VIKING SYSTEMS INC
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>ex10-1_0404.txt
<TEXT>
Exhibit 10.1
Form 8-K
Viking Systems, Inc.
File No. 000-49636
                              VIKING SYSTEMS, INC.
                              STOCK INCENTIVE PLAN

                                 March 31, 2004

Section 1. Purpose.

     The purposes of the Viking Systems,  Inc. Stock Incentive Plan (the "Plan")
are to: (i) aid in maintaining and developing key employees  capable of assuring
the future success of Viking Systems,  Inc. (the  "Company"),  and to offer such
personnel  incentives  to put  forth  maximum  efforts  for the  success  of the
Company's  business;  and (ii) to afford such key  employees an  opportunity  to
acquire a proprietary interest in the Company,  thereby aligning their interests
with the interests of the Company's shareholders.

Section 2. Definitions.

     As used in the Plan, the following  terms shall have the meanings set forth
below:

     (a)  "Affiliate"  shall mean (i) any entity  that,  directly or  indirectly
through one or more  intermediaries,  is  controlled by the Company and (ii) any
entity in which the Company has a significant equity interest,  as determined by
the Committee.

     (b) "Award" shall mean any Option,  Stock  Appreciation  Right,  Restricted
Stock,  Restricted Stock Unit,  Dividend Equivalent or Performance Award granted
under the Plan.

     (c) "Award Agreement" shall mean any written  agreement,  contract or other
instrument or document evidencing any Award granted under the Plan.

     (d) "Code"  shall mean the Internal  Revenue Code of 1986,  as amended from
time to time, and any regulations promulgated thereunder.

     (e)  "Committee"  shall  mean a  committee  of the  Board  that  the  Board
designates to administer the Plan. The Committee  shall consist of not less than
two directors,  each of whom shall qualify as a "non-employee  director"  within
the meaning of Rule 16b-3 ("Rule  16b-3")  under the 1934 Act, or any  successor
provisions thereto,  as an "outside director" under Section  162(m)(4)(C) of the
Internal  Revenue  Code of 1986,  as  amended  (the  "Code"),  or any  successor
provisions  thereto and as an "independent"  director pursuant to the definition
of independence in the listing requirements of the principal national securities
exchange,  national securities  association or over-the-counter  market on which
the Common Stock is traded, if any. If at any time the Committee shall not be in
existence,  then the  members  of the  Board  that do  qualify  as  non-employee



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directors, outside directors and independent directors shall administer the Plan
and shall be deemed to be the Committee for purposes of the Plan.

     (f) "Dividend  Equivalent"  shall mean any right granted under Section 6(e)
of the Plan.

     (g) "Fair  Market  Value"  means the fair market  value of the Common Stock
determined by such methods or procedures  as shall be  established  from time to
time by the Committee;  provided,  however,  that so long as the Common Stock is
traded on the Nasdaq  National  Market,  the Nasdaq  Smallcap  Market or another
over-the-counter  market,  the Fair Market Value shall be the average of the bid
and asked prices of a share of Common Stock in the  applicable  over-the-counter
market on the  specified  date,  as  reported  by the  National  Association  of
Securities  Dealers (or if no sales  occurred on such date,  the last  preceding
date on which sales occurred);  provided,  however, that if the principal market
for the Common  Stock is then a national  securities  exchange,  the Fair Market
Value shall be the average of the high and low prices of a share of Common Stock
on the principal  securities exchange on which the Common Stock is traded on the
specified date (or if no sales occurred on such date, the last preceding date on
which sales occurred).

     (h)  "Incentive  Stock Option"  shall mean an option  granted under Section
6(a) of the Plan that is intended to meet the requirements of Section 422 of the
Code or any successor provision thereto.

     (i) "Key Employee"  shall mean any employee of the Company or any Affiliate
who the Committee determines to be a key employee.

     (j) "Non-Qualified Stock Option" shall mean an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock Option.

     (k) "Option" shall mean an Incentive Stock Option or a Non-Qualified  Stock
Option.

     (m) "Participant" shall mean either a Key Employee designated to be granted
an Award under the Plan.

     (n) "Performance  Award" shall mean any right granted under Section 6(d) of
the Plan.

     (o)  "Person"  shall  mean  any   individual,   corporation,   partnership,
association or trust.

     (p)  "Restricted  Stock" shall mean any Share granted under Section 6(c) of
the Plan.

     (q) "Restricted  Stock Unit" shall mean any unit granted under Section 6(c)
of the Plan evidencing the right to receive a Share at some future date.

     (r) "Rule 16b-3" shall mean Rule 16b-3  promulgated  by the  Securities and
Exchange  Commission under the Securities  Exchange Act of 1934, as amended,  or
any successor rule or regulation thereto.

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     (s) "Shares"  shall mean shares of Common  Stock,  $.001 par value,  of the
Company or such other  securities  or property  as may become  subject to Awards
pursuant to an adjustment made under Section 4(c) of the Plan.

     (t) "Stock  Appreciation  Right" shall mean any right granted under Section
6(b) of the Plan.

Section 3. Administration.

     (a) Power and Authority of the Committee. The Plan shall be administered by
the  Committee.  Subject  to the  terms  of the  Plan and  applicable  law,  the
Committee shall have full power and authority to:

          (i) designate Participants;

          (ii)  determine  the type or types of  Awards  to be  granted  to each
     Participant under the Plan;

          (iii) determine the number of Shares to be covered by (or with respect
     to which payments are to be calculated in connection with) Awards;

          (iv)  determine  the  terms  and  conditions  of any  Award  or  Award
     Agreement;

          (v) amend the terms and conditions of any Award or Award Agreement and
     accelerate  the  exercisability  of  Options  or the lapse of  restrictions
     relating to Restricted Stock or Restricted Stock Units;

          (vi) determine  whether,  to what extent and under what  circumstances
     Awards may be exercised in cash, Shares, other securities,  other Awards or
     other property, or canceled, forfeited or suspended;

          (vii) determine  whether,  to what extent and under what circumstances
     cash or Shares  payable  with  respect to an Award  under the Plan shall be
     deferred either  automatically  or at the election of the holder thereof or
     the Committee;

          (viii)  interpret  and  administer  the  Plan  and any  instrument  or
     agreement relating to, or Award made under, the Plan;

          (ix) establish, amend, suspend or waive such rules and regulations and
     appoint  such  agents  as  it  shall  deem   appropriate   for  the  proper
     administration of the Plan; and

          (x) make any other  determination  and take any other  action that the
     Committee deems necessary or desirable for the  administration of the Plan.
     Unless  otherwise   expressly  provided  in  the  Plan,  all  designations,
     determinations,  interpretations  and other decisions under or with respect
     to the  Plan or any  Award  shall be  within  the  sole  discretion  of the
     Committee,  may be made at any time  and  shall be  final,  conclusive  and

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     binding upon any  Participant,  any holder or  beneficiary of any Award and
     any employee of the Company or any Affiliate.

     (b)  Meetings  of the  Committee.  The  Committee  shall  select one of its
members as its  chairman and shall hold its meetings at such times and places as
the  Committee  may  determine.  A majority  of the  Committee's  members  shall
constitute a quorum.  All  determinations  of the Committee shall be made by not
less than a majority of its members.  Any decision or  determination  reduced to
writing  and  signed  by all of the  members  of the  Committee  shall  be fully
effective as if it had been made by a majority vote at a meeting duly called and
held.  The  Committee  may  appoint  a  secretary  and may make  such  rules and
regulations for the conduct of its business as it shall deem advisable.

Section 4. Shares Available for Awards.

     (a) Shares  Available.  Subject to  adjustment as provided in Section 4(c),
the number of Shares  available  for the  issuance of shares  under  outstanding
Awards and the granting of future Awards under the Plan shall be 75,000,000.  If
any Shares covered by an Award or to which an Award relates are not purchased or
are  forfeited,  or if an Award  otherwise  terminates  without  delivery of any
Shares or cash  payments  to be received  thereunder,  then the number of Shares
counted  against the aggregate  number of Shares  available  under the Plan with
respect to such  Award,  to the extent of any such  forfeiture  or  termination,
shall again be available for granting  Awards under the Plan.  In addition,  any
Shares that are used by a Participant as full or partial  payment to the Company
of the  purchase  price of  Shares  acquired  upon  exercise  of an Option or to
satisfy  applicable tax withholding  requirements  (including  social  insurance
requirements)  upon the exercise or vesting of an Award shall again be available
for granting Awards.

     (b) Accounting for Awards. For purposes of this Section 4,

          (i) if an Award  entitles  the holder  thereof to receive or  purchase
     Shares,  the number of Shares  covered by such Award or to which such Award
     relates  shall be counted on the date of grant of such  Award  against  the
     aggregate  number of Shares  available for granting  Awards under the Plan;
     and

          (ii) if an Award  entitles the holder to receive cash payments but the
     amount of such payments are  denominated in or based on a number of Shares,
     such  number of Shares  shall be counted on the date of grant of such Award
     against the aggregate  number of Shares available for granting Awards under
     the Plan

     provided, however, that Awards that operate in tandem with (whether granted
     simultaneously  with or at a different time from),  or that are substituted
     for, other Awards may be counted or not counted under procedures adopted by
     the Committee in order to avoid double counting.

     (c)  Adjustments.  In the event that the Committee shall determine that any
dividend  or other  distribution  (whether  in the form of cash,  Shares,  other
securities  or other  property),  recapitalization,  stock split,  reverse stock
split, reorganization,  merger, consolidation,  split-up, spin-off, combination,

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repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase  Shares or other  securities of the Company
or other similar corporate  transaction or event affects the Shares such that an
adjustment is determined by the Committee to be  appropriate in order to prevent
dilution or  enlargement  of the benefits or potential  benefits  intended to be
made available  under the Plan,  then the Committee  shall, in such manner as it
may deem  equitable,  adjust any or all of (i) the number and type of Shares (or
securities  or other  property)  which  thereafter  may be made the  subject  of
Awards,  (ii) the number and type of Shares (or  securities  or other  property)
subject to  outstanding  Awards and (iii) the exercise price with respect to any
Award;  provided,  however, that the number of Shares covered by any Award or to
which such Award relates shall always be a whole number.

Section 5. Eligibility.

     Any Key Employee,  including any Key Employee who is an officer or director
of  the  Company  or  any  Affiliate,  shall  be  eligible  to be  designated  a
Participant;  provided,  however,  that an  Incentive  Stock Option shall not be
granted  to an  employee  of an  Affiliate  unless  such  Affiliate  is  also  a
"subsidiary  corporation" of the Company within the meaning of Section 424(f) of
the Code.

Section 6. Awards.

     (a)  Options.  The  Committee  is hereby  authorized  to grant  Options  to
Participants  with the following  terms and conditions and with such  additional
terms and  conditions  not  inconsistent  with the provisions of the Plan as the
Committee shall determine:

          (i) Exercise Price. The purchase price per Share  purchasable under an
     Option shall be determined by the Committee;  provided,  however, that such
     purchase  price  shall  not be less than the Fair  Market  Value of a Share
     (Rounded down to the nearest whole cent).

          (ii)  Option  Term.  The  term of each  Option  shall  be fixed by the
     Committee,  but such term  shall not exceed 10 years from the date on which
     such Option is granted.

          (iii) Time and Method of Exercise.  The Committee  shall determine the
     time or times at which an Option may be  exercised  in whole or in part and
     the method or methods by which, and the form or forms  (including,  without
     limitation, cash, Shares, other securities, other Awards or other property,
     or any combination thereof, having a Fair Market Value on the exercise date
     equal to the  relevant  exercise  price) in which  payment of the  exercise
     price with respect thereto may be made or deemed to have been made

     (b) Stock Appreciation  Rights. The Committee is hereby authorized to grant
Stock Appreciation  Rights to Participants  subject to the terms of the Plan and
any applicable Award  Agreement.  A Stock  Appreciation  Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the  excess of (i) the Fair  Market  Value of one Share on the date of  exercise

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(or, if the Committee shall so determine,  at any time during a specified period
before or after  the date of  exercise)  over (ii) the grant  price of the Stock
Appreciation Right as specified by the Committee,  which price shall not be less
than the exercise price for an Option as described in Section  6(a)(i) hereof on
the date of grant of the Stock Appreciation  Right.  Subject to the terms of the
Plan and any  applicable  Award  Agreement,  the grant price,  term,  methods of
exercise,  dates of  exercise,  methods of  settlement  and any other  terms and
conditions  of any  Stock  Appreciation  Right  shall  be as  determined  by the
Committee.  The Committee  may impose such  conditions  or  restrictions  on the
exercise of any Stock Appreciation Right as it may deem appropriate.

     (c) Restricted  Stock and Restricted  Stock Units.  The Committee is hereby
authorized to grant Awards of  Restricted  Stock and  Restricted  Stock Units to
Participants  with the following  terms and conditions and with such  additional
terms and  conditions  not  inconsistent  with the provisions of the Plan as the
Committee shall determine:

          (i)  Restrictions.  Shares of Restricted  Stock and  Restricted  Stock
     Units shall be subject to such  restrictions  as the  Committee  may impose
     (including, without limitation, any limitation on the right to vote a Share
     of Restricted  Stock or the right to receive any dividend or other right or
     property with respect thereto),  which restrictions may lapse separately or
     in combination at such time or times, in such  installments or otherwise as
     the Committee may deem appropriate.

          (ii) Stock  Certificates.  Any Restricted Stock granted under the Plan
     shall be evidenced by issuance of a stock certificate or certificates. Such
     certificate  or  certificates  shall  be  registered  in  the  name  of the
     Participant  and shall bear an appropriate  legend  referring to the terms,
     conditions and restrictions applicable to such Restricted Stock.

          (iii) Forfeiture;  Delivery of Shares.  Except as otherwise determined
     by the Committee,  upon  termination  of employment or upon  resignation or
     removal as an Outside Director (as determined under criteria established by
     the Committee)  during the  applicable  restriction  period,  all Shares of
     Restricted  Stock and all  Restricted  Stock Units at such time  subject to
     restriction  shall be forfeited and  reacquired  by the Company;  provided,
     however,  that the  Committee  may, when it finds that a waiver would be in
     the  best  interest  of the  Company,  waive in whole or in part any or all
     remaining  restrictions  with  respect  to  Shares of  Restricted  Stock or
     Restricted Stock Units.  Shares  representing  Restricted Stock that are no
     longer  subject to  restrictions  shall be delivered to the holder  thereof
     promptly after the applicable restrictions lapse or are waived. In the case
     of  Restricted  Stock  Units,  no  Shares  shall be issued at the time such
     Awards  are  granted.  Upon the  lapse or waiver  of  restrictions  and the
     restricted  period relating to Restricted  Stock Units evidencing the right
     to receive Shares, such Shares shall be issued and delivered to the holders
     of the Restricted Stock Units.

          (iv) Limit on  Restricted  Stock and  Restricted  Stock Units  Awards.
     Grants of Restricted  Stock and Restricted  Stock Units shall be subject to
     the limitations set forth in Section 6(f) hereof.

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<PAGE>

     (d)  Performance  Awards.  The  Committee  is  hereby  authorized  to grant
Performance  Awards  to  Participants  subject  to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan (i) shall
be granted  and payable in Shares  (including,  without  limitation,  Restricted
Stock) and (ii) shall confer on the holder  thereof the right to receive  Shares
upon the achievement of such performance  goals during such performance  periods
as the  Committee  shall  establish.  Subject  to the  terms of the Plan and any
applicable  Award  Agreement,  the  performance  goals to be achieved during any
performance  period,  the length of any  performance  period,  the amount of any
Performance  Award granted and the number of shares to be issued pursuant to any
Performance  Award shall be determined by the  Committee.  Grants of Performance
Awards shall be subject to the limitations set forth in Section 6(f) hereof.

     (e) Dividend  Equivalents.  The Committee is hereby  authorized to grant to
Participants  Dividend  Equivalents  under  which  such  Participants  who  hold
Restricted  Stock  Units or  Performance  Awards  shall be  entitled  to receive
payments (in cash or Shares,  as determined in the  discretion of the Committee)
equivalent  to the amount of cash  dividends  paid by the  Company to holders of
Shares.  Subject to the terms of the Plan and any  applicable  Award  Agreement,
such Dividend  Equivalents  may have such terms and  conditions as the Committee
shall determine.

     (f)   General.

          (i) No Cash Consideration for Awards.  Except as otherwise  determined
     by the Committee,  Awards shall be granted for no cash consideration or for
     such minimal cash consideration as may be required by applicable law.

          (ii) Awards May Be Granted Separately or Together.  Awards may, in the
     discretion of the Committee,  be granted either alone or in addition to, in
     tandem with or in  substitution  for any other  Award or any award  granted
     under any plan of the Company or any Affiliate other than the Plan.  Awards
     granted in addition to or in tandem with other  Awards or in addition to or
     in tandem with awards  granted  under any such other plan of the Company or
     any Affiliate  may be granted  either at the same time as or at a different
     time from the grant of such other Awards or awards.

          (iii) Forms of Payment Under Awards.  Subject to the terms of the Plan
     and of any applicable Award  Agreement,  payments to be made by the Company
     or an Affiliate upon the grant, exercise or payment of an Award may be made
     in Shares,  cash or a combination thereof as the Committee shall determine,
     and may be made in a  single  payment,  in  installments  or on a  deferred
     basis, in each case in accordance with rules and procedures  established by
     the Committee.  Such rules and procedures may include,  without limitation,
     provisions  for  the  payment  or  crediting  of  reasonable   interest  on
     installments or deferred payments.

          (iv)  Limits On  Transfer  of Awards.  No Award and no right under any
     such Award shall be assignable,  alienable,  salable or  transferable  by a

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     Participant  otherwise  than  by  will  or  by  the  laws  of  descent  and
     distribution;  provided,  however,  that a  Participant  may, in the manner
     established by the Committee:


               (A)  designate a  beneficiary  or  beneficiaries  to exercise the
          rights of the Participant and receive any property  distributable with
          respect to any Award upon the death of the Participant, or

               (B) transfer a Non-Qualified  Stock Option to any "family member"
          (as such term is used in Form S-8 under the Securities Act of 1933) of
          such Participant, provided that (1) there is no consideration for such
          transfer or such transfer is effected pursuant to a domestic relations
          order  in  settlement  of  marital  property   rights,   and  (2)  the
          Non-Qualified  Stock Options held by such  transferees  continue to be
          subject to the same terms and conditions  (including  restrictions  or
          subsequent  transfers) as were applicable to such Non-Qualified  Stock
          Options immediately prior to their transfer.

     Each  Award or right  under  any  Award  shall be  exercisable  during  the
     Participant's lifetime only by the Participant, by a transferee pursuant to
     a  transfer  permitted  by  clause  (B) of this  Section  6(g)(iv),  or, if
     permissible under applicable law, by the Participant's or such transferee's
     guardian  or legal  representative.  No Award or right under any such Award
     may be  pledged,  alienated,  attached  or  otherwise  encumbered,  and any
     purported pledge,  alienation,  attachment or encumbrance  thereof shall be
     void and unenforceable against the Company or any Affiliate.

          (v) Term of Awards. Subject to the terms of the Plan, the term of each
     Award shall be for such period as may be determined by the Committee.

          (vi) Rule 16b-3 Six-Month Limitations. To the extent required in order
     to comply with Rule 16b-3 only, any equity security offered pursuant to the
     Plan may not be sold for at least six months after  acquisition,  except in
     the  case of  death  or  disability,  and any  derivative  security  issued
     pursuant  to the Plan s all not b e  exercisable  for at 1east six  months,
     except in case of death or disability. Terms used in the preceding sentence
     shall,  for the purposes of such sentence only, have the meanings,  if any,
     assigned or attributed to them under Rule l6b-3.

          (vii) Restrictions;  Securities Exchange Listing. All certificates for
     Shares  delivered  under the Plan  pursuant  to any  Award or the  exercise
     thereof  shall  be  subject  to  such  stop   transfer   orders  and  other
     restrictions  as the  Committee  may deem  advisable  under the Plan or the
     rules,  regulations  and other  requirements of the Securities and Exchange
     Commission and any applicable  federal,  state or foreign  securities laws,
     and the  Committee  may cause a legend or  legends to be placed on any such
     certificates to make  appropriate  reference to such  restrictions.  If the
     Shares  are  traded on a  securities  exchange,  the  Company  shall not be

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<PAGE>


     required  to deliver any Shares  covered by an Award  unless and until such
     Shares have been admitted for trading on such securities exchange.

Section 7. Amendment and Termination; Adjustments.

     Except to the extent  prohibited  by  applicable  law and unless  otherwise
expressly provided in an Award Agreement or in the Plan:

     (a)  Amendments  to the Plan.  The Board of  Directors  of the  Company may
amend, alter,  suspend,  discontinue or terminate the Plan;  provided,  however,
that,  notwithstanding  any other provision of the Plan or any Award  Agreement,
without the  approval of the  shareholders  of the Company,  no such  amendment,
alteration, suspension, discontinuation or termination shall be made that:

          (i) absent such approval, would cause Rule 16b-3 to become unavailable
     with respect to the Plan;

          (ii)  requires the approval of the  Company's  shareholders  under any
     rules or  regulations of the National  Association  of Securities  Dealers,
     Inc. or any securities exchange that are applicable to the Company; or

          (iii)  requires the approval of the Company's  shareholders  under the
     Code in order to permit  Incentive  Stock  Options to be granted  under the
     Plan.

     (b)  Amendments to Awards.  The  Committee  may waive any  conditions of or
rights  of  the  Company  under  any   outstanding   Award,   prospectively   or
retroactively, subject to Section 7(c) of the Plan. The Committee may not amend,
alter, suspend, discontinue or terminate any outstanding Award, prospectively or
retroactively,  without the consent of the  Participant or holder or beneficiary
thereof.

     (c)  Prohibition on Option  Repricing.  The Committee  shall not reduce the
exercise  price  of  any  outstanding   Option,   whether   through   amendment,
cancellation  or replacement  grants,  or any other means,  without  shareholder
approval.

     (d) Correction of Defects, Omissions and Inconsistencies. The Committee may
correct any defect,  supply any omission or reconcile any  inconsistency  in the
Plan or any Award in the manner and to the  extent it shall  deem  desirable  to
carry the Plan into effect.

Section 8. Income Tax Withholding; Tax Bonuses.

     (a) Withholding.  In order to comply with all applicable federal,  state or
foreign income tax or social  insurance  contribution  laws or regulations,  the
Company  may  take  such  action  as it deems  appropriate  to  ensure  that all
applicable  federal,  state or  foreign  payroll,  withholding,  income,  social
insurance  contributions  or  other  taxes,  which  are the  sole  and  absolute
responsibility   of  a   Participant,   are  withheld  or  collected  from  such

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Participant.  In order to assist a Participant in paying all federal,  state and
foreign  taxes to be withheld or collected  upon  exercise or receipt of (or the
lapse of restrictions  relating to) an Award,  the Committee,  in its discretion
and subject to such additional  terms and conditions as it may adopt, may permit
the  Participant  to satisfy  such tax  obligation  by (i)  electing to have the
Company withhold a portion of the Shares otherwise to be delivered upon exercise
or receipt of (or the lapse of restrictions  relating to) such Award with a Fair
Market Value equal to the amount of such taxes or (ii) delivering to the Company
Shares other than Shares  issuable  upon exercise or receipt of (or the lapse of
restrictions  relating  to) such Award  with a Fair  Market  Value  equal to the
amount of such taxes.  The election,  if any, must be made on or before the date
that the amount of tax to be withheld is determined.

     (b)  Tax  Bonuses.  The  Committee,  in  its  discretion,  shall  have  the
authority,  at the time of grant of any  Award  under  this  Plan or at any time
thereafter to approve  bonuses to designated  Participants to be paid upon their
exercise  or receipt  of (or the lapse of  restrictions  relating  to) Awards in
order to provide  funds to pay all or a portion of  federal,  state and  foreign
taxes  due as a  result  of such  exercise  or  receipt  (or the  lapse  of such
restrictions).  The  Committee  shall have full  authority in its  discretion to
determine the amount of any such tax bonus.

Section 9. General Provisions.

     (a) No Rights to Awards. No Key Employee, Participant or other Person shall
have  any  claim to be  granted  any  Award  under  the  Plan,  and  there is no
obligation for uniformity of treatment of Key Employees, Participants or holders
or  beneficiaries  of Awards under the Plan.  The terms and conditions of Awards
need not be the same with respect to different Participants.

     (b)  Delegation.  The Committee may delegate to one or more officers of the
Company or any affiliate or a committee of such officers the authority,  subject
to such terms and limitations as the Committee shall determine,  to grant Awards
to Key  Employees  who are not officers or directors of the Company for purposes
of Section 16 of the Securities Exchange Act of 1934, as amended.

     (c) Terms of Awards.  The specific  terms of an Award  pursuant to the Plan
shall be set forth in an Award Agreement duly executed (by manual,  facsimile or
electronic signature) on behalf of the Company.

     (d) No Limit on Other Compensation  Arrangements.  Nothing contained in the
Plan shall prevent the Company or any  Affiliate  from adopting or continuing in
effect other or additional compensation arrangements,  and such arrangements may
be either generally applicable or applicable only in specific cases.

     (e) No Right to Employment or Directorship. The grant of an Award shall not
be construed as giving a  Participant  the right to be retained in the employ of
the Company or any  Affiliate or any right to remain as a member of the Board of
Directors,  as the case may be. In addition,  the Company or an Affiliate may at
any time dismiss a Participant from employment (or remove an Outside  Director),

                                       10

<PAGE>

free from any liability or any claim under the Plan, unless otherwise  expressly
provided in the Plan or in any Award Agreement.

     (f) Governing  Law. The validity,  construction  and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the laws of the State of Nevada.

     (g)  Severability.  If any provision of the Plan or any Award is or becomes
or is deemed to be invalid,  illegal or  unenforceable  in any  jurisdiction  or
would  disqualify  the Plan or any Award under any law deemed  applicable by the
Committee,  such  provision  shall be construed or deemed  amended to conform to
applicable laws, or if it cannot be so construed or deemed amended  without,  in
the determination of the Committee, materially altering the purpose or intent of
the Plan or the Award,  such provision shall be stricken as to such jurisdiction
or Award,  and the  remainder of the Plan or any such Award shall remain in full
force and effect.

     (h) No Trust or Fund  Created.  Neither the Plan nor any Award shall create
or be  construed  to create a trust or separate  fund of any kind or a fiduciary
relationship between the Company or any Affiliate and a Participant or any other
Person.  To the extent that any Person acquires a right to receive payments from
the  Company or any  Affiliate  pursuant  to an Award,  such  right  shall be no
greater than the right of any unsecured  general  creditor of the Company or any
Affiliate.

     (i) No Fractional Shares. No fractional Shares shall be issued or delivered
pursuant to the Plan or any Award,  and the Committee  shall  determine  whether
cash shall be paid in lieu of any fractional  Shares or whether such  fractional
Shares  or any  rights  thereto  shall  be  canceled,  terminated  or  otherwise
eliminated.

     (j)  Headings.  Headings are given to the Sections and  subsections  of the
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or  interpretation of
the Plan or any provision thereof.

Section 10. Effective Date of the Plan.

     The  Plan  shall  be  effective  as of  the  date  of its  approval  by the
shareholders of the Company ("Effective Date").

Section 11. Term of the Plan.

     Awards  shall be  granted  under the Plan  during a period  commencing  the
Effective Date,  through March 31, 2014.  However,  unless  otherwise  expressly
provided in the Plan or in an applicable Award Agreement,  any Award theretofore
granted may extend beyond the ending date of the period  stated  above,  and the
authority of the Committee  provided for hereunder  with respect to the Plan and
any Awards,  and the authority of the Board of Directors of the Company to amend
the Plan, shall extend beyond the end of such period.

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</TEXT>
</DOCUMENT>
