Document:

EXHIBIT 10.1
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                            1998 STOCK INCENTIVE PLAN
                                       OF
                       CAVANAUGHS HOSPITALITY CORPORATION

         Cavanaughs Hospitality Corporation, a Washington corporation (the
"Company"), has adopted the 1998 Stock Incentive Plan (the "Plan"), effective
March 6, 1998, for the benefit of its eligible employees, consultants, and
directors.

         The purposes of this Plan are as follows:

         (1) To provide an additional incentive for directors, Employees, and
consultants to further the growth, development and financial success of the
Company by personally benefiting through the ownership of Company stock and/or
rights which recognize such growth, development and financial success.

         (2) To enable the Company to obtain and retain the services of
directors, Employees, and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.

                                    ARTICLE I

                                   DEFINITIONS

         1.1   General. Wherever the following terms are used in this Plan they
shall have the meaning specified below, unless the context clearly indicates
otherwise.

         1.2   Award Limit. "Award Limit" shall mean five hundred thousand
(500,000) shares of Common Stock.

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

         1.4   Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.

         1.5   Committee. "Committee" shall mean the Compensation Committee of
the Board, or a subcommittee of the Board, appointed as provided in Section 9.1.

         1.6   Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.01 per share.

         1.7   Company. "Company" shall mean Cavanaughs Hospitality Corporation,
a Washington corporation.

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         1.8   Deferred Stock. "Deferred Stock" shall mean Common Stock awarded
under Article VII of this Plan.

         1.9   Director. "Director" shall mean a member of the Board.

         1.10  Dividend Equivalent. "Dividend Equivalent" shall mean a right to
receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VII of this Plan.

         1.11  Employee. "Employee" shall mean any officer or other employee (as
defined in accordance with Section 3401(c) of the Code) of the Company or any
Subsidiary.

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

         1.13  Fair Market Value. "Fair Market Value" of a share of Common Stock
as of a given date shall be (i) the mean between the highest and lowest selling
price of a share of Common Stock on the principal exchange on which shares of
Common stock are then trading, if any, on such date, or if shares were not
traded on such date, then on the closest preceding date on which a trade
occurred, or (ii) if Common Stock is not traded on an exchange, the mean between
the closing representative bid and asked prices for the Common Stock on such
date as reported by NASDAQ or, if NASDAQ is not then in existence, by its
successor quotation system; or (iii) if Common Stock is not publicly traded, the
Fair Market Value of a share of Common Stock as established by the Committee
acting in good faith.

         1.14  Grantee. "Grantee" shall mean an Employee or consultant granted a
Performance Award, Dividend Equivalent, Stock Payment or Stock Appreciation
Right, or an award of Deferred Stock, under this Plan.

         1.15  Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.

         1.16  Independent Director. "Independent Director" shall mean a member
of the Board who is not an Employee of the Company.

         1.17  Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.

         1.18  Option. "Option" shall mean a stock option granted under Article
III of this Plan. Subject to Sections 3.2 and 3.3, an Option granted under this
Plan shall, as determined by the Committee, be either a Non-Qualified Stock
Option or an Incentive Stock Option.

         1.19  Optionee. "Optionee" shall mean an Employee, consultant, or
Independent Director granted an Option under this Plan.

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         1.20  Performance Award. "Performance Award" shall mean a cash bonus,
stock bonus or other performance or incentive award that is paid in cash, Common
Stock or a combination of both, awarded under Article VII of this Plan.

         1.21  Plan. "Plan" shall mean the 1998 Stock Incentive Plan.

         1.22  QDRO. "QDRO" shall mean any qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act,
of 1974, as amended, or the rules and regulations thereunder.

         1.23  Restricted Stock. "Restricted Stock" shall mean Common Stock
awarded under Article VI of this Plan.

         1.24  Restricted Stockholder. "Restricted Stockholder" shall mean an
Employee or consultant granted an award of Restricted Stock under Article VI of
this Plan.

         1.25  Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3 under
the Exchange Act, as such Rule may be amended from time to time.

         1.26  Stock Appreciation Right. "Stock Appreciation Right" shall mean a
stock appreciation right granted under Article VIII of this Plan.

         1.27  Stock Payment. "Stock Payment" shall mean (i) a payment in the
form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation, including without limitation,
salary, bonuses and commissions, that would otherwise become payable to a
Employee or consultant in cash, awarded under Article VII of this Plan.

         1.28  Subsidiary. "Subsidiary" shall mean any corporation, partnership
or other entity in an unbroken chain beginning with the Company if each of them,
other than the last one in the unbroken chain, then owns stock or other
interests possessing 50 percent or more of the total combined economic interests
or the total combined voting power of all classes of stock or other interests in
one of the other entities in such chain.

         1.29  Termination of Directorship. "Termination of Directorship" shall
mean the time when an Optionee who is an Independent Director ceases to be a
Director for any reason, including, but not by way of limitation, a termination
by resignation, failure to be elected, death or retirement. The Board, in its
sole and absolute discretion, shall determine the effect of all matters and
questions relating to Termination of Directorship.

         1.30  Termination of Employment. "Termination of Employment" shall mean
the time when the employee-employer relationship between the Optionee, Grantee
or Restricted Stockholder and the Company or any Subsidiary is terminated for
any reason, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding (i)
terminations where there is a simultaneous reemployment, continuing employment
or retention as a consultant of an Optionee, Grantee or Restricted Stockholder
by the Company or any Subsidiary, (ii) at the discretion of the Committee,
terminations which result in a temporary

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severance of the employee-employer relationship, and (iii) at the discretion of
the Committee, terminations which are followed by the simultaneous establishment
of a consulting relationship by the Company or a Subsidiary with the former
employee. The Committee, in its absolute discretion, shall determine the effect
of all matters and questions relating to Termination of Employment, including,
but not by way of limitation, the question of whether a Termination of
Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
provided, however, that, with respect to Incentive Stock Options, a leave of
absence, change in status from an employee to an independent contractor or other
change in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status
or other change interrupts employment for the purpose of Section 422(a)(2) of
the Code and the then applicable regulations and revenue rulings under said
Section. Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in writing.

                                   ARTICLE II

                             SHARES SUBJECT TO PLAN

         2.1   Shares Subject to Plan.

               (a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Common stock, par value $.01 per share. The aggregate number of
such shares which may be issued upon exercise of such options or rights or upon
any such awards under the Plan Shall not exceed one million, two hundred
thousand (1,200,000) [increased to one million, four hundred thousand
(1,400,000) effective May 22, 2000] shares. The shares of Common Stock issuable
upon exercise of such options or rights or upon any such awards may be either
previously authorized but unissued shares or treasury shares.

               (b) The maximum number of shares which may be subject to Options
or Stock Appreciation Rights granted under the Plan to any individual in any
calendar year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, (i) shares subject to Options which are canceled
continue to be counted against the Award Limit and if, after grant of an Option,
the price of shares subject to such Option is reduced, the transaction is
treated as a cancellation of the Option and a grant of a new Option and both the
Option deemed to be canceled and the Option deemed to be granted are counted
against the Award Limit, and (ii) if, after grant of a Stock Appreciation Right,
the base amount on which stock appreciation is calculated is reduced to reflect
a reduction in the Fair Market Value of the Company's Common Stock, the
transaction is treated as a cancellation of the Stock Appreciation Right and a
grant of a new Stock Appreciation Right and both the Stock Appreciation Right
deemed to be canceled and the Stock Appreciation Right deemed to be granted are
counted against the Award Limit.

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         2.2   Unexercised Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other award under this Plan,
expires or is canceled without having been fully exercised, the number of shares
subject to such Option or other right but as to which such Option or other right
was not exercised prior to its expiration or cancellation may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.

                                   ARTICLE III

                               GRANTING OF OPTIONS

         3.1   Eligibility. Subject to the Award Limit, any Employee,
consultant, or Independent Directors elected by the Committee pursuant to
Section 3.4(a)(i) shall be eligible to be granted an Option.

         3.2   Disqualification for Stock Ownership. No Employee may be granted
an Incentive Stock Option under this Plan if such Employee, at the time the
Incentive Stock Option is granted, owns stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any then existing Subsidiary unless such Incentive Stock Option conforms to
the applicable provisions of Section 422 of the Code.

         3.3   Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted unless such Option, when granted, qualifies as an
"incentive stock option" under Section 422 of the Code. No Incentive Stock
Option shall be granted to any person who is not an Employee of a Subsidiary
that qualifies as a "subsidiary corporation" within the meaning of Section
424(f) of the Code.

         3.4   Granting of Options

               (a) The committee shall from time to time:

                   (i) Select from among the Employees, consultants, or
Independent Directors (including Employees, consultants, or Independent
Directors who have previously received Options or other awards under this Plan)
such of them as in its opinion should be granted Options;

                   (ii) Subject to the Award Limit, determine the number of
shares to be subject to such Options granted to the selected Employees,
consultants, or Independent Directors;

                   (iii) Determine whether such Options are to be Incentive
Stock Options or Non-Qualified Stock Options and whether such Options are to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code; and

                   (iv) Determine the terms and conditions of such Options,
consistent with this Plan; provided, however, that the terms and conditions of
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code shall include, but not be limited to, such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code.

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               (b) Upon the selection of a Employee, consultant, or Independent
Director to be granted an Option, the Committee shall instruct the Secretary of
the Company to issue the Option and may impose such conditions on the grant of
the Option as it deems appropriate. Without limiting the generality of the
preceding sentence, the Committee may, in its discretion and on such terms as it
deems appropriate, require as a condition on the grant of an Option to an
Employee, consultant, or Independent Director that the Employee, consultant, or
Independent Director surrender for cancellation some or all of the unexercised
Options, awards of Restricted Stock or Deferred Stock, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments or other rights
which have been previously granted to him under this Plan or otherwise. An
Option, the grant of which is conditioned upon such surrender, may have an
option price lower (or higher) than the exercise price of such surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.

               (c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

                                   ARTICLE IV

                                TERMS OF OPTIONS

         4.1   Option Agreement. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan. Stock
Option Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

         4.2   Option Price. The price per share of the shares subject to each
Option shall be set by the Committee; provided, however, that such price shall
be no less than the par value of a share of Common Stock, and (i) in the case of
Options intended to qualify as performance-based compensation as described in
Section 162(m)(4)(C) of the Code such price shall be no less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted,
and (ii) in the case of Incentive Stock Options such price shall not be less
than the greater of: (a) 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted, or (b) 110% of the Fair Market Value of
a share of Common Stock on the date such Option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company or any Subsidiary.

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         4.3   Option Term. The term of an Option shall be set by the Committee
in its discretion; provided, however, that, in the case of Incentive Stock
Options, the term shall not be more than ten (10) years from the date the
Incentive Stock Option is granted, or five (5) years from such date if the
Incentive Stock Option is granted to an individual then owning (within the
meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary.

         4.4   Option Vesting.

               (a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee, and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that unless
otherwise determined by the Committee, no Option granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the Option was granted.
Subject to the preceding sentence, at any time after grant of an Option, the
Committee may, in its sole discretion and subject to whatever terms and
conditions it selects, accelerate the period during which an Option vests.

               (b) No portion of an Option which is unexercisable at Termination
of Employment, Termination of Directorship, or termination of a consultancy, as
applicable, shall thereafter become exercisable, except as may be otherwise
provided by the Committee either in the Stock Option Agreement or in a
resolution adopted following the grant of the Option; provided that the
Committee may determine that the Option may be exercised subsequent to
Termination of Employment, Termination of Directorship, or termination of
consultancy without cause, or following a change in control of the Company, or
because of the Optionee's retirement, death or disability, or otherwise.

               (c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth in
the preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the date the Option with respect
to such stock is granted.

         4.5  Status as an Employee. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Optionee at any time for any reason whatsoever, with or without
good cause.

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                                    ARTICLE V

                               EXERCISE OF OPTIONS

         5.1   Partial Exercise. An exercisable Option may be exercised in whole
or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.

         5.2   Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or the Secretary's office:

               (a) A written notice complying with the applicable rules
established by the Committee stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;

               (b) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee may, in its
absolute discretion, also take whatever additional actions it deems appropriate
to effect such compliance including, without limitation, placing legends on
share certificates and issuing stop-transfer notices to agents and registrars;

               (c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and

               (d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, at the discretion of the Committee, the terms of the Option may (i)
allow a delay in payment up to thirty (30) days from the date the Option, or
portion thereof, is exercised; (ii) allow payment, in whole or in part, through
the delivery of shares of Common Stock owned by the Optionee, duly endorsed for
transfer to the Company with a Fair Market Value on the date of delivery equal
to the aggregate exercise price of the Option or exercised portion thereof;
(iii) allow payment, in whole or in part, through the surrender of shares of
Common Stock then issuable upon exercise of the Option having a Fair Market
Value on the date of Option exercise equal to the aggregate exercise price of
the Option or exercised portion thereof; (iv) allow payment, in whole or in
part, through the delivery of property of any kind which constitutes good and
valuable consideration; (v) allow payment, in whole or in part, through the
delivery of a full recourse promissory note bearing interest (at no less than
such rate as shall then preclude the imputation of interest under the Code) and
payable upon such terms as may be prescribed by the Committee, or (vi) allow
payment through any combination of the consideration provided in the foregoing
subparagraphs (ii), (iii), (iv) and (v). In the case of a promissory note, the
Committee may also prescribe the form of such note and the security to be given
for such note. The Option may not be exercised, however, by

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delivery of a promissory note or by a loan from the Company when or where such
loan or other extension of credit is prohibited by law.

         5.3   Conditions to Issuance of Stock Certificate. The Company shall
not be required to issue or deliver any certificate or certificates for shares
of stock purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:

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

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

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

               (d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience; and

               (e) The receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.

         5.4   Rights as Stockholders. The holders of Options shall not be, nor
have any of the rights or privileges of, stockholders of the Company in respect
of any shares purchasable upon the exercise of any part of an Option unless and
until certificates representing such shares have been issued by the Company to
such holders.

         5.5   Ownership and Transfer Restrictions. The Committee, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Stock Option Agreement and may be referred to on the certificates evidencing
such shares. The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option within (i) two years from the date of granting such
Option to such Employee or (ii) one year after the transfer of such shares to
such Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to given prompt
notice of disposition.

                                   ARTICLE VI

                            AWARD OF RESTRICTED STOCK

         6.1   Award of Restricted Stock

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               (a) The Committee shall from time to time, in its absolute
discretion:

                   (i) Select from among the Employees or consultants (including
Employees or consultants who have previously received other awards under this
Plan) such of them as in its opinion should be awarded Restricted Stock; and

                   (ii) Determine the purchase price, if any, and other terms
and conditions applicable to such Restricted Stock, consistent with this Plan.

               (b) The Committee shall establish the purchase price, if any, and
form of payment for Restricted Stock; provided, however, that such purchase
price shall be no less than the par value of the Common Stock to be purchased.
In all cases, legal consideration shall be required for each issuance of
Restricted Stock.

               (c) Upon the selection of an Employee or consultant to be awarded
Restricted Stock, the Committee shall instruct the Secretary of the Company to
issue such Restricted Stock and may impose such conditions on the issuance of
such Restricted Stock as it deems appropriate.

               (d) Notwithstanding the foregoing, the grants of Restricted Stock
set forth in Restricted Stock Agreements described in the Addendum to this Plan
shall become effective upon the closing of the Company's initial public
offering.

         6.2   Restricted Stock Agreement. Restricted Stock shall be issued only
pursuant to a written Restricted Stock Agreement, which shall be executed by the
selected key Employee or consultant and an authorized officer of the Company and
which shall contain such terms and conditions as the Committee shall determine,
consistent with this Plan.

         6.3   Status as an Employee. Nothing in this Plan or in any Restricted
Stock Agreement hereunder shall confer on any Restricted Stockholder any right
to continue in the employ of, or consult for, the Company or any Subsidiary or
shall interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Restricted
Stockholder at any time for any reason whatsoever, with or without good cause.

         6.4   Rights as Stockholders. Upon delivery of the shares of Restricted
Stock to the escrow holder pursuant to Section 6.7, the Restricted Stockholder
shall have, unless otherwise provided by the Committee, all the rights of a
stockholder with respect to said shares, subject to the restrictions in the
Restricted Stockholder's Restricted Stock Agreement, including the right to
receive all dividends and other distributions paid or made with respect to the
shares; provided, however, that in the discretion of the Committee, any
extraordinary distributions with respect to the Common Stock shall be subject to
the restrictions set forth in Section 6.5.

         6.5  Restriction. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Restricted Stock
Agreement, be subject to such restrictions as the Committee shall provide,

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which restrictions may include, without limitation, restrictions concerning
voting rights and transferability and restrictions based on duration of
employment with the Company, Company performance and individual performance;
provided, however, that unless otherwise determined by the Committee, no share
of Restricted Stock granted to a person subject to Section 16 of the Exchange
Act shall be sold, assigned or otherwise transferred until at least six months
have elapsed from (but excluding) the date on which the Restricted Stock was
issued, and provided, further, that by a resolution adopted after the Restricted
Stock is issued, the Committee may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by
the terms of the Restricted Stock Agreement. Restricted Stock may not be sold or
encumbered until all restrictions are terminated or expire. Unless provided
otherwise by the Committee, if no consideration was paid by the Restricted
Stockholder upon issuance, a Restricted Stockholder's rights in unvested
Restricted Stock shall lapse upon Termination of Employment or, if applicable,
upon the termination of the Restricted Stockholder's consulting relationship
with the Company.

         6.6   Repurchase of Restricted Stock. The Committee may provide in the
terms of each individual Restricted Stock Agreement that the Company shall have
the right to repurchase from the Restricted Stockholder the Restricted Stock
then subject to restrictions under the Restricted Stock Agreement immediately
upon a Termination of Employment or, if applicable, upon a termination of any
consulting relationship between the Restricted Stockholder and the Company, at a
cash price per share equal to the price paid by the Restricted Stockholder for
such Restricted Stock; provided, however, that provision may be made that no
such right of repurchase shall exist in the event of a Termination of Employment
or termination of consultancy without cause, or following a change in control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.

         6.7   Escrow. The Secretary of the Company or such other escrow holder
as the Committee may appoint shall retain physical custody of each certificate
representing Restricted Stock until all of the restrictions imposed under the
Restricted Stock Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.

         6.8   Legend. In order to enforce the restrictions imposed upon shares
of Restricted Stock hereunder, the Committee shall cause a legend or legends to
be placed on certificates representing all shares of Restricted Stock that are
still subject to restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.

                                   ARTICLE VII

                    PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
                         DEFERRED STOCK, STOCK PAYMENTS

         7.1   Performance Awards. Any Employee or consultant selected by the
Committee may be granted one or more Performance Awards. The value of such
Performance Awards may be linked to the market value, book value, net profits or
other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, in each

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case on a specified date or dates or over any period or periods determined by
the Committee, or may be based upon the appreciation in the market value, book
value, net profits or other measure of the value of a specified number of shares
of Common Stock over a fixed period or periods determined by the Committee. In
making such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular
Employee or consultant.

         7.2   Dividend Equivalents. Any Employee or consultant selected by the
Committee may be granted Dividend Equivalents based on the dividends declared on
Common Stock, to be credited as of dividend payment dates, during the period
between the date an Option, Stock Appreciation Right, Deferred Stock or
Performance Award is granted, and the date such Option, Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.

         7.3   Stock Payments. Any Employee or consultant selected by the
Committee may receive Stock Payments in the manner determined from time to time
by the Committee. The number of shares shall be determined by the Committee and
may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee on the date such Stock Payment is made
or on any date thereafter.

         7.4   Deferred Stock. Any Employee or consultant selected by the
Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined appropriate by the Committee, in each
case on a specified date or dates or over any period or periods determined by
the Committee. Common Stock underlying a Deferred Stock award will not be issued
until the Deferred Stock award has vested, pursuant to a vesting schedule or
performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.

         7.5   Performance Award Agreement, Dividend Equivalent Agreement,
Deferred Stock Agreement, Stock Payment Agreement. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan, and
shall be subject to ratification thereof by the Board.

         7.6   Term. The term of a Performance Award, Dividend Equivalent, award
of Deferred Stock and/or Stock Payment shall be set by the Committee in its
discretion.

                                      -12-
<PAGE>

         7.7   Exercise Upon Termination of Employment. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is exercisable
only while the Grantee is an Employee or consultant; provided that the Committee
may determine that the Performance Award, Dividend Equivalent, award of Deferred
Stock and/or Stock Payment may be exercised subsequent to Termination of
Employment or termination of consultancy without cause, or following a change in
control of the Company, or because of the Grantee's retirement, death or
disability, or otherwise.

         7.8   Payment on Exercise. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.3.

         7.9   Status as an Employee. Nothing in this Plan or in any agreement
hereunder shall confer on any Grantee any right to continue in the employ of, or
as a consultant for, the Company or any Subsidiary or shall interfere with or
restrict in any way the rights of the Company and any Subsidiary, which are
hereby expressly reserved, to discharge any Grantee at any time for any reason
whatsoever, with or without good cause.

                                  ARTICLE VIII

                            STOCK APPRECIATION RIGHTS

         8.1   Grant of Stock Appreciation Rights. Subject to the Award Limit, a
Stock Appreciation Right may be granted to any Employee or consultant selected
by the Committee. A Stock Appreciation Right may be granted (i) in connection
and simultaneously with the grant of an Option, (ii) with respect to a
previously granted Option, or (iii) independent of an Option. A Stock
Appreciation Right shall be subject to such terms and conditions not
inconsistent with this Plan as the Committee shall impose, and shall be
evidenced by a written Stock Appreciation Right Agreement, which shall be
executed by the Grantee and an authorized officer of the Company. The Committee,
in its discretion, may determine whether a Stock Appreciation Right is to
qualify as performance-based compensation as described in Section 162(m)(4)(C)
of the Code and Stock Appreciation Right Agreements evidencing Stock
Appreciation Rights intended to so qualify shall contain such terms and
conditions as may be necessary to meet the applicable provisions of Section
162(m) of the Code. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition of the grant of a Stock Appreciation Right to an Employee
or consultant that the Employee or consultant surrender for cancellation some or
all of the unexercised Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, or other rights which have been previously granted to him under this
Plan or otherwise. A Stock Appreciation Right, the grant of which is conditioned
upon such surrender, may have an exercise price lower (or higher) than the
exercise price of the surrendered Option or other award, may cover the same (or
a lesser or greater) number of shares as such surrendered Option or other award,
may contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the

                                      -13-
<PAGE>

number of shares, price, exercise period or any other term or condition of such
surrendered Option or other award.

         8.2   Coupled Stock Appreciation Rights.

               (a) A Coupled Stock Appreciation Right ("CSAR") shall be related
to a particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.

               (b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted Option to
which it is coupled.

               (c) A CSAR shall entitle the Grantee (or other person entitled to
exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.

         8.3   Independent Stock Appreciation Rights.

               (a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of Shares of Common Stock as the Committee may
determine; provided, however, that, unless otherwise determined by the
Committee, no ISAR granted to a person subject to Section 16 of the Exchange Act
shall be exercisable until at least six months have elapsed from (but excluding)
the date on which the ISAR was granted. The exercise price per share of Common
Stock subject to each ISAR shall be set by the Committee. An ISAR is exercisable
only while the Grantee is an Employee or consultant; provided that the Committee
may determine that the ISAR may be exercised subsequent to Termination of
Employment or termination of consultancy without cause, or following a change in
control of the Company, or because of the Grantee's retirement, death or
disability, or otherwise.

               (b) An ISAR shall entitle the Grantee (or other person entitled
to exercise the ISAR pursuant to this Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms) and
to receive from the Company an amount determined by multiplying the difference
obtained by subtracting the exercise price per share of the ISAR from the Fair
Market Value of a share of Common Stock on the date of exercise of the ISAR by
the number of shares of Common Stock with respect to which the ISAR shall have
been exercised, subject to any limitations the Committee may impose.

                                      -14-
<PAGE>

         8.4   Payment and Limitations on Exercise.

               (a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair Market Value
as of the date the Stock Appreciation Right is exercised) or a combination of
both, as determined by the Committee. To the extent such payment is effected in
Common Stock it shall be made subject to satisfaction of all provisions of
Section 5.3 hereinabove pertaining to Options.

               (b) Grantees of Stock Appreciation Rights who are subject to
Section 16 of the Exchange Act may, in the discretion of the Committee, be
required to comply with any timing or other restrictions under Rule 16b-3
applicable to the settlement or exercise of a Stock Appreciation Right.

         8.5   Status as an Employee. Nothing in this Plan or in any Stock
Appreciation Right Agreement hereunder shall confer on any Grantee any right to
continue in the employ of, or as a consultant for, the Company or any Subsidiary
or shall interfere with or restrict in any way the rights of the Company and any
subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.

                                   ARTICLE IX

                                 ADMINISTRATION

         9.1   Compensation Committee. The Compensation Committee (or a
subcommittee of the Board assuming the functions of the Committee under this
Plan) shall consist of two or more Directors appointed by and holding office at
the pleasure of the Board, each of whom is both a "Non-Employee Director" as
defined by Rule 16b-3 and, if Options and Stock Appreciation Rights granted
under the Plan are intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, an "outside director" as defined
under Section 162(m) of the Code. Appointment of Committee members shall be
effective upon acceptance of appointment. Committee members may resign at any
time by delivering written notice to the Board. Vacancies in the Committee may
be filled by the Board.

         9.2   Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments are granted or awarded, and to adopt such rules for the
administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules. The Committee shall
establish guidelines regarding the granting of Awards under the Plan, which
guidelines shall be subject to the approval of the entire Board. Any such grant
or award under this Plan need not be the same with respect to each Optionee,
Grantee or Restricted Stockholder. Any such interpretations and rules with
respect to Incentive Stock Options shall be consistent with the provisions of
Section 422 of the Code. In its absolute discretion, the Board may at any time
and from time to time exercise any and all rights and duties of the Committee
under this Plan except with respect to matters which under Rule 16b-3 or Section
162(m) of the Code, or any regulations or rules issued thereunder, are required

                                      -15-
<PAGE>

to be determined in the sole discretion of the Committee. All actions by the
Committee in accordance with this Plan shall be subject to the ratification
thereof by the entire Board.

         9.3   Majority Rule. The Committee shall act by a majority of its
members in attendance at a meeting at which a quorum is present or by a
memorandum or other written instrument signed by all members of the Committee.

         9.4   Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee in good faith shall be final and binding upon all Optionees,
Grantees, Restricted Stockholders, the Company (subject to the ratification
rights by the entire Board of Committee actions as described in this Plan) and
all other interested persons. No members of the Committee or Board shall be
personally liable for any action, determination or interpretation made in good
faith with respect to this Plan, options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments, and all members of the Committee shall be fully protected by the
Company in respect of any such action, determination or interpretation.

                                    ARTICLE X

                            MISCELLANEOUS PROVISIONS

         10.1  Not Transferable. Options, Restricted Stock awards, Deferred
Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution, unless and until such rights or awards have been exercised, or
the shares underlying such rights or awards have been issued, and all
restrictions applicable to such shares have lapsed. No Option, Restricted Stock
award, Deferred Stock award, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment or interest or right therein shall be
liable for the debts, contracts or engagements of the Optionee, Grantee or
Restricted Stockholder or his or her successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance,
assignment or any other means whether such disposition be voluntary or
involuntary or by operation of law by judgment, levy, attachment, garnishment or
any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect; provided
however, that this Section 10.1 shall not prevent (i) transfers by will or by
the applicable laws of descent and distribution, (ii) the designation by the
optionee or Grantee of a beneficiary to exercise the Optionee's Option or other
right or award (or any portion thereof) granted under the Plan after the
Optionee's or Grantee's death, or (iii) transfers to an Optionee's Grantee's or
Restricted Stockholder's alternate payee pursuant to a QDRO.

                                      -16-
<PAGE>

         During the lifetime of the Optionee or Grantee, only the Optionee, or
an alternate payee under a QDRO, may exercise an Option or other right or award
(or any portion thereof) granted to the Optionee or Grantee under the Plan.
After the death of the Optionee or Grantee, any exercisable portion of an Option
or other right or award may, prior to the time when such portion becomes
unexercisable under the Plan or the applicable Stock Option Agreement or other
agreement, be exercised by the Optionee's or Grantee's personal representative
or by any person empowered to do so under the deceased Optionee's or Grantee's
beneficiary designation, will or under the then applicable laws of descent and
distribution.

         10.2  Amendment, Suspension or Termination of this Plan. This Plan
shall terminate on the date of the annual meeting of the Board immediately
following the tenth anniversary of the Board's adoption of this Plan. This Plan
may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board or the Committee,
provided that, without approval of the Company's stockholders given within
twelve months before or after the action by the Committee, no action of the
Committee may, except as provided in Section 10.3, increase the limits imposed
in Section 2.1 on the maximum number of shares which may be issued under this
Plan or modify the Award Limit or amend the Plan in any way that would otherwise
require stockholder approval as a matter of applicable law, regulation or rule.
No amendment, suspension or termination of this Plan shall, without the consent
of the holder of Options, Restricted Stock awards, Deferred Stock awards,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, alter or impair any rights or obligations under any Options,
Restricted Stock awards, Deferred Stock awards, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments theretofore granted
or awarded, unless the award itself otherwise expressly so provides. No Options,
Restricted Stock, Deferred Stock, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:

               (a) The expiration of ten years from the date the Plan is adopted
by the Board; or

               (b) The expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 10.5.

         10.3  Changes in Common Stock or Assets of the Company. In the event
that the outstanding shares of Common Stock are hereafter changed into or
exchanged for cash or a different number or kind of shares or other securities
of the Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock split up, stock
dividend, or combination of shares, appropriate adjustments shall be made by the
Committee in the number and kind of shares for which Options, Restricted Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents,
Deferred Stock awards or Stock Payments may be granted, including adjustments of
the limitations in Section 2.1 on the maximum number and kind of shares which
may be issued and of the Award Limit described in Section 1.2.

                                      -17-
<PAGE>

         In the event of such a change or exchange, other than for shares or
securities of another corporation or by reason of reorganization, the Committee
shall also make an appropriate and equitable adjustment in the number and kind
of shares as to which all outstanding Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments, or portions thereof
then unexercised, shall be exercisable and in the number and kind of shares of
outstanding Restricted Stock or Deferred Stock. Such adjustment shall be made
with the intent that after the change or exchange of shares, each Optionee's and
each Grantee's and each Restricted Stockholder's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in an
outstanding Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment may include a necessary or appropriate corresponding
adjustment in Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment exercise price, but shall be made without change in
the total price applicable to the Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment, or the unexercised portion thereof
(except for any change in the aggregate price resulting from rounding-off of
share quantities or prices).

         Where an adjustment of the type described above is made to an Incentive
Stock Option under this Section, the adjustment will be made in a manner which
will not be considered a "modification" under the provisions of subsection
424(h)(3) of the Code.

         Notwithstanding the foregoing, in the event of such a reorganization,
merger, consolidation, recapitalization, reclassification, stock split up, stock
dividend or combination, or other adjustment or event which results in shares of
Common Stock being exchanged for or converted into cash, securities or other
property, the Company will have the right to terminate this Plan as of the date
of the exchange or conversion, in which case all options, rights and other
awards under this Plan shall become the right to receive such cash, securities
or other property, net of any applicable exercise price.

         In the event of a "spin-off" or other substantial distribution of
assets of the Company which has a material diminutive effect upon the Fair
Market Value of the Company's Common Stock, the Committee may in its discretion
make an appropriate and equitable adjustment to the Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent or Stock Payment exercise price to
reflect such diminution.

         10.4  Merger of the Company. In the event of the merger or
consolidation of the Company with or into another corporation, the exchange of
all or substantially all of the assets of the Company for the securities of
another corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company:

               (a) At the discretion of the Committee, the terms of an Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment may provide that it cannot be exercised after such event.

               (b) In its discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide either by the terms of such Option,
Performance Award, Stock

                                      -18-
<PAGE>

Appreciation Right, Dividend Equivalent or Stock Payment or by a resolution
adopted prior to the occurrence of such event that, for a specified period of
time prior to such event, such Option, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in this Plan or
in the provisions of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment.

               (c) In its discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide either by the terms of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment or by a resolution adopted prior to the occurrence of such event that
upon such event, such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment shall be assumed by the successor
corporation, or a parent or subsidiary thereof, or shall be substituted for by
similar options, rights or awards covering the stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kind of shares and prices.

               (d) In its discretion, and on such terms and conditions as it
deems appropriate, the Committee may provide either by the terms of a Restricted
Stock award or Deferred Stock award or by a resolution adopted prior to the
occurrence of such event that, for a specified period of time prior to such
event, the restrictions imposed under a Restricted Stock Agreement or a Deferred
Stock Agreement upon some or all shares of Restricted Stock or Deferred Stock
may be terminated, and, in the case of Restricted Stock, some or all shares of
such Restricted Stock may cease to be subject to repurchase under Section 6.6
after such event.

         10.5  Approval of Plan by Stockholders. This Plan will be submitted for
the approval of the Company's stockholders within twelve months after the date
of the Board's initial adoption of this Plan. Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments may be granted and
Restricted Stock or Deferred Stock may be awarded prior to such stockholder
approval, provided that such Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments shall not be exercisable and such
Restricted Stock or Deferred Stock shall not vest prior to the time when this
Plan is approved by the stockholders, and provided further that if such approval
has not been obtained at the end of said twelve-month period, all Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments previously granted and all Restricted Stock or Deferred Stock
previously awarded under this Plan shall thereupon be canceled and become null
and void.

         10.6  Tax Withholding. The Company shall be entitled to require payment
in cash or deduction from other compensation payable to each Optionee, Grantee
or Restricted Stockholder of any sums required by federal, state or local tax
law to be withheld with respect to the issuance, vesting or exercise of any
Option, Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment. The Committee may in its discretion
and in satisfaction of the foregoing requirement allow such Optionee, Grantee or
Restricted Stockholder to elect to have the Company withhold shares of Common
Stock (or allow the return of shares of Common Stock) having a Fair Market Value
equal to the sums required to be withheld.

                                      -19-
<PAGE>

         10.7  Loan. The Committee may, in its discretion, extend one or more
loans to Employees in connection with the exercise or receipt of an Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted under this Plan, or the issuance of Restricted Stock or Deferred
Stock awarded under this Plan. The terms and conditions of any such loan shall
be set by the Committee.

         10.8 Limitations Applicable to Section 16 Persons and Performance-Based
Compensation. Notwithstanding any other provision of this Plan, any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment granted, or Restricted Stock or Deferred Stock awarded, to a person who
is then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange
Act) that are requirements for the application of such exemptive rule, and this
Plan shall be deemed amended to the extent necessary to conform to such
limitations. Furthermore, notwithstanding any other provision of this Plan, any
Option or Stock Appreciation Right intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall be subject
to any additional limitations set forth in Section 162(m) of the Code (including
any amendment to Section 162(m) of the Code) or any regulations or rulings
issued thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.

         10.9  Effect of Plan Upon Options and Compensation Plans. The adoption
of this Plan shall not affect any other compensation or incentive plans in
effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees of the Company or any Subsidiary or
(ii) to grant or assume options or other rights otherwise than under this Plan
in connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or association.

         10.10 Compliance with Laws. This Plan, the granting and vesting of
options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and 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. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan,
Options, Restricted Stock awards, Deferred Stock

                                      -20-
<PAGE>

awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments granted or awarded hereunder shall be deemed amended to the
extent necessary to conform to such laws, rules and regulations.

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

         10.12 Governing Law. This Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Washington without regard to conflicts of laws thereof.

                                      * * *

         I hereby certify that the foregoing Plan was duly adopted by the Board
of Directors of Cavanaughs Hospitality Company on March 6, 1998 and was approved
by unanimous consent of its shareholders dated March 13, 1998.

         Executed on this __th day of March, 1998.

                                              /s/
                                              -----------------------------
                                              Richard Barbieri
                                              Secretary

                                    ADDENDUM

         The following initial grants of awards of Restricted Stock under the
Plan shall be made, effective as of the closing of the Company's initial public
offering, to the following persons in the amounts set forth below.

         Name                              Number of Shares
         ----                              ----------------

         Arthur Coffey                     15,000 shares

         John Taffin                       10,000 shares

         Lori Farnell                      10,000 shares

         David Peterson                    10,000 shares

         Shannon Kapek                     10,000 shares

         The foregoing Restricted Stock awards shall be subject to the terms and
conditions of the Plan and those set forth in written Restricted Stock
Agreements, which shall include, among other things, that 20% of the shares of
Restricted Stock subject to each recipient's Award shall be issued on the date
the Company consummates the initial public offering of Common Stock, and an
additional 20% shall be issued on each anniversary date thereof. The action of
the officers of the Company in preparing, negotiating and executing, on behalf
of the Company, the Restricted Stock Agreements with respect to the foregoing
Awards are ratified.

                                      -21-EXHIBIT 10.1
                                                                    ------------

                            INDEMNIFICATION AGREEMENT

     This Indemnification Agreement, made and entered into as of this ____ day
of _________________, 2001 ("Agreement"), by and between Datawatch Corporation,
a Delaware corporation ("Company"), and ___________ ("Indemnitee"):

     WHEREAS, highly competent persons have become more reluctant to serve
corporations as directors, officers or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation;

     WHEREAS, the Board of Directors of the Company (the "Board") has determined
that, in order to attract and retain qualified individuals, the Company will
attempt to maintain on an ongoing basis, at its sole expense, liability
insurance to protect persons serving the Company and its subsidiaries from
certain liabilities. Although the furnishing of such insurance has been a
customary and widespread practice among United States-based corporations and
other business enterprises, the Company believes that, given current market
conditions and trends, such insurance may be available to it in the future only
at higher premiums and with more exclusions. At the same time, directors,
officers, and other persons in service to corporations or business enterprises
are being increasingly subjected to expensive and time-consuming litigation
relating to, among other things, matters that traditionally would have been
brought only against the corporation or business enterprise itself;

     WHEREAS, the uncertainties relating to such insurance and to
indemnification have increased the difficulty of attracting and retaining such
persons;

     WHEREAS, the Board has determined that the increased difficulty in
attracting and retaining such persons is detrimental to the best interests of
the Company's stockholders and that the Company should act to assure such
persons that there will be increased certainty of such protection in the future;

     WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified;

     WHEREAS, this Agreement is a supplement to and in furtherance of the
By-Laws of the Company and any resolutions adopted pursuant thereto, and shall
not be deemed a substitute therefore, nor to diminish or abrogate any rights of
Indemnitee thereunder;

     WHEREAS, the Company's By-Laws and the Delaware corporate indemnification
statute (Section 145 of the Delaware General Corporation Law) each is
nonexclusive and, therefore, contemplates that contracts may be entered into
with respect to indemnification of directors, officers, employees and agents;
<PAGE>

                                      -2-

     WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify, and to advance expenses on behalf
of, such persons to the fullest extent permitted by applicable law so that they
will serve or continue to serve the Company free from undue concern that they
will not be so indemnified; and

     WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that
Indemnitee be so indemnified.

     NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:

     Section 1. Services by Indemnitee. Indemnitee agrees to serve as a
director, officer, employee and/or agent of the Company and/or any of its
subsidiaries, as the case may be, and may serve, at the request of the Company,
as a director, officer, employee and/or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise (a
"Relevant Enterprise"). Indemnitee may at any time and for any reason resign
from such position (subject to any other contractual obligation or any
obligation imposed by operation of law), in which event the Company shall have
no obligation under this Agreement to continue Indemnitee in such position. This
Agreement shall not be deemed an employment contract between the Company (or any
of its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that
Indemnitee's employment with the Company (or any of its subsidiaries), if any,
is "at will", and the Indemnitee may be discharged at any time for any reason,
with or without cause, except as may be otherwise provided in any written
employment contract between Indemnitee and the Company (or any of its
subsidiaries), other applicable formal severance policies duly adopted by the
Board, or, with respect to service as a director of the Company and/or any of
its subsidiaries, Indemnitee specifically acknowledges that this Agreement does
not impose any obligation of the Company to continue Indemnitee's service to the
Company except as may otherwise be provided by the Company's or its
subsidiaries', as the case may be, Certificate of Incorporation, By-laws, and
the General Corporation Law of the State of Delaware. The foregoing
notwithstanding, subject to Section 12 hereof, this Agreement shall continue in
force after Indemnitee has ceased to serve as a director, officer, employee
and/or agent, as the case may be, of the Company and its subsidiaries or of a
Relevant Enterprise.

     Section 2. Indemnification - General. The Company shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) (subject to the provisions of this Agreement) to the fullest
extent permitted by applicable law in effect on the date hereof and as amended
from time to time. The rights of Indemnitee provided under the preceding
sentence shall include, but shall not be limited to, the rights set forth in the
other Sections of this Agreement.

     Section 3. Proceedings Other Than Proceedings by or in the Right of the
Company and/or any of its Subsidiaries. Indemnitee shall be entitled to the
rights of indemnification provided in this Section 3 if, by reason of his
Corporate Status (as hereinafter defined), he is, or is threatened to be made, a
party to or a participant in any threatened, pending, or completed Proceeding
(as hereinafter defined), other than a Proceeding by or in the right of the
Company and/or any of its subsidiaries. Pursuant to this Section 3, Indemnitee
shall be
<PAGE>
                                      -3-

indemnified against all Expenses, judgments, penalties, fines and amounts paid
in settlement actually and reasonably incurred by him or on his behalf in
connection with such Proceeding or any claim, issue or matter therein, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company and/or any of its subsidiaries and,
with respect to any criminal Proceeding, had no reasonable cause to believe his
conduct was unlawful.

     Section 4. Proceedings by or in the Right of the Company and/or any of its
Subsidiaries. Indemnitee shall be entitled to the rights of indemnification
provided in this Section 4 if, by reason of his Corporate Status, he is, or is
threatened to be made, a party to or a participant in any threatened, pending or
completed Proceeding brought by or in the right of the Company and/or any of its
subsidiaries to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against all Expenses (including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses) actually and reasonably incurred by him or on his behalf in
connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Company
and/or any of its subsidiaries; provided, however, that, if applicable law so
provides, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Company and/or any of its subsidiaries unless
and to the extent that the Court of Chancery of the State of Delaware, or the
court in which such Proceeding shall have been brought or is pending, shall
determine that such indemnification may be made.

     Section 5. Partial Indemnification. Notwithstanding any other provision of
this Agreement, to the extent that Indemnitee is, by reason of his Corporate
Status, a party to (or a participant in) and is successful, on the merits or
otherwise, in defense of any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in defense of such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter. If Indemnitee is entitled under any provision of this agreement to
indemnification by the Company for some or a portion of the Expenses, judgments,
penalties, fines and amounts paid in settlement (including all interest,
assessments and other charges paid or payable in connection with or in respect
of such Expenses, judgments, penalties, fines and amounts paid in settlement)
actually and reasonably incurred by him or on his behalf in connection with such
Proceeding or any claim, issue or matter therein, but not, however, for the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion to which Indemnitee is entitled.

     Section 6. Indemnification for Additional Expenses.

     (a) The Company shall indemnify Indemnitee against any and all Expenses
which are reasonably incurred by Indemnitee in connection with any action
brought by Indemnitee for (i) indemnification or advance payment of Expenses by
the Company under this
<PAGE>
                                      -4-

Agreement or any other agreement or By-Law of the Company now or hereafter in
effect, or (ii) recovery under any directors' and officers' liability insurance
policies maintained by the Company; but only to the extent that Indemnitee
prevails in such action and ultimately is determined to be entitled to such
indemnification, advance payment of Expenses or insurance recovery, as the case
may be. Indemnitee shall be entitled to advancement of such Expenses pursuant to
and in accordance with the provisions of Section 7 hereof.

     (b) Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a witness in any
Proceeding to which Indemnitee is not a party, he shall be indemnified against
all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.

     Section 7. Advancement of Expenses. The Company shall advance, without
duplication, all reasonable Expenses incurred by or on behalf of Indemnitee in
connection with any Proceeding within seven (7) days after the receipt by the
Company of a statement or statements from Indemnitee requesting such advance or
advances from time to time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by Indemnitee and shall include or be preceded or accompanied by an
undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
against such Expenses. Notwithstanding the foregoing, the obligation of the
Company to advance Expenses pursuant to this Section 7 shall be subject to the
condition that, if, when and to the extent that the Company determines that
Indemnitee would not be permitted to be indemnified under applicable law, the
Company shall be entitled to be reimbursed, within thirty (30) days of such
determination, by Indemnitee (who hereby agrees to reimburse the Company) for
all such amounts theretofore paid; provided, however, that if Indemnitee has
commenced or thereafter commences legal proceedings in a court of competent
jurisdiction to secure a determination that Indemnitee should be indemnified
under applicable law, any determination made by the Company that Indemnitee
would not be permitted to be indemnified under applicable law shall not be
binding and Indemnitee shall not be required to reimburse the Company for any
advance of Expenses until a final judicial determination is made with respect
thereto (as to which all rights of appeal therefrom have been exhausted or
lapsed).

     Section 8. Procedure for Determination of Entitlement to Indemnification.

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

     (b) Upon written request by Indemnitee for indemnification pursuant to the
first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined) in a written
opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; or
<PAGE>
                                      -5-

(ii) if a Change of Control shall not have occurred, (A) by a majority vote of
the Disinterested Directors (as hereinafter defined), even though less than a
quorum of the Board, or (B) if there are no such Disinterested Directors or, if
such Disinterested Directors so direct, by Independent Counsel in a written
opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) if
so directed by the Board, by a majority vote of a quorum of the outstanding
shares of stock of all classes entitled to vote for directors, voting as a
single class, which quorum shall consist of stockholders who are not at that
time parties to the Proceeding in question; and, if it is so determined that
Indemnitee is entitled to indemnification, payment to Indemnitee shall be made
within seven (7) days after such determination. Indemnitee shall cooperate with
the person, persons or entity making such determination with respect to
Indemnitee's entitlement to indemnification, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including reasonable attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such determination shall be borne by the Company (irrespective
of the determination as to Indemnitee's entitlement to indemnification), and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

     (c) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent
Counsel shall be selected as provided in this Section 8(c). If a Change of
Control shall not have occurred, the Independent Counsel shall be selected by
the Board, and the Company shall give written notice to Indemnitee advising him
of the identity of the Independent Counsel so selected. If a Change of Control
shall have occurred, the Independent Counsel shall be selected by Indemnitee
(unless Indemnitee shall request that such selection be made by the Board, in
which event the preceding sentence shall apply), and Indemnitee shall give
prompt written notice to the Company advising it of the identity of the
Independent Counsel so selected. In either event, Indemnitee or the Company, as
the case may be, may, within 10 days after such written notice of selection
shall have been given, deliver to the Company or to Indemnitee, as the case may
be, a written objection to such selection; provided, however, that such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
so made and substantiated, the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit. If, within 20 days after
submission by Indemnitee of a written request for indemnification pursuant to
Section 8(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee, as the case may be, may petition
the Court of Chancery of the State of Delaware for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom all objections are so resolved or
the person so appointed shall act as Independent Counsel under Section 8(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable
fees and expenses incident to the procedures of this Section
<PAGE>
                                      -6-

8(c), regardless of the manner in which such Independent Counsel was selected or
appointed. Upon the due commencement of any judicial proceeding or arbitration
pursuant to Section 10(a) of this Agreement, Independent Counsel shall be
discharged and relieved of any further responsibility in such capacity (subject
to the applicable standards of professional conduct then prevailing).

     (d) The Company shall not be required to obtain the consent of the
Indemnitee to the settlement of any Proceeding which the Company has undertaken
to defend if the Company assumes full and sole responsibility for such
settlement and the settlement grants the Indemnitee a complete and unqualified
release in respect of the potential liability. The Company shall not be liable
for any amount paid by the Indemnitee in settlement of any Proceeding that is
not defended by the Company, unless the Company has consented to such
settlement, which consent shall not be unreasonably withheld.

     Section 9. Presumptions and Effect of Certain Proceedings.

     (a) In making a determination with respect to entitlement to
indemnification or the advancement of expenses hereunder, the person or persons
or entity making such determination shall presume that Indemnitee is entitled to
indemnification or advancement of expenses under this Agreement if Indemnitee
has submitted a request for indemnification or the advancement of expenses in
accordance with Section 8(a) of this Agreement, and the Company shall have the
burden of proof to overcome that presumption in connection with the making by
any person, persons or entity of any determination contrary to that presumption.
Neither the failure of the Company (including the Board or independent legal
counsel) to have made a determination prior to the commencement of any action
pursuant to this Agreement that indemnification is proper in the circumstances
because Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including the Board or independent legal counsel)
that Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that Indemnitee has not met the
applicable standard of conduct.

     (b) If the person, persons or entity empowered or selected under Section 8
of this Agreement to determine whether Indemnitee is entitled to indemnification
shall not have made a determination within sixty (60) days after receipt by the
Company of the request therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee shall be
entitled to such indemnification, absent (i) a misstatement by Indemnitee of a
material fact, or an omission of a material fact necessary to make Indemnitee's
statement not materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification under applicable
law; provided, however, that such 60-day period may be extended for a reasonable
time, not to exceed an additional thirty (30) days, if the person, persons or
entity making the determination with respect to entitlement to indemnification
in good faith requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; provided, FURTHER, that the
foregoing provisions of this Section 9(b) shall not apply (i) if the
determination of entitlement to indemnification is to be made by the
stockholders pursuant to Section 8(b) of this Agreement and if (A) within
fifteen (15) days after receipt by the Company of the request for such
determination, the Board of Directors has resolved to submit such determination
to the stockholders for their consideration at an annual
<PAGE>
                                      -7-

meeting thereof to be held within seventy-five (75) days after such receipt and
such determination is made thereat, or (B) a special meeting of stockholders is
called within fifteen (15) days after such receipt for the purpose of making
such determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 8(b) of this Agreement.

     (c) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of NOLO
CONTENDERE or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.

     (d) For purposes of any determination of good faith, Indemnitee shall be
deemed to have acted in good faith if Indemnitee's action is based on the
records or books of account of the Company or relevant subsidiary or Relevant
Enterprise, including financial statements, or on information supplied to
Indemnitee by the officers of the Company or relevant subsidiary or Relevant
Enterprise in the course of their duties, or on the advice of legal counsel for
the Company or relevant subsidiary or Relevant Enterprise, by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Company or relevant subsidiary or Relevant Enterprise.
The provisions of this Section 9(d) shall not be deemed to be exclusive or to
limit in any way the other circumstances in which the Indemnitee may be deemed
to have met the applicable standard of conduct set forth in this Agreement.

     (e) The knowledge and/or actions, or failure to act, of any other director,
officer, agent or employee of the Company or any of its subsidiaries or Relevant
Enterprise shall not be imputed to Indemnitee for purposes of determining the
right to indemnification under this Agreement.

     Section 10. Remedies of Indemnitee.

     (a) In the event that (i) a determination is made pursuant to Section 8 of
this Agreement that Indemnitee is not entitled to indemnification under this
Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7
of this Agreement, (iii) no determination of entitlement to indemnification
shall have been made pursuant to Section 8(b) of this Agreement within 90 days
after receipt by the Company of the request for indemnification; provided,
however, that such 90-day period may be extended for a reasonable time, not to
exceed an additional thirty (30) days, if the person, persons or entity making
the determination with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of documentation
and/or information relating thereto; provided, further, that the 90-day period
in this subsection (iii) shall not apply if the determination of entitlement of
indemnification is to be made by the stockholders pursuant to Section 8(b) of
this Agreement and if (A) within fifteen (15) days after receipt by the Company
of the request for such determination, the Board of Directors has resolved to
submit such determination to the
<PAGE>
                                      -8-

stockholders for their consideration at an annual meeting thereof to be held
within seventy-five (75) days after such receipt and such determination is made
thereat, or (B) a special meeting of stockholders is called within fifteen (15)
days after such receipt for the purpose of making such determination, such
meeting is held for such purpose within sixty (60) days after having been so
called and such determination is made thereat, (iv) payment of indemnification
is not made pursuant to Section 5 or 6 of this Agreement within ten (10) days
after receipt by the Company of a written request therefor or (v) payment of
indemnification is not made within ten (10) days after a determination has been
made that Indemnitee is entitled to indemnification, Indemnitee shall be
entitled to an adjudication by the Court of Chancery of the State of Delaware of
his entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in arbitration to be
conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of
the American Arbitration Association. Indemnitee shall commence such proceeding
seeking an adjudication or an award in arbitration within 180 days following the
date on which Indemnitee first has the right to commence such proceeding
pursuant to this Section 10(a); provided, however, that the foregoing clause
shall not apply in respect of a proceeding brought by Indemnitee to enforce his
rights under Section 5 of this Agreement.

     (b) In the event that a determination shall have been made pursuant to
Section 8(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits, and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10, the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.

     (c) If a determination shall have been made pursuant to Section 8(b) of
this Agreement that Indemnitee is entitled to indemnification, the Company shall
be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.

     (d) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to record damages for breach of, this Agreement, Indemnitee shall be entitled
to recover from the Company, and shall be indemnified by the Company against,
any and all expenses (of the types described in the definition of Expenses in
Section 17 of this Agreement) actually and reasonably incurred by him in such
judicial adjudication or arbitration, but only if he prevails therein. If it
shall be determined in said judicial adjudication or arbitration that Indemnitee
is entitled to receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by Indemnitee in connection with such
judicial adjudication or arbitration shall be appropriately prorated.

     (e) The Company shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 10 that the
procedures and presumptions of
<PAGE>
                                      -9-

this Agreement are not valid, binding and enforceable and shall stipulate in any
such court or before any such arbitrator that the Company is bound by all the
provisions of this Agreement.

     Section 11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation.

     (a) The rights of indemnification and to receive advancement of Expenses as
provided by this Agreement shall not be deemed exclusive of any other rights to
which Indemnitee may at any time be entitled under applicable law, the relevant
company's Certificate of Incorporation, By-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee under this Agreement in respect of any action
taken or omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. To the extent that a change in the General
Corporation Law of the State of Delaware, whether by statute or judicial
decision, permits greater indemnification or advancement of Expenses than would
be afforded currently under the relevant company's By-Laws and this Agreement,
it is the intent of the parties hereto that Indemnitee shall enjoy by this
Agreement the greater benefits so afforded by such change. No right or remedy
herein conferred is intended to be exclusive of any other right or remedy, and
every other right and remedy shall be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other right or remedy.

     (b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees, or
agents of the Company and its subsidiaries or of a Relevant Enterprise,
Indemnitee shall be covered by such policy or policies in accordance with its or
their terms to the maximum extent of the coverage available for any such
director, officer, employee or agent under such policy or policies.

     (c) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.

     (d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.

     (e) The Company's obligations to indemnify or advance expenses hereunder to
Indemnitee who is or was serving a Relevant Enterprise shall be reduced by any
amount Indemnitee has actually received as indemnification or advancement of
expenses from such Relevant Enterprise.

     Section 12. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) 10 years after the date that Indemnitee shall
have ceased to serve
<PAGE>
                                      -10-

as a director, officer, employee and/or agent of the Company and its
subsidiaries or of any Relevant Enterprise; or (b) the final termination of any
Proceeding then pending in respect of which Indemnitee is granted rights of
indemnification or advancement of expenses hereunder and of any proceeding
commenced by Indemnitee pursuant to Section 10 of this Agreement relating
thereto. This Agreement shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of Indemnitee and his heirs, executors
and administrators.

     Section 13. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, each portion of any Section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; (b) such provision or provisions
shall be deemed reformed to the extent necessary to conform to applicable law
and to give the maximum effect to the intent of the parties hereto; and (c) to
the fullest extent possible, the provisions of this Agreement (including,
without limitation, each portion of any Section of this Agreement containing any
such provision held to be invalid, illegal or unenforceable, that is not itself
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested thereby.

     Section 14. Exception to Right of Indemnification or Advancement of
Expenses. Except as provided in Section 6(a) of this Agreement, Indemnitee shall
not be entitled to indemnification or advancement of Expenses under this
Agreement (including, with respect to subsection (c) of this Section 14, payment
of profits) with respect to any Proceeding (a) brought by Indemnitee (other than
a Proceeding by Indemnitee to enforce his rights under this Agreement), (b)
brought by the Company or any of its subsidiaries against the Indemnitee
alleging (x) a willful violation by the Indemnitee of the terms and conditions
of any employment contract, (y) a willful misappropriation of corporate assets
by the Indemnitee or (z) any other willful and deliberate breach in bad faith of
any of the Indemnitee's duties to the Company (or its subsidiaries) or its
stockholders, if the bringing of such Proceeding against Indemnitee shall have
been approved or subsequently ratified by the Board, (c) arising out of the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of
the Securities Act of 1934, as amended, or any similar successor statute or (d)
arising out of acts or omissions, or transactions, from which Indemnitee may not
be relieved of liability under applicable law.

     Section 15. Identical Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.

     Section 16. Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.

     Section 17. Definitions. For purposes of this Agreement:
<PAGE>
                                      -11-

     (a) "Change in Control" shall mean the occurrence of any of the following
events:

         (i) a majority of the members of the Board at any time cease for any
     reason other than due to death or disability to be persons who were members
     of the Board twenty-four months prior to such time (the "Incumbent
     Directors"); provided that any director whose election, or nomination for
     election by the Company's stockholders, was approved by a vote of at least
     a majority of the members of the Board then still in office who are
     Incumbent Directors shall be treated as an Incumbent Director;

         (ii) any "person," including a "group" (as such terms are used in
     Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as
     amended (the "Act"), but excluding (a) the Company, its subsidiaries, any
     employee benefit plan of the Company or any of its subsidiaries, employees
     of the Company or any of its subsidiaries (or any group of which any of the
     foregoing is a member) and (b) James Wood, Richard de J. Osborne, WC
     Capital, LLC, Carnegie Hill Associates, LLC (or any group of which any of
     the foregoing is directly or indirectly a member) is or becomes the
     "beneficial owner" (as defined in Rule 13(d)(3) under the Act), directly or
     indirectly, including without limitation, by means of a tender or exchange
     offer, of securities of the Company representing a majority of the combined
     voting power of the Company's then outstanding securities; or

         (iii) the stockholders of the Company shall approve a definitive
     agreement (x) for the merger or other business combination of the Company
     with or into another corporation immediately following which merger or
     combination (A) the stock of the surviving entity is not readily tradable
     on an established securities market, (B) a majority of the directors of the
     surviving entity are persons who (1) were not directors of the Company
     immediately prior to the merger and (2) are not nominees or representatives
     of the Company or (C) any "person,", including a "group" (as such terms are
     used in Sections 13(d) and 14(d)(2) of the Act, but excluding the Company,
     its subsidiaries, any employee benefit plan of the Company or any of its
     subsidiaries, employees of the Company or any of its subsidiaries or any
     group of which any of the foregoing is a member) is or becomes the
     "beneficial owner" (as defined in Rule 13(d)(3) under the Act), directly or
     indirectly, of a majority of the securities of the surviving entity or (y)
     for the direct or indirect sale or other disposition of all or
     substantially all of the assets of the Company.

Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
occur in the event the Company files for bankruptcy, liquidation or
reorganization under the United States Bankruptcy Code.

     (b) "Corporate Status" describes the status of a person who is or was a
director, officer, employee, fiduciary or agent of the Company and its
subsidiaries or of a Relevant Enterprise.

     (c) "Disinterested Director" means a director of the Company who is not and
was not a party to the Proceeding in respect of which indemnification is sought
by Indemnitee.
<PAGE>
                                      -12-

     (d) "Effective Date" means January 12, 2001.

     (e) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, being or preparing to be a witness in, or
otherwise participating in, a Proceeding.

     (f) "Independent Counsel" means a law firm, or a member of a law firm, that
is experienced in matters of corporation law and neither presently is, nor in
the past five years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement. The Company agrees to pay the reasonable fees of the Independent
Counsel referred to above and to fully indemnify such counsel against any and
all Expenses, claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.

     (g) "Proceeding" includes any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, investigation,
inquiry, administrative hearing or any other actual, threatened or completed
proceeding, whether brought by or in the right of the Company or otherwise and
whether civil, criminal, administrative or investigative, in which Indemnitee
was, is, may be or will be involved as a party or otherwise, by reason of the
fact that Indemnitee is or was a director, officer, employee and/or agent of the
Company and/or any of its subsidiaries or of a Relevant Enterprise or by reason
of any action taken by him or of any inaction on his part while acting in such
capacity, in each case whether or not he is acting or serving in any such
capacity at the time any liability or expense is incurred for which
indemnification or advancement of expenses can be provided under this Agreement,
except for (i) one initiated by an Indemnitee pursuant to Section 10 of this
Agreement to enforce his rights under this Agreement or (ii) one pending on or
before the Effective Date.

     Section 18. Enforcement.

     (a) The Company expressly confirms and agrees that it has entered into this
Agreement and assumed the obligations imposed on it hereby in order to induce
Indemnitee to serve as a director, officer, employee and/or agent of the Company
and/or any of its subsidiaries and/or a Relevant Enterprise, and the Company
acknowledges that Indemnitee is relying upon this Agreement in serving in such
capacity.

     (b) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, oral, written and implied, between the parties
hereto with respect to the subject matter hereof.
<PAGE>
                                      -13-

     Section 19. Modification and Waiver. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.

     Section 20. Notice by Indemnitee. Indemnitee agrees to notify the Company
in writing immediately upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder. The failure of Indemnitee to so notify the Company shall not
relieve the Company of any obligation which it may have to the Indemnitee under
this Agreement or otherwise.

     Section 21. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given (i) upon delivery, if delivered by hand and receipted for by the
party to whom said notice or other communication shall have been directed, (ii)
on the first business day after the date on which it is mailed by overnight
courier service or transmitted via facsimile or (iii) on the third business day
after the date on which it is mailed by certified or registered mail with
postage prepaid:

     (a) If to Indemnitee, at the address specified on the signature page of
this Agreement; and

     (b) If to the Company to:

                    Datawatch Corporation
                    175 Cabot Street
                    Suite 503
                    Lowell, MA  01854
                    Attention:  Chief Executive Officer

         with a copy to:

                    Testa, Hurwitz & Thibeault
                    High Street Tower
                    125 High Street
                    Boston, MA  02110
                    Attention:  William B. Simmons, Jr., Esq.

or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.

     Section 22. Governing Law; Submission to Jurisdiction; Appointment of Agent
for Service of Process. This Agreement and the legal relations among the parties
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware, without regard to its conflict of laws rules. Except with
respect to any arbitration commenced by Indemnitee pursuant to Section 10(a) of
this Agreement, the Company and Indemnitee hereby irrevocably and
unconditionally (i) agree that any action or proceeding arising out of or in
<PAGE>
                                      -14-

connection with this Agreement shall be brought only in the Chancery Court of
the State of Delaware (the "Delaware Court"), and not in any other state or
federal court in the United States of America or any court in any other country,
(ii) consent to submit to the exclusive jurisdiction of the Delaware Court for
purposes of any action or proceeding arising out of or in connection with this
Agreement, (iii) appoint, to the extent such party is not a resident of the
State of Delaware, irrevocably, The Corporation Trust Company, 1209 Orange
Street, Wilmington, Delaware 19801 as its agent in the State of Delaware for
acceptance of legal process in connection with any such action or proceeding
against such party with the same legal force and validity as if served upon such
party personally within the State of Delaware, (iv) waive any objection to the
laying of venue of any such action or proceeding in the Delaware Court and (v)
waive, and agree not to plead or to make, any claim that any such action or
proceeding brought in the Delaware Court has been brought in an improper or
otherwise inconvenient forum.

     Section 23. Miscellaneous. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.

<PAGE>
                                      -15-

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

                              DATAWATCH CORPORATION

                              By:
                                     Name:       Bruce R. Gardner
                                     Title:      Chief Executive Officer

                              INDEMNITEE:

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

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

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

                              Address:
                              --------------------------------------------------

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

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