<PAGE>
                                                                   EXHIBIT 10.29


                         THE HOUSTON EXPLORATION COMPANY
                      EXECUTIVE DEFERRED COMPENSATION PLAN













                         Effective as of January 1, 2002


<PAGE>

                         THE HOUSTON EXPLORATION COMPANY
                      EXECUTIVE DEFERRED COMPENSATION PLAN

                         Effective as of January 1, 2002

                                TABLE OF CONTENTS

<Table>
<S>                                                                        <C>
                                    ARTICLE 1
                                   DEFINITIONS

 1.1      ACCOUNT...........................................................1
 1.2      BENEFICIARY.......................................................1
 1.3      BOARD.............................................................1
 1.4      CODE..............................................................1
 1.5      COMMON STOCK......................................................1
 1.6      COMPENSATION......................................................2
 1.7      COMPENSATION DEFERRAL ACCOUNT ....................................2
 1.8      COMPENSATION DEFERRALS............................................2
 1.9      DESIGNATION DATE..................................................2
 1.10     EFFECTIVE DATE....................................................2
 1.11     ELIGIBLE EMPLOYEE.................................................2
 1.12     EMPLOYER..........................................................2
 1.13     EMPLOYER CONTRIBUTION CREDIT ACCOUNT..............................2
 1.14     EMPLOYER CONTRIBUTION CREDITS.....................................2
 1.15     ENTRY DATE........................................................2
 1.16     FORM AND TIMING OF PAYMENT ELECTION FORM..........................2
 1.17     401(K) PLAN.......................................................2
 1.18     LTIP..............................................................3
 1.19     PARTICIPANT.......................................................3
 1.20     PHANTOM STOCK.....................................................3
 1.21     PLAN..............................................................3
 1.22     PLAN YEAR.........................................................3
 1.23     SPONSOR...........................................................3
 1.24     SPONSOR STOCK FUND................................................3
 1.25     TRUST.............................................................3
 1.26     TRUSTEE...........................................................3
 1.27     UNREALIZED EQUITY GAINS...........................................3
 1.28     UNREALIZED EQUITY GAINS CONTRIBUTION ACCOUNT......................3
 1.29     UNREALIZED EQUITY GAINS CONTRIBUTIONS.............................4
 1.30     VALUATION DATE....................................................4
</Table>

                                       i

<PAGE>


<Table>
<S>                                                                        <C>
                                    ARTICLE 2
                          ELIGIBILITY AND PARTICIPATION

 2.1      REQUIREMENTS......................................................4
 2.2      REEMPLOYMENT......................................................4
 2.3      CHANGE OF EMPLOYMENT CATEGORY.....................................4

                                    ARTICLE 3
                            CONTRIBUTIONS AND CREDITS

 3.1      PARTICIPANT CONTRIBUTIONS AND CREDITS.............................4
 3.2      EMPLOYER CONTRIBUTION CREDITS.....................................6
 3.3      CONTRIBUTIONS TO THE TRUST........................................7

                                    ARTICLE 4
                               ALLOCATION OF FUNDS

 4.1      ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS...............7
 4.2      ACCOUNTING FOR DISTRIBUTIONS......................................8
 4.3      SEPARATE ACCOUNTS.................................................8
 4.4      INTERIM VALUATIONS................................................8
 4.5      DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS......................8
 4.6      DEEMED INVESTMENTS IN PHANTOM STOCK...............................9
 4.7      EXPENSES AND TAXES...............................................10

                                    ARTICLE 5
                             ENTITLEMENT TO BENEFITS

 5.1      FIXED PAYMENT DATES; TERMINATION OF EMPLOYMENT...................10
 5.2      IMMEDIATE DISTRIBUTION ELECTION..................................11
 5.3      HARDSHIP DISTRIBUTIONS...........................................12
 5.4      REEMPLOYMENT OF RECIPIENT........................................12

                                    ARTICLE 6
                            DISTRIBUTION OF BENEFITS

 6.1      AMOUNT...........................................................12
 6.2      METHOD OF PAYMENT................................................13
 6.3      DEATH BENEFITS...................................................13
</Table>

                                       ii

<PAGE>

<Table>
<S>                                                                        <C>
                                    ARTICLE 7
                         BENEFICIARIES; PARTICIPANT DATA

 7.1      DESIGNATION OF BENEFICIARIES.....................................13
 7.2      INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES;
          INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES................14

                                    ARTICLE 8
                                 ADMINISTRATION

 8.1      ADMINISTRATIVE AUTHORITY.........................................14
 8.2      UNIFORMITY OF DISCRETIONARY ACTS.................................15
 8.3      LITIGATION.......................................................15
 8.4      CLAIMS PROCEDURE.................................................15

                                    ARTICLE 9
                                    AMENDMENT

 9.1      RIGHT TO AMEND...................................................16
 9.2      AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN.............17
 9.3      CHANGES IN LAW AFFECTING TAXABILITY..............................17

                                   ARTICLE 10
                                   TERMINATION

 10.1     SPONSOR'S RIGHT TO TERMINATE OR SUSPEND PLAN.....................17
 10.2     AUTOMATIC TERMINATION OF PLAN....................................18
 10.3     SUSPENSION OF DEFERRALS..........................................18
 10.4     ALLOCATION AND DISTRIBUTION......................................18
 10.5     SUCCESSOR TO SPONSOR.............................................18
 10.6     WITHDRAWAL OR TERMINATION BY AN EMPLOYER.........................18

                                   ARTICLE 11
                                    THE TRUST

 11.1     ESTABLISHMENT OF TRUST...........................................18

                                   ARTICLE 12
                                  MISCELLANEOUS

 12.1     LIMITATIONS ON LIABILITY OF SPONSOR OR EMPLOYER..................19
 12.2     CONSTRUCTION.....................................................19
 12.3     SPENDTHRIFT PROVISION............................................20
 12.4     SPONSOR STOCK SUBJECT TO THE PLAN................................20
</Table>

                                      iii


<PAGE>



                         THE HOUSTON EXPLORATION COMPANY
                      EXECUTIVE DEFERRED COMPENSATION PLAN

                         Effective as of January 1, 2002

                                    RECITALS

         This, The Houston Exploration Company Executive Deferred Compensation
Plan (the "Plan"), is adopted by The Houston Exploration Company (the "Sponsor")
for certain executive and management employees of the Sponsor and of those
affiliates of the Sponsor which are admitted as adopting employers under the
Plan (the Sponsor, as well as each such affiliate, hereinafter is referred to as
the "Employer"). The purpose of the Plan is to offer participants an opportunity
to elect to defer the receipt of compensation in order to provide deferred
compensation benefits taxable pursuant to section 451 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to provide a deferred compensation
vehicle to which the Sponsor may credit certain amounts on behalf of
participants. The Plan is intended to be a "tophat" plan (i.e., an unfunded
deferred compensation plan maintained for a select group of management or
highly compensated employees) under sections 201(2), 301(a)(3) and 401(a)(1) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA").

         Accordingly, the following Plan is adopted.

                                    ARTICLE 1
                                   DEFINITIONS

         1.1 ACCOUNT means the balance credited to a Participant's or
Beneficiary's Plan account, including amounts credited under the Compensation
Deferral Account, the Unrealized Equity Gains Contribution Account and the
Employer Contribution Credit Account, and deemed income, gains and losses (as
determined by the Sponsor, in its discretion) credited thereto. A Participant's
or Beneficiary's Account shall be determined as of the date of reference.

         1.2 BENEFICIARY means any person or persons so designated in accordance
with the provisions of Article 7.

         1.3 BOARD means the Sponsor's Board of Directors, or the Compensation
Committee or another committee thereof duly authorized to make determinations
and act for the Board under this Plan.

         1.4 CODE means the Internal Revenue Code of 1986 and the regulations
thereunder, as amended from time to time.

         1.5 COMMON STOCK means the common stock of the Sponsor, $.01 par value
or, in the event that the outstanding shares of common stock are later changed
into or exchanged for a different class of stock or securities of the Sponsor or
another corporation, that other stock or security.



                                       1
<PAGE>

         1.6 COMPENSATION means the total current cash remuneration, including
regular salary and bonus awards, paid by the Employer to an Eligible Employee
with respect to his or her service for the Employer (as determined by the
Employer, in its discretion).

         1.7 COMPENSATION DEFERRAL ACCOUNT is defined in Section 3.1.

         1.8 COMPENSATION DEFERRALS is defined in Section 3.1.

         1.9 DESIGNATION DATE means the date or dates as of which a designation
of deemed investment directions by an individual pursuant to Section 4.5, or any
change in a prior designation of deemed investment directions by an individual
pursuant to Section 4.5, shall become effective. The Designation Dates in any
Plan Year shall be designated by the Sponsor.

         1.10 EFFECTIVE DATE means the effective date of the Plan, which shall
be January 1, 2002.

         1.11 ELIGIBLE EMPLOYEE means, for any Plan Year (or applicable portion
thereof), a person employed by the Employer who is determined by the Sponsor to
be a member of a select group of management or highly compensated employees of
the Employer and who is designated by the Board to be an Eligible Employee under
the Plan.

                  By each November 1 (or before implementation of the Plan with
respect to the Plan's first Plan Year), the Sponsor shall notify those
individuals, if any, who will be Eligible Employees for the next Plan Year. If
the Sponsor determines that an individual first becomes an Eligible Employee
during a Plan Year, the Sponsor shall notify such individual of its
determination and of the date during the Plan Year on which the individual shall
first become an Eligible Employee.

         1.12 EMPLOYER means the Sponsor and any affiliated or related
corporation or business organization which agrees, with the consent of the
Sponsor, to become an Employer under the Plan.

         1.13 EMPLOYER CONTRIBUTION CREDIT ACCOUNT is defined in Section 3.2.

         1.14 EMPLOYER CONTRIBUTION CREDITS is defined in Section 3.2.

         1.15 ENTRY DATE with respect to an individual means the first day of
the pay period following the date on which the individual first becomes an
Eligible Employee.

         1.16 FORM AND TIMING OF PAYMENT ELECTION FORM means the form or forms
on which a Participant elects the form and timing of the Participant's Plan
benefit.

         1.17 401(k) PLAN means the Sponsor's tax qualified 401(k) retirement
plan, as amended from time to time.

         1.18 LTIP means The Houston Exploration Company 2002 Long Term
Incentive Plan, as the same may be amended from time to time.


                                       2
<PAGE>

         1.19 PARTICIPANT means any person so designated in accordance with the
provisions of Article 2, including, where appropriate according to the context
of the Plan, any former employee who is or may become (or whose Beneficiaries
may become) eligible to receive a benefit under the Plan.

         1.20 PHANTOM STOCK means an artificial unit of value, the amount of one
unit of which varies with the value of one share of Common Stock. Except as
otherwise provided herein, all distributions to a Participant or Beneficiary
with respect to Phantom Stock shall be made in Common Stock.

         1.21 PLAN means this, The Houston Exploration Company Executive
Deferred Compensation Plan, as amended from time to time.

         1.22 PLAN YEAR means the twelve (12) month period ending on the
December 31 of each year during which the Plan is in effect.

         1.23 SPONSOR means The Houston Exploration Company and its successors
and assigns unless otherwise herein provided.

         1.24 SPONSOR STOCK FUND means an account maintained on the books of the
Sponsor reflecting credits to Participants' Accounts in Phantom Stock.

         1.25 TRUST means the Trust described in Article 11.

         1.26 TRUSTEE means the trustee of the Trust described in Article 11.

         1.27 UNREALIZED EQUITY GAINS, with respect to a given option award or
restricted share award granted to a particular Participant under the LTIP,
means, (i) in the case of options, the difference in dollar value between the
exercise price of the option elected to be converted to an Unrealized Equity
Gains Contribution hereunder and the fair market value of the underlying shares
of Common Stock determined as of the effective date of the conversion or, (ii)
in the case of restricted shares, the fair market value of the restricted shares
elected to be converted to an Unrealized Equity Gains Contribution hereunder
determined as of the effective date of the conversion. In each case, fair market
value actually is determined with reference to the closing price of the shares
of Common Stock underlying the option or held as restricted shares on the day
that immediately precedes the conversion date specified in the election, or if
such day is not a trading day, on the next trading day (or on such other date as
the Sponsor shall reasonably elect).

         1.28 UNREALIZED EQUITY GAINS CONTRIBUTION ACCOUNT is defined in Section
3.1.

         1.29 UNREALIZED EQUITY GAINS CONTRIBUTIONS means contributions made
under Section 3.1.

         1.30 VALUATION DATE means the last day of each Plan Year and any other
date that the Sponsor, in its sole discretion, designates as a Valuation Date.


                                       3
<PAGE>

                                    ARTICLE 2
                          ELIGIBILITY AND PARTICIPATION

         2.1 REQUIREMENTS. Every Eligible Employee on the Effective Date shall
be eligible to become a Participant on the Effective Date. Every other Eligible
Employee shall be eligible to become a Participant on the first Entry Date
occurring on or after the date on which he or she becomes an Eligible Employee.
No individual shall become a Participant, however, if he or she is not an
Eligible Employee on the date his or her participation is to begin.

                  Participation in the Compensation Deferral and Unrealized
Equity Gains Contribution Account portions of the Plan is voluntary. In order to
participate in those portions of the Plan, an otherwise Eligible Employee must
make written application in such manner as may be required by Section 3.1 and by
the Sponsor and must agree to make Compensation Deferrals or Unrealized Equity
Gains Contributions as provided in Article 3. An Eligible Employee shall have
the right to make Unrealized Equity Gains Contributions only as provided by the
Sponsor in a written notice and only subject to the terms and conditions
specified in such notice.

                  Participation in the Employer Contribution Credit Account
portion of the Plan is automatic and does not require a Participant's election
to participate.

         2.2 REEMPLOYMENT. If a Participant whose employment with the Employer
is terminated is subsequently reemployed, he or she shall become a Participant
in accordance with the provisions of Section 2.1.

         2.3 CHANGE OF EMPLOYMENT CATEGORY. During any period in which a
Participant remains in the employ of the Employer, but ceases to be an Eligible
Employee, he or she shall not be eligible to make Compensation Deferrals or
Unrealized Equity Gains Contributions hereunder or to receive Employer
Contribution Credits hereunder.

                                    ARTICLE 3
                            CONTRIBUTIONS AND CREDITS

         3.1 PARTICIPANT CONTRIBUTIONS AND CREDITS.


                  (a) Compensation Deferrals. In accordance with rules
established by the Sponsor, a Participant may elect to defer annually up to
eighty percent (80%) of Compensation which is due to be earned and which would
otherwise be paid to the Participant during the year, in any fixed periodic
dollar amounts or percentages designated by the Participant. Amounts so deferred
will be considered a Participant's "Compensation Deferrals." Ordinarily, a
Participant shall make such an election with respect to a coming twelve (12)
month Plan Year during the period beginning on the November in your 1 and ending
on the November 30 of the prior calendar year, or during such other period as
might be established by the Sponsor.

                  Compensation Deferrals shall be made through regular payroll
deductions or through an election by the Participant to defer the payment of a
bonus not yet payable to him or her at the time of the election. The Participant
may change his or her regular payroll deduction Compensation Deferral amount as
of, and by written notice delivered to the Employer prior to, the beginning of
any



                                       4
<PAGE>

regular payroll period, with such change being first effective for Compensation
to be earned in that payroll period. In the case of bonus payment deferrals, the
Participant may reduce his or her bonus due to be paid by the Employer by
delivering written notice to the Employer of the bonus Compensation Deferral
amount prior to the date the applicable bonus is first due to be paid.

                  Once made, a Compensation Deferral election shall continue in
force only for the Plan Year to which the election relates, unless changed as
provided above. Compensation Deferrals shall be deducted by the Employer from
the pay of a deferring Participant and shall be credited to the Compensation
Deferral Account of the deferring Participant.

                  There shall be established and maintained a separate
Compensation Deferral Account in the name of each Participant to which shall be
credited or debited: (a) amounts equal to the Participant's Compensation
Deferrals; and (b) amounts equal to any deemed earnings or losses (to the extent
realized, based upon deemed fair market value of the Compensation Deferral
Account's deemed assets, as determined by the Sponsor, in its discretion)
attributable or allocable thereto.

                  A Participant shall at all times be 100% vested in amounts (if
any) credited to his or her Compensation Deferral Account.

                  (b) Unrealized Equity Gains Contributions. In accordance with
rules established by the Sponsor, a Participant may elect to have amounts in
respect of Unrealized Equity Gains made as Unrealized Equity Gains Contributions
to the Participant's Unrealized Equity Gains Contribution Account. The value of
the Unrealized Equity Gains Contributions to be credited to the Participant's
Account shall be the value of the Unrealized Equity Gains converted as
determined pursuant to Section 1.27.

                           A Participant shall be entitled to make an
Unrealized Equity Gains Contribution solely at the time and in the form and
manner determined by the Sponsor and communicated to the Participant. No
Participant shall have a right to make an Unrealized Equity Gains Contribution
unless and until notified in writing by the Sponsor and only to the extent
provided in such notice.

                           An Unrealized Equity Gains Contribution election
shall be made by a Participant with respect to options granted under the LTIP no
earlier than the date on which the options become exercisable, and must be made
prior to the date on which the options are exercised or lapse. An Unrealized
Equity Gains Contribution election must be made by a Participant with respect to
restricted shares granted under the LTIP prior to the date on which the
restricted shares are to become unrestricted. The preceding notwithstanding, (i)
if a Participant makes an Unrealized Equity Gains Contribution election with
respect to options or restricted shares and events occur or conditions exist
that would have caused the options or restricted shares to be forfeited, to the
extent of any such forfeiture, the Unrealized Equity Gains Contribution shall be
null and void and the forfeiture amount (determined by the Sponsor in its
discretion) shall be returned to the Sponsor; and (ii) among the terms and
conditions that the Sponsor may establish with respect to an Unrealized Equity
Gains Contribution election, the Sponsor may impose a waiting period between the
date such election is made and the date it becomes effective.


                                       5
<PAGE>

                           There shall be established and maintained a separate
Unrealized Equity Gains Contribution Account in the name of each Participant to
which shall be credited or debited: (a) amounts equal to the Participant's
Unrealized Equity Gains Contribution; and (b) amounts equal to any deemed
earnings or losses (to the extent realized, based upon deemed fair market value
of the Unrealized Equity Gains Contribution Account's deemed assets, as
determined by the Sponsor, in its discretion) attributable or allocable thereto.

                  A Participant shall become vested in amounts (if any) credited
to his or her Unrealized Equity Gains Contribution Account according to the
vesting schedule under the LTIP applicable to the award under the LTIP from
which the Unrealized Equity Gains Contribution derived.

         3.2 EMPLOYER CONTRIBUTION CREDITS. There shall be established and
maintained a separate Employer Contribution Credit Account in the name of each
Participant. There shall be established the following two (2) subaccounts under
a Participant's Employer Contribution Credit Account: (a) the Employer Matching
Contribution SubAccount; and (b) the Employer Discretionary Contribution
SubAccount. Each such SubAccount shall be credited or debited, as applicable,
with (a) amounts equal to the Employer's Contribution Credits credited to that
SubAccount; and (b) amounts equal to any deemed earnings and losses (to the
extent realized, based upon deemed fair market value of the SubAccount's deemed
assets as determined by the Sponsor, in its discretion) allocated to that
SubAccount.

                  (a) Employer Contribution Credits may be credited to the
Employer Matching Contribution SubAccounts of Participants who are eligible to
receive a matching contribution allocation under the 401(k) Plan. The Sponsor
shall credit such contributions with such frequency, and in such amounts, as the
Sponsor determines in its sole discretion, including, for example:

                           (i) crediting such contributions at the close of
each Plan Year in an amount equal to the excess of: (A) the matching
contributions that would be made by the Employer under the 401(k) Plan for the
Plan Year, calculated as if Participant Compensation Deferrals hereunder for the
Plan Year had instead been made to the 401(k) Plan, but using the Participant's
Compensation for the Plan Year rather than the 401(k) Plan's definition of
"compensation" and calculated without regard to the limits on recognizable
compensation and employee deferrals under the 401(k) Plan resulting from the
application of the Code's nondiscrimination testing requirements; over (B) the
matching contribution actually made by the Employer to the 401(k) Plan for the
Plan Year; and/or

                           (ii) crediting such contributions in an amount by
which the matching contribution to the 401(k) Plan on behalf of a Participant is
reduced on account of the inability of the 401(k) Plan to take into account in
calculating Employer matching contributions thereunder Compensation Deferrals
under this Plan.

                           Notwithstanding the above described discretion
accorded to the Sponsor to establish the amount of the Employer Contribution
Credits credited to the Participants' Employer Matching Contribution SubAccounts
each Plan Year, with respect to the Plan's initial (i.e., 2002) Plan Year, the
Sponsor shall credit such contributions in accordance with (i) and (ii) above,
using as the matching contribution rate twelve and onehalf percent (12.5%).


                                       6
<PAGE>

                           A Participant shall become vested in amounts (if
any) credited to his or her Employer Matching Contribution SubAccount according
to the vesting schedule applicable to matching contributions under the 401(k)
Plan.

                  (b) The Employer Contribution Credits credited to a
Participant's Employer Discretionary Contribution SubAccount for any particular
Plan Year shall be an amount (if any) determined by the Board, in its
discretion. The Sponsor shall credit such contributions on behalf of such
individuals, in such amounts and with such frequency, and subject to such
vesting requirements, as the Board determines in its sole discretion.

         3.3 CONTRIBUTIONS TO THE TRUST. Except as to amounts credited as
Phantom Stock under Section 4.6, an amount shall be contributed by the Employer
to the Trust maintained under Section 11.1 equal to the amount(s) required to be
credited to the Participant's Account under Sections 3.1 and 3.2. The Employer
shall make a good faith effort to contribute these amounts to the Trust as soon
as practicable following the date on which the contribution credit amount(s) are
determined.

                                    ARTICLE 4
                               ALLOCATION OF FUNDS

         4.1 ALLOCATION OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS. Subject to
such limitations as may from time to time be required by law, imposed by the
Sponsor or the Trustee or contained elsewhere in the Plan (including in Section
4.6), and subject to such operating rules and procedures as may be imposed from
time to time by the Sponsor, prior to the date on which a direction will become
effective, the Participant shall have the right to direct the Sponsor as to how
amounts in his or her Account shall be deemed to be invested. The Sponsor, may,
but is not required to, direct the Trustee to invest the account maintained in
the Trust on behalf of the Participant pursuant to the deemed investment
directions the Sponsor properly has received from the Participant.

                  The value of the Participant's Account shall be equal to the
value of the deemed investments maintained under the Trust on behalf of the
Participant plus, if applicable, any Phantom Stock deemed to be held in the
Participant's Unrealized Equity Gains Contribution Account. As of each valuation
date of the Trust, the Participant's Account will be credited or debited to
reflect the Participant's deemed investments of the Trust. The Participant's
Plan Account will be credited or debited with the increase or decrease in the
realizable net asset value or credited interest, as applicable, of the
designated deemed investments, as follows. As of each Valuation Date, an amount
equal to the net increase or decrease in realizable net asset value or credited
interest, as applicable (as determined by the Trustee), of each deemed
investment option within the Account since the preceding Valuation Date shall be
allocated among all Participants' Accounts deemed to be invested in that
investment option in accordance with the ratio which the portion of the Account
of each Participant which is deemed to be invested within that investment
option, determined as provided herein, bears to the aggregate of all amounts
deemed to be invested within that investment option.

         4.2 ACCOUNTING FOR DISTRIBUTIONS. As of the date of any distribution
hereunder, the distribution made hereunder to the Participant or his or her
Beneficiary or Beneficiaries shall be charged to such Participant's Account. If
a cash distribution is requested, the



                                       7
<PAGE>

amount of the distribution shall first be charged against the investments of the
Trust other than the Sponsor Stock Fund in which the Participant's Account is
deemed to be invested, on a pro rata basis, until such deemed investments are
exhausted. If an inkind distribution is requested, the amount of the
distribution shall be charged on a pro rata basis against all the investments of
the Trust in which the Participant's Account is deemed to be invested.

         4.3 SEPARATE ACCOUNTS. A separate bookkeeping account under the Plan
shall be established and maintained by the Sponsor to reflect the Account for
each Participant with bookkeeping subaccounts to show separately the
Participant's Compensation Deferral Account, the Participant's Unrealized Equity
Gains Contribution Account, and the Participant's Employer Contribution Credit
Account. Separate subaccounts shall also be maintained to reflect portions of a
Participant's Unrealized Equity Gains Contribution Account representing the
Plan's Sponsor Stock Fund and, if different, the Plan's other deemed investment
categories. Each subaccount will separately account for the credits and debits
described in Article 3. In addition, the Accounts of those Participants employed
by one Employer shall be accounted for separately from the Accounts of
Participants employed by other Employers.

         4.4 INTERIM VALUATIONS. If it is determined by the Sponsor that the
value of a Participant's Account as of any date on which distributions are to be
made differs materially from the value of the Participant's Account on the prior
Valuation Date upon which the distribution is to be based, the Sponsor, in its
discretion, shall have the right to designate any date in the interim as a
Valuation Date for the purpose of revaluing the Participant's Account so that
the Account will, prior to the distribution, reflect its share of such material
difference in value.

         4.5 DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS. Subject to such
limitations as may from time to time be required by law, imposed by the Sponsor
or the Trustee or contained elsewhere in the Plan (including in Section 4.6),
and subject to such operating rules and procedures as may be imposed from time
to time by the Sponsor, prior to and effective for each Designation Date, each
Participant may communicate to the Sponsor a direction (in accordance with (a),
below) as to how his or her Plan Account should be deemed to be invested among
such categories of deemed investments as may be made available by the Sponsor
hereunder. Such direction shall designate the percentage (in any whole percent
multiples) of each portion of the Participant's Plan Account which is requested
to be deemed to be invested in such categories of deemed investments, and shall
be subject to the following rules:

                  (a) Any initial or subsequent deemed investment direction
shall be in writing, on a form supplied by and filed with the Sponsor, and/or,
as required or permitted by the Sponsor, shall be by oral designation and/or
electronic transmission designation. A designation shall be effective as of the
Designation Date next following the date the direction is received and accepted
by the Sponsor on which it would be reasonably practicable for the Sponsor to
effect the designation.

                  (b) All amounts credited to the Participant's Account shall be
deemed to be invested in accordance with the then effective deemed investment
direction, and as of the Designation Date with respect to any new deemed
investment direction, all or a portion of the Participant's Account at that date
shall be reallocated among the designated deemed investment funds according to
the percentages specified in the new deemed investment direction unless and
until a subsequent deemed investment direction shall be filed and become
effective. An election concerning



                                       8
<PAGE>

deemed investment choices shall continue indefinitely as provided in the
Participant's most recent investment direction form provided by and filed with
the Sponsor.

                  (c) If the Sponsor receives an initial or revised deemed
investment direction which it deems to be incomplete, unclear or improper, the
Participant's investment direction then in effect shall remain in effect (or, in
the case of a deficiency in an initial deemed investment direction, the
Participant shall be deemed to have filed no deemed investment direction) until
the next Designation Date, unless the Sponsor provides for, and permits the
application of, corrective action prior thereto.

                  (d) If the Sponsor possesses (or is deemed to possess as
provided in (c), above) at any time directions as to the deemed investment of
less than all of a Participant's Account, the Participant shall be deemed to
have directed that the undesignated portion of the Account be deemed to be
invested in a money market, fixed income or similar fund made available under
the Plan as determined by the Sponsor in its discretion.

                  (e) Each Participant hereunder, as a condition to his or her
participation hereunder, agrees to indemnify and hold harmless the Sponsor, the
Employer and their agents and representatives from any losses or damages of any
kind relating to the deemed investment of the Participant's Account hereunder.

                  (f) Each reference in this Section to a Participant shall be
deemed to include, where applicable, a reference to a Beneficiary of a deceased
Participant.

         4.6 DEEMED INVESTMENTS IN PHANTOM STOCK. Participants' Unrealized
Equity Gains Contributions automatically will

be deemed to be invested in Phantom Stock, through the Sponsor Stock Fund.

                  A Participant may not transfer any portion of his or her
Account from the Sponsor Stock Fund into another deemed investment option, nor
may a Participant transfer any amounts from another deemed investment option
into the Sponsor Stock Fund.

                  All amounts invested in Phantom Stock shall be treated as if
they had been invested in shares of Common Stock purchased from the Sponsor at
fair market value, determined pursuant to Section 1.27.

                  All distributions with respect to the portion of a
Participant's Account allocated to the Sponsor Stock Fund shall be made solely
in shares of Common Stock. For purposes of making distributions with respect to
amounts allocated to the Sponsor Stock Fund, any fractional shares credited to
the Participant's Account shall be rounded up to the nearest full share.

                  In the event that the Sponsor declares a cash dividend to the
holders of its Common Stock, with respect to each Participant deemed to hold
Phantom Stock in the Sponsor Stock Fund, the Sponsor shall credit the
Participant's Compensation Deferral Account with an amount equal to that amount
of cash that a holder of a share of Common Stock would receive multiplied by the
shares of Phantom Stock credited to the Participant's Sponsor Stock Fund on the
date of record of such dividend. Such contributions shall be treated as
Compensation Deferrals for all purposes of this



                                       9
<PAGE>

Plan, including being eligible for Participant investment direction among the
Plan's deemed investments, except that the same shall not be considered
Compensation Deferrals for any matching Employer Contribution Credits made under
the Plan.

                  Despite the foregoing, the Sponsor may, but need not, prohibit
or delay the liquidation, disposition, or acquisition of any Phantom Stock units
by any Participant who is subject to short swing trading liability under Section
16(b) of the Securities and Exchange Act of 1934 if said liquidation,
disposition, or acquisition may result in the imposition of such liability.

         4.7 EXPENSES AND TAXES. Expenses, including Trustee fees, associated
with the administration or operation of the Plan shall be paid by the Sponsor
from its general assets unless the Sponsor elects to charge such expenses
against the appropriate Participant's Account or Participants' Accounts. Any
taxes allocable to an Account (or portion thereof) maintained under the Plan
which are payable prior to the distribution of the Account (or portion thereof),
as determined by the Sponsor, shall be paid by the Sponsor unless the Sponsor
elects to charge such taxes against the appropriate Participant's Account or
Participants' Accounts.

                                    ARTICLE 5
                             ENTITLEMENT TO BENEFITS

         5.1 FIXED PAYMENT DATES; TERMINATION OF EMPLOYMENT. On his or her Form
and Timing of Payment Election Form, a Participant may select a fixed payment
date for the payment or commencement of payment of that part of his or her
vested Account attributable to Compensation Deferrals, Unrealized Equity Gains
Contributions and/or Employer Contribution Credits made by the Participant or on
the Participant's behalf during the period indicated in the Form and Timing of
Payment Election Form (or the Participant may select fixed payment dates for the
payment or commencement of payment of two (2) portions of that part of his or
her vested Account), which will be valued and payable according to the
provisions of Article 6. Such payment dates may be extended to later dates so
long as elections to so extend the dates are made by the Participant at least
six (6) months prior to the date on which the distribution is to be made or
commence. Such payment dates may not be accelerated, except as provided in
Section 5.2.

                  A Participant who selects payment or commencement of payment
of the designated part of his or her vested Account on a fixed date or dates
shall receive payment of the designated part of his or her vested Account at the
earlier of such fixed payment date or dates (as extended, if applicable) or his
or her termination of employment with the Employer.

                  Any fixed payment date elected by a Participant as provided
above must be a date no earlier than the January 1 of the third calendar year
after the calendar year in which the election is made.

                  If a Participant does not make an election as provided above
for any particular amounts hereunder, and the Participant terminates employment
with the Employer for any reason, the Participant's vested Account at the date
of such termination shall be valued and payable at or commencing at such
termination according to the provisions of Article 6.


                                       10
<PAGE>

         5.2 IMMEDIATE DISTRIBUTION ELECTION. In addition to a Participant's
option to have payment or commencement of payment of his or her vested Account
occur on the fixed payment date described in Section 5.1 or on the Participant's
termination of employment as described in Section 5.1, a Participant may elect
to have his or her vested Account (or a portion thereof) paid or commence to be
paid immediately upon his or her election. Any amount paid pursuant to this
Section shall be subject to a ten percent (10%) penalty, with the amount of the
penalty being forfeited by the Participant and returned to the Employer. In
addition, a Participant who elects an immediate distribution under this Section
shall not be eligible to make, or to have made on his or her behalf, any
contributions to the Plan for the remainder of the Plan Year in which such
election is made and for the following full Plan Year.

                  The preceding notwithstanding, with respect to the
Participant's Unrealized Equity Gains Contribution Account, the immediate
distribution election opportunity described above shall not be available to the
Participant until January 1 of the third calendar year after the calendar year
in which the Unrealized Equity Gains Contributions for which an immediate
distribution election is desired have been credited to the Participant's
Account.

                  Any Participant wishing to elect an immediate distribution
pursuant to this Section must submit such election to the Sponsor, in writing,
on a form prescribed by the Sponsor. The distribution shall occur or commence as
soon as is administratively feasible following the Sponsor's receipt of such
form.

                  Notwithstanding the foregoing, the Sponsor may but need not
deny an immediate distribution election made by any Participant who is subject
to shortswing trading liability of Section 16(b) of the Securities and Exchange
Act of 1934 under circumstances in which said distribution may result in the
imposition of such liability.

         5.3 HARDSHIP DISTRIBUTIONS. In the event of financial hardship of the
Participant, as hereinafter defined, the Participant may apply to the Sponsor
for the distribution of all or any part of his or her vested Account. The
Sponsor shall consider the circumstances of each such case, and the best
interests of the Participant and his or her family, and shall have the right, in
its sole discretion, if applicable, to allow such distribution, or, if
applicable, to direct a distribution of part of the amount requested, or to
refuse to allow any distribution. Upon a finding of financial hardship, the
Sponsor shall direct that the appropriate distribution is made to the
Participant with respect to the Participant's vested Account. In no event shall
the aggregate amount of the distribution exceed either the full value of the
Participant's vested Account or the amount determined by the Sponsor to be
necessary to alleviate the Participant's financial hardship (which financial
hardship may be considered to include any taxes due because of the distribution
occurring because of this Section), and which is not reasonably available from
other resources of the Participant. For purposes of this Section, the value of
the Participant's vested Account shall be determined as of the date of the
distribution.

                  "Financial hardship" means (a) a severe financial hardship to
the Participant resulting from a sudden and unexpected illness or accident of
the Participant or of a dependent (as defined in Code section 152(a)) of the
Participant, (b) loss of the Participant's property due to casualty, or (c)
other similar extraordinary and unforeseeable circumstances arising as a result
of events beyond the



                                       11
<PAGE>

control of the Participant, each as determined to exist by the Sponsor. A
distribution may be made under this Section only with the consent of the
Sponsor.

                  Notwithstanding the foregoing, the Sponsor may but need not
deny a hardship distribution election made by a Participant who is subject to
shortswing trading liability of Section 16(b) of the Securities and Exchange
Act of 1934 under circumstances in which said distribution may result in the
imposition of such liability.

         5.4 REEMPLOYMENT OF RECIPIENT. If a Participant receiving installment
distributions pursuant to Section 6.2 is reemployed by the Employer, the
remaining distributions due to the Participant shall be suspended until such
time as the Participant (or his or her Beneficiary) once again becomes eligible
for benefits under Section 5.1 or 5.2, at which time such distribution shall
commence, subject to the limitations and conditions contained in this Plan.

                                    ARTICLE 6
                            DISTRIBUTION OF BENEFITS

         6.1 AMOUNT. A Participant (or his or her Beneficiary) shall become
entitled to receive, within ninety (90) days following the earlier of the
Participant's termination of employment with the Employer or the date or dates
selected by the Participant on his or her Form and Timing of Payment Election
Form (or, if no such selection is made, on or about the date of the
Participant's termination of employment with the Employer), a distribution in an
aggregate amount equal to the Participant's vested Account. A Participant may
alternatively elect to receive an immediate distribution, subject to a ten
percent (10%) penalty and a suspension from the Plan, of all or a portion of his
or her vested Account pursuant to Section 5.2. Any payment due hereunder from
the Trust which is not paid by the Trust for any reason will be paid by the
Employer from its general assets.

         6.2 METHOD OF PAYMENT.

                  (a) Cash Or InKind Payments. Payments under the Plan (other
than payments with respect to amounts deemed invested in Phantom Stock) shall be
made in cash or inkind, as elected by the Participant and as permitted by the
Sponsor and the Trustee in their sole and absolute discretion, subject, however,
to Section 12.4 and any other applicable restrictions on transfer that may be
applicable legally or contractually. All amounts deemed invested in Phantom
Stock through the Sponsor Stock Fund shall be distributed in shares of Common
Stock.

                  (b) Timing and Manner of Payment. Except as otherwise provided
herein, in the case of distributions to a Participant or his or her Beneficiary
by virtue of an entitlement pursuant to Sections 5.1, an aggregate amount equal
to the Participant's vested Account will be paid by the Trust or the Sponsor, as
provided in Section 6.1, in a lump sum or in up to ten (10) annual installments
(adjusted for gains and losses), as selected by the Participant as provided in
Article 5. If a Participant fails to designate properly the manner of payment of
the Participant's benefit under the Plan, such payment will be in a lump sum.

                  If the whole or any part of a payment hereunder is to be in
installments, the total to be so paid shall continue to be deemed to be invested
pursuant to Article 4 under such procedures as the Sponsor may establish, in
which case any deemed income, gain, loss or expense or tax allocable



                                       12
<PAGE>

thereto (as determined by the Sponsor, in its discretion) shall be reflected in
the installment payments, using such method for the calculation of the
installments as the Sponsor shall reasonably determine.

         6.3 DEATH BENEFITS. If a Participant dies before terminating his or her
employment with the Employer and before the commencement of payments to the
Participant hereunder, the entire value of the Participant's vested Account
shall be paid, within ninety (90) days following the Participant's death, in a
lump sum, to the person or persons designated in accordance with Section 7.1.

                  Upon the death of a Participant after payments hereunder have
begun but before he or she has received all payments to which he or she is
entitled under the Plan, the remaining benefit payments shall be paid to the
person or persons designated in accordance with Section 7.1, in the manner in
which such benefits were payable to the Participant.

                                    ARTICLE 7
                         BENEFICIARIES; PARTICIPANT DATA

         7.1 DESIGNATION OF BENEFICIARIES. Each Participant from time to time
may designate any person or persons (who may be named contingently or
successively) to receive such benefits as may be payable under the Plan upon or
after the Participant's death, and such designation may be changed from time to
time by the Participant by filing a new designation. Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Sponsor, and will be effective only when filed in writing with
the Sponsor during the Participant's lifetime.

                  In the absence of a valid Beneficiary designation, or if, at
the time any benefit payment is due to a Beneficiary, there is no living
Beneficiary validly named by the Participant, the Sponsor shall pay any such
benefit payment to the Participant's spouse, if then living, but otherwise to
the Participant's then living descendants, if any, per stirpes, but, if none, to
the Participant's estate. In determining the existence or identity of anyone
entitled to a benefit payment, the Sponsor may rely conclusively upon
information supplied by the Participant's personal representative, executor or
administrator. If a question arises as to the existence or identity of anyone
entitled to receive a benefit payment as aforesaid, or if a dispute arises with
respect to any such payment, then, notwithstanding the foregoing, the Sponsor,
in its sole discretion, may direct that the Trustee or Employer distribute such
payment to the Participant's estate without liability for any tax or other
consequences which might flow therefrom, or may take such other action as the
Sponsor deems to be appropriate.

         7.2 INFORMATION TO BE FURNISHED BY PARTICIPANTS AND BENEFICIARIES;
INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES. Any communication, statement
or notice addressed to a Participant or to a Beneficiary at his or her last post
office address as shown on the Employer's records shall be binding on the
Participant or Beneficiary for all purposes of the Plan. Neither an Employer nor
the Sponsor shall be obliged to search for any Participant or Beneficiary beyond
the sending of a registered letter to such last known address. If the Sponsor or
Employer notifies any Participant or Beneficiary that he or she is entitled to
an amount under the Plan and the Participant or Beneficiary fails to claim such
amount or make



                                       13
<PAGE>

his or her location known to the Employer within three (3) years thereafter,
then, except as otherwise required by law, if the location of one or more of the
next of kin of the Participant is known to the Employer, the Sponsor may direct
distribution of such amount to any one or more or all of such next of kin, and
in such proportions as the Sponsor determines. If the location of none of the
foregoing persons can be determined, the Sponsor shall have the right to direct
that the amount payable shall be deemed to be a forfeiture, except that the
dollar amount of the forfeiture, unadjusted for deemed gains or losses in the
interim, shall be paid by the Sponsor if a claim for the benefit subsequently is
made by the Participant or the Beneficiary to whom it was payable. If a benefit
payable to an unlocated Participant or Beneficiary is subject to escheat
pursuant to applicable state law, neither the Employer nor the Sponsor shall not
be liable to any person for any payment made in accordance with such law.

                                    ARTICLE 8
                                 ADMINISTRATION

         8.1 ADMINISTRATIVE AUTHORITY. Except as otherwise specifically provided
herein, the Sponsor shall have the sole responsibility for and the sole control
of the operation and administration of the Plan, and shall have the power and
authority to take all action and to make all decisions and interpretations which
may be necessary or appropriate in order to administer and operate the Plan,
including, without limiting the generality of the foregoing, the power, duty and
responsibility to:

                  (a) Resolve and determine all disputes or questions arising
under the Plan, and to remedy any ambiguities, inconsistencies or omissions in
the Plan.

                  (b) Adopt such rules of procedure and regulations as in its
opinion may be necessary for the proper and efficient administration of the Plan
and as are consistent with the Plan.

                  (c) Implement the Plan in accordance with its terms and the
rules and regulations adopted as above.

                  (d) Make determinations with respect to the eligibility of any
Eligible Employee as a Participant and make determinations concerning the
crediting of Plan Accounts.

                  (e) Appoint any persons or firms, or otherwise act to secure
specialized advice or assistance, as it deems necessary or desirable in
connection with the administration and operation of the Plan, and the Sponsor
shall be entitled to rely conclusively upon, and shall be fully protected in any
action or omission taken by it in good faith reliance upon, the advice or
opinion of such firms or persons. The Sponsor shall have the power and authority
to delegate from time to time by written instrument all or any part of its
duties, powers or responsibilities under the Plan, both ministerial and
discretionary, as it deems appropriate, to any person or committee, and in the
same manner to revoke any such delegation of duties, powers or responsibilities.
Any action of such person or committee in the exercise of such delegated duties,
powers or responsibilities shall have the same force and effect for all purposes
hereunder as if such action had been taken by the Sponsor. Further, the Sponsor
may authorize one or more persons to execute any certificate or document on
behalf of the Sponsor, in which event any person notified by the Sponsor of such
authorization shall be entitled to accept and conclusively rely upon any such
certificate or document executed by such person as representing



                                       14
<PAGE>

action by the Sponsor until such notified person shall have been notified of the
revocation of such authority.

         8.2 UNIFORMITY OF DISCRETIONARY ACTS. Whenever in the administration or
operation of the Plan discretionary actions by the Sponsor are required or
permitted, such actions shall be consistently and uniformly applied to all
persons similarly situated, and no such action shall be taken which shall
discriminate in favor of any particular person or group of persons.

         8.3 LITIGATION. Except as may be otherwise required by law, in any
action or judicial proceeding affecting the Plan, no Participant or Beneficiary
shall be entitled to any notice or service of process, and any final judgment
entered in such action shall be binding on all persons interested in, or
claiming under, the Plan.

         8.4 CLAIMS PROCEDURE. Any person claiming a benefit under the Plan (a
"Claimant") shall present the claim, in writing, to the Sponsor, and the Sponsor
shall respond in writing. If the claim is denied, the written notice of denial
shall state, in a manner calculated to be understood by the Claimant:

                  (a) The specific reason or reasons for the denial, with
specific references to the Plan provisions on which the denial is based;

                  (b) A description of any additional material or information
necessary for the Claimant to perfect his or her claim and an explanation of why
such material or information is necessary; and

                  (c) An explanation of the Plan's claims review procedure.

                  The written notice denying or granting the Claimant's claim
shall be provided to the Claimant within ninety (90) days after the Sponsor's
receipt of the claim, unless special circumstances require an extension of time
for processing the claim. If such an extension is required, written notice of
the extension shall be furnished by the Sponsor to the Claimant within the
initial ninety (90) day period and in no event shall such an extension exceed a
period of ninety (90) days from the end of the initial ninety (90) day period.
Any extension notice shall indicate the special circumstances requiring the
extension and the date on which the Sponsor expects to render a decision on the
claim. Any claim not granted or denied within the period noted above shall be
deemed to have been denied.

                  Any Claimant whose claim is denied, or deemed to have been
denied under the preceding sentence (or such Claimant's authorized
representative), may, within sixty (60) days after the Claimant's receipt of
notice of the denial, or after the date of the deemed denial, request a review
of the denial by notice given, in writing, to the Sponsor. Upon such a request
for review, the claim shall be reviewed by the Sponsor (or its designated
representative) which may, but shall not be required to, grant the Claimant a
hearing. In connection with the review, the Claimant may have representation,
may examine pertinent documents, and may submit issues and comments in writing.

                  The decision on review normally shall be made within sixty
(60) days of the Sponsor's receipt of the request for review. If an extension of
time is required due to special



                                       15
<PAGE>

circumstances, the Claimant shall be notified, in writing, by the Sponsor, and
the time limit for the decision on review shall be extended to one hundred
twenty (120) days. The decision on review shall be in writing and shall state,
in a manner calculated to be understood by the Claimant, the specific reasons
for the decision and shall include references to the relevant Plan provisions on
which the decision is based. The written decision on review shall be given to
the Claimant within the sixty (60) day (or, if applicable, the one hundred
twenty (120) day) time limit discussed above. If the decision on review is not
communicated to the Claimant within the sixty (60) day (or, if applicable, the
one hundred twenty (120) day) period discussed above, the claim shall be deemed
to have been denied upon review. All decisions on review shall be final and
binding with respect to all concerned parties.

                                    ARTICLE 9
                                    AMENDMENT

         9.1 RIGHT TO AMEND. The Sponsor, by action of the Board, shall have the
right to amend the Plan, at any time and with respect to any provisions hereof,
and all parties hereto or claiming any interest hereunder shall be bound by such
amendment; provided, however, that no such amendment shall deprive a Participant
or a Beneficiary of a right accrued hereunder prior to the date of the
amendment.

         9.2 AMENDMENTS TO ENSURE PROPER CHARACTERIZATION OF PLAN.
Notwithstanding the provisions of Section 9.1, the Plan may be amended by the
Sponsor, by action of the Board, at any time, retroactively if required, if
found necessary, in the opinion of the Sponsor, in order to ensure that the Plan
is characterized as "tophat" plan of deferred compensation maintained for a
select group of management or highly compensated employees as described under
ERISA sections 201(2), 301(a)(3), and 401(a)(1), and to conform the Plan to the
provisions and requirements of any applicable law (including ERISA and the
Code). No such amendment shall be considered prejudicial to any interest of a
Participant or a Beneficiary hereunder.

         9.3 CHANGES IN LAW AFFECTING TAXABILITY.

                  (a) Operation. This Section shall become operative upon the
enactment of any change in applicable statutory law or the promulgation by the
Internal Revenue Service of a final regulation or other pronouncement having the
force of law, which statutory law, as changed, or final regulation or
pronouncement, as promulgated, would cause any Participant to include in his or
her federal gross income amounts accrued by the Participant under the Plan on a
date (an "Early Taxation Event") prior to the date on which such amounts are
made available to him or her hereunder.

                  (b) Affected Right or Feature Nullified. Notwithstanding any
other Section of this Plan to the contrary (but subject to subsection (c),
below), as of an Early Taxation Event, the feature or features of this Plan that
would cause the Early Taxation Event shall be null and void, to the extent, and
only to the extent, required to prevent the Participant from being required to
include in his or her federal gross income amounts accrued by the Participant
under the Plan prior to the date on which such amounts are made available to him
or her hereunder. If only a portion of a Participant's Account is impacted by
the change in the law, then only such portion shall be subject to this Section,
with the remainder of the Account not so affected being subject to such rights
and features as if the law were not changed. If the law only impacts
Participants who have a certain status with respect to the Employer, then only
such Participants shall be subject to this Section.


                                       16
<PAGE>

                  (c) Tax Distribution. If an Early Taxation Event is earlier
than the date on which the statute, regulation or pronouncement giving rise to
the Early Taxation Event is enacted or promulgated, as applicable (i.e., if the
change in the law is retroactive), there shall be distributed to each
Participant, as soon as practicable following such date of enactment or
promulgation, the amounts that became taxable on the Early Taxation Event.

                                   ARTICLE 10
                                   TERMINATION

         10.1 SPONSOR'S RIGHT TO TERMINATE OR SUSPEND PLAN. The Sponsor reserves
the right to terminate the Plan and/or obligations to make further credits to
Plan Accounts, by action of the Board. The Sponsor also reserves the right to
suspend the operation of the Plan for a fixed or indeterminate period of time,
by action of the Board. Finally, the Sponsor reserves the right to terminate any
Employer's participation herein as provided in Section 10.6.

         10.2 AUTOMATIC TERMINATION OF PLAN. The Plan automatically shall
terminate upon the dissolution of the Sponsor, or upon its merger into or
consolidation with any other corporation or business organization if there is a
failure by the surviving corporation or business organization to adopt
specifically and agree to continue the Plan.

         10.3 SUSPENSION OF DEFERRALS. In the event of a suspension of the Plan,
the Sponsor shall continue all aspects of the Plan, other than contributions to
the Plan, during the period of the suspension, in which event payments hereunder
will continue to be made during the period of the suspension in accordance with
Articles 5 and 6.

         10.4 ALLOCATION AND DISTRIBUTION. This Section shall become operative
on a complete termination of the Plan. The provisions of this Section also shall
become operative in the event of a partial termination of the Plan, as
determined by the Sponsor, but only with respect to that portion of the Plan
attributable to the Participants to whom the partial termination is applicable.
Upon the effective date of any such event, notwithstanding any other provisions
of the Plan, no persons who were not theretofore Participants shall be eligible
to become Participants, the value of the interest of all Participants and
Beneficiaries shall be determined and, after deduction of estimated expenses in
liquidating and, if applicable, paying Plan benefits, paid to them as soon as is
practicable after such termination.

         10.5 SUCCESSOR TO SPONSOR. Any corporation or other business
organization which is a successor to the Sponsor by reason of a consolidation,
merger or purchase of substantially all of the assets of the Sponsor shall have
the right to become a party to the Plan by adopting the same by resolution of
the entity's board of directors or other appropriate governing body. If, within
ninety (90) days from the effective date of such consolidation, merger or sale
of assets, such new entity does not become a party hereto, as above provided,
the Plan automatically shall be terminated, and the provisions of Section 10.4
shall become operative.

         10.6 WITHDRAWAL OR TERMINATION BY AN EMPLOYER. Any Employer, by action
of its board of directors or other governing authority and notice to the Sponsor
and the Trustee, may withdraw from the Plan and Trust at any time, or may
terminate the Plan and Trust with respect to its Employees at any time, without
affecting other Employers not withdrawing or



                                       17
<PAGE>

terminating. A withdrawing Employer may arrange for the continuation of this
Plan and Trust in separate forms for its own Employees, with such amendments, if
any, as it may deem proper, and may arrange for continuation of the Plan and
Trust by merger with an existing plan and trust. The Sponsor may, in its
absolute discretion, terminate an Employer's participation in this Plan at any
time, without the consent of any Employer, Participant or Beneficiary.

                                   ARTICLE 11
                                    THE TRUST

         11.1 ESTABLISHMENT OF TRUST. The Sponsor shall establish the Trust with
the Trustee pursuant to such terms and conditions as are set forth in the Trust
agreement to be entered into between the Sponsor and the Trustee or the Sponsor
(directly or through an agent of the Sponsor or the Trustee) shall cause to be
maintained one or more separate subaccounts in an existing Trust maintained with
the Trustee with respect to one or more other plans of the Sponsor, which
subaccount or subaccounts represent Participants' interests in the Plan. Any
such Trust shall be intended to be treated as a "grantor trust" under the Code
and the establishment of the Trust or the utilization of any existing Trust for
Plan benefits, as applicable, shall not be intended to cause any Participant to
realize current income on amounts contributed thereto, and the Trust shall be so
interpreted.

                                   ARTICLE 12
                                  MISCELLANEOUS

         12.1 LIMITATIONS ON LIABILITY OF SPONSOR OR EMPLOYER. Neither the
establishment of the Plan nor any modification thereof, nor the creation of any
account under the Plan, nor the payment of any benefits under the Plan shall be
construed as giving to any Participant or other person any legal or equitable
right against the Sponsor, the Employer, or any officer or employee thereof
except as provided by law or by any Plan provision. Neither the Sponsor nor the
Employer in any way guarantee any Participant's Account from loss or
depreciation, whether caused by poor investment performance of a deemed
investment or the inability to realize upon an investment due to an insolvency
affecting an investment vehicle or any other reason. In no event shall the
Sponsor, the Employer, or any successor, employee, officer, director or
stockholder of the Sponsor or the Employer, be liable to any person on account
of any claim arising by reason of the provisions of the Plan or of any
instrument or instruments implementing its provisions, or for the failure of any
Participant, Beneficiary or other person to be entitled to any particular tax
consequences with respect to the Plan, or any credit or distribution hereunder.
Without limiting the generality of the preceding, neither the Sponsor nor the
Employer shall be liable to any person on account of any claim arising by reason
of any action or inaction on the part of any thirdparty service provider to the
Plan, except to the extent such service provider is liable therefor to the Plan
Sponsor or the Employer.

         12.2 CONSTRUCTION. If any provision of the Plan is held to be illegal
or void, such illegality or invalidity shall not affect the remaining provisions
of the Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provision had never been inserted herein.
For all purposes of the Plan, where the context admits, the singular shall
include the plural, and the plural shall include the singular. Headings of
Articles and Sections herein are inserted only for convenience of reference and
are not to be considered in the construction of the



                                       18
<PAGE>

Plan. The laws of Texas shall govern, control and determine all questions of law
arising with respect to the Plan and the interpretation and validity of its
respective provisions, except where those laws are preempted by the laws of the
United States. Participation under the Plan will not give any Participant the
right to be retained in the service of the Employer nor any right or claim to
any benefit under the Plan unless such right or claim has specifically accrued
hereunder.

                  The Plan is intended to be and at all times shall be
interpreted and administered so as to qualify as an unfunded deferred
compensation plan, and no provision of the Plan shall be interpreted so as to
give any individual any right in any assets of the Employer which is greater
than the rights of a general unsecured creditor of the Employer.

         12.3 SPENDTHRIFT PROVISION. No amount payable to a Participant or a
Beneficiary under the Plan will, except as otherwise specifically provided by
law, be subject in any manner to anticipation, alienation, attachment,
garnishment, sale, transfer, assignment (either at law or in equity), levy,
execution, pledge, encumbrance, charge or any other legal or equitable process,
and any attempt to do so will be void; nor will any benefit be in any manner
liable for or subject to the debts, contracts, liabilities, engagements or torts
of the person entitled thereto. Further, (i) the withholding of taxes from Plan
benefit payments, (ii) the recovery under the Plan of overpayments of benefits
previously made to a Participant or Beneficiary, (iii) if applicable, the
transfer of benefit rights from the Plan to another plan, or (iv) the direct
deposit of benefit payments to an account in a banking institution (if not
actually part of an arrangement constituting an assignment or alienation) shall
not be construed as an assignment or alienation.

                  In the event that any Participant's or Beneficiary's benefits
hereunder are garnished or attached by order of any court, the Sponsor, the
Employer or the Trustee may bring an action or a declaratory judgment in a court
of competent jurisdiction to determine the proper recipient of the benefits to
be paid under the Plan. During the pendency of said action, any benefits that
become payable shall be held as credits to the Participant's or Beneficiary's
Account or, if the Sponsor, the Employer or the Trustee prefers, paid into the
court as they become payable, to be distributed by the court to the recipient as
the court deems proper at the close of said action.

         12.4 SPONSOR STOCK SUBJECT TO THE PLAN.

                  (a) Changes in Capital Structure. Subject to any required
action by the shareholders and directors of the Sponsor, the number of units of
Phantom Stock allocable to the Account of any Participant and the number of
shares of Common Stock distributable from the Account of any Participant and the
perunit value or pershare price thereof shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, combination,
reclassification, the payment of a stock dividend on the Common Stock or any
other increase or decrease in the number of such shares of Common Stock effected
without receipt of consideration by the Sponsor. Such adjustment shall be made
by the Board, whose determination in that respect shall be final, binding, and
conclusive.

                           The Sponsor may, if it so determines in the exercise
of its sole discretion, also make provision for adjusting the number or class of
securities covered by the Plan, as well as the value thereof or price to be paid
therefor, in the event of the Sponsor's effecting one or more reorganizations,
recapitalizations, rights, offerings, or other increase or reductions of the
number of



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<PAGE>

shares of its outstanding Common Stock, or in the event of the Sponsor's being
consolidated with or merged into any other corporation. Unless otherwise
determined by the Board, upon the dissolution or liquidation of the Sponsor or
upon any merger or consolidation in any Plan Year, if the Sponsor is not the
surviving corporation, a Participant's right to receive shares of Common Stock
hereunder shall terminate and thereupon become null and void.

                  (b) Necessary Actions. To the extent required by law, as
determined by the Board, the adoption of the Plan shall be subject to approval
by the affirmative vote of the shareholders of the Sponsor in accordance with
applicable federal or state laws. Shares of Common Stock shall not be issued
under the Plan unless the issuance and delivery of such securities pursuant
thereto shall comply with all relevant provisions of federal, state, and local
securities laws. As a condition to the issuance of securities under the Plan,
the Sponsor may require the Participant to represent and warrant, at the time of
any allocation of securities, that the securities are being acquired only for
investment and without any present intention to sell or distribute such
securities if, in the opinion of the Sponsor, such a representation is required
by any of the aforementioned relevant provisions of law. During the term of this
Plan, the Sponsor will at all times reserve and keep available the number of
securities as shall be sufficient to satisfy the requirements of the Plan.
Inability of the Sponsor to obtain pertinent approval or exemption from any
regulatory body having jurisdiction and authority deemed by the Sponsor to be
necessary to the lawful allocation, issuance, or sale of any securities
hereunder shall relieve the Sponsor of any liability in respect of the
nonallocation, nonissuance, or nonsale of such securities as to which such
requisite authority shall not have been obtained.

         IN WITNESS WHEREOF, the Sponsor has caused the Plan to be executed and
its seal to be affixed hereto, effective as of the 1st day of January, 2002.


ATTEST/WITNESS:                             THE HOUSTON EXPLORATION COMPANY

/s/ Liz Melton                             By:  /s/ Roger B. Rice        (SEAL)
---------------------------------              ---------------------------

Print:  Liz Melton                        Print Name:  Roger Rice
      ---------------------------                      -------------------------
                                           Date:   10/21/02
                                                 -------------------------------


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