Document:

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                                                                     EXHIBIT 4.1

                              GENERAL MILLS, INC.

                              OFFICERS' CERTIFICATE
                                       AND
                              AUTHENTICATION ORDER

         Pursuant to the Indenture dated as of February 1, 1996 (the
"Indenture") between General Mills, Inc. (the "Company") and U.S. Bank National
Association (formerly known as First Trust of Illinois, National Association),
as trustee (the "Trustee"), and resolutions adopted by the Board of Directors of
the Company on December 17, 2001 and the Finance Committee of the Board of
Directors of the Company on May 5, 2003, this Officers' Certificate and
Authentication Order is being delivered to the Trustee to establish the terms of
a series of Securities in accordance with Section 301 of the Indenture, to
establish the form of the Securities of such series in accordance with Section
201 of the Indenture, to request the authentication and delivery of the
Securities of such series pursuant to Section 303 of the Indenture and to comply
with the provisions of Section 102 of the Indenture.

         Capitalized terms used but not defined herein and defined in the
Indenture shall have the respective meanings ascribed to them in the Indenture.

         A. ESTABLISHMENT OF SERIES PURSUANT TO SECTION 301 OF INDENTURE. There
is hereby established pursuant to Section 301 of the Indenture a series of
Securities which shall have the following terms (the numbered clauses set forth
below correspond to the numbered subsections of Section 301 of the Indenture):

                  (1) The series of Securities being authorized shall bear the
         title "2 5/8% Notes due 2006" (the "Notes").

                  (2) There shall be no limit upon the aggregate principal
         amount of the Notes which may be authenticated and delivered under the
         Indenture; provided, however, that the aggregate principal amount of
         Notes to be authenticated and delivered under the Indenture pursuant to
         this Officers' Certificate and Authentication Order shall be limited to
         the amount set forth in Section C below (except for Notes authenticated
         and delivered upon registration of transfer of, or in exchange for, or
         in lieu of, other Notes pursuant to Sections 304, 305, 306, 906 or 1107
         of the Indenture and except for any Notes which, pursuant to Section
         303 of the Indenture, are deemed never to have been authenticated and
         delivered under the Indenture).

                  (3) Interest on each Note will be paid to the Person in whose
         name the Note is registered at the close of business on the Regular
         Record Date (as defined in paragraph 5 below), except that interest due
         at Maturity will be paid to the Person to whom the principal of the
         Note is paid.

                  (4) The Notes will mature on October 24, 2006, unless the
         principal of any Note, or any installment of principal, becomes due and
         payable prior to such date. If the date of Maturity of a Note is not a
         Business Day, the payment due on such day shall be made on the next
         succeeding Business Day and no additional interest shall accrue for the

<PAGE>

         period from Maturity to that next succeeding Business Day. "Business
         Day" means each Monday, Tuesday, Wednesday, Thursday and Friday which
         is not a day on which banking institutions in the Place of Payment (as
         defined in paragraph 6 below) are authorized or obligated by law or
         executive order to close.

                  (5) Each Note will bear interest from and including September
         24, 2003 or from and including the most recent Interest Payment Date
         (as defined below) as to which interest on such Note (or any
         Predecessor Security with respect to such Note) has been paid or made
         available for payment at an annual rate of 2 5/8% until the principal
         of the Note is paid or made available for payment. Each payment of
         interest on a Note will include interest to, but excluding, as the case
         may be, the relevant Interest Payment Date or Maturity.

                  The "Interest Payment Dates" for the Notes will be April 24
         and October 24 of each year beginning on April 24, 2004 and the Regular
         Record Dates will be the April 9 or October 9, respectively, next
         preceding such Interest Payment Date whether or not a Business Day. If
         any Interest Payment Date is not a Business Day, the payment due on
         such day shall be made on the next succeeding Business Day and no
         additional interest shall accrue for the period from such Interest
         Payment Date to that next succeeding Business Day.

                  Interest (including interest for partial periods) will be
         calculated on the basis of a 360-day year of twelve 30-day months.

                  (6) Payment of principal of and premium (if any) and interest
         on each Note that is represented by a Global Security will be made to
         the Depositary (as specified in paragraph 16 below) or its nominee, as
         the case may be, as the sole registered owner and the sole Holder of
         the Notes represented thereby for all purposes under the Indenture.

                  Payment of principal of and premium (if any) and interest on
         each Note that is not represented by a Global Security will be made
         upon presentation and surrender of such Note at the office or agency
         maintained by the Company for that purpose in the Borough of Manhattan,
         The City of New York (which shall initially be the office of the
         Trustee). Registered Holders that wish to receive payment in
         immediately available funds must provide appropriate written wire
         transfer instructions sufficiently in advance of the payment date and
         present the Note in time for the party making the payment to make
         payments in such funds in accordance with its normal procedures. Any
         wire transfer instructions received by a party making payments shall
         remain in effect until revoked by the registered Holder. Payment in
         accordance with written wire transfer instructions from a registered
         Holder shall be deemed to constitute full and complete payment of all
         amounts so paid. The Company may, at its option, elect to make payments
         of interest other than at Maturity by check mailed to the address of
         the registered Holder thereof as of the close of business on the
         relevant Regular Record Date as such address appears in the Security
         Register.

                  The "Place of Payment" with respect to the Notes shall be the
         City of New York.

                                       2
<PAGE>

                  (7) The Company may not redeem the Notes at its option prior
         to maturity.

                  (8) The Company shall have no obligation to redeem or
         repurchase any Notes either pursuant to any sinking fund or analogous
         provision or at the option of any Holder thereof.

                  (15) The Notes shall be defeasible, in whole or any specified
         part, pursuant to Section 1302 or Section 1303 of the Indenture or both
         such Sections.

                  (16) The Notes shall be issuable in whole or in part in the
         form of one or more Global Securities registered in the name of the
         Depositary or its nominee. The Depositary with respect to such Global
         Securities shall be The Depository Trust Company. The Global Securities
         shall bear the legends set forth on the form of Note attached hereto as
         Exhibit A. Except as provided in the clause (2) of the last paragraph
         of Section 305 of the Indenture, such Global Security may not be
         exchanged in whole or in part for Securities registered, and no
         transfer of such Global Security in whole or in part may be registered,
         in the name or names of Persons other than the Depositary for such
         Global Security or a nominee thereof. So long as the Depositary or its
         nominee is the registered holder of any Global Security, the Depositary
         or its nominee, as the case may be, will be considered the sole Holder
         of the Notes represented by such Global Security for all purposes under
         the Notes and the Indenture.

         B. ESTABLISHMENT OF FORM OF SECURITIES PURSUANT TO SECTION 201 OF THE
INDENTURE. In accordance with Section 201 of the Indenture, the form attached
hereto as Exhibit A is hereby established as the form to represent the Notes.

         C. ORDER FOR THE AUTHENTICATION AND DELIVERY OF SECURITIES PURSUANT TO
SECTION 303 OF THE Indenture. Pursuant to Section 303 of the Indenture, you are
hereby requested, as Trustee under the Indenture, to authenticate, in the manner
provided by the Indenture, $500,000,000 aggregate principal amount of the Notes
registered in the name of Cede & Co., which Notes have been heretofore duly
executed by the proper officers of the Company and delivered to you as provided
in the Indenture, and to deliver said authenticated Notes to Credit Suisse First
Boston LLC and UBS Securities LLC through the facilities of The Depository Trust
Company against payment therefor on September 24, 2003.

         D. CERTIFICATION PURSUANT TO SECTION 102 OF THE INDENTURE. Each of the
undersigned has read the pertinent sections of the Indenture, including Sections
201, 301 and 303 thereof and the definitions in the Indenture relating thereto,
and certain other corporate documents and records. In the opinion of each of the
undersigned, the undersigned has made such examination or investigation as is
necessary to enable the undersigned to express an informed opinion as to whether
or not the conditions precedent to (i) the establishment of (a) a series of
Securities and (b) the form of such Securities and (ii) the issuance,
authentication and delivery of such series of Securities contained in the
Indenture have been complied with. In the opinion of the undersigned, all
conditions precedent to (x) the establishment of the Notes and the form of the
Notes and (y) the issuance, authentication and delivery of the Notes have been
complied with.

                                       3
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         Insofar as this Officers' Certificate and Authentication Order relates
to legal matters, it is based upon the Opinion of Counsel delivered by the
Company to the Trustee contemporaneously herewith.

         IN WITNESS WHEREOF, the undersigned have hereunto signed our names on
behalf of the Company.

Dated: September 24, 2003

                                          GENERAL MILLS, INC.

                                          By    /s/ James A. Lawrence
                                             -----------------------------------
                                             James A. Lawrence
                                             Executive Vice President and Chief
                                             Financial Officer

                                          By    /s/ David B. VanBenschoten
                                             -----------------------------------
                                             David B. VanBenschoten
                                             Vice President and Treasurer

                                  CERTIFICATION

         I, Elizabeth L. Wittenberg, an Assistant Secretary of the Company, do
hereby certify that James A. Lawrence is on the date hereof the duly elected or
appointed Executive Vice President and Chief Financial Officer of the Company
and the signature set forth above is his own true signature, and further certify
that David B. VanBenschoten is on the date hereof the duly elected or appointed
Vice President and Treasurer of the Company and the signature set forth above is
his own true signature.

                                                /s/ Elizabeth L. Wittenberg
                                             -----------------------------------
                                             Elizabeth L. Wittenberg
                                             Assistant Secretary

                                       4
<PAGE>

                                                                       EXHIBIT A

REGISTERED NO. ___                               PRINCIPAL AMOUNT: $____________

                               GENERAL MILLS, INC.

                              2 5/8% NOTE DUE 2006

CUSIP NO. 370334AX2        ISIN No. US370334AX21       Common Code No. _________

         [Applicable if the Note is a Global Note: UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.

         THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.]

         GENERAL MILLS, INC., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company," which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to _______________., or registered
assigns, the principal sum of ______________ (U.S. $___________) on October 24,
2006 (the "Maturity Date"), and to pay interest thereon from and including
September 24, 2003 or the most recent Interest Payment Date (as defined below)
as to which interest has been paid or made available for payment, semiannually
in arrears on April 24 and October 24 in each year (each an "Interest Payment
Date"), commencing on April 24, 2004, at the rate of 2 5/8% per annum until the
principal hereof has been paid or duly made available for payment. Interest
(including interest for partial periods) will be calculated on the basis of a
360-day year of twelve 30-day months. Each payment of interest hereon will
include interest to, but excluding, as the case may be, the relevant Interest
Payment Date or Maturity.

                                       5
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         The interest so payable, and punctually paid or made available for
payment, on any Interest Payment Date will, as provided for in the Indenture, be
paid to the Person in whose name this Note (or one or more Predecessor
Securities with respect hereto) is registered at the close of business on the
Regular Record Date for such Interest Payment Date, which shall be the April 9
or October 9 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date; except that interest due at Maturity will be paid to
the Person to whom the principal is paid. Any such interest not so punctually
paid or made available for payment will forthwith cease to be payable to the
Person in whose name this Note (or one or more Predecessor Securities with
respect hereto) is registered at the close of business on such Regular Record
Date and may either be paid to the Person in whose name this Note (or one or
more Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to the Holder of this Note not less than
10 days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in said Indenture.

         [For us if the Note is a Global Note: Payment of principal of and
premium (if any) and interest on this Note will be made to The Depository Trust
Company or its nominee, as the case may be, as the sole registered owner and the
sole Holder of the Note represented hereby for all purposes under the
Indenture.]

         [For use with certificated Notes: Payment of principal of and premium
(if any) and interest on this Note will be made upon presentation and surrender
of this Note at the office or agency maintained by the Company for that purpose
in the Borough of Manhattan, The City of New York (which shall initially be the
office of the Trustee). Registered Holders that wish to receive payment in
immediately available funds must provide appropriate written wire transfer
instructions sufficiently in advance of the payment date and present this Note
in time for the party making the payment to make payments in such funds in
accordance with its normal procedures. Any wire transfer instructions received
by a party making

                                       6
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payments shall remain in effect until revoked by the registered Holder. Payment
in accordance with written wire transfer instructions from the registered Holder
shall be deemed to constitute full and complete payment of all amounts so paid.
The Company may, at its option, elect to make payments of interest other than at
Maturity by check mailed to the address of the registered Holder as of the close
of business on the relevant Regular Record Date as such address appears in the
Security Register.]

         The "Place of Payment" with respect to this Note shall be The City of
New York.

         All payments on this Note will be made in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts.

         Any payment on this Note due on a day that is not a Business Day will
be made on the next succeeding Business Day with the same force and effect as if
made on the due date and no additional interest shall accrue for the period from
and after such date.

         "Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Place of Payment
are authorized or obligated by law or executive order to close.

         Reference is hereby made to the further provisions of this Note set
forth on the reverse hereof, which further provisions shall have the same effect
as though fully set forth in this place.

         Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee for the Notes by manual signature, this Note shall not
be entitled to any benefit under the Indenture, or be valid or obligatory for
any purpose.

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and has caused a facsimile of its corporate seal to be affixed hereto
or imprinted hereon.

Dated:
        --------------------

TRUSTEE'S CERTIFICATE OF AUTHENTICATION         GENERAL MILLS, INC.
This is one of the series
designated herein referred
to in the within-mentioned
Indenture.                                      By:
                                                   -----------------------------
                                                   [Name]

                                       7
<PAGE>

                                                   [Title]

U.S. BANK NATIONAL ASSOCIATION, as Trustee

                                                Attest:
                                                       -------------------------
  By:                                                  [Name]
     -------------------------------------             [Title]
              Authorized Officer

         OR

------------------------------------------      [SEAL]
as Authenticating Agent for the Trustee

  By:
     -------------------------------------
              Authorized Officer

                                       8
<PAGE>

                                [REVERSE OF NOTE]

                               GENERAL MILLS, INC.

                              2 5/8% NOTES DUE 2006

         This Note is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of February 1, 1996 (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and U.S. Bank National Association (f.k.a.
First Trust of Illinois, National Association), as Trustee (herein called the
"Trustee", which term includes any successor trustee under the Indenture), and
reference is hereby made to the Indenture and all indentures supplemental
thereto for a statement of the respective rights, limitations of rights, duties
and immunities thereunder of the Company, the Trustee and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. By the terms of the Indenture, additional
Securities of other separate series, which may vary as to date, amount, Stated
Maturity, interest rate or method of calculating the interest rate and in other
respects as therein provided, may be issued in an unlimited principal amount.
This Note is one of a series of the Securities designated as 2 5/8% Notes Due
2006 (the "Notes").

         In case an Event of Default, as defined in the Indenture, with respect
to the Notes shall have occurred and be continuing, the unpaid principal hereof
may be declared, and upon such declaration shall become, due and payable in the
manner, with the effect and subject to the conditions provided in the Indenture.

         The Company may not redeem this Note at its option prior to Maturity.

         The Company may, without the consent of the Holders of the Notes, issue
additional Securities having the same ranking and the same interest rate,
maturity and other terms as the Notes. Any additional Securities having the same
terms, together with these Notes, will constitute a single series of Notes under
the Indenture. No such additional Securities may be issued if an Event of
Default has occurred with respect to these Notes.

                                       9
<PAGE>

         The Indenture contains provisions for defeasance at any time of either
the entire principal of the Notes or of certain covenants and Events of Default
with respect to the Notes, in either case upon compliance by the Company with
certain conditions set forth in the Indenture.

        [This Note is exchangeable for definitive Notes only if (x) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for this Global Security or if at any time the Depositary ceases to
be a clearing agency registered under the Securities Exchange Act of 1934, as
amended, (y) the Company executes and delivers to the Trustee a Company Order
that this Note shall be so exchangeable or (z) an Event of Default with respect
to the Notes represented hereby has occurred and is continuing. In such case,
this Global Security shall be exchangeable into Notes issuable only in
denominations of $1,000 and integral multiples thereof. No Notes shall be
issuable in denominations of less than $1,000. If this Note is exchangeable
pursuant to the preceding sentences, it shall be exchangeable for definitive
Notes, bearing interest at the same rate, having the same date of issuance,
redemption provisions, Stated Maturity and other terms in registered form and of
differing denominations aggregating a like amount.]

         As provided in the Indenture and subject to the limitations herein and
therein set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer at the office
or agency of the Company in any place where the principal of and any premium and
interest on this Note are payable, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by the Holder hereof or the Holder's attorney duly
authorized in writing, and thereupon one or more new Notes of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.

         The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. No Notes will be
issuable in denominations of less than $1,000. As provided in the Indenture and
subject to the limitations herein and therein set forth, the Notes are
exchangeable for a like aggregate principal amount of Notes and of like tenor in
denominations of $1,000 and integral multiples thereof, as requested by the
Holder surrendering the same.

                                       10
<PAGE>

         No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.

         No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the places, at the respective times and at the rate herein prescribed.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in aggregate principal amount
of the Securities at the time Outstanding of each series to be affected. The
Indenture also contains provisions permitting the Holders of specified
percentages in aggregate principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future Holders of this Note and of any Note issued
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Note.

         As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Notes, the Holders of not less than 25% in principal amount of the Notes at the
time Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity, and the Trustee shall not have received from the
Holders of a majority in principal amount of the Notes at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute

                                       11
<PAGE>
any such proceeding, for 60 days after receipt of such notice, request and offer
of indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.

         Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may deem
and treat the Person in whose name this Security is registered as the absolute
owner of this Note at such holder's address as it appears on the Security
Register (whether or not this Note shall be overdue) for the purpose of
receiving payment of or on account hereof and for all other purposes, and
neither the Company nor the Trustee nor any such agent shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, effectually
satisfy and discharge liability for moneys payable on this Note.

         No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in any indenture supplemental thereto or any Note,
or because of any indebtedness evidenced thereby, shall be had against any
incorporator, or against any past, present or future stockholder, officer or
director, as such, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, under any rule of
law, statute or constitutional provision or by the enforcement of any assessment
or by any legal or equitable proceeding or otherwise, all such personal
liability of every such incorporator, stockholder, officer and director, as
such, being expressly waived and released by acceptance hereof and as a
condition of and as part of the consideration for the issuance of this Note.

         Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.

         The Indenture is, and this Note shall be, governed by and construed in
accordance with the laws of the State of New York.

                                       12
<PAGE>

                                  ABBREVIATIONS

              The following abbreviations, when used in the inscription on the
face of this instrument, shall be construed as though they were written out in
full according to applicable laws or regulations:

<TABLE>
<S>            <C>                                  <C>
TEN COM        --as tenants in common               UNIF TRAN MIN ACT______CUSTODIAN_______
TEN ENT        --as tenants by the entireties                        (Cust)         (Minor)
JT TEN         --as joint tenants with right          Under Uniform Transfers to Minors Act
                 of survivorship and not as
                 tenants in common                      _________________________________
                                                                      (State)
</TABLE>

              Additional abbreviations may also be used though not in the above
list.

              FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

Please insert Social Security or
Other identifying Number of Assignee

 ________________
/________________/______________________________________________________________
         PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE

________________________________________________________________________________

________________________________________________________________________________

the within Note of GENERAL MILLS, INC. and does hereby irrevocably constitute
and appoint ________________________________________ attorney to transfer said
Note on the books of the Company, with full power of substitution in the
premises.

Dated:  _________________________         ______________________________________

                                          ______________________________________

NOTICE: The signature to this assignment must correspond with the name as
written upon the face of the within instrument in every particular, without
alteration or enlargement or any change whatever.

                                       13<PAGE>

                                                                     EXHIBIT 4.5
                                                                  EXECUTION COPY

                                   KITTY HAWK
                      2003 LONG TERM EQUITY INCENTIVE PLAN

         The Kitty Hawk 2003 Long Term Equity Incentive Plan (the "PLAN") was
adopted by the Board of Directors of Kitty Hawk, Inc., a Delaware corporation
(the "COMPANY"), effective as of July 29, 2003.

                                    ARTICLE 1
                                     PURPOSE

         The purpose of the Plan is to foster and promote the long-term
financial success of the Company and its Subsidiaries and materially increase
the value of the Company and its Subsidiaries by (a) encouraging the long-term
commitment of the Employees, Consultants and Outside Directors of the Company
and its Subsidiaries, (b) motivating performance of the Employees, Consultants
and Outside Directors of the Company and its Subsidiaries by means of long-term
performance related incentives, (c) encouraging and providing Employees,
Consultants and Outside Directors of the Company and its Subsidiaries with an
opportunity to obtain an ownership interest in the Company, (d) attracting and
retaining outstanding Employees, Consultants and Outside Directors by providing
incentive compensation opportunities, and (e) enabling participation by
Employees, Consultants and Outside Directors in the long-term growth and
financial success of the Company and its Subsidiaries.

         With respect to Reporting Participants, the Plan and all transactions
under the Plan are intended to comply with all applicable conditions of Rule
16b-3 promulgated under the Securities Exchange Act of 1934 (the "1934 ACT"). To
the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void ab initio, to the extent permitted by
law and deemed advisable by the Committee.

         The Plan shall be submitted to the Company's stockholders for approval
in accordance with the Delaware General Corporation Law; however, the Committee
may grant Awards under the Plan prior to the time of stockholder approval. Any
such Awards granted prior to stockholder approval shall be null and void if
stockholder approval of the Plan is not obtained by July 29, 2004.

                                    ARTICLE 2
                                   DEFINITIONS

         For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

         2.1 "AWARD" means the grant of any Incentive Stock Option, Nonqualified
Stock Option, Restricted Stock, Restricted Stock Unit, or SAR whether granted
singly or in combination or in tandem (each individually referred to herein as
an "INCENTIVE").

<PAGE>

         2.2 "AWARD AGREEMENT" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.

         2.3 "AWARD PERIOD" means the period set forth in the Award Agreement
with respect to a Stock Option or SAR during which the Stock Option or SAR may
be exercised, which shall commence on the Date of Grant and expire at the time
set forth in the Award Agreement.

         2.4 "BOARD" means the board of directors of the Company.

         2.5 "CHANGE OF CONTROL" means the first to occur of the following:

                  (A) the consummation of a reorganization, merger or
         consolidation of the Company (other than a reorganization, merger or
         consolidation the sole purpose of which is to change the Company's
         domicile solely within the United States) (i) as a result of which the
         outstanding securities of the class then subject to Awards are
         exchanged or converted into cash, property and/or securities not issued
         by the Company and (ii) the terms of which provide that Awards shall
         continue in effect thereafter;

                  (B) any person or entity becoming the Beneficial Owner of
         voting securities of the Company representing more than 50% of the
         voting power of the Company (a "50% SHAREHOLDER"); provided, however,
         that the term "50% Shareholder" shall not include (i) the Company or
         any of its subsidiaries, (ii) any employee benefit plan of the Company
         or any of its Subsidiaries or (iii) any entity holding voting
         securities of the Company for or pursuant to the terms of any such
         plan; or

                  (C) any person or entity becoming the Beneficial Owner of
         voting securities of the Company representing more than 80% of the
         voting power of the Company (an "80% SHAREHOLDER"); provided, however,
         that the term "80% Shareholder" shall not include (i) the Company or
         any of its subsidiaries, (ii) any employee benefit plan of the Company
         or any of its Subsidiaries, or (iii) any entity holding voting
         securities of the Company for or pursuant to the terms of any such
         plan.

                  Notwithstanding the foregoing, a transaction described in
         clauses (A) or (B) shall not constitute a Change of Control hereunder
         if after such transaction (I) Continuing Directors occupy at least
         fifty percent (50%) of the seats (whether or not vacant) on the Board
         of Directors of the continuing, surviving or acquiring entity, as the
         case may be or, if such entity has a parent entity directly or
         indirectly holding at least a majority of the voting power of the
         voting securities of the continuing, surviving or acquiring entity,
         Continuing Directors occupy at least fifty percent (50%) of the seats
         (whether or not vacant) on the Board of Directors of the entity that is
         the ultimate parent of the continuing, surviving or acquiring entity,
         and (II) the continuing, surviving or acquiring entity (or the ultimate
         parent of such continuing, surviving or acquiring entity) assumes all
         outstanding Awards under this Plan or the Company survives as a
         separate legal entity and remains liable for all outstanding Awards
         under this Plan. For purposes of clarification, in calculating whether
         50% of the seats on the Board of Directors are

                                       2
<PAGE>

         occupied by Continuing Directors in clause (I) above, any vacant seat
         on the Board of Directors shall not be deemed to be occupied by a
         Continuing Director, until a Continuing Director has been appointed or
         elected to such seat. "CONTINUING DIRECTORS" means Board members who
         (x) at the date of this Plan were directors or (y) become directors
         after the date of this Plan and whose election or nomination for
         election by the Company's stockholders was approved by a vote of a
         majority of the directors then in office or by a nominating committee
         of the Board of Directors (such nominating committee being comprised
         solely of independent directors) the majority of the members of which
         were directors at the date of this Plan or who are Continuing
         Directors.

                  For purposes of the Plan, a person or entity shall be deemed
         to be a "BENEFICIAL OWNER" of securities that such person or entity
         beneficially owns (as such term is defined in Rule 13d-3 promulgated
         under the 1934 Act) together with securities beneficially owned by all
         of such person or entity's Affiliates and Associates (as such
         capitalized terms are defined in Rule 12b-2 promulgated under the 1934
         Act) and any other person or entity with which such person or entity,
         or such person or entity's Affiliates or Associates, has any agreement,
         arrangement, or understanding (other than the customary agreements with
         and between underwriters and selling group members with respect to a
         bona fide public offering of securities) for the purpose of acquiring,
         holding, voting or disposing of any securities of the Company.

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

         2.7 "COMMITTEE" means the committee or person appointed or designated
by the Board to administer the Plan in accordance with Article 3 of this Plan.

         2.8 "COMMON STOCK" means the common stock, par value $0.000001 per
share, which the Company is currently authorized to issue or may in the future
be authorized to issue, or any securities into which or for which the common
stock of the Company may be converted or exchanged, as the case may be, pursuant
to the terms of this Plan.

         2.9 "COMPANY" means Kitty Hawk, Inc. a Delaware corporation, and any
successor entity.

         2.10 "CONSULTANT" means any individual who is not an employee
performing advisory or consulting services for the Company or a Subsidiary, with
or without compensation, to whom the Company chooses to grant an Award in
accordance with the Plan, provided that bona fide services must be rendered by
such person and such services shall not be rendered in connection with the offer
or sale of securities in a capital raising transaction.

         2.11 "CORPORATION" means any entity that (i) is defined as a
corporation under Code Section 7701 and (ii) is the Company or is in an unbroken
chain of corporations (other than the Company) beginning with the Company, if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing a majority of the total combined voting power of all
classes of stock in one of the other corporations in the chain. For purposes of
clause

                                       3
<PAGE>

(ii) hereof, an entity shall be treated as a "corporation" if it satisfies the
definition of a corporation under Section 7701 of the Code.

         2.12 "DATE OF GRANT" means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement.

         2.13 "DEFERRAL SHARES" means, solely with respect to shares which a
Participant elects to defer the receipt, the number of shares of Common Stock
the Participant would otherwise be eligible to receive upon the exercise of a
Stock Option when the exercise price of such Stock Option is satisfied with the
delivery of Common Stock.

         2.14 "EMPLOYEE" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.

         2.15 "FAIR MARKET VALUE" means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the closing
sales price per share of Common Stock on the consolidated transaction reporting
system for the principal securities exchange for the Common Stock on that date,
or, if there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (b) if the shares of Common
Stock are not so listed but are quoted on Nasdaq, the closing sales price per
share of Common Stock on Nasdaq on that date, or, if there shall have been no
such sale so reported on that date, on the last preceding date on which such a
sale was so reported, or (c) if none of the above is applicable, such amount as
may be determined by the Committee or the Board acting in good faith taking into
account all relevant factors including, but not limited to, (x) the mean between
the closing bid and asked price on such date, or, if there are no quotations
available for such date, on the last preceding date on which such quotations
shall be available, as reported by Nasdaq, or, if not reported by Nasdaq, by the
National Quotation Bureau, Inc., or other applicable over-the-counter bulletin
board service and (y) any valuations or appraisals of the value of the Common
Stock or the value of the Company.

         2.16 "INCENTIVE" is defined in Section 2.1 hereof.

         2.17 "INCENTIVE STOCK OPTION" means an incentive stock option within
the meaning of Section 422 of the Code, granted pursuant to this Plan.

         2.18 "NONPUBLICLY TRADED" means not listed on a national securities
exchange registered with the Securities and Exchange Commission, not designated
for trading on the Nasdaq National Market, and not traded on an electronic
quotation system.

         2.19 "NONQUALIFIED STOCK OPTION" means a nonqualified stock option,
granted pursuant to this Plan, to which Section 421 of the Code does not apply.

         2.20 "OPTION PRICE" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.

                                       4
<PAGE>

         2.21 "OUTSIDE DIRECTOR" means a director of the Company who is not an
Employee.

         2.22 "PARTICIPANT" means an Employee, Consultant or Outside Director of
the Company or a Subsidiary to whom an Award is granted under this Plan.

         2.23 "PLAN" means this Kitty Hawk 2003 Long Term Equity Incentive Plan,
as amended from time to time.

         2.24 "REPORTING PARTICIPANT" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.

         2.25 "RESTRICTED STOCK" means shares of Common Stock issued or
transferred to a Participant pursuant to Section 6.5 of this Plan which are
subject to restrictions or limitations set forth in this Plan and in the related
Award Agreement.

         2.26 "RESTRICTED STOCK UNIT" means a unit of Common Stock, which may be
settled in either cash or Common Stock at the discretion of the Committee,
granted to a Participant pursuant to Section 6.5 of this Plan which is subject
to restrictions or limitations set forth in this Plan and in the related Award
Agreement.

         2.27 "RETIREMENT" means any Termination of Service solely due to
retirement upon or after attainment of age sixty (60) with at least three (3)
years of service, or permitted early retirement as determined by the Committee.

         2.28 "SAR" or "STOCK APPRECIATION RIGHT" means the right to receive a
payment, in cash and/or Common Stock, equal to the excess of the Fair Market
Value of a specified number of shares of Common Stock on the date the SAR is
exercised over the SAR Price for such shares.

         2.29 "SAR PRICE" means the exercise price of each share of Common Stock
covered by a SAR, determined on the Date of Grant of the SAR.

         2.30 "STOCK OPTION" means a Nonqualified Stock Option or an Incentive
Stock Option.

         2.31 "SUBSIDIARY" means (i) any corporation 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 a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "Subsidiaries" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.

                                       5
<PAGE>

         2.32 "TERMINATION OF SERVICE" occurs when a Participant who is an
Employee or a Consultant of the Company or any Subsidiary shall cease to serve
as an Employee or Consultant of the Company and its Subsidiaries, for any
reason; or, when a Participant who is an Outside Director of the Company or a
Subsidiary shall cease to serve as a director of the Company and its
Subsidiaries for any reason. Except as may be necessary or desirable to comply
with applicable federal or state law, a "Termination of Service" shall not be
deemed to have occurred when a Participant who is an Employee becomes a
Consultant or an Outside Director or vice versa. If, however, a Participant who
is an Employee and who has an Incentive Stock Option ceases to be an Employee
but does not suffer a Termination of Service, and if that Participant does not
exercise the Incentive Stock Option within the time required under Code section
422 upon ceasing to be an Employee, the Incentive Stock Option shall thereafter
become a Nonqualified Stock Option.

         2.33 "TOTAL AND PERMANENT DISABILITY" means a Participant is qualified
for long-term disability benefits under the Company's or Subsidiary's disability
plan or insurance policy; or, if no such plan or policy is then in existence or
if the Participant is not eligible to participate in such plan or policy, that
the Participant, because of a physical or mental condition resulting from bodily
injury, disease, or mental disorder which prevents the Participant from
performing his or her duties of employment for a period of six (6) continuous
months, as determined in good faith by the Committee, based upon medical reports
or other evidence satisfactory to the Committee; provided that, with respect to
any Incentive Stock Option, Total and Permanent Disability shall have the
meaning given it under the rules governing Incentive Stock Options under the
Code.

                                    ARTICLE 3
                                 ADMINISTRATION

         3.1 GENERAL ADMINISTRATION; ESTABLISHMENT OF COMMITTEE. Subject to the
terms of this Article 3, the Plan shall be administered by the Board or such
committee of the Board as is designated by the Board to administer the Plan (the
"COMMITTEE"), which Committee shall initially be the Compensation Committee of
the Board. The Committee shall consist of not fewer than two persons. Any member
of the Committee may be removed at any time, with or without cause, by
resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board. At any time there is no
Committee to administer the Plan, any references in this Plan to the Committee
shall be deemed to refer to the Board.

         If necessary to satisfy the requirements of Section 162(m) of the Code
and/or Rule 16b-3 promulgated under the 1934 Act, membership on the Committee
shall be limited to those members of the Board who are "outside directors" under
Section 162(m) of the Code and/or "non-employee directors" as defined in Rule
16b-3 promulgated under the 1934 Act. The Committee shall select one of its
members to act as its Chairman.

         3.2      DESIGNATION OF PARTICIPANTS AND AWARDS.

                  (a) The Committee or the Board shall determine and designate
         from time to time the eligible persons to whom Awards will be granted
         and shall set forth in each

                                       6
<PAGE>

         related Award Agreement, where applicable, the Award Period, the Date
         of Grant, and such other terms, provisions, limitations, and
         performance requirements, as are approved by the Committee, but not
         inconsistent with the Plan. The Committee shall determine whether an
         Award shall include one type of Incentive or two or more Incentives
         granted in combination or two or more Incentives granted in tandem
         (that is, a joint grant where exercise of one Incentive results in
         cancellation of all or a portion of the other Incentive). The Committee
         shall, at its sole discretion, subject to the Code and all rules and
         regulations promulgated thereunder, have the authority to allow a
         Participant to elect to defer the receipt of Deferral Shares and to
         impose certain mandatory minimum deferral periods with respect to such
         Deferral Shares. All decisions with respect to any Award, and the terms
         and conditions thereof, to be granted under the Plan to any member of
         the Committee shall be made solely and exclusively by the other members
         of the Committee, or if such member is the only member of the
         Committee, by the Board.

                  (b) Notwithstanding Subsection 3.2(a), the Board may, in its
         sole discretion and by a resolution adopted by the Board, authorize one
         or more officers of the Company (an "AUTHORIZED OFFICER") to (i)
         designate one or more Employees as eligible persons to whom Awards will
         be granted under the Plan and (ii) determine the number of shares of
         Common Stock that will be subject to such Awards; provided, however,
         that the resolution of the Board granting such authority shall (x)
         specify the total number of shares of Common Stock that may be made
         subject to the Awards, (y) set forth the price or prices (or a formula
         by which such price or prices may be determined) to be paid for the
         purchase of the Common Stock subject to such Awards, and (z) not
         authorize an officer to designate himself as a recipient of any Award.
         The Authorized Officer shall notify the Committee in writing of the
         persons designated to receive such Awards, the type of Award or the
         type of Incentives subject to the Award, the Date of Grant, the number
         of shares of Common Stock that will be subject to such Awards, and the
         purchase price to be paid for such shares. If authorized to do so in
         the Board's written resolution, the Authorized Officer shall cause the
         Company to execute an Award Agreement with the Participant, subject to
         the Committee's ratification of such terms of an Award as required by
         law.

                  Within an administratively reasonable time after receipt of
         the Authorized Officer's written notice of one or more Awards, the
         Committee shall authorize or ratify the grant of such Awards and shall
         prescribe all other terms of such Awards pursuant to its authority set
         forth in Subsection 3.2(a).

         3.3 AUTHORITY OF THE COMMITTEE. The Committee, in its discretion, shall
(i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, (iii)
establish performance goals for an Award and certify the extent of their
achievement, and (iv) make such other determinations or certifications and take
such other action as it deems necessary or advisable in the administration of
the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.
The Committee's discretion set forth herein shall not be limited by any
provision of the Plan, including any provision which by its terms is applicable
notwithstanding any other provision of the Plan to the contrary.

                                       7
<PAGE>

         To the extent permitted by law, the Committee may delegate to officers
of the Company, pursuant to a written delegation, the authority to perform
specified functions under the Plan. Any actions taken by any officers of the
Company pursuant to such written delegation of authority shall be deemed to have
been taken by the Committee.

         With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "APPLICABLE LAW"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.

                                    ARTICLE 4
                                   ELIGIBILITY

         Any Employee (including an Employee who is also a director or an
officer), Consultant or Outside Director of the Company or a Subsidiary whose
judgment, initiative, and efforts contributed or may be expected to contribute
to the successful performance of the Company is eligible to participate in the
Plan; provided that only Employees of a Corporation shall be eligible to receive
Incentive Stock Options. The Committee, upon its own action, may grant, but
shall not be required to grant, an Award to any Employee, Consultant or Outside
Director of the Company or any Subsidiary. Awards may be granted by the
Committee at any time and from time to time to new Participants, or to then
Participants, or to a greater or lesser number of Participants, and may include
or exclude previous Participants, as the Committee shall determine. Except as
required by this Plan, Awards granted at different times need not contain
similar provisions. The Committee's determinations under the Plan (including
without limitation determinations of which Employees, Consultants, or Outside
Directors, if any, are to receive Awards, the form, amount and timing of such
Awards, the terms and provisions of such Awards and the agreements evidencing
same) need not be uniform and may be made by it selectively among Participants
who receive, or are eligible to receive, Awards under the Plan.

                                    ARTICLE 5
                SHARES SUBJECT TO PLAN; MAXIMUM INDIVIDUAL GRANTS

         5.1 NUMBER AVAILABLE FOR AWARDS. Subject to adjustment as provided in
Articles 11 and 12, the maximum number of shares of Common Stock that may be
delivered pursuant to Awards granted under the Plan is 6,500,000 shares;
provided, however, that the number of shares of Common Stock that may be awarded
to a Participant in a single year may not exceed 1,500,000. Shares to be issued
may be made available from authorized but unissued Common Stock, Common Stock
held by the Company in its treasury, or Common Stock purchased by the Company on
the open market or otherwise. During the term of this Plan, the Company will at
all times reserve and keep available the number of shares of Common Stock that
shall be sufficient to satisfy the requirements of this Plan.

                                       8
<PAGE>

         5.2 REUSE OF SHARES. If, and to the extent:

                  (a) An Award shall expire or terminate for any reason without
         having been exercised in full, or in the event that an Award is
         exercised or settled in a manner such that some or all of the shares of
         Common Stock relating to the Award are not issued to the Participant
         (or beneficiary) (including as the result of the use of shares for
         withholding taxes or for payment of the exercise price), the shares of
         Common Stock subject thereto which have not become outstanding shall
         (unless the Plan shall have sooner terminated) become available for
         issuance under the Plan.

                  (b) Unvested shares of Common Stock issued under the Plan are
         subsequently repurchased by the Company as provided in Section 7.4,
         such shares of Common Stock shall (unless the Plan shall have sooner
         terminated) become available for issuance under the Plan.

                  (c) Shares of Restricted Stock under the Plan are forfeited
         for any reason, such shares of Restricted Stock shall (unless the Plan
         shall have sooner terminated) become available for issuance under the
         Plan.

                  (d) Shares of Common Stock are repurchased on the open market
         with remittances from the exercise of an Option under the Plan, such
         shares of Common Stock shall become available for issuance under the
         Plan.

         In no event shall the number of shares of Common Stock subject to
Incentive Stock Options exceed, in the aggregate 6,500,000 shares of Common
Stock plus shares subject to Incentive Stock Options which are forfeited or
terminated, or expire unexercised.

                                    ARTICLE 6
                                 GRANT OF AWARDS

         6.1 IN GENERAL. The Company shall execute an Award Agreement with a
Participant after the Committee approves the issuance of an Award. Any Award
granted pursuant to this Plan must be granted within ten (10) years after the
date of adoption of this Plan. The grant of an Award to a Participant shall not
be deemed either to entitle the Participant to, or to disqualify the Participant
from, receipt of any other Award under the Plan.

         6.2 STOCK OPTIONS. The grant of an Award of Stock Options shall be
authorized by the Committee and shall be evidenced by an Award Agreement setting
forth: (i) the Incentive or Incentives being granted, (ii) the total number of
shares of Common Stock subject to the Incentive(s), (iii) the Option Price, (iv)
the Award Period, (v) the Date of Grant, and (vi) such other terms, provisions,
limitations, and performance objectives, as are approved by the Committee, but
not inconsistent with the Plan.

                                       9
<PAGE>

         6.3 OPTION PRICE. The Option Price for any share of Common Stock which
may be purchased under a Stock Option must be at least equal to the Fair Market
Value of the share on the Date of Grant; if an Incentive Stock Option is granted
to an Employee who owns or is deemed to own (by reason of the attribution rules
of Section 424(d) of the Code) more than ten percent (10%) of the combined
voting power of all classes of stock of the Company (or any parent or
Subsidiary), the Option Price shall be at least 110% of the Fair Market Value of
the Common Stock on the Date of Grant.

         6.4 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option (or any such portion thereof) shall be a Nonqualified Stock Option. In
such case, the Committee shall designate which stock will be treated as
Incentive Stock Option stock by causing the issuance of a separate stock
certificate and identifying such stock as Incentive Stock Option stock on the
Company's records.

         6.5 RESTRICTED STOCK AND RESTRICTED STOCK UNITS. If shares of
Restricted Stock or Restricted Stock Units are granted to or received by a
Participant under an Award (including a Stock Option), the Committee shall set
forth in the related Award Agreement: (i) the number of shares of Common Stock
or Units awarded, (ii) the price per share, if any, to be paid by the
Participant for such Restricted Stock or Restricted Stock Units and the method
of payment of the price (if any), (iii) the time or times within which such
Award may be subject to forfeiture, (iv) specified performance goals of the
Company, a Subsidiary, any division thereof or any group of Employees of the
Company, or other criteria, which the Committee determines must be met in order
to remove any restrictions (including vesting) on such Award, and (v) all other
terms, limitations, restrictions, and conditions of the Restricted Stock or
Restricted Stock Units, which shall be consistent with this Plan. The relevant
performance goals will be set by the Committee and may be based upon factors
including, without limitation, increases in corporate earnings, revenue growth,
reduction in overhead, collection of accounts receivable and other goals set
solely at the discretion of the Committee. The provisions of Restricted Stock or
Restricted Stock Units need not be the same with respect to each Participant.
The Participant must accept such Award within a period of thirty (30) days (or
such shorter period as the Committee may specify) after the Date of Grant by
executing the applicable Award Agreement and paying the purchase price.

                  (a) LEGEND ON SHARES. Each Participant who is awarded or
         receives Restricted Stock shall be issued a stock certificate or
         certificates in respect of such shares of Common Stock. Such
         certificate(s) shall be registered in the name of the Participant, and
         shall bear an appropriate legend referring to the terms, conditions,
         and restrictions applicable to such Restricted Stock, substantially as
         provided in Section 15.10 of the Plan.

                                       10
<PAGE>

                  (b) RESTRICTIONS AND CONDITIONS. Shares of Restricted Stock
         shall be subject to the following restrictions and conditions:

                           (i) Subject to the other provisions of this Plan and
                  the terms of the particular Award Agreements, during such
                  period as may be determined by the Committee commencing on the
                  Date of Grant or the date of exercise of an Award (the
                  "RESTRICTION PERIOD"), the Participant shall not be permitted
                  to sell, transfer, pledge or assign shares of Restricted
                  Stock. Except for these limitations, the Committee may in its
                  sole discretion, remove any or all of the restrictions on such
                  Restricted Stock whenever it may determine that, by reason of
                  changes in applicable laws or other changes in circumstances
                  arising after the date of the Award, such action is
                  appropriate.

                           (ii) Except as provided in sub-paragraph (i) above or
                  in the applicable Award Agreement, the Participant shall have,
                  with respect to his or her Restricted Stock, all of the rights
                  of a stockholder of the Company, including the right to vote
                  the shares, and the right to receive any dividends thereon.
                  Certificates for shares of Common Stock free of restriction
                  under this Plan shall be delivered to the Participant promptly
                  after, and only after, the Restriction Period shall expire
                  without forfeiture in respect of such shares of Common Stock
                  or after any other restrictions imposed in such shares of
                  Common Stock by the applicable Award Agreement or other
                  agreement have expired. Certificates for the shares of Common
                  Stock forfeited under the provisions of the Plan and the
                  applicable Award Agreement shall be promptly returned to the
                  Company by the forfeiting Participant. Each Award Agreement
                  shall require that each Participant, in connection with the
                  issuance of a certificate for Restricted Stock, shall endorse
                  such certificate in blank or execute a stock power in form
                  satisfactory to the Company in blank and deliver such
                  certificate and executed stock power to the Company.

                           (iii) The Restriction Period of Restricted Stock
                  shall commence on the Date of Grant or the date of exercise of
                  an Award, as specified in the Award Agreement, and, subject to
                  Article 12 of the Plan, unless otherwise established by the
                  Committee in the Award Agreement setting forth the terms of
                  the Restricted Stock, shall expire upon satisfaction of the
                  conditions set forth in the Award Agreement; such conditions
                  may provide for vesting based on (i) length of continuous
                  service, (ii) achievement of specific business objectives,
                  (iii) increases in specified indices, (iv) attainment of
                  specified growth rates, or (v) other comparable measurements
                  of Company performance, as may be determined by the Committee
                  in its sole discretion.

                           (iv) Except as otherwise provided in the particular
                  Award Agreement, upon Termination of Service for any reason
                  during the Restriction Period, the nonvested shares of
                  Restricted Stock shall be forfeited by the Participant. In the
                  event a Participant has paid any consideration to the Company
                  for such forfeited Restricted Stock, the Committee shall
                  specify in the Award Agreement that either

                                       11
<PAGE>

                  (i) the Company shall be obligated to, or (ii) the Company
                  may, in its sole discretion, elect to, pay to the Participant,
                  as soon as practicable after the event causing forfeiture, in
                  cash, an amount equal to the lesser of the total consideration
                  paid by the Participant for such forfeited shares or the Fair
                  Market Value of such forfeited shares as of the date of
                  Termination of Service, as the Committee, in its sole
                  discretion shall select. Upon any forfeiture, all rights of a
                  Participant with respect to the forfeited shares of the
                  Restricted Stock shall cease and terminate, without any
                  further obligation on the part of the Company.

                           (v) In the event that Restricted Stock is issued to a
                  Participant as a result of such Participant's exercise of an
                  Award prior to the vesting of such Award, such Restricted
                  Stock shall remain subject to all of the vesting requirements
                  and forfeiture provisions of such Award and the Plan as if
                  such Award had not been exercised.

         6.6 SAR. A SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of a SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash. The SAR Price for any share of Common Stock subject to a SAR must be at
least equal to the Fair Market Value of the share on the Date of Grant;
provided, however, that the SAR Price for any share of Common Stock subject to a
SAR granted as a "tandem Award" shall be the exercise price of the Stock Option
that is granted in tandem with the SAR.

         6.7 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "tandem Award," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and a SAR are issued in a
tandem Award, and the Participant exercises the SAR with respect to 100 shares
of Common Stock, the right of the Participant to exercise the related Stock
Option shall be canceled to the extent of 100 shares of Common Stock.

         6.8 AUTOMATIC STOCK OPTION GRANTS TO OUTSIDE DIRECTORS.

                  (a) Each individual who is an Outside Director as of the date
         of this Agreement shall be granted a Stock Option on the date hereof to
         purchase 225,000 shares of Common Stock at an exercise price of $0.30
         per share, the Fair Market Value of the Common Stock on the date
         hereof. Such Stock Option shall be made subject to, and in no event may
         an Outside Director exercise any portion of such Stock

                                       12

<PAGE>

         Option prior to, stockholder approval of the Plan. Subject to the
         immediately preceding sentence, ten thirty-sixths (10/36) of the Common
         Stock issuable upon the exercise of such Stock Option shall be fully
         vested upon the grant of such Stock Option. The remaining twenty-six
         thirty-sixths (26/36) of the Common Stock issuable upon the exercise of
         such Stock Option will vest in 26 equal monthly installments with the
         first such installment vesting on September 1, 2003.

                  (b) With respect to any individual who joins the Board as an
         Outside Director before September 30, 2005, on the date on which such
         individual commences serving as an Outside Director, such individual
         shall be granted a Stock Option to purchase a number of shares of
         Common Stock such that the Stock Option will have a value (as
         determined by the Committee) of $45,000 on the date of such grant
         multiplied by a fraction, the numerator of which is equal to the number
         of days between the date such individual first commences serving as an
         Outside Director and September 30, 2005, and the denominator of which
         is the total number of days between October 1, 2002 and September 30,
         2005, rounded down to the nearest whole share. If a Stock Option
         pursuant to this Section 6.8(b) is granted prior to stockholder
         approval of the Plan, then such grant shall be subject to, and in no
         event may an Outside Director exercise any portion of such Stock Option
         prior to, such stockholder approval. Such Stock Option will vest in
         equal monthly installments with the first installment vesting on the
         one month anniversary of the date such Stock Option is granted and the
         total number of installments equal to the number of months (including
         the month of such grant) between the date of the grant of such Stock
         Option and September 30, 2005.

                  (c) On September 30, 2005, and on each anniversary of
         September 30, 2005, each individual who is then an Outside Director
         shall be granted a Stock Option to purchase a number of shares of
         Common Stock such that the Stock Option will have a value (as
         determined by the Committee) of $15,000 on the date of such grant,
         rounded down to the nearest whole share. Such Stock Option will vest in
         12 equal monthly installments with the first installment vesting on the
         one month anniversary of the date of such Stock Option's grant.

                  (d) Each grant of a Stock Option under this Section 6.8 shall
         be evidenced by an Award Agreement setting forth the number of shares
         subject to the Stock Option, the Option Price, the Award Period of the
         Stock Option, and such other terms and provisions determined by the
         Committee as are not inconsistent with the Plan. In the event of a
         Termination of Service of an Outside Director, the unexercised portion
         of any Stock Options granted pursuant to this Section 6.8 to such
         Outside Director which is vested will terminate and be forfeited upon
         the earlier of (i) 5 p.m. on the date which is 3 years following the
         date of the Outside Director's Termination of Service or (ii) 5 p.m. on
         the date the Award Period of such Stock Option terminates.

                                       13
<PAGE>

                                    ARTICLE 7
                              AWARD PERIOD; VESTING

         7.1 AWARD PERIOD.

                  (a) Subject to the other provisions of this Plan, the
         Committee shall specify the Award Period in each Award Agreement. No
         Award granted under the Plan may be exercised at any time after the end
         of its Award Period. The Award Period for any Award shall be no more
         than ten (10) years from the Date of Grant of the Award. However, if an
         Employee owns or is deemed to own (by reason of the attribution rules
         of Section 424(d) of the Code) more than ten percent (10%) of the
         combined voting power of all classes of stock of the Company (or any
         parent or Subsidiary) and an Incentive Stock Option is granted to such
         Employee, the Award Period of such Incentive Stock Option (to the
         extent required by the Code at the time of grant) shall be no more than
         five (5) years from the Date of Grant.

                  (b) In the event of a Termination of Service of a Participant,
         the Award Period shall be reduced or terminated in accordance with the
         Award Agreement.

         7.2 VESTING. Subject to Sections 6.8, 7.3 and 7.4, the Committee, in
its sole discretion, may determine that an Incentive will be immediately vested
in whole or in part, or that all or any portion may not be vested until a date,
or dates, subsequent to its Date of Grant, or until the occurrence of one or
more specified events, subject in any case to the terms of the Plan. If the
Committee imposes conditions upon vesting, then, subsequent to the Date of
Grant, the Committee may, in its sole discretion, accelerate the date on which
all or any portion of the Incentive may be vested.

         7.3 VESTING ON CHANGE OF CONTROL. Notwithstanding the foregoing, in the
event that a Change of Control occurs, then upon the effective date of such
Change of Control, provided the Participant is employed by (or, if the
Participant is a Consultant or Outside Director, is providing services to) the
Company or a Subsidiary from the Date of Grant to the date of such Change of
Control, any portion of an Award granted under this Plan that has not previously
vested shall thereupon immediately become fully vested and the Award shall be
fully exercisable, if not previously so exercisable.

         7.4      VESTING OF STOCK OPTIONS GRANTED TO EMPLOYEES.

         (a) Notwithstanding the provisions of Section 7.2, Stock Options
granted under the Plan to Employees prior to September 1, 2003, will vest as
follows:

                  (i) With respect to employees employed by the Company on
         September 30, 2002, ten forty-eights (10/48) of the Common Stock
         issuable upon the exercise of such Stock Option shall be fully vested
         upon the grant of such Stock Option. The remaining thirty-eight
         forty-eights (38/48) of the Common Stock issuable upon the exercise of
         such Stock Option will vest in 38 equal monthly installments with the
         first such installment vesting on September 1, 2003.

                                       14
<PAGE>

                  (ii) With respect to employees employed by the Company after
         September 30, 2002 but prior to September 1, 2003, the Stock Option
         will vest in 48 equal monthly installments as if the Stock Option were
         granted on the date of such employment and began vesting on the one
         month anniversary of the date of employment.

         (b) Stock Options granted under the Plan to Employees after September
1, 2003, will vest in 36 equal monthly installments with the first installment
vesting on the one month anniversary of the date of such grant.

                                    ARTICLE 8
                                EXERCISE OF AWARD

         8.1 IN GENERAL. The Committee, in its sole discretion, may determine
that an Award will be immediately exercisable, in whole or in part, or that all
or any portion may not be exercised until a date, or dates, subsequent to its
Date of Grant, or until the occurrence of one or more specified events, subject
in any case to the terms of the Plan. If a Stock Option is exercisable prior to
the time it is vested, the Common Stock obtained on the exercise of the Stock
Option shall be Restricted Stock which is subject to the applicable provisions
of the Plan and the Award Agreement. If the Committee imposes conditions (other
than conditions with respect to vesting) upon exercise, then subsequent to the
Date of Grant, the Committee may, in its sole discretion, accelerate the date on
which all or any portion of the Stock Option may be exercised, but may not,
except in the case of a Change of Control, accelerate the vesting conditions. No
Award may be exercised for a fractional share of Common Stock. The granting of
an Award shall impose no obligation upon the Participant to exercise that Award.

         8.2 LEGAL RESTRICTIONS. In no event may an Award be exercised or shares
of Common Stock be issued pursuant to an Award if the exercise or the issuance
thereof would violate applicable law or the rules or regulations of a stock
exchange or inter-dealer quotation system on which the shares of Common Stock
are then listed or quoted.

         8.3 EXERCISE OF STOCK OPTION.

                  (a) NOTICE AND PAYMENT. Subject to such administrative
         regulations as the Committee may from time to time adopt, a Stock
         Option may be exercised by the delivery of written notice to the
         Committee setting forth the number of shares of Common Stock with
         respect to which the Stock Option is to be exercised and the date of
         exercise thereof (the "EXERCISE DATE") which shall be at least one (1)
         day after giving such notice unless an earlier time shall have been
         mutually agreed upon. On the Exercise Date, the Participant shall
         deliver to the Company consideration with a value equal to the total
         Option Price of the shares to be purchased, payable as provided in the
         Award Agreement, which may provide, at the sole discretion of the
         Committee, for payment in any one or more of the following ways: (a)
         cash or check, bank draft, or money order payable to the order of the
         Company, (b) Common Stock or Restricted Stock owned by the Participant
         on the Exercise Date, valued at its Fair Market Value on the Exercise
         Date, and which the Participant has not acquired from the Company
         within six (6)

                                       15
<PAGE>

         months prior to the Exercise Date, and/or (c) in any other form of
         valid consideration (including cashless exercise features) that is
         acceptable to the Committee in its sole discretion; provided, that if
         the Option Price is paid in Restricted Stock, the stock received by the
         Participant pursuant to such exercise shall also be Restricted Stock.

                   (b) ISSUANCE OF CERTIFICATE. Except as otherwise provided in
         Section 6.5 hereof (with respect to shares of Restricted Stock) or in
         the applicable Award Agreement, upon payment of all amounts due from
         the Participant, the Company shall cause certificates for the Common
         Stock then being purchased to be delivered as directed by the
         Participant (or the person exercising the Participant's Stock Option in
         the event of his death) at its principal business office promptly after
         the Exercise Date.

                  (c) FAILURE TO PAY. Except as may otherwise be provided in an
         Award Agreement, if the Participant fails to pay for any of the Common
         Stock specified in such notice or fails to accept delivery thereof,
         that portion of the Participant's Stock Option and the Participant's
         right to purchase such Common Stock may be forfeited at the sole
         discretion of the Company.

         8.4 SARS. Subject to the conditions of this Section 8.4 and such
administrative regulations as the Committee may from time to time adopt, a SAR
may be exercised by the delivery (including by FAX) of written notice to the
Committee setting forth the number of shares of Common Stock with respect to
which the SAR is to be exercised and the Exercise Date which shall be at least
one (1) day after giving such notice unless an earlier time shall have been
mutually agreed upon. On the Exercise Date, the Participant shall receive from
the Company in exchange therefor cash in an amount equal to the excess (if any)
of the Fair Market Value (as of the date of the exercise of the SAR) per share
of Common Stock over the SAR Price per share specified in such SAR, multiplied
by the total number of shares of Common Stock of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of a SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.

         8.5 DISQUALIFYING DISPOSITION OF INCENTIVE STOCK OPTION. If shares of
Common Stock acquired upon exercise of an Incentive Stock Option are disposed of
by a Participant prior to the expiration of either two (2) years from the Date
of Grant of such Stock Option or one (1) year from the transfer of shares of
Common Stock to the Participant pursuant to the exercise of such Stock Option,
or in any other disqualifying disposition within the meaning of Section 422 of
the Code, such Participant shall notify the Company in writing of the date and
terms of such disposition. A disqualifying disposition by a Participant shall
not affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.

         8.6 PAYMENT OF TAXES FOR OUTSIDE DIRECTORS. In connection with the
exercise, vesting or other tax-triggering event related to an Award to an
Outside Director, the Company

                                       16
<PAGE>

shall pay such Outside Director subject to such tax an amount equal to forty
percent of the gains resulting from such exercise, vesting or other
tax-triggering event; provided, that the Company shall not be obligated to pay
more than $10,000 for each twelve month period of service by such Outside
Director as a member of the Company's Board of Directors.

                                    ARTICLE 9
                           AMENDMENT OR DISCONTINUANCE

         Subject to the limitations set forth in this Article 9, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Sections 162(m), 421, and 422 of the Code, including any successors to such
Sections, shall be effective unless such amendment shall be approved by the
requisite vote of the stockholders of the Company entitled to vote thereon. Any
such amendment shall, to the extent deemed necessary or advisable by the
Committee, be applicable to any outstanding Incentives theretofore granted under
the Plan, notwithstanding any contrary provisions contained in any Award
Agreement. In the event of any such amendment to the Plan, the holder of any
Incentive outstanding under the Plan shall, upon request of the Committee and as
a condition to the exercisability thereof, execute a conforming amendment in the
form prescribed by the Committee to any Award Agreement relating thereto.
Notwithstanding anything contained in this Plan to the contrary, unless required
by law, no action contemplated or permitted by this Article 9 shall adversely
affect any rights of Participants or obligations of the Company to Participants
with respect to any Incentive theretofore granted under the Plan without the
consent of the affected Participant.

                                   ARTICLE 10
                                      TERM

         The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on July 29, 2013, but Incentives granted before that date will
continue to be effective in accordance with their terms and conditions.

                                   ARTICLE 11
                               CAPITAL ADJUSTMENTS

         In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Common Stock, other securities
or other property), recapitalization, stock split, reverse stock split, rights
offering, reorganization, merger, consolidation, split-up, spin-off, split-off,
combination, subdivision, repurchase, or exchange of Common Stock or other
securities of the Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other similar corporate
transaction or event affects the Common Stock such that an adjustment is
determined by the Committee to be appropriate to

                                       17
<PAGE>

prevent the dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in such
manner as it may deem equitable, adjust any or all of the (i) the number of
shares and type of Common Stock (or the securities or property) which thereafter
may be made the subject of Awards, (ii) the number of shares and type of Common
Stock (or other securities or property) subject to outstanding Awards, (iii) the
Option Price of each outstanding Award, (iv) the amount, if any, the Company
pays for forfeited shares of Common Stock in accordance with Section 6.5, and
(v) the number of or SAR Price of shares of Common Stock then subject to
outstanding SARs previously granted and unexercised under the Plan, to the end
that the same proportion of the Company's issued and outstanding shares of
Common Stock in each instance shall remain subject to exercise at the same
aggregate SAR Price; provided however, that the number of shares of Common Stock
(or other securities or property) subject to any Award shall always be a whole
number. In lieu of the foregoing, if deemed appropriate, the Committee may make
provision for a cash payment to the holder of an outstanding Award.
Notwithstanding the foregoing, no such adjustment or cash payment shall be made
or authorized to the extent that such adjustment or cash payment would cause the
Plan or any Stock Option to violate Code Section 422. Such adjustments shall be
made in accordance with the rules of any securities exchange, stock market, or
stock quotation system to which the Company is subject. No adjustment or cash
payment will be required under this Article 11 for the issuance of Common Stock
or other securities for such consideration, not less than the par value of the
Common Stock, as may be determined from time to time by the Board to be fair
consideration.

         Upon the occurrence of any such adjustment or cash payment, the Company
shall provide notice to each affected Participant of its computation of such
adjustment or cash payment which shall be conclusive and shall be binding upon
each such Participant.

                                   ARTICLE 12
                   RECAPITALIZATION, MERGER AND CONSOLIDATION

         12.1 NO EFFECT ON COMPANY'S AUTHORITY. The existence of this Plan and
Incentives granted hereunder shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure and its business, or any merger or consolidation of the Company, or
any issuance of bonds, debentures, preferred or preference stocks ranking prior
to or otherwise affecting the Common Stock or the rights thereof (or any rights,
options, or warrants to purchase same), or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.

         12.2 CONVERSION OF INCENTIVES WHERE COMPANY SURVIVES. Subject to any
required action by the stockholders, if the Company shall be the surviving or
resulting corporation in any merger, consolidation or share exchange, any
Incentive granted hereunder shall pertain to and apply to the securities or
rights (including cash, property or assets) to which a holder of the number of
shares of Common Stock subject to the Incentive would have been entitled.

                                       18
<PAGE>

         12.3 EXCHANGE OR CANCELLATION OF INCENTIVES WHERE COMPANY DOES NOT
SURVIVE. In the event of any merger, consolidation or share exchange pursuant to
which the Company is not the surviving or resulting corporation, there shall be
substituted for each share of Common Stock subject to the unexercised portions
of outstanding Stock Options or SARs, that number of shares of each class of
stock or other securities or that amount of cash, property, or assets of the
surviving, resulting or consolidated company which were distributed or
distributable to the stockholders of the Company in respect to each share of
Common Stock held by them, such outstanding Stock Options or SARs to be
thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms.

         The Company shall give notice to each holder of Stock Options or SARs
(or to his personal representative) at least thirty (30) days preceding the
proposed effective date of any such reorganization, merger, consolidation, or
share exchange, or of any proposed sale of all or substantially all of the
assets of the Company, or of any dissolution or liquidation, and permit the
Participants to either:

                  (a) exercise at any time prior to the effective date of such
         transaction any or all of such outstanding Stock Options or SARs,
         including in the Board's discretion some or all of such Stock Options
         or SARs which would not otherwise be vested and exercisable; or

                  (b) elect to receive payment of an amount equal to a
         reasonable estimate of the difference between the net amount per share
         payable in such transaction or as a result of such transaction, and the
         exercise price per share of such Stock Option (hereinafter the
         "SPREAD"), multiplied by the number of shares subject to the Stock
         Option. In cases where the shares constitute, or would after exercise,
         constitute Restricted Stock, the Company, in its discretion may include
         some or all of those shares in the calculation of the amount payable
         hereunder. In estimating the Spread, appropriate adjustments to give
         effect to the existence of the Stock Options shall be made, such as
         deeming the Stock Options to have been exercised, with the Company
         receiving the exercise price payable thereunder, and treating the
         shares receivable upon exercise of the Options as being outstanding in
         determining the net amount per share. In cases where the proposed
         transaction consists of the acquisition of assets of the Company, the
         net amount per share shall be calculated on the basis of the net amount
         receivable with respect to shares of Common Stock upon a distribution
         and liquidation by the Company after giving effect to expenses and
         charges, including but not limited to taxes, payable by the Company
         before such liquidation could be completed.

         An Award that, by its terms, would be fully vested or exercisable upon
such a reorganization, merger, consolidation, share exchange, proposed sale of
all or substantially all of the assets of the Company or dissolution or
liquidation of the Company will be considered vested or exercisable for purposes
of this Section 12.3.

                                       19
<PAGE>

                                   ARTICLE 13
                           LIQUIDATION OR DISSOLUTION

         If the Company shall, at any time prior to the expiration of any
Incentive, make any partial distribution of its assets, in the nature of a
partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.

                                   ARTICLE 14
                         INCENTIVES IN SUBSTITUTION FOR
                      INCENTIVES GRANTED BY OTHER ENTITIES

         Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees or directors of a
corporation, partnership, or limited liability company who become or are about
to become Employees of the Company or any Subsidiary as a result of a merger or
consolidation of the employing corporation with the Company, the acquisition by
the Company of equity of the employing entity, or any other similar transaction
pursuant to which the Company becomes the successor employer. The terms and
conditions of the substitute Incentives so granted may vary from the terms and
conditions set forth in this Plan to such extent as the Committee at the time of
grant may deem appropriate to conform, in whole or in part, to the provisions of
the Incentives in substitution for which they are granted.

                                   ARTICLE 15
                            MISCELLANEOUS PROVISIONS

         15.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.

         15.2 NONPUBLICLY TRADED COMMON STOCK. In the event a Participant
receives, as Restricted Stock or pursuant to the exercise of a Stock Option,
shares of Common Stock that are Nonpublicly Traded (as defined herein), the
Committee may impose restrictions and conditions on the transfer or other
disposition of those shares. The restrictions and conditions may be reflected in
the Award Agreement or in a separate stockholders' agreement.

         15.3 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.

                                       20
<PAGE>

         15.4 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board and the Committee, each officer of the
Company, and each Employee of the Company acting on behalf of the Board or the
Committee shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination, or
interpretation.

         15.5 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

         15.6 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or inter-dealer quotation system or other forum in which
shares of Common Stock are quoted or traded (including without limitation
Section 16 of the 1934 Act and Section 162(m) of the Code); and, as a condition
of any sale or issuance of shares of Common Stock under an Incentive, the
Committee may require such agreements or undertakings, if any, as the Committee
may deem necessary or advisable to assure compliance with any such law or
regulation. The Plan, the grant and exercise of Incentives hereunder, and the
obligation of the Company to sell and deliver shares of Common Stock, shall be
subject to all applicable federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required.

         15.7 TAX REQUIREMENTS. Subject to Section 8.6, the Company or, if
applicable, any Subsidiary (for purposes of this Section 15.7, the term
"COMPANY" shall be deemed to include any applicable Subsidiary), shall have the
right to deduct from all amounts paid in cash or other form in connection with
the Plan, any Federal, state, local, or other taxes required by law to be
withheld in connection with an Award granted under this Plan. A Participant
receiving shares of Common Stock issued under the Plan shall be obligated to pay
the Company the amount of any taxes that the Company is required to withhold in
connection with the Participant's income arising with respect to the Award. Such
payments shall be required to be made when requested by Company and may be
required to be made prior to the delivery of any certificate representing shares
of Common Stock. Such payment may be made (i) by the delivery of cash to the
Company in an amount that equals or exceeds (to avoid the issuance of fractional
shares under (iii) below) the required tax withholding obligations of the
Company; (ii) if the Company, in its sole discretion, so consents in writing,
the actual delivery by the exercising Participant to the Company of shares of
Common Stock that the Participant has not acquired from the Company within six
(6) months prior to the date of exercise, which shares so delivered have an
aggregate Fair Market Value that equals or exceeds (to avoid the issuance of
fractional shares under (iii) below) the required tax withholding payment; (iii)
if the Company, in its sole discretion, so consents in writing, the Company's
withholding of a number of shares to be delivered upon the

                                       21
<PAGE>

exercise of the Stock Option or settlement of an Award, which shares so withheld
have an aggregate fair market value that equals (but does not exceed) the
required tax withholding payment; or (iv) any combination of (i), (ii), or
(iii). The Participant may also authorize the Company to withhold any such taxes
from any other cash remuneration otherwise paid by the Company to the
Participant. The Committee may in the Award Agreement impose any additional tax
requirements or provisions that the Committee deems necessary or desirable.

         15.8 STOCK OPTION ASSIGNABILITY. Incentive Stock Options may not be
transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered
other than by will or the laws of descent and distribution and may be exercised
during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative, and each Award Agreement in
respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 15.8 that is not required for compliance with Section
422 of the Code.

         Except as otherwise provided herein, Nonqualified Stock Options may not
be transferred, assigned, pledged, hypothecated or otherwise conveyed or
encumbered other than by will or the laws of descent and distribution. The
Committee may, in its discretion, authorize all or a portion of vested
Nonqualified Stock Options or SARs granted to a Participant to be on terms which
permit transfer by such Participant to (i) the spouse (or former spouse),
children or grandchildren of the Participant ("IMMEDIATE FAMILY MEMBERS"), (ii)
a trust or trusts for the exclusive benefit of such Immediate Family Members,
(iii) a partnership in which the only partners are (1) such Immediate Family
Members and/or (2) entities which are controlled by Immediate Family Members,
(iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of
the Code or any successor provision, or (v) a split interest trust or pooled
income fund described in Section 2522(c)(2) of the Code or any successor
provision; provided that (w) there shall be no consideration for any such
transfer, (x) the Award Agreement pursuant to which such Nonqualified Stock
Option or SAR is granted must be approved by the Committee and must expressly
provide for transferability in a manner consistent with this Section, (y)
subsequent transfers of transferred Nonqualified Stock Options or SARs shall be
prohibited except those by will or the laws of descent and distribution, and (z)
the forfeiture provisions provided for in this Plan and the Award Agreement
applicable to such Nonqualified Stock Options or SARs shall continue as if such
Nonqualified Stock Options or SARs had not been transferred.

         The Committee may, in its sole discretion, authorize all or a portion
of any Nonqualified Stock Options or SARs granted to an Outside Director under
the Plan to be on terms which permit their transfer to such Outside Director's
employer or to any other partnership or other entity in connection with which
such Outside Director provides services, in the event that such Outside Director
has agreed with such employer, partnership or other entity, whether formally or
informally, that such Nonqualified Stock Options or SARs shall be beneficially
owned by such employer or other entity.

         Following any transfer, any such Nonqualified Stock Option or SAR shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Articles 8, 9, 11,
13 and 15 hereof the term "Participant" shall be

                                       22
<PAGE>

deemed to include the transferee. The events of Termination of Service shall
continue to be applied with respect to the original Participant, following which
the Nonqualified Stock Options and SARs shall be exercisable by the transferee
only to the extent and for the periods specified in the Award Agreement. The
Committee and the Company shall have no obligation to inform any transferee of a
Nonqualified Stock Option or SAR of any expiration, termination, lapse or
acceleration of such Stock Option or SAR. The Company shall have no obligation
to register with any federal or state securities commission or agency any Common
Stock issuable or issued under a Nonqualified Stock Option or SAR that has been
transferred by a Participant under this Section 15.8.

         15.9 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.

         15.10 LEGEND. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):

                  On the face of the certificate:

                           "Transfer of this stock is restricted in accordance
                           with conditions printed on the reverse of this
                           certificate."

                  On the reverse:

                           "The shares of stock evidenced by this certificate
                           are subject to and transferable only in accordance
                           with that certain Kitty Hawk 2003 Long Term Equity
                           Incentive Plan, a copy of which is on file at the
                           principal office of the Company. No transfer or
                           pledge of the shares evidenced hereby may be made
                           except in accordance with and subject to the
                           provisions of said Plan. By acceptance of this
                           certificate, any holder, transferee or pledgee hereof
                           agrees to be bound by all of the provisions of said
                           Plan."

         The following legend shall be inserted on a certificate evidencing
Common Stock issued under the Plan if the shares were not issued in a
transaction registered under the applicable federal and state securities laws:

                           "Shares of stock represented by this certificate have
                           been acquired by the holder for investment and not
                           for resale, transfer or distribution, have been
                           issued pursuant to exemptions from the registration
                           requirements of applicable state and federal
                           securities laws, and may not be offered for sale,
                           sold or transferred other than pursuant to effective
                           registration under such laws, or in transactions
                           otherwise in

                                       23
<PAGE>

                           compliance with such laws, and upon evidence
                           satisfactory to the Company of compliance with such
                           laws, as to which the Company may rely upon an
                           opinion of counsel satisfactory to the Company."

         A copy of this Plan shall be kept on file in the principal office of
the Company.

         15.11 LAW GOVERNING. This Plan shall be governed by, construed, and
enforced in accordance with the laws of the State of Delaware (excluding any
conflict of laws rule or principle of Delaware law that might refer the
governance, construction, or interpretation of this agreement to the laws of
another state).

                                 ***************

                                       24
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed as of July 29, 2003, by its Chief Executive Officer and Secretary
pursuant to prior action taken by the Board.

                                KITTY HAWK, INC.

                                By:   /s/ ROBERT W. ZOLLER, JR.
                                     ------------------------------------------
                                Name:  Robert W. Zoller, Jr.
                                Title:   Chief Executive Officer and President

                                       25

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