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                                                                   EXHIBIT 10.16
                                                      1999 EQUITY INCENTIVE PLAN

                         COMMONWEALTH ENERGY CORPORATION

                           1999 EQUITY INCENTIVE PLAN

                                  FOR EMPLOYEES

         1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company and its Subsidiaries,
by offering them an opportunity to participate in the Company's future
performance through awards of Options, Restricted Stock Awards and Stock
Bonuses. Capitalized terms not defined in the text are defined in Section 23.

         2. SHARES SUBJECT TO THE PLAN.

         2.1 Number of Shares Available. Subject to Sections 2.2 and 18, the
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be Seven Million (7,000,000) Shares. Shares that are subject to
(a) issuance upon exercise of an Option but cease to be subject to such Option
for any reason other than exercise of such Option; (b) an Award granted
hereunder but are forfeited or are repurchased by the Company at the original
issue price; and (c) an Award that otherwise terminates without Shares being
issued will again become available for grant and issuance under the Plan. At all
times the Company shall reserve and keep available a sufficient number of Shares
as shall be required to satisfy the requirements of all outstanding Options
granted under this Plan and all other outstanding but unvested Awards granted
under this Plan.

         2.2 Adjustment of Shares. In the event that the number of outstanding
shares is changed by a stock dividend, recapitalization, stock split, reverse
stock split, subdivision, combination, reclassification or similar change in the
capital structure of the Company without consideration, then (a) the number of
Shares reserved for issuance under this Plan, (b) the Exercise Prices of and
number of Shares subject to outstanding Options, and (c) the number of Shares
subject to other outstanding Awards will be proportionately adjusted, subject to
any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of
a Share will not be issued but will either be replaced by a cash payment equal
to the Fair Market Value of such fraction of a Share or will be rounded up to
the nearest whole Share, as determined by the Board.

         3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted to
employees (including officers and directors who are also employees) of the
Company or of a Subsidiary of the Company. All other Awards may be granted to
employees, officers, directors, consultants, independent contractors and
advisors of the Company or any Subsidiary of the Company; provided such
consultants, contractors and advisors render bona fide services not in
connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Award under this Plan.

         4.       ADMINISTRATION.

         4.1 Board Authority. This Plan will be administered by the Board based
on the recommendations of the Committee. Subject to the general purposes, terms
and conditions of this Plan, the Board will have full power to implement and
carry out this Plan. Without limitation, the Board will have the authority to:

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         (a) construe and interpret this Plan, any Award Agreement and any other
agreement or document executed pursuant to this Plan;

         (b) prescribe, amend and rescind rules and regulations relating to this
Plan or any Award;

         (c) select persons to receive Awards;

         (d) determine the form and terms of Awards;

         (e) determine the number of Shares or other consideration subject to
Awards;

         (f) determine whether Awards will be granted singly, in combination
with, in tandem with, in replacement of, or as alternatives to, other Awards
under this Plan or any other incentive or compensation plan of the Company or
any parent or Subsidiary of the Company;

         (g) grant waivers of Plan or Award conditions;

         (h) determine the vesting, exercisability and payment of Awards;

         (i) correct any defect, supply any omission or reconcile any
inconsistency in this Plan, any Award or any Award Agreement;

         (j) determine whether an Award has been earned; and

         (k) make all other determinations necessary or advisable for the
administration of this Plan.

         4.2 Board Discretion. Any determination made by the Board with respect
to any Award will be made in its sole discretion at the time of grant of the
Award or, unless in contravention of any express term of this Plan or Award, at
any later time, and such determination will be final and binding on the Company
and on all persons having an interest in any Award under this Plan. The Board
may delegate to the Committee or one or more officers of the Company the
authority to grant an Award under this Plan to Participants who are not Insiders
of the Company.

         5. OPTIONS. The Board may grant Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs") to eligible
persons. The Board shall determine the type of Option which may be granted to an
eligible person (ISO or NQSO), the number of Shares subject to the Option, the
Exercise Price of the Option, the period during which the Option may be
exercised and all other terms and conditions of the Option, subject to the
following:

         5.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO ("Stock Option Agreement"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the Board
may from time to time approve, and which will comply with and be subject to the
terms and conditions of this Plan.

         5.2 Date of Grant. The date of grant of an Option will be the date on
which the Board makes the determination to grant such Option, unless otherwise
specified by the Board. A Stock Option Agreement and a copy of this Plan will be
delivered to the Participant within a reasonable time after the granting of the
Option.

         5.3 Exercise Period. Options shall be exercisable within the times or
upon the events determined by the Board as set forth in the Stock Option
Agreement governing such Option, subject to the following limitations:

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         (a) no Option will be exercisable after the expiration of ten (10)
years from the date the Option is granted;

         (b) Options shall be exercisable at the rate of at least 25% of the
Option Shares per year over four years from the date the Option Award is
granted, with the initial vesting to occur one (1) year after the Option grant
date. However, this minimum vesting requirement shall not be applicable with
respect to any Option granted to (i) any officers of the Company, (ii) members
of the Board or of the board of any Subsidiary or (iii) consultants who provide
services to the Company (or any Subsidiary of the Company); and

         (c) no ISO granted to a person who directly or by attribution owns more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any Parent or Subsidiary of the Company ("Ten Percent
Stockholder") will be exercisable after the expiration of five (5) years from
the date the ISO is granted.

         Subject to the foregoing limitations, the Board may provide for Options
to become exercisable at one time or from time to time, periodically or
otherwise, in such number of Shares or percentage of Shares as it determines.

         5.4 Exercise Price. The Exercise Price of an Option will be determined
by the Board when the Option is granted; provided that the Exercise Price of an
ISO (i) is not less than one hundred percent (100%) of the Fair Market Value of
the Shares on the date of grant; and (ii) the Exercise Price of any ISO granted
to a Ten Percent Stockholder will not be less than one hundred ten percent
(110%) of the Fair Market Value of the Shares on the date of grant.

         5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "Exercise
Agreement") in a form approved by the Board (which need not be the same for each
Participant), stating the number of Shares being purchased, the restrictions
imposed on the Shares purchased under such Exercise Agreement, if any, and such
representations and agreements regarding Participant's investment intent and
access to information and other matters, if any, as may be required or desired
by the Company to comply with applicable securities laws, together with payment
in full of the Exercise Price for the number of Shares being purchased.

         5.6 Termination. Notwithstanding the exercise periods set forth in a
Stock Option Agreement, exercise of an Option will always be subject to the
following:

         (a) If a Participant is Terminated for any reason except for
retirement, death or Disability, then the Participant may exercise such
Participant's Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than thirty (30) days after the
Termination Date (or such shorter or longer time period not exceeding five (5)
years as may be determined by the Board, with any exercise beyond three (3)
months after the Termination Date deemed to be an NQSO), but in any event, no
later than the expiration date of the Options.

         (b) If a Participant is Terminated because of the Participant's
retirement, death or Disability (or the Participant dies within three (3) months
after a Termination other than for Cause or because of the Participant's
Disability), then the Participant's Options may be exercised only to the extent
that such Options would have been exercisable by the Participant on the
Termination Date and must be exercised by the Participant (or the Participant's
legal representative or authorized assignee) no later than twenty-four (24)
months after the Termination Date (or such shorter or longer time period not
exceeding five (5) years as may be determined by the Board, with any Options
exercised beyond (a) three (3) months after the Termination Date when the
Termination is for any reason other than the Participant's death or Disability,
or (b) twelve (12) months after the Termination Date when the Termination is for
the Participant's Disability, deemed to be NQSOs), but in any event no later
than the expiration date of the Options.

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         (c) Notwithstanding the provisions in paragraph 5.6(a) above, if a
Participant is terminated for Cause, neither the Participant, the Participant's
estate nor such other person who may then hold the Option shall be entitled to
exercise any Option with respect to any Shares whatsoever, after termination of
service, whether or not after termination of service the Participant may receive
payment from the Company or any Subsidiary of the Company for vacation pay, for
services rendered prior to termination, for services rendered for the day on
which termination occurs, for salary in lieu of notice, or for any other
benefits. For the purpose of this paragraph, termination of service shall be
deemed to occur on the date when the Company dispatches notice or advice to a
Participant that his or her service is terminated.

         5.7 Limitations on Exercise. The Board may specify a reasonable minimum
number of Shares that may be purchased on any exercise of an Option, provided
that such minimum number will not prevent a Participant from exercising the
Option for the full number of Shares for which it is then exercisable.

         5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as
of the date of grant) of Shares with respect to which ISOs are exercisable for
the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or any Subsidiary of
the Company) will not exceed $100,000. If the Fair Market Value of Shares on the
date of grant with respect to which ISOs are exercisable for the first time by a
Participant during any calendar year exceeds $100,000, then the Options for the
first $100,000 worth of Shares to become exercisable in such calendar year will
be ISOs and the Options for the amount in excess of $100,000 that become
exercisable in that calendar year will be NQSOs. In the event that the Code or
the regulations promulgated thereunder are amended after the Effective Date of
this Plan to provide for a different limit on the Fair Market Value of Shares
permitted to be subject to ISOs, such different limit will be automatically
incorporated herein and will apply to any Options granted after the effective
date of such amendment.

         5.9 Modification, Extension or Renewal. The Board may modify, extend or
renew outstanding Options and authorize the grant of new Options in substitution
therefor, provided that any such action may not, without the written consent of
a Participant, impair any of such Participant's rights under any Option
previously granted. Any outstanding ISO that is modified, extended, renewed or
otherwise altered will be treated in accordance with Section 424(h) of the Code.
The Board may reduce the Exercise Price of outstanding Options without the
consent of Participants affected by a written notice to them; provided, however,
that the Exercise Price may not be reduced below the minimum Exercise Price that
would be permitted under Section 5.4 of this Plan for Options granted on the
date the action is taken to reduce the Exercise Price.

         5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to an ISO will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.

         6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the
Company to sell to an eligible person Shares of Restricted Stock. The Board will
determine to whom an offer will be made, the number of Shares the person may
purchase, the price to be paid (the "Purchase Price"), the restrictions to which
the Shares will be subject, and all other terms and conditions of the Restricted
Stock Award, subject to the following:

         6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("Restricted Stock Purchase Agreement") that will be in such form (which need
not be the same for each Participant) as the Board will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The offer of Restricted Stock will be accepted by the Participant's
execution and delivery of the Restricted Stock Purchase Agreement and full
payment for the Shares to the Company within thirty (30) days from the date the
Restricted Stock Purchase Agreement is delivered to the person. If such person
does not execute and deliver the Restricted Stock Purchase Agreement along with
full payment for the Shares to the Company within thirty (30) days, then the
offer will terminate, unless otherwise determined by the Board.

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         6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Board on the date the
Restricted Stock Award is granted, except in the case of a sale to a Ten Percent
Stockholder, in which case the Purchase Price will be 100% of the Fair Market
Value of the Shares. Payment of the Purchase Price may be made in accordance
with Section 8 of this Plan.

         6.3 Restrictions and Conditions. Shares of Restricted Stock transferred
to a Participant pursuant to an Award will be subject to the following
restrictions and conditions:

         (a) Subject to the provisions of the Plan and the Award Agreement,
during a period established by the Board commencing with the date of such Award
(the "Restriction Period"), the Participant will not be permitted to sell,
transfer, pledge, or assign shares of Restricted Stock awarded under the Plan.
Within these limits the Board, in its sole discretion, may provide for the lapse
of such restrictions in installments and may accelerate or waive such
restrictions, in whole or in part, based on the completion of a specified number
of years of service subject, however, to any requirements under California law,
including without limitation the restrictions contained in Section 5.3 hereof.
Restriction Periods may overlap and Participants may participate simultaneously
with respect to Restricted Stock Awards that are subject to different
Restriction Periods and have different performance goals and other criteria.

         (b) Except as otherwise provided in Section 6.3(a) and this paragraph
(b), the Participant will have with respect to shares of Restricted Stock all
the rights of a shareholder of the Company, including the right to vote the
shares and the right to receive cash dividends. Stock dividends issued with
respect to Restricted Stock will be treated as additional shares of Restricted
Stock that are subject to the same restrictions and other terms and conditions
that apply to the shares with respect to which such dividends are issued.

         (c) Subject to the applicable provisions of the Award Agreement and
this Section 6, and except as otherwise determined by the Board, upon the
Participant's Termination during the Restriction Period, or in the event that a
performance goal on which the vesting of Restricted Stock is conditioned is not
attained by the end of the Restriction Period, all shares still subject to
restriction (i) in the case of shares of Restricted Stock that were purchased by
the Participant pursuant to a Restricted Stock Award or the exercise of an
Option, will be subject for a period of ninety (90) days following the end of
the Restriction Period to the Company's right to repurchase all or a portion of
such shares, for cash and/or cancellation of purchase money indebtedness, at the
price paid by the Participant for such shares, and (ii) in the case of any other
Restricted Stock, will be forfeited.

         (d) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to the Restriction Period,
certificates for an appropriate number of unrestricted Shares will be delivered
to the Participant promptly.

         7. STOCK BONUSES.

         7.1 Awards of Stock Bonuses. A Stock Bonus is an award of Shares (which
may consist of Restricted Stock) for services rendered to the Company or any
Subsidiary of the Company. A Stock Bonus may be awarded for past services
already rendered to the Company, or any Subsidiary of the Company pursuant to an
Award Agreement (the "Stock Bonus Agreement") that will be in such form (which
need not be the same for each Participant) as the Board will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. A Stock Bonus may be awarded in such form (which need not be the same for
each Participant) as the Board may from time to time approve, and will comply
with and be subject to the terms and conditions of this Plan. Stock Bonuses may
vary from Participant to Participant and between groups of Participants, and may
be based upon the achievement of the Company or Subsidiary and/or individual
performance factors or upon such other criteria as the Board may determine.

         7.2 Terms of Stock Bonuses. The Board will determine the number of
Shares to be awarded to the Participant in connection with a Stock Bonus. If a
Stock Bonus is being earned upon the satisfaction of performance goals pursuant
to a Performance Stock Bonus Agreement, then the Board will: (a)

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determine the nature, length and starting date of any Performance Period for
such Stock Bonus; (b) select from among the Performance Factors to be used to
measure the performance, if any; and (c) determine the number of Shares that may
be awarded to the Participant. Prior to the payment of any Stock Bonus, the
Board shall determine the extent to which such Stock Bonus has been earned.
Performance Periods may overlap and Participants may participate simultaneously
with respect to Stock Bonuses that are subject to different Performance Periods
and different performance goals and other criteria. The number of Shares may be
fixed or may vary in accordance with such performance goals and criteria as may
be determined by the Board. The Board may adjust the performance goals
applicable to the Stock Bonuses to take into account changes in law and
accounting or tax rules and to make such adjustments as it deems necessary or
appropriate to reflect the impact of extraordinary or unusual items, events or
circumstances to avoid windfalls or hardships.

         7.3 Form of Payment. The earned portion of a Stock Bonus may be paid
currently or on a deferred basis with such interest or dividend equivalent, if
any, as the Board may determine. Payment may be made in the form of cash or
whole Shares or a combination thereof, either in a lump sum payment or in
installments, all as the Board will determine.

         8. PAYMENT FOR SHARE PURCHASES.

         8.1 Payment. Payment for Shares purchased pursuant to this Plan may be
made in cash (by check) or, where expressly approved for a Participant by the
Board and where permitted by law:

         (a) by cancellation of indebtedness of the Company to the Participant;

         (b) by surrender of shares that either: (1) have been owned by a
Participant for more than six (6) months and have been paid for within the
meaning of SEC Rule 144 (and, if such shares were purchased from the Company by
use of a promissory note, such note has been fully paid with respect to such
shares); or (2) were obtained by a Participant in the public market;

         (c) by tender of a full recourse promissory note having such terms as
may be approved by the Board and bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the Company will not be
entitled to purchase Shares with a promissory note unless the note is adequately
secured by collateral other than the Shares;

         (d) by waiver of compensation due or accrued to a Participant for
services rendered;

         (e) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:

                  (1)      through a "same day sale" commitment from a
                           Participant and a broker-dealer that is a member of
                           the National Association of Securities Dealers (an
                           "NASD Dealer") whereby the Participant irrevocably
                           elects to exercise the Option and to sell a portion
                           of the Shares so purchased to pay for the Exercise
                           Price, and whereby the NASD Dealer irrevocably
                           commits upon receipt of such Shares to forward the
                           Exercise Price directly to the Company; or

                  (2)      through a "margin" commitment from a Participant and
                           a NASD Dealer whereby the Participant irrevocably
                           elects to exercise the Option and to pledge the
                           Shares so purchased to the NASD Dealer in a margin
                           account as security for a loan from the NASD Dealer
                           in the amount of the Exercise Price, and whereby the
                           NASD Dealer irrevocably commits upon receipt of such
                           Shares to forward the Exercise Price directly to the
                           Company; or

         (f) by any combination of the foregoing.

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         8.2 Loan Guarantees. The Board may help a Participant pay for Shares
purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.

         9. WITHHOLDING TAXES.

         9.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require a
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.

         9.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Board may in its sole discretion
allow the Participant to satisfy the minimum withholding tax obligation by
electing to have the Company withhold from the Shares to be issued that number
of Shares having a Fair Market Value equal to the minimum amount required to be
withheld, determined on the date that the amount of tax to be withheld is to be
determined. All elections by a Participant to have Shares withheld for this
purpose will be made in accordance with the requirements established by the
Board and be in writing in a form acceptable to the Board.

         10. PRIVILEGES OF STOCK OWNERSHIP.

         10.1 Voting and Dividends. No Participant will have any of the rights
of a stockholder with respect to any Shares until the Shares in question are
issued to such Participant. After the Shares in question are issued to the
Participant, the Participant will be a stockholder and have all the rights of a
stockholder with respect to such Shares, including the right to vote and receive
all dividends or other distributions made or paid with respect to such Shares;
provided, that if such Shares are Restricted Stock, then any new, additional or
different securities the Participant may become entitled to receive with respect
to such Shares by virtue of a stock dividend, stock split or any other change in
the corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock; provided, further, that the Participant
will have no right to retain such stock dividends or stock distributions with
respect to Shares that are repurchased at the Participant's Purchase Price or
Exercise Price pursuant to Section 12.

         10.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding; provided, however, the Company will not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.

         11. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Award will be exercisable only by the Participant.

         12. RIGHT OF REFUSAL. Until such time as the Shares are first
registered under Section 12(g) of the Exchange Act, the Company shall have the
right of first refusal with respect to any proposed disposition by a Participant
(or any successor in interest) of any Shares sold pursuant to a Restricted Stock
Award or issued as a Stock Bonus. Such right of first refusal shall be
exercisable in accordance with the terms established by the Board and set forth
in the Award Agreement evidencing such Restricted Stock Award or Stock Bonus.

         13. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Board may deem

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necessary or advisable, including restrictions under any applicable federal,
state or foreign securities law, or any rules, regulations and other
requirements of the SEC or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.

         14. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Board may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Board, appropriately endorsed in blank,
with the Company or an agent designated by the Company to hold in escrow until
such restrictions have lapsed or terminated, and the Board may cause a legend or
legends referencing such restrictions to be placed on the certificates. Any
Participant who is permitted to execute a promissory note as partial or full
consideration for the purchase of Shares under this Plan will be required to
pledge and deposit with the Company all or part of the Shares so purchased as
collateral to secure the payment of the Participant's obligation to the Company
under the promissory note; provided, however, that the Board may require or
accept other or additional forms of collateral to secure the payment of such
obligation and, in any event, the Company will have full recourse against the
Participant under the promissory note notwithstanding any pledge of the
Participant's Shares or other collateral. In connection with any pledge of the
Shares, the Participant will be required to execute and deliver a written pledge
agreement in such form as the Board will from time to time approve. The Shares
purchased with the promissory note may be released from the pledge on a pro rata
basis as the promissory note is paid.

         15. EXCHANGE AND BUYOUT OF AWARDS. The Board may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Board may at any time buy from a
Participant an Award previously granted with payment in cash, Shares (including
Restricted Stock) or other consideration, based on such terms and conditions as
the Board and the Participant may agree.

         16. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not
be effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to: (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable; and/or (b) completion of any registration or other qualification
of such Shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company will be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
will have no liability for any inability or failure to do so.

         17. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Subsidiary of the Company or limit in any way the right of the
Company or any Subsidiary of the Company to terminate a Participant's employment
or other relationship at any time, with or without cause.

         18. CORPORATE TRANSACTIONS.

         18.1 Change in Control. Notwithstanding any other provision of the
Plan, in the event of a "Change in Control" as hereinafter defined, and as part
of the Change in Control a Participant's employment is terminated in fact or as
a result of a "Constructive Termination" as hereinafter defined, each
outstanding Option will become exercisable in full.

         A "Change in Control" shall be deemed to have occurred if:

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         (a) any "person" as such term is used in Sections 13(d) and 14(d) of
the Exchange Act (other than (i) the Company, (ii) any subsidiary of the
Company, (iii) any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or of any subsidiary of the Company, or
(iv) any company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock of the
Company), is or becomes the "beneficial owner" (as defined in Section 13(d) of
the Exchange Act), together with all Affiliates and Associates (as such terms
are used in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act) of such person, directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities;

         (b) the stockholders of the Company approve a merger or consolidation
of the Company with any other company, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, at least 51% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; or

         (c) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.

         A "Constructive Termination" shall be deemed to have occurred if:

11. A reduction in base salary below current level.

         12. Any material change to the duties and responsibilities of the
Participant's position as described in the employment Agreement or other
documentation regarding the Participant's duties and responsibilities as an
employee absent the Employee's written consent, or removal from such position
prior to the termination of the employment agreement absent the Employee's
written consent.

         13. A change of more than forty (40) miles in the office or location
where the Employee is based, provided that a change in the Employee's office
location prior to a Change of Control which is directly caused by the relocation
of the Company's headquarters office from its present address of 15901 Red Hill
Avenue, Suite 100, Tustin, CA 92780 must be more than fifty (50) miles from that
address, in order to constitute an event of Constructive Termination.

         In the event of a merger or consolidation in which the Company is not
the surviving corporation or which results in the acquisition of substantially
all the Company's outstanding stock by a single person or entity or by a group
of persons or entities acting in concert, or in the event of sale or transfer of
all or substantially all of the Company's assets (a "covered transaction"), all
outstanding Options may be terminated by the Board as of the effective date of
the covered transaction, subject to the following: If the covered transaction
follows a Change in Control or would give rise to a Change in Control, no Option
will be terminated (without the consent of the optionee) prior to the expiration
of 20 days following the later of (i) the date on which the Option became fully
exercisable and (ii) the date on which the Optionee received written notice of
the covered transaction.

         18.2 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either; (a) granting an Award under this Plan in substitution of
such other company's award; or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature

                                       9
<PAGE>   10
of Shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assume an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.

         19. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will become effective
on the date on which the Plan is adopted by the Board. This Plan shall be
approved by the stockholders of the Company (excluding Shares issued pursuant to
this Plan), consistent with applicable laws, within twelve (12) months before or
after the date this Plan is adopted by the Board. Upon the Effective Date, the
Board may grant Awards pursuant to this Plan; provided, however, that: (a) no
Option may be exercised prior to initial stockholder approval of this Plan; and
(b) no Option granted pursuant to an increase in the number of Shares subject to
this Plan approved by the Board will be exercised prior to the time such
increase has been approved by the stockholders of the Company. In the event that
initial stockholder approval is not obtained within the time period provided
herein, all Awards granted hereunder shall be cancelled, any Shares issued
pursuant to any Awards shall be cancelled and any purchase of Shares issued
hereunder shall be rescinded. Further, in the event that stockholder approval of
an increase in the number of Shares subject to the Plan is not obtained within
the time period provided herein, all Awards granted pursuant to such increase
will be cancelled, any Shares issued pursuant to any Award granted pursuant to
such increase will be cancelled, and any purchase of Shares pursuant to such
increase will be rescinded.

         20. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the date this Plan is
adopted by the Board or, if earlier, the date of stockholder approval. This Plan
and all agreements thereunder shall be governed by and construed in accordance
with the laws of the State of California.

         21. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Award Agreement or instrument to be executed pursuant
to this Plan; provided, however, that the Board will not, without the approval
of the stockholders of the Company, amend this Plan in any manner that requires
such stockholder approval.

         22. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the stockholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and bonuses otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific
cases.

         23. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:

         "AWARD" means any award under this Plan, including any Option,
Restricted Stock or Stock Bonus.

         "AWARD AGREEMENT" means, with respect to each Award, the signed written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.

         "BOARD" means the Board of Directors of the Company.

         "CAUSE" means the commission of an act of theft, embezzlement, fraud,
dishonesty or a breach of fiduciary duty to the Company or a Subsidiary of the
Company.

         "CODE" means the Internal Revenue Code of 1986, as amended.

         "COMMITTEE" means the Compensation Committee of the Board.

                                       10
<PAGE>   11
         "COMPANY" means Commonwealth Energy Corporation or any successor
corporation.

         "DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Board.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.

         "FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:

         (a)      if such Common Stock is then quoted on the Nasdaq National
                  Market, its closing price on the Nasdaq National Market on the
                  date of determination as reported in The Wall Street Journal;

         (b)      if such Common Stock is publicly traded and is then listed on
                  a national securities exchange, its closing price on the date
                  of determination on the principal national securities exchange
                  on which the Common Stock is listed or admitted to trading as
                  reported in The Wall Street Journal;

         (c)      if such Common Stock is publicly traded but is not quoted on
                  the Nasdaq National Market nor listed or admitted to trading
                  on a national securities exchange, the average of the closing
                  bid and asked prices on the date of determination as reported
                  in The Wall Street Journal; or

         (d)      if none of the foregoing is applicable, by the Board in good
                  faith.

         "INSIDER" means an officer or director of the Company or any other
person whose transactions in the Company's Common Stock are subject to Section
16 of the Exchange Act.

         "OPTION" means an award of an option to purchase Shares (which consist
of Restricted Stock) pursuant to Section 5.

         "PARTICIPANT" means a person who receives an Award under this Plan.

         "PERFORMANCE FACTORS" means the factors selected by the Board from
among the following measures to determine whether the performance goals
established by the Board and applicable to Awards have been satisfied:

         (a)      Net revenue and/or net revenue growth;

         (b)      Earnings before income taxes and amortization and/or earnings
                  before income taxes and amortization growth;

         (c)      Operating income and/or operating income growth;

         (d)      Net income and/or net income growth;

         (e)      Earnings per share and/or earnings per share growth;

         (f)      Total stockholder return and/or total stockholder return
                  growth;

         (g)      Return on equity;

                                       11
<PAGE>   12
         (h)      Operating cash flow return on income;

         (i)      Adjusted operating cash flow return on income;

         (j)      Economic value added; and

         (k)      Individual confidential business objectives.

         "PLAN" means this Commonwealth Energy Corporation Equity Incentive
Plan, as amended from time to time.

         "RESTRICTED STOCK" means Shares that are subject to the restrictions
described in Section 6.3.

         "RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section
6.

         "RESTRICTION PERIOD" means the period of service determined by the
Board, not to exceed five years, during which years of service or performance
are to be measured for Restricted Stock Awards or Stock Bonuses.

         "SEC" means the Securities and Exchange Commission.

         "SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 18, and any
successor security.

         "STOCK BONUS" means an award of Shares, or cash in lieu of Shares,
pursuant to Section 7.

         "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

         "TERMINATION" or "TERMINATED" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director, consultant, independent
contractor, or advisor to the Company or a Subsidiary of the Company. An
employee will not be deemed to have ceased to provide services in the case of
(i) sick leave, (ii) military leave, or (iii) any other leave of absence
approved by the Board, provided, that such leave is for a period of not more
than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute or unless provided otherwise pursuant to
formal policy adopted from time to time by the Company and issued and
promulgated to employees in writing. In the case of any employee on an approved
leave of absence, the Board may make such provisions respecting suspension of
vesting of the Award while on leave from the employ of the Company or a
Subsidiary as it may deem appropriate, except that in no event may an Option be
exercised after the expiration of the term set forth in the Option agreement.
The Board will have sole discretion to determine whether a Participant has
ceased to provide services and the effective date on which the Participant
ceased to provide services (the "Termination Date").

         "UNVESTED SHARES" means "Unvested Shares" as defined in the Award
Agreement.

         "VESTED SHARES" means "Vested Shares" as defined in the Award
Agreement.

                                       12<PAGE>   1
                                                                   Exhibit 10.19

                                CHANGE-OF-CONTROL

                              EMPLOYMENT AGREEMENT

         AGREEMENT, dated as of the ____ day of ________ 2000 (this
"Agreement"), by and between Hercules Incorporated, a Delaware corporation (the
"Company"), and ____________________ (the "Executive").

         WHEREAS, the Board of Directors of the Company (the "Board"), has
determined that it is in the best interests of the Company and its
shareholders/stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined herein). The Board believes it is
imperative to diminish the inevitable distraction of the Executive by virtue of
the personal uncertainties and risks created by a pending or threatened Change
of Control and to encourage the Executive's full attention and dedication to the
current Company and in the event of any threatened or pending Change of Control,
and to provide the Executive with compensation and benefits arrangements upon a
Change of Control that ensure that the compensation and benefits expectations of
the Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.

                 NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

SECTION 1. CERTAIN DEFINITIONS.

         (a) "Effective Date" means the first date during the Change of Control
Period (as defined herein) on which a Change of Control occurs. Notwithstanding
anything in this Agreement to the contrary, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (1) was at the request of a third
party that has taken steps reasonably calculated to effect a Change of Control
or (2) otherwise arose in connection with or anticipation of a Change of
Control, then "Effective Date" means the date immediately prior to the date of
such termination of employment.

         (b) "Change of Control Period" means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the "Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change of Control Period
shall not be so extended.

         (c) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company.

         (d) "Change of Control" means:

<PAGE>   2

                  (1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (A) the then-outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) the combined voting power of the
then-outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that, for purposes of this Section l(d), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
l(d)(3)(A), l(d)(3)(B) and 1 (d) (3) (C).

                  (2) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board.

                  (3) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business Combination"), in
each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, 60% or more of 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 (including, without limitation, a
corporation that, as a result of such transaction, owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then-outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination, and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement or of the action of the Board providing for such Business Combination;
or

                                       2
<PAGE>   3

                  (4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

         (e) "Alternative Change of Control" means a Change of Control as
defined above, except that the phrase "Approval by the shareholder of the
Company" in clause (3) of Section 1 (d) shall be deemed to read "Consummation."

SECTION 2. EMPLOYMENT PERIOD. The Company hereby agrees to continue the
Executive in its employ, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the third
anniversary of the Effective Date (the "Employment Period"). The Employment
Period shall terminate upon the Executive's termination of employment for any
reason.

SECTION 3. TERMS OF EMPLOYMENT.

         (a) POSITION AND DUTIES.

                  (1) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 120-day period immediately preceding the Effective Date and (B)
the Executive's services shall be performed at the office where the Executive
was employed immediately preceding the Effective Date or at any other location
less than 30 miles from such office.

                  (2) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period, it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.

         (b) COMPENSATION.

                  (1) BASE SALARY. During the Employment Period, the Executive
shall receive an annual base salary (the "Annual Base Salary") at an annual rate
at least equal to 12 times the highest monthly base salary paid or payable,
including any base salary that has been earned but deferred, to the Executive by
the Company and the Affiliated Companies in respect of the 12-month period
immediately preceding the month in which the Effective Date occurs. The

                                       3
<PAGE>   4

Annual Base Salary shall be paid at such intervals as the Company pays executive
salaries generally. During the Employment Period, the Annual Base Salary shall
be reviewed at least annually, beginning no more than 12 months after the last
salary increase awarded to the Executive prior to the Effective Date. Any
increase in the Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. The Annual Base Salary shall
not be reduced after any such increase and the term "Annual Base Salary" shall
refer to the Annual Base Salary as so increased.

                  (2) ANNUAL BONUS. In addition to the Annual Base Salary, the
Executive shall be awarded, for each fiscal year ending during the Employment
Period, an annual bonus (the "Annual Bonus") in cash at least equal to the
Executive's Recent Target Bonus, as DEFINED in the next sentence. The "Recent
Target Bonus" means the Annual Base Salary times a percentage equal to the
percentage of base salary most recently established, before the Effective Date,
for purposes of determining the Executive's target bonus under the Company's
Management Incentive Compensation Plan or any predecessor or successor plan (the
"MICP"). Each such Annual Bonus shall be paid no later than the end of the third
month of the fiscal year next following the fiscal year for which the Annual
Bonus is awarded, unless the Executive shall elect to defer the receipt of such
Annual Bonus. Any bonus paid to the Executive under the MICP as a result of the
Change of Control (a "Change of Control Bonus") shall be taken into account in
determining whether the requirements of this Section 3(b)(2) have been met with
respect to the fiscal year in which the Change of Control occurs.

                  (3) INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the
Employment Period, the Executive shall be entitled to participate in all cash
incentive, equity incentive, savings and retirement plans, practices, policies,
and programs applicable generally to other peer executives of the Company and
the Affiliated Companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and the Affiliated Companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, those provided generally at any time after
the Effective Date to other peer executives of the Company and the Affiliated
Companies. The Executive shall also continue to be entitled to any supplemental
pension benefits to which he may be entitled pursuant to any individual
agreement with the company or any Affiliated Companies (collectively, "Enhanced
Pension Benefits").

                  (4) WELFARE BENEFIT PLANS. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and the Affiliated Companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any

                                       4
<PAGE>   5

time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and the Affiliated
Companies.

                  (5) EXPENSES. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the most favorable policies,
practices and procedures of the Company and the Affiliated Companies in effect
for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the
Company and the Affiliated Companies.

                  (6) FRINGE BENEFITS. During the Employment Period, the
Executive shall be entitled to fringe benefits, including, without limitation,
tax and financial planning services, payment of club dues, and, if applicable,
use of an automobile and payment of related expenses, in accordance with the
most favorable plans, practices, programs and policies of the Company and the
Affiliated Companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies.

                  (7) OFFICE AND SUPPORT STAFF. During the Employment Period,
the Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and the Affiliated Companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and the Affiliated Companies.

                  (8) VACATION. During the Employment Period, the Executive
shall be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and the Affiliated Companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and the Affiliated Companies.

SECTION 4. TERMINATION OF EMPLOYMENT.

         (a) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically if the Executive dies during the Employment Period. If the Company
determines in good faith that the Disability (as defined herein) of the
Executive has occurred during the Employment Period (pursuant to the definition
of "Disability"), it may give to the Executive written notice in accordance with
Section 11(b) of its intention to terminate the Executive's employment. In such
event, the Executive's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Executive (the "Disability
Effective Date"), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive's
duties. "Disability" means the absence of the

                                       5
<PAGE>   6

Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.

         (b) CAUSE. The Company may terminate the Executive's employment during
the Employment Period for Cause. "Cause" means:

                  (1) the willful and continued failure of the Executive to
perform substantially the Executive's duties (as contemplated by Section
3(a)(1)(A)) with the Company or any Affiliated Company (other than any such
failure resulting from incapacity due to physical or mental illness or following
the Executive's delivery of a Notice of Termination for Good Reason), after a
written demand for substantial performance is delivered to the Executive by the
Board or the Chief Executive Officer of the Company that specifically identifies
the manner in which the Board or the Chief Executive Officer of the Company
believes that the Executive has not substantially performed the Executive's
duties, or

                  (2) the willful engaging by the Executive in illegal conduct
or gross misconduct that is materially and demonstrably injurious to the
Company.

For purposes of this Section 4(b), no act, or failure to act, on the part of the
Executive shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer of
the Company or a senior officer of the Company or based upon the advice of
counsel for the Company shall be conclusively presumed to be done, or omitted to
be done, by the Executive in good faith and in the best interests of the
Company. The cessation of employment of the Executive shall not be deemed to be
for Cause unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board (excluding the Executive,
if the Executive is a member of the Board) at a meeting of the Board called and
held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel for the Executive,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in Section 4(b)(1) or
4(b)(2), and specifying the particulars thereof in detail.

         (c) GOOD REASON. The Executive's employment may be terminated by the
Executive for Good Reason or by the Executive voluntarily without Good Reason.
"Good Reason" means:

                  (1) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a), or any other diminution in such position,
authority, duties or responsibilities (whether or not occurring solely as a
result of the Company's ceasing to be a publicly traded entity), excluding for
this purpose an isolated,

                                       6
<PAGE>   7

insubstantial and inadvertent action not taken in bad faith and that is remedied
by the Company promptly after receipt of notice thereof given by the Executive;

                  (2) any failure by the Company to comply with any of the
provisions of Section 3(b), other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;

                  (3) the Company's requiring the Executive (i) to be based at
any office or location other than as provided in Section 3(a)(1)(B), (ii) to be
based at a location other than the principal executive offices of the Company if
the Executive was employed at such location immediately preceding the Effective
Date, or (iii) to travel on Company business to a substantially greater extent
than required immediately prior to the Effective Date;

                  (4) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or

                  (5) any failure by the Company to comply with and satisfy
Section 10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. The Executive's mental or physical
incapacity following the occurrence of an event described above in clauses (1)
through (5) shall not affect the Executive's ability to terminate employment for
Good Reason.

         (d) NOTICE OF TERMINATION. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with Section 11(b). "Notice of
Termination" means a written notice that (1) indicates the specific termination
provision in this Agreement relied upon, (2) to the extent applicable, sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated, and (3) if the Date of Termination (as defined herein) is other than
the date of receipt of such notice, specifies the Date of Termination (which
Date of Termination shall be not more than 30 days after the giving of such
notice). The failure by the Executive or the Company to set forth in the Notice
of Termination any fact or circumstance that contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the Executive's or the
Company's respective rights hereunder.

         (e) DATE OF TERMINATION. "Date of Termination" means (1) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (2) if
the Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination, and (3) if the Executive's
employment is terminated by reason of

                                       7
<PAGE>   8

death or Disability, the Date of Termination shall be the date of death of the
Executive or the Disability Effective Date, as the case may be.

SECTION 5. OBLIGATIONS OF THE COMPANY UPON TERMINATION.

         (a) GOOD REASON; OTHER THAN FOR CAUSE, DEATH OR DISABILITY. If, during
the Employment Period, the Company terminates the Executive's employment other
than for Cause or Disability or the Executive terminates employment for Good
Reason:

                  (1) the Company shall pay to the Executive, in a lump sum in
cash within 30 days after the Date of Termination, the aggregate of the
following amounts:

                           (A) the sum of: (i) the Executive's Annual Base
         Salary through the Date of Termination to the extent not theretofore
         paid; (ii) the product of (x) the higher of (I) the Recent Target Bonus
         and (II) the Annual Bonus paid or payable, including any bonus or
         portion thereof that has been earned but deferred (and annualized for
         any fiscal year consisting of less than 12 full months or during which
         the Executive was employed for less than 12 full months), for the most
         recently completed fiscal year during the Employment Period, if any
         (such higher amount, the "Highest Annual Bonus") and (y) a fraction,
         the numerator of which is the number of days in the current fiscal year
         through the Date of Termination and the denominator of which is 365;
         provided, that if the Date of Termination occurs in the same fiscal
         year as the Change of Control, then such product shall be reduced (but
         not below zero) by the amount of any Change of Control Bonus payable to
         the Executive; and (iii) any accrued vacation pay, in each case, to the
         extent not theretofore paid (the sum of the amounts described in
         subclauses (i), (ii) and (iii), the "Accrued Obligations");

                           (B) the amount equal to the product of (i) three and
         (ii) the sum of (x) the Executive's Annual Base Salary and (y) the
         Highest Annual Bonus; and

                           (C) an amount equal to the excess of (i) the
         actuarial equivalent of the benefit under the Company's qualified
         defined benefit retirement plan (the "Retirement Plan") (utilizing
         actuarial assumptions no less favorable to the Executive than those in
         effect under the Retirement Plan immediately prior to the Effective
         Date), any excess or supplemental retirement plan in which the
         Executive participates (collectively, the "SERP") and any Enhanced
         Pension Benefits that the Executive would receive if the Executive's
         employment had continued for a number of years and fractions of years
         equal to the sum of (1) one or, if greater, the number of years and
         fractions of years from the Date of Termination through the third
         anniversary of the Change of Control (the "Continuation Period") plus
         (II) three years, and had achieved an age equal to the (x) Executive's
         actual age, plus (y) the number of years and fractions of years in the
         Continuation Period, plus (z) such additional number of years and
         fractions thereof, as may be necessary for the Executive to be eligible
         for unreduced early retirement benefits under the Retirement Plan, the
         SERP and the Enhanced Pension Benefits (if any), but the number
         described in this clause (z) shall not

                                       8
<PAGE>   9

         exceed five; with the foregoing calculations being made with the
         assumptions that all accrued benefits are fully vested, and that the
         Executive's compensation during the period of assumed continued
         employment is that required by Sections 3(b)(1) and 3(b)(2); over (ii)
         the actuarial equivalent of the Executive's actual benefit (paid or
         payable), if any, under the Retirement Plan, the SERP and the Enhanced
         Pension Benefits (if any) as of the Date of Termination;

                  (2) for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue welfare and fringe
benefits to the Executive and/or the Executive's family at least equal to those
that would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(4) and (6) if the Executive's
employment had not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and the Affiliated Companies and their families, provided, however,
that, if the Executive becomes reemployed with another employer and is eligible
to receive medical or other welfare benefits under another employer provided
plan, the medical and other welfare benefits described herein shall be secondary
to those provided under such other plan during such applicable period of
eligibility; and for purposes of determining eligibility (but not the time of
commencement of benefits) of the Executive for retiree benefits pursuant to such
plans, practices, programs and policies, the Executive shall be considered to
have remained employed until three years after the Date of Termination and to
have retired on the last day of such period;

                  (3) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and provider of which
shall be selected by the Executive in the Executive's sole discretion provided,
that the cost of such outplacement shall not exceed $50,000;

                  (4) all stock options and restricted stock held by the
Executive immediately before the Date of Termination shall vest in full, and
such stock options shall remain exercisable until the first to occur of the
first anniversary of the Date of Termination and the expiration of their
original terms; and

                  (5) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and the Affiliated Companies (such other amounts and benefits, the
"Other Benefits").

         (b) DEATH. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, the Company shall provide the
Executive's estate or beneficiaries with the Accrued Obligations and the timely
payment or delivery of the Other Benefits, and shall have no other severance
obligations under this Agreement. The Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of the Other
Benefits, the term "Other Benefits" as utilized in this Section 5(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive,

                                       9
<PAGE>   10

benefits at least equal to the most favorable benefits provided by the Company
and the Affiliated Companies to the estates and beneficiaries of peer executives
of the Company and the Affiliated Companies under such plans, programs,
practices and policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to
the Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and the Affiliated Companies and their beneficiaries.

         (c) DISABILITY. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination. With respect to
the provision of the Other Benefits, the term "Other Benefits" as utilized in
this Section 6(c) shall include, and the Executive shall be entitled after the
Disability Effective Date to receive, disability and other benefits at least
equal to the most favorable of those generally provided by the Company and the
Affiliated Companies to disabled executives and/or their families in accordance
with such plans, programs, practices and policies relating to disability, if
any, as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other peer
executives of the Company and the Affiliated Companies and their families.

         (d) CAUSE; OTHER THAN FOR GOOD REASON. If the Executive's employment is
terminated for Cause during the Employment Period, the Company shall provide to
the Executive (1) the Executive's Annual Base Salary through the Date of
Termination, (2) the amount of any compensation previously deferred by the
Executive, and (3) the Other Benefits, in each case, to the extent theretofore
unpaid, and shall have no other severance obligations under this Agreement. If
the Executive voluntarily terminates employment during the Employment Period,
excluding a termination for Good Reason, the Company shall provide to the
Executive the Accrued Obligations and the timely payment or delivery of the
Other Benefits, and shall have no other severance obligations under this
Agreement. In such case, all the Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.

SECTION 6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or the Affiliated Companies and for
which the Executive may qualify, nor, subject to Section 11(f), shall anything
herein limit or otherwise affect such rights as the Executive may have under any
other contract or agreement with the Company or the Affiliated Companies.
Amounts that are vested benefits or that the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or
agreement with the Company or the Affiliated Companies at or subsequent to the
Date of Termination shall be payable in accordance with such plan, policy,
practice or program or contract or agreement, except as explicitly modified by
this Agreement. Notwithstanding the foregoing, if the Executive receives
payments and benefits pursuant to Section 5(a) of this Agreement, the Executive
shall not be entitled to any severance pay or benefits under any severance plan,

                                       10
<PAGE>   11

program or policy of the Company and the Affiliated Companies, including without
limitation the Executive Severance Plan, unless otherwise specifically provided
therein in a specific reference to this Agreement.

SECTION 7. FULL SETTLEMENT; CONTESTS.

         (a) The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense, or other claim,
right or action that the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, and such amounts shall not be reduced
whether or not the Executive obtains other employment.

         (b) The Company agrees to pay as incurred (within 10 days following the
Company's receipt of an invoice from the Executive), to the full extent
permitted by law, all legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereof (including as a result of any contest by the Executive about the amount
of any payment pursuant to this Agreement), plus, in each case, interest on any
delayed payment at the applicable federal rate provided for in Section
7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code").
Notwithstanding the foregoing, the Company shall have no obligation to pay the
Executive's legal fees and expenses in connection with any action initiated by
the Executive as to which the trier of fact finds that the Executive's claim was
frivolous or brought in bad faith.

SECTION 8. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

         (a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution in the nature of
compensation (within the meaning of Section 28OG(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise (a "Payment"), would be subject to the excise tax imposed by
Section 4999 of the Code, together with any interest or penalties imposed with
respect to such excise tax (the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (the "Gross-Up Payment") in an amount
such that, after payment by the Executive of all taxes (and any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.

         (b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by
PriceWaterhouseCoopers (the "Accounting Firm"). The Accounting Firm shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been

                                       11
<PAGE>   12

a Payment or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive may appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 8, shall be paid by the Company to the Executive within 5 days of
the receipt of the Accounting Firm's determination. Any determination by the
Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (the "Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Company exhausts its remedies pursuant to Section
8(c) and the Executive thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of the Executive.

         (c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after the Executive is informed
in writing of such claim. The Executive shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such claim,
the Executive shall:

                  (1) give the Company any information reasonably requested by
the Company relating to such claim,

                  (2) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

                  (3) cooperate with the Company in good faith in order
effectively to contest such claim, and

                  (4) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 8(c),
the

                                       12
<PAGE>   13

Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that, if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis, and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties) imposed with respect to such
advance or with respect to any imputed income in connection with such advance;
and provided, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which the Gross-Up Payment would be payable hereunder,
and the Executive shall be entitled to settle or contest, as the case may be,
any other issue raised by the Internal Revenue Service or any other taxing
authority.

         (d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 8(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.

         (e) Notwithstanding any other provision of this Section 8, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of the Gross-Up Payment, and the Executive hereby
consents to such withholding.

SECTION 9. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or the Affiliated Companies, and their
respective businesses, which information, knowledge or data shall have been
obtained by the Executive during the Executive's employment by the Company or
the Affiliated Companies and which information, knowledge or data shall not be
or become public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement). After
termination of the Executive's employment with the Company, the Executive shall
not, without the prior written consent of the Company or as may otherwise be
required by law or legal process, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those persons designated
by the Company. In no event shall an asserted violation of the provisions of

                                       13
<PAGE>   14

this Section 9 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.

SECTION 10. SUCCESSORS.

         (a) This Agreement is personal to the Executive, and, without the prior
written consent of the Company, shall not be assignable by the Executive other
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Executive's legal representatives.

         (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns. Except as provided in Section 10(c),
without the prior written consent of the Executive this Agreement shall not be
assignable by the Company.

         (c) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
"Company" means the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid that assumes and agrees to perform this
Agreement by operation of law or otherwise.

SECTION 11. MISCELLANEOUS.

         (a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified other than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.

         (b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:

                  if to the Executive:

                  Hercules Incorporated
                  Hercules Plaza
                  Wilmington, Delaware 19894-0001

                  if to the Company:

                  Hercules Incorporated
                  Hercules Plaza
                  Wilmington, Delaware 19894-0001

                  Attn: Chief Executive Officer

                                       14
<PAGE>   15

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

         (c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

         (d) The Company may withhold from any amounts payable under this
Agreement such United States federal, state or local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or regulation.

         (e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.

         (f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a), prior to the Effective Date, the Executive's
employment may be terminated by either the Executive or the Company at any time
prior to the Effective Date, in which case the Executive shall have no further
rights under this Agreement. From and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.

                                       15
<PAGE>   16

         IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.

                                        ________________________________________
                                                      [Executive]

                                        HERCULES INCORPORATED

                                        By______________________________________
                                           President and Chief Executive Officer

Attest:

______________________________
Secretary

                                       16

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