, the Company shall obtain such consideration for the grant of an
Award under this Section 6 as the Committee in its discretion may determine.

7.       ADJUSTMENT PROVISIONS.

         If, prior to the complete exercise of any Option, or prior to the
expiration or lapse of all of the restrictions and conditions imposed pursuant
to a Restricted Share Award, there shall be declared and paid a dividend upon
the Shares or if the Shares shall be split up, converted, exchanged,
reclassified or in any way substituted for, then (i) in the case of an Option,
the Option, to the extent that it has not been exercised, shall entitle the
holder thereof upon the future exercise of the Option to such number and kind of
securities or cash or other property subject to the terms of the Option to which
he or she would have been entitled had he or she actually owned the Shares
subject to the unexercised portion of the Option at the time of the occurrence
of such dividend, split-up, conversion, exchange, reclassification or
substitution, and the aggregate purchase price upon the future exercise of the
Option shall be the same as if the originally optioned Shares were being
purchased thereunder; (ii) in the case of Restricted Shares issued pursuant to a
Restricted Share Award, the holder of such Award shall receive, subject to the
same restrictions and other conditions of such Award as determined pursuant to
the provisions of Section 6(b), the same securities or other property as are
received by the holders of Shares pursuant to such dividend, split-up,
conversion, exchange, reclassification or substitution; and (iii) in the case of
a Dividend Equivalent Right, the holder of such Dividend Equivalent

                                       11
<PAGE>

Right shall receive, the same securities or other property as are received by
the holders of Shares pursuant to such dividend, and in the case of a split-up,
conversion, exchange, reclassification or substitution, the Dividend Equivalent
Right shall be adjusted, as the Committee determines consistent with the terms
of such split-up, conversion, exchange, reclassification or substitution. Any
fractional Shares or securities payable upon the exercise of the Option as a
result of such adjustment shall be payable in cash based upon the Fair Market
Value of such Shares or securities at the time of such exercise. If any such
event should occur, the number of Shares with respect to which Awards remain to
be issued, or with respect to which Awards may be reissued, shall be adjusted in
a similar manner.

         Notwithstanding any other provision of this Plan, in the event of a
recapitalization, merger, consolidation, rights offering, separation,
reorganization or liquidation, or any other change in the corporate structure or
outstanding Shares, the Committee may make such equitable adjustments to the
number of Shares and the class of shares available hereunder or to any
outstanding Awards as it shall deem appropriate to prevent dilution or
enlargement of rights.

8.       ACCELERATION.

         Notwithstanding any other provision of this Plan to the contrary, all
or any part of any remaining unexercised Options granted to any person may be
exercised in the following circumstances (but in no event during the six month
period commencing on the date granted) and all or any part of any other Award
not theretofore vested shall vest: (i) with respect to Options only, immediately
upon (but prior to the expiration of the term of the Option) retirement, (ii)
subject to the provisions of Section 6, upon the permanent disability or death
of the holder, or (iii) upon a Change in Control.

9.       CHANGE IN CONTROL.

         Should a Change in Control occur, then at the discretion of the
Committee, all or any part of any remaining unexercised Options granted to any
person hereunder may be repurchased. The repurchase price shall be an amount
equal to the excess of (i) the fair market value of the Share(s) subject to the
Option(s) over (ii) the purchase price per Share, as set forth in the Option
Agreement. The repurchase of such Options is specifically approved by the Board
and, if necessary to exempt such surrender from Section 16(b) of the Exchange
Act, the Board shall take any additional action necessary for such approval to
comply with the requirements of Rule 16b-3(e) promulgated under the Exchange
Act.

10.      PARTICIPANT'S AGREEMENT.

          If, at the time of the exercise of any Option or the granting or
vesting of an Award, in the opinion of counsel for the Company, it is necessary
or desirable, in order to comply with any then applicable laws or regulations
relating to the sale of securities, that the individual exercising the Option or
receiving the Award shall agree to hold any Shares issued to the individual for
investment and without any present intention to resell or distribute the same
and that the individual will dispose of such Shares only in compliance with such
laws and regulations, the individual will, upon the request of the Company,
execute and deliver to the Company a further agreement to such effect.

                                       12
<PAGE>

11.      WITHHOLDING TAXES.

          No Award may be exercised and no distribution of Shares or cash
pursuant to an Award may be made under this Plan until appropriate arrangements
have been made by the holder with the Company for the payment of any amounts
that the Company may be required to withhold with respect thereto, which
arrangements may include the tender of previously owned Shares or the
withholding of Shares issuable pursuant to such Award.

12.      TERMINATION OF AUTHORITY TO MAKE GRANT.

         No Awards will be granted pursuant to this Plan after the expiration of
ten (10) years from the Effective Date.

13.      AMENDMENT AND TERMINATION.

         The Board may from time to time and at any time alter, amend, suspend,
discontinue or terminate this Plan or, with the consent of an affected holder,
any outstanding Awards hereunder, provided, however, that no such action of the
Board may, without the approval of the shareholders of the Company, alter the
provisions of this Plan or outstanding Awards so as to (i) increase the maximum
number of Shares which may be subject to Awards under this Plan (except as
provided in Section 5(b)); or (ii) change the class of persons eligible to
receive Awards; or (iii) amend this Plan in any manner that would require
stockholder approval under Rule 16b-3 of the Exchange Act or under Code Section
162(m); or (iv) reduce the purchase price on an outstanding Option.

14.      PREEMPTION BY APPLICABLE LAWS AND REGULATIONS.

          Notwithstanding anything in this Plan to the contrary, if, at any time
specified herein for the making of any determination or payment, or the issuance
or other distribution of Shares, any law, regulation or requirement of any
governmental authority having jurisdiction in the premises shall require either
the Company or the Participant (or the Participant's beneficiary), as the case
may be, to take any action in connection with any such determination, payment,
issuance or distribution, the issuance or distribution of such Shares or the
making of such determination or payment, as the case may be, shall be deferred
until such action shall have been taken.

15.      MISCELLANEOUS.

         (a) No Employment Contract. Nothing contained in this Plan shall be
construed as conferring upon any Participant the right to continue in the
employ, or as a Director of or consultant to, of the Company or any Affiliate.

         (b) Employment or Service with Affiliates. Employment by, or service
for, the Company for the purpose of this Plan shall be deemed to include
employment by, or service for, any Affiliate.

         (c) No Rights as a Stockholder. A Participant shall have no rights as a
stockholder with respect to Shares covered by the Participant's Award until the
date of the issuance of such

                                       13
<PAGE>

Shares to the Participant pursuant thereto. No adjustment will be made for
dividends or other distributions or rights for which the record date is prior to
the date of such issuance.

         (d) Nonassignability.

                  (1) General. Neither a Participant nor a Participant's estate,
         personal representative or beneficiary shall have the power or right to
         sell, exchange, pledge, transfer, assign or otherwise encumber or
         dispose of such Participant's estate's, personal representative's or
         beneficiary's interest arising under this Plan nor shall such interest
         be subject to seizure for the payment of a Participant's or
         beneficiary's debts, judgments, alimony, or separate maintenance or be
         transferable by operation of the law in the event of a Participant's,
         estate's, personal representative's or beneficiary's bankruptcy or
         insolvency and to the extent any such interest arising under this Plan
         is awarded to a spouse pursuant to any divorce proceeding, such
         interest shall be deemed to be terminated and forfeited,
         notwithstanding any vesting provisions or other terms herein or in such
         Award.

                  (2) Transfers to Family Trusts. Notwithstanding the preceding
         or any other limitation on the transferability of Awards, the Committee
         may (in its sole discretion) permit a Participant to transfer an Award,
         or cause the Company to grant an Award that otherwise would be granted
         to a Participant, to a trust established for the benefit of one or more
         of the children, grandchildren or spouse of the Participant or pursuant
         to a qualified domestic relations order. Any Participant desiring to
         make a transfer pursuant to this subsection shall make application
         therefore in such manner and time specified by the Committee and shall
         comply with such other requirements as the Committee may require to
         assure compliance with all applicable securities laws. The Committee
         shall not give permission for such an issuance or transfer if it would
         give rise to short-swing liability under Section 16(b) or if it may not
         be made in compliance with all applicable federal, state and foreign
         securities laws. The granting of permission for such an issuance or
         transfer shall not obligate the Company to register the Shares to be
         issued under an Award under federal or state securities laws.

         (e) Governing Law; Construction. All rights and obligations under this
Plan shall be governed by, and this Plan shall be construed in accordance with,
the laws of the State of Maryland, without regard to the principles of conflicts
of laws. Titles and headings to Sections herein are for purposes of reference
only, and shall in no way limit, define or otherwise affect the meaning or
interpretation of any provisions of this Plan.

                                       14

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