Document:

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                                                                   Exhibit 10.12

                        Factory Card & Party Outlet Corp.

                           2003 Equity Incentive Plan

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                                Table of Contents
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                                                                            Page
                                                                            ----
Article 1.   Effective Date, Objectives and Duration ........................  1
   1.1       Effective Date of the Plan .....................................  1
   1.2       Objectives of the Plan .........................................  1
   1.3       Duration of the Plan ...........................................  1

Article 2.   Definitions ....................................................  1
   2.1       "Affiliate" ....................................................  1
   2.2       "Award" ........................................................  1
   2.3       "Award Agreement" ..............................................  1
   2.4       "Change of Control" ............................................  2
   2.5       "Code" .........................................................  2
   2.6       "Committee" ....................................................  2
   2.7       "Common Stock" .................................................  2
   2.8       "Covered Employee" .............................................  2
   2.9       "Deferred Stock" ...............................................  2
   2.10      "Disability" ...................................................  2
   2.11      "Dividend Equivalent" ..........................................  2
   2.12      "Eligible Person" ..............................................  2
   2.13      "Exchange Act" .................................................  2
   2.14      "Fair Market Value" ............................................  2
   2.15      "Grant Date" ...................................................  3
   2.16      "Grantee" ......................................................  3
   2.17      "Incentive Stock Option" or "ISO" ..............................  3
   2.18      "including" or "includes" ......................................  3
   2.19      "Limited Right" ................................................  3
   2.20      "Mature Shares" ................................................  3
   2.21      "Nonstatutory Stock Option" or "NSO" ...........................  3
   2.22      "Option" .......................................................  3
   2.23      "Option Price" .................................................  3
   2.24      "Option Term" ..................................................  3
   2.25      "Other Stock-Based Award" ......................................  3
   2.26      "Performance Award" ............................................  3
   2.27      "Performance-Based Exception" ..................................  3
   2.28      "Performance Measures" .........................................  3
   2.29      "Performance Period" ...........................................  3
   2.30      "Performance Share" ............................................  4
   2.31      "Performance Unit" .............................................  4
   2.32      "Period of Restriction" ........................................  4
   2.33      "Permitted Transferee" .........................................  4
   2.34      "Person" .......................................................  4
   2.35      "Reload Option" ................................................  4
   2.36      "Restricted Shares" ............................................  4

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   2.37      "Retirement" ...................................................  4
   2.38      "Rule 16b-3" ...................................................  4
   2.39      "SEC" ..........................................................  4
   2.40      "Section 16 Non-Employee Director" .............................  5
   2.41      "Section 16 Person" ............................................  5
   2.42      "Share" ........................................................  5
   2.43      "Stock Appreciation Right" or "SAR" ............................  5
   2.44      "Termination of Employment" ....................................  5

Article 3.   Administration .................................................  5
   3.1       Committee ......................................................  5
   3.2       Powers of Committee ............................................  6

Article 4.   Shares Subject to the Plan, Maximum Awards, and
             162(m) Compliance ..............................................  8
   4.1       Number of Shares Available for Grants ..........................  8
   4.2       Adjustments in Authorized Shares and Awards ....................  8
   4.3       Annual Individual Limitations ..................................  8
   4.4       Performance-Based Exception Under Section 162(m) ...............  9

Article 5.   Eligibility and General Conditions of Awards ................... 11
   5.1       Eligibility .................................................... 11
   5.2       Award Agreement ................................................ 11
   5.3       General Terms and Consideration ................................ 11
   5.4       Termination of Employment ...................................... 11
   5.5       Nontransferability of Awards ................................... 12
   5.6       Cancellation and Rescission of Awards .......................... 13
   5.7       Stand-Alone, Tandem and Substitute Awards ...................... 14
   5.8       Compliance with Rule 16b-3 ..................................... 14
   5.9       Deferral of Award Payouts ...................................... 15

Article 6.   Stock Options .................................................. 15
   6.1       Grant of Options ............................................... 15
   6.2       Award Agreement ................................................ 15
   6.3       Option Price ................................................... 15
   6.4       Grant of Incentive Stock Options ............................... 15
   6.5       Payment ........................................................ 17
   6.6       Reload Options ................................................. 17

Article 7.   Stock Appreciation Rights ...................................... 18
   7.1       Issuance ....................................................... 18
   7.2       Award Agreements ............................................... 18
   7.3       Grant Price .................................................... 18
   7.4       Exercise and Payment ........................................... 18
   7.5       Grant of Limited Rights ........................................ 19
   7.6       Other Limitations .............................................. 19

                                       ii

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Article 8.   Restricted Shares .............................................. 20
   8.1       Grant of Restricted Shares ..................................... 20
   8.2       Award Agreement ................................................ 20
   8.3       Consideration for Restricted Shares ............................ 20
   8.4       Voting and Dividend Rights ..................................... 20
   8.5       Effect of Forfeiture ........................................... 20
   8.6       Escrow; Legends ................................................ 20

Article 9.   Performance Awards ............................................. 21
   9.1       Grant of Performance Awards .................................... 21
   9.2       Value/Performance Goals ........................................ 21
   9.3       Earning of Performance Awards .................................. 21
   9.4       Adjustment on Change of Position ............................... 21
   9.5       Voting and Dividend Rights ..................................... 21

Article 10.  Deferred Stock ................................................. 22
   10.1      Grant of Deferred Stock ........................................ 22
   10.2      Delivery and Limitations ....................................... 22
   10.3      Forfeiture ..................................................... 22

Article 11.  Dividend Equivalents ........................................... 22

Article 12.  Other Stock-Based Awards ....................................... 22

Article 13.  Withholding .................................................... 23
   13.1      Required Withholding ........................................... 23
   13.2      Elective Excess Withholding .................................... 23
   13.3      Notification under Code Section 83(b) .......................... 23

Article 14.  Change of Control .............................................. 24
   14.1      Effect of Change of Control .................................... 24
   14.2      Definition of Change of Control ................................ 24

Article 15.  Amendment, Modification, and Termination ....................... 25
   15.1      Amendment, Modification, and Termination ....................... 25
   15.2      Awards Previously Granted ...................................... 25

Article 16.  Additional Provisions .......................................... 25
   16.1      Successors ..................................................... 25
   16.2      Gender and Number .............................................. 25
   16.3      Severability ................................................... 26
   16.4      Requirements of Law ............................................ 26
   16.5      Securities Law Compliance ...................................... 26
   16.6      No Rights as a Stockholder ..................................... 26
   16.7      Nature of Payments ............................................. 27
   16.8      Non-Exclusivity of Plan ........................................ 27

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   16.9      Governing Law .................................................. 27
   16.10     Share Certificates ............................................. 27
   16.11     Unfunded Status of Awards; Creation of Trusts .................. 27
   16.12     Affiliation .................................................... 28
   16.13     Participation .................................................. 28
   16.14     Military Service ............................................... 28
   16.15     Construction ................................................... 28
   16.16     Headings ....................................................... 28
   16.17     Obligations .................................................... 28
   16.18     Stockholder Approval ........................................... 28

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                        FACTORY CARD & PARTY OUTLET CORP.
                           2003 EQUITY INCENTIVE PLAN

                                   Article 1.
                     Effective Date, Objectives and Duration

     1.1 Effective Date of the Plan. Factory Card & Party Outlet Corp., a
Delaware corporation (the "Company"), hereby establishes this Factory Card &
Party Outlet Corp. 2003 Equity Incentive Plan (the "Plan") as set forth herein
effective as of January 27, 2003 (the "Effective Date"), the date of its
adoption by the Board of Directors (the "Board") of the Company, subject to
approval by the Company's stockholders.

     1.2 Objectives of the Plan. The Plan is intended (i) to allow selected
employees and officers of the Company and its Affiliates to acquire or increase
equity ownership in the Company, thereby strengthening their commitment to the
success of the Company and stimulating their efforts on behalf of the Company,
(ii) assisting the Company and its Affiliates in attracting and retaining
employees and officers, (iii) to optimize the profitability and growth of the
Company and its Affiliates through incentives which will promote the Company's
goals, and (iv) to provide employees and officers with an incentive for
excellence in individual performance.

     1.3 Duration of the Plan. The Plan shall commence on the Effective Date and
shall remain in effect, subject to the right of the Board of Directors of the
Company ("Board") to amend or terminate the Plan at any time pursuant to Article
15 hereof, until the earlier of (i) January 27, 2013, or (ii) the date all
Shares subject to the Plan shall have been purchased or acquired and the
restrictions on all Restricted Shares granted under the Plan shall have lapsed,
according to the Plan's provisions.

                                   Article 2.
                                   Definitions

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

     2.1 "Affiliate" means any Person that directly or indirectly, through one
or more intermediaries, controls, or is controlled by or is under common control
with the Company.

     2.2 "Award" means Options (including Nonstatutory Stock Options, Incentive
Stock Options and Reload Options), Stock Appreciation Rights, Restricted Shares,
Performance Units, Performance Shares, Deferred Stock, Dividend Equivalents, or
Other Stock-Based Awards granted under the Plan.

     2.3 "Award Agreement" means the written agreement by which an Award shall
be evidenced.

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     2.4 "Change of Control" has the meaning set forth in Section 14.2.

     2.5 "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to a particular section of the Code include references to
regulations and rulings thereunder and to successor provisions.

     2.6 "Committee" has the meaning set forth in Section 3.1.

     2.7 "Common Stock" means the common stock of the Company.

     2.8 "Covered Employee" means a Grantee who, as of the date that the value
of an Award is recognizable as income, is one of the group of "covered
employees," within the meaning of Code Section 162(m), with respect to the
Company.

     2.9 "Deferred Stock" means a right granted under Section 10.1 to receive
Shares at the end of a specified deferral period.

     2.10 "Disability" means, unless otherwise defined in an Award Agreement, or
as otherwise determined under procedures established by the Committee for
purposes of the Plan, a disability within the meaning of Section 22(e)(3) of the
Code.

     2.11 "Dividend Equivalent" means a right to receive payments equal to
interest or dividends or property, if and when paid or distributed, on a
specified number of Shares.

     2.12 "Eligible Person" means any employee (including any officer) of the
Company or any Affiliate, or potential employee (including a potential officer)
of the Company or an Affiliate.

     2.13 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time. References to a particular section of the Exchange Act
include references to successor provisions.

     2.14 "Fair Market Value" means (a) with respect to any property other than
Shares, the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee, and (b)
with respect to Shares, unless otherwise determined in the good faith discretion
of the Committee, as of any date, (i) the closing price on the date of
determination reported in the table entitled "New York Stock Exchange Composite
Transactions" contained in The Wall Street Journal (or an equivalent successor
table) (or, if no sale of Shares was reported for such date, on the most recent
trading day prior to such date on which a sale of Shares was reported); (ii) if
the Shares are not listed on the New York Stock Exchange, the closing sales
price of the Shares on such other national exchange on which the Shares are
principally traded, or as reported by the National Market System, or similar
organization, or if no such quotations are available, the average of the high
bid and low asked quotations in the over-the-counter market as reported by the
National Quotation Bureau Incorporated, Pink Sheets LLC, NASD Bulletin Board, or
similar organizations; or (iii) in the event that there shall be no public
market for the Shares, the fair market value of the Shares as determined (which
determination shall be conclusive) in good faith by the Committee.

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     2.15 "Grant Date" means the date on which an Award is granted or such later
date as specified in advance by the Committee.

     2.16 "Grantee" means a person who has been granted an Award.

     2.17 "Incentive Stock Option" or "ISO" means an Option that is intended to
meet the requirements of Section 422 of the Code.

     2.18 "including" or "includes" means "including, without limitation," or
"includes, without limitation," respectively.

     2.19 "Limited Right" means an SAR that is exercisable only for a limited
period after a Change of Control as provided in Section 7.5.

     2.20 "Mature Shares" means Shares for which the holder thereof has good
title, free and clear of all liens and encumbrances, and which such holder
either (i) has held for at least six months or (ii) has purchased on the open
market.

     2.21 "Nonstatutory Stock Option" or "NSO" means an Option that is not
intended to meet the requirements of Section 422 of the Code.

     2.22 "Option" means a right granted to an Eligible Person allowing the
Grantee to purchase Shares at such price or prices and during such period or
periods as the Committee shall determine.

     2.23 "Option Price" means the per-share purchase price of a Share subject
to an Option.

     2.24 "Option Term" means the period beginning on the Grant Date of an
Option and ending on the date such Option expires, terminates or is cancelled.

     2.25 "Other Stock-Based Award" means a right, granted under Article 12
hereof, that relates to or is valued by reference to Shares or other Awards
relating to Shares.

     2.26 "Performance Award" means any Award of Performance Shares or
Performance Units.

     2.27 "Performance-Based Exception" means the performance-based exception
from the tax deductibility limitations of Section 162(m) of the Code contained
in Section 162(m)(4)(C) of the Code (including the special provisions for
options thereunder).

     2.28 "Performance Measures" has the meaning set forth in Section 4.4.

     2.29 "Performance Period" means the time established by the Committee at
the time any Performance Award is granted or at any time thereafter during which
any performance goals specified by the Committee with respect to such Award are
to be measured.

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     2.30 "Performance Share" means a grant pursuant to Article 9 of a unit
valued by reference to a designated number of Shares, which value may be paid to
the Grantee by delivery of such property as the Committee shall determine,
including cash, Shares, or any combination thereof, upon achievement of such
performance goals during the Performance Period as the Committee shall establish
at the time of such grant or thereafter.

     2.31 "Performance Unit" means a grant pursuant to Article 9 of a unit
valued by reference to a designated amount of property other than Shares, which
value may be paid to the Grantee by delivery of such property as the Committee
shall determine, including cash, Shares, or any combination thereof, upon
achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.

     2.32 "Period of Restriction" means the period during which Restricted
Shares are subject to forfeiture if the conditions specified in the Award
Agreement are not satisfied.

     2.33 "Permitted Transferee" means, in respect of any Grantee, any member of
the Immediate Family of such Grantee, any trust of which all of the primary
beneficiaries are such Grantee or members of his or her Immediate Family, or any
partnership of which all of the partners are such Grantee or members of his or
her Immediate Family. The "Immediate Family" of a Grantee means the Grantee's
spouse, children, step children, grandchildren, parents, stepparents, siblings,
grandparents, nieces and nephews.

     2.34 "Person" means any individual, sole proprietorship, partnership, joint
venture, limited liability company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, entity or
government instrumentality, division, agency, body or department.

     2.35 "Reload Option" has the meaning set forth in Section 6.6.

     2.36 "Restricted Shares" means Shares that are issued with the restriction
that the holder may not sell, transfer, pledge, or assign such Share and with
such other restrictions as the Committee, in its sole discretion, may impose
(including any restriction on the right to vote such Share, and the right to
receive cash dividends or Dividend Equivalents), which restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may specify.

     2.37 "Retirement" means, unless otherwise defined in an Award Agreement, or
as otherwise determined under procedures established by the Committee for
purposes of the Plan, a Termination of Employment occurring other than for cause
after the date the Grantee (i) has attained age 55 and completed at least 5
years of service with the Company or its Affiliates, or (ii) attained age 63.

     2.38 "Rule 16b-3" means Rule 16b-3 promulgated by the SEC under the
Exchange Act, as amended from time to time, together with any successor rule.

     2.39 "SEC" means the United States Securities and Exchange Commission, or
any successor thereto.

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     2.40 "Section 16 Non-Employee Director" means a member of the Board who
satisfies the requirements to qualify as a "non-employee director" under Rule
16b-3.

     2.41 "Section 16 Person" means a person who is subject to potential
liability under Section 16(b) of the 1934 Act with respect to transactions
involving equity securities of the Company.

     2.42 "Share" means a share of Common Stock, and such other securities of
the Company as may be substituted or resubstituted for Shares pursuant to
Section 4.2 hereof.

     2.43 "Stock Appreciation Right" or "SAR" means a right granted to an
Eligible Person pursuant to Article 7 to receive, upon exercise by the Grantee,
an amount equal to the number of Shares with respect to which the SAR is granted
multiplied by the excess of (i) the Fair Market Value of one Share on the date
of exercise or, if the Committee shall so determine in the case of any such
right other than one related to any Incentive Stock Option, at any time during a
specified period before the date of exercise, over (ii) the grant price of the
right as specified by the Committee.

     2.44 "Termination of Employment" occurs on the first day on which an
individual is for any reason no longer providing services to the Company or an
Affiliate in the capacity of an employee or officer; or, with respect to an
individual who is an employee or officer of an Affiliate, the first day on which
such entity ceases to be an Affiliate (unless immediately thereafter, the
individual becomes or remains an employee or officer of the Company or an
Affiliate that remains an Affiliate).

                                   Article 3.
                                 Administration

     3.1 Committee.

     (a) The Plan shall be administered by the Compensation Committee of the
Board.

     (b) The Board may by resolution authorize one or more officers of the
Company to do one or both of the following: (i) designate Eligible Persons who
are employees of the Company or of any of its Affiliates, and who are not
executive officers and are not (and are not expected to be) Covered Employees
and/or are Section 16 Persons at the time any such delegated authority is
exercised, to be recipients of Options or other Awards, and (ii) determine the
number of such Shares subject to Options or other Awards to be received by such
Eligible Persons and the terms and conditions (consistent with the Plan) of such
Awards; provided, however, that (A) the resolution so authorizing such officer
or officers shall specify the total number of such Shares subject to Options or
other Awards such officer or officers may award; and (B) the Committee may not
authorize any officer to designate himself or herself as a recipient of any such
Award.

     (c) Unless the context requires otherwise, any references herein to
"Committee" includes the Compensation Committee, or an officer authorized
pursuant to subsection (b), as applicable.

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     3.2 Powers of Committee. Subject to and consistent with the provisions of
the Plan, the Committee has full and final authority and sole discretion as
follows:

     (a) to determine when, to whom and in what types and amounts Awards should
be granted;

     (b) to grant Awards to Eligible Persons in any number, and to determine the
terms and conditions applicable to each Award (including the number of Shares or
the amount of cash or other property to which an Award will relate, any exercise
price, grant price or purchase price, any limitation or restriction, any
schedule for or performance conditions relating to the earning of the Award or
the lapse of limitations, forfeiture restrictions, restrictions on
exercisability or transferability, any performance goals including those
relating to the Company and/or an Affiliate and/or any division thereof and/or
an individual, and/or vesting based on the passage of time, based in each case
on such considerations as the Committee shall determine);

     (c) to determine the benefit payable under any Performance Unit,
Performance Share, Dividend Equivalent, or Other Stock-Based Award and to
determine whether any performance or vesting conditions have been satisfied;

     (d) to determine whether or not specific Awards shall be granted in
connection with other specific Awards, and if so, whether they shall be
exercisable cumulatively with, or alternatively to, such other specific Awards
and all other matters to be determined in connection with an Award;

     (e) to determine the Option Term;

     (f) to determine the amount, if any, that a Grantee shall pay for
Restricted Shares, whether to permit or require the payment of cash dividends
thereon to be deferred and the terms related thereto, when Restricted Shares
(including Restricted Shares acquired upon the exercise of an Option) shall be
forfeited and whether such shares shall be held in escrow;

     (g) to determine whether, to what extent and under what circumstances an
Award may be settled in, or the exercise price of an Award may be paid in, cash,
Shares, other Awards or other property, or an Award may be accelerated, vested,
canceled, forfeited or surrendered or any terms of the Award may be waived, and
to accelerate the exercisability of, and to accelerate or waive any or all of
the terms and conditions applicable to, any Award or any group of Awards for any
reason and at any time;

     (h) to determine whether, to what extent and under what circumstances cash,
Shares, other Awards, other property and other amounts payable with respect to
an Award will be deferred either automatically (whether to limit loss of
deductions pursuant to Code Section 162(m) or otherwise), at the election of the
Committee or at the election of the Grantee;

     (i) to offer to exchange or buy out any previously granted Award for a
payment in cash, Shares or other Award;

     (j) to construe and interpret the Plan and to make all determinations,
including determinations whether a Grantee's Termination of Employment occurs
for Retirement, death,

                                       6

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Disability, cause, or other reason, and all other factual determinations,
necessary or advisable for the administration of the Plan;

     (k) to make, amend, suspend, waive and rescind rules and regulations
relating to the Plan;

     (l) to appoint such agents as the Committee may deem necessary or advisable
to administer the Plan;

     (m) to determine the terms and conditions of all Award Agreements
applicable to Eligible Persons (which need not be identical) and, subject to
Section 15.2, to amend any such Award Agreement at any time in any manner
permitted by the Plan as then in effect;

     (n) to cancel, with the consent of the Grantee, outstanding Awards and to
grant new Awards in substitution therefor;

     (o) to impose such additional terms and conditions upon the grant, exercise
or retention of Awards as the Committee may, before or concurrently with the
grant thereof, deem appropriate, including limiting the percentage of Awards
which may from time to time be exercised by a Grantee;

     (p) to make adjustments in the terms and conditions of, and the criteria
in, Awards in recognition of unusual or nonrecurring events (including events
described in Section 4.2) affecting the Company or an Affiliate or the financial
statements of the Company or an Affiliate, or in response to changes in
applicable laws, regulations or accounting principles; provided, however, that
in no event shall such adjustment increase the value of an Award for a person
expected to be a Covered Employee for whom the Committee desires to have the
Performance-Based Exception apply;

     (q) to correct any defect or supply any omission or reconcile any
inconsistency, and to construe and interpret the Plan, the rules and
regulations, and Award Agreement or any other instrument entered into or
relating to an Award under the Plan; and

     (r) to take any other action with respect to any matters relating to the
Plan for which it is responsible and to make all other decisions and
determinations as may be required under the terms of the Plan or as the
Committee may deem necessary or advisable for the administration of the Plan.

     Any action of the Committee with respect to the Plan shall be final,
conclusive and binding on all persons, including the Company, its Affiliates,
any Grantee, any person claiming any rights under the Plan from or through any
Grantee, and stockholders, except to the extent the Committee may subsequently
modify, or take further action not consistent with, its prior action. If not
specified in the Plan, the time at which the Committee must or may make any
determination shall be determined by the Committee, and any such determination
may thereafter be modified by the Committee. The express grant of any specific
power to the Committee, and the taking of any action by the Committee, shall not
be construed as limiting any power or authority of the Committee. The Committee
may delegate to officers or managers of the Company or any

                                       7

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Affiliate the authority, subject to such terms as the Committee shall determine,
to perform specified functions under the Plan (subject to Sections 4.3 and
5.8(c)).

                                   Article 4.
        Shares Subject to the Plan, Maximum Awards, and 162(m) Compliance

     4.1 Number of Shares Available for Grants. Subject to adjustment as
provided in Section 4.2, the number of Shares hereby reserved for delivery under
the Plan shall be 250,000 of which 100,000 Shares shall be available for
delivery as Restricted Shares or Deferred Stock. If any Shares subject to an
Award granted hereunder are forfeited or such Award otherwise terminates without
the delivery of such Shares, the Shares subject to such Award, to the extent of
any such forfeiture or termination, shall again be available for grant under the
Plan. If any Shares subject to an Award granted hereunder are withheld, applied
as payment, or sold and the proceeds thereof applied as payment in connection
with the exercise of an Award or the withholding or payment of taxes related
thereto ("Returned Shares"), such Returned Shares shall again be available for
grant under the Plan. The Committee shall from time to time determine the
appropriate methodology for calculating the number of Shares to which an Award
relates pursuant to the Plan. Shares delivered pursuant to the Plan may be, in
whole or in part, authorized and unissued Shares, or treasury Shares, including
Shares repurchased by the Company for purposes of the Plan.

     4.2 Adjustments in Authorized Shares and Awards. In the event that the
Committee determines that any dividend or other distribution (whether in the
form of cash, Shares, or other property), recapitalization, forward or reverse
stock split, subdivision, consolidation or reduction of capital, reorganization,
merger, consolidation, scheme of arrangement, split-up, spin-off or combination
involving the Company or repurchase or exchange of Shares or other securities of
the Company or other rights to purchase Shares or other securities of the
Company, or other similar corporate transaction or event affects the Shares such
that any adjustment is determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee shall, in such manner as
it may deem equitable, adjust any or all of (a) the number and type of Shares
(or other securities or property) with respect to which Awards may be granted,
(b) the number and type of Shares (or other securities or property) subject to
outstanding Awards, (c) the grant or exercise price with respect to any Award
or, if deemed appropriate, make provision for a cash payment to the holder of an
outstanding Award, (d) the number and kind of Shares of outstanding Restricted
Shares or relating to any other outstanding Award in connection with which
Shares are subject, and (e) the number of Shares with respect to which Awards
may be granted to a Grantee, as set forth in Section 4.3; provided, in each
case, that with respect to Awards of Incentive Stock Options intended to
continue to qualify as Incentive Stock Options after such adjustment, no such
adjustment shall be authorized to the extent that such adjustment would cause
the Incentive Stock Option to violate Section 424(a) of the Code; and provided
further that the number of Shares subject to any Award denominated in Shares
shall always be a whole number.

     4.3 Annual Individual Limitations. Awards to any one individual in any one
calendar year are subject to the following limits, subject to adjustment as
provided in Section 4.2:

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     (a)  Options. The maximum number of Shares with respect to which Options
may be granted during a calendar year to any Grantee is 50,000;

     (b)  SARs. The maximum number of Shares with respect to which SARs may be
granted during a calendar year to any Grantee is 50,000;

     (c)  Aggregate Options and SARs. The sum of the number of Shares with
respect to which Options may be granted plus the number of Shares with respect
to which SARs may be granted in total during a calendar year to any Grantee
shall not exceed 100,000;

     (d)  Other Share-Denominated Awards. The maximum number of Shares with
respect to which Restricted Stock, Performance Shares, and Other Stock-Based
Awards denominated in Shares in total may be granted during a calendar year to
any Grantee is 100,000; and

     (e)  Dollar-Denominated Awards. The maximum dollar amount of compensation
that may be represented by Performance Units and Other Stock-Based Awards not
denominated in Shares awarded during calendar year to any Grantee is 150% of the
Grantee's annual base salary in effect on the date of the Award multiplied by
the number of whole and fractional years in the Performance Period for
Performance Units. (Thus, Awards that accrue over more than one calendar year
(or fiscal year) may exceed the on-year grant limit in the prior sentence at the
time of payment or settlement).

     4.4  Performance-Based Exception Under Section 162(m). The general
performance measures for Awards (other than Options) designed to qualify for the
Performance-Based Exception shall be chosen from among the following:

     (a)  Earnings (either in the aggregate or on a per-share basis);

     (b)  Net income or loss;

     (c)  Operating income or loss;

     (d)  Operating profit;

     (e)  Cash flow;

     (f)  Stockholder returns (including return on assets, investments, equity,
or gross sales) (including income applicable to common stockholders or other
class of stockholders);

     (g)  Return measures (including return on assets, equity, or sales);

     (h)  Earnings before or after either, or any combination of, interest,
taxes, depreciation or amortization (EBITDA);

     (i)  Gross revenues;

     (j)  Share price (including growth measures and total stockholder return or
attainment by the Shares of a specified value for a specified period of time);

                                       9

<PAGE>

     (k)  Reductions in expense levels in each case, where applicable,
determined either on a Company-wide basis or in respect of any one or more
business units;

     (l)  Net economic value;

     (m)  Market share;

     (n)  Annual net income to common stock;

     (o)  Annual cash flow provided by operations;

     (p)  Changes in annual revenues;

     (q)  Strategic business criteria, consisting of one or more objectives
based on meeting specified revenue, market penetration, geographic business
expansion goals, objectively identified project milestones, production volume
levels, cost targets, and goals relating to acquisitions or divestitures;

     (r)  Economic value added;

     (s)  Sales;

     (t)  Costs;

     (u)  Results of customer satisfaction surveys;

     (v)  Aggregate product price and other product price measures;

     (w)  Safety record;

     (x)  Service reliability;

     (y)  Operating and maintenance cost management;

     (z)  Debt rating; and/or

     (aa) Achievement of business or operational goals such as market share
and/or business development;

provided that applicable performance measures may be applied on a pre- or
post-tax basis; and provided further that the Committee may, on the Grant Date
of an Award intended to comply with the Performance-Based Exception, and in the
case of other Awards at any time, provide that the formula for such Award may
include or exclude items to measure specific objectives, such as losses from
discontinued operations, extraordinary gains or losses, the cumulative effect of
accounting changes, acquisitions or divestitures, foreign exchange impacts and
any unusual, nonrecurring gain or loss. For Awards intended to comply with the
Performance-Based Exception, the Committee shall set the Performance Measures
within the time period prescribed by Section 162(m) of the Code. The levels of
performance required with respect to Performance Measures may be expressed in
absolute or relative levels and may be based upon a set increase,

                                       10

<PAGE>

set positive result, maintenance of the status quo, set decrease or set negative
result. Performance Measures may differ for Awards to different Grantees. The
Committee shall specify the weighting (which may be the same or different for
multiple objectives) to be given to each performance objective for purposes of
determining the final amount payable with respect to any such Award. Any one or
more of the Performance Measures may apply to the Grantee, a department, unit,
division or function within the Company or any one or more Affiliates; and may
apply either alone or relative to the performance of other businesses or
individuals (including industry or general market indices).

     The Committee shall have the discretion to adjust the determinations of the
degree of attainment of the pre-established performance goals; provided,
however, that Awards which are designed to qualify for the Performance-Based
Exception may not be adjusted upward (the Committee shall retain the discretion
to adjust such Awards downward). The Committee may not delegate any
responsibility with respect to Awards intended to qualify for the
Performance-Based Exception. All determinations by the Committee as to the
achievement of the Performance Measure(s) shall be in writing prior to payment
of the Award.

                                   Article 5.
                  Eligibility and General Conditions of Awards

     5.1  Eligibility. The Committee may in its discretion grant Awards to any
Eligible Person, whether or not he or she has previously received an Award.

     5.2  Award Agreement. To the extent not set forth in the Plan, the terms
and conditions of each Award shall be set forth in an Award Agreement.

     5.3  General Terms and Consideration. The Committee may impose on any Award
or the exercise or settlement thereof, at the date of grant or, subject to the
provisions of Section 15.2, thereafter, such additional terms and conditions not
inconsistent with the provisions of the Plan as the Committee shall determine,
including terms requiring forfeiture, acceleration or pro-rata acceleration of
Awards in the event of a Termination of Employment by the Grantee. Except as may
be required under the Delaware General Corporation Law, Awards may be granted
for no consideration other than prior and future services.

     5.4  Termination of Employment. The Committee may determine and set forth
in an Award Agreement the extent to which an Award not vested shall terminate
upon a Grantee's Termination of Employment. Except as otherwise provided in such
Award Agreement, all Awards not vested shall terminate upon a Grantee's
Termination of Employment, except as provided below in this Section.

     (a)  Options and SARs.

          (i) Except as otherwise provided in an Award Agreement or clause (ii)
     or (iii) below, upon a Grantee's Termination of Employment, all Options and
     SARs not vested and exercisable immediately before such Termination of
     Employment shall terminate and no Option or SAR may be exercised after such
     Termination of Employment.

                                       11

<PAGE>

          (ii) If Termination of Employment occurs for a reason other than
     retirement, death, Disability or cause, Options and SARs which were vested
     and exercisable immediately before such Termination of Employment shall
     remain exercisable for a period of 90 days following such Termination of
     Employment (but not for more than 10 years from the grant date of the Award
     or expiration of the Option Term, if earlier) and shall then terminate.

          (iii) If Termination of Employment occurs by reason of retirement,
     death or disability, Options and SARs which were vested and exercisable
     immediately before such Termination of Employment shall remain exercisable
     for a period of one year following such Termination of Employment (but not
     for more than 10 years from the grant date of the Award or expiration of
     the Option Term, if earlier) and shall then terminate.

     (b)  Restricted Shares. Except as otherwise provided in an Award Agreement,
upon a Grantee's Termination of Employment, all Restricted Shares still subject
to restrictions shall be forfeited by the Grantee (and the Grantee shall sign
any document and take any other action required to assign such Shares back to
the Company) and reacquired by the Company.

     (c)  Performance Awards. Except as otherwise provided in an Award
Agreement:

          (i) If Termination of Employment occurs during a Performance Period
     for a reason other than retirement, disability or death, all Performance
     Awards shall be forfeited upon such Termination of Employment.

          (ii) If Termination of Employment occurs during a Performance Period
     by reason of retirement, disability or death, the Grantee shall be entitled
     to payment at or after conclusion of the Performance Period in accordance
     with the terms of the Award of that portion of the Performance Award equal
     to the amount that would be payable if the Grantee continued in employment
     for the remainder of the Performance Period multiplied by a fraction, the
     numerator of which is the number of days in the Performance Period
     preceding such Termination of Employment and the denominator of which is
     the total number of days in the Performance Period.

     (d)  Waiver by Committee. Notwithstanding the foregoing provisions of this
Section, the Committee may in its sole discretion as to all or part of any Award
as to any Grantee, at the time the Award is granted or thereafter, determine
that Awards shall become exercisable or vested upon a Termination of Employment,
determine that Awards shall continue to become exercisable or vested in full or
in installments after Termination of Employment, extend the period for exercise
of Options or SARs following Termination of Employment (but not beyond 10 years
from the date of grant of the Option or SAR), or provide that any Performance
Award shall in whole or in part not be forfeited upon such Termination of
Employment.

     5.5  Nontransferability of Awards.

     (a)  Each Award and each right under any Award shall be exercisable only by
the Grantee during the Grantee's lifetime, or, if permissible under applicable
law, by the Grantee's guardian or legal representative or by a transferee
receiving such Award pursuant to a qualified domestic relations order (a "QDRO")
as defined in the Code or Title I of the Employee Retire-

                                       12

<PAGE>

ment Income Security Act of 1974 as amended, or the rules thereunder. Nothing
herein shall be construed as requiring the Committee to honor a QDRO except to
the extent required under applicable law.

     (b)  No Award (prior to the time, if applicable, unrestricted Shares are
delivered in respect of such Award or Restricted Shares become unrestricted),
and no right under any Award, may be assigned, alienated, pledged, attached,
sold or otherwise transferred or encumbered by a Grantee otherwise than by will
or by the laws of descent and distribution (or in the case of Restricted Shares,
by transfer to the Company) or pursuant to a QDRO, and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall
be void and unenforceable against the Company or any Affiliate.

     (c)  Notwithstanding subsections (a) and (b) above, a Grantee may designate
a beneficiary ("Beneficiary") by written instrument filed with the Company in a
manner specified by the Committee in the Award Agreement or in the Committee's
rules and procedures of general application, to exercise an Option or SAR or
receive Restricted Shares or Deferred Stock or otherwise receive payment under
any Award to the extent exercisable or payable after the death of the Grantee.

     (d)  Notwithstanding subsections (a) and (b) above, a Grantee may transfer
a Nonstatutory Stock Option, SAR or Deferred Stock for no consideration to a
Permitted Transferee in accordance with rules and subject to such conditions as
may be specified by the Committee in the Award Agreement or in the Committee's
rules or procedures of general application. Following the transfer of a
Nonstatutory Stock Option, SAR or Deferred Stock to a Permitted Transferee, the
Permitted Transferee shall have all of the rights and obligations of the Grantee
to whom the Award was granted and such Grantee shall not retain any rights with
respect to the transferred Award, except that (i) the payment of any tax
attributable to the exercise of the Nonstatutory Stock Option or SAR or receipt
of the Deferred Stock shall remain the obligation of the Grantee, (ii) the
period during which the Nonstatutory Stock Option or SAR shall become
exercisable or remain exercisable shall depend on the service of the original
Grantee and the circumstances of his or her Termination of Employment. A
Permitted Transferee may not again transfer an Award to another Permitted
Transferee.

     (e)  If for any reason an Award is exercised or Shares are to be delivered
or payment is to be made under any Award by or to a person other than the
original Grantee, the person exercising or receiving delivery or payment under
such Award shall, as a condition to such exercise, delivery or receipt, supply
the Committee with such evidence as the Committee may reasonably require to
establish the identity of such person and such person's right to exercise or
receive delivery or payment under such Award. A Permitted Transferee or other
transferee, Beneficiary, guardian, legal representative or other person claiming
any rights under the Plan from or through any Grantee shall be subject to the
provisions of the Plan and any applicable Award Agreement, except to the extent
the Plan and Award Agreement otherwise provide with respect to such persons, and
to any additional restrictions or limitations deemed necessary or appropriate by
the Committee.

     5.6  Cancellation and Rescission of Awards. Unless the Award Agreement
specifies otherwise, the Committee may cancel, rescind, suspend, withhold, or
otherwise limit or restrict

                                       13

<PAGE>

any unexercised Award at any time if the Grantee is not in compliance with all
applicable provisions of the Award Agreement and the Plan.

     5.7  Stand-Alone, Tandem and Substitute Awards.

     (a)  Awards granted under the Plan may, in the discretion of the Committee,
be granted either alone or in addition to, in tandem with, or in substitution
for, any other Award granted under the Plan; provided that if the stand-alone,
tandem or substitute Award is intended to qualify for the Performance-Based
Exception, it must separately satisfy the requirements of the Performance-Based
Exception. If an Award is granted in substitution for another Award or any
non-Plan award or benefit, the Committee shall require the surrender of such
other Award or non-Plan award or benefit in consideration for the grant of the
new Award. Awards granted in addition to or in tandem with other Awards or
non-Plan awards or benefits may be granted either at the same time as or at a
different time from the grant of such other Awards or non-Plan awards or
benefits.

     (b) The Committee may, in its discretion and on such terms and conditions
as the Committee considers appropriate in the circumstances, grant Awards under
the Plan ("Substitute Awards") in substitution for stock and stock-based awards
("Acquired Entity Awards") held immediately prior to such merger, consolidation
or acquisition by employees of another corporation or entity who become Eligible
Persons as the result of a merger or consolidation of the employing corporation
or other entity (the "Acquired Entity") with the Company or an Affiliate or the
acquisition by the Company or an Affiliate of property or stock of the Acquired
Entity, in order to preserve for the Grantee the economic value of all or a
portion of such Acquired Entity Award, at such price as the Committee determines
necessary to achieve preservation of economic value.

     5.8  Compliance with Rule 16b-3.

     (a)  Six-Month Holding Period Advice. Unless a Grantee could otherwise
dispose of or exercise a derivative security or dispose of Shares delivered
under the Plan without incurring liability under Section 16(b) of the Exchange
Act, the Committee may advise or require a Grantee to comply with the following
in order to avoid incurring liability under Section 16(b):

          (i) at least six months must elapse from the date of acquisition of a
     derivative security under the Plan to the date of disposition of the
     derivative security (other than upon exercise or conversion) or its
     underlying equity security, and

          (ii) Shares granted or awarded under the Plan other than upon exercise
     or conversion of a derivative security must be held for at least six months
     from the date of grant of an Award.

     (b)  Reformation to Comply with Exchange Act Rules. To the extent the
Committee determines that a grant or other transaction by a Section 16 Person
should comply with applicable provisions of Rule 16b-3 (except for transactions
exempted under alternative Exchange Act rules), the Committee shall take such
actions as necessary to make such grant or other transaction so comply, and if
any provision of this Plan or any Award Agreement relating to a given Award does
not comply with the requirements of Rule 16b-3 as then applicable to any such
grant or

                                       14

<PAGE>

transaction, such provision will be construed or deemed amended, if the
Committee so determines, to the extent necessary to conform to the then
applicable requirements of Rule 16b-3.

     (c) Rule 16b-3 Administration. Any function relating to a Section 16 Person
shall be performed solely by the Committee or the Board if necessary to ensure
compliance with applicable requirements of Rule 16b-3, to the extent the
Committee determines that such compliance is desired. Each member of the
Committee or person acting on behalf of the Committee shall be entitled to, in
good faith, rely or act upon any report or other information furnished to him by
any officer, manager or other employee of the Company or any Affiliate, the
Company's independent certified public accountants or any executive compensation
consultant or attorney or other professional retained by the Company to assist
in the administration of the Plan.

     5.9 Deferral of Award Payouts. The Committee may permit or require a
Grantee to defer receipt of the payment of cash or the delivery of Shares that
would otherwise be due by virtue of the exercise of an Option, the lapse or
waiver of restrictions with respect to Restricted Shares, the satisfaction of
any requirements or goals with respect to Performance Units or Performance
Shares, the lapse or waiver of the deferral period for Deferred Stock, or the
lapse or waiver of restrictions with respect to Other Stock-Based Awards. If any
such deferral is required or permitted, the Committee shall, in its sole
discretion, establish rules and procedures for such payment deferrals. Except as
otherwise provided in an Award Agreement, any payment or any Shares that are
subject to such deferral shall be made or delivered to the Grantee upon the
Grantee's Termination of Employment.

                                   Article 6.
                                  Stock Options

     6.1 Grant of Options. Subject to and consistent with the provisions of the
Plan, the Committee may, at any time and from time to time, grant Options to any
Eligible Person in such number, and upon such terms, as shall be determined by
the Committee.

     6.2 Award Agreement. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the Option Term, the number of
Shares to which the Option pertains, the time or times at which such Option
shall be exercisable and such other provisions as the Committee shall determine.

     6.3 Option Price. The Option Price of an Option under this Plan shall be
determined in the sole discretion of the Committee, provided that the Option
Price shall not be less than 100% of the Fair Market Value of a Share on the
Grant Date. Subject to the adjustment allowed under Section 4.2, neither the
Committee nor the Board shall have the authority or discretion to change the
Option Price of any outstanding Option.

     6.4 Grant of Incentive Stock Options. At the time of the grant of any
Option, the Committee may in its discretion designate that such Option shall be
made subject to additional restrictions to permit it to qualify as an Incentive
Stock Option. Any Option designated as an Incentive Stock Option:

                                       15

<PAGE>

     (a) shall be granted only to an employee of the Company or a Subsidiary
Corporation (as defined below);

     (b) shall have an Option Price of not less than 100% of the Fair Market
Value of a Share on the Grant Date, and, if granted to a person who owns capital
stock (including stock treated as owned under Section 424(d) of the Code)
possessing more than 10% of the total combined voting power of all classes of
capital stock of the Company or any Subsidiary Corporation (a "10% Owner"), have
an Option Price not less than 110% of the Fair Market Value of a Share on its
Grant Date;

     (c) shall be for a period of not more than 10 years (five years if the
Grantee is a 10% Owner) from its Grant Date, and shall be subject to earlier
termination as provided herein or in the applicable Award Agreement;

     (d) shall not have an aggregate Fair Market Value (as of the Grant Date) of
the Shares with respect to which Incentive Stock Options (whether granted under
the Plan or any other stock option plan of the Grantee's employer or any parent
or Subsidiary Corporation ("Other Plans")) are exercisable for the first time by
such Grantee during any calendar year ("Current Grant"), determined in
accordance with the provisions of Section 422 of the Code, which exceeds
$100,000 (the "$100,000 Limit");

     (e) shall, if the aggregate Fair Market Value of the Shares (determined on
the Grant Date) with respect to the Current Grant and all Incentive Stock
Options previously granted under the Plan and any Other Plans which are
exercisable for the first time during a calendar year ("Prior Grants") would
exceed the $100,000 Limit, be, as to the portion in excess of the $100,000
Limit, exercisable as a separate option that is not an Incentive Stock Option at
such date or dates as are provided in the Current Grant;

     (f) shall require the Grantee to notify the Committee of any disposition of
any Shares delivered pursuant to the exercise of the Incentive Stock Option
under the circumstances described in Section 421(b) of the Code (relating to
holding periods and certain disqualifying dispositions) ("Disqualifying
Disposition"), within 10 days of such a Disqualifying Disposition;

     (g) shall by its terms not be assignable or transferable other than by will
or the laws of descent and distribution and may be exercised, during the
Grantee's lifetime, only by the Grantee; provided, however, that the Grantee
may, to the extent provided in the Plan in any manner specified by the
Committee, designate in writing a beneficiary to exercise his or her Incentive
Stock Option after the Grantee's death; and

     (h) shall, if such Option nevertheless fails to meet the foregoing
requirements, or otherwise fails to meet the requirements of Section 422 of the
Code for an Incentive Stock Option, be treated for all purposes of this Plan,
except as otherwise provided in subsections (d) and (e) above, as an Option that
is not an Incentive Stock Option.

     For purposes of this Section 6.4, "Subsidiary Corporation" means a
corporation other than the Company in an unbroken chain of corporations
beginning with the Company if, at the time of granting the Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of

                                       16

<PAGE>

stock in one of the other corporations in such chain. Notwithstanding the
foregoing and Section 14.2, the Committee may, without the consent of the
Grantee, at any time before the exercise of an Option (whether or not an
Incentive Stock Option), take any action necessary to prevent such Option from
being treated as an Incentive Stock Option.

     6.5 Payment. Except as otherwise provided by the Committee in an Award
Agreement, Options shall be exercised by the delivery of a written notice of
exercise to the Company, setting forth the number of Shares with respect to
which the Option is to be exercised, accompanied by full payment for the Shares
made by any one or more of the following means, subject to the approval of the
Committee:

     (a) cash, negotiable personal check or electronic funds transfer;

     (b) with the approval of the Committee, tender of Mature Shares, valued at
their Fair Market Value on the date of exercise;

     (c) with the approval of the Committee, attestation through the submission
of acceptable certification of ownership of Mature Shares valued at their Fair
Market Value on the date of exercise;

     (d) with the approval of the Committee, Restricted Shares held by the
Grantee for at least six months prior to the exercise of the Option, each such
share valued at the Fair Market Value of a Share on the date of exercise; or

     (e) subject to applicable law, pursuant to procedures previously approved
by the Company, through the sale of the Shares acquired on exercise of the
Option through a broker-dealer to whom the Grantee has submitted an irrevocable
notice of exercise and irrevocable instructions to deliver promptly to the
Company the amount of sale or loan proceeds sufficient to pay for such Shares,
together with, if requested by the Company, the amount of federal, state, local
or foreign withholding taxes payable by Grantee by reason of such exercise.

The Committee may in its discretion specify that, if any Restricted Shares
("Tendered Restricted Shares") are used to pay the Option Price, (x) all the
Shares acquired on exercise of the Option shall be subject to the same
restrictions as the Tendered Restricted Shares, determined as of the date of
exercise of the Option, or (y) a number of Shares acquired on exercise of the
Option equal to the number of Tendered Restricted Shares shall be subject to the
same restrictions as the Tendered Restricted Shares, determined as of the date
of exercise of the Option.

     6.6 Reload Options. In the event a Grantee exercises a Nonstatutory Stock
Option (an "Original Option") and pays the exercise price and/or pays applicable
withholding taxes triggered by the exercise of the Original Option with Mature
Shares, the Committee may award to the Grantee a new Nonstatutory Stock Option
(a "Reload Option"), on the date the Original Option was exercised, for a number
of Shares equal to the number of Shares exchanged by the Grantee to exercise the
Original Option or to pay such withholding taxes; subject to the following:

                                       17

<PAGE>

     (a) No Reload Option shall be granted if the exercise date of the Original
Option is (i) within six months of the expiration date of the Original Option,
(ii) a date after the Grantee's Termination of Employment, or (iii) a date after
the Plan has terminated.

     (b) The Reload Option shall be exercisable on the same terms and conditions
as the Original Option except that (i) the Reload Option shall become
exercisable in full on the day that is six (6) months after the date the
Original Option was exercised; (ii) the exercise price shall be equal to the
Fair Market Value of the Common Stock on the date the date the Original Option
was exercised, and (iii) the expiration date of the Reload Option shall be the
date of expiration of the Original Option.

     (c) The Committee may provide in the Award Agreement for any Nonstatutory
Option that a Reload Option will automatically be granted on exercise of such
Option in circumstances in which the grant of a Reload Option is permitted by
this Section 6.6.

     (d) Except as provided in subsection (c) the Committee shall issue a new
Award Agreement to evidence the Reload Option and such Award Agreement will
supersede the Award Agreement for the Original Option in all respects insofar as
the Reload Option is concerned.

     (e) A Grantee is not permitted to reload a Reload Option unless otherwise
permitted by the Committee in its sole discretion.

                                   Article 7.
                            Stock Appreciation Rights

     7.1 Issuance. Subject to and consistent with the provisions of the Plan,
the Committee, at any time and from time to time, may grant SARs to any Eligible
Person either alone or in addition to other Awards granted under the Plan. Such
SARs may, but need not, be granted in connection with a specific Option granted
under Article 6. Any SAR related to a Nonstatutory Stock Option may be granted
at the same time such Option is granted or at any time thereafter before
exercise or expiration of such Option. Any SAR related to an Incentive Stock
Option must be granted at the same time such Option is granted. The Committee
may impose such conditions or restrictions on the exercise of any SAR as it
shall deem appropriate.

     7.2 Award Agreements. Each SAR grant shall be evidenced by an Award
Agreement in such form and the Committee may approve and shall contain such
terms and conditions not inconsistent with other provisions of the Plan as shall
be determined from time to time by the Committee.

     7.3 Grant Price. The grant price of a SAR shall be determined by the
Committee in its sole discretion; provided that the grant price shall not be
less than the lesser of 100% of the Fair Market Value of a Share on the date of
the grant of the SAR, or the Option Price under the Nonstatutory Stock Option to
which the SAR relates.

     7.4 Exercise and Payment. Upon the exercise of SARs, the Grantee shall be
entitled to receive the value thereof. The Fair Market Value of a Share on the
date of exercise of SARs shall be determined in the same manner as the Fair
Market Value of a Share on the date of grant

                                       18

<PAGE>

of an Option is determined. SARs shall be deemed exercised on the date written
notice of exercise in a form acceptable to the Committee is received by the
Secretary of the Company. Unless the Award Agreement provides otherwise or
reserves to the Committee or the Grantee or both the right to defer payment, the
Company shall make payment in respect of any SAR within five days of the date
the SAR is exercised. Any payment by the Company in respect of a SAR may be made
in cash, Shares, other property, or any combination thereof, as the Committee,
in its sole discretion, shall determine.

     7.5 Grant of Limited Rights.

     (a) The Committee in its sole discretion may grant Limited Rights upon or
after the grant of any Option under the Plan. Each Limited Right shall be
identified with a share of Stock subject to an Option of the Grantee. The number
of Limited Rights awarded to a Grantee shall equal the number of Shares subject
to the Option with which such Limited Rights are identified. Upon the exercise,
expiration, termination, forfeiture, or cancellation of a Grantee's Option, the
Grantee's associated Limited Rights shall terminate.

     (b) Limited Rights shall become exercisable upon the occurrence of a Change
of Control. Limited Rights shall be exercised by delivery to the Company, within
90 days after the date of such Change of Control, of written notice of intent to
exercise specific Limited Rights. The exercise of Limited Rights shall result in
the cancellation of the Option with which such Limited Rights are identified, to
the extent of such exercise.

     (c) The Company shall notify all Grantees holding Limited Rights of the
occurrence of a Change of Control promptly after its occurrence, but any failure
of the Company so to notify shall not deprive any Grantee of any rights that
accrued as a result of a Change of Control. Any such failure of the Company
shall, if a Grantee does not otherwise know of the Change of Control,
automatically extend the 90-day period specified above until 90 days after the
Company notifies such Grantee or such Grantee otherwise knows of the Change of
Control, whichever first occurs, but in no event beyond the maximum term of the
identified Option specified in the applicable Award Agreement.

     (d) Within five business days after the exercise of any Limited Rights, the
Company shall pay to the Grantee, in cash an amount equal to the difference
between (i) the Change of Control Value, and (ii) the Option Price of the
Option.

     (e) For purposes of this Section 7.5 "Change of Control Value" means the
greater of (A) the highest Fair Market Value of a Share during the 180-day
period preceding the 30th day prior to the date of the Company's receipt of
notice of exercise of Limited Rights, or (B) the cash amount (or fair cash
value, as determined by the Committee in its sole discretion, of consideration
other than cash), payable in respect of a Share to holders of Shares in
connection with the Change of Control.

     7.6 Other Limitations. The Committee may at any time impose any other
limitations upon the exercise of SARs which, in the Committee's sole discretion,
are necessary or desirable in order for Grantees to qualify for an exemption
from Section 16(b) of the Exchange Act.

                                       19

<PAGE>
                                   Article 8.
                                Restricted Shares

     8.1 Grant of Restricted Shares. Subject to and consistent with the
provisions of the Plan, the Committee, at any time and from time to time, may
grant Restricted Shares to any Eligible Person in such amounts as the Committee
shall determine.

     8.2 Award Agreement. Each grant of Restricted Shares shall be evidenced by
an Award Agreement that shall specify the Period(s) of Restriction, the number
of Restricted Shares granted, and such other provisions as the Committee shall
determine. The Committee may impose such conditions and/or restrictions on any
Restricted Shares granted pursuant to the Plan as it may deem advisable,
including restrictions based upon the achievement of specific performance goals,
time-based restrictions on vesting following the attainment of the performance
goals, and/or restrictions under applicable securities laws; provided that such
conditions and/or restrictions may lapse, if so determined by the Committee, in
the event of the Grantee's Termination of Employment due to death, disability,
normal or approved early retirement, or involuntary termination by the Company
or an Affiliate without cause.

     8.3 Consideration for Restricted Shares. The Committee shall determine the
amount, if any, that a Grantee shall pay for Restricted Shares.

     8.4 Voting and Dividend Rights. The Committee shall determine the extent to
which the Grantee shall have the right to receive dividends and to vote
Restricted Shares during the Period of Restriction. Unless otherwise specified
in the Award Agreement, the Grantee shall have the right to receive dividends
and to vote Restricted Shares during the Period of Restriction.

     8.5 Effect of Forfeiture. If Restricted Shares are forfeited, and if the
Grantee was required to pay for such shares or acquired such Restricted Shares
upon the exercise of an Option, the Grantee shall be deemed to have resold such
Restricted Shares to the Company at a price equal to the lesser of (x) the
amount paid by the Grantee for such Restricted Shares, or (y) the Fair Market
Value of a Share on the date of such forfeiture. The Company shall pay to the
Grantee the deemed sale price as soon as is administratively practical. Such
Restricted Shares shall cease to be outstanding, and shall no longer confer on
the Grantee thereof any rights as a stockholder of the Company, from and after
the date of the event causing the forfeiture, whether or not the Grantee accepts
the Company's tender of payment for such Restricted Shares.

     8.6 Escrow; Legends. The Committee may provide that the certificates for
any Restricted Shares (a) shall be held (together with a stock power executed in
blank by the Grantee) in escrow by the Secretary of the Company until such
Restricted Shares become nonforfeitable or are forfeited and/or (y) shall bear
an appropriate legend restricting the transfer of such Restricted Shares. If any
Restricted Shares become nonforfeitable, the Company shall cause certificates
for such Shares to be delivered (or otherwise transferred of record) without
such legend.

                                       20

<PAGE>
                                   Article 9.
                               Performance Awards

     9.1 Grant of Performance Awards. Subject to and consistent with the
provisions of the Plan, the Committee may, at any time and from time to time,
award Performance Units or Performance Shares to any Eligible Person in such
amounts and upon such terms as shall be determined by the Committee.

     9.2 Value/Performance Goals. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will
determine the number or value of Performance Awards that will be paid to the
Grantee. With respect to Covered Employees and to the extent the Committee deems
it appropriate to comply with Section 162(m) of the Code, all performance goals
shall be objective Performance Measures satisfying the requirements for the
Performance-Based Exception, and shall be set by the Committee within the time
period prescribed by Section 162(m) of the Code and related regulations.

     (a) Performance Unit. Each Performance Unit shall have an initial value
that is established by the Committee at the time of grant.

     (b) Performance Share. Each Performance Share shall have an initial value
equal to the Fair Market Value of a Share on the date of grant.

     9.3 Earning of Performance Awards. After the applicable Performance Period
has ended, the holder of Performance Awards shall be entitled to payment based
on the level of achievement of performance goals set by the Committee. If a
Performance Award is intended to comply with the Performance-Based Exception,
the Committee shall certify the level of achievement of the performance goals in
writing before the Award is settled. At the discretion of the Committee, the
settlement of Performance Awards may be in cash, Shares of equivalent value, or
in some combination thereof, as set forth in the Award Agreement.

     9.4 Adjustment on Change of Position. If a Grantee is promoted, demoted or
transferred to a different business unit of the Company during a Performance
Period, then, to the extent the Committee determines the performance goals or
Performance Period are no longer appropriate, the Committee may adjust, change,
eliminate or cancel the performance goals or the applicable Performance Period
as it deems appropriate in order to make them appropriate and comparable to the
initial performance goals or Performance Period.

     9.5 Voting and Dividend Rights. At the discretion of the Committee, a
Grantee may be entitled to receive any dividends or Dividend Equivalents
declared with respect to Shares deliverable in connection with grants of
Performance Awards which have been earned, but not yet delivered (or otherwise
transferred of record) to the Grantee. A Grantee shall not have the right to
vote Shares deliverable in connection with grants of Performance Awards until
such Shares have been delivered (or otherwise transferred of record) to the
Grantee.

                                       21

<PAGE>
                                   Article 10.
                                 Deferred Stock

     10.1 Grant of Deferred Stock. Subject to and consistent with the provisions
of the Plan, the Committee, at any time and from time to time, may grant
Deferred Stock to any Eligible Person, in such amount and upon such terms as the
Committee shall determine.

     10.2 Delivery and Limitations. Delivery of Shares will occur upon
expiration of the deferral period specified for the Award of Deferred Stock by
the Committee. In addition, an Award of Deferred Stock shall be subject to such
limitations as the Committee may impose, which limitations may lapse at the
expiration of the deferral period or at other specified times, separately or in
combination, in installments or otherwise, as the Committee shall determine at
the time of grant or thereafter. A Grantee awarded Deferred Stock will have no
voting rights and will have no rights to receive dividends in respect of
Deferred Stock, unless and only to the extent that the Committee shall award
Dividend Equivalents in respect of such Deferred Stock.

     10.3 Forfeiture. Except as otherwise determined by the Committee, upon
Termination of Employment during the applicable deferral period, Deferred Stock
that is at that time subject to deferral (other than a deferral at the election
of the Grantee) shall be forfeited.

                                   Article 11.
                              Dividend Equivalents

     11.1 The Committee is authorized to grant Awards of Dividend Equivalents
alone or in conjunction with other Awards. The Committee may provide that
Dividend Equivalents shall be paid or distributed when accrued or shall be
deemed to have been reinvested in additional Shares or additional Awards or
otherwise reinvested.

                                   Article 12.
                            Other Stock-Based Awards

     12.1 The Committee is authorized, subject to limitations under applicable
law, to grant such other Awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Shares,
as deemed by the Committee to be consistent with the purposes of the Plan;
including Shares awarded which are not subject to any restrictions or
conditions, convertible or exchangeable debt securities or other rights
convertible or exchangeable into Shares, and Awards valued by reference to the
value of securities of or the performance of specified Affiliates. Subject to
and consistent with the provisions of the Plan, the Committee shall determine
the terms and conditions of such Awards. Except as provided by the Committee,
Shares delivered pursuant to a purchase right granted under this Article 12
shall be purchased for such consideration, paid for by such methods and in such
forms, including cash, Shares, outstanding Awards or other property, as the
Committee shall determine.

                                       22

<PAGE>
                                   Article 13.
                                   Withholding

     13.1 Required Withholding.

     (a) Whenever, under the Plan, Shares are to be delivered upon exercise or
payment of an Award, upon Restricted Shares becoming nonforfeitable, upon
payment of cash, or any other event with respect to rights and benefits
hereunder, the Company or any Affiliate shall be entitled to require (A) that
the Grantee remit an amount in cash, or in the Company's discretion, in Mature
Shares, sufficient to satisfy all of the employer's federal, state, and local
tax withholding requirements related thereto but no more than the minimum amount
necessary to satisfy such amounts ("Required Withholding"), (B) the withholding
of such Required Withholding from compensation otherwise due to the Grantee or
from any Shares due to the Grantee under the Plan or (C) any combination of the
foregoing.

     (b) Any Grantee who makes a Disqualifying Disposition (as defined in
Section 6.4(g)) or an election under Section 83(b) of the Code shall remit to
the Company an amount sufficient to satisfy all resulting Required Withholding;
provided that, in lieu of or in addition to the foregoing, the Company and/or an
Affiliate shall have the right to withhold such Required Withholding from
compensation otherwise due to the Grantee or from any Shares or other payment
due to the Grantee under the Plan.

     13.2 Elective Excess Withholding.

     (a) Subject to the following subsection and with the Committee's prior
approval, a Grantee may elect to remit (or attest to the ownership of) Mature
Shares upon the exercise or settlement of an Award or upon Restricted Shares
becoming non-forfeitable (each, a "Taxable Event") having a Fair Market Value
equal to an amount greater than the Required Withholding for the Taxable Event
but not to exceed the estimated total amount of such Grantee's tax liability
("Excess Withholding") with respect to the Taxable Event.

     (b) Each Excess Withholding election shall be subject to the following
conditions:

         (i) any Grantee's election shall be subject to the Committee's
     discretion to revoke the Grantee's right to elect Excess Withholding at any
     time before the Grantee's election if the Committee has reserved the right
     to do so in the Award Agreement;

         (ii) the Grantee's election must be made before the date (the "Tax
     Date") on which the amount of tax to be withheld is determined; and

         (iii) the Grantee's election shall be irrevocable.

     13.3 Notification under Code Section 83(b). If the Grantee, in connection
with the exercise of any Option, or the grant of Restricted Shares, makes the
election permitted under Section 83(b) of the Code to include in such Grantee's
gross income in the year of transfer the amounts specified in Section 83(b) of
the Code, then such Grantee shall notify the Company of such election within 10
days of filing the notice of the election with the Internal Revenue Service, in
addition to any filing and notification required pursuant to regulations issued
under

                                       23

<PAGE>

Section 83(b) of the Code. The Committee may, in connection with the grant of an
Award or at any time thereafter, prohibit a Grantee from making the election
described above.

                                  Article 14.
                                Change of Control

     14.1 Effect of Change of Control. In order to maintain the Grantees' rights
in the event of any Change of Control of the Company, as hereinafter defined,
the Committee, as constituted before such Change in Control, may, in its sole
discretion, as to any Award, either at the time an Award is made or any time
thereafter, take any one or more of the following actions: (i) provide for the
acceleration of any time periods relating to the exercise or realization of any
such Award so that such Award may be exercised or realized in full on or before
a date fixed by the Committee; (ii) provide for the purchase of any such Award
with or without the Grantee's consent for an amount of cash equal to the amount
that could have been attained upon the exercise of such Award or realization of
the Grantee's rights had such Award been currently exercisable or payable or
exercisable or payable during a stipulated period prior to the Change of
Control; (iii) make such adjustment to any such Award then outstanding as the
Committee deems appropriate to reflect such Change in Control; or (iv) cause any
such Award then outstanding to be assumed, or new rights substituted therefor,
by the acquiring or surviving corporation after such Change in Control. The
Committee may, in its discretion, include such further provisions and
limitations respecting a Change in Control in any Award Agreement as it may deem
equitable and in the best interests of the Company.

     14.2 Definition of Change of Control. A "Change of Control" shall be deemed
to have occurred if:

     (a) any "Person" (as such term is used in Section 13(d) of the Exchange
Act) is or becomes the "beneficial owner" (as determined pursuant to Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities including, but not limited to, by reason
of the acquisition of securities of the Company prior to the Effective Date; or

     (b) during any period of two (2) consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the members of the Board and any new director, whose election
to the Board or nomination for election to the Board by the Company stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board; or

     (c) the Company shall merge with or consolidate into any other corporation,
other than a merger or consolidation which would result in the holders of the
voting securities of the company outstanding immediately prior thereto holding
immediately thereafter securities representing at least seventy-five percent
(75%) of the combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or

                                       24

<PAGE>

consolidation; except that a merger or consolidation or recapitalization of the
Company (or similar transaction) in which no Person (other than Company or an
employee benefit plan sponsored by the Company) acquires more than thirty
percent (30%) of the combined voting power of the Company's then outstanding
securities shall not constitute a Change in Control; or

     (d) the stockholders of the Company approve a plan of complete liquidation
of the Company or such a plan is commenced; or

     (e) the Company enters into or the stockholders of the Company approve an
agreement for the sale and disposition of all or substantially all of the
Company or of all or substantially all of the Company's assets.

                                  Article 15.
                    Amendment, Modification, and Termination

     15.1 Amendment, Modification, and Termination. Subject to Section 15.2, the
Board may, at any time and from time to time, alter, amend, suspend, discontinue
or terminate the Plan in whole or in part without the approval of the Company's
stockholders, except that (a) any amendment or alteration shall be subject to
the approval of the Company's stockholders if such stockholder approval is
required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Shares may then be listed or
quoted, and (b) the Board may otherwise, in its discretion, determine to submit
other such amendments or alterations to stockholders for approval. Without
limiting the generality of the foregoing, the number of Shares available for
grant hereunder shall not be increased without the approval of the Company's
stockholders.

     15.2 Awards Previously Granted. Except as otherwise specifically permitted
in the Plan or an Award Agreement, no termination, amendment, or modification of
the Plan, or amendment or modification of an Award Agreement, shall adversely
affect in any material way any Award or such Award Agreement previously granted
under the Plan without the written consent of the Grantee of such Award;
provided that the consent of the Grantee shall not be required for any amendment
that is necessary or advisable (as determined by the Committee) to carry out the
purpose of the Award as a result of any new applicable law or change in an
existing applicable law.

                                  Article 16.
                              Additional Provisions

     16.1 Successors. All obligations of the Company under the Plan with respect
to Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise of all or substantially all of the
business and/or assets of the Company.

     16.2 Severability. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or part
of a Section so declared to be unlawful or invalid shall, if

                                       25

<PAGE>

possible, be construed in a manner which will give effect to the terms of such
Section or part of a Section to the fullest extent possible while remaining
lawful and valid.

     16.3 Requirements of Law. The granting of Awards and the delivery of Shares
under the Plan shall be subject to all applicable laws, rules, and regulations,
and to such approvals by any governmental agencies or national securities
exchanges as may be required. Notwithstanding any provision of the Plan or any
Award, Grantees shall not be entitled to exercise, or receive benefits under,
any Award, and the Company (and any Affiliate) shall not be obligated to deliver
any Shares or deliver benefits to a Grantee, if such exercise or delivery would
constitute a violation by the Grantee or the Company of any applicable law or
regulation.

     16.4 Securities Law Compliance.

     (a) If the Committee deems it necessary to comply with any applicable
securities law, or the requirements of any stock exchange upon which Shares may
be listed, the Committee may impose any restriction on Shares acquired pursuant
to Awards under the Plan as it may deem advisable. All certificates for Shares
delivered under the Plan pursuant to any Award or the exercise thereof shall be
subject to such stop transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations and other requirements of the SEC,
any stock exchange upon which Shares are then listed, any applicable securities
law, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions. If so requested
by the Company, the Grantee shall make a written representation to the Company
that he or she will not sell or offer to sell any Shares unless a registration
statement shall be in effect with respect to such Shares under the Securities
Act of 1993, as amended, and any applicable state securities law or unless he or
she shall have furnished to the Company, in form and substance satisfactory to
the Company, that such registration is not required.

     (b) If the Committee determines that the exercise or nonforfeitability of,
or delivery of benefits pursuant to, any Award would violate any applicable
provision of securities laws or the listing requirements of any national
securities exchange or national market system on which are listed any of the
Company's equity securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as applicable, but the Company shall use all
reasonable efforts to cause such exercise, nonforfeitability or delivery to
comply with all such provisions at the earliest practicable date.

     16.5 No Rights as a Stockholder. No Grantee shall have any rights as a
stockholder of the Company with respect to the Shares (other than Restricted
Shares) which may be deliverable upon exercise or payment of such Award until
such Shares have been delivered (or otherwise transferred of record) to him or
her. Restricted Shares, whether held by a Grantee or in escrow by the Secretary
of the Company, shall confer on the Grantee all rights of a stockholder of the
Company, except as otherwise provided in the Plan or Award Agreement. At the
time of a grant of Restricted Shares, the Committee may require the payment of
cash dividends thereon to be deferred and, if the Committee so determines,
reinvested in additional Restricted Shares. Stock dividends and deferred cash
dividends issued with respect to Restricted Shares shall be subject to the same
restrictions and other terms as apply to the Restricted Shares with respect to
which such

                                       26

<PAGE>

dividends are issued. The Committee may in its discretion provide for payment of
interest on deferred cash dividends.

     16.6 Nature of Payments. Unless otherwise specified in the Award Agreement,
Awards shall be special incentive payments to the Grantee and shall not be taken
into account in computing the amount of salary or compensation of the Grantee
for purposes of determining any pension, retirement, death or other benefit
under (a) any pension, retirement, profit-sharing, bonus, insurance or other
employee benefit plan of the Company or any Affiliate, except as such plan shall
otherwise expressly provide, or (b) any agreement between (i) the Company or any
Affiliate and (ii) the Grantee, except as such agreement shall otherwise
expressly provide.

     16.7 Non-Exclusivity of Plan. Neither the adoption of the Plan by the Board
nor its submission to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board to adopt such
other compensatory arrangements for employees as it may deem desirable.

     16.8 Governing Law. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Delaware,
other than its laws respecting choice of law.

     16.9 Share Certificates. All certificates for Shares delivered under the
terms of the Plan shall be subject to such stop-transfer orders and other
restrictions as the Committee may deem advisable under federal or state
securities laws, rules and regulations thereunder, and the rules of any national
securities laws, rules and regulations thereunder, and the rules of any national
securities exchange or automated quotation system on which Shares are listed or
quoted. The Committee may cause a legend or legends to be placed on any such
certificates to make appropriate reference to such restrictions or any other
restrictions or limitations that may be applicable to Shares. In addition,
during any period in which Awards or Shares are subject to restrictions or
limitations under the terms of the Plan or any Award Agreement, or during any
period during which delivery or receipt of an Award or Shares has been deferred
by the Committee or a Grantee, the Committee may require any Grantee to enter
into an agreement providing that certificates representing Shares deliverable or
delivered pursuant to an Award shall remain in the physical custody of the
Company or such other person as the Committee may designate.

     16.10 Unfunded Status of Awards; Creation of Trusts. The Plan is intended
to constitute an "unfunded" plan for incentive and deferred compensation. With
respect to any payments not yet made to a Grantee pursuant to an Award, nothing
contained in the Plan or any Award Agreement shall give any such Grantee any
rights that are greater than those of a general creditor of the Company;
provided, however, that the Committee may authorize the creation of trusts or
make other arrangements to meet the Company's obligations under the Plan to
deliver cash, Shares or other property pursuant to any Award which trusts or
other arrangements shall be consistent with the "unfunded" status of the Plan
unless the Committee otherwise determines.

     16.11 Affiliation. Nothing in the Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company or any Affiliate to
terminate any Grantee's employment at any time, nor confer upon any Grantee the
right to continue in the employ of or as an officer of the Company or any
Affiliate.

                                       27

<PAGE>

     16.12 Participation. No employee or officer shall have the right to be
selected to receive an Award under this Plan or, having been so selected, to be
selected to receive a future Award.

     16.13 Military Service. Awards shall be administered in accordance with
Section 414(u) of the Code and the Uniformed Services Employment and
Reemployment Rights Act of 1994.

     16.14 Construction. The following rules of construction will apply to the
Plan: (a) the word "or" is disjunctive but not necessarily exclusive, and (b)
words in the singular include the plural, words in the plural include the
singular, and words in the neuter gender include the masculine and feminine
genders and words in the masculine or feminine gender include the other neuter
genders.

     16.15 Headings. The headings of articles and sections are included solely
for convenience of reference, and if there is any conflict between such headings
and the text of this Plan, the text shall control.

     16.16 Obligations. Unless otherwise specified in the Award Agreement, the
obligation to deliver, pay or transfer any amount of money or other property
pursuant to Awards under this Plan shall be the sole obligation of a Grantee's
employer; provided that the obligation to deliver or transfer any Shares
pursuant to Awards under this Plan shall be the sole obligation of the Company.

     16.17 Stockholder Approval. All Awards granted on or after the Effective
Date and prior to the date the Company's stockholders approve the Plan are
expressly conditioned upon and subject to approval of the Plan by the Company's
stockholders.

                                       28Twelfth Supplemental Indenture dated as of September 9, 2003

 Exhibit 4.2 
  
 CenterPoint Energy Houston Electric, LLC 
 1111 Louisiana 
 Houston, TX 77002 
  

  
 CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC 
  
 TO 
  
 JPMORGAN CHASE BANK 
 Trustee 
  

  
 TWELFTH SUPPLEMENTAL INDENTURE 
  
 Dated as of September 9, 2003 
  

  
 Supplementing the General Mortgage Indenture 

Dated as of October 10, 2002 
  
 THIS INSTRUMENT GRANTS A SECURITY INTEREST BY A PUBLIC UTILITY 
  
 THIS INSTRUMENT CONTAINS AFTER-ACQUIRED PROPERTY PROVISIONS 
  
 This instrument is being filed pursuant to Chapter 35 of the Texas Business and Commerce Code 
  
  

 TWELFTH SUPPLEMENTAL INDENTURE, dated as of September 9, 2003, between CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC, a
limited liability company organized and existing under the laws of the State of Texas (herein called the “Company”), having its principal office at 1111 Louisiana, Houston, Texas 77002, and JPMORGAN CHASE BANK, a banking corporation duly
organized and existing under the laws of the State of New York, as Trustee (herein called the “Trustee”), the office of the Trustee at which on the date hereof its corporate trust business is administered being 600 Travis Street, Suite
1150, Houston, Texas 77002. 
  
 RECITALS OF THE COMPANY 

 
 WHEREAS, the Company has heretofore executed and delivered to the Trustee a General
Mortgage Indenture dated as of October 10, 2002 (the “Indenture”) providing for the issuance by the Company from time to time of its bonds, notes or other evidence of indebtedness to be issued in one or more series (in the Indenture and
herein called the “Securities”) and to provide security for the payment of the principal of and premium, if any, and interest, if any, on the Securities; and 
  
 WHEREAS, the Company, in the exercise of the power and authority conferred upon and reserved to it under the provisions of the Indenture and
pursuant to appropriate resolutions of the Manager, has duly determined to make, execute and deliver to the Trustee this Twelfth Supplemental Indenture to the Indenture as permitted by Sections 201, 301, 402(2), 403(2) and 1401 of the Indenture in
order to establish the form or terms of, and to provide for the creation and issuance of, a thirteenth series of Securities under the Indenture in an initial aggregate principal amount of $300,000,000 (such thirteenth series being hereinafter
referred to as the “Thirteenth Series”); and 
  
 WHEREAS, all things
necessary to make the Securities of the Thirteenth Series, when executed by the Company and authenticated and delivered by the Trustee or any Authenticating Agent and issued upon the terms and subject to the conditions hereinafter and in the
Indenture set forth against payment therefor the valid, binding and legal obligations of the Company and to make this Twelfth Supplemental Indenture a valid, binding and legal agreement of the Company, have been done; 
  
 NOW, THEREFORE, THIS TWELFTH SUPPLEMENTAL INDENTURE WITNESSETH that, in order to establish
the terms of a series of Securities, and for and in consideration of the premises and of the covenants contained in the Indenture and in this Twelfth Supplemental Indenture and for other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, it is mutually covenanted and agreed as follows: 
  
  

 2 

 ARTICLE ONE 
  
 DEFINITIONS AND OTHER PROVISIONS 
 OF GENERAL APPLICATION 
  
 Section 101.    Definitions.    Each capitalized term that is used herein and is defined in the Indenture shall have the meaning specified in the Indenture unless such term is otherwise defined
herein. 
  
 ARTICLE TWO 
  
 TITLE, FORM AND TERMS OF THE BONDS 
  
 Section 201.    Title of the
Bonds.    This Twelfth Supplemental Indenture hereby creates a series of Securities designated as the “5.75% General Mortgage Bonds, Series M, due 2014” (the “Series M Bonds”), and a series of Securities
designated as the “5.75% General Mortgage Bonds, Series M2, due 2014” (the “Series M2 Bonds” and, together with the Series M Bonds, the “Bonds”). For purposes of the Indenture, the Bonds shall constitute a single series
of Securities and, subject to the provisions, including, but not limited to Article Four of the Indenture, the Bonds may be issued in an unlimited principal aggregate amount, although the initial issuance of the Bonds shall be in the principal
amount of $300,000,000. 
  
 Section
202.    Form and Terms of the Bonds.    The form and terms of the Bonds will be set forth in an Officer’s Certificate delivered by the Company to the Trustee pursuant to the authority granted by
this Twelfth Supplemental Indenture in accordance with Sections 201 and 301 of the Indenture. 
  
 Section 203.    Treatment of Proceeds of Title Insurance Policy.    Any moneys received by the Trustee as proceeds of any title insurance policy on Mortgaged Property of
the Company shall be subject to and treated in accordance with the provisions of Section 607(2) of the Indenture (other than the last paragraph thereof). 
  
 ARTICLE THREE 
  
 MISCELLANEOUS PROVISIONS 
  
 The Trustee makes no undertaking or representations in respect of, and shall not be responsible in any manner whatsoever for and in respect of, the validity or sufficiency of this Twelfth Supplemental Indenture or the proper authorization
or the due execution hereof by the Company or for or in respect of the recitals and statements contained herein, all of which recitals and statements are made solely by the Company. 
  
 Except as expressly amended and supplemented hereby, the Indenture shall continue in full force and effect in accordance with the provisions
thereof and the Indenture is in all respects hereby ratified and confirmed. This Twelfth Supplemental Indenture and all of its provisions shall be 
  
  
  
  

 3 

 deemed a part of the Indenture in the manner and to the extent herein and therein provided. 
  
 This Twelfth Supplemental Indenture shall be governed by, and construed in accordance with,
the law of the State of New York. 
  
 This Twelfth Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 
  
  

 4 

 IN WITNESS WHEREOF, the parties hereto have caused this Twelfth Supplemental Indenture to be duly
executed as of the day and year first above written. 
  

	CENTERPOINT ENERGY HOUSTON ELECTRIC, LLC
	
	 /S/    MARC KILBRIDE

	

	 Marc Kilbride

	 Vice President and Treasurer

	
	 JPMORGAN CHASE BANK, as Trustee

	
	 /S/    CAROL LOGAN

	

	 Carol Logan

	 Vice President and Trust Officer

  
 ACKNOWLEDGMENT 
  

	STATE OF TEXAS	 	)
	 	 	) ss.
	 COUNTY OF HARRIS
	 	)

  
 On the 4th day of
September 2003, before me, Amelia Oviedo, the undersigned notary public, personally came Marc Kilbride, to me known, who, being by me duly sworn, did depose and say that he is Vice President and Treasurer of CenterPoint Energy Houston Electric, LLC,
a limited liability company organized under the laws of the State of Texas, that he executed the foregoing instrument in his authorized capacity, and that by his signature on the instrument he, or the entity upon behalf of which he acted, executed
the instrument. 
  

	/S/    AMEILIA OVIEDO
	

	 Notary Public

  

 ACKNOWLEDGMENT 
  

	STATE OF TEXAS	 	)
	 	 	)    ss
	 COUNTY OF HARRIS
	 	)

  
 On the 4th day of
September 2003, before me, Treva Bushnell, the undersigned notary public, personally came Carol Logan, to me known, who, being by me duly sworn, did depose and say that she is Vice President and Trust Officer of JPMorgan Chase Bank, a banking
corporation organized under the laws of the State of New York, that she executed the foregoing instrument in her authorized capacity, and that by her signature on the instrument she, or the entity upon behalf of which she acted, executed the
instrument. 
  
  

	/S/    TREVA BUSHNELL
	

	Notary Public

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