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                                                                   Exhibit 10.48

                           BIO-KEY INTERNATIONAL, INC.
                            2004 STOCK INCENTIVE PLAN

1.       PURPOSE.

         The purpose of this 2004 Stock Incentive Plan (the "Plan") of BIO-key
International, Inc., a Minnesota corporation (the "Company"), is to promote and
closely align the interests of employees of the Company and its shareholders by
providing employees with stock-based compensation and other performance-based
compensation. The Plan is intended to strengthen the Company's ability to reward
employee performance that enhances long-term shareholder value, increase
employee stock ownership through performance-based compensation plans, and
strengthen the Company's ability to attract and retain outstanding employees.

         Except where the context otherwise requires or as specifically provided
herein, the term "Company" shall include any of the Company's present or future
parent or subsidiary corporations as defined in Section 424 of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated thereunder
(the "Code"), and any other business venture or affiliate in which the Company
has a controlling interest.

2.       ADMINISTRATION.

         (a) ADMINISTRATION BY BOARD. The Plan will be administered by the board
of directors of the Company (the "Board"). The Board will have full and final
authority to operate, manage and administer the Plan on behalf of the Company.
To the extent required for transactions under the Plan to qualify for the
exemptions available under Rule 16b-3 promulgated under the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), all actions relating to
Awards (as defined in Section 4) to persons subject to Section 16 of the
Exchange Act may be taken by the Board or a Committee composed of two or more
members, each of whom is a "non-employee director" within the meaning of Rule
16b-3 under the Exchange Act. To the extent required for compensation realized
from Awards under the Plan to be deductible by the Company pursuant to Section
162(m) of the Code ("Section 162(m)"), such Awards may be granted by the Board
or a Committee composed of two or more members, each of whom is an "outside
director" within the meaning of Section 162(m).

         (b) AUTHORITY OF BOARD. Except as provided in the Plan, the Board shall
be authorized and empowered to take all actions necessary or desirable, in its
sole discretion, in connection with the administration of the Plan, including,
without limitation, the following:

             (1) to prescribe, amend and rescind rules and regulations relating
to the Plan and any Awards and to define terms not otherwise defined herein;

             (2) to determine which persons are Participants, to which of such
Participants, if any, Awards shall be granted hereunder, and the timing of any
such Awards;

             (3) to grant Awards to Participants and determine the terms and
conditions thereof, including the number of shares of Common Stock subject to
Awards and the circumstances under which Awards become exercisable or vested or
are forfeited or expire;

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             (4) to establish, verify the extent of satisfaction of, adjust,
reduce or waive any performance goals or other conditions applicable to the
grant, issuance, exercisability, vesting and/or ability to retain any Award;

             (5) to prescribe and amend the terms and conditions of the
agreements or other documents evidencing Awards made under this Plan, which
terms and conditions may differ among individual Awards and participants;

             (6) to interpret and construe this Plan, any rules and regulations
under this Plan, and the terms and conditions of any Award granted hereunder,
and to make exceptions to any such provisions in good faith and for the benefit
of the Company; and

             (7) to make all other determinations deemed necessary or advisable
for the administration of the Plan.

         All decisions and interpretations by the Board shall be made in the
Board's sole discretion and shall be final, binding and conclusive on all
persons having or claiming any interest in the Plan or in any Award. No member
or former member of the Board acting pursuant to the authority delegated by the
Board shall be liable for any action or determination made in good faith with
respect to the Plan.

         (c) APPOINTMENT OF COMMITTEES. To the extent permitted by applicable
law, the Board may delegate any or all of its powers under the Plan to one or
more committees or subcommittees of the Board (a "Committee"). Action of a
Committee may be taken by the vote of a majority of its members or by the
written consent of a majority of its members. All decisions by a Committee shall
be made in the Committee's sole discretion and shall be final, binding and
conclusive on all persons having or claiming any interest in the Plan or in any
Award. A Committee may allocate among its members and delegate to any director
of the Company who is not a member of the Committee any of its administrative
responsibilities. All references in the Plan to the "Board" shall mean the Board
or one or more Committees to the extent the Board has delegated any of its
powers or authority under the Plan to such Committee.

3.       INDIVIDUALS ELIGIBLE FOR AWARDS.

         Awards under the Plan may be made to the following individuals: (i)
employees, officers or directors of the Company, (ii) consultants or advisors to
the Company, and (iii) individuals who have entered into an agreement with the
Company under which they will be employed by the Company in the future. Each
individual who is eligible to participate in the Plan or has been granted an
Award under the Plan shall be deemed a "Participant."

4.       AWARDS AVAILABLE UNDER THE PLAN.

         Awards may be made under the Plan in the form of: (i) options, (ii)
stock appreciation rights, (iii) restricted stock, (iv) restricted stock units,
(v) unrestricted stock, and (vi) other equity-based or equity-related awards
that the Board determines to be consistent with the purpose of the Plan and the
interests of the Company (each award together with the written agreement
containing the terms and conditions of the award, an "Award").

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5.       STOCK AVAILABLE FOR AWARDS.

         (a) NUMBER OF SHARES. Awards may be made under the Plan for up to
4,000,000 shares of common stock, $.01 par value per share, of the Company (the
"Common Stock"). If: (i) any Award expires or is terminated, surrendered or
canceled without having been fully exercised or is forfeited in whole or in part
(including as the result of shares of Common Stock subject to such Award being
repurchased by the Company at the original issuance price pursuant to a
contractual repurchase right), (ii) any Award results in any Common Stock not
being issued (including, without limitation, when an Award is settled for cash),
(iii) shares of Common Stock are surrendered or withheld from any Award to
satisfy a Participant's income tax or other withholding obligation, or (iv)
shares of Common Stock owned by a Participant are tendered to pay the exercise
price of any Award granted under the Plan, then in each such case the shares of
Common Stock covered by such forfeited, terminated or canceled Award or that are
equal to the number of shares surrendered, withheld or tendered shall again
become available for transfer pursuant to Awards granted or to be granted under
the Plan, subject, however, in the case of Incentive Stock Options (as
hereinafter defined), to any limitations under the Code. Shares issued under the
Plan may consist in whole or in part of authorized but unissued shares or
treasury shares.

         (b) LIMITATIONS ON AWARDS. In no event may any Participant be granted
Awards with respect to more than 300,000 shares of Common Stock in any calendar
year. The number of shares of Common Stock relating to an Award granted to a
Participant in a calendar year that are subsequently forfeited, cancelled or
otherwise terminated shall continue to count toward the foregoing limitation in
such calendar year. In addition, if the exercise price of an Award is
subsequently reduced, the transaction shall be deemed a cancellation of the
original Award and the grant of a new Award so that both transactions shall
count toward the maximum shares issuable in the calendar year to a Participant.
Except as provided under the Plan and under the terms of any Award: (i) there
shall be no limit on the number or the value of shares of Common Stock that may
be subject to Awards to any individual under the Plan; and (ii) there shall be
no limit on the amount of cash, securities (other than shares of Common Stock as
provided herein) or other property that my be delivered pursuant to any Award.
The limitations on Awards described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code ("Section 162(m)") to the
extent any Awards are intended to qualify as "performance-based compensation"
under Section 162(m).

         (c) SUBSTITUTE AWARDS. The Board may grant Awards in tandem with or in
substitution for any other Award granted under this Plan or any award granted
under any other plan of the Company. The Board may grant Awards under the Plan
in substitution for stock and stock-based awards held by employees of another
corporation who concurrently become employees of the Company as the result of a
merger or consolidation of the employing corporation with the Company or the
acquisition by the Company of property or stock of the employing corporation.
The Board may direct that the substitute Awards be granted on such terms and
conditions as the Board considers appropriate in the circumstances.

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6.       STOCK OPTIONS.

         (a) GENERAL. The Board may grant options to purchase Common Stock
(each, an "Option") and determine the number of shares of Common Stock to be
covered by each Option, the exercise price of each Option, and the conditions
and limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option that is not intended to be an Incentive Stock
Option (as defined below) or that is intended to be an Incentive Stock Option
but fails to so qualify, whether at the time of grant or thereafter, shall be
designated a "Nonstatutory Stock Option".

         (b) INCENTIVE STOCK OPTIONS. An Option that the Board intends to be an
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company, any of the
Company's present or future parent or subsidiary corporations as defined in
Sections 424(e) or (f) of the Code and any other entities the employees of which
are eligible to receive Incentive Stock Options under the Code, and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. To the extent required for "incentive stock option" treatment
under Section 422 of the Code, the aggregate fair market value as determined by,
or in a manner approved by, the Board in good faith ("Fair Market Value"),
determined as of the time of grant, of the shares of Common Stock with respect
to which Incentive Stock Options granted under the Plan and any other plan of
the Company become exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. The Company shall have no liability to
a Participant, or any other party, if an Option, or any part thereof, that is
intended to be an Incentive Stock Option is not an Incentive Stock Option.

         (c) EXERCISE PRICE. The Board shall establish the exercise price of an
Option at the time each Option is granted and specify it in the applicable
Award; provided, however, that the exercise price shall be not less than 85% of
the fair market value of the Common Stock, as determined by the Board, at the
time the Option is granted; and provided further, that if the Option granted is
an Incentive Stock Option, the exercise price shall be not less than 100% of the
fair market value of the Common Stock, as determined by the Board, at the time
the Incentive Stock Option is granted. If an employee owns or is deemed to own,
by reason of the attribution rules applicable under Section 424(d) of the Code,
more than ten percent (10%) of the combined voting power of all classes of stock
of the Company and an Incentive Stock Option is granted to such employee, the
exercise price shall be not less than 110% of the fair market value of the
Common Stock, as determined by the Board, at the time the Option is granted.

         (d) DURATION. Each Option shall be exercisable at such times and
subject to such terms and conditions as the Board may specify in the applicable
Award; provided, however, that no Option will be granted for a term in excess of
10 years. If an employee owns or is deemed to own, by reason of the attribution
rules applicable under Section 424(d) of the Code, more than ten percent (10%)
of the combined voting power of all classes of stock of the Company and an
Incentive Stock Option is granted to such employee, the term of such option
shall be no more than five (5) years from the date of grant.

         (e) EXERCISABILITY; RIGHTS OF STOCKHOLDER. Options shall become vested
and exercisable at such time or times, whether or not in installments, as shall
be determined by the

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Board. In the alternative, the Board may specify that an Option shall become
vested and exercisable upon the achievement of such performance goals,
objectives and other conditions as it may establish at the time of grant. A
Participant shall have the rights of a stockholder only as to shares of Common
Stock acquired upon the exercise of a Option and not as to shares of Common
Stock underlying unexercised Options.

         (f) RESTRICTIONS. The Board shall determine, with respect to each
Option to be granted, the nature and extent of the restrictions, if any, to be
imposed on the shares of Common Stock that may be purchased thereunder. Without
limiting the generality of the foregoing, the Board may impose conditions
restricting absolutely or conditionally the transferability of shares of Common
Stock acquired through the exercise of Options for such periods, and subject to
such conditions, including continued employment of the Participant by the
Company, as the Board may determine.

         (g) METHOD OF EXERCISE. Options may be exercised in whole or in part by
delivering written notice of exercise to the Company specifying the number of
shares to be purchased and signed by the proper person, or by any other form of
notice, including electronic notice, approved by the Board, together with
payment in full of the aggregate exercise price for the number of shares for
which the Option is exercised.

         (h) METHODS OF PAYMENT. Common Stock purchased upon the exercise of an
Option granted under the Plan may be paid for as follows:

             (1) in cash or by check, payable to the order of the Company;

             (2) if the shares of Common Stock underlying the Option are
registered under the Securities Act, except as the Board may, in its sole
discretion, otherwise provide in an Award, by: (i) delivery of an irrevocable
and unconditional undertaking by a creditworthy broker to deliver promptly to
the Company sufficient funds to pay the exercise price and any required tax
withholding, or (ii) delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company the exercise price and any required tax withholding;

             (3) by delivery of such shares of Common Stock owned by the
Participant valued at their Fair Market Value, provided (i) such method of
payment is then permitted under applicable law, (ii) such shares of Common Stock
were owned by the Participant at least six months prior to such delivery, and
(iii) such shares of Common Stock are not subject to any repurchase, forfeiture,
unfulfilled vesting or other similar requirements or restrictions (any such
shares satisfying all of the requirements set forth in subsections (i), (ii) and
(iii), "Mature Shares");

             (4) by reducing the number of shares of Common Stock otherwise
issuable under the Option to the Participant upon the exercise of the Option by
a number of shares of Common Stock having a Fair Market Value equal to such
aggregated exercise price; provided, however, that such method of payment is
then permitted under applicable law;

             (5) to the extent permitted by applicable law and by the Board, in
its sole discretion, by: (i) delivery of a promissory note of the Participant to
the Company on terms

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determined by the Board, or (ii) payment of such other lawful consideration as
the Board may determine; or

             (6) by any combination of the above permitted forms of payment.

         The delivery of certificates representing the shares of Common Stock to
be purchased pursuant to the exercise of an Option will be contingent upon
receipt from the Participant (or a purchaser acting in his stead in accordance
with the provisions of the Option) by the Company of the full purchase price for
the shares and the fulfillment of any other requirements contained in the Option
or imposed by applicable law.

7.       STOCK APPRECIATION RIGHTS.

         (a) GENERAL. The Board may grant Awards entitling the holder on
exercise thereof to acquire: (i) a number of shares of Common Stock, (ii) an
equivalent amount of cash, or (iii) a combination of Common Stock and cash, as
determined by the Board in its sole discretion, determined in whole or in part
by reference to the appreciation, from and after the date of grant, in the Fair
Market Value of a share of Common Stock (each, a "SAR"), with such rights and
subject to such restrictions and conditions as the Board may determine at the
time of grant.

         (b) EXERCISE PRICE. The Board shall establish the exercise price at the
time each SAR is granted and specify it in the applicable Award; provided,
however, that the exercise price shall be not less than 85% of the fair market
value of the Common Stock, as determined by the Board, at the time the SAR is
granted.

         (c) CALCULATION OF APPRECIATION. Upon exercise, the Participant shall
receive a number of shares of Common Stock, an amount of cash, or a combination
of Common Stock and cash, having an aggregate Fair Market Value equal to the
product of: (i) the sum of: (x) the Fair Market Value of a share of Common Stock
on the date of the Participant's request, less (y) the exercise price per share
of Common Stock specified in such SAR, multiplied by (ii) the number of shares
of Common Stock for which such SAR shall be exercised.

         (d) EXERCISABILITY; RIGHTS OF STOCKHOLDER. SARs shall become vested and
exercisable at such time or times, whether or not in installments, as shall be
determined by the Board. In the alternative, the Board may specify that a SAR
shall become vested and exercisable upon the achievement of such performance
goals, objectives and other conditions as it may establish at the time of grant.
A Participant shall have the rights of a stockholder only as to shares of Common
Stock acquired upon the exercise of a SAR and not as to shares of Common Stock
underlying unexercised SARs.

         (e) RESTRICTIONS. The Board shall determine, with respect to each SAR
to be granted, the nature and extent of the restrictions, if any, to be imposed
on any shares of Common Stock that may be purchased thereunder. Without limiting
the generality of the foregoing, the Board may impose conditions restricting
absolutely or conditionally the transferability of shares of Common Stock
acquired through the exercise of SARs for such periods, and subject to such
conditions, including continued employment of the Participant by the Company, as
the Board may determine.

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         (f) METHOD OF EXERCISE. SARs may be exercised in whole or in part by
delivering written notice of exercise to the Company specifying the number of
shares to be purchased and signed by the proper person, or by any other form of
notice, including electronic notice, approved by the Board.

8.       RESTRICTED STOCK.

         (a) GENERAL. The Board may grant Awards entitling recipients to
acquire, for such purchase price, if any, as may be determined by the Board,
shares of Common Stock ("Restricted Stock") with such rights and subject to such
restrictions and conditions as the Board may determine at the time of grant.

         (b) ACCEPTANCE OF AWARD. A Participant who is granted Restricted Stock
shall have no rights with respect to such Award unless the Participant shall
have accepted the Award within 60 days (or such shorter date as the Board may
specify) following the date of the Award by making payment to the Company of the
specified purchase price, if any, of the shares covered by the Award and by
executing and delivering to the Company a written instrument that sets forth the
terms and conditions applicable to the Restricted Stock in such form as the
Board shall determine.

         (c) VESTING OF RESTRICTED STOCK. Shares of Restricted Stock shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Board. In the alternative, the Board
may specify that the shares of Restricted Stock shall become vested and
exercisable upon the achievement of such performance goals, objectives and other
conditions as it may establish at the time of grant. Subsequent to such date or
dates and/or the attainment of such pre-established performance goals,
objectives and other conditions, the shares on which all restrictions have
lapsed shall no longer be Restricted Stock and shall be deemed "vested."

         (d) RIGHTS AS A STOCKHOLDER. Upon complying with the provisions of this
Section 8, a Participant shall have all the rights of a stockholder with respect
to the Restricted Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in the Plan and subject to such other conditions contained in the
Award. Unless the Board shall otherwise determine, certificates evidencing
shares of Restricted Stock shall remain in the possession of the Company until
such shares are vested as provided in Section 8(c) below.

         (e) RESTRICTIONS. In the event of termination of employment by the
Company for any reason, including death, Disability, Retirement and for Cause,
the Company shall have the right, at the discretion of the Board, to repurchase
shares of Restricted Stock that have not then vested at their purchase price, or
to require forfeiture of such shares to the Company if acquired at no cost, from
the Participant or the Participant's legal representative or legatee. Unless
otherwise specified in the Award, the company must exercise such right of
repurchase or forfeiture within 90 days following such termination of
employment.

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         (f) WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The written
instrument evidencing the Award may require or permit the immediate payment,
waiver, deferral or investment of dividends paid on the Restricted Stock.

9.       RESTRICTED UNITS.

         (a) GENERAL. The Board may grant Awards entitling recipients to acquire
in the future: (i) shares of Common Stock, (ii) an equivalent amount of cash, or
(iii) a combination of shares of Common Stock and cash, as determined by the
Board in its sole discretion, with such rights and subject to such restrictions
and conditions as the Board may determine at the time of grant, (each, a
"Restricted Unit"; together with Restricted Stock, a "Restricted Award").

         (b) VESTING OF RESTRICTED UNITS. Restricted Units shall become vested
and exercisable at such time or times, whether or not in installments, as shall
be determined by the Board. In the alternative, the Board may specify that a
Restricted Unit shall become vested and exercisable upon the achievement of such
performance goals, objectives and other conditions as it may establish at the
time of grant.

         (c) NO RIGHTS AS STOCKHOLDER. A Participant holding Restricted Units
shall not have the rights of a stockholder with respect to the shares of Common
Stock, if any, issuable under such Restricted Units, unless and until such
shares are issued to the Participant pursuant to the provisions of the
Restricted Units and this Plan.

10.      UNRESTRICTED STOCK.

         The Board may grant Awards entitling recipients to acquire, for such
purchase price, if any, as may be determined by the Board, shares of Common
Stock free of any vesting restrictions or conditions under the Plan
("Unrestricted Stock") at a purchase price determined by the Board if such
shares of Common Stock are registered under the Securities Act. Shares of
Unrestricted Stock may be granted or sold in respect of past services or other
valid consideration.

11.      OTHER STOCK-BASED AWARDS.

         The Board may grant other types of equity-based or equity-related
Awards in such amounts and subject to such terms and conditions as the Board may
determine. Such Awards may entail the transfer of actual shares of Common Stock
to Participants or payment in cash or otherwise of amounts based on the value of
shares of Common Stock, and may include, without limitation, Awards designed to
comply with or take advantage of the applicable local laws of jurisdictions
other than the United States.

12.      ADJUSTMENTS FOR CHANGES IN COMMON STOCK AND CERTAIN OTHER EVENTS.

         (a) CHANGES IN CAPITALIZATION. In the event of any stock split, reverse
stock split, stock dividend, recapitalization, combination of shares,
reclassification of shares, spin-off or other similar change in capitalization
or event, or any distribution to holders of shares of Common Stock other than an
ordinary cash dividend: (i) the number and class of securities available under
this Plan, (ii) the limitations on Awards set forth in Section 5(b), (iii) the
number and class of securities and exercise price per share subject to each
Option then outstanding,

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(iv) the repurchase price per share of Common Stock subject to each Restricted
Award then outstanding, and (v) the terms of each other stock-based Award then
outstanding, shall be adjusted appropriately by the Company, or substituted
Awards may be made, if applicable, to the extent the Board shall determine, in
good faith, that such an adjustment or substitution is necessary or appropriate.
Any adjustment under this Section 12(a) shall become effective at the close of
business on the date the subdivision or combination becomes effective, or as of
the record date of such dividend, or in the event that no record date is fixed,
upon the making of such dividend. If this Section 12(a) applies and Section
12(c) also applies to any event, Section 12(c) shall be applicable to such
event, and this Section 12(a) shall not be applicable.

         (b) LIQUIDATION OR DISSOLUTION. In the event the shareholders of the
Company approve a plan of complete liquidation or dissolution of the Company or
an agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets, the Board shall provide that: (i) except to the
extent specifically provided to the contrary in any Award, all then unexercised
Options and SARs outstanding will: (A) become exercisable in full as of a
specified time at least 10 business days prior to the effective date of such
liquidation, dissolution, sale or disposition, and (B) terminate effective upon
such liquidation, dissolution, sale or disposition, except to the extent
exercised before such effective date, and (ii) except to the extent specifically
provided to any Restricted Award, all restrictions and conditions on all
Restricted Awards then outstanding shall automatically be deemed terminated or
satisfied.

         (c) REORGANIZATION AND CHANGE IN CONTROL EVENTS.

             (1) DEFINITIONS.

                 (a) A "Reorganization Event" shall mean:

                          (i) any merger or consolidation of the Company with or
             into another entity as a result of which all of the outstanding
             shares of Common Stock are converted into or exchanged for the
             right to receive cash, securities or other property; or

                          (ii) any exchange of all of the outstanding shares of
             Common Stock for cash, securities or other property pursuant to a
             share exchange transaction.

                 (b) A "Change in Control Event" shall mean:

                          (i) the acquisition by an individual, entity or group
             within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
             Act (each, a "Person") of beneficial ownership of any capital stock
             of the Company if, after such acquisition, such Person beneficially
             owns (within the meaning of Rule 13d-3 promulgated under the
             Exchange Act) 30% or more of either (x) the then-outstanding shares
             of common stock of the Company (the "Outstanding Common Stock") or
             (y) the combined voting power of the then-outstanding securities of
             the Company entitled to vote generally in the election of directors
             (the "Outstanding Voting Securities"); provided, however, that for
             purposes of this subsection (i), the following acquisitions shall
             not constitute a Change in Control Event: (A) any acquisition
             directly from the Company (excluding an acquisition pursuant to the
             exercise, conversion or exchange of any security exercisable for,
             convertible into or exchangeable for common stock or voting
             securities of the Company, unless the

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             Person exercising, converting or exchanging such security acquired
             such security directly from the Company or an underwriter or agent
             of the Company), (B) any acquisition by any employee benefit plan
             or related trust sponsored or maintained by the Company or any
             corporation controlled by the Company, or (C) any acquisition by
             any corporation pursuant to a Business Combination (as defined in
             Section 12(c)(1)(b)(iii) below) that complies with clauses (x) and
             (y) of subsection (iii) of this definition;

                          (ii) an event that results in the Continuing Directors
             (as defined below) not constituting a majority of the Board (or, if
             applicable, the board of directors of a successor corporation to
             the Company). "Continuing Director" means, at any date, a member of
             the Board: (x) who was a member of the Board on the date of the
             initial adoption of this Plan by the Board, or (y) who was
             nominated or elected subsequent to such date by at least a majority
             of the directors who were Continuing Directors at the time of such
             nomination or election or whose election to the Board was
             recommended or endorsed by at least a majority of the directors who
             were Continuing Directors at the time of such nomination or
             election; provided, however, that there shall be excluded from this
             clause (y) any individual whose initial assumption of office
             occurred as a result of an actual or threatened election contest
             with respect to the election or removal of directors or other
             actual or threatened solicitation of proxies or consents, by or on
             behalf of a person other than the Board; or

                          (iii) the consummation of a merger, consolidation,
             reorganization, recapitalization or share exchange involving the
             Company or a sale or other disposition of all or substantially all
             of the assets of the Company (a "Business Combination"), unless,
             immediately following such Business Combination, each of the
             following two conditions is satisfied: (x) all or substantially all
             of the individuals and entities who were the beneficial owners of
             the Outstanding Common Stock and Outstanding Voting Securities
             immediately prior to such Business Combination beneficially own,
             directly or indirectly, more than 50% of the then-outstanding
             shares of common stock and the combined voting power of the
             then-outstanding securities entitled to vote generally in the
             election of directors, respectively, of the resulting or acquiring
             corporation in such Business Combination, which shall include,
             without limitation, a corporation that as a result of such
             transaction owns the Company or all or substantially all of the
             Company's assets either directly or through one or more
             subsidiaries (such resulting or acquiring corporation is referred
             to herein as the "Acquiring Corporation") in substantially the same
             proportions as their ownership of the Outstanding Common Stock and
             Outstanding Voting Securities, respectively, immediately prior to
             such Business Combination, and (y) no Person (excluding the
             Acquiring Corporation or any employee benefit plan or related trust
             maintained or sponsored by the Company or by the Acquiring
             Corporation) beneficially owns, directly or indirectly, 30% or more
             of the then-outstanding shares of common stock of the Acquiring
             Corporation, or of the combined voting power of the
             then-outstanding securities of such corporation entitled to vote
             generally in the election of directors (except to the extent that
             such ownership existed prior to the Business Combination).

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             (2) EFFECT ON OPTIONS AND SARS.

                          (a) REORGANIZATION EVENT. Upon the occurrence of a
             Reorganization Event (regardless of whether such event also
             constitutes a Change in Control Event), or the execution by the
             Company of any agreement with respect to a Reorganization Event
             (regardless of whether such event will result in a Change in
             Control Event), the Board shall provide that all outstanding
             Options and SARs shall be assumed, or equivalent options shall be
             substituted, by the acquiring or succeeding corporation (or an
             affiliate thereof); provided, however, that if such Reorganization
             Event also constitutes a Change in Control Event, except to the
             extent specifically provided to the contrary in the instrument
             evidencing any Option or SAR or any other agreement between a
             Participant and the Company, such assumed or substituted options
             shall be immediately exercisable in full upon the occurrence of
             such Reorganization Event. For purposes hereof, an Option or SAR
             shall be considered to be assumed if, following consummation of the
             Reorganization Event, the Option or SAR confers the right to
             purchase, for each share of Common Stock subject to the Option or
             SAR immediately prior to the consummation of the Reorganization
             Event, the consideration (whether cash, securities or other
             property) received as a result of the Reorganization Event by
             holders of Common Stock for each share of Common Stock held
             immediately prior to the consummation of the Reorganization Event
             (and if holders were offered a choice of consideration, the type of
             consideration chosen by the holders of a majority of the
             outstanding shares of Common Stock); provided, however, that if the
             consideration received as a result of the Reorganization Event is
             not solely common stock of the acquiring or succeeding corporation
             (or an affiliate thereof), the Company may, with the consent of the
             acquiring or succeeding corporation (or an affiliate thereof),
             provide for the consideration to be received upon the exercise of
             Options and SARs to consist solely of common stock of the acquiring
             or succeeding corporation (or an affiliate thereof) equivalent in
             fair market value to the per share consideration received by
             holders of outstanding shares of Common Stock as a result of the
             Reorganization Event.

                          Notwithstanding the foregoing, if the acquiring or
             succeeding corporation (or an affiliate thereof) does not agree to
             assume, or substitute for, such Options and SARs, then the Board
             shall, upon written notice to the Participants, provide that all
             then unexercised Options and SARs will become exercisable in full
             as of a specified time prior to the Reorganization Event and will
             terminate immediately prior to the consummation of such
             Reorganization Event, except to the extent exercised by the
             Participants before the consummation of such Reorganization Event;
             provided, however, that in the event of a Reorganization Event
             under the terms of which holders of Common Stock will receive upon
             consummation thereof a cash payment for each share of Common Stock
             surrendered pursuant to such Reorganization Event (the "Acquisition
             Price"), then the Board may instead provide that all outstanding
             Options and SARs shall terminate upon consummation of such
             Reorganization Event and that each Participant shall receive, in
             exchange therefor, a cash payment equal to the amount (if any) by
             which: (A) the Acquisition Price multiplied by the number of shares
             of Common Stock subject to such outstanding Options and SARs
             (whether or not then exercisable), exceeds (B) the aggregate
             exercise price of such Options. To the extent all or any portion of
             an Option or SAR becomes exercisable solely as a result of the
             first sentence of this paragraph, upon exercise of such Option or
             SAR the Participant shall receive shares subject to a right of
             repurchase by the Company or its successor at the exercise price of
             the Option or SAR. Such repurchase right: (X) shall lapse at the
             same rate as the Option or SAR would have become exercisable under
             its terms, and (Y) shall not apply to

                                      -11-
<PAGE>

             any shares subject to the Option or SAR that was exercisable
             under its terms without regard to the first sentence of
             this paragraph.

                          (b) CHANGE IN CONTROL EVENT THAT IS NOT A
             REORGANIZATION EVENT. Upon the occurrence of a Change in Control
             Event that does not also constitute a Reorganization Event, except
             to the extent specifically provided to the contrary in any Option
             or SAR Award, all Options and SARs then outstanding shall
             automatically become immediately exercisable in full.

         (3) EFFECT ON RESTRICTED AWARDS AND AWARDS OF UNRESTRICTED STOCK.

                          (a) REORGANIZATION EVENT THAT IS NOT A CHANGE IN
             CONTROL EVENT. Upon the occurrence of a Reorganization Event that
             is not a Change in Control Event, the repurchase and other rights
             of the Company under each outstanding Restricted Award shall inure
             to the benefit of the Company's successor and shall apply to the
             cash, securities or other property that the Common Stock was
             converted into or exchanged for pursuant to such Reorganization
             Event in the same manner and to the same extent as they applied to
             the Common Stock subject to such Restricted Award.

                          (b) CHANGE IN CONTROL EVENT. Upon the occurrence of a
             Change in Control Event (regardless of whether such event also
             constitutes a Reorganization Event), except to the extent
             specifically provided to the contrary in the Restricted Award, all
             restrictions and conditions on all Restricted Awards then
             outstanding shall automatically be deemed terminated or satisfied.

         (d) NOTICE OF ADJUSTMENT. When any adjustment is required to be made in
under this Section 12, the Company shall promptly notify the Participant of such
event and of the number of shares of Common Stock or other securities or
property thereafter owned or that may be acquired under an Award.

         (e) NO IMPAIRMENT. The Company and the Participant will not, by any
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company or the
Participant, respectively, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 12 and in the taking of all
such action as may be necessary or appropriate in order to protect the rights or
the Company and the Participant against impairment

13.      TERMINATION OF AWARDS.

         (a) TERMINATION BY DEATH. If any Participant's employment by, or other
relationship with, the Company terminates by reason of death: (i) any Options or
SARs then owned by such Participant may thereafter be exercised, to the extent
exercisable at the date of death by the legal representative or legatee of the
Participant, until the earlier of the date that is one year (or such longer
period as the Board shall specify at any time) after the date of death or until
the date of expiration of the stated term of the Options or SARs, if earlier,
and (ii) any restrictions and conditions on any Restricted Awards then owned by
the Participant shall automatically be deemed terminated or satisfied on the
date of death, and the legal representative or legatee of the Participant shall
have the right to acquire any shares of Common Stock underlying the Restricted
Awards until the earlier of the date that is one year (or such longer period as
the Board shall

                                      -12-
<PAGE>

specify at any time) after the date of death or until the expiration of the
stated term of the Restricted Award.

         (b) TERMINATION BY REASON OF DISABILITY OR RETIREMENT.

             (1) If a Participant's employment by, or other relationship with,
the Company terminates by reason of disability as set forth in Section 22(e)(3)
of the Code ("Disability"): (i) any Options or SARs then owned by such
Participant may thereafter be exercised, to the extent they were exercisable at
the time of such termination of employment, until the earlier of the date that
is one year (or such longer period as the Board shall specify at any time) after
the date of such termination of employment or the date of expiration of the
stated term of the Options or SARs, and (ii) any restrictions and conditions on
any Restricted Awards then owned by the Participant shall automatically be
deemed terminated or satisfied on the date of such termination of employment,
and the legal representative or guardian of the Participant shall have the right
to acquire any shares of Common Stock underlying the Restricted Awards until the
earlier of the date that is one year (or such longer period as the Board shall
specify at any time) after the date of such termination of employment or the
date of expiration of the stated term of the Restricted Award.

             (2) If a Participant retires in good standing from active
employment or service with the Company in accordance with the retirement
policies of the Company then in effect ("Retirement"), (i) any Options and SARs
then held by the Participant may thereafter be exercised, to the extent they
were exercisable at the time of such termination, until the earlier of the date
that is three months (or such longer period as the Board shall specify at any
time) after the date of such Retirement or until the date of expiration of the
stated term of the Options or SARs, and (ii) any restrictions and conditions on
any Restricted Awards then owned by the Participant shall automatically be
deemed terminated or satisfied on the date of such Retirement and the
Participant shall have the right to acquire any shares of Common Stock
underlying the Restricted Awards until the earlier of the date that is three
months (or such longer period as the Board shall specify at any time) after the
date of such Retirement or the date of expiration of the stated term of the
Restricted Award.

             (3) The Board shall have sole authority and discretion to determine
whether a Participant's employment or services has been terminated by reason of
Disability or Retirement.

         (c) TERMINATION FOR CAUSE. If a Participant's employment by, or other
relationship with, the Company terminates for "Cause," any Options, SARs and
Restricted Awards held by such Participant shall immediately terminate and be of
no further force and effect; provided, however, that the Board may, in its sole
discretion, provide that any such Options and SARs may be exercised until the
earlier of the date that is three months after the date of such termination of
employment or the date of expiration of the stated term of the Options or SARs.

         "Cause" shall have the meaning ascribed to such term in any employment,
consulting, advisory or other agreement between the applicable Participant and
the Company; provided, however, that if no such agreement exists or, if such
agreement exists but no such term is provided or defined therein, "Cause" shall
mean a determination by the Company (including the Board) that the Participant's
employment or other relationship with the Company should be

                                      -13-
<PAGE>

terminated as a result of: (i) a material breach by the Participant of any
agreement to which the Participant and the Company are parties, (ii) any act,
other than Retirement, or omission to act by the Participant that may have a
material and adverse effect on the business of the Company or on the
Participant's ability to perform services for the Company, including, without
limitation, the proven or admitted commission of any crime (other than an
ordinary traffic violation), or (iii) any material misconduct or material
neglect of duties by the Participant in connection with the business or affairs
of the Company.

         (d) OTHER TERMINATION. Except as provided under the Plan or under the
terms of any Award, if a Participant's employment by, or other relationship
with, the Company terminates for any reason other than death, Disability,
Retirement or for Cause: (i) any Options and SARs held by such Participant may
thereafter be exercised, to the extent they are exercisable on the date of
termination of employment, until the earlier of the date that is 90 days (or
such longer period as the Board shall specify at any time) after the date of
such termination of employment or the date of expiration of the stated term of
the Options and SARs, and (ii) any restrictions and conditions on any Restricted
Awards then owned by the Participant shall automatically be deemed terminated or
satisfied on the date of such Retirement and the Participant shall have the
right to acquire any shares of Common Stock underlying the Restricted Awards
until the earlier of the date that is 90 days (or such longer period as the
Board shall specify at any time) after the date of such termination of
employment or the date of expiration of the stated term of the Restricted Award.

         (e) TRANSFER AND LEAVE OF ABSENCE. For purposes of the Plan, the
following events shall not be deemed a termination of employment: (i) a transfer
of employment between any of the Company, a parent, a subsidiary or any other
affiliate of the Company, and (ii) an approved leave of absence for military
service or sickness, or for any other purpose approved by the Board, if the
employee's right to re-employment is guaranteed by a statute, by contract or
under the policy pursuant to which the leave of absence was granted, or if the
Board otherwise so provides in writing.

14.      WITHHOLDING.

         (a) PAYMENT BY PARTICIPANT. Each Participant shall pay to the Company,
or make arrangements satisfactory to the Board regarding payment of, any
federal, state, local and/or payroll taxes of any kind required by law to be
withheld with respect to such income. The Company may, to the extent permitted
by law, deduct any such taxes from any payment of any kind otherwise due to a
Participant whether or not pursuant to the Plan.

         (b) PAYMENT IN SHARES. A Participant may elect, with the consent of the
Board, to have such tax withholding obligation satisfied, in whole or in part,
by (i) authorizing the Company to withhold from shares of Common Stock to be
issued pursuant to an Award a number of shares of Common Stock having an
aggregate Fair Market Value that would satisfy the minimum withholding amount
due with respect to such Award, or (ii) delivering to the Company a number of
Mature Shares with an aggregate Fair Market Value that would satisfy the minimum
withholding amount due. The Company may require that any fractional share amount
be settled in cash. For the purposes of this Section 14(b), Fair Market Value
shall be determined as of the date on which the amount of tax to be withheld is
determined.

                                      -14-
<PAGE>

         (c) NOTICE OF DISQUALIFYING DISPOSITION. If any Participant shall make
any disposition of shares of Common Stock delivered pursuant to the exercise of
an Incentive Stock Option under the circumstances described in Section 421(b) of
the Code (relating to certain disqualifying dispositions), such Participant
shall notify the Company of such disposition within 10 days thereof.

15.     STATUS OF PARTICIPANT. With respect to the portion of any Award that has
not been exercised and any payments in cash, shares of Common Stock or other
consideration not received by a Participant, a Participant shall have no rights
greater than those of a general unsecured creditor of the Company unless the
Board shall otherwise expressly determine in connection with an Award. The Board
may, in its sole discretion, authorize the creation of trusts or other
arrangements to meet the Company's obligations to deliver shares of Common Stock
or make payments with respect to Awards hereunder, provided that the existence
of such trusts or other arrangements is consistent with the provision of the
preceding sentence.

16.      GENERAL PROVISIONS APPLICABLE TO AWARDS.

         (a) TRANSFERABILITY OF AWARDS. Except as the Board may otherwise
determine or provide in an Award or as otherwise provided in the Plan, no Award
or any right or obligation thereunder may be sold, exchanged, transferred,
assigned, pledged, hypothecated or otherwise encumbered or disposed of, whether
voluntarily or involuntarily, by the person to whom they are granted, except by
will or the laws of descent and distribution. Awards shall be exercisable only
during the life of the Participant to whom an Award was granted and only by the
Participant or the Participant's legal representative. References to a
Participant, to the extent relevant in the context, shall include references to
authorized transferees. Notwithstanding the immediately proceeding three (3)
sentences, the Board may permit a Participant to transfer any Award to any
person or entity that the Board so determines under such terms and conditions
that it deems appropriate in its sole discretion. Any assignment in violation of
the provisions of this Section 16(a) shall be void. All of the terms and
conditions of this Plan and any Awards shall be binding upon any such permitted
successors and assigns of the Participant.

         (b) AGREEMENTS EVIDENCING AWARDS. Each Award granted under the Plan
shall be evidenced by a written document that shall contain such provisions and
conditions as the Board deems appropriate. By accepting an Award pursuant to the
Plan, a Participant thereby agrees that the Award shall be subject to all of the
terms and provisions of the Plan and the applicable Award.

         (c) NON-UNIFORM DETERMINATIONS. Except as otherwise provided by the
Plan, each Award may be made alone or in addition to or in relation to any other
Award. The terms of each Award need not be identical, and the Board need not
treat Participants uniformly, regardless of whether such persons are similarly
situated. Without limiting the generality of the foregoing, the Board shall be
entitled, among other things, to make non-uniform and selective determinations
when issuing Awards, and to grant non-uniform and selective Awards as to: (i)
the persons to receive Awards, (ii) the terms and provisions of Awards, and
(iii) whether a Participant's employment has been terminated for purposes of the
Plan.

                                      -15-
<PAGE>

         (d) ACCELERATION. The Board may at any time provide that any Award
shall become immediately exercisable in full or in part, free of some or all
restrictions or conditions, or otherwise realizable in full or in part, as the
case may be.

         (e) DELIVERY OF SHARES. The Company will not be obligated to deliver
any shares of Common Stock pursuant to the Plan or to remove restrictions from
shares previously delivered under the Plan until: (i) all conditions of the
Award have been met or removed to the satisfaction of the Company, (ii) in the
opinion of the Company's counsel, all other legal matters in connection with the
issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations. The Board may, at any time, provide that, at the time any shares of
Common Stock would otherwise be delivered pursuant to an Award, the Participant
shall instead receive an instrument evidencing the right to future delivery of
shares of Common Stock at such time or times, and on such conditions, as the
Board shall specify. The Board may at any time accelerate the time at which
delivery of all or any part of the shares of Common Stock shall take place.

         (f) STOCK CERTIFICATES. Any stock certificates issued in respect of a
Restricted Stock Award shall be registered in the name of the Participant and,
unless otherwise determined by the Board, deposited by the Participant, together
with a stock power endorsed in blank, with the Company or the Company's
designee. At the expiration of the applicable restriction periods, the Company
or such designee shall deliver the certificates no longer subject to such
restrictions to the Participant or if the Participant has died, to the
Participant's legal representative or legatee. Delivery of stock certificates to
Participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the Participant, at the
Participant's last known address on file with the Company.

17.      MISCELLANEOUS

         (a) NO RIGHT TO EMPLOYMENT OR OTHER STATUS. No person shall have any
claim or right to be granted an Award. The adoption of the Plan and grant of an
Award shall not be construed as giving a Participant the right to continued
employment or any other relationship with the Company. The Company expressly
reserves the right at any time to dismiss or otherwise terminate its
relationship with a Participant free from any liability or claim under the Plan
or any Award.

         (b) NATURE OF PAYMENTS. Any and all grants of Awards and deliveries of
shares of Common Stock, cash, securities or other property under the Plan shall
be in consideration of services performed or to be performed for the Company by
the Participant. Awards under the Plan may, in the discretion of the Board, be
made in substitution in whole or in part for cash or other compensation
otherwise payable to a Participant. All such grants and deliveries shall
constitute a special discretionary incentive payment to the Participant and
shall not be required to be taken into account in computing the amount of salary
or compensation of the Participant for the purpose of determining any
contributions to or any benefits under any pension, retirement,

                                      -16-
<PAGE>

profit-sharing, bonus, life insurance, severance or other benefit plan of the
Company or under any agreement with the Participant, unless the Company
specifically provides otherwise.

         (c) NO RIGHTS AS STOCKHOLDER. Subject to the provisions of the
applicable Award, no Participant or Designated Beneficiary shall have any rights
as a stockholder with respect to any shares of Common Stock to be distributed
with respect to an Award until delivery of the shares to the Participant or the
Participant's legal representative or legatee. In the event the Company effects
a split of the shares of Common Stock by means of a stock dividend and the
exercise price of and the number of shares subject to an Option are adjusted as
of the date of the distribution of the dividend (rather than as of the record
date for such dividend), a Participant who exercises an Option between the
record date and the distribution date for such stock dividend shall be entitled
to receive, on the distribution date, the stock dividend with respect to the
shares of Common Stock acquired upon such Option exercise, notwithstanding the
fact that such shares were not outstanding as of the close of business on the
record date for such stock dividend.

         (d) EFFECTIVE DATE OF PLAN. The Plan shall become effective on the date
on which it is adopted by the Board; provided, however, that: (i) no Award
granted to a Participant shall become effective until any shareholder approval
of the Company to issue the underlying securities necessary under applicable
legal, regulatory or listing requirements shall be obtained, and (ii) no Award
granted to a Participant that is intended to comply with Section 162(m) shall
become exercisable, vested or realizable, as applicable to such Award, unless
and until the Plan has been approved by the Company's stockholders to the extent
stockholder approval is required by Section 162(m) in the manner required under
Section 162(m).

         (e) ENTIRE AGREEMENT. This Plan and any Award contain the entire
agreement between the parties with respect to the subject matter hereof and
supercede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof, and no party
shall be liable or bound to any other party in any manner by any warranties,
representations, guarantees or covenants except as specifically set forth in the
Plan and any Award. Nothing in this Agreement, express or implied, is intended
to confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

         (f) AMENDMENT OF PLAN OR AWARD. The Board may at any time amend or
discontinue the Plan and amend or cancel any outstanding Award, including in any
manner that adversely affects the rights, duties or obligations of any
Participant, and including but not limited to, substituting therefor another
Award of the same or a different type, changing the date of exercise or
realization, converting an Incentive Stock Option to a Nonstatutory Stock
Option, and converting an Option into a SAR, for the purpose of satisfying
changes in law or for any other lawful purpose. Unless otherwise determined by
the Board, shareholder approval of any suspension, discontinuance, revision or
amendment shall be obtained only to the extend necessary to comply with any
applicable law, rule or regulation. To the extent required by Section 162(m), no
Award granted to a Participant that is intended to comply with Section 162(m)
after the date of such amendment shall become exercisable, realizable or vested,
as applicable to such Award, unless and until such amendment shall have been
approved by the

                                      -17-
<PAGE>

Company's stockholders if required by Section 162(m) (including the vote
required under Section 162(m)). No Award shall be made that is conditioned upon
stockholder approval of any amendment to the Plan.

         (g) SEVERABILITY. If any provision of the Plan or any Award or the
application thereof to any person or circumstance is held to be invalid or
unenforceable to any extent, the remainder of the Plan or any Award shall remain
in full force and effect and shall be reformed to render the Agreement valid and
enforceable while reflecting to the greatest extent permissible the intent of
the parties.

         (h) SUCCESSORS AND ASSIGNS. The terms and conditions of the Plan and
any Award shall be binding upon and inure to the benefit of the Company and its
successors and assigns.

         (i) TERMINATION OF PLAN. The Plan shall terminate upon the tenth
anniversary of its effective date. The Board may terminate the Plan at any time
prior to such date. No Award may be granted under the Plan after the Plan has
been terminated. No Award granted while this Plan is in effect shall be altered
or impaired by termination of the Plan, except upon the consent of the holder of
such Award. The power of the Board to construe and interpret this Plan and the
Awards granted prior to the termination of the Plan shall continue after such
termination.

         (j) OTHER COMPENSATORY ARRANGEMENTS. Neither the adoption of the Plan
by the Board nor the submission of the Plan to the shareholders of the Company
for approval shall be construed as creating any limitations on the power of the
Board to adopt such other incentive arrangements as it may deem desirable, and
such arrangements may be either generally applicable or applicable only in
specific cases.

         (k) CONSENTS AND LEGAL REQUIREMENTS. If the Board shall at any time
determine that any Consent (as defined below) is necessary or desirable as a
condition of, or in connection with, the granting of any Award, the delivery of
shares of Common Stock, or the delivery of any cash, securities or other
property under the Plan, 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 Board. The Board
may require each person acquiring shares of Common Stock pursuant to an Award to
represent to and agree with the Company in writing that such person is acquiring
the shares for investment purposes only and without a view to distribution
thereof. The Board may also direct that any certificate evidencing shares
delivered pursuant to the Plan shall bear a legend setting forth such
restrictions on transferability as the Board may determine to be necessary or
desirable, and may advise the transfer agent to place a stop order against any
legended shares.

         "Consent" as use herein with respect to any Plan Action includes (i)
any and all listings, registrations or qualifications in respect thereof upon
any securities exchange or under any federal, state or local law, or law, rule
or regulation of a jurisdiction outside the United States, (ii) any and all
written agreements and representations by the Participant with respect to the
disposition of shares, or with respect to any other matter, which the Committee
may 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, registration or qualification

                                      -18-
<PAGE>

be made, (iii) any and all other consents, clearances and approvals in respect
of a plan action by any governmental or other regulatory body or any stock
exchange or self-regulatory agency, and (iv) any and all consents or
authorizations required to comply with, or required to be obtained under,
applicable local law or otherwise required by the Board. Nothing herein shall
require the Company to list, register or qualify the shares of Common Stock on
any securities exchange.

         (l) SECTION 83(B) ELECTION. No election under Section 83(b) of the Code
(relating to the inclusion of gross income in the year of transfer the amounts
specified in such Code section) or under a similar provision of the law of a
jurisdiction outside the United States may be made unless expressly permitted by
the terms of the Award or by action of the Board in writing prior to the making
of such election. If a Participant, in connection with the acquisition of shares
of Common Stock under the Plan or otherwise, is expressly permitted under the
terms of the Award or by such Board action to make any such election and the
Participant makes the election, the Participant shall notify the Board of such
election within 10 days of filing notice of the election with the Internal
Revenue Service or other governmental authority, in addition to any filing or
notification required pursuant to the regulations issued under Section 83(b) of
the Code or other applicable provision.

         (m) ABSENCE OF THIRD-PARTY BENEFICIARY RIGHTS. Unless expressly
provided in the Plan or any Award, no provision of the Plan or any Award is
intended, nor will be interpreted, to provide or create any third-party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, officer, director, shareholder, employee, partner of any party hereto
or any other person or entity, and, except as so provided, all provisions hereof
and thereof will be solely between the parties to the Plan and any Award.

         (n) PROVISIONS FOR FOREIGN PARTICIPANTS. The Board may modify the terms
and conditions of Awards granted to Participants who are foreign nationals or
employed outside the United States, establish sub-plans under the Plan, or adopt
such modifications or procedures as the Board may determine to be necessary or
advisable, to recognize differences in laws, rules, regulations or customs of
such foreign jurisdictions with respect to tax, securities, currency, employee
benefit, accounting or other matters.

         (o) LIABILITY OF THE COMPANY. The Company and any affiliate that is in
existence or hereafter comes into existence shall not be liable to a Participant
or other persons as to: (i) the non-issuance or sale of shares of Common Stock
as to which the Company has been unable to obtain approval from any regulatory
body having jurisdiction deemed by the Company's counsel to be necessary to the
lawful issuance and sale of any shares of Common Stock hereunder, and (ii) any
tax consequence expected, but not realized, by any Participant or other person
due to the receipt, exercise or settlement of any Option, SAR or other Award
granted hereunder.

         (p) GOVERNING LAW. This Plan and any Award shall be governed by and
construed in accordance with the laws of the State of Minnesota, without regard
to the laws that might otherwise govern under applicable principles of conflicts
of laws thereof.

                                      -19-Exhibit 10.42

EXHIBIT 10.42

2004 RESTRICTED STOCK AWARD AGREEMENT

GRANTED JANUARY 2, 2004

Ralcorp Holdings, Inc. (the “Company”), pursuant to its 2002 Incentive Stock Plan (the “Plan”), grants to William P. Stiritz (the “Recipient”) a Restricted Stock Award of 1,585 shares of its $.01 par value Common Stock. The Award is subject to the provisions of the Plan and to the following terms and conditions:

	
1.
	Delivery
	 	 
	
 
	
A share certificate for this Award (the “Certificate”), with a legend restricting transfer as set forth below, will be issued by the Company upon acceptance by the Recipient of the Award and will be retained by it. Upon lapse of the restrictions as described below, a new non-legended certificate representing shares then released from restrictions will be issued and delivered to Recipient.

	 	 
	
2.
	Lapse of Restrictions
	 	 
	 	All shares will be immediately released from restrictions in the event of:
	 	 	 
	 	a.	
Recipient’s death; or,

	 	 	 
	 	b.	
Recipient’s voluntary termination or retirement (whether pursuant to any mandatory retirement provision of the Company’s Articles of Incorporation, Bylaws or Board resolution, or otherwise) or termination due to expiration of Recipient’s term without re-election to a subsequent term.

		 	 
	
3.
	Forfeiture
	 	 	 
	
 
	
All rights in and to any and all shares granted pursuant to this Award that have not been released from restrictions as described in Paragraph 2 above shall be forfeited if Recipient is removed from his position as a Director for cause in accordance with the Company’s Articles and Bylaws and the corporation laws of the State of Missouri.

	 	 	 
	
4.
	Shareholder Rights
	 	 	 
	
 
	
Prior to the release of restrictions as set forth above, Recipient shall be entitled to all shareholder rights except the right to sell, pledge, transfer or otherwise dispose of the shares, and except that any and all dividends declared and paid with respect to restricted shares will be held by the Company in a tax deferred account until release of restrictions. Interest will be credited to the account quarterly on the full amount in the account until the account is distributed. Interest shall be calculated

 

	 
	 	 	 
	

	 

	 	 	 
	
 
	
at a rate equal to the average of the daily close of business prime rates for the quarter, as such prime rates are established by Morgan Guaranty Trust Company of New York, or such other bank as may be designated by the Nominating and Compensation Committee of the Board of Directors of the Company (the “Committee”). On the date on which restrictions are released, or as soon as practicable thereafter, all dividends and interest, if any, accrued to that date with respect to the shares on which the restrictions are released will be payable to Recipient. In the event that the restrictions are not released and the award is forfeited pursuant to Paragraph 3 above, Recipient shall not be entitled to receive any dividends and interest which may have accrued with respect to the shares so forfeited, unless approved by the Committee.

	 	 	 
	
5.
	Other
	 	 	 
	
 
	
The Company reserves the right, as determined by the Committee, to convert this Award to a substantially equivalent award and to make any other modification it may consider necessary or advisable to comply with any law or regulation. In addition, this Agreement shall be governed by the laws of the State of Missouri.

	 	 	 
	
6.
	Effective Date
	 	 	 
	 	This Award shall be deemed to be effective January 2, 2004.

	 	 	RALCORP HOLDINGS, INC.
	
ACKNOWLEDGED AND
	 	 	 
	
ACCEPTED:
	 	 	 
	 	 	
By:
	
______________________

	 	 	 	
C. G. Huber, Jr.

Secretary

_____________________________

Recipient

_____________________________

Date

_____________________________

Location

_____________________________

S.S.#

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