Document:

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                                                                   EXHIBIT 10(r)

                          NATIONAL GRID USA COMPANIES'
                           INCENTIVE COMPENSATION PLAN

                                                   Adopted December 6, 2001
                                                   Effective as of April 1, 2000

                                                     /s/ Richard P. Sergel
                                                   -----------------------------
                                                   Chief Executive Officer
                                                   National Grid USA

                                        Amended and Restated March 1, 2003
                                        Effective as of April 1, 2002

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                          NATIONAL GRID USA COMPANIES'
                           INCENTIVE COMPENSATION PLAN

                     Adopted with effect from April 01, 2000

1.    This Plan comprises two distinct parts:

      A)    The Incentive Compensation Plan (Cash Plan)

      B)    The Incentive Share Plan (Share Plan).

2.    The Cash Plan comprises Appendix A to the Plan.

3.    The Share Plan comprises Appendix B to the Plan.

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                                TABLE OF CONTENTS

                                   APPENDIX A

                          NATIONAL GRID USA COMPANIES'
                           INCENTIVE COMPENSATION PLAN

<TABLE>
<S>                                                                                                         <C>
I.       INTRODUCTION....................................................................................   1
         1.01    Name....................................................................................   1
         1.02    Purpose.................................................................................   1
II.      DEFINITIONS.....................................................................................   2
         2.01    ADR.....................................................................................   2
         2.02    ADS.....................................................................................   2
         2.03    Base Compensation.......................................................................   2
         2.04    Benefits Administrator..................................................................   2
         2.05    Board...................................................................................   2
         2.06    Board/CEO...............................................................................   2
         2.07    Bonus Award.............................................................................   2
         2.08    Cash Bonus..............................................................................   2
         2.09    CEO.....................................................................................   2
         2.10    Chairman................................................................................   3
         2.11    Change in Control.......................................................................   3
         2.12    Company.................................................................................   3
         2.13    A Major Transaction.....................................................................   3
         2.14    Matching Percentage.....................................................................   4
         2.15    National Grid USA.......................................................................   5
         2.16    Organizational Targets..................................................................   5
         2.17    Participant.............................................................................   5
         2.18    Plan....................................................................................   5
         2.19    Plan Year...............................................................................   5
III.     ADMINISTRATION..................................................................................   5
         3.01    Administration and Interpretation.......................................................   5
</TABLE>

                                       i

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<TABLE>
<S>                                                                                                        <C>
         3.02    Amendment or Termination................................................................   5
         3.03    No Segregation of Assets; No Assignment.................................................   6
         3.04    Participant List........................................................................   6
         3.05    Effectuation of Interest................................................................   6
         3.06    Accounting..............................................................................   7
IV.      PARTICIPATION...................................................................................   7
         4.01    Selection...............................................................................   7
         4.02    Notification............................................................................   7
V.       PARTICIPANT'S COMPENSATION......................................................................   7
VI.      BASE COMPENSATION...............................................................................   7
         6.01    Base Compensation.......................................................................   7
         6.02    Salary Approvals........................................................................   8
VII.     INCENTIVE COMPENSATION..........................................................................   8
         7.01    Bonus Award.............................................................................   8
         7.02    Target Payout...........................................................................   8
         7.03    Bonus Award Measurement.................................................................   8
         7.04    Bonus Award Payout......................................................................   9
         7.05    Bonus Award Payment.....................................................................   9
         7.06    Exercise of Discretion..................................................................  10
         7.07    Distribution............................................................................  10
         7.08    Deferral of Cash........................................................................  10
VIII.    PAYMENT UPON CHANGE OF CONTROL..................................................................  11
IX.      GENERAL PROVISIONS..............................................................................  12
         9.01    Other Benefit Plans.....................................................................  12
         9.02    Termination of Participation............................................................  12
         9.03    Interplan Transfer/Entry During Plan Year...............................................  12
         9.04    Future Employment.......................................................................  13
         9.05    Headings................................................................................  13
         9.06    Gender and Number.......................................................................  13
</TABLE>

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<TABLE>
<S>                                                                                                        <C>
         9.07    Governing Law...........................................................................  13
         9.08    Rate Making.............................................................................  13

</TABLE>

                                      iii

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                                   APPENDIX B

                          NATIONAL GRID USA COMPANIES'
                              INCENTIVE SHARE PLAN

<TABLE>
<S>                                                                                                         <C>
I.       INTRODUCTION.....................................................................................  1
         1.01    Name.....................................................................................  1
         1.02    Purpose..................................................................................  1
II.      DEFINITIONS......................................................................................  1
         2.01    ADS......................................................................................  1
         2.02    Annual Incentive Share Award.............................................................  2
         2.03    Base Compensation........................................................................  2
         2.04    Benefits Administrator...................................................................  2
         2.05    Board....................................................................................  2
         2.06    Board/CEO................................................................................  2
         2.07    Bonus Award..............................................................................  2
         2.08    Cash Bonus...............................................................................  2
         2.09    CEO......................................................................................  2
         2.10    Chairman.................................................................................  2
         2.11    Company..................................................................................  2
         2.12    Matching Percentage......................................................................  2
         2.13    National Grid USA........................................................................  3
         2.14    Participant..............................................................................  3
         2.15    Plan.....................................................................................  3
         2.16    Plan Year................................................................................  3
         2.17    Restricted Shares........................................................................  3
         2.18    Trustee..................................................................................  3
III.     ADMINISTRATION...................................................................................  3
         3.01    Administration and Interpretation........................................................  3
         3.02    Amendment or Termination.................................................................  3
         3.03    Effectuation of Interest.................................................................  4
</TABLE>

                                       iv

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<TABLE>
<S>                                                                                                         <C>
         3.04    Accounting...............................................................................  4
IV.      ANNUAL INCENTIVE SHARE AWARD.....................................................................  4
         4.01    Calculation of Award.....................................................................  4
         4.02    Purchase of ADS's........................................................................  4
         4.03    Timing of Purchase.......................................................................  5
         4.04    Restriction on Shares/ADS's..............................................................  5
         4.05    Distribution Date........................................................................  6
         4.06    Deferral of ADS's........................................................................  6
V.       GENERAL PROVISIONS...............................................................................  6
         5.01    Other Benefit Plans......................................................................  6
         5.02    Future Employment........................................................................  7
         5.03    Headings.................................................................................  7
         5.04    Gender and Number........................................................................  7
         5.05    Governing Law............................................................................  7
         5.06    Rate Making..............................................................................  7
</TABLE>

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                                   APPENDIX A

                          NATIONAL GRID USA COMPANIES'
                           INCENTIVE COMPENSATION PLAN

<PAGE>

                          NATIONAL GRID USA COMPANIES'

                           INCENTIVE COMPENSATION PLAN

                                              Adopted December 6, 2001
                                              Effective as of April 1, 2000
                                              Amended and Restated March 1, 2003
                                              Effective as of April 1, 2002

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
I.       INTRODUCTION...................................................    1
         1.01    Name...................................................    1
         1.02    Purpose................................................    1
II.      DEFINITIONS....................................................    2
         2.01    ADR....................................................    2
         2.02    ADS....................................................    2
         2.03    Base Compensation......................................    2
         2.04    Benefits Administrator.................................    2
         2.05    Board..................................................    2
         2.06    Board/CEO..............................................    2
         2.07    Bonus Award............................................    2
         2.08    Cash Bonus.............................................    2
         2.09    CEO....................................................    2
         2.10    Chairman...............................................    3
         2.11    Change in Control......................................    3
         2.12    Company................................................    3
         2.13    A Major Transaction....................................    3
         2.14    Matching Percentage....................................    4
         2.15    National Grid USA......................................    5
         2.16    Organizational Targets.................................    5
         2.17    Participant............................................    5
         2.18    Plan...................................................    5
         2.19    Plan Year..............................................    5
III.     ADMINISTRATION.................................................    5
         3.01    Administration and Interpretation......................    5
         3.02    Amendment or Termination...............................    5
         3.03    No Segregation of Assets; No Assignment................    6
</TABLE>

                                        i

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<TABLE>
<S>                                                                        <C>
         3.04    Participant List.......................................    6
         3.05    Effectuation of Interest...............................    6
         3.06    Accounting.............................................    7
IV.      PARTICIPATION..................................................    7
         4.01    Selection..............................................    7
         4.02    Notification...........................................    7
V.       PARTICIPANT'S COMPENSATION.....................................    7
VI.      BASE COMPENSATION..............................................    7
         6.01    Base Compensation......................................    7
         6.02    Salary Approvals.......................................    8
VII.     INCENTIVE COMPENSATION.........................................    8
         7.01    Bonus Award............................................    8
         7.02    Target Payout..........................................    8
         7.03    Bonus Award Measurement................................    8
         7.04    Bonus Award Payout.....................................    9
         7.05    Bonus Award Payment....................................    9
         7.06    Exercise of Discretion.................................   10
         7.07    Distribution...........................................   10
         7.08    Deferral of Cash.......................................   10
VIII.    PAYMENT UPON CHANGE OF CONTROL.................................   11
IX.      GENERAL PROVISIONS.............................................   12
         9.01    Other Benefit Plans....................................   12
         9.02    Termination of Participation...........................   12
         9.03    Interplan Transfer/Entry During Plan Year..............   12
         9.04    Future Employment......................................   13
         9.05    Headings...............................................   13
         9.06    Gender and Number......................................   13
         9.07    Governing Law..........................................   13
         9.08    Rate Making............................................   13
</TABLE>

                                       ii

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                          NATIONAL GRID USA COMPANIES'
                           INCENTIVE COMPENSATION PLAN

I. INTRODUCTION

      1.01 Name. The Plan shall be known as the National Grid USA Companies'
Incentive Compensation Plan. The Plan includes two distinct parts, the Incentive
Compensation Plan or Cash Plan and the Incentive Share Plan or Share Plan. The
Cash Plan is set forth in Appendix A and the Share Plan is set forth in Appendix
B.

      1.02 Purpose. The purpose of the National Grid USA Companies' Incentive
Compensation Plan (the Plan), which previously comprised four separate cash
plans entitled New England Electric Companies' Senior Incentive Compensation
Plan, New England Electric Companies' Incentive Compensation Plan I, New England
Electric Companies' Incentive Compensation Plan II, and New England Electric
Companies' Incentive Compensation Plan III, is to achieve and maintain a high
level of corporate performance by making it possible for those selected
executives whose efforts and responsibilities have direct and major influence on
corporate earnings to earn significant compensation rewards in the form of cash
in proportion to corporate achievement of organizational objectives and the
executive's contribution thereto. This Plan, effective as of the date of the
consummation of the merger of New England Electric System and National Grid
Group plc is being amended and restated effective as of April 1, 2002 in order
to reflect changes in the method of measuring and rewarding compensation.

                                       1

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II. DEFINITIONS

      2.01 ADR means American Depositary Receipt of National Grid Transco plc,
or its successor as traded on the New York Stock Exchange. The value of one ADR
is the closing price as reported in the Wall Street Journal on the date of
determination and is interchangeable with ADS.

      2.02 ADS means American Depositary Share of National Grid Transco plc, or
its successor as traded on the New York Stock Exchange. The value of one ADS is
the closing price as reported in the Wall Street Journal on the date of
determination.

      2.03 Base Compensation means the compensation referred to in Section 6.01
and includes all salary, whether received or deferred.

      2.04 Benefits Administrator means the National Grid USA executive officer
responsible for the Human Resources function or his/her designee.

      2.05 Board means the Board of Directors of National Grid Transco plc.

      2.06 Board/CEO means whenever a decision must be made for Participants
under the Plan, the Board will make decisions for the CEO and/or Chairman; and
the CEO will make the decisions for the remaining Participants.

      2.07 Bonus Award means the compensation referred to in Article VII.

      2.08 Cash Bonus means the total cash component of the bonus awarded a
Participant for a Plan Year under Article VII, including amounts awarded upon a
Change in Control or upon consummation of a transaction approved by a Major
Transaction.

      2.09 CEO means the Chief Executive Officer of National Grid USA.

                                       2

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      2.10 Chairman means the Chairman of National Grid USA.

      2.11 Change in Control occurs when the conditions set forth in any of the
following sections shall have been satisfied:

      (a)   any person or persons in concert obtains Control (as defined in
            Section 840 of the United Kingdom's Income and Corporation Taxes Act
            1988) of National Grid Transco plc as a result of making a general
            offer to acquire shares in National Grid Transco plc, or having
            obtained Control, makes such an offer; or

      (b)   the consummation of the sale or disposition by National Grid Transco
            plc of all or substantially all of the assets of National Grid USA
            to a non-affiliated entity; or

      (c)   the complete liquidation, dissolution or winding up of National Grid
            Transco plc and/or of National Grid USA.

            A Change in Control shall not be deemed to have occurred if the
events referred to above are part of an arrangement ("a Reorganisation") which
will mean that National Grid Transco plc and/or National Grid USA will be under
the Control of another company or the business of National Grid Transco plc is
carried on by another company, and the persons who owned the shares in National
Grid Transco plc immediately before the Change in Control will immediately
afterwards own more than 50% of the shares in that other company.

      2.12 Company means any National Grid USA company that has an employee(s)
who participates in the Plan.

      2.13 A Major Transaction shall be deemed to have occurred if the
conditions set forth in any one of the following sections shall have been
satisfied:

                                       3

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      (a)   any person becomes bound or entitled to acquire shares in National
            Grid Transco plc under Sections 428 to 430F of the United Kingdom's
            Companies Act 1985, or a scheme of arrangement or compromise under
            Section 425 of the United Kingdom's Companies Act 1985 is proposed
            for National Grid Transco plc, or

      (b)   National Grid Transco plc's shareholders approve the sale or
            disposition of all or substantially all of the assets of National
            Grid USA to a non-affiliated entity or

      (c)   National Grid Transco plc passes a resolution for voluntary winding
            up, or an order is made for the compulsory winding up of National
            Grid Transco plc and/or National Grid USA or

      (d)   The shareholders of National Grid Transco plc, approve an event the
            consummation of which would result in the occurrence of a Change in
            Control, or.

      (e)   The Board adopts a resolution that, for purposes of the Incentive
            Compensation Plan, a Major Transaction has occurred.

            A Major Transaction shall not be deemed to have occurred if the
events referred to above are part of an arrangement ("a Reorganisation") which
will mean that National Grid Transco plc and/or National Grid USA will be under
the Control of another company or the business of National Grid Transco plc is
carried on by another company, and the persons who owned the shares in National
Grid Transco plc immediately before the series of transactions are consummated
will immediately after consummation own more than 50% of the shares in that
other company.

      2.14 Matching Percentage shall have the meaning set forth in National Grid
USA Companies' Incentive Share Plan.

                                       4

<PAGE>

      2.15 National Grid USA means National Grid USA, a wholly owned subsidiary
of National Grid Transco plc and the successor of the New England Electric
System companies.

      2.16 Organizational Targets means those objectives established by the
Board for each Plan Year for National Grid Transco, plc. and/or its
subsidiaries.

      2.17 Participant means the CEO and/or Chairman, and such other individuals
who have been selected, in accordance with Section 4.01, or an equivalent prior
provision, to be a participant in the Plan.

      2.18 Plan means the National Grid USA Companies' Incentive Compensation
Plan, as amended from time to time.

      2.19 Plan Year means a twelve month period beginning on April 1 of any
year.

III. ADMINISTRATION

      3.01 Administration and Interpretation. The Plan shall be administered by
the Benefits Administrator, and interpretations of the Plan or other
determinations with respect to the Plan by the Benefits Administrator shall be
final and binding on all parties. Determinations or interpretations affecting
the Benefits Administrator, individually, shall be made by the CEO and such
determinations or interpretations shall be final and binding on all parties.

      3.02 Amendment or Termination. The CEO may amend or terminate the Plan at
any time, provided that:

      (a)   no such action shall affect any right or obligation with respect to
            any Bonus Award previously granted;

                                       5

<PAGE>

      (b)   provisions of Article VIII and Sections 2.11 and 2.13 may not be
            amended without the written consent of any Participant affected;

      (c)   no termination of the Plan may be made after a Major Transaction
            unless, if applicable, the shareholders of National Grid Transco plc
            have rescinded their approval of the transaction; and

      (d)   no amendment of the Plan may be made after a Major Transaction
            without the written consent of any Participant affected unless, if
            applicable, the shareholders of National Grid Transco plc have
            rescinded their approval of the transaction.

      3.03 No Segregation of Assets; No Assignment. National Grid USA is not
required to set aside or segregate any assets of any kind to meet obligations
under the Plan. A Participant has no rights under the Plan to any specific
assets of National Grid USA. A Participant may not commute, sell, assign,
transfer, or otherwise convey the right to receive any payments under the Plan,
which payments and the right thereto shall be, to the fullest extent permitted
by law, nonassignable and nontransferable, whether voluntarily or involuntarily.

      3.04 Participant List. The Benefits Administrator shall be responsible for
maintaining an up-to-date list of the Participants in the Plan.

      3.05 Effectuation of Interest. In the event it should become impossible
for the Benefits Administrator, the CEO, the Chief Executive Officer of National
Grid Transco plc, or National Grid USA to perform any act required by the Plan,
the Benefits Administrator, the CEO, the Chief Executive Officer of National
Grid Transco plc, or National Grid USA may perform such other act as it in good
faith determines will most nearly carry out the intent and purpose of the Plan.

                                       6

<PAGE>

      3.06 Accounting. The Vice President and Controller of National Grid USA
will be responsible for accounting matters directly affecting the Plan.

IV. PARTICIPATION

      4.01 Selection. Except for the CEO and/or Chairman who are automatically
participants in the Plan, it is anticipated (but not binding) that, by March 1
of each year, the CEO shall, based upon qualifications, select the ICP I
Participants for the following year; and senior management shall, based upon
qualifications, select the ICP II and III Participants for the following year.
In addition, with the written consent of the CEO, qualified individuals may be
added to the Plan or transferred to different levels of the Plan during a Plan
Year.

      4.02 Notification. The Benefits Administrator shall notify those new
Participants who have been included in the Plan for the following year and those
Participants who have been dropped from the Plan for the following year.

V. PARTICIPANT'S COMPENSATION

      5.01 The compensation for each Participant will consist of two components:
Base Compensation and Incentive Compensation as described in Articles VI and VII
below.

VI. BASE COMPENSATION

      6.01 Base Compensation. A Participant's performance will be evaluated and
his or her base compensation, including any merit or promotional increase, will
be set in accordance with the National Grid USA salary management program.

                                       7

<PAGE>

      6.02 Salary Approvals. The Board will approve all salary changes for the
CEO and/or Chairman, and the CEO will approve all salary changes for ICP I
Participants. For all other Participants, the Senior Vice President in charge of
his/her function will approve the Participant's salary change.

VII. INCENTIVE COMPENSATION

      7.01 Bonus Award. A Participant's Incentive Compensation (Bonus Award)
will be based upon the Participant's overall performance, comparison of the
Participant's performance and contributions in relationship to his/her peers,
and accomplishment of the Participant's individual objectives. At the beginning
of each Plan Year, Organizational Targets will be developed by the Board.
Individual objectives and measurements of success in support of these
Organizational Targets and business goals of the Company shall then be
established by the Board or the Chief Executive Officer of National Grid Transco
plc for the CEO and the Chairman, and for all other Participants; by the CEO or
appropriate senior management for each Plan Year.

      7.02 Target Payout. At the end of the Plan Year, the Board will measure
National Grid USA's performance in relation to the Organizational Targets. If
National Grid USA achieves its Organizational Targets, full credit will be given
to National Grid USA (Target Payout). The Target Payout will be adjusted up or
down, to reflect results greater than or less than the target. This will
determine the amount available for Bonus Awards for Participants for said Plan
Year.

      7.03 Bonus Award Measurement. At the end of the Plan Year, the
Participant's overall performance, performance in relationship to his/her peers,
and accomplishment of individual objectives will be assessed by the Board or the
Chief Executive Officer of National Grid Transco

                                       8

<PAGE>

plc for the CEO and the Chairman, by the appropriate Senior Vice President for
the remaining ICP I Participants, and by senior management for ICP II and ICP
III Participants. Each Participant will be rated on a scale of 1-5.

1   =   Exceptional Performance
2   =   Excellent Performance
3   =   Good Performance
4   =   Poor Performance
5   =   Unsatisfactory Performance

      7.04 Bonus Award Payout. The Bonus Award payout will be based upon the
Participants ICP level and overall performance rating as set forth in Section
7.03 above. The Target Payout for ICP I is 45% of base compensation; for ICP
II-33% of base compensation and for ICP III-10% of base compensation. For
example, if the Plan pays out at target, a score of 1-5 will typically generate
the following payout levels:

1     Exceptional performance = 130 - 150% of target
2     Excellent performance = 100 - 130% of target
3     Good performance = 50 - 100% of target
4     Poor performance = 0 - 50% of target
5     Unsatisfactory performance = 0%

      7.05 Bonus Award Payment. Participant's in ICP I and II will receive two
thirds of their Bonus Award in cash and one-third in ADS's (which is the payment
referred to in Article 4.0 of Appendix B, the Incentive Share Plan). ICP III
Participants will receive their total Bonus Award in cash.

                                       9

<PAGE>

      Notwithstanding the foregoing, the CEO and Chairman's Bonus Awards will be
determined in accordance with their respective Employment Agreement. Further, if
any other Participant has an employment agreement with a Company, National Grid
USA, or National Grid Transco plc that provides for percentages different than
those set forth above, the terms set forth in the Participant's employment
agreement shall supercede the terms set forth in the Plan.

      7.06 Exercise of Discretion. The Board, the Chief Executive Officer of
National Grid Transco plc, the CEO, the Senior Vice President, and/or member of
senior management, as appropriate, are expected to use their sound judgment in
evaluating a Participant's overall performance. In addition, they shall retain
the discretion to adjust Bonus Awards as they deem appropriate. Further, the
Board/CEO or the Chief Executive Officer of National Grid Transco plc, as
appropriate, retains the discretion, from time to time, to add or delete
performance measures and to adjust pay out percentages as deemed appropriate.

      7.07 Distribution. The Bonus Award will be distributed to Participants by
the June 15 following the Plan Year.

      Notwithstanding any other provision of this Plan, if the Annual Incentive
Share Award earned under the Share Plan cannot be distributed to Participants
within the time frame set forth in the Share Plan, then each Participant shall
receive from the Cash Plan, a cash amount that otherwise would have been awarded
in ADR's under the Share plan.

      7.08 Deferral of Cash. Notwithstanding anything in the Plan to the
contrary, a Participant in ICP I or II may elect to defer receipt of a Bonus
Award in accord with the terms and conditions of National Grid USA Companies
Deferred Compensation Plan. Thereafter, the Participants right to the deferred
compensation shall be governed solely by the terms of said Plan.

                                       10

<PAGE>

VIII. PAYMENT UPON CHANGE OF CONTROL

      In the event of a Change in Control or Major Transaction, each Participant
will receive, within 30 days of the consummation of the (1) Change in Control or
(2) of the transaction approved by the Major Transaction, a cash payment equal
to (a) the average of the bonus percentages for the Plan for the last three
years prior to the Change in Control or consummation of the transaction approved
by the Major Transaction times the Participant's annualized Base Compensation;
or if the Plan has not been in effect for three years, then the average of the
bonus percentage for the Plan and the preceding plan, New England Electric
Companies' Senior Incentive Compensation Plan or New England Electric Companies'
Incentive Compensation Plans I, II, or III and (b) a Matching Percentage based
upon the average of the bonus percentages for the Plan for the last three years
prior to the Change in Control or consummation of the transaction approved by
the Major Transaction times the Participant's annualized Based Compensation; or
if the Plan has not been in effect for three years, then the average of the
bonus percentage for the Plan and the preceding plan, New England Electric
Companies' Senior Incentive Compensation Plan or New England Electric Companies'
Incentive Compensation Plans I, II, or III. Further, if the consummation of the
Change in Control or of the transaction approved by the Major Transaction occurs
prior to the determination and payment of the Bonus Award for the prior Plan
Year, the Participant will also receive within 30 days a cash payment equal to
(a) said percentage times the Participant's Base Compensation received in the
prior Plan Year and (b) an amount based upon that amount that the Participant
would receive as a Matching Percentage based upon the percentage under the Plan
times the Participant's Base Compensation received in the prior Plan Year. No
further benefits will be payable from the Plan.

                                       11

<PAGE>

IX. GENERAL PROVISIONS

      9.01 Other Benefit Plans. Bonus Awards will not be used in determining the
Participant's benefits under any group insurance plan or any incentive program
other than the Share Plan. Notwithstanding the foregoing, Bonus Awards will be
included in pension plan calculations to the extent provided in said pension
plans.

      9.02 Termination of Participation. Termination of participation shall be
determined as follows:

            (a)   The CEO and/or Chairman will be deemed Participants for the
                  Plan Year regardless of the number of months they are actively
                  employed in a Plan Year unless otherwise specified in their
                  Employment Agreement.

            (b)   If, for any reason, a Participant should cease to be actively
                  employed by a subsidiary of National Grid USA prior to October
                  1 of a Plan Year, that person will not be deemed a Participant
                  for that year unless the CEO determines there are
                  extraordinary circumstances which justify inclusion.

            (c)   A Participant who is actively employed during the first six
                  months of the Plan Year, but ceases to be so actively employed
                  during the last six months of a Plan Year will be deemed a
                  Participant for that Plan Year on a proportional basis.

      9.03 Interplan Transfer/Entry During Plan Year.

            (a)   The CEO will also determine the extent, if any, of additions
                  to the Plan or replacements for a Participant terminating
                  participation in the Plan during any Plan Year. If a
                  Participant's ICP level changes during the Plan Year,

                                       12

<PAGE>

                  the Participant will be deemed to be a Participant for that
                  Plan Year on a proportional basis for each level,
                  respectively. If an individual becomes a Participant during a
                  Plan Year, the individual will be deemed a Participant for
                  that Plan Year on a prorated basis.

      9.04 Future Employment. Neither the Plan nor the making of awards
hereunder shall be construed to create any obligation to continue the Plan or to
give any present or future employee any right to continued employment.

      9.05 Headings. The headings of articles and sections of the Plan are for
convenience of reference only.

      9.06 Gender and Number. Unless the context requires otherwise, the
singular shall include the plural; the masculine gender shall include the
feminine; and such words as "herein", "hereinafter", "hereof", and "hereunder"
shall refer to this instrument as a whole and not merely to the subdivisions in
which such words appear.

      9.07 Governing Law. Except as otherwise required by law, the Plan and all
matters arising thereunder shall be governed by the laws of The Commonwealth of
Massachusetts.

      9.08 Rate Making. Bonus Awards shall not be included for rate-making
purposes. The Plan initially adopted on December 6, 2001 effective as of April
1, 2000 is hereby amended and restated as of March 1, 2003 and effective as of
April 1, 2002.

                                      ------------------------------------------
                                      Chief Executive Officer
                                      National Grid USA

                                       13

<PAGE>

                                   APPENDIX B

                          NATIONAL GRID USA COMPANIES'
                              INCENTIVE SHARE PLAN

                                       14

<PAGE>

                          NATIONAL GRID USA COMPANIES'

                              INCENTIVE SHARE PLAN

                                              Adopted - December 6, 2001
                                              Effective as of April 1, 2000

                                              Amended and Restated March 1, 2003
                                              Effective as of April 1, 2002.

                                       15

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                Page
<S>                                                             <C>
I.       INTRODUCTION........................................    1
         1.01    Name........................................    1
         1.02    Purpose.....................................    1
II.      DEFINITIONS.........................................    1
         2.01    ADS.........................................    1
         2.02    Annual Incentive Share Award................    2
         2.03    Base Compensation...........................    2
         2.04    Benefits Administrator......................    2
         2.05    Board.......................................    2
         2.06    Board/CEO...................................    2
         2.07    Bonus Award.................................    2
         2.08    Cash Bonus..................................    2
         2.09    CEO.........................................    2
         2.10    Chairman....................................    2
         2.11    Company.....................................    2
         2.12    Matching Percentage.........................    2
         2.13    National Grid USA...........................    3
         2.14    Participant.................................    3
         2.15    Plan........................................    3
         2.16    Plan Year...................................    3
         2.17    Restricted Shares...........................    3
         2.18    Trustee.....................................    3
III.     ADMINISTRATION......................................    3
         3.01    Administration and Interpretation...........    3
         3.02    Amendment or Termination....................    3
         3.03    Effectuation of Interest....................    4
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                              <C>
         3.04    Accounting..................................    4
IV.      ANNUAL INCENTIVE SHARE AWARD........................    4
         4.01    Calculation of Award........................    4
         4.02    Purchase of ADS's...........................    4
         4.03    Timing of Purchase..........................    5
         4.04    Restriction on Shares/ADS's.................    5
         4.05    Distribution Date...........................    6
         4.06    Deferral of ADS's...........................    6
V.       GENERAL PROVISIONS..................................    6
         5.01    Other Benefit Plans.........................    6
         5.02    Future Employment...........................    7
         5.03    Headings....................................    7
         5.04    Gender and Number...........................    7
         5.05    Governing Law...............................    7
         5.06    Rate Making.................................    7
         5.07    Effective Date..............................
</TABLE>

                                       ii

<PAGE>

                          NATIONAL GRID USA COMPANIES'

                              INCENTIVE SHARE PLAN

I. INTRODUCTION

      1.01 Name. The Plan shall be known as the National Grid USA Companies'
Incentive Share Plan.

      1.02 Purpose. The purpose of the National Grid USA Companies' Incentive
Share Plan ("the Plan"), previously entitled New England Electric Companies'
Incentive Share Plan is to achieve and maintain a high level of corporate
performance by making it possible for those selected executives whose efforts
and responsibilities have direct and major influence on corporate earnings to
earn significant compensation rewards in the form of ADS's measured by the
individual's achievements under National Grid USA Companies' Incentive
Compensation Plan (Incentive Compensation Plan). The Plan, effective as of the
date of the consummation of the merger of New England Electric System and
National Grid Transco plc is being amended and restated effective as of April 1,
2002 in order to reflect changes in the method of measuring and rewarding
compensation.

II. DEFINITIONS

      2.01 ADS means American Depositary Share of National Grid Transco plc, or
its successor, as traded on the New York Stock Exchange. The value of one ADS is
the closing price as reported in the Wall Street Journal on the date of
determination.

                                       1

<PAGE>

      2.02 Annual Incentive Share Award means the total number of ADS's awarded
to a participant for a Plan Year.

      2.03 Base Compensation means the compensation referred to in Section 6.01
of the Incentive Compensation Plan and includes all salary, whether received or
deferred.

      2.04 Benefits Administrator means the National Grid USA executive officer
responsible for the Human Resources function or his/her designee.

      2.05 Board means the Board of Directors of National Grid Transco plc.

      2.06 Board/CEO means whenever a decision must be made for Participants
under the Plan, the Board will make decisions for the CEO/and or Chairman; and
the CEO will make the decision for remaining Participants.

      2.07 Bonus Award means the Cash Bonus and the Annual Incentive Share
Award.

      2.08 Cash Bonus means the total cash component of the bonus awarded a
Participant for a Plan Year under Article 7.0 of the Incentive Compensation
Plan, including amounts awarded upon a Change in Control or upon consummation of
a transaction approved by a Major Transaction.

      2.09 CEO means the Chief Executive Officer of National Grid USA.

      2.10 Chairman means the Chairman of National Grid USA.

      2.11 Company means any National Grid USA company that has an employee(s)
who participates in the Plan.

      2.12 Matching Percentage means such sum as may be authorised by the Board
prior to the commencement of the Plan Year but, in default, of any other
determination:

                                       2

<PAGE>

      50% if the Participant is a participant in the Plan at the level of ICP I
      or ICP II.

      2.13 National Grid USA means National Grid USA, a wholly owned subsidiary
of National Grid Transco plc and the successor of the New England Electric
System companies.

      2.14 Participant means the CEO and/or Chairman, and any other individual
who is a participant in the Incentive Compensation Plan Level I or Level II.

      2.15 Plan means the National Grid USA Companies' Incentive Share Plan, as
amended from time to time.

      2.16 Plan Year means a twelve month period beginning on April 1 of any
year.

      2.17 Restricted Shares means those shares/ADS's issued under the Plan, or
its predecessor subject to the restrictions set forth in Section 4.04 below.

      2.18 Trustee means any bank or other financial institution so designated
by the Treasurer or Chief Financial Officer of National Grid USA.

III. ADMINISTRATION

      3.01 Administration and Interpretation. The Plan shall be administered by
the Benefits Administrator and interpretations of the Plan or other
determinations with respect to the Plan by the Benefits Administrator shall be
final and binding on all parties. Determinations or interpretations affecting
the Benefits Administrator, individually shall be made by the CEO and such
determinations or interpretations shall be final and binding all parties.

      3.02 Amendment or Termination. The CEO may amend or terminate the Plan at
any time, provided that no such action shall affect any right or obligation with
respect to any Bonus Award previously granted.

                                       3

<PAGE>

      3.03 Effectuation of Interest. In the event it should become impossible
for the Benefits Administrator, the CEO, the Chief Executive Officer of National
Grid Transco plc, or National Grid USA to perform any act required by the Plan,
the Benefits Administrator, the CEO, the Chief Executive Officer of National
Grid Transco, or National Grid USA may perform such other act as it in good
faith determines will most nearly carry out the intent and purpose of the Plan.

      3.04 Accounting. The Vice President and Controller of National Grid USA
will be responsible for accounting matters directly affecting the Plan.

IV. ANNUAL INCENTIVE SHARE AWARD

      4.01 Calculation of Award. Each Participant's Annual Incentive Share Award
shall be determined by multiplying the Participant's Cash Bonus by the
applicable Matching Percentage. Notwithstanding the foregoing, if any
Participant has an employment agreement with National Grid USA or National Grid
Transco plc that provides for percentages different than those set forth herein
the terms set forth in the Participant's Employment Agreement shall supersede
the terms set forth in the Plan.

      4.02 Purchase of ADS's. The Company will purchase ADS's in the
Participant's name, based upon the number of ADSs awarded to the Participant
under Section 4.01 above. The number of ADSs purchased or will be rounded up to
the next whole ADS.

      The Board/CEO may require each Company to deposit cash in a trust as
needed to acquire the requisite number of ADS's for awards as they are
determined. The Trustee will invest the cash in ADS's as soon as practicable.
Any ADS's acquired by the Trustee shall be held until all

                                       4

<PAGE>

awards have been invested in ADS's. Any awards held in trust shall be held for
the exclusive benefit of the Participants.

      The price of ADS's will be computed on the basis of the average of high
and low prices on the New York Stock Exchange - Composite Transactions as
reported in the Wall Street Journal for the five consecutive trading days ending
on the trading day prior to the fifteenth day of April following the Plan Year
for which the award applies. If there is no trading in ADS's on the New York
Stock Exchange for a substantial amount of time during the five-day period, or
if publication by The Wall Street Journal of reports of ADS transactions for any
day in the five-day period does not take place or is subject to reporting error,
the value of ADS's shall be determined on the basis of such market quotations or
other method as National Grid Transco plc shall deem appropriate.

      The price of ADS's purchased on the open market shall not include
commissions. To the extent ADS's held by the Trustee earn cash dividends, said
dividends shall be allocated and distributed to Participants on a pro-rata
basis.

      4.03 Timing of Purchase. Purchase of ADS's under the Plan shall take place
as soon as practicable following the end of the Plan Year for which the Annual
Incentive Share Award applies.

      4.04 Restriction on Shares/ADS's .

      (a)   Subject to Section 4.04(b), all Shares/ADS's awarded under the Plan
            to officers of National Grid USA or its predecessor, pertaining to
            performance in 1996 and thereafter, shall not be commuted, sold,
            assigned, transferred, or otherwise conveyed, whether voluntarily or
            involuntarily, for a period of five years from

                                       5

<PAGE>

            issuance, provided, however, said Shares/ADS's may be deferred to
            National Grid USA's Deferred Compensation Plan.

      (b)   In the event of the Participant ceasing to be employed by a Company,
            the Board/CEO can determine whether any vesting restriction and/or
            any restriction on the freedom to dispose of the Shares/ADs's shall
            be waived or commuted.

      (c)   All Shares/ADs's awarded under the Plan to the CEO and/or Chairman,
            as of 2000 and thereafter shall be subject to any vesting
            requirements set forth in his/her applicable employment agreement.

      4.05 Distribution Date. Except as set forth above, the ADS's shall be
distributed to the Participants by the June 15 following the Plan Year.

      4.06 Deferral of ADS's Notwithstanding anything in the Plan to the
contrary, a Participant in ICP I or II may elect to defer receipt of an Annual
Incentive Share Award according to terms and conditions of National Grid USA
Companies Deferred Compensation Plan. Thereafter, the Participant's rights to
the deferred ADS's shall be governed solely by the terms of said plan.

V. GENERAL PROVISIONS

      5.01 Other Benefit Plans. Annual Incentive Share Awards or other
distributions issued under the Plan shall not be used in determining a
Participant's benefits under any group insurance plan or any incentive program
except for the Incentive Compensation Plan. Notwithstanding the foregoing,
Annual Incentive Share Awards under the Plan will be included in pension plan
calculations to the extent provided in said pension plans.

                                       6

<PAGE>

      5.02 Future Employment. Neither the Plan nor the making of awards
hereunder shall be construed to create any obligation to continue the Plan or to
give any present or future employee any right to continued employment.

      5.03 Headings. The headings of articles and sections of the Plan are for
convenience of reference only.

      5.04 Gender and Number. Unless the context requires otherwise, the
singular shall include the plural; the masculine gender shall include the
feminine; and such words as "herein", "hereinafter", "hereof", and "hereunder"
shall refer to this instrument as a whole and not merely to the subdivisions in
which such words appear.

      5.05 Governing Law. Except as otherwise required by law, the Plan and all
matters arising thereunder shall be governed by the laws of the Commonwealth of
Massachusetts.

      5.06 Rate Making. Bonus Awards shall not be included for rate-making
purposes.

                                       7

<PAGE>

The Plan initially adopted on December 6, 2001, effective as of April 1, 2000 is
hereby amended and restated as of March 1, 2003 and effective as of April 1,
2002.

                                      ------------------------------------------
                                      Chief Executive Officer
                                      National Grid USA

                                       8

<PAGE>

                    Amendment to National Grid USA Companies'
                           Incentive Compensation Plan

      Pursuant to the provisions of Article III of the National Grid USA
Companies' Incentive Compensation Plan, said Plan is hereby amended effective
September 1, 2003 as follows:

      1.    Section 2.11 is amended to read:

            2.11  A Change in Control shall be deemed to have occurred if the
                  conditions set forth in any of the following paragraphs shall
                  have been satisfied:

                  (a)   any Person or Persons in concert obtains Control (as
                        defined in Section 840 of the United Kingdom's Income
                        and Corporation Taxes Act 1988) of National Grid Transco
                        plc as a result of making a general offer to acquire
                        shares in National Grid Transco plc or having obtained
                        Control, makes such an offer;

                  (b)   the consummation of the sale or disposition by National
                        Grid Transco plc of National Grid USA to a
                        non-affiliated entity (whether by merger, sale of all or
                        substantially all of the capital stock or assets of
                        National Grid USA or otherwise);

                  (c)   the complete liquidation, dissolution or winding up of
                        National Grid Transco plc and/or of National Grid USA;
                        or

                  (d)   the acquisition by National Grid Transco plc or National
                        Grid USA or their successors of all or substantially all
                        of the assets of or ownership of all or substantially
                        all of the outstanding shares of a U.S. electric and/or
                        gas utility company which would increase the size or
                        revenues of National Grid USA by 25% or more.

                              A Change in Control shall not be deemed to have
                        occurred if the events referred to above are part of an
                        arrangement ("a Reorganization") which will mean that
                        National Grid Transco plc and/or National grid USA will
                        be under the Control of another company or the business
                        of National Grid Transco plc is carried on by another
                        company, and the Persons who owned the shares in
                        National Grid Transco plc immediately before the Change
                        in Control will immediately afterwards own more than 50%
                        of the shares in that other company.

<PAGE>

2. Section 2.13 is amended to read:

      2.13  A Major Transaction shall be deemed to have occurred if the
            conditions set forth in any one of the following paragraphs shall
            have been satisfied:

      (a)   any Person becomes bound or entitled to acquire shares in National
            Grid Transco plc under Sections 428 to 430F of the United Kingdom's
            Companies Act 1985, or a scheme of arrangement or compromise under
            Section 425 of the United Kingdom's Companies Act 1985 is proposed
            for National Grid Transco plc;

      (b)   National Grid Transco plc shareholders, National Grid USA's
            shareholders and/or the Board of Directors of National Grid USA
            approve the sale of National Grid USA to a non-affiliated entity
            (whether by merger, sale of all or substantially all of the capital
            stock or assets of National Grid USA, or otherwise);

      (c)   National Grid Transco plc passes a resolution for voluntary winding
            up, or an order is made for the compulsory winding up of National
            Grid Transco plc and/or National Grid USA;

      (d)   the shareholders of National Grid Transco plc, the shareholders of
            National Grid USA and/or the Board of Directors of National Grid USA
            approve an event the consummation of which would result in the
            occurrence of a Change in Control; or

      (e)   the Board of Directors of National Grid Transco plc adopts a
            resolution that, for purposes of this Agreement, a Major Transaction
            has occurred.

                  A Major Transaction shall not be deemed to have occurred if
            the events referred to above are part of an arrangement ("a
            Reorganization") which will mean that National Grid Transco plc
            and/or National Grid USA will be under the Control of another
            company or the business of National Grid Transco plc is carried on
            by another company, and the Persons who owned the shares in National
            Grid Transco plc immediately before the series of transactions are
            consummated will immediately after consummation own more than 50% of
            the shares in that other company.

                                    By:      /s/ Richard P. Sergel
                                       -----------------------------------------
                                             Chief Executive Officer
                                             National Grid USA

                                       2<PAGE>

                                                                   EXHIBIT 10(u)

                                 COMPOSITE COPY

           INCLUDES ALL AMENDMENTS ADOPTED THROUGH 9/28/00 AMENDMENT.

                                 NIAGARA MOHAWK

                            LONG TERM INCENTIVE PLAN

ARTICLE 1. ESTABLISHMENT, PURPOSE AND DURATION

      1.1 Establishment of the Plan. Niagara Mohawk Power Corporation, a New
York corporation, established an incentive compensation plan, known as the
"Niagara Mohawk Power Corporation Long Term Incentive Plan," to permit grants of
SAR's, Stock Units and Dividend Equivalents. The plan became effective as of
September 25, 1996 ("Effective Date") and was amended and restated as of June
10, 1997.

      Effective as of January 1, 1999, the name of the plan was changed to the
Niagara Mohawk Long Term Incentive Plan" ("Plan"). The plan shall remain in
effect as provided in Section 1.3.

      1.2 Purpose of the Plan. The purpose of the Plan is to promote the success
and enhance the value of the Company through the retention and continued
motivation of Participants, focusing their efforts toward the execution of
business strategies directed toward improving financial returns to shareholders.

      1.3 Duration of the Plan. The Plan shall commence on the Effective Date,
as described in Section 1.1 herein, and shall remain in effect, subject to the
right of the Board of Directors to terminate the Plan at any time pursuant to
Article 14 herein, until September 24, 2006. The applicable terms of the Plan
and any terms and conditions applicable to SARs or Stock Units, including any
deferral elections, granted prior to such date shall survive the termination of
the Plan .

ARTICLE 2. DEFINITIONS

      Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when such meaning is intended, the initial letter of the word
is capitalized:

      2.1 "Award" means, individually or collectively, a grant under the Plan of
SARs or Stock Units.

      2.2 "Award Agreement" means an agreement entered into by each Participant
and the Company, setting forth the terms and provisions applicable to an Award
granted to a Participant under the Plan.

      2.3 "Base Value" of an SAR shall have the meaning set forth in Section 6.2
herein.

                                      -1-
<PAGE>

                                 COMPOSITE COPY

           INCLUDES ALL AMENDMENTS ADOPTED THROUGH 9/28/00 AMENDMENT.

      2.4 "Board" or "Board of Directors" means effective March 17, 1999, the
      Board of Directors of Niagara Mohawk Holdings, Inc. Prior to March 17,
      1999 references to "Board" mean the Board of Directors of Niagara Mohawk
      Power Corporation.

      2.5 "Cause" means: (i) a material default or other material breach by a
Participant of his obligations under any Employment Agreement he may have with
the Company, (ii) failure by a Participant diligently and competently to perform
his duties under any Employment Agreement he may have with the Company, or
otherwise, or (iii) misconduct, dishonesty, insubordination or other act by a
Participant detrimental to the good will of the Company or damaging the
Company's relationships with its customers, suppliers or employees. "Cause"
shall be determined in good faith by the Committee.

      2.6 "Change in Control" of the Company shall be deemed to have occurred as
of the first day that any one or more of the following conditions shall have
been satisfied:

      (1)   The acquisition by any Person of beneficial ownership (within the
            meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
            more of either (i) the then outstanding Shares of the Company or
            (ii) the combined voting power of the then outstanding voting
            securities of the Company entitled to vote generally in the election
            of directors (the "Outstanding Company Voting Securities");
            provided, however, that the following acquisitions shall not
            constitute a Change of Control: (i) any acquisition directly from
            the Company (excluding an acquisition by virtue of the exercise of a
            conversion privilege), (ii) any acquisition by the Company, (iii)
            any acquisition by any employee benefit plan (or related trust)
            sponsored or maintained by the Company or any corporation controlled
            by the Company or (iv) any acquisition by any corporation pursuant
            to a reorganization, merger or consolidation, if, following such
            reorganization, merger or consolidation, the conditions described in
            clauses (i), (ii) and (iii) of subparagraph (3) below are satisfied;
            or

      (2)   Individuals who, as of April 1, 1999, constitute the Board of
            Directors (the "Incumbent Board") cease for any reason to constitute
            at least a majority of the Board; provided, however, that any
            individual becoming a director subsequent to the date hereof whose
            election, or nomination for election by the Company's shareholders,
            was approved by a vote of at least a majority of the directors then

                                      -2-
<PAGE>

                                 COMPOSITE COPY

           INCLUDES ALL AMENDMENTS ADOPTED THROUGH 9/28/00 AMENDMENT.

            comprising the Incumbent Board shall be considered as though such
            individual were a member of the Incumbent Board, but excluding, for
            this purpose, any such individual whose initial assumption of office
            occurs as a result of either an actual or threatened election
            contest (as such terms are used in Rule 14a-11 of Regulation 14A
            promulgated under the Exchange Act) or other actual or threatened
            solicitation of proxies or consents by or on behalf of a Person
            other than the Board; or

      (3)   The consummation of a reorganization, merger or consolidation
            involving the Company that requires the approval of the Company's
            shareholders (whether for such transaction or the issuance of
            securities in the transaction), in each case, unless, immediately
            following such reorganization, merger or consolidation, (i) more
            than 75 % of, the then outstanding shares of common stock of (A) the
            corporation resulting from such reorganization, merger or
            consolidation (the "Surviving Corporation") or (B) if applicable,
            the ultimate parent corporation that directly or indirectly has
            beneficial ownership of at least 95% of the outstanding shares of
            common stock of the surviving corporation (the "Parent Corporation")
            and more than 75% of the combined voting power of the then
            outstanding voting securities of the Surviving Corporation (or, if
            applicable, the Parent Corporation) entitled to vote generally in
            the election of directors are then beneficially owned, directly or
            indirectly, by all or substantially all of the individuals and
            entities who were the beneficial owners, respectively, of the
            Outstanding Shares and Outstanding Company Voting Securities
            immediately prior to such reorganization, merger or consolidation,
            in substantially the same proportions as their ownership immediately
            prior to such reorganization, merger or consolidation, of the
            Outstanding Shares and Outstanding Company Voting Securities, as the
            case may be, (ii) no Person (excluding the Company, any employee
            benefit plan (or related trust) of the Company, the Surviving
            Corporation (or, if applicable, the Parent Corporation) and any
            Person beneficially owning, immediately prior to such
            reorganization, merger or consolidation, directly or indirectly, 20%
            or more of the Outstanding Shares or Outstanding Voting Securities,
            as the case may be) beneficially owns, directly or indirectly, 20%
            or more of, respectively, the then outstanding shares of common
            stock of the Surviving Corporation (or, if applicable, the Parent
            Corporation) or the combined voting power of the then outstanding
            voting securities of the Surviving Corporation (or, if applicable,
            the Parent Corporation) entitled to vote generally in the election
            of directors and (iii) at least a majority of the members of the
            board of directors of the Surviving Corporation (or, if applicable,
            the Parent Corporation) were members of the Incumbent Board at the
            time of the execution of the initial agreement providing for such
            reorganization, merger or consolidation; or

                                      -3-
<PAGE>

                                 COMPOSITE COPY

           INCLUDES ALL AMENDMENTS ADOPTED THROUGH 9/28/00 AMENDMENT.

      (4)   Approval by the shareholders of the Company of (i) a complete
            liquidation or dissolution of the Company or (ii) the sale or other
            disposition of all or substantially all of the assets of the Company
            or, on or after April 1, 1999, of Niagara Mohawk Power Corporation,
            other than to a corporation, with respect to which following such
            sale or other disposition, (A) more than 75% of, respectively, the
            then outstanding shares of common stock of such corporation and the
            combined voting power of the then outstanding voting securities of
            such corporation entitled to vote generally in the election of
            directors is then beneficially owned, directly or indirectly, by all
            or substantially all of the individuals and entities who were the
            beneficial owners, respectively, of the Outstanding Shares and
            Outstanding Company Voting Securities immediately prior to such sale
            or other disposition in substantially the same proportion as their
            ownership immediately prior to such sale or other disposition of the
            Outstanding Shares and Outstanding Company Voting Securities, as the
            case may be, (B) no Person (excluding the Company and any employee
            benefit plan (or related trust) of the Company or such corporation
            and any Person beneficially owning, immediately prior to such sale
            or other disposition, directly or indirectly, 20% or more of the
            Outstanding Shares or Outstanding Company Voting Securities, as the
            case may be) beneficially owns, directly or indirectly, 20% or more
            of, respectively, the then outstanding shares of common stock of
            such corporation and the combined voting power of the then
            outstanding voting securities of such corporation entitled to vote
            generally in the election of directors and (C) at least a majority
            of the members of the board of directors of such corporation were
            members of the Incumbent Board at the time of the execution of the
            initial agreement or action of the Board providing for such sale or
            other disposition of assets of the Company;

provided, however, that the implementation of the corporate restructuring
contemplated by the Company's PowerChoice proposal filed with the New York
Public Service Commission on October 6, 1995, or any substantially similar
corporate restructuring (as determined by the Committee) shall not be deemed to
be a "Change in Control".

      2.7 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.

      2.8 "Committee" means the committee, as specified in Article 3, appointed
by the Board to administer the Plan with respect to grants of Awards.

      2.9 "Company" means Niagara Mohawk Holdings, Inc. (effective as of March
17, 1999), Niagara Mohawk Power Corporation, and any other separate employer
that participates in this Plan with the consent of the Board (each of these
separate employers, as well as any other separate employer that participates in
this Plan with the consent of the Board, shall hereinafter be referred to as a
"Participating Employer"). Notwithstanding the foregoing, the term "Company"
means Niagara Mohawk Holdings, Inc. for the purposes of the administration of
the Plan and for

                                      -4-
<PAGE>

                                 COMPOSITE COPY

           INCLUDES ALL AMENDMENTS ADOPTED THROUGH 9/28/00 AMENDMENT.

purposes of Section 2.6. The term "Company" is being used solely for convenience
to make the Plan easier to read, and does not alter the fact that an Employee is
employed by the separate Participating Employer from which the Employee
regularly receives his paycheck. With respect to any Employee, the term
"Company" means such separate Participating Employer.

      2.10 "Director" means any individual who is a member of the Board of
Directors of the Company.

      2.11 "Disability" shall have the meaning ascribed to such term under
Section 22(e)(3) of the Code.

      2.12 "Dividend Equivalent" means, with respect to Shares underlying a
Stock Unit, an amount equal to all cash and stock dividends declared on an equal
number of outstanding Shares on all common stock dividend payment dates
occurring during the Vesting Period.

      2.13 "Eligible Employee" means an Employee who is eligible to participate
in the Plan, as set forth in Section 5.1 herein.

      2.14 "Employee" means any full-time employee of the Company, who is not
covered by any collective bargaining agreement to which the Company is a party.
Directors who are not otherwise employed by the Company shall not be considered
Employees under the Plan. For purposes of the Plan, transfer of employment of a
Participant from the Company to any one of its Subsidiaries shall not be deemed
a termination of employment.

      2.15 "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.

      2.16 "Exercise Period" means the period during which an SAR is
exercisable, as set forth in the related Award Agreement.

      2.17 "Fair Market Value" means the average of the daily opening and
closing sale prices as reported in the consolidated transaction reporting
system.

      2.18 "Participant" means an Employee of the Company who has outstanding an
Award granted under the Plan.

      2.19 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act, as used in Sections 13(d) and 14(d) thereof,
including usage in the definition of a "group" in Section 13(d) thereof.

                                      -5-
<PAGE>

                                 COMPOSITE COPY

           INCLUDES ALL AMENDMENTS ADOPTED THROUGH 9/28/00 AMENDMENT.

      2.20 "Retirement" means (i) ascribed to such term in the tax-qualified
defined benefit pension plan maintained by the Company for the benefit of some
or all of its non-represented employees and (ii) retirement from the Company or
its subsidiaries with the approval of the Committee.

      2.21 "Shares" means, through March 17, 1999, the shares of common stock of
Niagara Mohawk Power Corporation, par value $1.00. After March 17, 1999, all
references to "Shares" mean the shares of common stock of Niagara Mohawk
Holdings, Inc., par value $1.00.

      2.22 "Stock Appreciation Right" or "SAR" means a right, designated as an
SAR, to receive a payment on the day the right is exercised, pursuant to the
terms of Article 6 herein. Each SAR shall be denominated in terms of one Share.

      2.23 "Stock Unit" means a right, designated as a Stock Unit, to receive a
payment as soon as practicable following the last day of a Vesting Period,
pursuant to the terms of Article 7 herein. Each Stock Unit shall be denominated
in terms of one Share.

      2.24 "Subsidiary" means any corporation that is a "subsidiary corporation"
of the Company as that term is defined in Section 424(f) of the Code.

      2.25 "Valuation Period" means the 12 trading day period ending on and
including the relevant date.

      2.26 "Vesting Period" means the period during which Stock Units are not
yet payable, as set forth in the related Award Agreement.

ARTICLE 3. ADMINISTRATION

      3.1 The Committee. The Plan shall be administered by the Compensation and
Succession Committee of the Board, or by any other Committee appointed by the
Board consisting of not less than two (2) non-employee Directors. The members of
the Committee shall be appointed from time to time by, and shall serve at the
discretion of, the Board of Directors.

      3.2 Authority of the Committee. The Committee shall have full power except
as limited by law, the Articles of Incorporation and the Bylaws of the Company,
subject to such other restricting limitations or directions as may be imposed by
the Board and subject to the provisions herein, to determine the size and types
of Awards; to determine the terms and conditions of such Awards in a manner
consistent with the Plan; to construe and interpret the Plan

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and any agreement or instrument entered into under the Plan; to establish, amend
or waive rules and regulations for the Plan's administration; and (subject to
the provisions of Article 14 herein) to amend the terms and conditions of any
outstanding Award. Further, the Committee shall make all other determinations
that may be necessary or advisable for the administration of the Plan. As
permitted by law, the Committee may delegate its authorities as identified
hereunder.

      3.3 Decisions Binding. All determinations and decisions made by the
Committee pursuant to the provisions of the Plan and all related orders or
resolutions of the Board shall be final, conclusive and binding on all persons,
including the Company, its shareholders, Employees, Participants and their
estates and beneficiaries.

      3.4 Costs. The Company shall pay all costs of administration of the Plan.

ARTICLE 4. ADJUSTMENTS IN AUTHORIZED SHARES

      In the event of any merger, reorganization consolidation,
recapitalization, separation, liquidation, stock dividend, split-up, share
combination or other change in the corporate structure of the Company affecting
the Shares, such adjustment shall be made in the number of SARs and Stock Units
that may be granted under the Plan, and in the number and/or price of
outstanding Awards granted under the Plan, as may be determined to be
appropriate and equitable by the Committee, in its sole discretion, to prevent
dilution or enlargement of rights; provided, however, that the number of SARs
and Stock Units subject to an Award shall always be a whole number.

ARTICLE 5. ELIGIBILITY AND PARTICIPATION

      5.1 Eligibility. Persons eligible to participate in the Plan include all
key Employees of the Company, as determined by the Committee.

      5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all eligible Employees those to
whom Awards shall be granted and shall determine the nature and amount of each
Award.

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ARTICLE 6. STOCK APPRECIATION RIGHTS

6.1 Grant of SARs. Subject to the terms and conditions of the Plan, SARs may be
granted to Eligible Employees at any time and from time to time, as shall be
determined by the Committee.

      The Committee shall have complete discretion in determining the number of
SARs granted to each Participant (subject to Article 4 herein) and, consistent
with the provisions of the Plan, in determining the terms and conditions
pertaining to such SARs.

      6.2 Base Value. The Base Value of an SAR shall equal the Fair Market Value
of a Share determined for the 12 trading day period immediately preceding the
date of the grant, or for such other period as the Compensation Committee, in
its sole discretion, shall determine at the time of grant.

      6.3 Exercise and Payment of SARs. A Participant may exercise an SAR at any
time during the Exercise Period. SARs shall be exercised by the delivery of a
written notice of exercise to the Company, setting forth the number of SARs
being exercised. Upon exercise of an SAR, a Participant shall be entitled to
receive payment in cash from the Company in an amount equal to the product of:

      (a)   the excess of (i) the Fair Market Value of a Share on the date of
            exercise over (ii) the Base Value of the SAR, multiplied by

      (b)   the number of Shares with respect to which the SAR is exercised.

      6.4 SAR Award Agreement. Each SAR grant shall be evidenced by an Award
Agreement that shall specify the number of SARs granted, the Base Value, the
Exercise Period, the expiration date and such other provisions as the Committee
shall determine.

      6.5 Lapse of SARs. Subject to the provisions of Article 9, an SAR will
lapse upon the earlier of (i) fifteen (15) years from the date of grant and (ii)
the expiration of the Exercise Period as set forth in the grant.

ARTICLE 7. STOCK UNITS

      7.1 Grant of Stock Units. Subject to the terms and conditions of the
Plan, Stock Units may be granted to Eligible Employees at any time and from time
to time, as shall be determined by the Committee.

      The Committee shall have complete discretion in determining the number of
Stock Units granted to each Participant (subject to Article 4 herein) and,
consistent with the provisions of the Plan, in determining the terms and
conditions pertaining to such Stock Units.

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      7.2 Vesting of Stock Units. The Vesting Period of Stock Units granted
under the Plan shall be determined by the Committee, in its sole discretion, as
set forth in the related Award Agreement .

      7.3 Payment of Stock Units. After the applicable Vesting Period has ended,
the holder of Stock Units shall be entitled to receive, for each Stock Unit
held, payment in cash from the Company in an amount equal to the Fair Market
Value of one Share determined as of the Valuation Period ending on the last day
of the Vesting Period. Payment shall be made as soon as practicable following
the last day of the Vesting Period.

      7.4 Stock Unit Award Agreement. Each Stock Unit grant shall be evidenced
by an Award Agreement that shall specify the number of Stock Units granted, the
Vesting Period and such other provisions as the Committee shall determine.

ARTICLE 8. DIVIDEND EQUIVALENTS

      Simultaneously with the grant of Stock Units, the Participant shall be
granted Dividend Equivalents, to be credited to a bookkeeping entry account, on
each common stock dividend payment date with respect to the Shares subject to
such Award. In the case of cash dividends, the number of Dividend Equivalents
credited on each common stock dividend payment date shall equal the number of
Shares (including fractional Shares) that could be purchased on the dividend
payment date, based on the average of the opening and closing sale price, as
reported in the consolidated transaction reporting system on that date, with
cash dividends that would have been paid on Awards of Stock Units and on
Dividend Equivalents previously credited to such bookkeeping entry account, if
such Stock Units or Dividend Equivalents were Shares. In the case of stock
dividends, the number of Dividend Equivalents credited on each stock dividend
payment date shall be equal to the number of Shares (including fractional
Shares) that would have been issued as a stock dividend in respect of the
Participant's Stock Units and on Dividend Equivalents previously credited to
such bookkeeping entry account, if such Stock Units or Dividend Equivalents were
Shares.

      Participants shall receive cash payment from the Company of the Fair
Market Value of the Dividend Equivalents, if and when they receive payment of
the related Stock Units, the Fair Market Value of such Dividend Equivalents to
be determined in the same manner as for the related Stock Units.

      The Committee may, in its discretion, establish such rules and procedures
governing the crediting of Dividend Equivalents, including timing and payment
contingencies that apply to the Dividend Equivalents, as the Committee deems
necessary or appropriate in order to comply with applicable law.

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ARTICLE 9. TERMINATION OF EMPLOYMENT; TRANSFERABILITY

      9.1 Disability; Involuntary Termination. In the event the employment of a
Participant is terminated by reason of Disability or involuntarily by the
Company (other than for Cause):

      (i)   during a Vesting Period for Stock Units, the Participant shall
            receive a full payout of the Stock Units and related Dividend
            Equivalents, as and when provided in Section 7.3 herein;

      (ii)  before the Exercise Period commences for SARs subject to an Award,
            such SARs may be exercised in full at any time during the one year
            period commencing on the day the Exercise Period begins; and

      (iii) during the Exercise Period for SARs, but before exercise, such SARs
            may be exercised in full at any time during the one year period
            after such termination, but in no event after the Exercise Period
            for such SARs has expired.

      9.2 Death. In the event the employment of a Participant is terminated by
reason of death:

      (i)   during the Vesting Period for Stock Units, the Participant's
            beneficiary or estate shall receive a full payout of the Stock Units
            and related Dividend Equivalents. The payout shall be made promptly
            based on the Fair Market Value of a Share on the date of death; and

      (ii)  before the Exercise Period commences for SARs subject to an Award or
            during the Exercise Period, but before exercise, the Participant's
            beneficiary or estate shall receive a full payout of all SARs
            subject to an Award, to the extent the Fair Market Value of a Share
            exceeds the Base Value of the SAR on the date of death.

      9.3 Corporate Restructuring. In the event (i) the corporate restructuring
as contemplated by the Company's PowerChoice proposal filed with the New York
Public Service Commission on October 6, 1995, or any substantially similar
corporate restructuring (determined by the Committee), is implemented and (ii)
the employment of a Participant with the Company is terminated (other than for
Cause), then with respect to Awards granted prior to implementation of the
restructuring,

      (i)   during a Vesting Period for Stock Units, the Participant shall
            receive a full payout of Stock Units and related Dividend
            Equivalents, as and when provided in Section 7.3 herein;

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      (ii)  before the Exercise Period commences for SARs subject to an Award,
            such SARs may be exercised in full at any time during the one year
            period commencing on the day the Exercise Period begins; and

      (iii) during the Exercise Period for SARs, but before exercise, such SARs
            may be exercised in full at any time during the one year period
            after such termination, but in no event after the Exercise Period
            for such SARs has expired.

      9.4 Retirement. In the event the employment of a Participant is terminated
by reason of Retirement:

      (i)   during a Vesting Period for Stock Units, the Participant shall
            receive a prorated payout of the Stock Units and related Dividend
            Equivalents. The prorated payout shall be determined by the
            Committee, shall be based upon the length of time that the
            Participant held the Stock Units during the Vesting Period and shall
            be made as and when provided in Section 7.3 herein;

      (ii)  before the Exercise Period commences for SARs subject to an Award,
            the number of SARs subject to an Award shall be prorated by the
            Committee, based upon the length of time that the Participant held
            the SARs before Retirement; after the Exercise Period commences, the
            prorated SARs may be exercised at any time in full or in part from
            time to time during the Exercise Period, and

      (iii) during the Exercise Period for SARs, but before exercise, such SARs
            may be exercised at any time in full or in part from time to time
            during the Exercise Period.

      Other than as set forth in Article 13, in the event that a Participant's
employment terminates for any reason other than as set forth in Sections 9.l,
9.2, 9.3 and 9.4, above, all Stock Units, SARs and Dividend Equivalents shall be
forfeited by the Participant to the Company .

      9.5 Nontransferability of Awards. Notwithstanding the foregoing, the
Committee may in its discretion authorize a participant to transfer all or a
portion of any award to the participant's family members on such terms
prescribed by the Committee. No Award granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, all Awards
granted to a Participant under the Plan shall be exercisable/payable during his
or her lifetime only by or to such Participant or his or her legal
representative.

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      9.6 Right of Committee. Subject to the provisions of Section 14.2 herein,
all provisions in this Article 9 are subject to the Committee's right, at any
time, to make such other determinations as it may choose, in its sole
discretion. Furthermore, should more than one section of Article 9 and/or
Article 13 apply to a situation, the Committee shall have the right, in its sole
discretion, to determine which section and/or article to apply.

ARTICLE 10. BENEFICIARY DESIGNATION

      Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his death before he
receives any or all of such benefit. Each such designation shall revoke all
prior designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during the Participant's lifetime. In the absence of any such
designation , benefits remaining unpaid at the Participant's death shall be paid
to the Participant's estate.

      The spouse of a married Participant domiciled in a community property
jurisdiction shall join in any designation of beneficiary or beneficiaries other
than the spouse.

ARTICLE 11. DEFERRALS

      The Committee may permit a Participant to defer such Participant's receipt
of the payment of cash that would otherwise be due to such Participant. If any
such deferral election is permitted, the Committee shall, in its sole
discretion, establish such rules and procedures as it deems necessary or
desirable for such payment deferrals.

ARTICLE 12. RIGHTS OF EMPLOYEES

      12.1 Employment. Nothing in the Plan shall interfere with or limit in any
way the right of the Company to terminate any Participant's employment at any
time, for any reason or no reason, in the Company's sole discretion, nor confer
upon any Participant any right to continue in the employ of the Company.

      12.2 Participation. No Employee shall have the right to be selected to
receive an Award under the Plan, or, having been so selected, to be selected to
receive a future Award.

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ARTICLE 13. CHANGE IN CONTROL

      Upon the occurrence of a Change in Control, as defined herein, unless
otherwise specifically prohibited by the terms of Article 17 herein:

      (a) If the Change in Control results solely in a cash payment for the
      outstanding Shares and such Shares cease to be readily tradeable on a
      national securities exchange which is registered under Section 6 of the
      Exchange Act or on NASDAQ, then any and all SARs granted hereunder shall
      be deemed to have been exercised on the date such Change in Control
      occurs;

      (b) If the Change in Control does not result solely in a cash payment for
      the outstanding Shares or such Shares continue to be readily tradeable on
      a national securities exchange which is registered under Section 6 of the
      Exchange Act or on NASDAQ, then any and all SARs granted hereunder shall
      be fully and immediately exercisable and may be exercised at any time in
      full or in part from time to time until the end of the Exercise Period. In
      such event, if the Shares are converted into the common stock, American
      Depositary Share ("ADSs") or American Depositary Receipts ("ADRs") of the
      Person referred to in subsection (1) of Section 2.6, the Surviving
      Corporation or the Parent Corporation, then (i) payments for SARS shall be
      based on the value of the common stock, ADRs or ADSs (as applicable) of
      such Person Surviving Corporation or Parent Corporation and (ii) the Base
      Value and number of SARs shall be appropriately adjusted to reflect the
      per Share consideration received by the holders of the Shares. In the
      event such Change in Control results in payment of a combination of cash
      and other property (including common stock, ADRs or ADSs) for the
      outstanding Shares, the per Share consideration shall be deemed to be the
      change in control price (as such term is defined below).

      (c) Any Vesting Period with respect to Stock Units shall be deemed to have
      expired, and there shall be paid out in cash to Participants within thirty
      (30) days following the effective date of the Change in Control the cash
      payment due with respect to such Stock Units and related Dividend
      Equivalents, with a Valuation Period ending on the effective date of the
      Change in Control. Notwithstanding the foregoing and the provisions of
      Section 7.3, if the Change in Control results in payment of a combination
      of cash and other property for the outstanding Shares, the cash payment
      for each of such Stock Units and related Dividend Equivalents shall be an
      amount equal to the change in control price.

            In addition, if the Change in Control occurs pursuant to the
      transaction described in subsection (3) of Section 2.6, then any
      Participant (i) who had an outstanding Award on the date of the approval
      by the shareholders of the Corporation of such transaction, (ii) whose
      employment is terminated after shareholder approval and prior to the date
      of the occurrence of the Change in Control, by the Company other than for
      cause, by the Participant for good reason (as such terms are defined
      below), or by the acceptance by the participant of a

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      position with the acquirer of Niagara Mohawk Power Corporation's nuclear
      facilities, and (iii) who forfeited any Stock Units, Dividend Equivalents
      or SARs as a result of such termination of employment, shall receive a
      cash payment, within thirty (30) days following the date such Change in
      Control occurs, equal to (i) with respect to each forfeited Stock Unit and
      Dividend Equivalent, the change in control price and (ii) with respect to
      each forfeited SAR, the result of multiplying (A) the excess of the change
      in control price over the Base Value of the SAR by (B) the number of
      Shares forfeited under such SAR.

      For purposes of this Article:

      (i) "cause" shall (A) have the meaning ascribed to such term in the
      Participant's employment agreement or change in control severance
      agreement with the Company or a subsidiary, if any, and (B) mean, in the
      absence of an agreement referred to in clause (A), the Participant's
      having (a) materially breached his obligations to the Company or any of
      its subsidiaries, (b) failed in a willful and continued manner to
      substantially perform his duties and responsibilities after a demand for
      substantial performance is delivered to the Participant by a direct
      supervisor or any more senior executive, which specifically identifies the
      manner in which the direct supervisor or executive believes that the
      Participant has not substantially performed his duties, (c) been convicted
      of, or have entered a plea of guilty or nolo contendere to, a felony.

      (ii) "change in control price" shall mean the greater of (A) the Fair
      Market Value of one Share on the date of the Change in Control or (B) the
      cash consideration per Share in such transaction (determined without
      regard to any limits on the number of Shares for which a cash payment will
      be made).

      (iii) "good reason" shall (A) have the meaning ascribed to such term in
      the Participant's employment agreement or change in control severance
      agreement with the Company or a subsidiary, if any, and (B) mean, in the
      absence of an agreement referred to in clause (A), the imposition of a
      requirement that the Participant be based at an office or location other
      than one within a 50-mile radius of the office or a location at which the
      Participant was based immediately prior to approval by the Corporation's
      shareholders of the transaction described in subsection (3) of Section
      2.6, or a reduction in the Participant's base annual salary from the rate
      in effect immediately prior to such shareholder approval.

ARTICLE 14. AMENDMENT, MODIFICATION AND TERMINATION

      14.1 Amendment. Modification and Termination. The Board may, at any time
and from time to time, alter, amend, suspend or terminate the Plan in whole or
in part.

      14.2 Awards Previously Granted. No termination, amendment or modification
of the Plan shall adversely affect in any material way any Award previously
granted under the Plan, without the written consent of the Participant holding
such Award, unless such termination, modification or amendment is required by
applicable law.

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ARTICLE 15. TAX WITHHOLDING

      The Company shall have the power and the right to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
Federal, state and local taxes (including the Participant's FICA obligation)
required by law to be withheld with respect to any taxable event arising out of
or as a result of an Award made under the Plan.

ARTICLE 16. 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.

ARTICLE 17. LEGAL CONSTRUCTION

      17.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular and the singular shall include the plural.

      17.2 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

      17.3 Requirements of Law. The granting of Awards 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.

      17.4 Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with, and
governed by, the laws of the State of New York, without regard to conflicts of
law provisions.

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