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                                                                    Exhibit 10-K





                              HERCULES INCORPORATED
                      LONG TERM INCENTIVE COMPENSATION PLAN
                            (AS AMENDED AND RESTATED)



                                                       [HERCULES LOGO]
                                                       Hercules Plaza
                                                       Wilmington, DE 19894-0001
                                                       April 29, 1999
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                                TABLE OF CONTENTS


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ARTICLE I       PURPOSE .........................................................................               1

ARTICLE II      DEFINITIONS AND CONSTRUCTION ....................................................               1
                  Section 2.1 Definitions .......................................................               1
                           (1) Accelerated Date .................................................               1
                           (2) Act...............................................................               1
                           (3) APD Election .....................................................               1
                           (4) Attributable Shares ..............................................               1
                           (5) Award.............................................................               1
                           (6) Award Commitment .................................................               1
                           (7) Award Items.......................................................               2
                           (8) Base Salary.......................................................               2
                           (9) Beneficiary.......................................................               2
                           (10) Board............................................................               2
                           (11) Bonus............................................................               2
                           (12) Cash Value Award or CVA..........................................               2
                           (13) CEO..............................................................               2
                           (14) Change in Control................................................               2
                           (15) Code.............................................................               2
                           (16) Committee .......................................................               2
                           (17) Common Stock.....................................................               2
                           (18) Company .........................................................               2
                           (19) Date of Grant ...................................................               2
                           (20) Designated Retirement Date ......................................               2
                           (21) Disability ......................................................               2
                           (22) Fair Market Value ...............................................               3
                           (23) Grantee .........................................................               3
                           (24) Grantor .........................................................               3
                           (25) Hercules Incorporated Deferred Compensation Plan ................               3
                           (26) Hercules Incorporated Non-Qualified Savings Plan ................               3
                           (27) Hercules Pension Plan ...........................................               3
                           (28) Hercules Pension Restoration Plan ...............................               3
                           (29) Incentive Stock Option or ISO ...................................               3
                           (30) Management Incentive Compensation Plan ..........................               3
                           (31) Maximum Award ...................................................               3
                           (32) Minimum Award ...................................................               3
                           (33) Nonqualified Option .............................................               4
                           (34) Nonreporting Person .............................................               4
                           (35) Normal Retirement Date ..........................................               4
                           (36) Normal Vesting Date .............................................               4
                           (37) Option or Stock Option ..........................................               4
                           (38) Optionee ........................................................               4
                           (39) Option Period ...................................................               4
                           (40) Option Price ....................................................               4
                           (41) Other Market-Based Awards .......................................               4
                           (42) Other Performance-Based Awards ..................................               4
                           (43) Participating Subsidiary ........................................               4
                           (44) PASO Period .....................................................               4
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                           (45) Payout Schedule .................................................               4
                           (46) Performance Accelerated Stock Option or "PASO" ..................               4
                           (47) Performance Goal ................................................               4
                           (48) Performance Period ..............................................               4
                           (49) Performance Share ...............................................               5
                           (50) Performance Share Award .........................................               5
                           (51) Performance Share Fair Market Value .............................               5
                           (52) Phantom Unit ....................................................               5
                           (53) Phantom Unit Award ..............................................               5
                           (54) Phantom Unit Fair Market Value ..................................               5
                           (55) Reduction in Force ..............................................               5
                           (56) Related Entity ..................................................               5
                           (57) Reporting Person ................................................               5
                           (58) Restricted Stock ................................................               5
                           (59) Restricted Stock Award ..........................................               5
                           (60) Restricted Stock Unit............................................               5
                           (61) Restricted Stock Unit Award......................................               5
                           (62) Restricted Period ...............................................               5
                           (63) Restriction Range ...............................................               5
                           (64) Retirement ......................................................               6
                           (65) Rule 16b-3 ......................................................               6
                           (66) SAR .............................................................               6
                           (67) SAR Fair Market Value ...........................................               6
                           (68) Stock Appreciation Right.........................................               6
                           (69) Stock Appreciation Right Award...................................               6
                           (70) Stock Option Award...............................................               6
                           (71) Subsidiary ......................................................               6
                           (72) Substitution Awards .............................................               6
                           (73) Suspension Period ...............................................               6
                           (74) Target Award ....................................................               6
         Section 2.2 Construction ...............................................................               6

ARTICLE III       STOCK AVAILABLE FOR AWARDS ....................................................               7
         Section 3.1       Common Stock .........................................................               7
         Section 3.2       Number of Shares Deliverable .........................................               7
         Section 3.3       Reusable Shares ......................................................               7
         Section 3.4       Shares Not Charged Against Available Shares ..........................               7

ARTICLE IV        AWARDS AND AWARD AGREEMENTS ...................................................               7
         Section 4.1       General...............................................................               7
         Section 4.2       Eligibility ..........................................................               8
         Section 4.3       Terms and Conditions; Award Commitments ..............................               8
                 4.3.1     Terms And Conditions..................................................               8
                 4.3.2     Award Commitments.....................................................               8

ARTICLE V        OPTIONS AND STOCK APPRECIATION RIGHTS...........................................               8
         Section 5.1       Award of Options......................................................               8
                 5.1.1     Grants................................................................               8
                 5.1.2     Types of Options .....................................................               9
                 5.1.3     Substantial Stockholder ..............................................               9
                 5.1.4     Maximum Award ........................................................               9
         Section 5.2       Option Price .........................................................               9
         Section 5.3       Option Periods .......................................................               9
         Section 5.4       Exercise of Options ..................................................               9
                 5.4.1     Exercisability . .....................................................               9
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                 5.4.2     Certain Limitations. .................................................               9
                 5.4.3     Method of Exercise....................................................               9
         Section 5.5       Time and Method ......................................................              10
                 5.5.1     Form of Payment.......................................................              10
                 5.5.2     Time of Payment ......................................................              10
                 5.5.3     Methods for Tendering Shares .........................................              10
                 5.5.4     ISO Limitation .......................................................              10
         Section 5.6       Delivery of Shares ...................................................              10
         Section 5.7       Stockholder Rights ...................................................              10
         Section 5.8       Incentive Stock Options ..............................................              10
                 5.8.1     Individual Limitation ................................................              10
                 5.8.2     Code Qualification....................................................              11
                 5.8.3     Notice of Disposition ................................................              11
         Section 5.9       Stock Appreciation Rights Awards......................................              11
                 5.9.1     Grants................................................................              11
                 5.9.2     SAR Exercise..........................................................              11
                 5.9.3     Value of SAR Payment .................................................              11
                 5.9.4     Time and Method of Payment ...........................................              11
                 5.9.5     Effect of SAR and Option Exercises....................................              12
                 5.9.6     Nature of SARs .......................................................              12
         Section 5.10      Performance Accelerated Stock Options Awards .........................              12
                 5.10.1    Grants ...............................................................              12
                 5.10.2    Accelerated Date .....................................................              12
                 5.10.3    PASO Period ..........................................................              12
                 5.10.4    Exercisability .......................................................              13
                 5.10.5    Corporate or Business Goals ..........................................              13
                 5.10.6    PASOs Treated Like Options ...........................................              13

ARTICLE VI       PERFORMANCE SHARE AWARDS .......................................................              13
         Section 6.1       Grants ...............................................................              13
         Section 6.2       Performance Period ...................................................              13
         Section 6.3       Performance Goals ....................................................              13
         Section 6.4       Payout Schedule ......................................................              14
         Section 6.5       Issuance of Stock and Stock Certificates .............................              14
                 6.5.1     Issuance..............................................................              14
                 6.5.2     Custody and Legends ..................................................              14
         Section 6.6       Restrictions and Forfeitures..........................................              14
         Section 6.7       Stockholder Rights....................................................              15
         Section 6.8       Delivery of Shares and Cash Payments..................................              15
                 6.8.1     Determination of Performance Results and
                           Award Settlement......................................................              15
                 6.8.2     Delivery of Shares and Payment of Cash ...............................              15
                 6.8.3     Revisions for Significant Events .....................................              16
                 6.8.4     Conditions Precedent..................................................              16
                 6.8.5     Performance Share Fair Market Value ..................................              16

ARTICLE VII      RESTRICTED STOCK AWARDS ........................................................              17
         Section 7.1       Grants ...............................................................              17
         Section 7.2       Restricted Period ....................................................              17
         Section 7.3       Restrictions and Forfeiture ..........................................              17
         Section 7.4       Issuance of Stock and Stock Certificate ..............................              17
                 7.4.1     Issuance .............................................................              17
                 7.4.2     Custody and Legends...................................................              18
         Section 7.5       Stockholder Rights ...................................................              18
         Section 7.6       Delivery of Shares ...................................................              18
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ARTICLE VIII     PHANTOM UNIT AWARDS.............................................................              18
         Section 8.1       Grants ...............................................................              18
         Section 8.2       Vesting of Awards ....................................................              19
         Section 8.3       Value of Phantom Units Payments ......................................              19
         Section 8.4       Time and Method of Payment ...........................................              19
         Section 8.5       Forfeiture of Phantom Units ..........................................              19
         Section 8.6       Nature of Phantom Units ..............................................              20

ARTICLE IX       CASH VALUE AWARDS ..............................................................              20
         Section 9.1       Grants ...............................................................              20
         Section 9.2       Performance Period ...................................................              20
         Section 9.3       Performance Goals ....................................................              20
         Section 9.4       Payout Schedule ......................................................              20
         Section 9.5       Form Of Payout........................................................              20
         Section 9.6       Calculation Of Payout ................................................              21

ARTICLE X        OTHER AWARDS ...................................................................              21
         Section 10.1      Other Market-Based Awards ............................................              21
         Section 10.2      Other Performance-Based Awards .......................................              21
         Section 10.3      Terms of Other Awards ................................................              21
         Section 10.4      Stock Option Dividend Equivalents.....................................              22
                 10.4.1    Grants ...............................................................              22
                 10.4.2    Interest .............................................................              22
                 10.4.3    Forfeiture............................................................              22

ARTICLE XI       SUBSTITUTION AWARDS.............................................................              22
         Section 11.1        Substitution of Performance Shares .................................              22
         Section 11.2        Substitution of Restricted Stock ...................................              22
         Section 11.3        Substitution Procedures ............................................              22
         Section 11.4        Substitutions in Contemplation of Retirement .......................              22

ARTICLE XII       TERMINATION OF EMPLOYMENT .....................................................              23
         Section 12.1        Retirement .........................................................              23
                 12.1.1      Stock Options and SARs .............................................              23
                 12.1.2      Performance Share, Restricted Stock, Phantom
                             Unit, and Cash Value Awards ........................................              23
                 12.1.3      Performance Accelerated Stock Options ..............................              23
                 12.1.4      Restricted Stock Unit...............................................              23
         Section 12.2        Reduction in Force .................................................              24
                 12.2.1      Stock Options and SARs .............................................              24
                 12.2.2      Performance Share, Restricted Stock, Restricted Stock Unit,
                             Phantom Unit and Cash Value Awards .................................              24
                 12.2.3      Performance Accelerated Stock Options...............................              24
         Section 12.3        Transfers to Certain Related Entities...............................              24
                 12.3.1      Stock Options and SARs .............................................              24
                 12.3.2      Performance Share, Restricted Stock, Restricted Stock Unit,
                             Phantom Unit and Cash Value Awards .................................              24
                 12.3.3      Performance Accelerated Stock Options...............................              24
         Section 12.4        Disability or Death.................................................              25
                 12.4.1      Stock Options and SARs .............................................              25
                 12.4.2      Performance Share, Restricted Stock, Restricted Stock Unit,
                             Phantom Unit and Cash Value Awards .................................              25
                 12.4.3      Performance Accelerated Stock Options...............................              25
         Section 12.5        Resignation ........................................................              25
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                 12.5.1      Stock Options, SARs and Performance Accelerated Stock Options ......              25
                 12.5.2      Performance Share, Restricted Stock, Restricted Stock Unit,
                             Phantom Unit and Cash Value Awards .................................              25
         Section 12.6        Decrease in Company Ownership ......................................              26
                 12.6.1      Stock Options and SARs .............................................              26
                 12.6.2      Performance Share, Restricted Stock,  Restricted Stock Unit,
                             Phantom Unit and Cash Value Awards .................................              26
                 12.6.3      Performance Accelerated Stock Options ..............................              26
         Section 12.7        Termination of Employment for Other Reasons ........................              26
                 12.7.1      Stock Options, SARs and Performance
                             Accelerated Stock Options ..........................................              26
                 12.7.2      Performance Share, Restricted Stock, Restricted Stock Unit,
                             Phantom Unit and Cash Value Awards..................................              26
         Section 12.8        Termination Date....................................................              27
         Section 12.9        Reporting Person Limitation ........................................              27

ARTICLE XIII     EXCHANGE AWARDS; ABOVE TARGET MICP AWARDS.......................................              27
         Section 13.1        Salary/Bonus Reductions.............................................              27
                 13.1.1      Restricted Stock ...................................................              27
                 13.1.2      Options.............................................................              27
         Section 13.2        Deferred Accounts ..................................................              28
                 13.2.1      Deferred Compensation Plan Accounts ................................              28
                 13.2.2      Non-Qualified Savings Plan Accounts ................................              28
         Section 13.3        Termination of Employment ..........................................              28
                 13.3.1      Death, Disability and Reduction in Force ...........................              28
                 13.3.2      Retirement..........................................................              29
                 13.3.3      Resignation or Termination for Cause ...............................              29
         Section 13.4        Avoidance of Pension Diminution ....................................              29
                 13.4.1      Governing Provisions ...............................................              29
                 13.4.2      Exchange Awards ....................................................              30
                 13.4.3      Designated Retirement Date .........................................              30
         Section 13.5        Irrevocability .....................................................              30
         Section 13.6        Equivalency ........................................................              30
         Section 13.7        MICP Awards ........................................................              31
         Section 13.8        Definition .........................................................              31

ARTICLE XIV      CERTAIN TERMS APPLICABLE TO ALL AWARDS .........................................              31
         Section 14.1        Withholding Taxes ..................................................              31
         Section 14.2        Adjustments to Reflect Capital Changes..............................              32
                 14.2.1      Recapitalization ...................................................              32
                 14.2.2      Sale or Reorganization .............................................              32
                 14.2.3      Options to Purchase Stock of Acquired Companies ...................               32
         Section 14.3        Failure to Comply With Terms and Conditions ........................              32
         Section 14.4        Forfeiture Upon Occurrence of Certain Events .......................              32
         Section 14.5        Regulatory Approvals and Listing ...................................              33
         Section 14.6        Restrictions Upon Resale of Stock ..................................              33
         Section 14.7        Reporting Person Limitation ........................................              33

ARTICLE XV       DISPUTES    ....................................................................              33

ARTICLE XVI      ADMINISTRATION OF THE PLAN .....................................................              34
         Section 16.1        Committee ..........................................................              34
         Section 16.2        Committee Actions ..................................................              34
         Section 16.3        No Liability of Committee Members ..................................              34
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ARTICLE XVII EFFECTIVE DATE, TERM OF THE PLAN AND STOCKHOLDER APPROVAL ..........................              34

ARTICLE XVIII  CHANGE IN CORPORATE CONTROL ......................................................              35
         Section 18.1        Options ............................................................              35
         Section 18.2        SARs ...............................................................              35
         Section 18.3        All Other Awards ...................................................              35
         Section 18.4        Definitions ........................................................              35

ARTICLE XIX       AMENDMENT AND TERMINATION .....................................................              36
         Section 19.1        Amendment ..........................................................              36
         Section 19.2        Suspension or Termination ..........................................              36
         Section 19.3        No Repricing of Options.............................................              36

ARTICLE XX       MISCELLANEOUS ..................................................................              37
         Section 20.1        Deferral Election ..................................................              37
         Section 20.2        Designation of Beneficiary .........................................              37
         Section 20.3        No Right to an Award or to Continued Employment ....................              37
         Section 20.4        Discretion of the Committee and the CEO ............................              37
         Section 20.5        Indemnification and Exculpation ....................................              38
                 20.5.1      Indemnification ....................................................              38
                 20.5.2      Exculpation ........................................................              38
         Section 20.6        Unfunded Plan.......................................................              38
         Section 20.7        Inalienability of Rights and Interests .............................              38
         Section 20.8        Awards Not Includable for Benefit Purposes .........................              39
         Section 20.9        No Issuance of Fractional Shares ...................................              39
         Section 20.10       Modification for Overseas Grantees .................................              39
         Section 20.11       Leaves of Absence ..................................................              39
         Section 20.12       Communications .....................................................              39
                 20.12.1     Communications by the Committee ....................................              39
                 20.12.2     Communications by the Participants and Others ......................              39
         Section 20.13       Parties in Interest ................................................              39
         Section 20.14       Severability .......................................................              40
         Section 20.15       Compliance with Laws ...............................................              40
         Section 20.16       No Strict Construction .............................................              40
         Section 20.17       Modification .......................................................              40
         Section 20.18       Governing Law ......................................................              40
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                              HERCULES INCORPORATED
                      LONG TERM INCENTIVE COMPENSATION PLAN

                                    ARTICLE I
                                     PURPOSE

         The Hercules Incorporated Long Term Incentive Compensation Plan, the
terms of which are herein set forth (as the same is now in effect or as
hereafter amended from time to time, the "Plan"), is intended to advance the
interests of Hercules Incorporated, a Delaware corporation (the "Company"), and
its stockholders by providing a means by which the Company and its participating
subsidiaries and affiliates shall be able to motivate selected key employees
(including officers and directors who are employees) to direct their efforts to
those activities that will contribute materially to the Company's success. The
Plan is also intended to serve the best interests of the stockholders by linking
remunerative benefits paid to employees who have substantial responsibility for
the successful operation, administration and management of the Company and/or
its participating subsidiaries and affiliates with the enhancement of
stockholder value while such key employees increase their proprietary interest
in the Company. Finally, the Plan is intended to enable the Company to attract
and retain in its employ highly qualified persons for the successful conduct of
its business.

         The Plan became effective as of April 1, 1991, and was amended and
restated as of June 30, 1993, April 27, 1995, April 24, 1997, and is hereby
further amended and restated as of April 29, 1999. Notwithstanding anything to
the contrary, the said amended and restated Plan shall not terminate or
adversely affect any Awards granted prior hereto.


                                   ARTICLE II
                          DEFINITIONS AND CONSTRUCTION


         SECTION 2.1 DEFINITIONS

         The following words and phrases when used in the Plan with an initial
capital letter, unless their context clearly indicates to the contrary, shall
have the respective meanings set forth below in this Section 2.1:

                           (1) Accelerated Date. As defined in Subsection
         5.10.2.

                           (2) Act. The Securities Exchange Act of 1934, as now
         in effect or as hereafter amended from time to time. References to any
         section or subsection of the Act are to such section or subsection as
         the same may from time to time be amended or renumbered and/or any
         comparable or succeeding provisions of any legislation that amends,
         supplements or replaces such section or subsection.

                           (3) APD Election. As defined in Subsection 13.4.2

                           (4) Attributable Shares. As defined in Subsection
         9.6.

                           (5) Award. A grant of Award Items in accordance with
         the provisions of the Plan. A grant of a particular Award Item may
         sometimes be referred to as follows: "Stock Option Award" for a grant
         of Stock Options; "Stock Appreciation Right Award" for Stock
         Appreciation Rights; "PASO Award" for Performance Accelerated Stock
         Options; "CVA Award" for Cash Value Awards; "Performance Shares Award"
         for Performance Shares; "Restricted Stock Award" for Restricted Stock;
         and "Phantom Unit Award" for Phantom Units.

                           (6) Award Commitment. The written commitment
         delivered by the Company to the Grantee evidencing an Award and setting
         forth such terms and conditions of the Award as may be deemed
         appropriate by the Committee. The Award Commitment shall be in a form
         approved by the Committee, and


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         shall be deemed amended from time to time to include such additional
         terms and conditions as the Committee may specify after the execution
         in the exercise of its powers under the Plan.

                           (7) Award Items. Individually and collectively, as
         the case may be, the items awarded to any Grantee in accordance with
         the provisions of the Plan in the form of Options, Stock Appreciation
         Rights, Performance Accelerated Stock Options, Cash Value Awards,
         Performance Shares, Restricted Stock, Phantom Units or other award, or
         any combination of the foregoing.

                           (8) Base Salary. The regular salary paid to an
         employee. Base salary shall not include bonuses or other forms of
         compensation which are not considered regular earnings by the
         Committee.

                           (9) Beneficiary. Any individual, estate or trust who
         or which by designation of the Grantee pursuant to Section 20.2 or
         operation of law succeeds to the rights and obligations of the Grantee
         under the Plan and Award Commitment upon the Grantee's death.

                           (10) Board. The Board of Directors of the Company.

                           (11) Bonus. An amount payable pursuant to the
         Management Incentive Compensation Plan or any other short term
         incentive compensation plan approved by the Committee.

                           (12) Cash Value Award or CVA. A grant in accordance
         with the provisions of the Plan in the form of a designated cash value
         payable in cash, Common Stock or Restricted Stock, or a combination
         thereof, all as determined by the Grantor at the Payout Date.

                           (13) CEO. The Chief Executive Officer of the Company.

                           (14) Change in Control. The occurrence of an event
         defined in Section 18.4, which event is of a nature that would be
         required to be reported in response to Item 6(e) of Schedule 14A
         promulgated under the Act as in effect on the date hereof or, if Item
         6(e) is no longer in effect, any regulations issued by the Securities
         and Exchange Commission pursuant to the Act which serves similar
         purposes.

                           (15) Code. The Internal Revenue Code of 1986, as now
         in effect or as hereafter amended from time to time, and as construed
         and interpreted by valid regulations issued by the United States
         Internal Revenue Service thereunder. References to any section or
         subsection of the Code are to such section or subsection as the same
         may from time to time be amended or renumbered and/or any comparable or
         succeeding provisions of any legislation that amends, supplements or
         replaces such section or subsection.

                           (16) Committee. The Compensation Committee of the
         Board or such other committee as may be designated by the Board to
         administer the Plan.

                           (17) Common Stock. Voting common stock authorized for
         issuance by the Company and issued and outstanding.

                           (18) Company. Hercules Incorporated and its
         successors and assigns.

                           (19) Date of Grant. The date designated by the
         Grantor as the date as of which the Grantor grants an Award, which
         shall not be earlier than the date on which the Grantor approves the
         granting of such Award.

                           (20) Designated Retirement Date. As defined in
         Section 13.4.3.

                           (21) Disability. A physical or mental impairment
         sufficient to make the individual eligible for benefits under the
         Long-Term Disability Plan of Hercules Incorporated or under a
         disability plan of one of the Participating Subsidiaries (whether or
         not a participant in such disability plan), so long as for


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         Incentive Stock Options such impairment also constitutes a disability
         within the meaning of Section 22(e)(3) of the Code.

                           (22) Fair Market Value. Unless otherwise indicated in
         the provisions of the Plan, as of any date the closing price for one
         share of Common Stock as reported on the Composite Tape for New York
         Stock Exchange Listed Companies and published in the Eastern Edition of
         The Wall Street Journal, or, if there is no trading on the date in
         question, the closing price of the Common Stock, as so reported and
         published, on the next preceding date on which there was trading in
         Common Stock.

                           (23) Grantee. An employee of the Company or any
         Participating Subsidiary to whom an Award is granted. At the time of
         award, such employee (including any director or officer who is also an
         employee) must be in the regular full-time employment of the Company or
         any Participating Subsidiary, without limitation as to length of
         service.

                           (24) Grantor. The Committee or the CEO, as the case
         may be, who grants an Award. The Committee shall (i) grant Awards to
         Reporting Persons and (ii) establish the maximum aggregate amount of
         particular Award Items to be granted to Nonreporting Persons as a group
         and (iii) establish the guidelines and oversight under which, pursuant
         to authorities granted by the Committee, the CEO may grant Awards to
         Nonreporting Persons. Notwithstanding anything to the contrary, the CEO
         is not intended to be nor shall be construed as a member of the
         Committee. In making awards to Nonreporting Persons, the CEO is acting
         as a delegee of the Committee and is at all times accountable to the
         Committee and authorized to act only in accordance with the provisions
         of the Plan and the guidelines and direction provided by the Committee
         from time to time.

                           (25) Hercules Incorporated Deferred Compensation
         Plan. The Hercules Incorporated Deferred Compensation Plan as the same
         is now in effect or as hereafter amended from time to time.

                           (26) Hercules Incorporated Non-Qualified Savings
         Plan. The Hercules Incorporated Non-Qualified Savings Plan (a portion
         of the Hercules Incorporated Deferred Compensation Plan) as the same is
         now in effect or as hereafter amended from time to time.

                           (27) Hercules Pension Plan. The Hercules Pension Plan
         as the same is now in effect or as hereafter amended from time to time.

                           (28) Hercules Pension Restoration Plan. The Hercules
         Employee Pension Restoration Plan as the same is now in effect or as
         hereafter amended from time to time.

                           (29) Incentive Stock Option or ISO. An Option granted
         pursuant to Section 5.1 which is intended to meet, and structured with
         a view to satisfying, the requirements of Section 422 of the Code and
         is designated by the Committee as an Incentive Stock Option. The Award
         of an Incentive Stock Option shall contain such provisions as are
         necessary to comply with such Section 422.

                           (30) Management Incentive Compensation Plan. The
         Hercules Incorporated Annual Management Incentive Compensation Plan as
         the same is now in effect or as hereafter amended from time to time.

                           (31) Maximum Award. The number or amount of
         Performance Accelerated Stock Options, Cash Value Awards, or
         Performance Shares, as the case may be, which vest when the maximum
         performance in the relevant Performance Range is achieved.

                           (32) Minimum Award. The number or amount of
         Performance Accelerated Stock Options, Cash Value Awards, or
         Performance Shares, as the case may be, which vest when the minimum
         performance in the relevant Performance Range is achieved.


                                       3
<PAGE>   11
                           (33) Nonqualified Option. An Option granted pursuant
         to Section 5.1 which does not qualify as, and is not designated by the
         Committee as, an Incentive Stock Option and is designated as a
         Nonqualified Option.

                           (34) Nonreporting Person. A Grantee who is not
         subject to Section 16 of the Act.

                           (35) Normal Retirement Date. Age 65.

                           (36) Normal Vesting Date. As defined in Subsection
         5.10.1.

                           (37) Option or Stock Option. A right granted pursuant
         to Article V that for a specified period of time entitles the holder
         thereof to purchase full shares of Common Stock at a stated price. At
         the discretion of the Committee, an Option may be an Incentive Stock
         Option or a Nonqualified Stock Option.

                           (38) Optionee. A Grantee to whom an Option or Stock
         Appreciation Right or Performance Accelerated Stock Option, as the case
         may be, is granted pursuant to Article V.

                           (39) Option Period. As defined in Section 5.3.

                           (40) Option Price. The per share price at which
         shares of Common Stock may be purchased upon exercise of a particular
         Option or Performance Accelerated Stock Option.

                           (41) Other Market-Based Awards. Awards granted in
         accordance with Section 9.1.

                           (42) Other Performance-Based Awards. Awards granted
         in accordance with Section 9.2.

                           (43) Participating Subsidiary. Any Subsidiary
         (existing from time to time) designated by the Board as a Participating
         Subsidiary; provided, however, for Incentive Stock Options only,
         "Participating Subsidiary" means any such Subsidiary which at the time
         such Option is granted qualifies as a "Subsidiary" of the Company under
         Section 424(b) of the Code.

                           (44) PASO Period. As defined in Subsection 5.10.3.

                           (45) Payout Schedule. The distribution scheme for
         applicable Award Items for a given Plan Year upon performance of
         varying goals, all as established by either the Committee with respect
         to the Company, or by the CEO (or his designee or designees) with
         respect to a given subsidiary, business unit, corporate staff group or
         individual.

                           (46) Performance Accelerated Stock Option or "PASO".
         Stock Option with a normal vesting date established by the Committee;
         provided, however, that under certain circumstances such vesting date
         may be accelerated by the Committee to an earlier date if the Committee
         determines that the applicable Performance Goal has been met.

                           (47) Performance Goal. The level of performance
         established by the Grantor, which must be achieved in order to earn or
         vest the applicable Minimum Award, Target Award, Maximum Award or
         intermediate level of Award Items.

                           (48) Performance Period. The period of time selected
         by the Committee during which the achievement of Performance Goals is
         measured for purposes of determining the extent to which an applicable
         Award Item has been earned or will vest.

                           (49) Performance Share. A contingent right to
         receive, when certain performance criteria have been attained, without
         payment to the Company, the amounts of Common Stock and cash


                                       4
<PAGE>   12
         determined under Article VI. Such rights are subject to forfeiture or
         reduction if the applicable Performance Goals are not met within the
         applicable Performance Period.

                           (50) Performance Share Award. A Performance Share
         Award under Article VI, settlement of which is contingent upon
         attainment during a Performance Period of Performance Goals.

                           (51) Performance Share Fair Market Value. As defined
         in Subsection 6.8.5.

                           (52) Phantom Unit. A right to receive, without
         payment to the Company, an amount of cash equal to the value of a share
         of Common Stock as of a future date, plus dividend equivalents and
         interest payments provided for in Article VIII. A "unit" of phantom
         units does not represent or entitle the recipient to any equity
         securities of the Company, but instead involves the creation of an
         unfunded account for the recipient, the value of which is measured by
         reference to the value of Common Stock.

                           (53) Phantom Unit Award. An Award of Phantom Units
         under Article VIII, subject to such forfeiture provisions as are set
         forth in the Award Commitment.

                           (54) Phantom Unit Fair Market Value. As defined in
         Section 8.3.

                           (55) Reduction in Force. Termination of employment by
         the Company or a Participating Subsidiary in such a manner that the
         employee so terminated is eligible to receive benefits under the
         Company or a Participating Subsidiary dismissal salary plan.

                           (56) Related Entity. A corporation, partnership,
         joint venture or other entity not more than 50% but at least 20% of
         whose outstanding voting stock or voting power for the election of
         directors is beneficially owned directly or indirectly by the Company.

                           (57) Reporting Person. A Grantee who is subject to
         Section 16 of the Act.

                           (58) Restricted Stock. Shares of Common Stock issued,
         without payment to the Company, pursuant to a Restricted Stock Award
         granted under Article VII. For a specific period of time such shares
         are subject to a substantial risk of forfeiture and to such
         restrictions against sale, transfer or other disposition, as determined
         by the Committee at the time of grant.

                           (59) Restricted Stock Award. An Award of Restricted
         Stock under Article VII.

                           (60) Restricted Stock Unit. A right to receive,
         without payment to the Company, a number of shares of Common Stock as
         of a future date, plus dividend equivalents and interest payments
         provided for in Article VIII. A unit of a Restricted Stock Unit does
         not represent or entitle the recipient to any equity securities of the
         Company until such future date. In the interim, the unit represents an
         unfunded account for the recipient, the value which is measured by
         reference to the value of Common Stock.

                           61) Restricted Stock Unit Award. An award of
         Restricted Stock Units under Article VIII, subject to such forfeiture
         provisions as are set forth in the Award Commitment.

                           (62) Restricted Period. As defined in Section 7.2.

                           (63) Restriction Range. As defined in Section 7.2.

                           (64) Retirement. Termination of employment at Normal
         Retirement Date or with consent of the Company with immediate
         eligibility for retirement benefits under a retirement or pension plan
         maintained by the Company, a Participating Subsidiary or Related
         Entity.

                           (65) Rule 16b-3. Rule 16b-3 of the General Rules and
         Regulations under the Act, or any law, rule, regulation or other
         provision that may hereafter replace such Rule.


                                       5
<PAGE>   13
                           (66) SAR. A Stock Appreciation Right, as defined
         below.

                           (67) SAR Fair Market Value. As defined in Subsection
         5.9.3.

                           (68) Stock Appreciation Right. A right granted
         pursuant to Article V pursuant to which the holder of a related Option,
         upon exercise of the Stock Appreciation Right and in lieu of exercising
         the related Option, is entitled to surrender the related Option, or any
         applicable portion thereof, to the extent unexercised, and to receive
         an amount equal to the appreciation in market value of a fixed number
         of shares of Common Stock from the Date of Grant. Stock Appreciation
         Rights may be payable in shares of Common Stock or cash, or a
         combination of both. Under the Plan, Stock Appreciation Rights are
         granted in tandem with Options.

                           (69) Stock Appreciation Right Award. An Award of
         Stock Appreciation Rights under Article V.

                           (70) Stock Option Award. An Award of Options under
         Article V.

                           (71) Subsidiary. Any corporation, partnership, joint
         venture or other entity in which the Company owns, directly or
         indirectly through one or more intermediaries, at least 50% of the
         outstanding voting stock or voting power for the election of directors
         or equivalent governing body. In the case of Incentive Stock Options,
         Subsidiary shall mean any corporation that qualifies as a "subsidiary
         corporation" of the Company under Section 424(f) of the Code.

                           (72) Substitution Awards. As defined in Section 11.

                           (73) Suspension Period. As defined in Article XIII.

                           (74) Target Award. The number or amount of
         Performance Accelerated Stock Options, Cash Value Awards or Performance
         Shares, as the case may be, which vest when the target performance in
         the relevant Performance Range is achieved.

         SECTION 2.2 CONSTRUCTION

         Whenever any words are used herein in the masculine gender, they shall
be construed as though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used herein in the
singular form they shall be construed as though they were also used in the
plural form in all cases where they would so apply. Headings of sections and
subsections of this Plan are inserted for convenience of reference, are not a
part of this Plan, and are not to be considered in the construction hereof. The
words "hereof," "herein," "hereunder" and other similar compounds of the word
"here" shall mean and refer to the entire Plan, and not to any particular
provision or section. The words "includes", "including" and other similar
compounds of the word "include" shall mean and refer to including without
limitation. All references herein to specific Articles, Sections or Subsections
shall mean Articles, Sections or Subsections of this document unless otherwise
qualified.


                                       6
<PAGE>   14
                                   ARTICLE III
                           STOCK AVAILABLE FOR AWARDS

         SECTION 3.1 COMMON STOCK

         Only Common Stock may be delivered under this Plan, such shares to be
made available from authorized but unissued shares or from shares reacquired by
the Company, including shares purchased in the open market.

         SECTION 3.2 NUMBER OF SHARES DELIVERABLE

         Subject to adjustments as provided in Section 14.2: (i) during the
period of October 1, 1996, through April 30, 2002, the maximum aggregate number
of shares for all Award Items shall be 15,000,000; and (ii) of the maximum
15,000,000 shares available, no more than 8,200,000 shares may be granted for
Award Items which are other than Options.

         SECTION 3.3 REUSABLE SHARES

         In the event that shares of Common Stock underlying an Award are
returned to the Company for any reason (including forfeited or unexercised
items) other than the surrender of Options upon the exercise of a Stock
Appreciation Rights, the shares so affected shall be available for use under
this Plan to the same Grantee or other Grantee by way of any type or form of
Option or Award authorized under the Plan; provided, however, that shares
received by the Company upon the exercise of an ISO and shares subject to an ISO
surrendered upon exercise of a SAR shall not be available for the subsequent
award of ISOs under this Plan, and that shares received by the Company upon the
return (whether due to forfeiture or otherwise) of Restricted Stock or
Performance Shares shall not be available for a subsequent Award under this
Plan.

         SECTION 3.4 SHARES NOT CHARGED AGAINST AVAILABLE SHARES

         Shares of Common Stock issued in payment of Stock Appreciation Rights
shall not be charged against the number of shares of Common Stock available for
subsequent Awards. Shares of Common Stock substituted in accordance with Article
XI for shares previously awarded under this Plan or the Hercules Incorporated
Restricted Stock Plan of 1986 shall not be counted against the authorized
aggregate number of shares which may be issued under the Plan.


                                   ARTICLE IV
                          AWARDS AND AWARD COMMITMENTS


         SECTION 4.1 GENERAL

         4.1.1 Subject to the provisions of this Plan, the Committee may (i)
determine and designate at any time and from time to time those Reporting
Persons to whom Awards are to be granted; (ii) determine the time or times when
Awards shall be granted; (iii) determine the form or forms of Awards to be
granted to any Reporting Person or to Nonreporting Persons, as a group; (iv)
determine the number of Award Items subject to each Award to be granted to any
Reporting Person; (v) determine the maximum aggregate number of shares of Award
Items subject to Awards to be granted to Nonreporting Persons, as a group; (vi)
determine the terms and conditions of each Award; (vii) determine the number of
shares of Restricted Stock a Reporting Person may acquire by exchange pursuant
to Section 13.1 and the time or times of such acquisition; and (viii) determine
the number of Options a Reporting or Nonreporting Person may acquire by exchange
pursuant to Section 13.1 and the time or times of acquisition.

         4.1.2 The CEO shall, subject to the provisions of the Plan, (i)
determine and designate at any time and from time to time those Nonreporting
Persons to whom Awards are to be granted; (ii) determine the form or forms of
Award to be granted any Nonreporting Person and (iii) determine the number of
Award Items subject to each


                                       7
<PAGE>   15
Award to be granted to any Nonreporting Person. Awards may be granted singly, in
combination or in tandem and may be made in combination or in tandem with or in
replacement of, or as alternatives to awards or grants under any other employee
plan maintained by the Company or its present or future Participating
Subsidiaries. Unless this Plan is extended, no Awards shall be granted or
exchanges effected under the Plan after April 30, 2002, but any then-current
restrictions applicable to any Awards theretofore granted or exchanges
theretofore effected shall extend beyond that date in accordance with their
provisions and any shares of Common Stock used in payment of Cash Value Awards
and/or Performance Shares originally granted before April 30, 2002, may be
delivered after April 30, 2002, in accordance with the provisions of the
applicable Award. Notwithstanding the later delivery of such shares of Common
Stock, the number of such shares shall be credited against the maximum aggregate
number in effect under Section 3.2 at the date of such original grant.

         SECTION 4.2 ELIGIBILITY

         The persons who shall be eligible to receive Awards granted pursuant to
this Plan shall be such employees (including directors and officers who are also
employees) of the Company or any of the Participating Subsidiaries as the
relevant Grantor shall select from time to time from among those who contribute
or may be expected to contribute to the successful performance of the Company or
any Participating Subsidiary. Employees eligible for Phantom Unit Awards shall
include, in addition to employees of the Company or any of the Participating
Subsidiaries, any employees of any other Subsidiary or Related Entity.

         SECTION 4.3 TERMS AND CONDITIONS; AWARD COMMITMENTS

         4.3.1 Terms And Conditions. Each Award granted pursuant to this Plan
shall be subject to all of the terms, conditions and restrictions provided in
this Plan and such other terms, conditions and restrictions, if any, as may be
specified by the Committee with respect to the Award in question at the time of
the making of the Award or as may be specified thereafter by the Committee in
the exercise of its powers under the Plan. Without limiting the foregoing, it is
understood that the Committee may, at any time and from time to time after the
granting of an Award hereunder, specify such additional terms, conditions and
restrictions with respect to such Award as may be deemed necessary or
appropriate to ensure compliance with any and all applicable laws, including,
but not limited to, terms and conditions for compliance with Federal and state
securities laws and methods of withholding or providing for the payment of
required taxes. The terms, conditions and restrictions with respect to any
Award, Grantee or Award Commitment need not be identical with the terms,
conditions and restrictions with respect to any other Award, Grantee or Award
Commitment.

         4.3.2 Award Commitments. Each Award granted pursuant to the Plan shall
be subject to all the terms, conditions and restrictions provided in the Plan
and such other terms, conditions and restrictions, if any, as may be specified
by the Committee with respect to the Award in question at the time of the making
of the Award or as may be specified thereafter by the Committee in the exercise
of its powers under the Plan. Each Award granted pursuant to the Plan shall be
evidenced by an Award Commitment and shall comply with, and be subject to, the
provisions of the Plan. The Award Commitment shall not be a precondition to the
granting of Awards; however, no person shall have any rights under any Award
granted under the Plan unless and until the Company shall have executed and
delivered an Award Commitment to the Grantee to whom such Award shall have been
granted. An executed original of the Award Commitment shall be provided to both
the Company and the Grantee.


                                    ARTICLE V
                      OPTIONS AND STOCK APPRECIATION RIGHTS


         SECTION 5.1 AWARD OF OPTIONS

         5.1.1 Grants. From time to time and upon the recommendation of the CEO,
the Committee may grant Stock Option Awards in such number as it may determine
to such Reporting Persons as the Committee may select. From time to time, the
CEO may grant Stock Option Awards in such number as he may determine to such
Nonreporting Persons as he may select; provided, however, each and all such
grants shall be subject to any maximum


                                       8
<PAGE>   16
aggregate amount of Options established by the Committee for grants under the
Plan for Nonreporting Persons as a group. The Committee shall determine the
number of shares of Common Stock to which each Option relates; provided,
however, such number of shares of Common Stock shall automatically be reduced on
a share for share basis to the extent that shares are issued pursuant to the
exercise of the Option or shares subject to the Option are the basis for the
exercise of the related Stock Appreciation Right.

         5.1.2 Types of Options. Options granted pursuant to the Plan may be
either in the form of Incentive Stock Options or in the form of Nonqualified
Options. Incentive Stock Options and Nonqualified Options shall be granted
separately hereunder. The Committee shall determine whether and to what extent
Options granted under the Plan shall be Incentive Stock Options or Nonqualified
Options and the Option shall be so designated.

         5.1.3 Substantial Stockholder. No Option shall be granted hereunder to
any person who, at the time such Option is to be granted, owns stock of the
Company or of any of its Subsidiaries possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any such
Subsidiary. For purposes of the preceding sentence, the attribution rules of
stock ownership set forth in Section 424(d) of the Code shall apply.

         5.1.4 Maximum Award To An Individual. During the period from April 29,
1999, through April 30, 2002, no person shall be granted or receive more than
1,500,000 Options and/or Performance Accelerated Stock Options in the aggregate.

         SECTION 5.2 OPTION PRICE

         The Option Price of Common Stock covered by each Option shall be
determined by the Committee but shall not be less than 100% of the Fair Market
Value of a share of Common Stock on the Date of Grant.

         SECTION 5.3 OPTION PERIODS

         The Committee shall determine the term of each Option. Subject to
earlier termination as provided in Articles XI, XII and XIII, the term shall not
exceed ten (10) years from the Date of Grant.

         SECTION 5.4 EXERCISE OF OPTIONS

         5.4.1 Exercisability. Subject to Subsection 5.4.2 and Articles XII and
XIII, each Option shall be exercisable at any time or times during the Option
Period and in such amount or amounts as the Committee may prescribe and specify
in the applicable Award Commitment (subject further in the case of Incentive
Stock Options, to such restrictions as may be imposed from time to time by the
Code).

         5.4.2 Certain Limitations. The Committee may provide that an Option may
not be exercised in whole or in part for any period or periods of time, from
zero to nine and one-half (9.5) years as specified in the Award Commitment.
Except as provided in Article XII, or as otherwise determined by the Committee,
an Option may be exercised only during the continuance of the Grantee's
employment with the Company or any of its Subsidiaries. Options granted to a
Reporting Person shall not be exercisable until at least six (6) months have
elapsed from the Date of Grant of the Option. No Option may be exercised after
the expiration of the applicable Option Period. No Option may be exercised for a
fractional share.

         5.4.3 Method of Exercise. A Grantee may exercise an Option, in whole or
from time to time in part, by giving written notice of exercise to the Company.
The notice of exercise shall be on a form approved by the Committee and shall
state the number of shares with respect to which the Option is being exercised.
Such notice must be received by the office of the Company designated in the
Award Commitment on or before the expiration date of the Option.

         SECTION 5.5 TIME AND METHOD OF PAYMENT

         5.5.1 Form of Payment. The Optionee shall pay the Option Price in cash
or, with the Committee's permission and according to such rules as they may
prescribe, by delivering shares of Common Stock already owned


                                       9
<PAGE>   17
by the Optionee for at least six months prior to the date of exercise and having
a Fair Market Value on the date of exercise equal to the Option Price, or a
combination of cash and shares. The Committee may also permit payment in
accordance with a cashless exercise program under which, if so instructed by the
Optionee, shares of Common Stock may be issued directly to the Optionee's broker
or dealer upon receipt of the purchase price in cash from the broker or dealer.

         5.5.2 Time of Payment. The Optionee shall pay the Option Price not
later than ten (10) days after the date of a statement from the Company
following exercise setting forth the Option Price, Fair Market Value of Common
Stock on the exercise date, the number of shares of Common Stock that may be
delivered in payment of the Option Price (if applicable) and the amount of
withholding tax due, if any. If the Optionee fails to pay the Option Price
within the ten (10) day period, the Committee shall have the right to take
whatever action it deems appropriate, including voiding the Option exercise.

         5.5.3 Methods for Tendering Shares. The Committee shall determine
acceptable methods for tendering shares of Common Stock as payment upon exercise
of an Option and may impose such limitations and restrictions on the use of
shares of Common stock to exercise an Option as it deems appropriate.

         5.5.4 ISO Limitation. Common Stock acquired by the Grantee which is
identified as having been obtained through an Incentive Stock Option under the
Plan and still subject to Incentive Stock Option holding requirements as defined
in the Code, may not be tendered in payment of the Option Price.

         SECTION 5.6 DELIVERY OF SHARES

         No shares of Common Stock shall be delivered pursuant to the exercise,
in whole or in part, of any Option, unless and until (i) payment in full of the
Option Price therefor is received by the Company and (ii) compliance with all
applicable requirements and conditions of this Plan, the Award Commitment and
such rules and regulations as may be established by the Committee that are
preconditions to delivery, including, but not limited to, the requirements and
conditions of Section 14.5. Promptly after exercise of the Option, payment in
full of the Option Price and compliance with the conditions described in the
preceding sentence, the Company shall effect the issuance to the Optionee of
such number of shares of Common Stock as are subject to the Option exercise.

         SECTION 5.7 STOCKHOLDER RIGHTS

         An Optionee shall have none of the rights or privileges of a
stockholder with respect to any shares of Common Stock covered by an Option
unless and until the Optionee has given written notice of exercise of the
Option, has paid in full the Option Price for such shares of Common Stock and
has otherwise complied with this Plan, the Award Commitment and such rules and
regulations as may be established by the Committee, and the shares are issued to
him. No adjustment shall be made for dividends in cash or property or other
distributions or rights with respect to any such shares of Common Stock for
which the record date is prior to the date on which the Optionee or a transferee
of the Option shall have become the holder of record of any such shares covered
by the Option. Notwithstanding anything to the contrary, an Option may include
dividend equivalents as described in Section 10.4.

         SECTION 5.8 INCENTIVE STOCK OPTIONS

         5.8.1 Individual Limitation. No Grantee may be granted an ISO under
this Plan (or any other plans of the Company or any Participating Subsidiary)
which would result in Common Stock with an aggregate Fair Market Value (measured
as of the Date of Grant) of more than $100,000 first becoming exercisable in any
one calendar year, or which would entitle such Grantee to purchase a number of
shares greater than the maximum number permitted by Section 422(d)(1) of the
Code as in effect on the Date of Grant.

         5.8.2 Code Qualification. Whenever possible, each provision in the Plan
and in every Option granted under this Plan which is designated by the Committee
as an ISO shall be interpreted in such a manner as to entitle the Option to the
tax treatment afforded by Section 422 of the Code. If any provision of the Plan
or any Option designated by the Committee as an ISO shall be held not to comply
with requirements necessary to entitle such Option to such tax treatment, then
(i) such provision shall be deemed to have contained from the outset such
language as shall be


                                       10
<PAGE>   18
necessary to entitle such Option to the tax treatment afforded under Section 422
of the Code, and (ii) all other provisions of this Plan and the Award Commitment
shall remain in full force and effect. If any Award Commitment covering an
Option designated by the Committee to be an ISO under the Plan shall not
explicitly include any terms required to entitle such ISO to the tax treatment
afforded by Section 422 of the Code, all such terms shall be deemed implicit in
the designation of such Option and such Option shall be deemed to have been
granted subject to all such terms.

         5.8.3 Notice of Disposition. An Optionee shall give prompt notice to
the Company of any disposition of shares of Common Stock acquired upon exercise
of an ISO if such disposition occurs within either two (2) years after grant or
one year after receipt of such shares by such Optionee. Such Optionee shall also
comply with any applicable withholding requirements.

         SECTION 5.9 STOCK APPRECIATION RIGHTS AWARDS

         5.9.1 Grants. The Committee may grant SARs at the same time as
Optionees are awarded Options under the Plan. Each SAR shall be in tandem with
and relate to a specific Option under the Plan and shall specify that the number
of Option Shares subject to the SAR shall be equal to the number of shares of
Common Stock that the Optionee is entitled to receive pursuant to the related
Option.

         5.9.2    SAR Exercise. A SAR may be exercised, in whole or in part,
                  within the period specified for the exercise of the Option in
                  the related Option grant only upon surrender of the related
                  Option (or portion thereof) by the Optionee. Each SAR shall be
                  exercisable at such time or times, on the conditions and to
                  the extent, but only to the extent, that the related Option is
                  exercisable, provided that no such SAR (except in the case of
                  death or physical or mental incapacity) shall be exercisable
                  prior to the expiration of six (6) months following the Date
                  of Grant and, provided further, that any SAR granted hereunder
                  may provide, at the election of the Committee, that the SAR
                  may be exercised only at a time when the Optionee to whom the
                  SAR has been granted is subject to the provisions of Section
                  16(b) of the Act. Each SAR and all rights and obligations
                  thereunder shall terminate and may no longer be exercised upon
                  the termination or exercise of the related Option. An Optionee
                  may exercise a SAR by giving written notice of exercise to the
                  Company stating the number of shares of Common Stock subject
                  to exercisable Options with respect to which the SARs are
                  being exercised. The date upon which such written notice is
                  received by the Company shall be the exercise date for the
                  SARs.

         An Option and SAR covering the same share of Common Stock may not be
exercised simultaneously.

         5.9.3 Value of SAR Payment. If an Optionee exercises a SAR, he shall
receive an amount equal to the product of (i) the amount by which the SAR Fair
Market Value on the exercise date of one share of Common Stock exceeds the
Option Price of the related Option, times (ii) the number of shares covered by
the Option, or portion thereof, which is surrendered. For purposes of this
Article V, "SAR Fair Market Value" of a SAR or share of Common Stock on any date
shall be the average of the daily closing prices of a share of Common Stock for
five (5) consecutive business days immediately preceding the day in question as
reported on the Composite Tape for New York Stock Exchange Listed Companies and
published in the Eastern Edition of The Wall Street Journal, subject to the
provisions of Section 5.9.4.

         5.9.4    Time and Method of Payment

         5.9.4.1 Any payment which may become due from the Company by reason of
an Optionee's exercise of a SAR may be paid to the Optionee all in cash, all in
shares of Common Stock or partly in shares and partly in cash, as determined by
the Committee. The Committee shall determine the timing of any payment made.

         5.9.4.2 If paid in cash, the amount thereof shall be the amount of
appreciation determined under Subsection 5.9.3. The payments to be made, in
whole or in part, in cash upon the exercise of SARs by any Reporting Person
shall be made in accordance with the provisions relating to the exercise of SARs
of Rule 16b-3 of the General Rules and


                                       11
<PAGE>   19
Regulations under the Act, as in effect at the time of such exercise, or any
law, rule, regulation or other provision that may hereafter replace such Rule.

         5.9.4.3 In the event that all or a portion of the payment is made in
shares of Common Stock, the number of shares of Common Stock received shall be
determined by dividing the amount of the appreciation determined under
Subsection 5.9.3 by the SAR Fair Market Value of a share of Common Stock on the
exercise date of the SAR. Cash will be paid in lieu of any fractional share of
Common Stock or, if the Committee should so determine, the number of shares of
Common Stock will be rounded downward to the next whole share of Common Stock.
All shares shall be valued at their SAR Fair Market Value as of the date of such
exercise; provided, however, that with respect to exercises of SARs by an
employee who is subject to the provisions of Section 16(b) of the Act during any
period commencing on the third business day following the date of release for
publication of the quarterly or annual summary statements of the Company's sales
and earnings and ending on the twelfth business day following such date (a
"window period"), the Committee may prescribe, by rule of general application,
such other measure of fair market value per share as the Committee may, in its
discretion, determine, but not in excess of the highest sale price of the Common
Stock reported on the Composite Tape for New York Stock Exchange Listed
Companies and published in the Eastern Edition of The Wall Street Journal during
such window period. Notwithstanding the foregoing, the fair market value (or SAR
Fair Market Value, if applicable) of SARs that relate to an ISO, shall not be in
excess of the maximum amount that would be permissible under Section 422 of the
Code without disqualifying such option as an ISO under such Section 422.

         5.9.5 Effect of SAR and Option Exercises. Upon exercise of a SAR, the
number of shares of Common Stock subject to exercise under the related Option
shall automatically be reduced by the number of shares of Common Stock
represented by the Option or portion thereof surrendered, as provided in
Subsection 5.1.1. Shares of Common Stock subject to Options or portions thereof
surrendered upon the exercise of SARs shall not be available for subsequent
awards under the Plan. The exercise of any number of Options shall result in an
equivalent reduction in the number of shares of Common Stock covered by the
related SAR and such shares may not again be subject to a SAR under this Plan.

         5.9.6 Nature of SARs. SARs shall be used solely as a device for the
measurement and determination of the amount to be paid to Grantees as provided
in the Plan. SARs shall not constitute or be treated as property or as a trust
fund of any kind. All amounts at any time attributable to the SARs shall be and
remain the sole property of the Company and all Grantees' rights hereunder are
limited to the rights to receive cash and shares of Common Stock as provided in
the Plan.

         SECTION 5.10 PERFORMANCE ACCELERATED STOCK OPTIONS AWARDS

         5.10.1 Grants. From time to time and upon the recommendation of the
CEO, the Committee may grant PASOs in such number as it may determine to such
Reporting Persons as the Committee may select. From time to time, the CEO may
grant PASOs in such number as he may determine to such Nonreporting Persons as
he may select; provided, however, each and all such grants shall be subject to
Subsection 5.1.4 and any maximum aggregate amount of PASOs established by the
Committee for grants under the Plan for Nonreporting Persons as a group. The
Committee shall determine the number of PASOs to be awarded; provided, however,
such number of PASOs shall automatically be reduced on a share for share basis
to the extent that shares are issued pursuant to the exercise of the PASO.
Subject to Subsection 5.10.2, each PASO shall specify a normal vesting date
("Normal Vesting Date") (which shall be less than the PASO Period).

         5.10.2 Accelerated Date. The date or event designated by the Grantor
(which shall be earlier than the Normal Vesting Date) at which the vesting of
some or all PASOs shall occur if the Grantor determines that the applicable
Performance Goals have been met.

         5.10.3 PASO Period. The Committee shall determine the term of each
PASO. Subject to earlier termination as provided in Article XII, the term shall
not exceed ten (10) years.


                                       12
<PAGE>   20
         5.10.4 Exercisability. Subject to Subsection 5.10.2 and Article XII, or
as otherwise determined by the Committee, each PASO shall be exercisable at any
time or times during the PASO Period and in such amount or amounts as the
Committee may prescribe and specify in the applicable Award Commitment.

         5.10.5 Corporate or Business Goals. From time to time, the Grantor
shall determine Performance Goals to be used for, among other things, purposes
of determining the Accelerated Date. If the Grantor shall determine minimum
target and/or maximum performance goals and (i) if the minimum performance goal
is not reached, then the Normal Vesting Date of the affected PASOs shall not be
accelerated, and the Grantor may either determine new goals on the PASOs or
allow the PASOs to vest at the Normal Vesting Date; (ii) if the minimum
performance goal is reached but the target performance goal is not reached, then
the Grantor may accelerate the Normal Vesting Date to an Accelerated Date for
part of the affected PASOs (as specified in the applicable Award Commitment),
and for the remainder of the PASOs, the Grantor may determine new goals or allow
the PASOs to vest at the Normal Vesting Date; (iii) if the performance goal is
reached and the maximum performance goal is not reached, then the Grantor may
accelerate the Normal Vesting Date to an Accelerated Date for part of the
affected PASOs, and for the remainder of the PASOs, the Grantor may determine
new goals or allow the PASOs to vest at the Normal Vesting Date; and (iv) if the
maximum performance goal is reached, then the Normal Vesting Date for all
affected PASOs shall be accelerated to the Accelerated Date.

         5.10.6 PASOs Treated Like Options. Except as otherwise provided in the
Plan, PASOs shall be treated identical to Options; provided, however, that if
there is a conflict between a provision specifically covering PASOs and one
generally covering Options, then the specific provision shall control as to
PASOs.

                                   ARTICLE VI
                            PERFORMANCE SHARE AWARDS


         SECTION 6.1 GRANTS

         From time to time and upon the recommendation of the CEO, the Committee
may grant Performance Share Awards in such number as it may determine to such
Reporting Persons as the Committee may select. From time to time, the CEO may
grant in such number as he may determine Performance Share Awards to such
Nonreporting Persons as he may select; provided, however, each and all such
grants shall be subject to any maximum aggregate number of Performance Shares
established by the Committee for grants under the Plan for Nonreporting Persons
as a group.

         SECTION 6.2 PERFORMANCE PERIOD

         At the time of a Performance Share Award grant, the Committee shall
establish a Performance Period of not less than one year nor more than five (5)
years, commencing the Date of Grant of the Award.

         SECTION 6.3 PERFORMANCE GOALS

         At the time of each grant, the Committee shall establish for all
Performance Share Awards the Performance Goals for the Company and any
Participating Subsidiary, while the CEO (or his designee or designees) shall
establish for each individual Performance Share Award the business unit,
corporate staff group and individual Performance Goals (other than his own which
will be the same as the Performance Goals for the Company), if any. All of the
designated Performance Goals must be met as a precondition to any distribution
or payment being made with respect to the Performance Share Award following the
end of the Performance Period. Except as provided in Article XII, these
Performance Goals (although their measurement, including adjustments, if any, as
permitted under Subsection 6.8.3, will not occur until after the expiration of
the applicable Performance Period) must be met during the continuance of the
Grantee's employment with the Company or any Participating Subsidiary, prior to
the expiration of the applicable Performance Period and prior to the lapse of
restrictions and delivery of any shares of Common Stock and/or the making of any
payment with respect to the Performance Share Award. Performance Goals may vary
among Grantees and among Awards to a Grantee. Performance Goals shall be based
upon such performance criteria


                                       13
<PAGE>   21
or combination of factors as the Grantor may deem appropriate, including, but
not limited to, specified levels of earnings per share, return on investment,
return on stockholders' equity and such other goals related to the Company's
performance as are deemed appropriate by the Committee.

         SECTION 6.4 PAYOUT SCHEDULE

         In tandem with the establishment of the Performance Goals, the Grantor
shall establish a Payout Schedule for that Performance Period for each
Performance Share Award. Each Payout Schedule shall establish for each
Performance Period minimum, target, maximum and intermediate performance and
distribution levels for determining the shares of Common Stock deliverable
and/or cash payable, if any, upon settlement of the Performance Share Award at
the conclusion of the Performance Period.

         SECTION 6.5 ISSUANCE OF STOCK AND STOCK CERTIFICATES

         6.5.1 Issuance. As soon as possible after the Date of Grant of a
Performance Share Award, the Company shall cause to be issued to the Grantee
such number of shares of Common Stock as prescribed by the applicable Payout
Schedule for attainment of target level of performance, that is, the Target
Award. Concurrently, the Company shall cause to be issued a stock certificate or
certificates, registered in the name of the Grantee and dated the Date of Grant,
evidencing such shares. Each such issuance (of shares and of a stock certificate
or certificates) shall be subject throughout the Performance Period to the
terms, conditions and restrictions (including forfeiture and restrictions
against transfer provisions of Section 6.6) contained in this Plan and/or the
Award Commitment entered into between the registered owner of such shares and
the Company, except as otherwise provided in this Plan. Although not a
precondition to the granting of a Performance Share Award, each such issuance
shall be subject to forfeiture to the Company as of the date of issuance if an
Award Commitment and a stock power endorsed by the Grantee in blank with respect
to the shares of Common Stock covered by the Performance Share Award under this
Article VI are not duly executed by the Grantee and timely returned to the
Company.

         6.5.2 Custody and Legends. Each certificate for shares of Common Stock
issued in respect of the Performance Share Award awarded under Subsection 6.5.1
shall be held in custody by the Company for the Grantee's account until the
expiration or termination of the applicable Performance Period (except as
provided in Article XII) and the satisfaction of any and all other conditions of
the Award Commitment applicable to Performance Shares covered by the Performance
Share Award. Such certificate shall be imprinted with a legend to indicate that
the transferability thereof and the shares of stock represented thereby are
subject to the terms, conditions and restrictions (including forfeiture and
restrictions against transfer) contained in this Plan and/or an Award Commitment
entered into between the registered owner of such shares and the Company, a copy
of which Plan and Award Commitment is on file in the office of the Company's
Corporate Secretary. Such legend shall not be removed from any stock certificate
evidencing Performance Shares until the lapse or release of the restrictions as
described in Section 6.8. Each certificate also shall be subject to appropriate
stop-transfer orders.

         SECTION 6.6 RESTRICTIONS AND FORFEITURES

         The shares of Common Stock issued to a Grantee pursuant to Section 6.5
shall be subject to the following restrictions until the expiration or
termination of the Performance Period established pursuant to Section 6.2: (i) a
Grantee shall not be entitled to delivery of a certificate evidencing the shares
of Common Stock covered by the Performance Share Award until the expiration or
termination of the Performance Period; (ii) none of such shares of Common Stock
may be sold, transferred, assigned, pledged or otherwise encumbered or disposed
of during the Performance Period and until the satisfaction of any and all other
conditions; and (iii) all such Common Stock shall be forfeited and returned to
the Company and all rights of the Grantee with respect to such Common Stock
(including, but not limited to, those specified in Section 6.7) shall terminate
without further obligation on the part of the Company unless (x) the Grantee has
remained a regular full time employee of the Company or any Participating
Subsidiary until the expiration or termination of the Performance Period (except
as provided in Article XII) and (y) the satisfaction of any and all other
conditions of the Award Commitment applicable to such Common Stock covered by
the Performance Share Award is completed. Upon the forfeiture of any shares of
Common Stock, ownership of such forfeited shares shall be transferred to the
Company without further acts by the Grantee.


                                       14
<PAGE>   22
         SECTION 6.7 STOCKHOLDER RIGHTS

         Following registration in the Grantee's name, and subject to execution
of the documents provided for in Section 6.5, during the Performance Period the
Grantee shall have the entire beneficial interest in, and all rights and
privileges of a stockholder as to, such shares of Common Stock awarded to him
with respect to the target level performance, including, but not limited to, the
right to vote and receive dividends, subject to the restrictions and forfeiture
risks set forth in Section 6.6. Any shares of Common Stock distributed as a
dividend or otherwise with respect to any shares issued under a Performance
Share Award as to which the restrictions have not yet lapsed shall be subject to
the same restrictions as such shares.

         SECTION 6.8 DELIVERY OF SHARES AND CASH PAYMENTS

         6.8.1 Determination of Performance Results and Award Settlement. As
soon as practicable after the Performance Period expires or otherwise terminates
with respect to each Performance Share Award, the Committee shall determine
whether and the extent to which any corporate Performance Goals were achieved
during the Performance Period; and the Grantor shall determine whether and the
extent to which applicable business unit, corporate staff and individual
Performance Goals, if any, were achieved during the Performance Period.
Following such determinations, a calculation shall be made of the number of
shares of Common Stock whose restrictions shall lapse and shall be deliverable
and the cash payable, if any, upon settlement of the Performance Share Award.
The computation shall be made by application of the Payout Schedule to the
degree of actual performance achieved against Performance Goals (determined as
provided in the preceding sentence).

         6.8.2    Delivery of Shares and Payment of Cash

         6.8.2.1 In the event the minimum level of performance established by
the Payout Schedule is not achieved, the entire Performance Share Award is
forfeited, including, without limitation, the shares of Common Stock held in
custody pursuant to Section 6.5.

         6.8.2.2 Should the minimum level of performance established by the
Payout Schedule be achieved, the Grantee shall have earned (subject to
adjustments as provided by Subsection 6.8.3) the applicable Minimum Award and in
settlement thereof the Section 6.6 restrictions on that number of shares of
Common Stock held in custody pursuant to Section 6.5 equal to the share number
specified by the Payout Schedule for performance at the minimum level shall
lapse and as promptly as administratively feasible thereafter, the Company shall
deliver to the Grantee a stock certificate or certificates for the number of
shares of Common Stock earned. Upon such delivery, shares remaining in custody
(which are the difference between the applicable Minimum Award and the
applicable Target Award) shall be forfeited and ownership transferred to the
Company without further acts by the Grantee.

         6.8.2.3 In the event the target level of the Payout Schedule is
achieved, the Grantee shall have earned (subject to adjustments as provided by
Subsection 6.8.3) the applicable Target Award and in settlement thereof the
Section 6.6 restrictions on all of the shares held in custody pursuant to
Section 6.5 shall lapse and as soon as administratively feasible thereafter the
Company shall deliver to the Grantee a stock certificate or certificates for the
number of shares of Common Stock earned.

         6.8.2.4 For performance at a level between the minimum performance
level of the Payout Schedule and the target level of the Payout Schedule the
Section 6.6 restrictions on that number of shares of Common Stock held in
custody pursuant to Section 6.5 equal to the share number specified by the
Payout Schedule for performance at the applicable intermediate level shall lapse
and as promptly as administratively feasible thereafter, the Company shall
deliver to the Grantee a stock certificate or certificates for the number of
shares of Common Stock earned. Upon such delivery, shares remaining in custody
(which are the difference between the number of shares prescribed for the level
of performance achieved and the Target Award) shall be forfeited and ownership
transferred to the Company without further acts by the Grantee.

         6.8.2.5 Should the maximum level of performance established by the
Payout Schedule be attained or exceeded, the Grantee shall have earned (subject
to adjustments as provided by Subsection 6.8.3) the applicable Maximum Award and
in settlement thereof (i) the restrictions on that number of shares of Common
Stock held in


                                       15
<PAGE>   23
custody pursuant to Section 6.5 equal to the share number specified by the
Payout Schedule for performance at the target level shall lapse and as promptly
as administratively feasible thereafter the Company shall deliver to the Grantee
a stock certificate or certificates for the number of shares of Common Stock
earned at the target level, and (ii) the share differential between the number
of shares specified by the Payout Schedule for performance at the target level
and the number of shares specified in the Payout Schedule for performance at the
maximum level of performance shall be paid in cash, shares of Common Stock or a
combination thereof, as determined by the Committee. Such share differential
shall have a value which is the product of the number of shares constituting the
share differential times the Performance Share Fair Market Value on the vesting
date.

         6.8.2.6 For performance between the target level and the maximum level
of performance specified in the Payout Schedule (i) the Section 6.6 restrictions
on that number of shares of Common Stock held in custody pursuant to Section 6.5
equal to the share number specified by the Payout Schedule for performance at
the target level shall lapse and as promptly as administratively feasible
thereafter, the Company shall deliver to the Grantee a stock certificate or
certificates for the number of shares of Common Stock earned at the target
level, and (ii) the share differential between the share number specified by the
Payout Schedule for performance at the target level and the share number
specified by the Payout Schedule for performance at the applicable intermediate
level shall be paid in cash, shares of Common Stock or a combination thereof, as
determined by the Committee. Such share differential shall have a value which is
the product of the number of shares constituting the share differential times
the Performance Share Fair Market Value on the vesting date.

         6.8.2.7 Cash payments normally will be made as soon as practicable
following the end of the Performance Period. All shares delivered to a Grantee
pursuant to this Subsection 6.8.2 shall be without the legend described in
Subsection 6.5.2 and shall be free of all restrictions and forfeitures, except
as otherwise provided by Article XII or imposed by law. No payment will be
required from the Grantee upon the delivery of any shares of Common Stock,
except that the amount necessary to satisfy applicable Federal, state or local
tax requirements shall be paid by the Grantee in accordance with the
requirements of Section 14.1.

         6.8.3 Revisions for Significant Events. When circumstances occur
(including, but not limited to, unusual or nonrecurring events, changes in tax
laws or accounting principles or practices) that cause any Performance Goal,
Payout Schedule and/or level of performance or distribution specified in a
Payout Schedule to be inappropriate in the judgment of the party initially
responsible for establishing the Performance Goal, Payout Schedule and/or
performance or distribution level, such party may make such changes as said
party deems equitable in recognition of any unforeseen events or changes in
circumstances or changed business or economic conditions.

         6.8.4 Conditions Precedent. Incentives shall be paid to the Grantee
only upon compliance by the Grantee with all obligations of such Grantee under
the Plan and/or the Award Commitment with respect to such Performance Share
Awards, including the requirement that, except as provided in Article XII, the
Performance Goals (although their measurement, including adjustments, if any,
required by the Committee or the CEO, as provided herein, will not occur until
after the expiration of the applicable Performance Period) must be met during
the continuance of the Grantee's employment with the Company or any of the
Participating Subsidiaries, prior to the expiration of the applicable
Performance Period and prior to the lapse of restrictions and delivery of any
shares of Common Stock and/or the making of any payment with respect to the
Performance Share Award.

         6.8.5 Performance Share Fair Market Value. As used in this Article VI,
"Performance Share Fair Market Value" of a Performance Share Unit or a share of
Common Stock on any date shall be the average of the daily closing prices for a
share of Common Stock for the five (5) consecutive trading days immediately
preceding the day in question as reported on the Composite Tape for New York
Stock Exchange Listed Companies and published in the Eastern Edition of The Wall
Street Journal.


                                       16
<PAGE>   24
                                   ARTICLE VII
                             RESTRICTED STOCK AWARDS

         SECTION 7.1 GRANTS

         From time to time and upon the recommendation of the CEO, the Committee
may grant Restricted Stock Awards in such number as it may determine to such
Reporting Persons as the Committee may select. From time to time, the CEO may
grant in such number as he may determine Restricted Stock Awards to such
Nonreporting Persons as he may select; provided, however, each and all such
grants shall be subject to any maximum aggregate number of shares of Restricted
Stock established by the Committee for grants under the Plan for Nonreporting
Persons as a group.

         SECTION 7.2 RESTRICTED PERIOD

         At the time of a Restricted Stock Award grant, the Committee shall
establish (for all Restricted Stock shares which are then being awarded to a
Participant or, if it is the intent that the total of such shares shall be
divided into separate parts, for each part of such total) a Restricted Period of
not less than one year or more than five (5) years (the "Restriction Range"),
commencing with the Date of Grant of the Award. Different Restricted Periods may
be fixed within the Restriction Range for different parts of the shares of
Restricted Stock which are being awarded to a Grantee.

         SECTION 7.3 RESTRICTIONS AND FORFEITURE

         The shares of Restricted Stock covered by the Restricted Stock Award
granted to a Grantee pursuant to Section 7.1 shall be subject to the following
restrictions until the expiration or termination of the Restricted Period
established pursuant to Section 7.2: (i) a Grantee shall not be entitled to
delivery of a certificate evidencing the shares of Restricted Stock covered by
the Restricted Stock Award until the expiration or termination of the Restricted
Period and the satisfaction of any and all other conditions specified in the
Award Commitment applicable to such Restricted Stock shares; (ii) none of the
shares of Restricted Stock may be sold, transferred, assigned, pledged or
otherwise encumbered or disposed of during the Restriction Period and until the
satisfaction of any and all other conditions specified in the Award Commitment
applicable to such Restricted Stock; and (iii) all of the shares of Restricted
Stock shall be forfeited and returned to the Company and all rights of the
Grantee with respect to such Restricted Stock shares (including, but not limited
to, those specified in Section 7.5) shall terminate without further obligation
on the part of the Company unless (x) the Grantee has remained a regular full
time employee of the Company or any Participating Subsidiary until the
expiration or termination of the Restricted Period or Periods and (y) the
satisfaction of any and all other conditions of the Award Commitment applicable
to such Restricted Stock shares. Upon the forfeiture of any shares of Restricted
Stock, such forfeited shares shall be transferred to the Company without further
acts by the Grantee.

         SECTION 7.4 ISSUANCE OF STOCK AND STOCK CERTIFICATE

         7.4.1 Issuance. As soon as practicable after the Date of Grant of a
Restricted Stock Award, the Company shall cause to be issued to the Grantee such
number of shares of Common Stock as constitutes the Restricted Stock shares
awarded under the Restricted Stock Award. Concurrently, the Company shall cause
to be issued a stock certificate or certificates, registered in the name of the
Grantee and dated as of the Date of Grant, evidencing such shares. Each such
issuance (of shares and of a stock certificate or certificates) shall be subject
throughout the Performance Period to the terms, conditions and restrictions
(including forfeiture and restrictions against transfer provisions of Section
7.3) contained in this Plan and/or the Award Commitment entered into between the
registered owner of such shares and the Company, except as otherwise provided in
this Plan. Although not a precondition to the granting of a Performance Share
Award, each such issuance shall be subject to forfeiture to the Company as of
the Date of Grant if an Award Commitment and a stock power endorsed by the
Grantee in blank with respect to the shares of Restricted Stock covered by the
Award under this Article VII are not duly exercised by the Grantee and timely
returned to the Company.


                                       17
<PAGE>   25
         7.4.2 Custody and Legends. Each certificate for shares of Common Stock
issued in respect of the Restricted Stock Award granted under Section 7.1 shall
be held in custody by the Company for the Grantee's account until the expiration
or termination of the applicable Restricted Period (except as provided in
Article XII) and the satisfaction of any and all other conditions of the Award
Commitment applicable to such shares of Restricted Stock covered by the
Restricted Stock Award. Such certificate shall be imprinted with a legend to
indicate that the transferability thereof and the shares of Common Stock
represented thereby are subject to the terms, conditions and restrictions
(including forfeiture and restrictions against transfer) contained in this Plan
and/or an Award Commitment entered into between the registered owner of such
shares and the Company, a copy of which Plan and Award Commitment is on file in
the office of the Company's Corporate Secretary. Such legend shall not be
removed from any stock certificate evidencing such Restricted Stock shares until
the lapse or release of the restrictions as described in Section 7.3. Each
certificate also shall be subject to appropriate stop-transfer orders.

         SECTION 7.5 STOCKHOLDER RIGHTS

         Following registration in the Grantee's name and subject to execution
of the documents provided for in Section 7.4, during the Restricted Period the
Grantee shall have the entire beneficial interest in, and all rights and
privileges of a stockholder as to, such shares of Common Stock covered by the
Restricted Stock Award, including, but not limited to, the right to vote such
shares and the right to receive dividends, subject to the restrictions and
forfeitures set forth in Section 7.3. Any shares of Common Stock distributed as
a dividend or otherwise with respect to any shares of Restricted Stock as to
which the restrictions have not yet lapsed shall be subject to the same
restrictions as such Restricted Stock shares.

         SECTION 7.6 DELIVERY OF SHARES

         Upon the expiration (without a forfeiture) or earlier termination of
the Restriction Period and the satisfaction of or release from any other
conditions by the Grantee under the Plan and/or the Award Commitment with
respect to such shares of Restricted Stock, or at such earlier time as provided
under the provisions of Article XII and/or Article XIII, all of such shares
shall be released from all restrictions and forfeiture provisions under Section
7.3, any similar restrictions and forfeiture provisions under the Award
Commitment applicable to such shares and all other restrictions and forfeiture
provisions of this Plan or such Award Commitment. As promptly as
administratively feasible thereafter the Company shall deliver or cause to be
delivered to such Grantee a stock certificate or certificates for the
appropriate number of shares of Common Stock, free of such restrictions and
forfeitures, except as otherwise provided by Article XIV or imposed by law. No
payment will be required from the Grantee upon the delivery of any shares of
Restricted Stock, except that amount necessary to satisfy applicable Federal,
state or local tax requirements shall be paid by the Grantee in accordance with
the requirements of Section 14.1.


                                  ARTICLE VIII
                               PHANTOM UNIT AWARDS

         SECTION 8.1 GRANTS

         From time to time and upon the recommendation of the CEO, the Committee
may grant Phantom Unit Awards in such number as it may determine to such
Reporting Persons as the Committee may select. From time to time, the CEO may
grant Phantom Unit Awards in such number as he may determine to such
Nonreporting Persons as he may select; provided, however, each and all such
grants shall be subject to any maximum aggregate number of Phantom Units
established by the Committee for grants under the Plan for Nonreporting Persons
as a group.

         Notwithstanding the above paragraph, the Committee may at its
discretion grant Phantom Units payable in one share of Hercules Common Stock for
each unit at the time of vesting pursuant to Section 8.2. In these cases, such
Phantom Units are referred to as Restricted Stock Units and during the period
that such Restricted Stock Units are awarded, shall be subject to all the
provisions of Section 8.2 except, however, such payment shall be made in shares
of Hercules Common Stock as contrasted to cash as provided above.


                                       18
<PAGE>   26
         SECTION 8.2 VESTING OF AWARDS

         The amounts credited with respect to each Phantom Unit shall become
vested on the date or dates determined and set forth in the applicable Award
Commitment at the time of grant unless vested sooner as described in Article XII
of the Plan. The vesting period shall be determined by the Committee, but in no
case shall such period be less than one year or more than five (5) years.
Vesting shall be subject to the terms, conditions and provisions hereinafter
with respect to forfeiture and termination of Awards or early vesting or
forfeiture of Awards in accordance with the provisions of Article XII.

         SECTION 8.3 VALUE OF PHANTOM UNITS PAYMENTS

         The amount payable with respect to each vested Phantom Unit Award shall
be the sum of (i) the dividends and interest credited to such account and (ii)
an amount determined by multiplying the number of Phantom Units posted to such
account by the Phantom Unit Fair Market Value on the date of vesting. For the
purpose of determining such amount the Company shall establish and maintain a
separate memorandum account for each Grantee granted a Phantom Unit Award
pursuant to Section 8.1. As of the Date of Grant of each grant of a Phantom Unit
Award the Company shall credit to the account of each Grantee who has been
granted a Phantom Unit Award such number of Phantom Units as is specified in the
Award. From the Date of Grant until the date that payments under the Plan
commence the account of each Grantee shall be credited quarterly with an amount
determined by multiplying the amount of Phantom Units credited to each account
by the per share dividend paid quarterly by the Company on its Common Stock. In
addition, each account (representing dividends and credited interest) shall be
credited quarterly with an amount determined by multiplying the account balance
at the close of each quarter by an amount representing one-fourth of the average
per annum rate of interest established by Morgan Guaranty Trust Company (or by
such other major New York commercial bank as the Committee shall designate) in
New York from time to time during such quarter as its prime lending rate. As
used in this Article VIII, "Phantom Unit Fair Market Value" of a Phantom Unit or
a share of Common Stock on any date shall be the average of the daily closing
prices for a share of Common Stock for the five (5) consecutive trading days
immediately preceding the day in question as reported on the Composite Tape for
New York Stock Exchange Listed Companies and published in the Eastern Edition of
The Wall Street Journal.

         SECTION 8.4 TIME AND METHOD OF PAYMENT

         Any payment which may become due from the Company upon the vesting of a
Phantom Unit shall be paid to the Grantee in cash. The date or dates upon which
amounts determined pursuant to Section 8.3 shall be paid to the Grantee shall be
determined by the Committee prior to the Date of Grant and set forth in the
applicable Award Commitment or in accord with such rules and regulations as may
be adopted by the Committee.

         SECTION 8.5 FORFEITURE OF PHANTOM UNITS

         Except as otherwise provided in Article XII, all of the Phantom Units
credited to a Grantee's account (including all dividend equivalents and interest
credited thereto) shall be forfeited and all rights of the Grantee with respect
to such Phantom Units (including any dividend equivalents and interest related
thereto) shall terminate without further obligation on the part of the Company
unless and until (i) the Grantee has remained a regular full time employee of
the Company or any Participating Subsidiary until vesting as described in
Section 8.2 and (ii) the satisfaction of any other conditions specified in the
Plan and/or Award Commitment applicable to such Phantom Units, except as may
otherwise be determined by the Committee.

         SECTION 8.6 NATURE OF PHANTOM UNITS

         Phantom Units shall be used solely as a device for the measurement and
determination of the amount to be paid to Grantees as provided in the Plan.
Phantom Units shall not constitute or be treated as property or as a trust fund
of any kind. All amounts at any time attributable to the Phantom Units shall be
and remain the sole property of the Company and all Grantees' rights hereunder
are limited to the rights to receive cash and shares of Common Stock as provided
in the Plan.


                                       19
<PAGE>   27
                                   ARTICLE IX
                                CASH VALUE AWARDS

         SECTION 9.1 GRANTS

         From time to time and upon the recommendation of the CEO, the Committee
may grant Cash Value Awards in such number as it may determine to such Reporting
Persons as the Committee may select. From time to time, the CEO may grant Cash
Value Awards in such number as he may determine to such Nonreporting Persons as
he may select; provided, however, each and all such grants shall be subject to
any maximum dollar value established by the Committee for grants under the Plan
for Nonreporting Persons as a group.

         SECTION 9.2 PERFORMANCE PERIOD

         At the time of a Cash Value Award grant, the Committee shall establish
a Performance Period of not less than one year nor more than five (5) years,
commencing on the Date of Grant of the Award.

         SECTION 9.3 PERFORMANCE GOALS

         At the time of each grant, the Committee shall establish for all Cash
Value Awards the Performance Goals for the Company and any Participating
Subsidiary, while the CEO (or his designee or designees) shall establish for
each individual Cash Value Award the business unit, corporate staff group and
individual Performance Goals (other than his own which will be the same as the
Performance Goals for the Company), if any. All of the designated Performance
Goals must be met as a precondition to any distribution or payment being made
with respect to the Cash Value Award following the end of the Performance
Period. Except as provided in Article XII, these Performance Goals (although
their measurement, including adjustments, if any, will not occur until after the
expiration of the applicable Performance Period) must be met during the
continuance of the Grantee's employment with the Company or any Participating
Subsidiary, prior to the expiration of the applicable Performance Period and
prior to the making of any payment with respect to the Cash Value Award.
Performance Goals may vary among Grantees and among Awards to a Grantee.
Performance Goals shall be based upon such performance criteria or combination
of factors as the Grantor may deem appropriate, including, but not limited to,
specified levels of earnings per share, return on investment, return on
stockholders' equity and such other goals related to the Company's performance
as are deemed appropriate by the Committee.

         SECTION 9.4 PAYOUT SCHEDULE

         In tandem with the establishment of the Performance Goals, the Grantor
shall establish a Payout Schedule for that Performance Period for each Cash
Value Award. Each Payout Schedule shall establish for each Performance Period
minimum, target, maximum and intermediate performance and distribution levels
for determining the payout of the Common Stock, if any, of the Cash Value Award
at the conclusion of the Performance Period.

         SECTION 9.5 FORM OF PAYOUT

         Payment of a Cash Value Award shall be made in cash, Common Stock,
Restricted Stock or any combination thereof as determined by the Grantor at the
time of the Payout. Restricted Stock shall be governed by Articles VII and XII;
provided, however, that Restricted Stock granted at less than Fair Market Value
shall also be governed by Section 9.6 and the Attributable Shares (defined
below) shall be governed by Section 13.3.

         SECTION 9.6 CALCULATION OF PAYOUT

         As soon as practicable after the Performance Period expires with
respect to the Cash Value Award, the Grantor shall determine whether and the
extent to which any Performance Goals were achieved during the Performance
Period. The Grantor may also determine the amount and form of the Payout. If the
Payout is to be paid in Restricted Stock, then the number of shares calculated
by the Grantor may be determined by using either 100% or 85% (as determined by
the Committee) of the Fair Market Value on the date of issue. If the Grantor
uses 85% of the Fair Market Value, then those shares attributable to the
discount (i.e., 100% minus 85%) (the "Attributable Shares")


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<PAGE>   28
shall be subject to the forfeiture provisions under Section 13.3; and otherwise,
the Restricted Stock shall be subject to forfeiture under Article XII.

                                    ARTICLE X
                                  OTHER AWARDS


         SECTION 10.1 OTHER MARKET-BASED AWARDS

         The Grantor may grant other Market-Based Awards, provided that the
purchase price or base price for the equity securities of the Company shall in
no event be less than 100% of the Fair Market Value of such security on the Date
of Grant. Such Other Market-Based Awards shall be in a form determined by the
Committee, and the Committee shall have complete authority to determine the
terms, conditions and restrictions of the awards, not inconsistent with the
terms of the Plan. The Committee, upon recommendation of the CEO, shall
determine the time or times at which such Other Market-Based Awards shall be
made. Any such Other Market-Based Award shall be confirmed by an Award
Commitment executed by the Company and the Grantee, which Agreement shall
contain such provisions as the Committee determines to be necessary or
appropriate to carry out the intent of the Plan with respect to such Award.

         SECTION 10.2 OTHER PERFORMANCE-BASED AWARDS

         The Grantor may grant Other Performance-Based Awards. Such Other
Performance-Based Awards shall be in a form determined by the Committee, and the
Committee shall have complete authority to determine the terms, conditions and
restrictions of the awards, not inconsistent with the terms of the Plan. The
Committee, upon recommendation of the CEO, shall determine the time or times at
which such Other Performance-Based Awards shall be made. Any such Other
Performance-Based Award shall be confirmed by an Award Commitment executed by
the Company and the Grantee, which Agreement shall contain such provisions as
the Committee determines to be necessary or appropriate to carry out the intent
of the Plan with respect to such Award.

         SECTION 10.3 TERMS OF OTHER AWARDS

         In addition to the terms and conditions specified in the Award
Commitment, awards made pursuant to this Article X shall be subject to the
following:

                  (a) Any shares of Common Stock subject to Awards made under
         this Article X may not be sold, assigned, transferred, pledged or
         otherwise encumbered prior to the date on which the shares are issued,
         or, if later, the date on which any applicable restriction or
         performance period lapses; and

                  (b) If specified by the Committee in the Award Commitment, the
         recipient of an Award under this Article X shall be entitled to
         receive, currently or on a deferred basis, interest or dividends or
         dividend equivalents with respect to the Common Stock covered by the
         Award; and

                  (c) The Award Commitment with respect to any Award shall
         contain provisions dealing with the disposition of such Award in the
         event of a termination of employment prior to the exercise, realization
         or payment of such Award, whether such termination occurs because of
         retirement, disability, death or other reason, with such provisions to
         take account of the specific nature and purpose of the Award.

         SECTION 10.4 STOCK OPTION DIVIDEND EQUIVALENTS.

         10.4.1 Grants. The Grantor may provide that a Grantee to whom an Option
has been granted which is exercisable in whole or in part at a future time for
shares of Common Stock (referred to in this subsection as "Share" or "Shares")
shall be entitled to receive an amount per Share equal in value to the cash
dividends, if any, paid per Share on issued and outstanding Shares, as of the
dividend record dates occurring during the period between the Date of Grant and
the time each such Share is delivered pursuant to exercise of such Stock Option
or the related Stock


                                       21
<PAGE>   29
Appreciation Right. Such amounts (herein called "Dividend Equivalents") shall be
paid in cash at the time of the delivery of such Shares.

         10.4.2 Interest. The Grantor may authorize payment of interest on
Dividend Equivalents. The interest will be payable in cash at the same time the
related Dividend Equivalents are paid.

         10.4.3 Forfeiture. To the extent the Stock Options to which Dividend
Equivalents and interest are related shall be forfeited all accrued Dividend
Equivalents and interest thereon shall also be forfeited.

                                   ARTICLE XI
                               SUBSTITUTION AWARDS


         SECTION 11.1 SUBSTITUTION OF PERFORMANCE SHARES

         Upon the request of the Grantee, the Committee may grant Restricted
Stock Awards in substitution for such numbers of shares of Common Stock of equal
value held in custody pursuant to Section 6.5 whose restrictions shall lapse
upon expiration or other termination of a Performance Period. The number of
Performance Shares available for substitution shall be determined by the method
described in Section 11.3. Such Substitution Awards shall be subject to such
Restricted Periods and other terms, conditions and restrictions as the Committee
may from time to time determine. No substitution shall be permitted after
termination of employment, regardless of the reason for termination. Once
substitution has been approved by the Committee, no payment will be made with
respect to an original Award.

         SECTION 11.2 SUBSTITUTION OF RESTRICTED STOCK

         Upon request of the Grantee, the Committee may grant Restricted Stock
Awards in substitution for shares of Restricted Stock previously awarded either
under this Plan or under the Hercules Incorporated Restricted Stock Plan of
1986. Such Awards shall be subject to such Restricted Periods and other terms,
conditions and restrictions as the Committee may from time to time determine. No
substitution shall be permitted after termination of employment, regardless of
the reason for termination.

         SECTION 11.3 SUBSTITUTION PROCEDURES

         Any request of a Grantee pursuant to Section 11.1 or 11.2 shall be
filed in writing with the Committee in accordance with such rules and
regulations, including any deadline for the making of such request, as the
Committee may provide. No substitution shall be permitted past any termination
of employment described in Article XII or past the occurrence of any of the
events specified in clauses (i), (ii) and (iii) of Section 14.4.

         SECTION 11.4 SUBSTITUTIONS IN CONTEMPLATION OF RETIREMENT

         Prior to the expiration of the Performance Period or Restricted Period
applicable to any Performance Shares or Restricted Stock Awards granted to a
Grantee prior to January 1, 1995, such Grantee may, with the consent of the
Committee, surrender all or a portion of his Award in substitution for Phantom
Unit Awards subject to the terms and conditions of Article VIII, and provided
that: (i) such surrender shall be treated as a forfeiture under the Plan; (ii)
such substitution shall be made for retirement planning purposes; (iii) such
substitution shall be made prior to December 31 of the year preceding the
Grantee's Normal Retirement Date but not more than one year prior to the
Grantee's Normal Retirement Date; or, in cases where Retirement with consent
occurs prior to the Grantee's Normal Retirement Date, not less than sixty (60)
nor more than three hundred and sixty (360) days before an announced Retirement
approved by the Company; and (iv) any Phantom Units shall be substituted as of
the expiration date of the applicable Performance Period in an amount consistent
with the number of shares calculated for each Award being substituted.


                                       22
<PAGE>   30
                                   ARTICLE XII
                            TERMINATION OF EMPLOYMENT


         12.1 RETIREMENT

         12.1.1 Stock Options and SARs. If prior to the expiration of the Option
Period a Grantee who has been given an Option or SAR under the Plan shall cease
to be employed by the Company, any Participating Subsidiary or Related Entity
because of his Retirement, (i) in the case of Nonqualified Options (except
PASOs) and their related SARs, each Option and SAR shall become immediately
exercisable and shall remain exercisable for a period of five (5) years from the
date of cessation of employment (with respect to options granted prior to May 1,
1994, the period shall be three (3) years from the date of cessation of
employment), but not beyond the end of the Option Period, and (ii) in the case
of ISOs and their related SARs, each Option and SAR shall, at such time as it
becomes exercisable under the Award Commitment covering such Option, remain
exercisable for a period of three (3) months from the cessation of employment,
but not beyond the end of the Option Period.

         12.1.2 Performance Share, Restricted Stock, Phantom Unit, and Cash
Value Awards. If prior to the expiration of the Performance or Restricted Period
a Grantee who has been given a Performance Share, Restricted Stock, Phantom Unit
or Cash Value Award under the Plan shall cease to be employed by the Company,
any Participating Subsidiary or Related Entity because of his Retirement, (i)
that Grantee shall be entitled to Performance Shares or Cash Value at the end of
the Performance Period based upon the extent to which the Performance Goals were
satisfied at the end of such period (provided, however, the Committee may
provide for an earlier payment in settlement of such Performance Shares in such
amount and under such terms and conditions as the Committee deems appropriate or
desirable); and (ii) all remaining restrictions with respect to such Grantee's
Restricted Stock and Phantom Unit Awards shall lapse as of the date of
termination.

         12.1.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company, any Participating Subsidiary
or Related Entity because of his Retirement, that Grantee shall be entitled to
PASOs as follows: If the PASOs are exercisable on the date of Retirement, then
the PASOs will remain exercisable until the earlier of five (5) years or the end
of the PASO period; if the PASOs are not yet exercisable, then they shall become
exercisable at the earlier of (i) such time as the PASOs become exercisable
through acceleration due to performance, or (ii) four and one-half (4.5) years
after Retirement regardless of performance, or (iii) the end of nine and
one-half (9.5) years from the award date. Once the PASOs become exercisable,
they shall remain exercisable until the earlier of five (5) years after
Retirement or the end of the PASO period, provided, however, the Grantor may
provide for acceleration of the vesting date and/or an earlier settlement of
such PASOs under such terms and conditions as the Grantor deems appropriate or
desirable.

         12.1.4 Restricted Stock Unit. If prior to the expiration of the
restriction period for a Restricted Stock Unit, a grantee who has been granted a
Restricted Stock Unit under the Plan, shall cease to be employed by the Company,
any participating subsidiary or related entity because of his retirement, that
grantee at his election no less than 60 days prior to his designated retirement
date, be entitled to defer the payout of such Restricted Stock Units to a future
designated date and on such date all remaining restrictions with respect to such
grantee"s Restricted Stock shall lapse as of such designated date and shares
shall be distributed to such grantee plus accrued dividend equivalents, plus
interest thereon, or if no such election is filed, all remaining restrictions
with respect to such grantee"s Restricted Stock shall lapse on the date of
termination and such shares shall be distributed along with accrued dividend
equivalents, plus interest thereon.

         SECTION 12.2 REDUCTION IN FORCE

         12.2.1 Stock Options and SARs. If prior to the expiration of the Option
Period a Grantee who has been given a Option or SAR under the Plan shall cease
to be employed by the Company or any Participating Subsidiary because of a
Reduction in Force, (i) in the case of Nonqualified Options (except PASOs) and
their related SARs, each Option and SAR shall become immediately exercisable and
shall remain exercisable for a period of one year from the date of cessation of
employment, but not beyond the end of the Option Period, and (ii) in the case of
an ISO, each


                                       23
<PAGE>   31
Option and SAR shall, at such time as it becomes exercisable under the Award
Commitment covering such Option, remain exercisable for a period of three (3)
months from the cessation of employment, but not beyond the end of the Option
Period.

         12.2.2 Performance Share, Restricted Stock, Restricted Stock Unit,
Phantom Unit and Cash Value Awards. If prior to the expiration of the
Performance or Restricted Period a Grantee who has been given a Performance
Share, Restricted Stock, Restricted Stock Unit, Phantom Unit or Cash Value Award
under the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a Reduction in Force, (i) that Grantee shall be entitled
to a Minimum Award of Performance Shares or Cash Value at the end of the
Performance Period prorated for the portion of the Performance Period during
which the Grantee was employed by the Company, any Participating Subsidiary
(provided, however, the Committee may provide for an earlier payment in
settlement of such Performance Shares or Cash Value in such amount and under
such terms and conditions as the Committee deems appropriate or desirable); and
(ii) all remaining restrictions with respect to such Grantee's Restricted Stock,
Restricted Stock Unit and Phantom Unit Awards shall lapse, in an amount prorated
for the amount of time such Awards have remained under restriction, as of the
date of termination.

         12.2.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a Reduction in Force, the Grantor shall determine the
timing, terms and conditions of the exercise of the Award as the Grantor deems
appropriate or desirable except that no PASO may be exercised beyond the end of
the PASO Period.

         SECTION 12.3 TRANSFERS TO CERTAIN RELATED ENTITIES

         12.3.1 Stock Options and SARs. If prior to the expiration of the Option
Period a Grantee who has been given a Option or SAR under the Plan shall cease
to be employed by the Company or any Participating Subsidiary because of a
transfer to a Related Entity, (i) in the case of Nonqualified Options (except
PASOs) and their related SARs, each Option and SAR shall become immediately
exercisable and shall remain exercisable for a period of three (3) years from
the date of cessation of employment, but not beyond the end of the Option
Period, and (ii) in the case of an ISO, each Option and SAR shall, at such time
as it becomes exercisable under the Award Commitment covering such Option,
remain exercisable for a period of three (3) months from the cessation of
employment, but not beyond the end of the Option Period.

         12.3.2 Performance Share, Restricted Stock, Restricted Stock Unit,
Phantom Unit and Cash Value Awards. If prior to the expiration of the
Performance or Restricted Period a Grantee who has been given a Performance
Share, Restricted Stock, Restricted Stock Unit, Phantom Unit or Cash Value Award
under the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a transfer to a Related Entity, then all restrictions with
respect to such Performance Shares, Restricted Stock, Restricted Stock Unit or
Phantom Units shall remain in effect until the end of the Performance or
Restricted Period; provided, however, the Grantor may provide as the case may be
for an earlier payment in settlement of such Performance Shares, Restricted
Stock, Restricted Stock Units or Phantom Units and for payment of Cash Value
Awards, all in such amount and under such terms and conditions as the Grantor
deems appropriate or desirable.

         12.3.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a transfer to a Related Entity, the Grantor shall
determine the timing, terms and conditions of the exercise of the Award as the
Grantor deems appropriate or desirable except that no PASO may be exercised
beyond the end of the PASO Period.

         SECTION 12.4 DISABILITY OR DEATH

         12.4.1 Stock Options and SARs. If prior to the end of the Option Period
a Grantee who has been granted a Option shall cease to be employed by the
Company, any Participating Subsidiary or Related Entity by reason of Death or
Disability, (i) in the case of Nonqualified Options (excluding PASOs) and their
related SARs, each Option and SAR shall become immediately exercisable and shall
remain exercisable for a period of one year from the date


                                       24
<PAGE>   32
of cessation of employment, but not beyond the end of the Option Period, and
(ii) in the case of an ISO, each Option and SAR shall, at such time as it
becomes exercisable under the Award Commitment covering such Option, remain
exercisable for a period of one year from the cessation of employment, but not
beyond the end of the Option Period. Notwithstanding the foregoing, the
Committee may, in its sole discretion, on a case-by-case basis, determine for
new Options, or extend for outstanding Options, the period during which the
Options may be exercised after the Grantee dies or suffers a Disability,
provided that such post-termination exercise period may not extend beyond the
expiration of the stated Option Period.

         12.4.2 Performance Share, Restricted Stock, Restricted Stock Unit,
Phantom Unit and Cash Value Awards. If prior to the expiration of the
Performance or Restricted Period a Grantee who has been given a Performance
Share, Restricted Stock, Restricted Stock Unit, Phantom Unit and Cash Value
Award under the Plan shall cease to be employed by the Company, any
Participating Subsidiary or Related Entity by reason of Death or Disability, (i)
that Grantee shall be entitled to Performance Shares or Cash Value (paid in
cash) at the Target Award level on the date of termination; and (ii) all
remaining restrictions with respect to such Grantee's Restricted Stock,
Restricted Stock Unit, and Phantom Unit Awards shall lapse as of the date of
termination.

         12.4.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period, a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company, any Participating Subsidiary
or Related Entity because of Disability or Death, then such Grantee (or the
Beneficiary of such Grantee) shall be entitled to PASOs as follows: if the PASOs
are exercisable on the date of such Disability or Death, then the PASOs will
remain exercisable until the earlier of one (1) year or the end of the PASO
Period; if the PASOs are not yet exercisable, then they shall become exercisable
at the earlier of (i) such time as the PASOs become exercisable through
acceleration due to performance, or (ii) six (6) months after such Disability or
Death, or (iii) nine and one-half (9.5) years from the award date. Once the
PASOs become exercisable, they shall remain exercisable until the earlier of one
(1) year after or the end of the PASO Period. Notwithstanding the foregoing, the
Committee may, in its sole discretion, on a case-by-case basis, determine for
new PASOs, or extend for outstanding PASOs, the period during which the PASOs
may be exercised after the Grantee dies or suffers a Disability, provided that
such post-termination exercise period may not extend beyond the expiration of
the stated PASO Period.

         SECTION 12.5 RESIGNATION

         12.5.1 Stock Options, SARs and Performance Accelerated Stock Options.
If the Grantee shall voluntarily resign before eligibility for Retirement
(except for Retirement with approval of the Company), the Options (including
PASOs) and SARs granted in tandem shall be canceled coincident with the
effective date of the termination of employment.

         12.5.2 Performance Share, Restricted Stock, Restricted Stock Unit,
Phantom Unit and Cash Value Awards. If prior to the expiration of the
Performance or Restricted Period a Grantee who has been given a Performance
Share, Restricted Stock, Restricted Stock Unit, Phantom Unit or Cash Value Award
under the Plan shall voluntarily resign (except for Retirement with approval of
the Company), then all Performance Share, Restricted Stock, Restricted Stock
Unit, Phantom Unit and Cash Value Awards theretofore awarded to such Grantee as
to which there still remains an unexpired portion of the Performance or
Restricted Period or the vesting period shall, upon such termination of
employment, be forfeited by such Grantee to the Company, without the payment of
any consideration by the Company. Thereafter, neither the Grantee nor any heirs,
assigns or personal representatives of such Grantee shall have any further
rights or interest in such Performance Share, Restricted Stock, Restricted Stock
Unit, Phantom Unit or Cash Value Awards, and the Grantee's name shall thereupon
be deleted from the list of the Company's stockholders with respect to such
Performance Shares, Restricted Stock, Restricted Stock Units, Phantom Units or
Cash Value Award. Notwithstanding any other provisions of this Subsection
12.5.2, the value of any vested and deferred Phantom Units shall be paid to the
Grantee as soon as practicable.


         SECTION 12.6 DECREASE IN COMPANY OWNERSHIP

         12.6.1 Stock Options and SARs. If prior to the expiration of the Option
Period a Grantee who has been given an Option or SAR under the Plan shall cease
to be employed by any Participating Subsidiary because of a


                                       25
<PAGE>   33
decrease in the Company's ownership interest in a Participating Subsidiary to
below 50% but at or above 20%, (i) in the case of Nonqualified Options (except
PASOs) and their related SARs, each Option and SAR shall become immediately
exercisable and shall remain exercisable for a period of three (3) years from
the date of cessation of employment, but not beyond the end of the Option
Period, and (ii) in the case of an ISO, each Option and SAR shall, at such time
as it becomes exercisable under the Award Commitment covering such Option,
remain exercisable for a period of three (3) months from the cessation of
employment, but not beyond the end of the Option Period.

         12.6.2 Performance Share, Restricted Stock, Restricted Stock Unit,
Phantom Unit and Cash Value Awards. If prior to the expiration of the
Performance or Restricted Period a Grantee who has been given a Performance
Share, Restricted Stock, Restricted Stock Unit, Phantom Unit or Cash Value Award
under the Plan shall cease to be employed by any Participating Subsidiary
because of a decrease in the Company's ownership interest in a Participating
Subsidiary to below 50% but at or above 20%, then all restrictions with respect
to such Performance Shares, Restricted Stock, Restricted Stock Units or Phantom
Units shall remain in effect until the end of the Performance Period or
Restricted Period; provided, however, the Committee may provide, as the case may
be, for an earlier payment in settlement of such Performance Shares, Restricted
Stock, Restricted Stock Units or Phantom Units and for payment of Cash Value
Awards, all in such amount and under such terms and conditions as the Committee
deems appropriate or desirable or make any other adjustment deemed appropriate
due to the decrease in Company ownership.

         12.6.3 Performance Accelerated Stock Options. If prior to the
expiration of the PASO Period a Grantee who has been given a PASO Award under
the Plan shall cease to be employed by the Company or any Participating
Subsidiary because of a decrease in company ownership, the Grantor shall
determine the timing, terms and conditions of the exercise of the Award as the
Grantor deems appropriate or desirable except that no PASO may be exercised
beyond the end of the PASO Period.

         SECTION 12.7 TERMINATION OF EMPLOYMENT FOR OTHER REASONS

         12.7.1 Stock Options, SARs and Performance Accelerated Stock Options.
If the Grantee's employment terminates for any reason other than specified in
Sections 12.1, 12.2, 12.3, 12.4, 12.5 or 12.6, each Option, SAR and PASO shall
terminate; provided, however, the Grantor may provide for acceleration of the
vesting date and/or an earlier settlement of such PASOs in such amount and under
such terms and conditions as the Grantor deems appropriate or desirable.

         12.7.2 Performance Share, Restricted Stock, Restricted Stock Unit,
Phantom Unit and Cash Value Awards. If prior to the expiration of the
Performance or Restricted Period a Grantee who has been given a Performance
Share, Restricted Stock, Restricted Stock Unit, Phantom Unit or Cash Value Award
under the Plan shall cease to be employed by the Company, any Participating
Subsidiary or Related Entity because of any reason other than specified in
Sections 12.1, 12.2, 12.3, 12.4, 12.5 or 12.6, then all Performance Share,
Restricted Stock, Restricted Stock Unit, Phantom Unit and Cash Value Awards
theretofore awarded to such Grantee as to which there still remains an unexpired
portion of the Performance or Restricted Period shall, upon such termination of
employment, be forfeited by such Grantee to the Company, without the payment of
any consideration by the Company; provided, however, the Grantor may provide for
settlement of a Cash Value Award in such amount, at such time and under such
terms and conditions as the Grantor deems appropriate or desirable. Thereafter,
neither the Grantee nor any heirs, assigns or personal representatives of such
Grantee shall have any further rights or interest in such Performance Share,
Restricted Stock, Restricted Stock Unit, Phantom Unit or Cash Value Awards, and
the Grantee's name shall thereupon be deleted from the list of the Company's
stockholders with respect to such Performance Shares or Restricted Stock.
Notwithstanding any other provisions of this Subsection 12.7.2, the value of any
vested and deferred Phantom Units shall be paid to the Grantee as soon as
practicable.

         SECTION 12.8 TERMINATION DATE

         Termination of employment of a Grantee for any of the reasons
enumerated in this Article XII shall, for purposes of the Plan, be deemed to
have occurred as of the date which is recorded in the ordinary course in the
Company books and records in accordance with the then-prevailing procedures and
practices of the Company.


                                       26
<PAGE>   34
         SECTION 12.9 REPORTING PERSON LIMITATION

         Notwithstanding any other provision of this Article XII, a Grantee who
ceases to be a Reporting Person through retirement or any other termination of
employment shall not be entitled to exercise a SAR.

                                  ARTICLE XIII
                    EXCHANGE AWARDS; ABOVE TARGET MICP AWARDS

         SECTION 13.1 SALARY/BONUS REDUCTIONS

         13.1.1 Restricted Stock. A Grantee (including those described in
Section 13.8) may elect to reduce and defer his or her current or future Base
Salary and/or earned Bonus and, thereafter, exchange such deferred amounts for
Restricted Stock. Such elections shall direct deferrals and exchanges on a
one-time (annual) basis or, in the alternative in the case of Base Salary, on an
ongoing basis covering a period not exceeding five (5) years. Should a Grantee
elect a one-time (annual) exchange, the deferred amounts shall be credited to
his or her deferred compensation account under this Plan and, thereafter, on the
third (3rd) business day following the public announcement of the Company's
annual earnings, the deferred amounts shall be exchanged for that number of
shares of Restricted Stock that equals the number of whole shares determined by
dividing the deferred amount forgone by 85% of the Fair Market Value of one
share of Common Stock on the date of the exchange. Should a Grantee elect an
exchange of Base Salary on an ongoing basis for a period of one year or less,
the number of shares of Restricted Stock he or she shall acquire through such
exchanges, which shall be effected on the third (3rd) business day following the
public announcement of the Company's annual earnings, shall be determined by
dividing the total projected deferred amounts forgone for the designated period
by 85% of the Fair Market Value of one share of Common Stock on the date of the
exchange. When the elected period extends beyond one year, the number of shares
of Restricted Stock acquired through such exchanges, which shall be effected on
the third (3rd) business day following the public announcement of the Company's
annual earnings, shall equal that number of whole shares of Restricted Stock
determined by dividing the discounted present value of the total projected
deferred amounts forgone for the designated period (using the appropriate
Treasury Bill rates for the applicable period) by 85% of the Fair Market Value
of one share of Common Stock on the date of the exchange. Restricted Stock
acquired pursuant to exchanges under this Subsection 13.1.1 shall have a
Restricted Period of not less than three (3) years (such Restricted Period to be
extended up to five (5) years to coincide with a deferral election that extends
beyond three (3) years), as determined by the Committee, and shall be subject to
all of the terms, conditions and provisions of Article VII, except as may
otherwise be determined by the Committee prior to their acquisition.

         13.1.2 Options. A Grantee may elect to reduce and defer his or her
current or future Base Salary and/or earned Bonus and, thereafter, exchange such
deferred amounts for Nonqualified Options. Such elections shall direct deferrals
and exchanges on a one-time (annual) basis or, in the alternative in the case of
Base Salary, on an ongoing basis covering a period not exceeding five (5) years.
Should a Grantee elect a one-time (annual) exchange, the deferred amounts shall
be credited to his or her deferred compensation account under this Plan and,
thereafter, on the third (3rd) business day following the public announcement of
the Company's annual earnings, the deferred amounts shall be exchanged for that
number of Options as is determined by the Committee, in its discretion, to be
the equivalent in value of that number of whole shares of Restricted Stock
determined by dividing the deferred amount forgone by 85% of the Fair Market
Value of one share of the Common Stock on the date of the exchange. Should a
Grantee elect an exchange of Base Salary on an ongoing basis for a period of one
year or less, the number of Options he or she shall acquire through such
exchanges is that number of Options as is determined by the Committee, in its
discretion, to be the equivalent in value of that number of whole shares of
Restricted Stock determined by dividing the total projected deferred amount
forgone for the designated period by 85% of the Fair Market Value of one share
of Common Stock on the date of the exchange. When the elected period extends
beyond one year, the Options acquired through such exchanges, which shall be
effected on the third (3rd) business day following the public announcement of
the Company's annual earnings, shall be that number of Options determined by the
Committee, in its discretion, to be the equivalent in value of that number of
whole shares of Restricted Stock determined by dividing the discounted present
value of the total projected deferred amounts forgone for the designated period
(using the appropriate Treasury Bill rates for the applicable period) by 85% of
the Fair Market Value of one share of the Common Stock on the date of the
exchange. Options acquired pursuant to this Subsection 13.1.2 shall be
exercisable


                                       27
<PAGE>   35
according to the following three (3)-year schedule (unless the Grantee's
employment with the Company or a Participating Subsidiary is terminated, in
which case the provisions of Section 13.3 or Article XII, as apposite, shall
govern):

         40% of the Options will be exercisable beginning one year after the
         exchange, a second 40% of the Options will be exercisable beginning two
         (2) years after the exchange, and the final 20% of the Options will be
         exercisable beginning three (3) years after the exchange;

and shall be subject to all of the terms, conditions and provisions of Article V
(as modified as to exercisability by this Subsection 13.1.2), except as may
otherwise be determined by the Committee prior to their acquisition.

         SECTION 13.2 DEFERRED ACCOUNTS

         13.2.1 Deferred Compensation Plan Accounts. Subject to the Company's
approval, amounts accrued under the Hercules Incorporated Deferred Compensation
Plan (other than under the Hercules Incorporated Non-qualified Savings Plan
portion thereof) may, upon the Grantee's request for a one-time (annual)
exchange, be surrendered in exchange for Restricted Stock and/or Nonqualified
Options. The number of shares of Restricted Stock and Options acquired in this
manner shall be determined in the same manner as is specified in Subsections
13.1.1 and 13.1.2, respectively, and all Restricted Stock and Options so
acquired shall be subject to all of the terms, conditions and provisions of
Subsections 13.1.1 and 13.1.2, respectively. Exchanges under this Subsection
13.2.1 shall be effected the third (3rd) business day after the first public
announcement of the Company's annual earnings.

         13.2.2   Non-Qualified Savings Plan Accounts. Subject to the Company's
                  approval, amounts accrued under the Hercules Incorporated
                  Non-Qualified Savings Plan portion of the Hercules Deferred
                  Compensation Plan may, upon the Grantee's request for a
                  one-time (annual) exchange, be surrendered in exchange for
                  Restricted Stock and/or Nonqualified Options. The number of
                  shares of Restricted Stock and Options acquired in this manner
                  shall be determined in the same manner as is specified in
                  Subsections 13.1.1 and 13.1.2, respectively, except that the
                  computation in each case shall be based on 100% of the Fair
                  Market Value of one share of Common Stock rather than the 85%
                  of the Fair Market Value specified in Subsections 13.1.1 and
                  13.1.2. All Restricted Stock and Options so acquired shall be
                  subject to all of the terms, conditions and provisions of
                  Subsections 13.1.1 and 13.1.2, respectively. Exchanges under
                  this Subsection 13.2.2 shall be effected the third (3rd)
                  business day after the first public announcement of the
                  Company's annual earnings.

         SECTION 13.3 TERMINATION OF EMPLOYMENT

         13.3.1   Death, Disability and Reduction in Force. Notwithstanding any
provisions of Sections 12.2 and 12.4 to the contrary:

                  (a) If prior to the expiration of an applicable Restricted
         Period a Grantee who has received Restricted Stock pursuant to
         Subsections 13.1.1, 13.2.1 and/or 13.2.2 shall cease to be employed by
         the Company by reason of Death, Disability, Reduction in Force or
         Retirement directly attributable to a Reduction in Force, all
         restrictions and forfeiture provisions under this Plan with respect to
         the Restricted Stock exchanged pursuant to this Article XIII shall
         lapse as of the date of termination of employment and delivery of such
         shares shall be governed by the provisions of Section 7.6.

                  (b) If prior to the expiration of an applicable Option Period
         a Grantee who has received Options pursuant to Subsections 13.1.2,
         13.2.1 and/or 13.2.2 shall cease to be employed by the Company by
         reason of Death, Disability, Reduction in Force or Retirement directly
         attributable to a Reduction in Force, the Option Period shall be
         adjusted to the lesser of the remaining Option Period or one year from
         the date of employment termination. Notwithstanding the foregoing, the
         Committee may, in its sole discretion, on a case-by-case basis,
         determine for new Options, or extend for outstanding Options, the
         period during which the Options may be exercised after the Grantee dies
         or suffers a Disability, provided that such post-termination exercise
         period may not extend beyond the expiration of the stated Option
         Period.


                                       28
<PAGE>   36
         13.3.2 Retirement. Notwithstanding any provisions of Section 12.1 to
the contrary:

                  (a) In the event of Retirement (not directly attributable to a
         Reduction in Force) by a Grantee who has received Restricted Stock
         pursuant to Subsections 13.1.1, 13.2.1 and/or 13.2.2 prior to the
         expiration of an applicable Restricted Period, that number of shares of
         Restricted Stock equal to the amount attributable to the 15% discount
         made available under this Article XIII, and prorated for the length of
         time remaining in the Restricted Period, shall be forfeited and
         returned to the Company.

                  (b) If prior to the expiration of an applicable Option Period
         a Grantee who has received Options pursuant to Subsections 13.1.2,
         13.2.1 and/or 13.2.2 shall cease to be employed by the Company by
         reason of his or her Retirement (not directly related to a Reduction in
         Force), the Option Period shall be adjusted to the lesser of the
         remaining Option Period or five (5) years from the date of termination.
         In the event of Retirement (not directly attributable to a Reduction in
         Force) by a Grantee who has received Options pursuant to Subsections
         13.1.2, 13.2.1 and/or 13.2.2, a number of Options equal to the amount
         attributable to the 15% discount and prorated for the length of time
         remaining in the period during which Options may not be exercised shall
         be forfeited.

         13.3.3   Resignation or Termination for Cause. Notwithstanding any
provisions of Sections 12.5 and 12.7 to the contrary:

                  (a) In the event a Grantee who has received Restricted Shares
         pursuant to Subsections 13.1.1, 13.2.1 and/or 13.2.2 voluntarily
         resigns (except for retirement with approval of the Company) or
         terminates employment for reasons other than any of those specified in
         Sections 12.1, 12.2, 12.3, 12.4 and 12.6 prior to the expiration of an
         applicable Restricted Period, all shares of Restricted Stock shall be
         forfeited and returned to the Company and such Grantee shall receive a
         payment equal to the lower of the Fair Market Value of the Restricted
         Shares forfeited or the original amount exchanged.

                  (b) In the event a Grantee who has received Options pursuant
         to Subsections 13.1.2, 13.2.1 and/or 13.2.2 voluntarily resigns (except
         for retirement with approval of the Company) or terminates employment
         for reasons other than any of those specified in Sections 12.1, 12.2,
         12.3, 12.4 and 12.6 prior to the expiration of the applicable Option
         Period, all Options shall be forfeited and returned to the Company and
         such Grantee shall receive a payment equal to the lower of a value (as
         determined by the Committee) of the Options forfeited or the original
         amount exchanged.

         SECTION 13.4 AVOIDANCE OF PENSION DIMINUTION

         13.4.1 Governing Provisions. Grantees electing Base Salary and/or Bonus
reductions under Section 13.1 may suffer a permanent diminution of their
qualified pension entitlement under the Hercules Pension Plan. To offset this
diminution in part, exchange awards in respect of pensions otherwise payable as
nonqualified pensions (as measured from the date of the APD Election defined
next below) may be requested within five (5) years of anticipated retirement.
Subject to the Committee's approval of such a request, all such exchanges shall
be effected in accordance with the provisions of this Section 13.4.

         13.4.2 Exchange Awards. A Grantee who is within five (5) years (but not
less than one year) of his or her anticipated retirement date may elect ("APD
Election") to exchange the present value (as of the date of the APD Election) of
his or her projected benefits payable as of the Designated Retirement Date (as
defined below) under the Hercules Pension Restoration Plan (utilizing the method
and assumptions used to convert a pension to a partial cash payment under the
Hercules Pension Plan) for Restricted Stock issuable under Subsection 13.1.1
and/or Options granted under Subsection 13.1.2. Restricted Stock and/or Options
received in such an exchange shall be in substitution of any pension
entitlements under the Hercules Pension Restoration Plan, the rights to such
entitlements being forfeited and canceled in consideration of such exchange.

         13.4.3 Designated Retirement Date. As a part of his or her APD
Election, a Grantee shall designate a retirement date ("Designated Retirement
Date"). In the event of any termination of employment prior to the Designated
Retirement Date, the following will apply:


                                       29
<PAGE>   37
                  (a) If the Grantee elected Restricted Stock, that number of
         Restricted Stock shares shall be forfeited as has a value (on the date
         of his or her APD Election) equivalent to the present value determined
         for purposes of Subsection 13.4.2 minus the present value (as of the
         APD Election date) of the amount due under the Hercules Pension
         Restoration Plan as of the date of actual retirement, utilizing the
         method and assumptions used to convert a pension to a partial cash
         payment under the Hercules Pension Plan. Further, in the event that the
         Grantee's actual retirement date occurs within three (3) years of the
         APD Election, the Grantee shall forfeit that number of Restricted Stock
         shares (adjusted by the preceding sentence) attributable to the 15%
         discount made available under Subsection 13.1.1 and prorated for the
         length of time remaining in the three (3)- year period commencing with
         the date of the APD Election.

                  (b) If the Grantee elected Nonqualified Options, that number
         of Options shall be forfeited as the Committee in its discretion shall
         determine has a value (on the date of his or her APD Election)
         equivalent to the present value determined for purposes of Subsection
         13.4.2 minus the present value (as of the date of his or her APD
         Election) of the amount due under the Hercules Pension Restoration Plan
         as of the date of actual retirement, utilizing the method and
         assumptions used to convert a pension to a partial cash payment under
         the Hercules Pension Plan. Further, in the event that the Grantee's
         actual retirement date occurs within three (3) years of the APD
         Election, the Grantee shall forfeit that number of Options as the
         Committee in its discretion shall determine has a value equal to that
         number of Restricted Stock shares (adjusted by the preceding sentence)
         attributable to the 15% discount made available under Subsection 13.1.2
         and prorated for the length of time remaining in the period commencing
         with the date of the APD Election.

                  (c) Notwithstanding (a) and (b) next above, in the event of
         the Grantee's death, Disability or termination of employment with the
         consent of the Company, the Committee may, in its discretion, waive any
         forfeitures otherwise applicable under this Subsection 13.4.3.

         SECTION 13.5 IRREVOCABILITY

         Any election under Sections 13.1, 13.2 or 13.4 shall be irrevocable.

         SECTION 13.6 EQUIVALENCY

         Notwithstanding any provision in this Article XIII to the contrary, all
elections under this Article XIII that involve an exchange of future
compensation or pension benefit entitlement shall in each instance be equalized
(that is, recalculated using actual numbers) at the expiration of the period
elected or termination of employment and forfeiture shall be applied, if
appropriate.

         SECTION 13.7 MICP AWARDS

         Any payout under the Management Incentive Compensation Plan for
performance above the target level Performance Goals for any Performance Period
shall be in that number of whole shares of Restricted Stock obtained by dividing
the dollar value of the payout by 85% of the Fair Market Value of one share of
Common Stock on the date of such award. Restricted Stock acquired pursuant to
this Section 13.7 shall be subject to all of the terms, conditions and
provisions of Article VII and Article XIII, except as may otherwise be
determined by the Committee prior to the Date of Award.

         SECTION 13.8 DEFINITION

         For purposes of this Article XIII, the term "Grantee" includes all
employees of the Company or any Participating Subsidiary who are designated by
the CEO to be eligible for purposes of this Article XIII.


                                       30
<PAGE>   38
                                   ARTICLE XIV
                     CERTAIN TERMS APPLICABLE TO ALL AWARDS

         SECTION 14.1 WITHHOLDING TAXES

         The Company shall withhold (or secure payment from the Grantee in lieu
of withholding) the amount of any withholding or other tax required by law to be
withheld or paid by the Company with respect to any amount payable and/or shares
issuable under such Grantee's Award, or with respect to any income recognized
upon a disqualifying disposition of shares received pursuant to the exercise of
an ISO, and the Company may defer payment or issuance of the cash or stock upon
exercise or vesting of an Award unless indemnified to its satisfaction against
any liability for any such tax. The amount of such withholding or tax payment
shall be determined by the Committee and shall be payable by the Grantee at the
time of delivery or when payment is made [except as otherwise payable under
Section 14.1(c)] in accordance with the following rules:

                  (a) With respect to Awards payable in cash, the Company will
         withhold an amount sufficient to satisfy applicable Federal, state and
         local tax withholding requirements and remit the net award to the
         Grantee;

                  (b) With respect to Awards payable in stock, the Company will
         notify the Grantee of the amount due from such Grantee to satisfy the
         tax withholding requirements with respect to the stock. The Grantee
         shall pay the amount due to satisfy the tax withholding requirements in
         cash; provided, however, that the Grantee may elect to meet the tax
         withholding requirement by requesting the Company, in writing, to
         withhold from such Award and sell through a brokerage firm the
         appropriate number of shares of Common Stock, rounded up to the next
         whole number, which would result in proceeds equal to the tax
         withholding requirement. Any election by a Grantee to have shares
         withheld under this Section 14.1 shall be subject to such terms and
         conditions as the Committee may specify, which may include that the
         election shall be irrevocable and in the case of a Reporting Person,
         the election to have shares withheld under this Section 14.1 must be
         made either (i) not less than six (6) months prior to the date that the
         tax is to be withheld by the Company, or (ii) during the period
         beginning on the third business day following the date of the release
         for publication of the Company's quarterly or annual summary statements
         of earnings and ending on the twelfth business day following such date.
         If the cash required (whether paid directly or indirectly through the
         sale of stock election described above) is not received by the Company
         within sixty (60) days of notification by the Company of the tax
         withholding due, the Committee shall have the right to take whatever
         action it deems appropriate, including voiding the Award. The Company
         shall not deliver or pay the Award (net of the tax withholding) until
         the tax withholding obligation is satisfied. At the time that all other
         restrictions lapse (other than being subject to Section 16 of the Act)
         a Reporting Person shall make the election described in Subsection (c)
         below.

                  (c) If permitted under applicable Federal income tax laws, a
         Grantee may elect to include in gross income for Federal income tax
         purposes in the year in which a stock Award is made, an amount equal to
         the Fair Market Value of the Award on the Date of Grant. If the Grantee
         makes such an election, the Grantee shall promptly notify the Company
         in writing and shall provide the Company with a copy of the executed
         election form as filed with the Internal Revenue Service by no later
         than thirty (30) days from the Date of the Grant. Promptly following
         such notification, the Grantee shall pay directly to the Company, or
         make arrangements satisfactory to the Committee, the cash amount
         determined by the Company to be sufficient to satisfy applicable
         Federal, state or local withholding tax requirements. If the Grantee
         shall fail to make such payments, the Company and its Subsidiaries
         shall, to the extent permissible by law, have the right to deduct from
         any payment of any kind otherwise due to the Grantee any Federal, state
         or local taxes of any kind required by law to be withheld with respect
         to such Restricted Stock.

         SECTION 14.2 ADJUSTMENTS TO REFLECT CAPITAL CHANGES

         14.2.1 Recapitalization. In the event of any stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other change
in capitalization with a similar substantive effect upon the Plan or the Awards
granted under the Plan, such adjustments shall be made in the number and kind of
shares subject to outstanding


                                       31
<PAGE>   39
Awards, the Option Price for such shares and the number and kind of shares
available for Awards subsequently granted under the Plan as may be determined
appropriate by the Committee.

         14.2.2 Sale or Reorganization. After any reorganization, merger or
consolidation in which the Company is the surviving corporation, each Grantee
shall, at no additional cost, be entitled upon any exercise of an Option or
receipt of other Award to receive (subject to any required action by
stockholders), in lieu of the number of shares of Common Stock receivable or
exercisable pursuant to such Award, the number and class of shares of stock or
other securities to which such Grantee would have been entitled pursuant to the
terms of the reorganization, merger or consolidation if, at the time of such
reorganization, merger or consolidation, such Grantee had been the holder of
record of a number of shares of stock equal to the number of shares receivable
or exercisable pursuant to such Award. Comparable rights shall accrue to each
Grantee in the event of successive reorganizations, mergers or consolidations of
the character described above.

         14.2.3 Options to Purchase Stock of Acquired Companies. After any
reorganization, merger or consolidation in which the Company or a Subsidiary
shall be a surviving corporation, the Committee may grant substituted options
under the provisions of the Plan, pursuant to Section 424 of the Code, replacing
old options granted under a plan of another party to the reorganization, merger
or consolidation whose stock subject to the old options that may no longer be
issued following such merger or consolidation. The foregoing adjustments and
manner of application of the foregoing provisions shall be determined by the
Committee in its sole discretion. Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject to any
Options.

         SECTION 14.3 FAILURE TO COMPLY WITH TERMS AND CONDITIONS

         Notwithstanding any other provision of the Plan, no payment or delivery
with respect to any Award shall be made, and all rights of the Grantee who
receives such Award (or his designated Beneficiary or legal representative) to
such payment or delivery under the Plan shall be forfeited, at the discretion of
the Committee, if, prior to the time of such payment or delivery, the Grantee
breaches a restriction or any of the terms, restrictions and/or conditions of
the Plan and/or the Award Commitment.

         SECTION 14.4 FORFEITURE UPON OCCURRENCE OF CERTAIN EVENTS

         Notwithstanding any other provision of the Plan, no payment of any
Award shall be made and all rights of the Grantee who received such Award (or
his designated Beneficiary or legal representative) to the payment thereof under
the Plan shall be forfeited if, prior to the time of such payment, the Grantee
(i) without the Company's consent, shall be employed by a competitor of, or
shall be engaged in any activity in competition with, the Company or a
Subsidiary; (ii) divulges without the consent of the Company any secret or
confidential information belonging to the Company or a Subsidiary; or (iii) has
been dishonest or fraudulent in any matter affecting the Company or a Subsidiary
or has committed any act which, in the sole judgment of the Committee, has been
substantially detrimental to the interests of the Company or a Subsidiary. The
Company shall give a Grantee written notice of the occurrence of any such event
prior to making any such forfeiture. The determination of the Committee as to
the occurrence of any of the events specified in clauses (i), (ii), and (iii) of
this Section 14.4 shall be conclusive and binding upon all persons for all
purposes. Any Award shall be subject to forfeiture for the reasons provided in
this Section 14.4 in such manner as shall be provided by the Committee.

         SECTION 14.5 REGULATORY APPROVALS AND LISTING

         The Company shall not be required to issue any certificate or
certificates for shares of Common Stock under the Plan prior to (i) obtaining
any approval from any governmental agency which the Company shall, in its
discretion, determine to be necessary or advisable, (ii) the admission of such
shares to listing on any national securities exchange on which the Company's
Common Stock may be listed, and (iii) the completion of any registration or
other qualification of such shares of Common Stock under any state or Federal
law or ruling or regulations of any governmental body which the Company shall,
in its discretion, determine to be necessary or advisable.


                                       32
<PAGE>   40
         SECTION 14.6 RESTRICTIONS UPON RESALE OF STOCK

         If the shares of Common Stock that have been issued to a Grantee
pursuant to the terms of the Plan are not registered under the Securities Act of
1933, as amended ("Securities Act"), pursuant to an effective registration
statement, such Grantee, if the Committee shall deem it advisable, may be
required to represent and agree in writing (i) that any such shares acquired by
such Grantee pursuant to the Plan will not be sold except pursuant to an
effective registration statement under the Securities Act, or pursuant to an
exemption from registration under said Act and, (ii) that such Grantee is
acquiring such shares for his own account and not with a view to the
distribution thereof.

         SECTION 14.7 REPORTING PERSON LIMITATION

         Notwithstanding any other provision of the Plan, to the extent required
to qualify for the exemption provided by Rule 16b-3 under the Act, and any
successor provision, (1) any Common Stock or other equity security offered under
the Plan to a Reporting Person may not be sold for at least six (6) months after
the earlier of acquisition of the security or the date of grant of the
derivative security, if any, pursuant to which the Common Stock or other equity
security was acquired; and (2) any Option, SAR or other similar right related to
an equity security, issued under the Plan to a Reporting Person shall not be
transferable other than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order and shall be exercisable during
the Grantee's lifetime only by the Grantee or the Grantee's guardian or legal
representative.

                                   ARTICLE XV
                                    DISPUTES

         If the employment of a Grantee with the Company or any Participating
Subsidiary shall terminate prior to the expiration of the Performance or
Restriction Period applicable to any Performance Share, Restricted Stock,
Restricted Stock Unit or Phantom Unit Award awarded to such Grantee and there
exists a dispute between such Grantee and the Company or the Committee as to the
satisfaction of the conditions to the release of such shares or units under the
Plan or the terms and conditions of the Performance Share, Restricted Stock,
Restricted Stock Unit, or Phantom Unit Award, the Performance Share, Restricted
Stock, Restricted Stock Unit or Phantom Unit Awards as to which such dispute
shall exist shall remain subject to the restrictions of the Plan until the
resolution of such dispute, regardless of any intervening expiration of the
Performance or Restriction Period originally applicable to such shares, except
that any dividends which may be declared and which may be payable to the
participant as of a date during the period from termination of such Grantee's
employment to the resolution of such dispute (the "Suspension Period") shall

                  (i) to the extent to which such dividends would have been
         payable to such Grantee on such Performance Share, Restricted Stock,
         Restricted Stock Unit or Phantom Unit Award, be held by the Company as
         part of its general funds and shall be paid to or for the account of
         such Grantee only upon, and in the event of, a resolution of such
         dispute in a manner favorable to such Grantee and then only with
         respect to such Performance Share, Restricted Stock, Restricted Stock
         Unit or Phantom Unit Award as to which such resolution shall be so
         favorable, and

                  (ii) in the event the dispute is resolved in a manner
         unfavorable to the Grantee, be canceled as dividends payable upon
         Performance Share, Restricted Stock, Restricted Stock Unit or Phantom
         Unit Award as to which such resolution shall be so unfavorable.

         In addition, to the extent that resolution of any such dispute shall be
unfavorable to the Grantee, the Performance Shares, Restricted Stock, Restricted
Stock Unit or Phantom Unit Award as to which such dispute shall have existed
shall be forfeited in accordance with the provisions of Article XII or Section
14.4.


                                       33
<PAGE>   41
                                   ARTICLE XVI
                           ADMINISTRATION OF THE PLAN


         SECTION 16.1 COMMITTEE

         The Plan shall be administered by or under the direction of the
Committee. No person shall be eligible or continue to serve as a member of the
Committee unless such person is a director of the Company and is a
"disinterested person" within the meaning of Rule 16b-3, and no person shall be,
or shall have been, eligible to receive an Award under the Plan to acquire
stock, stock options, stock appreciation rights, performance shares or
restricted stock of the Company or any Participating Subsidiary at any time
within the one (1) year immediately preceding the member's appointment to the
Committee.

         SECTION 16.2 COMMITTEE ACTIONS

         Except for matters required by the terms of this Plan to be decided by
the CEO or his designee or designees, the Committee shall have full power and
authority to interpret and construe the Plan, to prescribe, amend and rescind
rules, regulations, policies and practices, to impose such conditions and
restrictions on Awards as it deems appropriate and to make all other
determinations necessary or desirable in connection with the administration of,
or the performance of its responsibilities under, this Plan. Subject to the
limitations of provisions of Section 20.4, each decision, determination,
interpretation or other action of the Committee made or taken pursuant to grants
of authority under the Plan shall be final and shall be conclusive and binding
on all persons for all purposes. The Committee's decisions, determinations and
interpretations (including without limitations, the terms and provisions of such
awards and the agreements evidencing same) need not be uniform and may be made
selectively among Grantees who receive, or are eligible to receive, awards under
the Plan, whether or not such Grantees are similarly situated. The Committee
may, to the extent that any such action will not prevent the Plan from complying
with Rule 16b-3, delegate any of its powers and authority under the Plan as it
deems appropriate to designated officers or employees of the Company.

         SECTION 16.3 NO LIABILITY OF COMMITTEE MEMBERS

         As and to the extent provided by Section 20.5, no past, present or
future member of the Committee shall be personally liable by reason of any
contract or other instrument executed by him or on his behalf in his capacity as
a member of the Committee, nor for any mistake of judgment made in good faith,
and the Company shall indemnify and hold harmless each member of the Committee.


                                  ARTICLE XVII
            EFFECTIVE DATE, TERM OF THE PLAN AND STOCKHOLDER APPROVAL

         The Plan became effective as of April 1, 1991, and was amended and
restated as of June 30, 1993, April 27, 1995, April 24, 1997, and is hereby
further amended and restated as of April 29, 1999. The termination date of the
Plan shall be April 30, 2002. No Award shall be granted under the Plan after
such termination date. The Plan will continue in effect for existing Awards as
long as any such Awards are outstanding.


                                  ARTICLE XVIII
                           CHANGE IN CORPORATE CONTROL


         SECTION 18.1 OPTIONS AND PASOS

         In the event of a Change in Control, (i) all Options and PASOs
outstanding on the date of such Change in Control shall become immediately and
fully exercisable, and (ii) a Grantee who is an elected officer or director of
the Company will be permitted to surrender for cancellation within sixty (60)
days after such Change in Control any


                                       34
<PAGE>   42
Option or PASO or portion thereof to the extent not yet exercised (or with
respect to an Option or PASO or portion thereof granted less than six (6) months
prior to the date of the Change in Control, within sixty (60) days after the
expiration of a six (6)-month period following the Date of Grant) and to receive
a cash payment in an amount equal to the excess, if any, of (x) in the case of a
Nonqualified Stock Option or PASO, the adjusted Fair Market Value of the Common
Stock subject to the Option or PASO or a portion thereof surrendered or (y) in
the case of an ISO, the Fair Market Value of the Common Stock subject to the
Option or PASO or portion thereof surrendered over the Option Price. The
provisions of this Section 18.1 shall be applicable to Nonqualified Stock
Options, PASOs or ISOs. The provisions of this Section 18.1 shall not be
applicable to any Options granted to a Grantee if any Change in Control results
from such Grantee's beneficial ownership (within the meaning of Rule 13d(3)
under the Act) of Common Stock or Company voting securities.

         SECTION 18.2 SARS

         In the event of a Change in Control, all SARs shall become immediately
and fully exercisable but not before any related ISO is exercisable. Upon any
exercise of a SAR (other than a SAR granted in tandem with a related ISO) or any
portion thereof during the sixty (60)-day period following the Change in
Control, (or with respect to a SAR granted to an officer or director of the
Company less than six (6) months prior to the date of the Change in Control,
within sixty (60) days after the expiration of a six (6) month period following
the Date of Grant) the amount payable shall be determined by reference to the
SAR Fair Market Value of the Common Stock and shall be paid in cash. SARs
granted in connection with ISOs will be payable as determined by reference to
the Fair Market Value of the Common Stock on the date of such exercise and shall
be paid in cash. The provisions of this Section 18.2 shall not be applicable to
any SARs granted to a Grantee if any Change in Control results from such
Grantee's beneficial ownership (within the meaning of Rule 13d(3) under the Act)
of Common Stock or Company voting securities.

         SECTION 18.3 ALL OTHER AWARDS

         In the event of a Change of Control, all Performance Share Awards,
Restricted Stock Awards, Phantom Unit Awards, Cash Value Awards, Other
Market-Based Awards (if any) and Other Performance-Based Awards (if any) shall
immediately vest and become fully payable within thirty (30) days after a Change
in Control to all Grantees who have been granted an Award. In the case of
Performance Share Awards and Cash Value Awards, all Awards shall vest at the
Maximum Award.

         SECTION 18.4 DEFINITIONS

         A Change in Control of the Company shall occur when there is an
unsolicited Change in Control of the Company that is not initiated by the
Company, and is of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act, as in
effect on the effective date of the Plan; provided, however, that no Change in
Control shall be deemed to have occurred unless and until a "person" (as such
term is used in Sections 13(d) and 14(d)(2) of the Act) together with all
"affiliates" and "associates" of such person (as such terms respectively, are
defined in Rule 12b-2 of the General Rules and Regulations under the Act) is or
becomes a beneficial owner, directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities.


                                   ARTICLE XIX
                            AMENDMENT AND TERMINATION


         SECTION 19.1 AMENDMENT

         The Board reserves the right at any time or times to modify, alter or
amend, in whole or in part, any or all of the provisions of the Plan to any
extent and in any manner that it may deem advisable, and no consent or approval
by the stockholders of the Company or by any other person, committee or entity
of any kind shall be required to make any modification, alteration or amendment;
provided, however, that the Board shall not, without the requisite


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<PAGE>   43
affirmative approval of the stockholders of the Company, make any modification,
alteration or amendment which (i) except as provided in Section 3, increases the
maximum number of shares of Common Stock available for Awards under this Plan,
(ii) decreases the Option Price to less than 100% of the Fair Market Value on
the Date of Grant of an Option, (iii) extends the period during which Awards may
be granted under the Plan beyond April 30, 2002, (iv) changes the employee (or
class of employees) eligible to receive Awards under the Plan, (v) materially
increase the benefits accruing to a Grantee under the Plan, or (vi) requires
stockholders' approval under Rule 16b-3 or the Code, unless such compliance is
no longer desired, or under any other applicable law. No modification,
alteration or amendment of the Plan may, without the consent of the Grantee
(Beneficiaries in case of his death) to whom any Award shall theretofore have
been granted under the Plan adversely affect any right of such Grantee under
such Award, except in accordance with the provisions of the Plan and/or any
Award Commitment applicable to any such Award. Subject to the provisions of this
Section 19.1, any modification, alteration or amendment of any provisions of the
Plan may be made retroactively.

         SECTION 19.2 SUSPENSION OR TERMINATION

         The Board reserves the right at any time to suspend or terminate, in
whole or in part, any or all of the provisions of the Plan for any reason and
without the consent of or approval by the stockholders of the Company, any
Grantee or Beneficiary or any other person, committee or entity of any kind;
provided, however, that no such suspension or termination shall affect any right
or obligation with respect to any Award theretofore made except as herein
otherwise provided.

         SECTION 19.3 NO REPRICING OF OPTIONS

         Notwithstanding any other provision in the Plan, the Board shall not
amend any outstanding Options to reduce the Option Price of such Option, nor
substitute new Options for previously granted Options having a higher Option
Price.


                                       36
<PAGE>   44
                                   ARTICLE XX
                                  MISCELLANEOUS

         SECTION 20.1 DEFERRAL ELECTION

         At the discretion of the Committee payment of Phantom Units or any
other cash award, or any portion thereof, may be deferred by a Grantee until
such time as the Committee may establish. All such deferrals shall be
accomplished by the delivery of a written, irrevocable election by the Grantee
at such times prior to the time payment would otherwise be made as the Committee
shall determine. All deferrals shall be made in accordance with such rules and
regulations established by the Committee to ensure that such deferrals comply
with all applicable requirements of the Code and its regulations. Deferred
payments shall be paid in a lump sum or installments, as determined by the
Committee. The Committee also may credit interest at such rates to be determined
by the Committee.

         SECTION 20.2 DESIGNATION OF BENEFICIARY

         Each Grantee shall file with the Company a written designation of one
or more persons as the Beneficiary who shall be entitled to receive the Award,
if any, payable under the Plan upon his death. A Grantee may from time to time
revoke or change his Beneficiary designation without the consent of any prior
Beneficiary by filing a new designation with the Company. The last such
designation received by the Company shall be controlling; provided, however,
that no designation, or change or revocation thereof, shall be effective unless
received by the Company prior to the Grantee's death, and in no event shall it
be effective as of a date prior to such receipt. If no such Beneficiary
designation is in effect at the time of a Grantee's death, or if no designated
Beneficiary survives the Grantee or if such designation conflicts with law, the
Grantee's estate shall be entitled to receive the Award, if any, payable under
the Plan upon his death. If the Committee is in doubt as to the right of any
person to receive such Award, the Company may retain such Award, without
liability for any interest thereon, until the Committee determines the rights
thereto, or the Company may pay such Award into any court of appropriate
jurisdiction and such payment shall be a complete discharge of the liability of
the Company therefor.

         SECTION 20.3 NO RIGHT TO AN AWARD OR TO CONTINUED EMPLOYMENT

         No Grantee or other person shall have any claim or right to be granted
an Award under the Plan. Neither the action of the Company in establishing this
Plan, nor any provisions hereof, nor any action taken by the Company, any
Participating Subsidiary, the Committee or the CEO (or his designee or
designees) pursuant to such provisions shall be construed as creating in any
employee or class of employees any right with respect to continuation of
employment by the Company or any of the Participating Subsidiaries, and they
shall not be deemed to interfere in any way with the Company's or any
Participating Subsidiary's right to employ, discipline, discharge, terminate,
lay off or retire any Grantee with or without cause, to discipline any Employee,
or to otherwise affect the Company's right to make employment decisions with
respect to any Grantee.

         SECTION 20.4 DISCRETION OF THE COMMITTEE AND THE CEO

         Whenever the terms of the Plan provide for or permit a decision to be
made or an action to be taken by a Grantor, such decision may be made or such
action taken in the sole and absolute discretion of such Grantor and shall be
final, conclusive and binding on all persons for all purposes; provided,
however, that the Board may review any decision or action of the Grantor and if
the Board determines that any Award or other decision or act of the Grantor is
inequitable or contrary to the provisions of this Plan, it may reverse or modify
such Award, decision or act. As provided in Section 16.2 in the case of the
Grantor's determinations under the Plan, including, without limitation the
determination of the person to receive awards and the amount of such awards,
need not be uniform and may be made by him selectively among persons who
receive, or are eligible to receive, awards under this Plan, whether or not such
persons are similarly retired.


                                       37
<PAGE>   45
         SECTION 20.5 INDEMNIFICATION AND EXCULPATION

         20.5.1 Indemnification. Each person who is or shall have been a member
of the Committee and each director, officer or employee of the Company or any
Participating Subsidiary to whom any duty or power related to the administration
or interpretation of this Plan may be delegated, shall be indemnified and held
harmless by the Company against and from any and all loss, cost, liability or
expense that may be imposed upon or reasonably incurred by him in connection
with or resulting from any claim, action, suit or proceeding to which he may be
or become a party or in which he may be or became involved by reason of any
action taken or failure to act under this Plan and against and from any and all
amounts paid by him in settlement thereof (with the Company's written approval)
or paid by him in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment in favor of the Company based upon a finding of
his bad faith; subject, however, to the condition that upon the institution of
any claim, action, suit or proceeding against him, he shall in writing give the
Company an opportunity, at its own expense, to handle and defend the same before
he undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other right to which such person
may be entitled under the Company's Restated Certificate of Incorporation, as a
matter of law or otherwise, or any power that the Company may have to indemnify
him or hold him harmless.

         20.5.2 Exculpation. Each member of the Committee, and each director,
officer and employee of the Company or of any Participating Subsidiary shall be
fully justified in relying or acting upon in good faith any information
furnished in connection with the administration of this Plan by any appropriate
person or persons other than himself. In no event shall any person who is or
shall have been a member of the Committee, or a director, officer or employee of
the Company or any Participating Subsidiary be liable for any determination made
or other action taken or any omission to act in reliance upon such report or
information, for any action (including the furnishing of information) taken or
any failure to act, if in good faith.

         SECTION 20.6 UNFUNDED PLAN

         This Plan is intended to constitute an unfunded, long-term incentive
compensation plan for certain selected employees. No special or separate fund
shall be established and no segregation of assets shall be made to assure
payment of such amounts, except as expressly set forth in the Plan with respect
to Restricted Stock or Performance Shares held in custody accounts. The Company
may, but shall not be obligated to, acquire shares of its Common Stock from time
to time in anticipation of its obligations under the Plan, but no Grantee shall
have any right in or against any shares of stock so acquired. All such stock
shall constitute general assets of the Company and may be disposed of by the
Company at such time and for such purposes as it may deem appropriate. No
obligation or liability of the Company to any Grantee with respect to any right
to receive a distribution or payment under the Plan shall be deemed to be
secured by any pledge or other encumbrance on any property of the Company.

         SECTION 20.7 INALIENABILITY OF RIGHTS AND INTERESTS

         The rights and interests of a Grantee under this Plan are personal to
the Grantee and to any person or persons who may become entitled to distribution
or payments under the Plan by reason of death of the Grantee, and the rights and
interests of the Grantee or any such person (including, without limitation, any
Award distributable or payable under the Plan) shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any such attempted action shall be void and no such
benefit or interest shall be any manner liable for or subject to debts,
contracts, liabilities, engagements or torts of any Grantees. If any Grantee
shall attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge any of his rights or interests under the Plan, (including without
limitation, any Award payable under the Plan) then the Committee may hold or
apply such benefit or any part thereof to or for the benefit of such Grantee or
his Beneficiary, his spouse, children, blood relatives or other dependents, or
any of them, in such manner and in such proportions as the Committee may
consider proper.


                                       38
<PAGE>   46
         SECTION 20.8 AWARDS NOT INCLUDABLE FOR BENEFIT PURPOSES

         Payments received by a Grantee pursuant to the provisions of the Plan
shall not be included in the determination of benefits under any pension, group
insurance or other benefit plan applicable to the Grantee which are maintained
by the Company or any of its Subsidiaries, except as may be determined by the
Board.

         SECTION 20.9 NO ISSUANCE OF FRACTIONAL SHARES

         The Company shall not be required to deliver any fractional share of
Common Stock but, as determined by the Committee, may pay in lieu thereof,
except as otherwise provided in this Plan, the Fair Market Value (determined as
of the date of payment the restrictions terminate) of such fractional share to
the Grantee or the Grantee's beneficiary, as the case may be.

         SECTION 20.10 MODIFICATION FOR OVERSEAS GRANTEES

         Notwithstanding any provision to the contrary, the Committee may
incorporate such provisions, or make such modifications or amendments in Award
Commitments of Grantees who reside or are employed outside of the United States
of America, or who are citizens of a country other than the United States of
America, as the Committee deems necessary or appropriate to accomplish the
purposes of the Plan with respect to such Grantee in light of differences in
applicable law, tax policies or customs, and to ascertain compliance with all
applicable laws.

         SECTION 20.11 LEAVES OF ABSENCE

         The Committee shall be entitled to make such rules, regulations and
determinations as it deems appropriate under the Plan in respect of any leave of
absence taken by the recipient of any Award. Without limiting the generality of
the foregoing, the Committee shall be entitled to determine (a) whether or not
any such leave of absence shall constitute a termination of employment within
the meaning of the Plan and, (b) the impact, if any, of any such leave of
absence on awards under the Plan theretofore made to any recipient who takes
such leave of absence.

         SECTION 20.12 COMMUNICATIONS

         20.12.1 Communications by the Committee. All notices, statements,
reports and other communications made, delivered or transmitted to a Grantee,
Beneficiary or other person under this Plan shall be deemed to have been duly
given, made or transmitted when delivered to, or when mailed by first-class
mail, postage prepaid and addressed to, such Grantee, Beneficiary or other
person at his address last appearing on the records of the Committee.

         20.12.2 Communications by the Participants and Others. All elections,
designations, requests, notices, instructions and other communications made,
delivered or transmitted by the Company, a Participating Subsidiary, Grantee,
Beneficiary or other person to the Committee required or permitted under this
Plan shall be in such form as is prescribed from time to time by each such
Committee, shall be mailed by first-class mail or delivered to such location as
shall be specified by each such Committee, and shall be deemed to have been
given and delivered only upon actual receipt thereof by such Committee at such
location.

         SECTION 20.13 PARTIES IN INTEREST

         The provisions of the Plan and the terms and conditions of any Award
shall, in accordance with their terms, be binding upon, and inure to the benefit
of, all successors of each Grantee, including, without limitation, such
Grantee's estate and the executors, administrators, or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Grantee. The obligations of the Company under the Plan shall
be binding upon the Company and its successors and assigns.

         SECTION 20.14 SEVERABILITY

         Whenever possible, each provision in the Plan and every Award at any
time granted under the Plan shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of the Plan or
any


                                       39
<PAGE>   47
Award at any time granted under the Plan shall be held to be prohibited by or
invalid under applicable law, then (a) such provision shall be deemed amended to
accomplish the objectives of the provision as originally written to the fullest
extent permitted by law, and (b) all other provisions of the Plan and every
other Award at any time granted under the Plan shall remain in full force and
effect.

         SECTION 20.15 COMPLIANCE WITH LAWS

         The Plan and the grant of Awards shall be subject to all applicable
Federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required. It is intended that the Plan
be applied and administered in compliance with Rule 16b-3. If any provision of
the Plan would be in violation of Rule 16b-3 if applied as written, such
provision shall not have effect as written and shall be given effect so as to
comply with Rule 16b-3, as determined by the Committee. The Board is authorized
to amend the Plan and to make any such modifications to Award Commitments to
comply with Rule 16b-3, and to make any such other amendments or modifications
as it deems necessary or appropriate to better accomplish the purposes of the
Plan in light of any amendments made to Rule 16b-3.

         SECTION 20.16 NO STRICT CONSTRUCTION

         No rule of strict construction shall be implied against the Company,
the Committee, the CEO or any other person in the interpretation of any of the
terms of the Plan, any Award granted under the Plan or any rule or procedure
established by the Committee.

         SECTION 20.17 MODIFICATION

         This document contains all of the provisions of the Plan and no
provisions may be waived, modified or otherwise altered except in a writing
adopted by the Board.

         SECTION 20.18 GOVERNING LAW

         All questions pertaining to validity, construction and administration
of the Plan and the rights of all persons hereunder shall be determined with
reference to, and the provisions of the Plan shall be governed by and shall be
construed in conformity with, the internal laws of the State of Delaware.


                                       40