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                                                                    EXHIBIT 10.3

                              IONICS, INCORPORATED

                 AMENDED AND RESTATED 1997 STOCK INCENTIVE PLAN

    1. Purpose. The purpose of this Plan is to enable officers and other key
employees of, and consultants to, Ionics, Incorporated (the "Company") and any
present or future parent or subsidiary of the Company (collectively, "Related
Corporations") to (i) own shares of Stock in the Company, (ii) participate in
the stockholder value which has been created, (iii) have a mutuality of interest
with other stockholders and (iv) enable the Company to attract, retain and
motivate key employees and consultants of particular merit. As used herein, the
terms "parent" and "subsidiary" mean "parent corporation" and "subsidiary
corporation," respectively, as those terms are defined in Section 424 of the
Code.

    2. Definitions. For the purposes of the Plan, the following terms shall have
the meanings set forth below:

         (a) Award means the grant or sale pursuant to the Plan of any
    Restricted Stock Awards, Stock Options or Long-Term Performance Awards.

         (b) Board means the Board of Directors of the Company.

         (c) Code means the Internal Revenue Code of 1986, as amended from time
    to time, or any statute successor thereto, and any regulations issued from
    time to time thereunder.

         (d) Company means Ionics, Incorporated, a corporation organized under
    the laws of the Commonwealth of Massachusetts (or any successor
    corporation).

         (e) Disability means "permanent and total disability" as defined under
    Section 22(e)(3) of the Code or any successor statute.

         (f) Effective Date means the date that the Plan is approved by both the
    Board of Directors of the Company and the stockholders of the Company, and
    if not approved on the same day, the date of the last approval.

         (g) Fair Market Value means, as of any given date, the last reported
    sales price of the Stock as reported in The Wall Street Journal for such
    date, or if no such sale is reported on the last preceding trade date to the
    sales date, or if the Stock is not publicly traded on or as of such date,
    the fair market value of the Stock as determined by the Committee in good
    faith based on the available facts and circumstances at the time.

         (h) Incentive Stock Option means any Stock Option intended to be and
    designated as an "Incentive Stock Option" within the meaning of Section 422
    of the Code.

         (i) Long-Term Performance Award means an award made pursuant to Section
    7 below that is payable in cash and/or Stock in accordance with the terms of
    the grant, based on Company, business unit and/or individual performance
    over a period of at least one year.

         (j) Non-Qualified Stock Option means any Stock Option that is not an
    Incentive Stock Option.

         (k) Participant means an employee or consultant to whom an Award is
    granted pursuant to the Plan.

         (l) Plan means the Ionics, Incorporated 1997 Stock Incentive Plan, as
    set forth herein and as it may be amended from time to time.

         (m) Restricted Stock Award means an award made pursuant to Section 8
    below that is payable in Stock in accordance with and subject to the terms
    of the grant.

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         (n) Retirement means a termination of employment, for reasons other
    than death, which satisfies the requirements for normal, early, late or
    disability retirement in accordance with the Ionics, Incorporated Retirement
    Plan or any successor plan.

         (o) Stock means the common stock, $1.00 par value per share, of the
    Company.

         (p) Stock Option or Option means any option to purchase shares of Stock
    granted pursuant to Section 6 below.

    In addition the term CHANGE IN CONTROL shall have meaning set forth in
Section 9.2.

    3. Administration

         (a) Board or Committee Administration. The Plan shall be administered
    by the Board or, subject to paragraph 3(d) (relating to compliance with
    Section 162(m) of the Code), by a committee appointed by the Board (the
    "Committee"), which shall initially be the Compensation Committee of the
    Board. Hereinafter, all references in this Plan to the "Committee" shall
    mean the Board if no Committee has been appointed. Subject to ratification
    of the grant or authorization of each Award by the Board (if so required by
    applicable state law), and subject to the terms of the Plan, the Committee
    shall have the authority to (i) determine to whom (from among the class of
    employees eligible under Section 5 to receive Incentive Stock Options)
    Incentive Stock Options shall be granted, and to whom (from among the class
    of individuals and entities eligible under Section 5 to receive
    Non-Qualified Stock Options, Restricted Stock Awards and Long-Term
    Performance Awards) Non-Qualified Stock Options, Restricted Stock Awards and
    Long-Term Performance Awards may be granted, (ii) determine the time or
    times at which Awards shall be granted; (iii) determine the purchase price
    of shares subject to each Option or Restricted Stock Award, which prices
    shall not be less than the minimum price specified in Section 6.2(a) or
    Section 8, as the case may be; (iv) determine whether each Option granted
    shall be an Incentive Stock Option or a Non-Qualified Stock Option; (v)
    determine (subject to Sections 6.2(b) and 6.2(c)) the time or times when
    each Option shall become exercisable and the duration of the exercise
    period; (vi) extend the period during which outstanding Options may be
    exercised; (vii) determine whether restrictions such as repurchase options
    are to be imposed on shares subject to Awards and the nature of such
    restrictions, if any; (viii) determine the Restriction Period (as set forth
    in Section 8.1(a)); and (viii) interpret the Plan and prescribe and rescind
    rules and regulations relating to it. If the Committee determines to issue a
    Non-Qualified Stock Option, it shall take whatever actions it deems
    necessary, under Section 422 of the Code and the regulations promulgated
    thereunder, to ensure that such Non-Qualified Stock Option is not treated as
    an Incentive Stock Option. The interpretation and construction by the
    Committee of any provisions of the Plan or of any Award granted under it
    shall be final unless otherwise determined by the Board. The Committee may
    from time to time adopt such rules and regulations for carrying out the Plan
    as it may deem advisable. No member of the Board or the Committee shall be
    liable for any action or determination made in good faith with respect to
    the Plan or any Award granted under it.

         (b) Committee Actions. The Committee may select one of its members as
    its chairman, and shall hold meetings at such time and places as it may
    determine. A majority of the Committee shall constitute a quorum and acts of
    a majority of the members of the Committee at a meeting at which a quorum is
    present, or acts reduced to or approved in writing by all the members of the
    Committee (if consistent with applicable state law), shall be the valid acts
    of the Committee. From time to time the Board may increase the size of the
    Committee and appoint additional members thereof, remove members (with or
    without cause) and appoint new members in substitution therefor, fill
    vacancies however caused, or remove all members of the Committee and
    thereafter directly administer the Plan.

         (c) Grant of Awards to Board Members. Awards may be granted to members
    of the Board who are otherwise eligible to receive Awards under the Plan.
    All grants of Awards to members of the Board shall in all respects be made
    in accordance with the provisions of this Plan applicable to other eligible
    persons. Members of the Board who either (i) are eligible to receive grants
    of Awards pursuant to the

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    Plan or (ii) have been granted Awards may vote on any matters affecting the
    administration of the Plan or the grant of any Awards pursuant to the Plan,
    except that no such member shall act upon the granting to himself or herself
    of Awards, but any such member may be counted in determining the existence
    of a quorum at any meeting of the Board during which action is taken with
    respect to the granting to such member of Awards.

         (d) Performance-Based Compensation. The Board, in its discretion, may
    take such action as may be necessary to ensure that Stock Options and
    Restricted Stock Awards granted under the Plan qualify as "qualified
    performance-based compensation" within the meaning of Section 162(m) of the
    Code and applicable regulations promulgated thereunder ("Performance-Based
    Compensation"). Such action may include, in the Board's discretion, some or
    all of the following: (i) if the Board determines that Stock Options and
    certain Restricted Stock Awards granted under the Plan generally shall
    constitute Performance-Based Compensation, the Plan shall be administered,
    to the extent required for such Stock Options and certain Restricted Stock
    Awards to constitute Performance-Based Compensation, by a Committee
    consisting solely of two or more "outside directors" (as defined in
    applicable regulations promulgated under Section 162(m) of the Code); and
    (ii) Stock Options and certain Restricted Stock Awards granted under the
    Plan may be subject to such other terms and conditions as are necessary for
    compensation recognized in connection with the exercise or disposition of
    such Stock Option or the disposition of Stock acquired pursuant to such
    Stock Option to constitute Performance-Based Compensation.

    4. Shares of Stock Subject to the Plan.

         (a) Stock. The Stock subject to Awards shall be authorized but unissued
    shares of Stock or shares of Stock reacquired by the Company in any manner.
    Subject to adjustment as provided in subsection (c) of this Section 4, the
    aggregate number of shares of Stock that may be issued pursuant to the Plan
    shall be (i) 2,750,000 (which number includes the aggregate number of shares
    with respect to which no options have been granted under the 1979 Stock
    Option Plan on the Effective Date), plus (ii) such number of shares as to
    which options granted under the 1979 Stock Option Plan terminate or expire
    without being fully exercised, plus (iii) effective as of January 1, 1998
    and each of the three successive years thereafter, a number of shares of
    Stock equal to two percent (2%) of the total number of shares of Stock
    issued and outstanding as of the close of business on December 31 of the
    preceding year. Subject to adjustment as provided in subsection (c) of this
    Section 4, no more than an aggregate of 750,000 shares of Stock may be
    issued pursuant to the exercise of Incentive Stock Options granted under the
    Plan (including shares issued pursuant to the exercise of Incentive Stock
    Options granted under the Plan that are the subject of disqualifying
    dispositions within the meaning of Sections 421, 422 and 424 of the Code and
    the regulations thereunder); no more than an aggregate of 150,000 shares of
    Stock may be issued in connection with Long-Term Performance Awards granted
    under this Plan; and no more than an aggregate of 1,000,000 shares of Stock
    may be issued in connection with Restricted Stock Awards. If any Award
    granted under the Plan expires, ceases to be exercisable or is terminated,
    surrendered (other than pursuant to Sections 6.2(k) or 12.5) or forfeited,
    in whole or in part, the unpurchased shares subject to such Award shall
    again be available for grants of Awards under the Plan.

         No employee of the Company or any Related Corporation may be granted
    Options (or any other Award) to acquire, in the aggregate, more than 200,000
    shares of Stock during any 12-month period under the Plan. If any Award
    granted under the Plan expires, or is terminated, surrendered or forfeited,
    in whole or in part, the unpurchased shares subject to such Award shall be
    included in the determination of the aggregate number of shares of Stock
    deemed to have been granted to such employee under the Plan.

         (b) Computation of Available Shares. For the purpose of computing the
    total number of shares of Stock available for Plan purposes at any time
    during which the Plan is in effect, there shall be debited against the total
    number of shares determined to be available pursuant to paragraphs (a) and
    (c) of this Section 4 the maximum number of shares of Stock subject to
    issuance upon exercise of Options or upon settlement of other Awards
    theretofore made under the Plan. In addition, however, shares related to the
    unexercised, undistributed or restricted portion of any expired, terminated,
    surrendered (other than

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    pursuant to Sections 6.2(k) or 12.5) or forfeited Award for which no
    material benefit was received by a Participant (e.g. dividends, but not
    including voting rights), or to the portion of any Award settled in cash,
    shall be recredited to the number remaining upon such expiration,
    termination, surrender or forfeiture and thereafter again be available for
    distribution in connection with future Awards under the Plan.

         (c) Other Adjustment. In the event of any merger, reorganization,
    consolidation, recapitalization, Stock dividend, or other change in
    corporate structure affecting the Stock, such substitution or adjustment
    shall be made in the aggregate number of shares reserved for issuance under
    the Plan, and in the number and option price of shares subject to
    outstanding Options and other Stock-based Awards granted under the Plan, as
    may be determined to be appropriate by the Committee in its sole discretion
    provided that the number of shares subject to any Award shall always be a
    whole number.

    5. Eligibility. Incentive Stock Options may be granted only to employees of
the Company and any Related Corporation. Officers and other key employees of or
consultants to the Company, who are responsible for or contribute to, as
determined by the Committee in its sole discretion, the management, growth
and/or profitability of the business of the Company and/or any Related
Corporation are eligible for Awards under the Plan.

    6. Stock Options.

    6.1 Provision for Grant. Stock Options may be granted alone, in addition to
or in tandem with other Awards under the Plan. Any Stock Option granted under
the Plan shall be in such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee who is an employee
of the Company, or of any Related Corporation, Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options. To the extent that
any Stock Option does not qualify as an Incentive Stock Option, it shall
constitute a separate Non-Qualified Stock Option. In the case of any other
person eligible for an Award under the Plan, any Stock Option granted under the
Plan shall be a Non-Qualified Stock Option.

    Anything in the Plan to the contrary notwithstanding, no term of this Plan
relating to Incentive Stock Options shall be interpreted, amended or altered,
nor shall any discretion or authority granted under the Plan be so exercised
(other than acceleration of the exercisability of Stock Options hereunder) so as
to disqualify the Plan under Section 422 of the Code, or, without the consent of
the optionee(s) affected, to disqualify any Incentive Stock Option under such
Section 422.

    6.2 Terms and Conditions. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee shall
deem appropriate:

         (a) Option Price. The option price per share of Stock purchasable under
    a Stock Option shall be determined by the Committee at the time of grant but
    shall be not less than 100% of the Fair Market Value of the Stock at the
    time of grant. However, any Incentive Stock Option granted to any optionee
    who, at the time the option is granted, owns more than 10% of the voting
    power of all classes of stock of the Company or of a parent or subsidiary
    corporation (in each case as defined in Section 424 of the Code) shall have
    an exercise price no less than 110% of Fair Market Value per share on date
    of the grant.

         (b) Option Term. The term of each Stock Option shall be fixed by the
    Committee, but no Stock Option shall be exercisable more than ten years
    after the date on which the Option is granted. However, any Incentive Stock
    Option granted to any optionee who, at the time the Option is granted, owns
    more than 10% of the voting power of all classes of stock of the Company or
    of a parent or subsidiary corporation (in each case as defined in Section
    424 of the Code) may not have a term of more than five years. No Stock
    Option may be exercised by any person after expiration of the term of the
    Option.

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         (c) Exercisability. Stock Options shall be exercisable at such time or
    times and subject to such terms and conditions as shall be determined by the
    Committee at or after grant, provided, however, that, except as provided in
    Sections 6.2(f), 6.2(g) and 9, unless otherwise determined by the Committee
    at or after grant, no Stock Option shall be exercisable during the six
    months following the date of the granting of the Option. If the Committee
    provides, in its discretion, that any Stock Option is exercisable only in
    installments, the Committee may waive such installment exercise provisions
    at any time at or after grant in whole or in part, based on such factors as
    the Committee shall determine, in its sole discretion.

         (d) Method of Exercise. Subject to whatever installment exercise
    provisions apply pursuant to Section 6.2(c), Stock Options may be exercised
    in whole or in part at any time and from time to time during the option
    period, by giving written notice of exercise to the Company specifying the
    number of shares to be purchased. Such notice shall be accompanied by
    payment in full of the purchase price, either by certified or bank check, or
    such other instrument as the Committee may accept. As determined by the
    Committee, in its sole discretion, payment in full or in part may also be
    made in the form of unrestricted Stock already owned by the optionee (based,
    in each case, on the Fair Market Value of the Stock on the date the option
    is exercised, as determined by the Committee); provided, however, that, in
    the case of an Incentive Stock Option, the right to make a payment in the
    form of already owned shares may be authorized only at the time the Option
    is granted.

         If payment of the Option exercise price of a Stock Option is made in
    whole or in part in the form of unrestricted Stock already owned by the
    Participant, the Company may require that the Stock has been owned by the
    Participant for a specified minimum period of time, for the purpose of
    avoiding any charge to the Company's earnings, limiting the pyramiding of
    Stock Option exercises, or such other purposes as the Company deems
    appropriate.

         No shares of Stock shall be issued until full payment therefor has been
    made. An optionee shall generally have the rights to dividends or other
    rights of a shareholder with respect to shares subject to the Option when
    the optionee has given written notice of exercise, has paid in full for such
    shares, and, if requested, has given the representation described in Section
    12.1.

         (e) Transferability. No Stock Option shall be transferable by the
    optionee otherwise than by will or by the laws of descent and distribution,
    and all Stock Options shall be exercisable, during the optionee's lifetime,
    only by the optionee, provided, however, the Committee may grant
    Non-Qualified Stock Options that are transferable, without payment of
    consideration, to immediate family members of the optionee or to trusts for
    such family members, or to partnerships in which such immediate family
    members are the only parties, subject to such limits as the Committee may
    establish, and the transferee shall remain subject to all of the terms and
    conditions applicable to such Non-Qualified Stock Options prior to such
    transfer.

         (f) Termination by Reason of Death. If an optionee's employment by or
    association with the Company or any Related Corporation terminates by reason
    of death, any Stock Option held by such optionee may thereafter be
    exercised, to the extent then exercisable at the time of death, or on such
    accelerated basis as the Committee may determine at or after grant, by the
    legal representative of the estate or by the legatee of the optionee under
    the will of the optionee, for a period of 90 days (or such shorter period as
    the Committee may specify at grant) from the date of such death or until the
    expiration of the stated term of such Stock Option, whichever period is the
    shorter.

         (g) Termination by Reason of Disability or Retirement. If an optionee's
    employment by or association with the Company or any Related Corporation
    terminates by reason of Disability or Retirement, any Stock Option held by
    such optionee may thereafter be exercised by the optionee, to the extent it
    was exercisable at the time of termination, or on such accelerated basis as
    the Committee may determine at or after grant, for a period of 90 days (or
    such shorter period as the Committee may specify at grant) from the date of
    such termination of employment or until the expiration of the stated term of
    such Stock Option, whichever period is the shorter; provided, however, that,
    if the optionee dies within such 90-day period (or such shorter period as
    the Committee shall specify at grant), any unexercised

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    Stock Option held by such optionee shall thereafter be exercisable to the
    extent to which it was exercisable at the time of death for a period of 90
    days from the date of such death or until the expiration of the stated term
    of such Stock Option, whichever period is the shorter.

         (h) Other Termination. Unless otherwise determined by the Committee at
    grant, if an optionee's employment by or association with the Company or any
    Related Corporation terminates for any reason other than death, Disability
    or Retirement, the Stock Option shall thereupon terminate, except that in
    the Committee's sole discretion, based upon such factors as the Committee
    may deem appropriate, the Committee may specify that such Stock Option may
    be exercised, to the extent exercisable at termination, or on such
    accelerated basis as the Committee may determine at or after grant, for a
    period of 90 days (or such shorter period as the Committee shall specify at
    grant) from the date of such termination or until the expiration of the
    stated term of such Stock Option, whichever period is shorter.

         (i) Extension of Exercisability Period. The Committee or Board of
    Directors pursuant to the authority granted in Section 3(a) may in its
    discretion grant Stock Options which provide for longer periods of
    exercisability following the termination of an optionee's employment by or
    association with the Company or any Related Company than is provided in
    Subsections 6.2(f), 6.2(g), and 6.2(h), provided that any extended
    exercisability period shall not extend beyond the expiration of the stated
    term of the Stock Option. Notwithstanding Sections 6.2(f), 6.2(g) and
    6.2(h), the Committee or the Board of Directors may also in its discretion
    amend outstanding Stock Options to extend the period during which they
    remain exercisable, provided that any extended exercisability period shall
    not extend beyond the expiration of the stated term of the Stock Option.

         (j) Incentive Stock Option Limitations. To the extent required for
    "incentive stock option" status under Section 422 of the Code, the aggregate
    Fair Market Value (determined as of the time of grant) of the Stock with
    respect to which Incentive Stock Options granted are exercisable for the
    first time by the optionee during any calendar year under the Plan and/or
    any other stock option plan of the Company and any parent or subsidiary
    corporation (within the meaning of Section 424 of the Code) shall not exceed
    $100,000. The Company intends to designate any Options granted in excess of
    the $100,000 limitation as Non-Qualified Stock Options, and the Company
    shall issue certificates to the optionee with respect to the Options that
    are Non-Qualified Options and Options that are Incentive Stock Options.

         (k) Cashless Exercise; Satisfaction of Tax Withholdings. To the extent
    permitted under applicable laws and regulations, at the request of a
    Participant, the Company agrees to cooperate in a "cashless exercise" of an
    Option. The cashless exercise shall be effected by the Participant
    delivering to a registered securities broker acceptable to the Company
    instructions to sell a sufficient number of shares of Stock for which such
    Option is then exercisable to cover the costs and expenses associated with
    such exercise and sale. Under any Option, the Committee may permit a
    Participant to pay any applicable withholding taxes by delivering a
    sufficient number of previously owned shares of Common Stock to the Company
    to satisfy such taxes.

    7. Long-Term Performance Awards

    7.1 Provision for Grant. Long-Term Performance Awards may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee shall
determine the nature, length and starting date of the performance period (the
"Performance Period") for each Long-Term Performance Award, which subject to
Section 9 below shall be a period of at least one year, and shall determine the
performance objectives to be used in valuing Long-Term Performance Awards and
determining the extent to which such Long-Term Performance Awards have been
earned. Performance objectives may vary from Participant to Participant and
between groups of Participants and shall be based upon such Company, business
unit and/or individual performance factors and criteria as the Committee may
deem appropriate, including, but not limited to, earnings per share or return on
equity. Performance Periods may overlap and Participants may participate
simultaneously with respect to Long-Term Performance Awards that are subject to
different Performance Periods and/or different performance factors and criteria.

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    7.2 Periodical Determination of Performance. At the beginning of each
Performance Period, the Committee shall determine for each Long-Term Performance
Award subject to such Performance Period the range of dollar values or number of
shares of Stock to be awarded to the Participant at the end of the Performance
Period if and to the extent that the relevant measure(s) of performance for such
Long-Term Performance Award is (are) met. Such dollar values or number of shares
of Stock may be fixed or may vary in accordance with such performance and/or
other criteria as may be specified by the Committee, in its sole discretion.

    7.3 Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives to
a Long-Term Performance Award, the Committee may revise the performance
objectives and/or underlying factors and criteria applicable to the Long-Term
Performance Awards affected, to the extent deemed appropriate by the Committee,
in its sole discretion, to avoid unintended windfalls or hardship.

    7.4 Termination of Employment. Subject to Section 9 below and unless
otherwise provided in the applicable Award agreement(s), if a Participant
terminates employment or other association with the Company or any Related
Corporation during a Performance Period because of death, Disability or
Retirement, such Participant shall be entitled to a payment with respect to each
outstanding Long-Term Performance Award at the end of the applicable Performance
Period (i) based, to the extent relevant under the terms of the award, upon the
Participant's performance for the portion of such Performance Period ending on
the date of termination and the performance of the applicable business unit(s)
for the entire Performance Period, and (ii) prorated, where deemed appropriate
by the Committee, for the portion of the Performance Period during which the
Participant was employed by or associated with the Company and any Related
Corporation, all as determined by the Committee, in its sole discretion.
However, the Committee may provide for an earlier payment in settlement of such
award in such amount and under such terms and conditions as the Committee deems
appropriate.

    Subject to Section 9 below, if a Participant terminates employment by or
association with the Company and any Related Corporation during a Performance
Period for any other reason, then such Participant shall not be entitled to any
payment with respect to Long-Term Performance Awards subject to such Performance
Period, unless the Committee shall otherwise determine, in its sole discretion.

    7.5 Form of Payment. The earned portion of a Long-Term Performance Award may
be paid currently or on a deferred basis with such interest or earnings
equivalent as may be determined by the Committee, in its sole discretion.
Payment shall be made in the form of cash or whole shares of Stock, either in a
lump sum payment or in annual installments commencing as soon as practicable
after the end of the relevant Performance Period, all as the Committee shall
determine at or after grant.

    8. Restricted Stock Awards

    8.1 Terms and Conditions. The Committee may grant Restricted Stock Awards in
furtherance of the purpose of the Plan without, unless otherwise provided, other
payment and subject to the restrictions referred to in this Section 8. All
Restricted Stock Awards granted under the Plan shall be so granted for, and in
consideration of, past services rendered to the Company or a Related Corporation
or other lawful consideration and shall be subject to the following terms and
conditions and to such other terms and conditions, not inconsistent with the
Plan, as shall be prescribed by the Committee in its sole discretion and as
shall be contained in the Restricted Stock Agreement referred to in Section
8.1(d) hereof:

         (a) Restriction Period. At the time of a grant of shares of Restricted
    Stock, the Committee shall establish for all such shares received by a
    grantee (a "Restricted Stock Grantee") (or, if it is the intent that the
    total of such shares shall be divided into separate parts, for each part of
    such total) a period of time (the "Restriction Period") commencing with the
    date of the grant of such shares during which time the shares may not be
    sold, assigned, transferred, pledged, or otherwise encumbered, except as
    herein provided. Different Restriction Periods may be fixed for different
    parts of the shares that are being granted to a recipient, and the
    Restriction Period for one grant may differ from the Restriction Period for
    other grants; provided, however, that in no event will the total Restriction
    Period with respect to any

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    Restricted Stock Award be less than three (3) years, and restrictions shall
    lapse as to equal pro rata portions of a Restricted Stock Award over the
    total Restriction Period. Except for such restrictions, unless otherwise
    determined by the Committee, the Restricted Stock Grantee as owner of the
    shares of Stock subject to the Restricted Stock Awards shall have all the
    rights of a stockholder, including but not limited to the right to receive
    any dividends paid on such shares of Stock and the right to vote such shares
    of Stock. The restrictions shall terminate upon the expiration of the
    Restriction Period, or, if determined by the Committee, earlier upon the
    Restricted Stock Grantee's death, Disability, Retirement, or other voluntary
    or involuntary termination of employment without cause.

         (b) Termination of Employment. If a Restricted Stock Grantee ceases to
    be an employee of the Company or a Related Corporation, all Restricted Stock
    Awards theretofore granted to him as to which the restrictions imposed under
    this Section 8 have not terminated or do not thereby terminate shall, except
    as otherwise provided in this Plan, upon such cessation of employment be
    forfeited and returned to the Company. Notwithstanding the foregoing, the
    Committee in its discretion may waive such forfeiture, but only where the
    termination of employment of a Restricted Stock Grantee is due to
    Retirement, Disability, death or voluntary or involuntary termination of
    employment without cause. In any of such events the Committee may provide
    that any remaining restriction period shall terminate for all Restricted
    Stock Awards of the Restricted Stock Grantee and the Company shall deliver,
    upon remittance by the Restricted Stock Grantee of the amount of any taxes
    or other amounts which have been withheld by the Company, the shares of
    Stock subject to the Restricted Stock Award to or for the benefit of the
    Restricted Stock Grantee free of restrictions. In the event that the
    Restricted Stock Grantee forfeits any shares of Stock subject to the
    Restricted Stock Award, the Company shall reacquire such shares without
    making any payment to the Restricted Stock Grantee therefor.

         (c) Legend. Each certificate issued in respect of Restricted Stock
    Awards granted under the Plan shall be registered in the name of the
    Restricted Stock Grantee and deposited by him, together with a stock power
    endorsed in blank, with the Company and shall bear the following (or a
    similar) legend:

         "The transferability of this certificate and the shares of stock
    represented hereby are subject to the terms, conditions and restrictions
    (including forfeiture) contained in a Plan and an Agreement between the
    registered owner and Ionics, Incorporated. A copy of such Plan and Agreement
    will be furnished to the holder of this certificate upon written request and
    without charge."

         (d) Restricted Stock Agreement. The Restricted Stock Grantee shall
    enter into an Agreement (a "Restricted Stock Agreement") with the Company,
    in a form not inconsistent with the Plan, agreeing to the terms and
    conditions of the grant and such other matters as the Committee shall in its
    sole discretion determine. The Restricted Stock Agreement may be amended by
    the Committee at any time to modify the Restriction Period with respect to
    any Restricted Stock Awards the restrictions on which have not then lapsed
    or in any other respect; provided that, except as provided in Section 10, no
    amendment shall adversely affect the terms and conditions of an outstanding
    grant without the written consent of the Restricted Stock Grantee.

         (e) Termination of Restrictions. Upon the termination of the
    restrictions imposed under this Section 8, the Company shall return to the
    Restricted Stock Grantee (or his legal representative, beneficiary, or heir)
    certificates, without a legend, for the shares of Common Stock deposited
    with it pursuant to subsection (c) hereof.

    8.2 Taxes. The Company or a Related Corporation, as the case may be, shall
have the right to deduct from amounts payable to the Restricted Stock Grantee,
or to require such grantee to pay, any taxes required by law to be withheld with
respect to Restricted Stock Awards. In the Committee's discretion such tax
obligations may be paid in whole or in part in shares of Common Stock, including
shares retained from the grant creating the tax obligation, valued at their fair
market value on the date of delivery.

    8.3 Notice of Election Under Section 83(b). Each Restricted Stock Grantee
making an election under Section 83(b) of the Code and the regulations and
rulings promulgated thereunder, will provide a copy thereof to the Company
within thirty days of the filing of such election with the Internal Revenue
Service
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<PAGE>



and the Restricted Stock Agreement referred to in Section 8 shall so provide. In
the event a Restricted Stock Grantee does not provide to the Company a copy of a
valid election under Section 83(b) of the Code filed with the Internal Revenue
Service with respect to a Restricted Stock Award, the Company may presume that
no such election was filed and, accordingly, withhold from any payments
(including salary and bonuses) otherwise payable to the Restricted Stock Grantee
in order to comply with any withholding obligation arising upon the termination
of any restriction.

    9. Change in Control Provisions.

    9.1 Consequences of Event. In the event of a Change in Control, in addition
to the adjustment provided for in Section 4(c), the Committee may in its
discretion determine whether, with respect to all Stock Options granted and
Awards made before the Change in Control, the following acceleration and
valuation provisions shall apply:

         (a) Any Stock Options awarded under the Plan not previously exercisable
    shall thereupon become fully exercisable.

         (b) Any remaining restrictions on Restricted Stock Awards shall lapse;

         (c) Any outstanding Long-Term Performance Awards shall be paid out in
    cash within thirty days following the Change in Control based on prorated
    target results for the Performance Periods in question.

    In case of any reorganization, merger or consolidation of the Company into
or with another company or in the case of any sale or conveyance to another
company or entity of the property of the Company as a whole or substantially as
a whole, each Stock Option and other Award shall be automatically converted into
a stock option or other award which covers shares of stock or other securities
equivalent in kind and value to the shares or other securities the optionee or
holder would have held if the Stock Option or other Award had been exercised or
received in full prior to such reorganization, merger, consolidation, sale or
conveyance and no disposition thereof had subsequently been made, and the option
price under each Stock Option shall be proportionately adjusted.

    9.2 Change in Control. For purposes of this Plan, a "Change in Control"
means the happening of any of the following:

         (a) The acquisition, other than from the Company, by any individual,
    entity or group (within the meaning of Section 12(d)(3) or 14(d)(2) of the
    Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
    beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
    Exchange Act) of 20% or more of either (i) the then outstanding shares of
    common stock of the Company (the "Outstanding Company Common Stock") or (ii)
    the combined voting power of the then outstanding voting securities of the
    Company entitled to vote generally in the election of directors (the
    "Company Voting Securities"); provided, however, that any acquisition by (x)
    any noncorporate shareholder of the Company as of the effective date of the
    initial registration of an offering of Stock under the Securities Act of
    1933, (y) the Company or any of its subsidiaries, or any employee benefit
    plan (or related trust) sponsored or maintained by the Company or any of its
    subsidiaries, or (z) any corporation with respect to which, following such
    acquisition, more than 60% of, respectively, the then outstanding shares of
    common stock of such corporation and combined voting power of the then
    outstanding voting securities of such corporation entitled to vote generally
    in the election of directors is then beneficially owned, directly or
    indirectly, by all or substantially all of the individuals and entities who
    were the beneficial owners, respectively, of the Outstanding Company Common
    Stock and Company Voting Securities immediately prior to such acquisition in
    substantially the same proportion as their ownership, immediately prior to
    such acquisition, of the Outstanding Company Common Stock and Company Voting
    Securities, as the case may be, shall not constitute a Change in Control of
    the Company; or

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<PAGE>

         (b) Continuing Directors constitute less than a majority of the Board,
    where a Continuing Director is (i) each person who was a director of the
    Company on January 2, 1997, and (ii) each person who subsequently becomes a
    director of the Company and whose election or nomination was approved by a
    vote of at least a majority of the Continuing Directors in office at the
    time of the election or nomination unless that person became a director in
    connection with an actual or threatened election contest; or

         (c) Approval by the shareholders of the Company of a reorganization,
    merger or consolidation (a "Business Combination"), in each case, with
    respect to which all or substantially all of the individuals and entities
    who were the respective beneficial owners of the Outstanding Company Common
    Stock and Company Voting Securities immediately prior to such Business
    Combination do not own beneficially, directly or indirectly, more than 60%
    of, respectively, the then outstanding shares of common stock and the
    combined voting power of the then outstanding voting securities entitled to
    vote generally in the election of directors, as the case may be, of the
    corporation resulting from such Business Combination in substantially the
    same proportion as their ownership immediately prior to such Business
    Combination of the Outstanding Company Common Stock and Company Voting
    Securities, as the case may be; or

         (d) a complete liquidation or dissolution of the Company or a sale or
    other disposition of all or substantially all of the assets of the Company
    other than to a corporation with respect to which, following such sale or
    disposition, more than 60% of, respectively, the then outstanding shares of
    common stock and the combined voting power of the then outstanding voting
    securities entitled to vote generally in the election of directors is then
    owned beneficially, directly or indirectly, by all or substantially all of
    the individuals and entities who were the beneficial owners, respectively,
    of the Outstanding Company Common Stock and Company Voting Securities
    immediately prior to such sale or disposition in substantially the same
    proportion as their ownership of the Outstanding Company Common Stock and
    Company Voting Securities, as the case may be, immediately prior to such
    sale or disposition.

    10. Amendment and Termination. The Board may terminate or amend the Plan at
any time and from time to time; provided, however, that the Board may not,
without approval of the stockholders of the Company, increase the maximum number
of shares of Stock issuable under the Plan or change the description of the
individuals eligible to receive Awards. No termination of or amendment to the
Plan may adversely affect the rights of a Participant with respect to any Award
theretofore granted under the Plan without such Participant's consent.

    The Committee may amend the terms of any Award theretofore granted,
prospectively or retroactively, but, subject to Section 4 above, no such
amendment shall (i) decrease the exercise price of an outstanding Stock Option,
or (ii) effect the simultaneous cancellation of an outstanding Stock Option and
new grant of a replacement Stock Option, or (iii) without the Participant's
consent, impair the rights of any Participant.

    11. Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of any
other general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to Awards hereunder; provided, however, unless the Committee otherwise
determines with the consent of the affected Participant, the existence of such
trusts or other arrangements shall be consistent with the "unfunded" status of
the Plan.

    12. General Provisions.

    12.1 Investment Representation. The Committee may require each person
acquiring shares pursuant to an Award under the Plan to represent to and agree
with the Company in writing that the Participant is acquiring the shares for
investment without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer. All certificates for shares of Stock or other
securities delivered under the Plan shall be subject to such stock-

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<PAGE>

transfer orders and other restrictions as the Committee may deem advisable under
the rules, regulations, and other requirements of any stock exchange upon which
the Stock is then listed, and any applicable Federal or state securities law,
and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.

    12.2 Adoption of Other Plans. Nothing contained in this Plan shall prevent
the Board of Directors from adopting other or additional compensation
arrangements, subject to stockholder approval if such approval is required; and
such arrangements may be either generally applicable or applicable only in
specific cases.

    12.3 No Employment Rights. Neither the establishment or continuation of the
Plan, nor the grant of any Award hereunder, shall confer upon any employee or
consultant of the Company or any Related Corporation any right to continued
employment or association with the Company and any Related Corporation, nor
shall it interfere in any way with the right of the Company and any Related
Corporation to terminate the employment or association of any of its employees
or consultants at any time.

    12.4 Participant Not to Compete. In consideration of the Company's grant of
an Award, a Participant shall agree in the agreement setting forth the terms of
such Award that during the period of his employment by or other service with the
Company or any Related Corporation, and for a period of at least two (2) years
after the date such employment or service terminates, he will not without the
consent of the Board accept or perform work for any entity whose business is
competitive with the business carried on by the Company and any Related
Corporation, or engage in activities which are significantly competitive with
the business of the Company and any Related Corporation. In the event a
Participant breaches such agreement, the Participant shall forfeit all rights to
any unexercised Options or unearned Awards held as of the date of such breach.

    12.5 Tax Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for Federal income tax
purposes with respect to any Award, the Participant shall pay to the Company, or
make arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such amount. Unless otherwise determined by the Committee, the
minimum required withholding obligations may be settled with Stock. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Participant.

    12.6 Payments on Death. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid.

    12.7 Governing Law. The Plan and all Awards and actions taken thereunder
shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.

    13. Term of Plan. The Plan shall become effective upon the approval of the
Plan by the stockholders of the Company. No Award shall be granted pursuant to
the Plan on or after the tenth anniversary of the Plan's approval by
stockholders, but Awards theretofore granted may extend beyond that date.

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