Document:

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                                                                    EXHIBIT 10.3

                              EMPLOYMENT AGREEMENT

         THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as
of this _____ day of ____________, 2005 by and between FREESEAS INC., a Marshall
Islands corporation (the "Company"), and Efstathios D. Gourdomichalis (the
"Executive").

                                R E C I T A L S:

         A. The Company's Board of Directors desires to employ the Executive to
serve as the Company's Chief Financial Officer and Treasurer on the terms and
subject to the conditions set forth in this Agreement.

         B. The Executive is willing to make his services available to the
Company on the terms and subject to the conditions set forth in the Agreement.

                               A G R E E M E N T:

         NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereby agree as follows:

        1.       EMPLOYMENT.

                  1.1 EMPLOYMENT AND TERM. Effective as of ______________, 2005
(the "Commencement Date"), the Company shall employ the Executive and the
Executive shall serve the Company, on the terms and conditions set forth herein,
for the period (the "Term") beginning on the Commencement Date and expiring on
the third anniversary of the Commencement Date (the "Expiration Date"), unless
sooner terminated as hereinafter set forth; provided, however, that the Term of
this Agreement shall be extended for additional two-year periods if not less
than 30 days prior to the Expiration Date or any anniversary thereof, the
Company delivers to the Executive written notice that the Term of the
Executive's employment hereunder shall be extended for an additional year.

                  1.2 DUTIES OF EXECUTIVE. The Executive shall serve as Chief
Financial Officer and Treasurer of the Company and shall perform the duties of
an executive commensurate with such positions, shall diligently perform all
services as may be reasonably assigned to him by the Board of Directors of the
Company and shall exercise such power and authority as may from time to time be
delegated to him by the Board of Directors of the Company. Executive
acknowledges and agrees that Executive may be required, without additional
compensation, to perform services for any business entity controlling,
controlled by, or under common control with the Company by virtue of direct or
indirect beneficial ownership of voting securities of or voting interest in the
controlled entity (such business entities hereinafter individually and
collectively, "Affiliates"), including, but not limited to, service as an
officer or director of the Company or any Affiliate. During the Term, and

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consistent with the foregoing, Executive shall devote his time, attention,
skill, and ability to the faithful and diligent performance of the duties and
responsibilities described herein.

        2.       COMPENSATION.

                  2.1 BASE SALARY. The Executive shall receive a base salary at
the annual rate of $150,000 (the "Base Salary"). The Base Salary shall be
payable in substantially equal installments consistent with the Company's normal
payroll schedule, subject to any applicable taxes. The Executive's Base Salary
may be increased in the Board's discretion, subject to reasonable performance
objectives as established by the Board.

                  2.2 ADDITIONAL CASH COMPENSATION. The Executive shall also be
entitled to receive such performance or merit bonuses (collectively, a "Bonus")
as shall be determined from time to time during the Term by the Board or a
designated committee of the Board.

        3.       EXPENSE REIMBURSEMENT AND OTHER BENEFITS.

                  3.1 EXPENSE REIMBURSEMENT. Upon the submission of supporting
documentation by the Executive, and in accordance with Company policies for its
executives, the Company shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company.

                  3.2 PARTICIPATION IN BENEFIT PLANS. If applicable, the
Executive shall be entitled to participate in the Company's insurance plans,
deferred compensation plan, stock option plan, retirement income or pension
plan, short- and long-term disability programs, or other present or future group
employee benefit plan or program of the Company for which executives shall
become eligible. Nothing contained in this Agreement shall prevent the Board of
Directors from amending, terminating or otherwise altering any such plan,
program or arrangement as long as such amendment or alteration equitably affects
all executive officers of the Company.

                  3.3 VACATION. The Executive shall be entitled to reasonable
paid vacation during each year of the Term, in accordance with the policies of
the Company.

                  3.4 STOCK OPTIONS. STOCK OPTIONS. The Executive shall be
granted options to acquire 200,000 shares of the Company's Common Stock at an
exercise price of $5.00 per share (the "Options"). The Options shall vest at a
rate of 1/3 per year, with the first 1/3 vesting immediately upon the signing of
this Agreement, the second 1/3 vesting on the first anniversary of this
Agreement and the final 1/3 on the second anniversary of this Agreement.

                  3.5 The Executive shall also be entitled from time to time
during the Term, in accordance with the Company's policies and with performance

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objectives as may be established by the Board, to receive grants of additional
options to acquire shares of the Company's Common Stock.

        4.       TERMINATION.

                  4.1 TERMINATION BY THE COMPANY FOR CAUSE. The Company may
terminate this Agreement, and Executive's employment, "for cause" at any time.
As used herein, "for cause" shall mean any one of the following: (1) the willful
breach or habitual neglect by Executive of his job duties and responsibilities;
(2) material default or other material breach by Executive of Executive's
obligations hereunder or fraud; or (3) conviction of any crime, excluding minor
traffic offenses. In the event the Company terminates the Executive's employment
for cause, the Executive shall be entitled to receive only his Base Salary
earned up until the date of said termination.

                  4.2 TERMINATION BY DEATH OR DISABILITY. In the event of the
Executive's death, this Agreement and the Executive's salary and compensation
shall automatically end. If the Executive is unable to perform his employment
duties for a cumulative period of 90 business days in any six-month period, this
Agreement and Executive's employment will be automatically terminated. The
Company will pay the Executive on the date of termination the earned
compensation set forth in this Agreement. Any bonus due under Section 2.2 shall
be prorated to the date of termination.

         5.       CONFIDENTIAL INFORMATION. Executive will, in the course of
Executive's duties on behalf of the Company, be advised of certain business
matters and affairs of the Company. The duties performed by Executive place
Executive in a position of trust and confidence with respect to certain trade
secrets and other proprietary information relating to the business of the
Company and not generally known to the public. This proprietary information
includes sales or sales strategies or prospects, pricing or pricing strategies,
advertising or promotional programs, inventions, developments, or discoveries of
the Company, customer lists, finances, including prices, costs, and revenues,
and other business arrangements, plans, procedures and strategies (collectively,
the "Confidential Information"). Both during and after the Term, Executive shall
not, directly or indirectly, divulge, publish, communicate, or make available to
any person, corporation, governmental agency, or other entity (except in
performing Executive's duties hereunder), or use for Executive's own or any
other person or entity's purposes or benefit, any Confidential Information.
Executive shall use his best efforts to prevent the publication or disclosure by
any other person or entity of any such Confidential Information. While Executive
is employed by the Company, all documents and Confidential Information compiled,
received, held, or used by Executive in connection with the business of the
Company shall remain the Company's property. Notwithstanding anything to the
contrary contained herein, Confidential Information shall not include (i)
information known to Executive prior to his employment with the Company; (ii)
information otherwise in the public domain, or (iii) information requested
pursuant to judicial process.

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         6.       BOOKS AND RECORDS. All books, records, accounts and similar
repositories of Confidential Information of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company, as the case may be, and shall be returned
immediately to the Company on termination of this Agreement.

         7.       NON-COMPETE. As a condition of employment with the Company,
Executive agrees that, so long as Executive is employed by the Company,
Executive shall not, directly or indirectly, whether or not for compensation, be
engaged in or have any financial interest in any business competing with the
business of the Company as conducted or as may be conducted in the future. For
purposes of this Agreement, the definition of engaged in or financial interest
in a business shall include being employed, or being a partner in an entity
which is engaged in a business competing with that of the Company or having an
equity or other financial interest in an entity engaged in a business competing
with that of the Company. Notwithstanding the foregoing (i) the ownership of
securities of any entity representing less than 20% of any class of securities
of any entity issued and outstanding, and (ii) any interest acquired by the laws
of descent or distribution shall not be prohibited hereunder. Further, the
performance of services on behalf of and the owning of securities of any
Affiliate shall not be prohibited hereunder.

         8.       SOLICITATION OF EMPLOYEES AND CLIENTS. As a condition of
employment with the Company, and so long as executive is employed by the
Company, Executive shall not directly or indirectly, solicit, interfere with,
hire, or entice away from the Company or any of its Affiliates (i) any person
who is or was employed by the Company or any of its Affiliates, or (ii) any
client or customer of the Company or any potential client or customer of the
Company with which the Company was actively engaged in sales or promotional
efforts.

         9.       INJUNCTION AND EQUITABLE RELIEF. It is recognized and hereby
acknowledged by the parties hereto that a breach by the Executive of any of the
covenants contained in this Agreement will cause irreparable harm and damage to
the Company, the monetary amount of which may be virtually impossible to
ascertain. As a result, the Executive recognizes and hereby acknowledges that
the Company shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, together with all
other appropriate equitable relief, and that such right to injunction and
equitable relief shall be cumulative and in addition to whatever other remedies
the Company may possess.

         10.      BINDING EFFECT. This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto, their personal representatives,
successors, heirs and assigns.

         11.      SEVERABILITY. Invalidity or unenforceability of any provision
hereof shall in no way affect the validity or enforceability of any other
provisions.

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         12.      TERMINOLOGY. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural and vice versa. Titles of
Paragraphs are for convenience only, and neither limit nor amplify the
provisions of the Agreement itself.

         13.      GOVERNING LAW. This Agreement shall be governed and construed
in accordance with the laws of the Marshall Islands.

         14.      ENTIRE AGREEMENT. This Agreement contains the entire
understanding between the parties and may not be changed or modified except by
an agreement in writing signed by all the parties.

         15.      NOTICES. Any notice required or permitted to be delivered
hereunder shall be deemed to be delivered when deposited in the United States
mail, postage prepaid, registered or certified mail, return receipt requested,
addressed to the Company at its principal executive offices and addressed to the
Executive at the address first stated herein, or to such other address as either
party hereto shall from time to time designate to the other party by notice in
writing as provided herein.

         16.      ATTORNEY'S FEES. In the event that any action is filed or
arbitration is conducted regarding this Agreement, the unsuccessful party shall
pay to the prevailing party, in addition to all other sums that either party may
be called on to pay, a reasonable sum for attorney's fees, including fees
incurred in negotiation, preparation for trial or arbitration, and all appeals
and enforcement proceedings.

         17.      COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each such counterpart shall for all purposes be deemed an
original.

         18.      ASSIGNABILITY. This Agreement shall not be assigned by either
party; provided, however, this Agreement may be assigned by the Company without
the Executive's consent to the purchaser in a transaction involving the sale of
all or substantially all of the Company's assets and Executive may assign the
right to receive compensation hereunder to a designee without the Company's
consent.

                            [SIGNATURES ON NEXT PAGE]

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         IN WITNESS WHEREOF, this Agreement has been duly signed by the parties
hereto on the day and year first above written.

                                         COMPANY:

                                         FREESEAS INC.

                                         By:
                                            ------------------------------------
                                         Name:
                                              ----------------------------------
                                         Title:
                                               ---------------------------------

                                         EXECUTIVE:

                                         ---------------------------------------
                                         Efstathios D. Gourdomichalis

                                       6<PAGE>
                                                                    EXHIBIT 10.4

                             ADVENTURE HOLDINGS S.A.
                            2005 STOCK INCENTIVE PLAN

                                   ARTICLE 1
                                     GENERAL

         1.1 PURPOSE

         The Adventure Holdings S.A. 2005 Stock Incentive Plan (the "Plan") is
designed to provide certain key persons, on whose initiative and efforts the
successful conduct of the business of Adventure Holdings S.A. (the "Company")
depends, with incentives to: (a) enter into and remain in the service of the
Company, (b) acquire a proprietary interest in the success of the Company, (c)
maximize their performance, and (d) enhance the long-term performance of the
Company.

         1.2 ADMINISTRATION

              (a) Administration by Board of Directors. The Plan shall be
administered by the Company's Board of Directors (the "Administrator"). The
Administrator shall have the authority (i) to exercise all of the powers granted
to it under the Plan, (ii) to construe, interpret and implement the Plan and any
Award Agreements executed pursuant to Section 2.1 in its sole discretion with
all such determination being final, binding and conclusive, (iii) to prescribe,
amend and rescind rules and regulations relating to the Plan, including rules
governing its own operations, (iv) to make all determinations necessary or
advisable in administering the Plan, and (v) to correct any defect, supply any
omission and reconcile any inconsistency in the Plan.

              (b) Administrator Action. Actions of the Administrator shall be
taken by the vote of a majority of its members. Any action may be taken by a
written instrument signed by a majority of the Administrator members, and action
so taken shall be fully as effective as if it had been taken by a vote at a
meeting. Except to the extent prohibited by applicable law or the applicable
rules of a stock exchange, the Administrator may allocate all or any portion of
its responsibilities and powers to any one or more of its members and may
delegate all or any part of its responsibilities to any person or persons
selected by it, and may revoke any such allocation or delegation at any time.

         1.3 PERSONS ELIGIBLE FOR AWARDS

         The persons eligible to receive awards under the Plan are those
officers, directors, and executive, managerial, administrative and professional
employees of the Company, (collectively, "key persons") as the Administrator in
its sole discretion shall select, taking into account the duties of the
respective employees, their present and potential contributions to the success
of the Company, and such other factors as the Administrator deems relevant in
connection with accomplishing the purpose of the Plan. The Administrator may
from time to time, in its sole discretion, determine that any key person shall
be ineligible to receive awards under the Plan.

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         1.4 TYPES OF AWARDS UNDER PLAN

         Awards may be made under the Plan in the form of (a) incentive stock
options, (b) non-qualified stock options, (c) stock appreciation rights, (d)
dividend equivalent rights, (e) restricted stock, (f) unrestricted stock, (g)
restricted stock units, and (h) performance shares, all as more fully set forth
in Article II. The term "award" means any of the foregoing. No incentive stock
option may be granted to a person who is not an employee of the Company on the
date of grant.

         1.5 SHARES AVAILABLE FOR AWARDS

              (a) Aggregate Number Available; Certificate Legends. Subject to
the provisions of Section 1.5(b), the total number of shares of common stock of
the Company ("Common Stock") with respect to which awards may be granted
pursuant to the Plan is 750,000 shares. Shares issued pursuant to the Plan may
be authorized but unissued Common Stock, authorized and issued Common Stock held
in the Company's treasury or Common Stock acquired by the Company for the
purposes of the Plan. The Administrator may direct that any stock certificate
evidencing shares issued pursuant to the Plan shall bear a legend setting forth
such restrictions on transferability as may apply to such shares.

              (b) Adjustment Upon Changes in Common Stock. Upon certain changes
in Common Stock, the number of shares of Common Stock available for issuance
with respect to awards that may be granted under the Plan pursuant to Section
1.5(a), shall be adjusted pursuant to Section 3.7(a).

              (c) Certain Shares to Become Available Again. The following shares
of Common Stock shall again become available for awards under the Plan: any
shares that are subject to an award under the Plan and that remain unissued upon
the cancellation or termination of such award for any reason whatsoever; any
shares of restricted stock forfeited pursuant to Section 2.7(e), provided that
any dividends paid on such shares are also forfeited pursuant to such Section
2.7(e); and any shares in respect of which a stock appreciation right or
performance share award is settled for cash.

         1.6 DEFINITIONS OF CERTAIN TERMS

              (a) The "Fair Market Value" of a share of Common Stock on any day
shall be the closing price on the Nasdaq Stock Market as reported for such day
in The Wall Street Journal or, if no such price is reported for such day, the
average of the high bid and low asked price of Common Stock as reported for such
day. If no quotation is made for the applicable day, the Fair Market Value of a
share of Common Stock on such day shall be determined in the manner set forth in
the preceding sentence using quotations for the next preceding day for which
there were quotations, provided that such quotations shall have been made within
the ten (10) business days preceding the applicable day. Notwithstanding the
foregoing, if deemed necessary or appropriate by the Administrator, the Fair
Market Value of a share of Common Stock on any day shall be determined by the
Administrator. In no event shall the Fair Market Value of any share of Common
Stock be less than its par value.

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              (b) The term "incentive stock option" means an option that is
intended to qualify for special federal income tax treatment pursuant to
sections 421 and 422 of the Code as now constituted or subsequently amended, or
pursuant to a successor provision of the Code, and which is so designated in the
applicable Grant Certificate. Any option that is not specifically designated as
an incentive stock option shall under no circumstances be considered an
incentive stock option. Any option that is not an incentive stock option is
referred to herein as a "non-qualified stock option."

              (c) The term "cause" in connection with a termination of
employment by reason of a dismissal for cause shall mean:

                  (i) to the extent that there is an employment, severance or
         other agreement governing the relationship between the grantee and the
         Company, a Company subsidiary or a Company joint venture, which
         agreement contains a definition of "cause," cause shall consist of
         those acts or omissions that would constitute "cause" under such
         agreement; and otherwise,

                  (ii) the grantee's termination of employment by the Company or
         an affiliate on account of any one or more of the following:

                           (1) any failure by the grantee substantially to
                  perform the grantee's employment duties;

                           (2) any excessive unauthorized absenteeism by the
                  grantee;

                           (3) any refusal by the grantee to obey the lawful
                  orders of the Board or any other person or Administrator to
                  whom the grantee reports;

                           (4) any act or omission by the grantee that is or may
                  be injurious to the Company, monetarily or otherwise;

                           (5) any act by the grantee that is inconsistent with
                  the best interests of the Company;

                           (6) the grantee's material violation of any of the
                  Company's policies, including, without limitation, those
                  policies relating to discrimination or sexual harassment;

                           (7) the grantee's unauthorized (a) removal from the
                  premises of the Company or an affiliate of any document (in
                  any medium or form) relating to the Company or an affiliate or
                  the customers or clients of the Company or an affiliate or (b)
                  disclosure to any person or entity of any of the Company's, or
                  its affiliates' confidential or proprietary information;

                           (8) the grantee's commission of any felony, or any
                  other crime involving moral turpitude; and

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                           (9) the grantee's commission of any act involving
                  dishonesty or fraud.

         Any rights the Company may have hereunder in respect of the events
giving rise to cause shall be in addition to the rights the Company may have
under any other agreement with a grantee or at law or in equity. Any
determination of whether a grantee's employment is (or is deemed to have been)
terminated for cause shall be made by the Administrator in its discretion, which
determination shall be final, binding and conclusive on all parties. If,
subsequent to a grantee's voluntary termination of employment or involuntary
termination of employment without cause, it is discovered that the grantee's
employment could have been terminated for cause, the Administrator may deem such
grantee's employment to have been terminated for cause. A grantee's termination
of employment for cause shall be effective as of the date of the occurrence of
the event giving rise to cause, regardless of when the determination of cause is
made.

              (d) "Common Stock Offering" shall mean the sale of the Company's
Common Stock in a firmly underwritten public offering.

                                   ARTICLE 2
                              AWARDS UNDER THE PLAN

         2.1 AGREEMENTS EVIDENCING AWARDS

         Each award granted under the Plan (except an award of unrestricted
stock) shall be evidenced by a written certificate ("Award Agreement") which
shall contain such provisions as the Administrator may, in its sole discretion,
deem necessary or desirable. By executing an Award Agreement pursuant to the
Plan, a grantee thereby agrees that the award shall be subject to all of the
terms and provisions of the Plan and the applicable Award Agreement.

         2.2 GRANT OF STOCK OPTIONS, STOCK APPRECIATION RIGHTS, RESTRICTED STOCK
UNITS AND DIVIDEND EQUIVALENT RIGHTS

              (a) Stock Option Grants. The Administrator may grant incentive
stock options and non-qualified stock options ("options") to purchase shares of
Common Stock from the Company, to such key persons, and in such amounts and
subject to such vesting and forfeiture provisions and other terms and
conditions, as the Administrator shall determine, in its sole discretion,
subject to the provisions of the Plan.

              (b) Stock Appreciation Right Grants; Types of Stock Appreciation
Rights. The Administrator may grant stock appreciation rights to such key
persons, and in such amounts and subject to such vesting and forfeiture
provisions and other terms and conditions, as the Administrator shall determine,
in its sole discretion, subject to the provisions of the Plan. The terms of a
stock appreciation right may provide that it shall be automatically exercised
for a cash payment upon the happening of a specified event that is outside the
control of the grantee, and that it shall not be otherwise exercisable. Stock
appreciation rights may be granted in connection with all or any part of, or
independently of, any option granted under the Plan. A stock appreciation right

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granted in connection with an option may be granted at or after the time of
grant of such option.

              (c) Nature of Stock Appreciation Rights. The grantee of a stock
appreciation right shall have the right, subject to the terms of the Plan and
the applicable Award Agreement, to receive from the Company an amount equal to
(i) the excess of the Fair Market Value of a share of Common Stock on the date
of exercise of the stock appreciation right over the Fair Market Value of a
share of Common Stock on the date of grant (or over the option exercise price if
the stock appreciation right is granted in connection with an option),
multiplied by (ii) the number of shares with respect to which the stock
appreciation right is exercised. Payment upon exercise of a stock appreciation
right shall be in cash or in shares of Common Stock (valued at their Fair Market
Value on the date of exercise of the stock appreciation right) or both, all as
the Administrator shall determine in its sole discretion. Upon the exercise of a
stock appreciation right granted in connection with an option, the number of
shares subject to the option shall be reduced by the number of shares with
respect to which the stock appreciation right is exercised. Upon the exercise of
an option in connection with which a stock appreciation right has been granted,
the number of shares subject to the stock appreciation right shall be reduced by
the number of shares with respect to which the option is exercised.

              (d) Option Exercise Price. Each Award Agreement with respect to an
option shall set forth the amount (the "option exercise price") payable by the
grantee to the Company upon exercise of the option evidenced thereby. The option
exercise price per share shall be determined by the Administrator in its sole
discretion. Notwithstanding the foregoing, with respect to any options granted
within 30 days of a Common Stock Offering, the option exercise price will be the
average of the Fair Market Value of a share of Common Stock over the 30 day
period following the closing of the Common Stock Offering.

              (e) Exercise Period. Each Award Agreement with respect to an
option or stock appreciation right shall set forth the periods during which the
award evidenced thereby shall be exercisable, whether in whole or in part. Such
periods shall be determined by the Administrator in its sole discretion;
provided, however, that no option or a stock appreciation right shall be
exercisable more than 10 years after the date of grant, and provided further
that, except as and to the extent that the Administrator may otherwise provide
pursuant to Sections 2.5, 3.7 or 3.8, no option or stock appreciation right
shall be exercisable prior to the first anniversary of the date of grant. (See
the default exercise period provided for under Sections 2.3(a) and (b).)

              (f) Reload Options. The Administrator may, in its sole discretion,
include in any Award Agreement with respect to an option (the "original option")
a provision that an additional option (the "reload option") shall be granted to
any grantee who, pursuant to Section 2.3(c)(ii), delivers shares of Common Stock
in partial or full payment of the exercise price of the original option. The
reload option shall be for a number of shares of Common Stock equal to the
number thus delivered, shall have an exercise price equal to the Fair Market
Value of a share of Common Stock on the date of exercise of the original option,
and shall have an expiration date no later than the expiration date of the
original option. In the event that an Award Agreement provides for the grant of
a reload option, such Agreement shall also provide that the exercise price of
the original option be no less than the Fair Market Value of a share of Common

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Stock on its date of grant, and that any shares that are delivered pursuant to
Section 2.3(c)(ii) in payment of such exercise price shall have been held for at
least six months.

              (g) Dividend Equivalent Rights. The Administrator may, in its sole
discretion, include in any Award Agreement with respect to an option, stock
appreciation right or performance shares, a dividend equivalent right entitling
the grantee to receive amounts equal to the ordinary dividends that would be
paid, during the time such award is outstanding and unexercised, on the shares
of Common Stock covered by such award if such shares were then outstanding. In
the event such a provision is included in a Award Agreement, the Administrator
shall determine whether such payments shall be made in cash or in shares of
Common Stock, whether they shall be conditioned upon the exercise of the award
to which they relate, the time or times at which they shall be made, and such
other vesting and forfeiture provisions and other terms and conditions as the
Administrator shall deem appropriate.

              (h) Restricted Stock Units. The Administrator may, in its sole
discretion, grant restricted stock units to such key persons, and in such
amounts and subject to such vesting and forfeiture provisions and other terms
and conditions, as the Administrator shall determine, in its sole discretion,
subject to the provisions of the Plan. A restricted stock unit granted under the
Plan shall confer upon the grantee a right to receive from the Company, upon the
occurrence of an event specified in the Award Agreement, such grantee's vested
restricted stock units multiplied by the Fair Market Value of a share of Common
Stock. Restricted stock units may be granted in connection with all or any part
of, or independently of, any award granted under the Plan. A restricted stock
unit granted in connection with another award may be granted at or after the
time of grant of such award.

              (i) Incentive Stock Option Limitation; Exercisability. To the
extent that the aggregate Fair Market Value (determined as of the time the
option is granted) of the stock with respect to which incentive stock options
are first exercisable by any employee during any calendar year shall exceed
$100,000, or such higher amount as may be permitted from time to time under
section 422 of the Code, such options shall be treated as non-qualified stock
options.

              (j) Incentive Stock Option Limitation: 10% Owners. Notwithstanding
the provisions of paragraphs (d) and (e) of this Section 2.2, an incentive stock
option may not be granted under the Plan to an individual who, at the time the
option is granted, owns stock possessing more than 10% of the total combined
voting power of all classes of stock of his employer corporation or of its
parent or subsidiary corporations (as such ownership may be determined for
purposes of section 422(b) (6) of the Code) unless (i) at the time such
incentive stock option is granted the option exercise price is at least 110% of
the Fair Market Value of the shares subject thereto and (ii) the incentive stock
option by its terms is not exercisable after the expiration of 5 years from the
date it is granted.

         2.3 EXERCISE OF OPTIONS, STOCK APPRECIATION RIGHTS AND RESTRICTED STOCK
UNITS

         Subject to the other provisions of this Article II, each option, stock
appreciation right and restricted stock unit granted under the Plan shall be
exercisable as follows:

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              (a) Timing and Extent of Exercise. Options, stock appreciation
rights and restricted stock units shall be exercisable at such times and under
such conditions as set forth in the corresponding Award Agreement, but in no
event shall any such award be exercisable prior to the first anniversary or
subsequent to the tenth anniversary of the date on which such award was granted.
Unless the applicable Award Agreement otherwise provides, an option, stock
appreciation right or restricted stock unit may be exercised from time to time
as to all or part of the shares or units as to which such award is then
exercisable. A stock appreciation right granted in connection with an option may
be exercised at any time when, and to the same extent that, the related option
may be exercised.

              (b) Notice of Exercise. An option, stock appreciation right or
restricted stock unit shall be exercised by the filing of a written notice with
the Company or the Company's designated exchange agent (the "exchange agent"),
on such form and in such manner as the Administrator shall in its sole
discretion prescribe.

              (c) Payment of Exercise Price. Any written notice of exercise of
an option shall be accompanied by payment for the shares being purchased. Such
payment shall be made: (i) by certified or official bank check (or the
equivalent thereof acceptable to the Company or its exchange agent) for the full
option exercise price; or (ii) with the consent of the Administrator, by
delivery of shares of Common Stock having a Fair Market Value (determined as of
the exercise date) equal to all or part of the option exercise price and a
certified or official bank check (or the equivalent thereof acceptable to the
Company or its exchange agent) for any remaining portion of the full option
exercise price; or (iii) at the discretion of the Administrator and to the
extent permitted by law, by such other provision, consistent with the terms of
the Plan, as the Administrator may from time to time prescribe (whether directly
or indirectly through the exchange agent).

              (d) Delivery of Certificates Upon Exercise. Subject to the
provision of section 2.3(e), promptly after receiving payment of the full option
exercise price, or after receiving notice of the exercise of a stock
appreciation right for which payment will be made partly or entirely in shares,
the Company or its exchange agent shall, subject to the provisions of Section
3.2, deliver to the grantee or to such other person as may then have the right
to exercise the award, a certificate or certificates for the shares of Common
Stock for which the award has been exercised. If the method of payment employed
upon option exercise so requires, and if applicable law permits, an optionee may
direct the Company or its exchange agent, as the case may be, to deliver the
stock certificate(s) to the optionee's stockbroker.

              (e) Investment Purpose and Legal Requirements. Notwithstanding the
foregoing, at the time of the exercise of any option, the Company may, if it
shall deem it necessary or advisable for any reason, require the holder of such
option (i) to represent in writing to the Company that it is the optionee's then
intention to acquire the Shares with respect to which the option is to be
exercised for investment and not with a view to the distribution thereof, or
(ii) to postpone the date of exercise until such time as the Company has
available for delivery to the optionee a prospectus meeting the requirements of
all applicable securities laws; and no shares shall be issued or transferred

                                       7
<PAGE>

upon the exercise of any option unless and until all legal requirements
applicable to the issuance or transfer of such Shares have been complied with to
the satisfaction of the Company. The Company shall have the right to condition
any issuance of shares to any optionee hereunder on such optionee's undertaking
in writing to comply with such restrictions on the subsequent transfer of such
shares as the Company shall deem necessary or advisable as a result of any
applicable law, regulation or official interpretation thereof, and certificates
representing such shares may contain a legend to reflect any such restrictions.

              (f) No Stockholder Rights. No grantee of an option, stock
appreciation right or restricted stock unit (or other person having the right to
exercise such award) shall have any of the rights of a stockholder of the
Company with respect to shares subject to such award until the issuance of a
stock certificate to such person for such shares. Except as otherwise provided
in Section 1.5(b), no adjustment shall be made for dividends, distributions or
other rights (whether ordinary or extraordinary, and whether in cash, securities
or other property) for which the record date is prior to the date such stock
certificate is issued.

         2.4 COMPENSATION IN LIEU OF EXERCISE OF AN OPTION

         Upon written application of the grantee of an option, the Administrator
may in its sole discretion determine to substitute, for the exercise of such
option, compensation to the grantee not in excess of the difference between the
option exercise price and the Fair Market Value of the shares covered by such
written application on the date of such application. Such compensation may be in
cash, in shares of Common Stock, or both, and the payment thereof may be subject
to conditions, all as the Administrator shall determine in its sole discretion.
In the event compensation is substituted pursuant to this Section 2.4 for the
exercise, in whole or in part, of an option, the number of shares subject to the
option shall be reduced by the number of shares for which such compensation is
substituted.

         2.5 TERMINATION OF EMPLOYMENT; DEATH SUBSEQUENT TO A TERMINATION OF
EMPLOYMENT

              (a) General Rule. Except to the extent otherwise provided in
paragraphs (b), (c), (d) or (e) of this Section 2.5 or Section 3.8(b)(iii), a
grantee who incurs a termination of employment may exercise any outstanding
option or stock appreciation right on the following terms and conditions: (i)
exercise may be made only to the extent that the grantee was entitled to
exercise the award on the termination of employment date; and (ii) exercise must
occur within three months after termination of employment but in no event after
the original expiration date of the award.

              (b) Dismissal for Cause; Resignation. If a grantee incurs a
termination of employment as the result of a dismissal for cause or resignation
without the Company's prior consent, all options and stock appreciation rights
not theretofore exercised shall terminate upon the grantee's termination of
employment.

              (c) Retirement. If a grantee incurs a termination of employment as
the result of his retirement, then any outstanding option, stock appreciation
right or restricted stock unit shall be exercisable pursuant to its terms. For
this purpose "retirement" shall mean a grantee's termination of employment,
under circumstances other than those described in paragraph (b) above, on or
after: (x) his 65th birthday, (y) the date on which he has attained age 60 and
completed at least five years of service with the Company (using any method of

                                       8
<PAGE>

calculation the Administrator deems appropriate) or (z) if approved by the
Administrator, on or after he has completed at least 20 years of service.

              (d) Disability. If a grantee incurs a termination of employment by
reason of a disability (as defined below), then any outstanding option, stock
appreciation right or restricted stock unit shall be exercisable pursuant to its
terms. For this purpose "disability" shall mean, except in connection any
physical or mental condition that would qualify a grantee for a disability
benefit under the long-term disability plan maintained by the Company or, if
there is no such plan, a physical or mental condition that prevents the grantee
from performing the essential functions of the grantee's position (with or
without reasonable accommodation) for a period of six consecutive months. The
existence of a disability shall be determined by the Administrator in its sole
and absolute discretion.

              (e) Death.

                  (i) Termination of Employment as a Result of Grantee's Death.
         If a grantee incurs a termination of employment as the result of his
         death, then any outstanding option, stock appreciation right or
         restricted stock unit shall be exercisable pursuant to its terms.

                  (ii) Restrictions on Exercise Following Death. Any such
         exercise of an award following a grantee's death shall be made only by
         the grantee's executor or administrator or other duly appointed
         representative reasonably acceptable to the Administrator, unless the
         grantee's will specifically disposes of such award, in which case such
         exercise shall be made only by the recipient of such specific
         disposition. If a grantee's personal representative or the recipient of
         a specific disposition under the grantee's will shall be entitled to
         exercise any award pursuant to the preceding sentence, such
         representative or recipient shall be bound by all the terms and
         conditions of the Plan and the applicable Award Agreement which would
         have applied to the grantee including, without limitation, the
         provisions of Sections 3.2 and 3.5 hereof.

              (f) Special Rules for Incentive Stock Options. No option that
remains exercisable for more than three months following a grantee's termination
of employment for any reason other than death or disability, or for more than
one year following a grantee's termination of employment as the result of his
becoming disabled, may be treated as an incentive stock option.

              (g) Administrator Discretion. The Administrator, in the applicable
Award Agreement, may waive or modify the application of the foregoing provisions
of this Section 2.5.

         2.6 TRANSFERABILITY OF OPTIONS, STOCK APPRECIATION RIGHTS AND
RESTRICTED STOCK UNITS

         Except as otherwise provided in an applicable Award Agreement
evidencing an option, stock appreciation right or restricted stock unit, during
the lifetime of a grantee, each such award granted to a grantee shall be
exercisable only by the grantee and no such award shall be assignable or

                                       9
<PAGE>

transferable otherwise than by will or by the laws of descent and distribution.
The Administrator may, in any applicable Award Agreement evidencing an option
(other than an incentive stock option to the extent inconsistent with the
requirements of section 422 of the Code applicable to incentive stock options),
permit a grantee to transfer all or some of the options to (A) the grantee's
spouse, children or grandchildren ("Immediate Family Members"), (B) a trust or
trusts for the exclusive benefit of such Immediate Family Members, or (C) other
parties approved by the Administrator in its sole and absolute discretion.
Following any such transfer, any transferred options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
the transfer.

         2.7 GRANT OF RESTRICTED STOCK

              (a) Restricted Stock Grants. The Administrator may grant
restricted shares of Common Stock to such key persons, in such amounts, and
subject to such vesting and forfeiture provisions and other terms and conditions
as the Administrator shall determine in its sole discretion, subject to the
provisions of the Plan. Restricted stock awards may be made independently of or
in connection with any other award under the Plan. A grantee of a restricted
stock award shall have no rights with respect to such award unless such grantee
accepts the award within such period as the Administrator shall specify by
accepting delivery of a restricted stock agreement in such form as the
Administrator shall determine and, in the event the restricted shares are newly
issued by the Company, makes payment to the Company its exchange agent by
certified or official bank check (or the equivalent thereof acceptable to the
Company) in an amount at least equal to the par value of the shares covered by
the award.

              (b) Issuance of Stock Certificate(s). Promptly after a grantee
accepts a restricted stock award, the Company or its exchange agent shall issue
to the grantee a stock certificate or stock certificates for the shares of
Common Stock covered by the award or shall establish an account evidencing
ownership of the stock in uncertificated form. Upon the issuance of such stock
certificate(s), or establishment of such account, the grantee shall have the
rights of a stockholder with respect to the restricted stock, subject to: (i)
the nontransferability restrictions and forfeiture provision described in
paragraphs (d) and (e) of this Section 2.7; (ii) in the Administrator's
discretion, to a requirement that any dividends paid on such shares shall be
held in escrow until all restrictions on such shares have lapsed; and (iii) any
other restrictions and conditions contained in the applicable restricted stock
agreement.

              (c) Custody of Stock Certificate(s). Unless the Administrator
shall otherwise determine, any stock certificates issued evidencing shares of
restricted stock shall remain in the possession of the Company until such shares
are free of any restrictions specified in the applicable restricted stock
agreement. The Administrator may direct that such stock certificate(s) bear a
legend setting forth the applicable restrictions on transferability.

              (d) Nontransferability. Shares of restricted stock may not be
sold, assigned, transferred, pledged or otherwise encumbered or disposed of
except as otherwise specifically provided in this Plan or the applicable
restricted stock agreement. The Administrator at the time of grant shall specify
the date or dates (which may depend upon or be related to the attainment of
performance goals and other conditions) on which the nontransferability of the
restricted stock shall lapse.

                                       10
<PAGE>

              (e) Consequence of Termination of Employment. A grantee's
termination of employment for any reason (including death) shall cause the
immediate forfeiture of all shares of restricted stock that have not yet vested
as of the date of such termination of employment. All dividends paid on such
shares also shall be forfeited, whether by termination of any escrow arrangement
under which such dividends are held, by the grantee's repayment of dividends he
received directly, or otherwise.

         2.8 GRANT OF UNRESTRICTED STOCK

         The Administrator may grant (or sell at a purchase price at least equal
to par value) shares of Common Stock free of restrictions under the Plan, to
such key persons and in such amounts and subject to such forfeiture provisions
as the Administrator shall determine in its sole discretion. Shares may be thus
granted or sold in respect of past services or other valid consideration.

         2.9 GRANT OF PERFORMANCE SHARES

              (a) Performance Share Grants. The Administrator may grant
performance share awards to such key persons, and in such amounts and subject to
such vesting and forfeiture provisions and other terms and conditions, as the
Administrator shall in its sole discretion determine, subject to the provisions
of the Plan. Such an award shall entitle the grantee to acquire shares of Common
Stock, or to be paid the value thereof in cash, as the Administrator shall
determine, if specified performance goals are met. Performance shares may be
awarded independently of, or in connection with, any other award under the Plan.
A grantee shall have no rights with respect to a performance share award unless
such grantee accepts the award by accepting delivery of a Award Agreement at
such time and in such form as the Administrator shall determine.

              (b) Stockholder Rights. The grantee of a performance share award
will have the rights of a stockholder only as to shares for which a stock
certificate has been issued pursuant to the award and not with respect to any
other shares subject to the award.

              (c) Consequence of Termination of Employment. Except as may
otherwise be provided by the Administrator at any time prior to a grantee's
termination of employment, the rights of a grantee of a performance share award
shall automatically terminate upon the grantee's termination of employment by
the Company and its subsidiaries for any reason (including death).

              (d) Exercise Procedures; Automatic Exercise. At the discretion of
the Administrator, the applicable Award Agreement may set out the procedures to
be followed in exercising a performance share award or it may provide that such
exercise shall be made automatically after satisfaction of the applicable
performance goals.

              (e) Tandem Grants; Effect on Exercise. Except as otherwise
specified by the Administrator, (i) a performance share award granted in tandem
with an option may be exercised only while the option is exercisable, (ii) the
exercise of a performance share award granted in tandem with any other award
shall reduce the number of shares subject to such other award in the manner
specified in the applicable Award Agreement, and (iii) the exercise of any award

                                       11
<PAGE>

granted in tandem with a performance share award shall reduce the number of
shares subject to the latter in the manner specified in the applicable Award
Agreement.

              (f) Nontransferability. Performance shares may not be sold,
assigned, transferred, pledged or otherwise encumbered or disposed of except as
otherwise specifically provided in this Plan or the applicable Award Agreement.
The Administrator at the time of grant shall specify the date or dates (which
may depend upon or be related to the attainment of performance goals and other
conditions) on which the nontransferability of the performance shares shall
lapse.

                                   ARTICLE 3
                                  MISCELLANEOUS

         3.1 AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS

              (a) Amendment of the Plan. The Board may from time to time
suspend, discontinue, revise or amend the Plan in any respect whatsoever, except
that no such amendment shall materially impair any rights or materially increase
any obligations under any award theretofore made under the Plan without the
consent of the grantee (or, upon the grantee's death, the person having the
right to exercise the award). For purposes of this Section 3.1, any action of
the Board or the Administrator that in any way alters or affects the tax
treatment of any award shall not be considered to materially impair any rights
of any grantee.

              (b) Stockholder Approval Requirement. Stockholder approval shall
be required with respect to any amendment to the Plan that (i) increases the
aggregate number of shares that may be issued pursuant to incentive stock
options or changes the class of employees eligible to receive such options; or
(ii) materially increases the benefits under the Plan to persons whose
transactions in Common Stock are subject to section 16(b) of the 1934 Act or
increases the benefits under the Plan to someone who is, materially increases
the number of shares which may be issued to such persons, or materially modifies
the eligibility requirements affecting such persons.

              (c) Modification of Awards. The Administrator may cancel any award
under the Plan. The Administrator also may amend any outstanding Award
Agreement, including, without limitation, by amendment which would: (i)
accelerate the time or times at which the award becomes unrestricted or may be
exercised, provided that, except as and to the extent that the Administrator may
otherwise provide pursuant to Section 2.5, 3.7 or 3.8, no option, stock
appreciation right or restricted stock unit shall be exercisable prior to the
first anniversary of its date of grant; (ii) waive or amend any goals,
restrictions or conditions set forth in the Agreement; or (iii) waive or amend
the operation of Section 2.5 with respect to the termination of the award upon
termination of employment. However, any such cancellation or amendment (other
than an amendment pursuant to Sections 3.7 or 3.8(b)) that materially impairs
the rights or materially increases the obligations of a grantee under an
outstanding award shall be made only with the consent of the grantee (or, upon
the grantee's death, the person having the right to exercise the award).

                                       12
<PAGE>

         3.2 Consent Requirement

              (a) No Plan Action Without Required Consent. If the Administrator
shall at any time determine that any Consent (as hereinafter defined) is
necessary or desirable as a condition of, or in connection with, the granting of
any award under the Plan, the issuance or purchase of shares or other rights
thereunder, or the taking of any other action thereunder (each such action being
hereinafter referred to as a "Plan Action"), then such Plan Action shall not be
taken, in whole or in part, unless and until such Consent shall have been
effected or obtained to the full satisfaction of the Administrator.

              (b) Consent Defined. The term "Consent" as used herein with
respect to any Plan Action means (i) any and all listings, registrations or
qualifications in respect thereof upon any securities exchange or under any
federal, state or local law, rule or regulation, (ii) any and all written
agreements and representations by the grantee with respect to the disposition of
shares, or with respect to any other matter, which the Administrator shall deem
necessary or desirable to comply with the terms of any such listing,
registration or qualification or to obtain an exemption from the requirement
that any such listing, qualification or registration be made and (iii) any and
all consents, clearances and approvals in respect of a Plan Action by any
governmental or other regulatory bodies.

         3.3 Nonassignability

         Except as provided in Sections 2.5(e), 2.6, 2.7(d) and 2.9(f): (a) no
award or right granted to any person under the Plan or under any Award Agreement
shall be assignable or transferable other than by will or by the laws of descent
and distribution; and (b) all rights granted under the Plan or any Award
Agreement shall be exercisable during the life of the grantee only by the
grantee or the grantee's legal representative.

         3.4 Requirement of Notification of Election Under Section 83(b) of the
Code

         If any grantee shall, in connection with the acquisition of shares of
Common Stock under the Plan, make the election permitted under section 83(b) of
the Code (i.e., an election to include in gross income in the year of transfer
the amounts specified in section 83(b)), such grantee shall notify the Company
of such election within 10 days of filing notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under the authority of Code section 83(b).

         3.5 Requirement of Notification Upon Disqualifying Disposition Under
Section 421(b) of the Code

         Each Award Agreement with respect to an incentive stock option shall
require the grantee to notify the Company of any disposition of shares of Common
Stock issued pursuant to the exercise of such option under the circumstances
described in section 421(b) of the Code (relating to certain disqualifying
dispositions), within 10 days of such disposition.

                                       13
<PAGE>

         3.6 Withholding Taxes

              (a) With Respect to Cash Payments. Whenever cash is to be paid
pursuant to an award under the Plan, the Company shall be entitled to deduct
therefrom an amount sufficient in its opinion to satisfy all federal, state and
other governmental tax withholding requirements related to such payment.

              (b) With Respect to Delivery of Common Stock. Whenever shares of
Common Stock are to be delivered pursuant to an award under the Plan, the
Company shall be entitled to require as a condition of delivery that the grantee
remit to the Company an amount sufficient in the opinion of the Company to
satisfy all federal, state and other governmental tax withholding requirements
related thereto. With the approval of the Administrator, which the Administrator
shall have sole discretion whether or not to give, the grantee may satisfy the
foregoing condition by electing to have the Company withhold from delivery
shares having a value equal to the amount of tax to be withheld. Such shares
shall be valued at their Fair Market Value as of the date on which the amount of
tax to be withheld is determined. Fractional share amounts shall be settled in
cash. Such a withholding election may be made with respect to all or any portion
of the shares to be delivered pursuant to an award.

         3.7 ADJUSTMENT UPON CHANGES IN COMMON STOCK

              (a) Shares Available for Grants. In the event of any change in the
number of shares of Common Stock outstanding by reason of any stock dividend or
split, reverse stock split, recapitalization, merger, consolidation, combination
or exchange of shares or similar corporate change, the maximum number of shares
of Common Stock with respect to which the Administrator may grant awards under
Article II hereof, as described in Section 1.5(a), and the individual annual
limit described in Section 1.5(d), shall be appropriately adjusted by the
Administrator. In the event of any change in the number of shares of Common
Stock outstanding by reason of any other event or transaction, the Administrator
may, but need not, make such adjustments in the number and class of shares of
Common Stock with respect to which awards: (i) may be granted under Article II
hereof and (ii) granted to any one employee of the Company or a subsidiary
during any one calendar year, in each case as the Administrator may deem
appropriate.

              (b) Outstanding Restricted Stock and Performance Shares. Unless
the Administrator in its sole and absolute discretion otherwise determines, any
securities or other property (including dividends paid in cash) received by a
grantee with respect to a share of restricted stock, the issue date with respect
to which occurs prior to such event, but which has not vested as of the date of
such event, as a result of any dividend, stock split, reverse stock split,
recapitalization, merger, consolidation, combination, exchange of shares or
otherwise will not vest until such share of restricted stock vests, and shall be
promptly deposited with the Company or other custodian designated pursuant to
Section 2.7(c) hereof.

                  The Administrator may, in its absolute discretion, adjust any
grant of shares of restricted stock, the issue date with respect to which has
not occurred as of the date of the occurrence of any of the following events, or
any grant of performance shares, to reflect any dividend, stock split, reverse
stock split, recapitalization, merger, consolidation, combination, exchange of

                                       14
<PAGE>

shares or similar corporate change as the Administrator may deem appropriate to
prevent the enlargement or dilution of rights of grantees.

              (c) Outstanding Options, Stock Appreciation Rights and Dividend
Equivalent Rights--Increase or Decrease in Issued Shares Without Consideration.
Subject to any required action by the stockholders of the Company, in the event
of any increase or decrease in the number of issued shares of Common Stock
resulting from a subdivision or consolidation of shares of Common Stock or the
payment of a stock dividend (but only on the shares of Common Stock), or any
other increase or decrease in the number of such shares effected without receipt
of consideration by the Company, the Administrator shall proportionally adjust
the number of shares of Common Stock subject to each outstanding option and
stock appreciation right, and the exercise price-per-share of Common Stock of
each such option and stock appreciation right and the number of any related
dividend equivalent rights.

              (d) Outstanding Options, Stock Appreciation Rights, Restricted
Stock Units and Dividend Equivalent Rights--Certain Mergers. Subject to any
required action by the stockholders of the Company, in the event that the
Company shall be the surviving corporation in any merger or consolidation
(except a merger or consolidation as a result of which the holders of shares of
Common Stock receive securities of another corporation), each option, stock
appreciation right and dividend equivalent right outstanding on the date of such
merger or consolidation shall pertain to and apply to the securities which a
holder of the number of shares of Common Stock subject to such option, stock
appreciation right, restricted stock unit or dividend equivalent right would
have received in such merger or consolidation.

              (e) Outstanding Options, Stock Appreciation Rights, Restricted
Stock Units and Dividend Equivalent Rights--Certain Other Transactions. In the
event of (i) a dissolution or liquidation of the Company, (ii) a sale of all or
substantially all of the Company's assets, (iii) a merger or consolidation
involving the Company in which the Company is not the surviving corporation or
(iv) a merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of Common Stock receive
securities of another corporation and/or other property, including cash, the
Administrator shall, in its absolute discretion, have the power to:

                  (i) cancel, effective immediately prior to the occurrence of
         such event, each option, stock appreciation right and restricted stock
         unit (including each dividend equivalent right related thereto)
         outstanding immediately prior to such event (whether or not then
         exercisable), and, in full consideration of such cancellation, pay to
         the grantee to whom such option or stock appreciation right was granted
         an amount in cash, for each share of Common Stock subject to such
         option or stock appreciation right, respectively, equal to the excess
         of (x) the value, as determined by the Administrator in its absolute
         discretion, of the property (including cash) received by the holder of
         a share of Common Stock as a result of such event over (y) the exercise
         price of such option or stock appreciation right; or

                  (ii) provide for the exchange of each option, stock
         appreciation right and restricted stock unit (including any related
         dividend equivalent right) outstanding immediately prior to such event
         (whether or not then exercisable) for an option on, stock appreciation
         right, restricted stock unit and dividend equivalent right with respect
         to, as appropriate, some or all of the property which a holder of the
         number of shares of Common Stock subject to such option, stock
         appreciation right or restricted stock unit would have received and,

                                       15
<PAGE>

         incident thereto, make an equitable adjustment as determined by the
         Administrator in its absolute discretion in the exercise price of the
         option, stock appreciation right or restricted stock unit, or the
         number of shares or amount of property subject to the option, stock
         appreciation right, restricted stock unit or dividend equivalent right
         or, if appropriate, provide for a cash payment to the grantee to whom
         such option, stock appreciation right or restricted stock unit was
         granted in partial consideration for the exchange of the option, stock
         appreciation right or restricted stock unit.

              (f) Outstanding Options, Stock Appreciation Rights, Restricted
Stock Units and Dividend Equivalent Rights--Other Changes. In the event of any
change in the capitalization of the Company or a corporate change other than
those specifically referred to in Sections 3.7(c), (d) or (e) hereof, the
Administrator may, in its absolute discretion, make such adjustments in the
number and class of shares subject to options, stock appreciation rights,
restricted stock units and dividend equivalent rights outstanding on the date on
which such change occurs and in the per-share exercise price of each such
option, stock appreciation right and restricted stock unit as the Administrator
may consider appropriate to prevent dilution or enlargement of rights. In
addition, if and to the extent the Administrator determines it is appropriate,
the Administrator may elect to cancel each option, stock appreciation right and
restricted stock unit (including each dividend equivalent right related thereto)
outstanding immediately prior to such event (whether or not then exercisable),
and, in full consideration of such cancellation, pay to the grantee to whom such
option, stock appreciation right or restricted stock unit was granted an amount
in cash, for each share of Common Stock subject to such option, stock
appreciation right or restricted stock unit, respectively, equal to the excess
of (i) the Fair Market Value of Common Stock on the date of such cancellation
over (ii) the exercise price of such option, stock appreciation right or
restricted stock unit.

              (g) No Other Rights. Except as expressly provided in the Plan, no
grantee shall have any rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend, any increase or
decrease in the number of shares of stock of any class or any dissolution,
liquidation, merger or consolidation of the Company or any other corporation.
Except as expressly provided in the Plan, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Common Stock subject to an award or the
exercise price of any option or stock appreciation right.

         3.8 CHANGE IN CONTROL

              (a) Change in Control Defined. For purposes of this Section 3.8,
"Change in Control" shall mean the occurrence of any of the following:

                  (i) any person or "group" (within the meaning of Section
         13(d)(3) of the 1934 Act), other than entities which the Chairman of
         the Board directly or indirectly controls (as defined in Rule 12b-2
         under the 1934 Act), acquiring "beneficial ownership" (as defined in
         Rule 13d-3 under the 1934 Act), directly or indirectly, of fifty

                                       16
<PAGE>

         percent (50%) or more of the aggregate voting power of the capital
         stock ordinarily entitled to elect directors of the Company;

                  (ii) the sale of all or substantially all of the Company's
         assets in one or more related transactions to a person other than such
         a sale to a subsidiary of the Company which does not involve a change
         in the equity holdings of the Company or to an entity which the
         Chairman directly or indirectly controls; or

                  (iii) any merger, consolidation, reorganization or similar
         event of the Company or any of its subsidiaries, as a result of which
         the holders of the voting stock of the Company immediately prior to
         such merger, consolidation, reorganization or similar event do not
         directly or indirectly hold at least fifty-one percent (51%) of the
         aggregate voting power of the capital stock of the surviving entity.

              (b) Effect of a Change in Control. Unless the Administrator
provides otherwise in a Award Agreement, upon the occurrence of a Change in
Control:

                  (i) notwithstanding any other provision of this Plan, any
         award then outstanding shall become fully vested and any award in the
         form of an option, stock appreciation right or restricted stock unit
         shall be immediately exercisable;

                  (ii) to the extent permitted by law, the Administrator may, in
         its sole discretion, amend any Award Agreement in such manner as it
         deems appropriate;

                  (iii) a grantee who incurs a termination of employment for any
         reason, other than a dismissal for cause, concurrent with or within one
         year following the Change in Control may exercise any outstanding
         option, stock appreciation right or restricted stock unit, but only to
         the extent that the grantee was entitled to exercise the award on his
         termination of employment date, until the earlier of (A) the original
         expiration date of the award and (B) the later of (x) the date provided
         for under the terms of Section 2.5 without reference to this Section
         3.8(b)(iii) and (y) the first anniversary of the grantee's termination
         of employment.

              (c) Miscellaneous. Whenever deemed appropriate by the
Administrator, any action referred to in paragraph (b)(ii) of this Section 3.8
may be made conditional upon the consummation of the applicable Change in
Control transaction.

         3.9 RIGHT OF DISCHARGE RESERVED

         Nothing in the Plan or in any Award Agreement shall confer upon any
grantee the right to continue his employment with the Company or affect any
right that the Company may have to terminate such employment.

         3.10 NON-UNIFORM DETERMINATIONS

         The Administrator's determinations under the Plan need not be uniform
and may be made by it selectively among persons who receive, or who are eligible
to receive, awards under the Plan (whether or not such persons are similarly
situated). Without limiting the generality of the foregoing, the Administrator

                                       17
<PAGE>

shall be entitled, among other things, to make non-uniform and selective
determinations, and to enter into non-uniform and selective Award Agreements, as
to (a) the persons to receive awards under the Plan, and (b) the terms and
provisions of awards under the Plan.

         3.11 OTHER PAYMENTS OR AWARDS

         Nothing contained in the Plan shall be deemed in any way to limit or
restrict the Company from making any award or payment to any person under any
other plan, arrangement or understanding, whether now existing or hereafter in
effect.

         3.12 HEADINGS

         Any section, subsection, paragraph or other subdivision headings
contained herein are for the purpose of convenience only and are not intended to
expand, limit or otherwise define the contents of such subdivisions.

         3.13 Effective Date and Term of Plan

              (a) Adoption; Stockholder Approval. The Plan was adopted by the
Board and although the Company intends to obtain approval of the Plan by the
Company's stockholders within the time period required to allow grants of
options hereunder to qualify as incentive stock options, awards under the Plan
prior to such stockholder approval may, but need not, be made subject to such
approval.

              (b) Termination of Plan. Unless sooner terminated by the Board or
pursuant to Paragraph (a) above, the provisions of the Plan respecting the grant
of incentive stock options shall terminate on the tenth anniversary of the
adoption of the Plan by the Board, and no incentive stock option awards shall
thereafter be made under the Plan. All such awards made under the Plan prior to
its termination shall remain in effect until such awards have been satisfied or
terminated in accordance with the terms and provisions of the Plan and the
applicable Award Agreements.

         3.14 Restriction on Issuance of Stock Pursuant to Awards

         The Company shall not permit any shares of Common Stock to be issued
pursuant to Awards granted under the Plan unless such shares of Common Stock are
fully paid and non-assessable under applicable law.

         3.15 Governing Law

         Except to the extent preempted by any applicable federal law, the Plan
will be construed and administered in accordance with the laws of the Marshall
Islands without giving effect to principles of conflict of laws.

                                       18

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