FIRST STATE BANCORPORATION
2003 EQUITY INCENTIVE PLAN
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>d06662exv10w1.txt
<DESCRIPTION>2003 EQUITY INCENTIVE PLAN
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.1


                           FIRST STATE BANCORPORATION
                           2003 EQUITY INCENTIVE PLAN

                          Effective Date: June 6, 2003
                     Approved by Stockholders: June 6, 2003
                       Termination Date: See Section 13.2


                         SECTION 1. HISTORY AND PURPOSE

     First State Bancorporation, a New Mexico corporation (the "Company"),
adopted the First State Bancorporation 1993 Stock Option Plan (the "1993 Plan")
on October 5, 1993. The 1993 Plan was subsequently amended on June 5, 1998, June
8, 2001 and December 13, 2002. By its terms, the 1993 Plan terminates effective
October 5, 2003, unless earlier terminated by the Company. The Company hereby
adopts the First State Bancorporation 2003 Equity Incentive Plan (the "Plan")
immediately prior to or coincident with the termination of the 1993 Plan as a
means to provide a variety of types of equity ownership to certain individuals
for the purposes specified below. The shares that were reserved for grant under
the 1993 Plan that were not granted under the 1993 Plan shall be included in the
total number of shares reserved for issuance under this Plan.

     The purpose of the Plan is to further the growth and development of the
Company, by affording an opportunity for stock ownership to selected Employees,
Directors and Consultants of the Company and its Subsidiaries who are
responsible for the conduct and management of its business or who are involved
in endeavors significant to its success and thereby to create in them a more
direct interest in the future success of the operations of the Company by
relating incentive compensation to increases in shareholder value, so that the
income of those participating in the Plan is more closely aligned with the
income of the Company's stockholders. The Plan is also intended to assist the
Company in attracting new Employees and Consultants and retaining existing
Employees and Consultants; to optimize the profitability and growth of the
Company through incentives which are consistent with the Company's goals; to
provide incentives for excellence in individual performance; and to promote
teamwork.

                             SECTION 2. DEFINITIONS

Unless otherwise indicated, the following words when used herein shall have the
following meanings:

     2.1 "AFFILIATE" shall mean, with respect to any person or entity, a person
or entity that directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such person or
entity.

     2.2 "AWARD" shall mean the grant of Options, Restricted Stock, Stock
Appreciation Rights ("SARs") or other stock-based grant under the Plan.

     2.3 "BOARD OF DIRECTORS" shall mean the Board of Directors of the Company.


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     2.4 "CAUSE" shall mean "Cause," as defined in the Participant's employment
agreement, if applicable, or if the Participant has not entered into an
employment agreement with the Company, as determined in the sole and absolute
discretion of the Company, a termination on account of dishonesty, fraud,
misconduct, unauthorized use or disclosure of confidential information or trade
secrets or conviction or confession of a crime punishable by law (except minor
violations), in each such case as determined by the Plan Administrator, and its
determination shall be conclusive and binding. Such actions constituting "Cause"
shall include, without limitation: (1) repeated refusal to obey written
directions of the Board of Directors or a superior officer (so long as such
directions do not involve illegal or immoral acts); (2) repeated acts of
substance abuse that are materially injurious to the Company or any of its
Subsidiaries; (3) fraud or dishonesty that is materially injurious to the
Company or any of its Subsidiaries; (4) breach of any material obligation of
nondisclosure or confidentiality owed to the Company or any of its Subsidiaries;
(5) commission of a criminal offense involving money or other property of the
Company (excluding any traffic violations or similar violations); or (6)
commission of a criminal offense that constitutes a felony in the jurisdiction
in which the offense is committed. A Participant who agrees to resign from his
or her affiliation with the Company in lieu of being terminated for Cause may be
deemed to have been terminated for Cause for purposes of the Plan.

     2.5 "CHANGE IN CONTROL" shall be deemed to have occurred in the event of
any one of the following:

          (a) A person (as that term is used in Section 13d of the Securities
     Exchange At of 1934, as amended (the "Exchange Act")) becomes the
     beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
     shares of the Company having twenty-five percent (25%) or more of the total
     number of votes that may be cast for the election of directors of the
     Company without the prior approval of at least two-thirds of the members of
     the Board unaffiliated with that person; or

          (b) Persons who constitute the directors of the Company at the
     beginning of a 24-month period cease to constitute at least two-thirds of
     all directors at any time during the period, unless the election of any new
     or replacement directors was approved by a vote of at least a majority of
     the members of the Board in office immediately before the period and of the
     new and replacement directors so approved;

          (c) The adoption of any plan or proposal to liquidate or dissolve the
     Company; or

          (d) Any merger or consolidation of the Company unless thereafter (1)
     directors of the Company immediately prior thereto continue to constitute
     at least two-thirds of the directors of the surviving entity or transferee,
     or (2) the Company's securities continue to represent or are converted into
     securities that represent more than eighty percent (80%) of the combined
     voting power of the surviving entity or transferee.

     The Plan Administrator's reasonable determination as to whether such an
event has occurred shall be final and conclusive. A Change in Control shall not
occur with respect to an Employee if, in advance of such event, the Employee
agrees in writing that such event shall not constitute a Change in Control.
Notwithstanding anything to the contrary in this section, no


                                       2
<PAGE>

rights under this Plan shall accrue to the Employee because of a Change in
Control if the Employee or any group of which the Employee is a member, is the
person whose acquisition constitutes the Change in Control.

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

     2.7 "CONSULTANT" shall mean a consultant, agent, advisor or independent
contractor who provides service to the Company and who does not receive wages
subject to income tax federal withholding under section 3401 of the Code;
provided, however, that such person renders bona fide services that are not in
connection with the offer and sale of the Company's securities in a capital
raising transaction and does not directly or indirectly promote or maintain a
market for the Company's securities.

     2.8 "CONTINUOUS SERVICE" shall mean that the Participant's service with the
Company or an Affiliate, whether as an Employee, Consultant or Director, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Plan Administrator, in its
sole discretion, may determine whether Continuous Service shall be considered
interrupted in the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal leave.

     2.9 "DIRECTOR" shall mean a member of the Board of Directors.

     2.10 "EFFECTIVE DATE" shall mean the effective date of the Plan.

     2.11 "EMPLOYEE" shall include common law employees of the Company and its
Subsidiaries and any person who has accepted a binding offer of employment from
the Company or its Subsidiary, but shall exclude any individual classified by
the Company as an independent contractor or leased employee.

     2.12 "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.

     2.13 "FAIR MARKET VALUE" shall mean the value of the Stock, determined in
accordance with the following:

          (a) Publicly Traded. If the Stock is listed on any established stock
     exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
     Market, then the Fair Market Value per share shall be deemed to be the
     average (mean) of the "high" and "low" sales prices for the Stock or
     security in the over-the-counter market for the preceding five days as
     reported by the National Association of Securities Dealers Automated
     Quotations System, or, if the prices are not reported thereby, the average
     of the closing bid and asked prices for the preceding five days, reported
     by the National


                                       3
<PAGE>

     Quotations Bureau.

          (b) Not Publicly Traded. If none of these conditions apply, the Fair
     Market Value per share shall be deemed to be an amount as determined in
     good faith by the Plan Administrator by applying any reasonable valuation
     method.

     2.14 "INCENTIVE STOCK OPTION" shall mean any option granted to an eligible
Employee under the Plan, which the Company intends at the time the option is
granted to be an Incentive Stock Option within the meaning of Code Section 422.

     2.15 "NONQUALIFIED STOCK OPTION" shall mean any option granted to an
eligible Employee, Director or Consultant under the Plan that is not an
Incentive Stock Option.

     2.16 "OPTION" shall mean and refer collectively to Incentive Stock Options
and Nonqualified Stock Options.

     2.17 "OPTION AGREEMENT" shall mean the agreement specified in Section 7.2.

     2.18 "OPTION STOCK RESTRICTION AGREEMENT" shall mean an agreement placing
certain restrictions upon the Participant's right to transfer shares, including
without limitation the creation of an irrevocable right of first refusal upon
the transfer of shares in favor of the Company and its designees and provisions
requiring the Participant to transfer the shares to the Company or the Company's
designees upon a termination of employment, as described in Section 7.7.

     2.19 "PARENT" shall mean a parent corporation of the Company as defined in
Code Section 424(e).

     2.20 "PARTICIPANT" shall mean any Employee, Director or Consultant who is
granted an Award under the Plan. "Participant" shall also mean the personal
representative of a Participant and any other person who acquires the right to
exercise or receive payment pursuant to an Award by bequest or inheritance.

     2.21 "PLAN ADMINISTRATOR" shall mean the body that is responsible for the
administration of the Plan, as determined pursuant to Section 4.1.

     2.22 "RELATED OPTION" shall mean an Incentive Stock Option or a
Nonqualified Stock Option that has been granted in conjunction with a SAR.

     2.23 "RESTRICTED STOCK" shall mean shares of Stock granted to a Participant
that are subject to the restrictions set forth in Section 8 of the Plan and the
Restricted Stock Award Agreement. "Restricted Stock" shall also include any
shares of the Company's capital stock issued as the result of a dividend on or
split of Restricted Stock. Upon termination of the restrictions, such Stock or
other capital stock shall no longer be Restricted Stock.


                                       4
<PAGE>

     2.24 "RESTRICTED STOCK AWARD AGREEMENT" shall mean the agreement specified
in Section 8.2 between the Company and a Participant pursuant to which
Restricted Stock is granted to the Participant.

     2.25 "RESTRICTION PERIOD" shall be the period set forth in the Restricted
Stock Award Agreement that is the period beginning on the date of grant of the
Award and ending on the vesting of the Restricted Stock.

     2.26 "REORGANIZATION" shall mean any one of the following events:

          (a) the merger or consolidation of the Company (but only if the
     Company is not the surviving corporation or if the Company becomes a
     subsidiary of another corporation) or the acquisition of its assets or
     stock pursuant to a non-taxable reorganization, unless the surviving or
     acquiring corporation assumes the outstanding Awards or substitutes new
     Awards (for Options, in a manner consistent with regulations under Code
     Section 424);

          (b) the dissolution or liquidation of the Company;

          (c) the appointment of a receiver for all or substantially all of the
     Company's assets or business;

          (d) the appointment of a trustee for the Company after a petition has
     been filed for the Company's reorganization under applicable statutes; or

          (e) the sale, lease, or exchange of all or substantially all of the
     Company's assets and business.

     2.27 "RETIREMENT" shall mean the date on which an Employee or Consultant
voluntarily terminates his or her Continuous Service after reaching the age of
60 following at least ten years of Continuous Service with the Company or
reaching the age of 65 following at least five years of Continuous Service.

     2.28 "RULE 16b-3" shall mean Rule 16b-3 promulgated by the Securities
Exchange Commission under the Exchange Act, together with any successor rule, as
in effect from time to time.

     2.29 "STOCK" shall mean the Company's common stock, no par value, and any
share or shares of the Company's capital stock hereafter issued or issuable in
substitution for such shares.

     2.30 "SUBSIDIARY" shall mean a subsidiary corporation of the Company as
defined in Code Section 424(f).

     2.31 "SAR" shall mean a stock appreciation right granted pursuant to
Article 9 of the Plan.


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<PAGE>

     2.32 "Termination Date" shall mean the termination date of the Plan, as
first set forth above.

                           SECTION 3. EFFECTIVE DATE

     The Effective Date of the Plan shall be the effective date first set forth
above; provided, however, that the adoption of the Plan by the Board of
Directors is subject to approval and ratification by the shareholders of the
Company within 12 months of the effective date. Incentive Stock Options granted
under the Plan prior to approval of the Plan by the shareholders of the Company
shall be subject to approval of the Plan by the shareholders of the Company. If
the shareholders of the Company do not approve the Plan as specified above, the
Plan shall terminate retroactively to the date of initial adoption and any grant
of Awards hereunder shall be null and void without any further action by the
Board or the Company.

                           SECTION 4. ADMINISTRATION

     4.1 PLAN ADMINISTRATOR. The Plan shall be administered by the Board of
Directors, unless and until such time as the Board of Directors delegates the
administration of the Plan to a committee, which shall be appointed by and shall
serve at the pleasure of the Board of Directors. Any committee member shall be
deemed to have resigned automatically from the committee upon his or her
termination of service with the Company. To the extent the Board considers it
desirable for transactions relating to a grant of Options to be eligible to
qualify for an exemption under Rule 16b-3, the Plan Administrator shall consist
of a committee of two or more Directors of the Company, all of whom qualify as
"non-Employee Directors" within the meaning of Rule 16b-3. To the extent the
Board considers it desirable for compensation delivered pursuant to a grant of
Options to be eligible to qualify for an exemption under Code Section 162(m),
the Plan Administrator shall consist of a committee of two or more Directors of
the Company, all of whom qualify as "outside Directors" within the meaning of
Code Section 162(m). The Board may from time to time remove members from or add
members to any such committee; fill vacancies on the committee, howsoever
caused; and otherwise increase or decrease the number of members of such
committee, in each case as the Board deems appropriate to permit transactions in
Shares pursuant to the Plan and to satisfy such conditions of Rule 16b-3 or Code
Section 162(m) as then in effect.

     4.2 MEETINGS AND ACTIONS. The Plan Administrator shall hold meetings at
such times and places as it may determine. A majority of the members of the Plan
Administrator shall constitute a quorum, and the acts of the majority of the
members present at a meeting or a consent in writing signed by all members of
the Plan Administrator shall be the acts of the Plan Administrator and shall be
final, binding and conclusive upon all persons, including the Company, its
Subsidiaries, its stockholders, and all persons having any interest in Awards
that may be or have been granted pursuant to the Plan.

     4.3 POWERS OF PLAN ADMINISTRATOR. The Plan Administrator shall have the
full and exclusive right to grant and determine terms and conditions of all
Awards granted under the Plan and to prescribe, amend and rescind rules and
regulations for administration of the Plan. In selecting Participants and
granting Awards, the Plan Administrator shall take into consideration the
contribution the Participant has made or may make to the


                                       6
<PAGE>

success of the Company or its Subsidiaries and such other factors as the Plan
Administrator shall determine.

     4.4 INTERPRETATION OF PLAN. The Plan Administrator may correct any defect,
supply any omission, or reconcile any inconsistency in the Plan or in any
agreement entered into hereunder. The determination of the Plan Administrator as
to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all
persons, including the Company, its Subsidiaries, its shareholders, and all
persons having any interest in Awards that may be or have been granted pursuant
to the Plan.

     4.5 INDEMNIFICATION. Each person who is or shall have been a member of the
Plan Administrator or of the Board of Directors shall be indemnified and held
harmless by the Company against and from any loss, cost, liability or expense
that may be imposed upon or reasonably incurred in connection with or resulting
from any claim, action, suit or proceeding to which such person may be a party
or in which such person may be involved by reason of any action taken or failure
to act under the Plan and against and from any and all amounts paid in
settlement thereof, provided that the Company approved such settlement, or paid
in satisfaction of a judgment in any such action, suit or proceeding, provided
such person shall give the Company an opportunity, at its own expense, to handle
and defend the same before undertaking to handle and defend it on such person's
own behalf. The foregoing right of indemnification shall not be exclusive of,
and is in addition to, any other rights of indemnification to which any person
may be entitled under the Company's Certificate of Incorporation or Bylaws, as a
matter of law, or otherwise, or any power that the Company may have to indemnify
them or hold them harmless.

                      SECTION 5. STOCK SUBJECT TO THE PLAN

     5.1 PLAN LIMIT. The aggregate number of shares of Stock that may be issued
under Awards granted pursuant to the Plan shall not exceed 750,000 shares;
provided, however, that a maximum of 100,000 shares may be issued as Restricted
Stock Awards. Shares that may be issued under Awards may consist, in whole or in
part, of authorized but unissued stock or treasury stock of the Company not
reserved for any other purpose. In addition, the Company may use the proceeds
received from a Participant upon the exercise of his or her Option to repurchase
shares of Stock in the open market, which shall be available for grant of Awards
under the Plan.

     5.2 INDIVIDUAL LIMIT. Subject to the provisions of Section 5.4 relating to
adjustments upon changes in the shares of Stock, no Participant shall be
eligible to be granted Awards covering more than 10% of the shares of Stock then
available under the Plan during any calendar year.

     5.3 UNUSED STOCK. If any outstanding Award under the Plan expires or for
any other reason ceases to be exercisable, in whole or in part, other than upon
exercise of the Award, the shares which were subject to such Award and as to
which the Award had not been exercised shall continue to be available under the
Plan. Any shares that are repurchased by the Company in accordance with the
terms of an Option Stock Restriction Agreement shall upon such repurchase once
again be available for issuance under the Plan. Any Restricted Stock that is
forfeited to the Company pursuant to restrictions contained in this Plan or the


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Restricted Stock Award Agreement shall again be available for issuance under the
Plan.

     5.4 ADJUSTMENT FOR CHANGE IN OUTSTANDING SHARES.

          (a) In General. If there is any change, increase or decrease, in the
     outstanding shares of Stock that is effected without receipt of additional
     consideration by the Company, by reason of a stock dividend, subdivision,
     reclassification, recapitalization, merger, consolidation, stock split,
     combination or exchange of stock, or other similar circumstances, then in
     each such event, the Plan Administrator shall make an appropriate
     adjustment in the aggregate number of shares of Stock available under the
     Plan, the number of shares of Stock subject to each outstanding Award and
     the Option or Restricted Stock prices in order to prevent the dilution or
     enlargement of any Participant's rights. In the event of any adjustment in
     the number of shares of Stock covered by any Award, including those
     provided in subsection (b) and (d) below, each such Award shall cover only
     the number of full shares resulting from such adjustment. The Plan
     Administrator's determinations in making any adjustment shall be final and
     conclusive.

          (b) Adjustments for Certain Distributions of Property. If the Company
     at any time distributes with respect to its Stock securities of other
     property (except cash or Stock), a proportionate part of those securities
     or other property shall be set aside and delivered to the Participant when
     he exercises an Option or the restrictions on Restricted Stock lapse. The
     securities or other property shall be in the same ratio to the total
     securities and property set aside for the Participant as the number of
     shares of Stock with respect to which the Option is then exercised or the
     Restricted Stock then vests is to the total shares of Stock subject to the
     Award.

          (c) Exceptions to Adjustment. Except as expressly provided herein, the
     issue by the Company of shares of Stock of any class, or securities
     convertible into or exchangeable for shares of Stock of any class, for cash
     or property or for labor or services, either upon sale of upon exercise of
     rights or warrants to subscribe therefore, or upon conversion of shares or
     obligations of the Company convertible into or exchangeable for shares of
     Stock of any class shall not affect, and no adjustment by reason thereof
     shall be made with respect to, the number of shares of Stock subject to any
     Award granted under the Plan.

     5.5 RETENTION OF RIGHTS. The existence of this Plan and any Award granted
pursuant to the Plan shall not affect the right or power of the Company or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other change in the Company's capital structure or its
business, or a merger or consolidation or the Company, or any issue of bonds,
debentures, or preferred or preference stock ranking before or affecting the
Stock, or the dissolution of the Company or any sale or transfer of all or any
part of the Company's assets or business, or any other corporate act or
proceeding, whether similar or not.

     5.6 NO REPRICING OF OPTIONS. No modifications to reduce the exercise price
(repricing) of previously fixed stock option Awards issued under the Plan may be
made pursuant to the Plan.


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<PAGE>

                             SECTION 6. ELIGIBILITY

     All full-time and part-time Employees of the Company and its Subsidiaries
who are responsible for the conduct and management of its business or who are
involved in endeavors significant to its success shall be eligible to receive
any Award under the Plan. Directors and Consultants who are not Employees of the
Company or its Subsidiaries shall be eligible to receive any Award, other than
Incentive Stock Options, under the Plan. Any Director who is otherwise eligible
to participate, who makes an election in writing not to receive any grants under
the Plan, shall not be eligible to receive any such grants during the period set
forth in such election.

                          SECTION 7. GRANT OF OPTIONS

     7.1 GRANT OF OPTIONS. The Plan Administrator may from time to time in its
discretion determine which of the eligible Employees, Directors and Consultants
of the Company or its Subsidiaries should receive Options, the type of Options
to be granted (whether Incentive Stock Options or Nonqualified Stock Options),
the number of shares subject to such Options, and the dates on which such
Options are to be granted. No Employee may be granted Incentive Stock Options to
the extent that the aggregate Fair Market Value (determined as of the time each
Option is granted) of the Stock with respect to which any such Options are
exercisable for the first time during a calendar year (under all incentive stock
option plans of the Company and its Parent and Subsidiaries) would exceed
$100,000. To the extent that the limitation set forth in the preceding sentence
has been exceeded, the Options that exceed the annual limitation shall be deemed
to be Nonqualified Stock Options rather than Incentive Stock Options.

     7.2 OPTION AGREEMENT. Each Option granted under the Plan shall be evidenced
by a written Option Agreement setting forth the terms upon which the Option is
granted. Each Option Agreement shall designate the type of Options being granted
(whether Incentive Stock Options or Nonqualified Stock Options), and shall state
the number of shares of Stock, as designated by the Plan Administrator, to which
that Option pertains. More than one Option, and any combination of Options, SARs
and Restricted Stock Awards, may be granted to an eligible person.

          (a) Option Price. The option price per share of Stock under each
     Option shall be determined by the Plan Administrator and stated in the
     Option Agreement. The option price for Incentive Stock Options granted
     under the Plan shall not be less than 100% of the Fair Market Value
     (determined as of the day the Option is granted) of the shares subject to
     the Option. The option price for Nonqualified Stock Options granted under
     the Plan shall not be less than 85% of the Fair Market Value (determined as
     of the day the Option is granted) of the shares subject to the Option.

          (b) Duration of Options. Each Option shall be of a duration as
     specified in the Option Agreement; provided, however, that the term of each
     Incentive Stock Option shall be no more than ten years from the date on
     which the Option is granted and shall be subject to early termination as
     provided herein.

          (c) Vesting. Unless otherwise stated in the Option Agreement, Options
     shall be subject to the following vesting schedule, which may be waived or
     accelerated by the


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<PAGE>

     Plan Administrator at any time:

<TABLE>
<CAPTION>
         ------------------------------------------------------------------------------------------
         Period of Participant's Continuous Service     Percentage or Fraction of Shares Subject to
         from the Grant Date                            Option that become Vested and Exercisable
         ------------------------------------------------------------------------------------------
         <S>                                            <C>
                       0 years                                           0%
         ------------------------------------------------------------------------------------------
                       1 year                                            20%
         ------------------------------------------------------------------------------------------
                       2 years                                           40%
         ------------------------------------------------------------------------------------------
                       3 years                                           60%
         ------------------------------------------------------------------------------------------
                       4 years                                           80%
         ------------------------------------------------------------------------------------------
                       5 years                                           100%
         ------------------------------------------------------------------------------------------

</TABLE>

          (d) Additional Limitations on Grant for 10% Stockholders. No Incentive
     Stock Option shall be granted to an Employee who, at the time the Incentive
     Stock Option is granted, owns stock (as determined in accordance with Code
     Section 424(d)) representing more than 10% of the total combined voting
     power of all classes of stock of the Company or of any Parent or
     Subsidiary, unless the option price of such Incentive Stock Option is at
     least 110% of the Fair Market Value (determined as of the day the Incentive
     Stock Option is granted) of the stock subject to the Incentive Stock Option
     and the Incentive Stock Option by its terms is not exercisable more than
     five years from the date it is granted.

          (e) Rights as Stockholder. A Participant shall have no rights as a
     stockholder of the Company with respect to any shares of Stock covered by
     an Option until the date of the issuance of the stock certificate for such
     shares.

          (f) Other Terms and Conditions. The Option Agreement may contain such
     other provisions, which shall not be inconsistent with the Plan, as the
     Plan Administrator shall deem appropriate, including, without limitation,
     provisions that relate to the Participant's ability to exercise an Option
     in whole or in part to the passage of time or the achievement of specific
     goals or the occurrence of certain events, as specified by the Plan
     Administrator.


     7.3 NONTRANSFERABILITY OF OPTIONS. Options granted pursuant to the Plan are
not transferable by the Participant other than by will or the laws of descent
and distribution and shall be exercisable during the Participant's lifetime only
by the Participant. Upon any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of the Options contrary to the provisions hereof, or upon the
levy of any attachment or similar process upon the Award, the Award shall
immediately become null and void. Notwithstanding the foregoing, to the extent
specified in an Option Agreement, an Option may be transferred by a Participant
solely to (1) the Participant's immediate family (children, grandchildren, or
spouse) or trusts or other entities established for the benefit of the
Participant's immediate family; or (2) the trust underlying a nonqualified
deferred compensation plan established and maintained by the Company, to the
extent specifically permitted in the trust agreement. Any such transfer of an
Incentive Stock Option shall result in the conversion of the Option to a
Nonqualified Stock Option.

     7.4 MANNER OF EXERCISE. Subject to the limitations and conditions of the
Plan or the Option Agreement, an Option shall be exercisable, in whole or in
part, from time to


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<PAGE>

time, by giving written notice of exercise to the Secretary of the Company,
which notice shall specify the number of shares of Stock to be purchased and
shall be accompanied by (a) payment in full to the Company of the purchase price
of the shares to be purchased; plus (b) payment in full of such amount as the
Company shall determine to be sufficient to satisfy any liability it may have
for any withholding of federal, state or local income or other taxes incurred by
reason of the exercise of the Option; (c) representations meeting the
requirements of Sections 11.4 and/or 11.5 if requested by the Company; and (d)
an Option Stock Restriction Agreement meeting the requirements of Section 7.7 if
requested by the Company. Except as provided in Section 7.5, the conditions of
this Section 7.4 shall be satisfied at the time that the Option or any part
thereof is exercised, and no shares of Stock shall be issued or delivered until
such conditions have been satisfied by the Participant.

     7.5 PAYMENT OF PURCHASE PRICE. Payment for shares and withholding taxes
shall be in the form of either (a) cash, (b) a certified or bank cashier's check
to the order of the Company, or (c) shares of the Stock, properly endorsed to
the Company, in an amount the Fair Market Value of which on the date of receipt
by the Company equals or exceeds the aggregate option price of the shares with
respect to which the Option is being exercised, provided that such shares have
been held outright by the Participant for at least six months, (d) any other
form of legal consideration that may be acceptable to the Plan Administrator, or
(e) in any combination thereof; provided, however, that no payment may be made
in shares of Stock unless the Plan Administrator has approved of payment in such
form by such Participant with respect to the Option exercise in question. If
approved by the Plan Administrator with respect to the Option exercise in
question, if the Stock is not registered under Section 12(g) of the Exchange Act
at the time an Option is exercised, payment may be made by authorization for the
Company to retain from the total number of shares of Stock as to which the
Option is exercised that number of shares of Stock having a Fair Market Value on
the date of exercise equal to the exercise price for the total number of shares
of Stock as to which the Option is exercised. Should the Stock be registered
under Section 12(g) of the Exchange Act at the time an Option is exercised, and
to the extent the option is exercised for vested shares, then payment may also
be made through a special sale and remittance procedure pursuant to which the
Participant shall concurrently provide irrevocable written instructions (1) to a
brokerage firm designated by the Company to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds available on
the settlement date, sufficient funds to cover the aggregate exercise price
payable for the purchased shares plus all applicable withholding taxes, and (2)
to the Company to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale. Upon the exercise of any
Option, the Company, in its sole discretion, may permit the deferred payment of
the purchase price on such terms and conditions, as the Company shall specify.

     7.6 TERMINATION OF CONTINUOUS SERVICE. Any vesting of the Option shall
cease upon termination of Continuous Service, and the Option shall be
exercisable only to the extent that it was exercisable on the date of such
termination. Any Option not exercisable as of the date of termination, and any
Option or portions thereof not exercised within the period specified herein,
shall terminate.

          (a) Termination Other than for Cause. Subject to any limitations set
     forth in the Option Agreement, and provided that the notice of exercise is
     provided prior to the


                                       11
<PAGE>

     expiration of the Option, the Participant shall be entitled to exercise the
     Option (i) during the Participant's Continuous Service, and (ii) for a
     period of three months after the date of termination of the Participant's
     Continuous Service for reason other than for Cause, or such longer period
     as may be set forth in the Option Agreement.

          (b) Termination by Death. Notwithstanding subsection (a), if a
     Participant's Continuous Service should terminate as a result of the
     Participant's death, or if a Participant should die within a period of
     three months after termination of the Participant's Continuous Service
     under circumstances in which subsection (a) would permit the exercise of
     the Option following termination, the personal representatives of the
     Participant's estate or the person or persons who shall have acquired the
     Option from the Participant by bequest or inheritance may exercise the
     Option at any time within one year after the date of death, but not later
     than the expiration date of the Option.

          (c) Termination by Disability or Retirement. Notwithstanding
     subsection (a), if a Participant's Continuous Service should terminate by
     reason of (i) the Participant's disability (within the meaning of the
     long-term disability policy maintained by the Company, or if none, within
     the meaning of Code Section 22(e)(3)), or (ii) the Participant's
     Retirement, the Participant may exercise the Option at any time within one
     year after the date of termination but not later than the expiration date
     of the Option.

          (d) Termination for Cause; Breach of Covenant Not to Compete or
     Nondisclosure Agreement. Notwithstanding anything herein to the contrary,
     and unless otherwise provided by the Option Agreement, unexercised Options
     granted to the Participant shall terminate immediately if the Participant
     is terminated for Cause, breaches any obligation under a covenant not to
     compete with the Company or any of its Subsidiaries, or breaches any
     obligation under an agreement not to use or disclose proprietary
     information obtained from or through the Company or any of its
     Subsidiaries, upon such occurrence.

     7.7 OPTION STOCK RESTRICTION AGREEMENT. Upon demand by the Company, the
Participant shall execute and deliver to the Company an Option Stock Restriction
Agreement in such form as the Company may provide at the time of exercise of the
Option. Such Agreement may include, without limitation, restrictions upon the
Participant's right to transfer shares, including the creation of an irrevocable
right of first refusal in the Company and its designees, and provisions
requiring the Participant to transfer the shares to the Company or the Company's
designees upon a termination of Continuous Service. Upon such demand, execution
of the Option Stock Restriction Agreement by the Participant prior to the
transfer or delivery of any shares and prior to the expiration of the option
period shall be a condition precedent to the right to purchase such shares,
unless such condition is expressly waived in writing by the Company.



                      SECTION 8. STOCK APPRECIATION RIGHTS

     8.1 GRANT OF SARS. The Plan Administrator may from time to time in its
discretion determine which of the eligible Employees, Directors and Consultants
of the Company or its Subsidiaries should receive SARs, the number of shares
subject to such


                                       12
<PAGE>

SARs, and the dates on which such SARs are to be granted. The Plan Administrator
may, but shall not be obligated to, grant SARs pursuant to the provisions of
this Section 8.1 to any Participant with respect to all or any portion of the
shares of Stock subject to the Related Option. The SAR may be granted either
concurrently with the grant of the Related Option or at any time thereafter
prior to the complete exercise, termination, expiration or cancellation of the
Related Option. The grant of the SAR shall be evidenced in the written Option
Agreement for the Related Option, either as initially issued or as amended. The
Option Agreement shall state the number of shares of SARs being granted, as
designated by the Plan Administrator. More than one SAR may be granted to a
Participant. The exercise price per share of each SAR shall be determined by the
Plan Administrator and stated in the Option Agreement. Each SAR shall be of the
same duration as the Related Option.

     8.2 EXERCISE OF SARS. Each SAR shall be exercisable to the extent the
Related Option is then exercisable (including any vesting provisions provided in
Section 7.2) and may be subject to such additional limitations on exercisability
as the Option Agreement may provide (e.g., solely in the event of a Change in
Control). In no event shall a SAR be exercisable after the expiration,
termination or exercise of the Related Option. Upon the exercise of SARs, the
Related Option shall be considered to have been exercised to the extent of the
number of shares of Stock with respect to which SARs are exercised, both for
purposes of acquiring shares of Stock upon exercise of an Option and for
purposes of determining the number of shares of Stock which may be issued
pursuant to the Plan. The effective date of exercise of a SAR shall be the date
on which the Company shall have received notice from the Participant of the
exercise thereof. Upon the exercise of SARs, the Participant shall receive in
cash an amount equal to the Fair Market Value on the date of exercise of such
SAR of the shares of Stock with respect to which such SAR shall have been
exercised over the aggregate exercise price of the Related Option.

                       SECTION 9. RESTRICTED STOCK AWARDS

     9.1 AWARD OF RESTRICTED STOCK. The Plan Administrator may from time to time
in its sole discretion determine which of the eligible Employees, Directors, or
Consultants of the Company should receive grants of Restricted Stock, the number
of shares of Restricted Stock to be granted to each such eligible Employee,
Director, and Consultant, the dates on which such shares of Restricted Stock are
to be granted, and the restrictions applicable to each grant of shares of
Restricted Stock.

     9.2 RESTRICTED STOCK AWARD AGREEMENT. Each Restricted Stock Award granted
under the Plan shall be evidenced by a written Restricted Stock Award Agreement
setting forth the terms upon which the Restricted Stock Award is granted. Each
Restricted Stock Award Agreement shall state the number of shares of Stock, as
designated by the Plan Administrator, to which that Restricted Stock Award
pertains; the price, if any, to be paid by the Participant for the Restricted
Stock; and the restrictions applicable to each grant of shares of Restricted
Stock. More than one Restricted Stock Award may be granted to an eligible
person. The terms of any Restricted Stock Award Agreement need not be identical
to the terms of other Restricted Stock Award Agreement applicable to other
grants of Restricted Stock under the Plan to the same or other Participants. No
shares of Restricted Stock shall be issued under the Plan until the Participant
of such shares provides the Company with a signed Restricted Stock Award
Agreement in the form specified by the


                                       13
<PAGE>

Plan Administrator with respect to the grant of Restricted Stock to that
Participant.

          (a) Issuance of Restricted Stock. The right to receive Restricted
     Stock shall be conditioned upon the delivery by the Participant of (a)
     payment in full, in cash, check, or by certified or bank cashier's check to
     the Company (or payment by such other consideration as shall be permitted
     by the Plan Administrator) or, upon approval of the Plan Administrator,
     shares of the Stock, properly endorsed to the Company, in an amount the
     Fair Market Value of which on the date of receipt by the Company equals or
     exceeds the aggregate purchase price of the shares; (b) payment in similar
     form equal to such amount as the Company shall determine to be sufficient
     to satisfy any liability it may have for any withholding of federal, state
     or local income or other taxes incurred by reason of the vesting of the
     Restricted Stock or the Participant's election under Code Section 83(b);
     (c) a representation meeting the requirements of Section 12.4 if requested
     by the Plan Administrator; and (d) a copy of the executed Restricted Stock
     Award Agreement in the form specified by the Plan Administrator with
     respect to the grant of Restricted Stock to that Participant.

          (b) Vesting. Unless otherwise stated in the Award Agreement,
     Restricted Stock shall be subject to the following vesting schedule, which
     may be waived or accelerated by the Plan Administrator at any time:

<TABLE>
<CAPTION>
         ------------------------------------------------------------------------------
         Period of Participant's Continuous            Percentage or Fraction of Shares
         Service from the Grant Date                   that become Vested
         ------------------------------------------------------------------------------
         <S>                                           <C>
                   0 years                                            0%
         ------------------------------------------------------------------------------
                   1 year                                             20%
         ------------------------------------------------------------------------------
                   2 years                                            40%
         ------------------------------------------------------------------------------
                   3 years                                            60%
         ------------------------------------------------------------------------------
                   4 years                                            80%
         ------------------------------------------------------------------------------
                   5 years                                            100%
         ------------------------------------------------------------------------------
</TABLE>

          (c) Stock Certificates. The stock certificate or certificates
     representing the Restricted Stock shall be registered in the name of the
     Participant to whom such Restricted Stock shall have been granted. Such
     certificates shall remain in the custody of the Company and the Participant
     shall deposit with the Company stock powers or other instruments of
     assignment, each endorsed in blank, so as to permit retransfer to the
     Company of all or a portion of the Restricted Stock that shall be forfeited
     or otherwise not become vested in accordance with the Plan and the
     applicable Restricted Stock Award Agreement.

          (d) Restrictions and Rights. Restricted Stock shall constitute issued
     and outstanding shares of Stock for all corporate purposes. The Participant
     shall have the right to vote such Restricted Stock, to receive and retain
     all regular cash dividends and such other distributions, as the Board of
     Directors may, in its discretion, designate, pay or distribute on such
     Restricted Stock, and to exercise all other rights, powers and privileges
     of a holder of Stock with respect to such Restricted Stock, except as set
     forth in this section. The Restricted Stock Award Agreement may contain
     such other provisions, which shall not be inconsistent with the Plan, as
     the Plan Administrator shall deem appropriate.


                                       14
<PAGE>

          (e) Forfeiture. If the Participant fails to satisfy any applicable
     restrictions, terms and conditions set forth in this Plan or in the
     Restricted Stock Award Agreement for any reason, any Restricted Stock held
     by such Participant and affected by such conditions shall be forfeited to
     the Company in return for such consideration as shall be specified in the
     Restricted Stock Award Agreement. The Company and its officers are
     authorized to reflect such forfeiture of Restricted Stock on the Company's
     stock ledger.

     9.3 NONTRANSFERABILITY OF RESTRICTED STOCK. Restricted Stock granted
pursuant to the Plan is not transferable by the Participant until all
restrictions on such Restricted Stock shall have lapsed. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of the Restricted
Stock, contrary to the provisions hereof, or upon the levy of any attachment or
similar process upon the Restricted Stock, the Restricted Stock shall
immediately become null and void. Notwithstanding the foregoing, to the extent
specified in an Award Agreement, Restricted Stock may be transferred by a
Participant solely to (1) the Participant's immediate family (children,
grandchildren, or spouse) or trusts or other entities established for the
benefit of the Participant's immediate family; or (2) the trust underlying a
nonqualified deferred compensation plan established and maintained by the
Company, to the extent specifically permitted in the trust agreement.

     9.4 TERMINATION OF CONTINUOUS SERVICE. In the event that a Participant
terminates Continuous Service with the Company for any reason, including
disability of the Participant, any unvested Restricted Stock held by such
Participant as of the date of such termination of Continuous Service shall be
forfeited to the Company as of the date of termination of Continuous Service.

                            SECTION 10. OTHER AWARDS

     The Plan Administrator may from time to time in its sole discretion
determine which of the eligible Employees, Directors, or Consultants of the
Company should receive grants of other grants of Stock and/or other Awards that
are value in whole or in part by reference to, or are otherwise based upon,
Stock, including without limitation dividend equivalents, standalone stock
appreciation rights, phantom stock (including restricted stock units) and
performance units. Such Awards may be issued alone or in conjunction with other
Awards under the Plan. In addition, the Plan Administrator may, from time to
time, in its sole discretion and consistent with applicable law that would
prohibit the imposition of the constructive receipt of income under Code Section
451, afford a Participant the opportunity to convert the form of Award currently
held by the Participant prior to the time such Participant would become vested
in such Award (e.g., from a Restricted Stock Award to an Award of restricted
stock units).

             SECTION 11. CHANGE IN CONTROL; CORPORATE REORGANIZATION

     Upon the occurrence of a Change in Control or Reorganization, with respect
to Awards held by Participants whose Continuous Service has not terminated, the
vesting of such Awards (and, if applicable, the time during which such Awards
may be exercised) shall be accelerated in full, and, if applicable, the Awards
shall terminate if not exercised at or prior to such Change in Control or
Reorganization; provided, however, that if the Option Agreement or Restricted
Stock Award Agreement applicable to a particular Award states that no
acceleration of vesting shall occur with respect to the Award under such
agreement, the agreement shall control. Unless the


                                       15
<PAGE>

surviving corporation or acquiring corporation agrees to assume any outstanding
Award, the Plan Administrator shall, upon written notice to all Participants
holding such fully vested Awards, provide that all unexercised Awards must be
exercised within a specified number of days of the date of such notice or such
Awards will terminate. In response to such a notice, a Participant may make an
irrevocable election to exercise the Participant's Award contingent upon and
effective as of the effective date of the Change in Control or Reorganization.
Prior to such a Change in Control or Reorganization, the Plan Administrator may,
in its sole discretion, terminate any or all unexercised Awards (after
acceleration of vesting) in exchange for consideration similar to that received
by stockholders of Stock of the Company in the Change in Control or
Reorganization, less the exercise price required under such Awards.

                         SECTION 12: ISSUANCE OF SHARES

     12.1 TRANSFER OF SHARES TO PARTICIPANT. As soon as practicable after (i) a
Participant has given the Company written notice of exercise of an Option and
has otherwise met the requirements of Section 7.2, or (ii) a Participant has
satisfied any applicable restrictions, terms and conditions set forth in this
Plan or in the Restricted Stock Award Agreement with respect to a Restricted
Stock Award, the Company shall register a certificate in such Participant's name
for the number of shares of Stock as to which the Option has been exercised or
the Restricted Stock Award has been satisfied and shall, upon the Participant's
request, deliver such certificate to the Participant. In no event shall the
Company be required to transfer fractional shares to the Participant, and in
lieu thereof, the Company may pay an amount in cash equal to the Fair Market
Value of such fractional shares on the date of exercise.

     12.2 LEGEND. All certificates evidencing shares of Restricted Stock
originally issued or subsequently transferred to any person or entity, which are
subject to the terms and provisions of this Agreement shall bear a legend that
reads substantially as follows, in addition to such other legends as counsel to
the Company may deem appropriate:

         "THIS CERTIFICATE AND THE SHARES OF STOCK REPRESENTED HEREBY ARE
         SUBJECT TO THE PROVISIONS OF THE COMPANY'S 2003 EQUITY INCENTIVE PLAN
         AND AN AGREEMENT BETWEEN THE ISSUER AND THE REGISTERED HOLDER, OR HIS
         PREDECESSOR IN INTEREST, WHEREBY THE TRANSFER IN ANY MANNER OF SUCH
         SHARES OF STOCK OR ANY INTEREST THEREIN IS RESTRICTED AND THE SHARES OF
         STOCK ARE SUBJECT TO FORFEITURE. A COPY OF SAID PLAN AND SAID AGREEMENT
         MAY BE INSPECTED AT THE PRINCIPAL OFFICE OF THE ISSUER."

     To the extent that restrictions on the Restricted Stock have lapsed,
certificates bearing the legend provided for herein may be submitted to the
Company, and the Company shall reissue such certificates free of such legend.

     12.3 COMPLIANCE WITH LAWS. If the issuance or transfer of shares by the
Company would for any reason, in the opinion of counsel for the Company, violate
any applicable federal or state laws or regulations, the Company may delay
issuance or transfer of such shares to the Participant until compliance with
such laws can reasonably be obtained. In no event shall the Company be obligated
to effect or obtain any listing,


                                       16
<PAGE>

registration, qualification, consent or approval under any applicable federal or
state laws or regulations or any contract or agreement to which the Company is a
party with respect to the issuance of any such shares. If, after reasonable
efforts, the Company is unable to obtain the authority that counsel for the
Company deems necessary for the lawful issuance and sale of shares upon exercise
of Options or vesting of Restricted Stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell shares upon exercise
of such Options or vesting of Restricted Stock unless and until such authority
is obtained.

     12.4 INVESTMENT REPRESENTATION. The Company may require any Participant, as
a condition precedent to exercising any Option or purchasing any Restricted
Stock, to provide a written representation providing assurances satisfactory to
the Company (a) as to the Participant's knowledge and experience in financial
and business matters and/or that the Participant has engaged a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, (b) that the Participant is
capable of evaluating, alone or together with the purchaser representative, the
merits and risks of acquiring the Stock; and (c) that the Participant is
acquiring the stock subject to the Option or the Restricted Stock for such
person's own account and not with any present intention of selling or otherwise
distributing the stock. Such a representation shall not be required if (1) the
issuance of the shares pursuant to an Award has been registered under a then
currently effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), or (2) as to any particular requirement, a
determination is made by counsel for the Company that such representation is not
required. Certificates representing Stock acquired pursuant to an Award may
contain such legends and transfer restrictions as the Company shall deem
reasonably necessary or desirable, including, without limitation, legends
restricting transfer of the Stock until there has been compliance with federal
and state securities laws and until the Participant or any other holder of the
Stock has paid the Company such amounts as may be necessary in order to satisfy
any withholding tax liability of the Company.

     12.5 LOCK-UP AGREEMENT. Upon demand by the Company, the Participant shall
execute and deliver to the Company a representation that, in connection with the
first underwritten registered offering of any securities of the Company under
the Securities Act of 1933, as amended, the Participant will not sell or
otherwise transfer or dispose of any shares of Stock held by the Participant
(other than those included in the registration) for a period specified by the
representative of the underwriters not to exceed 180 days following the
effective date of the registration statement of the Company filed under the Act;
provided, however, that (a) such agreement shall apply only to the Company's
underwritten public offering of shares of Stock of the Company or the
development of a public trading market for the shares of Stock of the Company;
and (b) all officers and Directors of the Company and holders of at least one
percent (1%) of the Company's voting securities at the time of such initial
public offering enter into similar agreements.

     The obligations described in this section shall not apply to a registration
solely to employee benefit plans on Form S-8 or similar forms that may be
promulgated in the future, or a registration relating solely to a Commission
Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the
future. The Company may impose stop-transfer instructions with respect to the
shares of Stock (or other securities) subject to


                                       17
<PAGE>

the foregoing restriction until the end of said 180-day period.

                      SECTION 13: AMENDMENT AND TERMINATION

     13.1 AMENDMENT OF THE PLAN. The Board of Directors may at any time and from
time to time alter, amend, suspend or terminate the Plan or any part thereof as
it may deem proper, except that no such action shall diminish or impair the
rights under an Award previously granted. Unless the shareholders of the Company
shall have given their approval, the total number of shares which may be issued
under the Plan shall not be increased, except as provided in Section 5.4, and no
amendment shall be made which reduces the price at which the Stock may be
offered upon the exercise of Options under the Plan below the minimum required
by Section 7.2(a), except as provided in Section 5.4, or which materially
modifies the requirements as to eligibility for participation in the Plan.
Subject to the terms and conditions of the Plan, the Board of Directors may
modify, extend or renew outstanding Awards granted under the Plan, or accept the
surrender of outstanding Awards in substitution therefor, except that no such
action shall diminish or impair the rights under an Award previously granted
without the consent of the Participant.

     13.2 TERMINATION OF THE PLAN. This Plan shall not have any fixed
Termination Date. The Board of Directors may at any time suspend or terminate
the Plan. No such suspension or termination shall diminish or impair the rights
under an Award previously granted without the consent of the Participant.
Notwithstanding the foregoing, no Incentive Stock Options may be granted any
time after ten years after the adoption by the Board of any amendments to the
Plan that constitutes the adoption of a new plan for purposes of Code Section
422.

                         SECTION 14: GENERAL PROVISIONS

     14.1 NO EMPLOYMENT RIGHTS. Nothing contained in this Plan or in any Award
granted under the Plan shall confer upon any Participant any right with respect
to the continuation of such Participant's Continuous Service by the Company or
any Subsidiary or interfere in any way with the right of the Company or any
Subsidiary, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such Continuous Service or to increase or
decrease the compensation of the Participant from the rate in existence at the
time of the grant of the Award.

     14.2 OTHER EMPLOYEE BENEFITS. Unless so provided by the applicable plan,
the amount of compensation deemed to be received by a Participant as a result of
the exercise of an Award shall not constitute earnings with respect to which any
other employee benefits of the person are determined, including without
limitation benefits under any pension, profit sharing, life insurance, or
disability or other salary continuation plan.

     14.3 CONFIDENTIALITY OF INFORMATION. Information regarding the grant of
Awards under this Plan is confidential and may not be shared with anyone other
than the Participant's immediate family and personal financial advisor and other
person(s) designated by Participant by power of attorney or assignment.

     14.4 SEVERABILITY. If any provision of this Plan is held by any court or
governmental authority to be illegal or invalid for any reason, such illegality
or invalidity


                                       18
<PAGE>

shall not affect the remaining provisions. Instead, each provision held to be
illegal or invalid shall, if possible, be construed and enforced in a manner
that will give effect to the terms of such provision to the fullest extent
possible while remaining legal and valid.

     14.5 GOVERNING LAW AND VENUE. This Plan, and all Awards granted under this
Plan, shall be construed and shall take effect in accordance with the laws of
the State of New Mexico without regard to conflicts of laws principles.
Resolution of any disputes under this Agreement shall only be held in courts in
Santa Fe, New Mexico.

     14.6 USE OF PROCEEDS. Any cash proceeds received by the Company from the
sale of shares of Stock under the Plan shall be used for general corporate
purposes.




                                      * * *

     Adopted as of the Effective Date as first set forth above.

                                             FIRST STATE BANCORPORATION


                                             By:    /s/ LEONARD J. DELAYO, JR.
                                                    ----------------------------
                                             Name:  Leonard J. DeLayo, Jr.
                                                    ----------------------------
                                             Title: Chairman of the Board
                                                    ----------------------------


                                       19

</TEXT>
</DOCUMENT>
