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                                                                   EXHIBIT 10.2

                       THE 1999 EQUITY PARTICIPATION PLAN

                                       OF

                          ALLIANCE ENTERTAINMENT CORP.

            Alliance Entertainment Corp., a Delaware corporation (the
"Company"), has adopted The 1999 Equity Participation Plan of Alliance
Entertainment Corp. (the "Plan"), effective as of May 19, 1999, for the benefit
of its eligible employees, consultants and directors.

            The purposes of the Plan are as follows:

            (1) To provide an additional incentive for key Employees (as such
term is defined below), consultants and directors to further the growth,
development and financial success of the Company by personally benefitting
through the ownership of Company stock and/or rights which recognize such
growth, development and financial success.

            (2) To enable the Company to obtain and retain the services of key
Employees, consultants and directors considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.

                                   ARTICLE I.

                                   DEFINITIONS

            I.1. General. Wherever the following terms are used in the Plan they
shall have the meanings specified below, unless the context clearly indicates
otherwise.

            I.2. Award. "Award" shall mean an Option, a Stock award, a Common
Stock award, a Restricted Stock award, a Performance Award, a Dividend
Equivalents award, a Deferred Stock award, a Stock Payment award or a Stock
Appreciation Right which may be awarded or granted under the Plan (collectively,
"Awards").

            I.3. Award Agreement. "Award Agreement" shall mean a written
agreement executed by an authorized officer of the Company and the Holder which
shall contain such terms and conditions with respect to an Award as the
Committee shall determine, consistent with the Plan.

            I.4. Award Limit. "Award Limit" shall mean Five Hundred Thousand
(500,000) shares of Common Stock, as adjusted pursuant to Section 11.3 of the
Plan.

            I.5. Board. "Board" shall mean the Board of Directors of the
Company.

            I.6. Change in Control. "Change in Control" shall mean:

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                  (a) the sale, lease or other transfer of all or substantially
            all of the assets of the Company to any person or group (as such
            term is used in Section 13(d)(3) of the Exchange Act);

                  (b) the adoption by the stockholders of the Company of a plan
            relating to the liquidation or dissolution of the Company;

                  (c) the merger or consolidation of the Company with or into
            another entity or the merger of another entity into the Company or
            any Subsidiary thereof with the effect that immediately after such
            transaction the stockholders of the Company immediately prior to
            such transaction (or their affiliates) hold less than fifty percent
            (50%) of the total voting power of all securities generally entitled
            to vote in the election of directors, managers or trustees of the
            entity surviving such merger or consolidation;

                  (d) the acquisition by any person, entity or group, within the
            meaning of Section 13(d) or 14(d) of the Exchange Act, of more than
            fifty percent (50%) of the voting power of all securities (other
            than the Company or a person, entity or group that directly or
            indirectly controls, is controlled by, or is under common control
            with the Company, directly or indirectly), of the Company generally
            entitled to vote in the election of Directors of the Company
            pursuant to a tender or exchange offer made directly to the
            Company's stockholders which the Board does not recommend that such
            stockholders accept; or

                  (e) there is a change in the composition of the Board over a
            period of thirty-six (36) consecutive months (or less) such that a
            majority of the Board members (rounded up to the nearest whole
            number) ceases, by reason of one or more proxy contests for the
            election of Board members, to be comprised of individuals who either
            (i) have been Board members continuously since the beginning of such
            period or (ii) have been elected or nominated for election as Board
            members during such period by at least a majority of the Board
            members described in clause (i) who were still in office at the time
            such election or nomination was approved by the Board.

            I.7. Code. "Code" shall mean the Internal Revenue Code of 1986, as
amended.

            I.8. Committee. "Committee" shall mean the entire Board, unless a
compensation committee of the Board, or another committee or subcommittee of the
Board is appointed as provided in Section 10.1, in which case Committee shall
mean such compensation committee or other committee or subcommittee.

            I.9. Common Stock. "Common Stock" shall mean the common stock of the
Company, par value $.0001 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options

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or other rights to purchase Common Stock. Debt securities of the Company
convertible into Common Stock shall be deemed equity securities of the Company.

            I.10. Company. "Company" shall mean Alliance Entertainment Corp., a
Delaware corporation.

            I.11. Deferred Stock. "Deferred Stock" shall mean Common Stock
awarded under Article VIII of the Plan.

            I.12. Director. "Director" shall mean a member of the Board.

            I.13. Dividend Equivalent. "Dividend Equivalent" shall mean a right
to receive the equivalent value (in cash or Common Stock) of dividends paid on
Common Stock, awarded under Article VIII of the Plan.

            I.14. Employee. "Employee" shall mean any officer or other employee
(as defined in accordance with Section 3401(c) of the Code) of the Company, or
of any corporation which is a Subsidiary.

            I.15. Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.

            I.16. Fair Market Value. "Fair Market Value" of a share of Common
Stock as of a given date shall be (i) the closing price of a share of Common
Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares were
not traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred; or (ii) if Common Stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, the mean
between the closing representative bid and asked prices for the Common Stock on
the trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the fair market value
of a share of Common Stock as established by the Committee acting in good faith.

            I.17. Holder. "Holder" shall mean an Employee, consultant, or
Director who has been granted or awarded an Award.

            I.18. Incentive Stock Option. "Incentive Stock Option" shall mean an
option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an incentive stock option by the Committee.

            I.19. Non-Qualified Stock Option. "Non-Qualified Stock Option" shall
mean an Option which is not designated as an Incentive Stock Option by the
Committee.

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            I.20. Option. "Option" shall mean a stock option granted under
Article IV of the Plan. An Option granted under the Plan shall, as determined by
the Committee, be either a Non-Qualified Stock Option or an Incentive Stock
Option.

            I.21. Optionee. "Optionee" shall mean an Employee, consultant or
Director granted an Option under the Plan.

            I.22. Performance Award. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that is paid in cash,
Common Stock or a combination of both, awarded under Article VIII of the Plan.

            I.23. Performance Criteria. "Performance Criteria" shall mean the
following business criteria with respect to the Company or any Subsidiary: (i)
net income, (ii) pre-tax income, (iii) operating income, (iv) cash flow, (v)
earnings per share, (vi) return on equity, (vii) return on invested capital or
assets, (viii) cost reductions or savings, (ix) funds from operations, (x)
appreciation in the Fair Market Value of Common Stock and (xi) earnings before
any one or more of the following items: interest, taxes, depreciation or
amortization.

            I.24. Plan. "Plan" shall mean The 1999 Equity Participation Plan of
Alliance Entertainment Corp.

            I.25. QDRO. "QDRO" shall mean a qualified domestic relations order
as defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder.

            I.26. Restricted Stock. "Restricted Stock" shall mean Common Stock
awarded under Article VII of the Plan.

            I.27. Restricted Stockholder. "Restricted Stockholder" shall mean an
Employee, consultant or Director granted an award of Restricted Stock under
Article VII of the Plan.

            I.28. Rule 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.

            I.29. Section 162(m) Participant. "Section 162(m) Participant" shall
mean any key Employee designated by the Committee as a key Employee whose
compensation for the fiscal year in which the key Employee is so designated or a
future fiscal year may be subject to the limit on deductible compensation
imposed by Section 162(m) of the Code.

            I.30. Securities Act. "Securities Act" shall mean the Securities Act
of 1933, as amended.

            I.31. Stock Appreciation Right. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article IX of the Plan.

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            I.32. Stock Payment. "Stock Payment" shall mean (i) a payment in the
form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation, including without limitation,
salary, bonuses and commissions, that would otherwise become payable to a key
Employee, consultant or Director in cash, awarded under Article VIII of the
Plan.

            I.33. Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.

            I.34. Termination of Consultancy. "Termination of Consultancy" shall
mean the time when the engagement of a consultant to the Company or a Subsidiary
is terminated for any reason, with or without cause, including, but not by way
of limitation, by resignation, discharge, death or retirement; but excluding
terminations where there is a simultaneous commencement of employment with the
Company or any Subsidiary, or, in the discretion of the Committee, where there
is a simultaneous commencement of service as a Director of the Company. The
Committee, in its absolute discretion, shall determine the effect of all matters
and questions relating to Termination of Consultancy, including, but not by way
of limitation, the question of whether a Termination of Consultancy resulted
from a discharge for good cause, and all questions of whether a particular leave
of absence constitutes a Termination of Consultancy. Notwithstanding any other
provision of the Plan, the Company or any Subsidiary has an absolute and
unrestricted right to terminate a consultant's service at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

            I.35. Termination of Service as a Director. "Termination of Service
as a Director" shall be as defined by the Committee in an Award Agreement.

            I.36. Termination of Employment. "Termination of Employment" shall
mean the time when the employee-employer relationship between an Employee and
the Company or any Subsidiary is terminated for any reason, with or without
cause, including, but not by way of limitation, a termination by resignation,
discharge, death, disability or retirement; but excluding (i) terminations where
there is a simultaneous reemployment or continuing employment of a Holder by the
Company or any Subsidiary, (ii) at the discretion of the Committee, terminations
which result in a temporary severance of the employee-employer relationship, and
(iii) at the discretion of the Committee, terminations which are followed by the
simultaneous establishment of a consulting relationship by the Company or a
Subsidiary with the former Employee, and (iv) at the discretion of the
Committee, terminations which are immediately followed by the Holder's service
as a Director. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether a particular leave of absence constitutes a Termination of Employment;
provided, however, that, with respect to Incentive Stock Options, unless
otherwise determined by the Committee in its discretion, a leave of absence,
change in status from an employee to an independent contractor or other change
in the employee-employer

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relationship shall constitute a Termination of Employment if, and to the extent
that, such leave of absence, change in status or other change interrupts
employment for the purposes of Section 422(a)(2) of the Code and the then
applicable regulations and revenue rulings under said Section. Notwithstanding
any other provision of the Plan, the Company or any Subsidiary has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided otherwise in writing.

                                   ARTICLE II.

                             SHARES SUBJECT TO PLAN

            II.1. Shares Subject to Plan.

                  (a) The shares of stock subject to Awards shall be Common
            Stock, initially shares of the Company's Common Stock, par value
            $.0001 per share. The aggregate number of such shares which may be
            issued upon exercise of such Options or rights or upon any such
            Awards under the Plan shall not exceed One Million Five Hundred
            Thousand (1,500,000) shares. The shares of Common Stock issuable
            upon exercise of such Options or rights or upon any such Awards may
            be either previously authorized but unissued shares or treasury
            shares.

                  (b) The maximum number of shares which may be subject to
            Awards granted under the Plan to any individual in any calendar year
            shall not exceed the Award Limit. To the extent required by Section
            162(m) of the Code, shares subject to Options which are canceled
            continue to be counted against the Award Limit and if, after grant
            of an Option, the price of shares subject to such Option is reduced,
            the transaction is treated as a cancellation of the Option and a
            grant of a new Option and both the Option deemed to be canceled and
            the Option deemed to be granted are counted against the Award Limit.
            Furthermore, to the extent required by Section 162(m) of the Code,
            if, after grant of a Stock Appreciation Right, the base amount on
            which stock appreciation is calculated is reduced to reflect a
            reduction in the Fair Market Value of the Common Stock, the
            transaction is treated as a cancellation of the Stock Appreciation
            Right and a grant of a new Stock Appreciation Right, and both the
            Stock Appreciation Right deemed to be canceled and the Stock
            Appreciation Right deemed to be granted are counted against the
            Award Limit.

            II.2. Add-Back of Options and Other Rights. If any Option, or other
right to acquire shares of Common Stock under any other Award under the Plan,
expires or is canceled without having been fully exercised, or is exercised in
whole or in part and the Optionee receives cash as permitted by the Plan, the
number of shares subject to such Option or other right but as to which such
Option or other right was not exercised prior to its expiration, cancellation or
exercise may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1. Furthermore, any shares subject to Awards which are
adjusted pursuant to Section 11.3 and become exercisable with respect to shares
of stock of another corporation shall be considered canceled and may again be
optioned, granted or awarded hereunder, subject to the

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limitations of Section 2.1. Shares of Common Stock which are delivered by the
Holder or withheld by the Company upon the exercise of any Award under the Plan
in payment of the exercise price thereof or tax withholding thereon, may again
be optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. If any share of Restricted Stock is forfeited by the Holder or repurchased
by the Company pursuant to Section 7.5 hereof, such share may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.

                                  ARTICLE III.

                               GRANTING OF AWARDS

            III.1. Award Agreement. Each Award shall be evidenced by an Award
Agreement. Award Agreements evidencing Awards intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code. Award Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to meet the applicable provisions of Section 422 of the Code.

            III.2. Provisions Applicable to Section 162(m) Participants.

                  (a) The Committee, in its discretion, may determine whether an
            Award is to qualify as performance-based compensation as described
            in Section 162(m)(4)(C) of the Code.

                  (b) Notwithstanding anything in the Plan to the contrary, the
            Committee may grant any Award to a Section 162(m) Participant,
            including Restricted Stock, the restrictions with respect to which
            lapse upon the attainment of performance goals which are related to
            one or more of the Performance Criteria and any performance or
            incentive award described in Article VIII that vests or becomes
            exercisable or payable upon the attainment of performance goals
            which are related to one or more of the Performance Criteria.

                  (c) To the extent necessary to comply with the performance
            based compensation requirements of Section 162(m)(4)(C) of the Code,
            with respect to any Award granted under Articles VII and VIII which
            may be granted to one or more Section 162(m) Participants, no later
            than ninety (90) days following the commencement of any fiscal year
            in question or any other designated fiscal period or period of
            service (or such other time as may be required or permitted by
            Section 162(m) of the Code), the Committee shall, in writing, (i)
            designate one or more Section 162(m) Participants, (ii) select the
            Performance Criteria applicable to the fiscal year or other
            designated fiscal period or period of service, (iii) establish the
            various performance targets, in terms of an objective formula or
            standard, and amounts of Restricted Stock or bonus amounts, as
            applicable, which

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            may be earned for such fiscal year or other designated fiscal period
            or period of service and (iv) specify the relationship between
            Performance Criteria and the performance targets and the amounts of
            Restricted Stock or bonus amounts, as applicable, to be earned by
            each Section 162(m) Participant for such fiscal year or other
            designated fiscal period or period of service. Following the
            completion of each fiscal year or other designated fiscal period or
            period of service, the Committee shall certify in writing whether
            the applicable performance targets have been achieved for such
            fiscal year or other designated fiscal period or period of service.
            In determining the amount earned by a Section 162(m) Participant,
            the Committee shall have the right to reduce (but not to increase)
            the amount payable at a given level of performance to take into
            account additional factors that the Committee may deem relevant to
            the assessment of individual or corporate performance for the fiscal
            year or other designated fiscal period or period of service.

            III.3. Consideration. In consideration of the granting of an Award
under the Plan, the Company may require, in the Award Agreement, that the Holder
remain in the employ of the Company or any Subsidiary for a period of at least
one year (or such shorter period, if any, as may be fixed in the Award Agreement
or by action of the Committee following grant of the Award) after the Award is
granted.

            III.4. Awards Agreements Under Which Common Stock is Issuable.
Unless the Committee determines otherwise, Award Agreements under which Common
Stock is issuable shall require the Holder at the time such Common Stock is
issued to enter into a Management Stockholders Agreement, a Proxy, and/or other
agreements under which the sale or transfer of the Common Stock issuable under
the Award is restricted. Such Management Stockholders Agreement, Proxy and all
other agreements shall be in such form as determined by the Committee.

            III.5. At-Will Employment. Nothing in the Plan or in any Award
Agreement hereunder shall confer upon any Holder any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary, or as a
Director of the Company, or shall interfere with or restrict in any way the
rights of the Company and any Subsidiary, which are hereby expressly reserved,
to discharge any Holder at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in a written agreement
between the Holder and the Company and any Subsidiary.

                                  ARTICLE IV.

                             GRANTING OF OPTIONS TO
                      EMPLOYEES, CONSULTANTS AND DIRECTORS

            IV.1. Eligibility. Any Employee, consultant or Director selected by
the Committee pursuant to Section 4.4(a)(i) shall be eligible to be granted an
Option.

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            IV.2. Incentive Stock Option Provisions. No person may be granted an
Incentive Stock Option under the Plan if such person, at the time the Incentive
Stock Option is granted, owns stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or any
then existing Subsidiary or parent corporation (within the meaning of Section
422 of the Code) unless such Incentive Stock Option conforms to the applicable
provisions of Section 422 of the Code.

            IV.3. Qualification for Incentive Stock Options. No Incentive Stock
Option shall be granted to any person who is not an Employee.

            IV.4. Granting of Options to Employees, Consultants and Directors.

                  (a) The Committee shall, from time to time, in its absolute
            discretion, and subject to applicable limitations of the Plan:

                        (i) Determine which Employees are key Employees and
            select from among the key Employees, consultants and Directors
            (including Employees, consultants and Directors who have previously
            received Awards under the Plan) such of them as in its opinion
            should be granted Options;

                        (ii) Subject to the Award Limit, determine the number of
            shares to be subject to such Options granted to the selected key
            Employees, consultants or Directors;

                        (iii) Subject to Section 4.3, determine whether such
            Options are to be Incentive Stock Options or Non-Qualified Stock
            Options and whether such Options are to qualify as performance-based
            compensation as described in Section 162(m)(4)(C) of the Code; and

                        (iv) Determine the terms and conditions of such Options,
            consistent with the Plan; provided, however, that the terms and
            conditions of Options intended to qualify as performance-based
            compensation as described in Section 162(m)(4)(C) of the Code shall
            include, but not be limited to, such terms and conditions as may be
            necessary to meet the applicable provisions of Section 162(m) of the
            Code.

                  (b) Upon the selection of a key Employee, consultant or
            Director to be granted an Option, the Committee shall instruct the
            Secretary of the Company to issue the Option and may impose such
            conditions on the grant of the Option as it deems appropriate.
            Unless the Committee determines otherwise, each Award Agreement
            shall provide that the Optionee shall enter into a Management
            Stockholders Agreement and Proxy as a condition to the exercise of
            such Option in such form as approved by the Committee at the time
            the Option is exercised. The Committee may also require the Optionee
            to enter into other agreements under which the sale or transfer of
            the Common Stock issuable under the Award is restricted. Such
            Management Stockholders Agreement, Proxy and all other agreements
            shall be in such form as determined by the Committee.

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                  (c) Without limiting the generality of the preceding Section
            4.4(b), the Committee may, in its discretion and on such terms as it
            deems appropriate, require as a condition of the grant of an Option
            to an Employee, consultant or Director that the Employee, consultant
            or Director surrender for cancellation some or all of the
            unexercised Options or any other Award or other rights which have
            been previously granted to him under the Plan or otherwise. An
            Option, the grant of which is conditioned upon such surrender, may
            have an Option price lower (or higher) than the exercise price of
            such surrendered Option or other Award, may cover the same (or a
            lesser or greater) number of shares as such surrendered Option or
            other Award, may contain such other terms as the Committee deems
            appropriate, and shall be exercisable in accordance with its terms,
            without regard to the number of shares, price, exercise period or
            any other term or condition of such surrendered Option or other
            Award.

                  (d) Any Incentive Stock Option granted under the Plan may be
            modified by the Committee, with the consent of the Optionee, to
            disqualify such Option from treatment as an "incentive stock option"
            under Section 422 of the Code.

            IV.5. Options in Lieu of Cash Compensation.

            Options may be granted under the Plan to Employees and consultants
in lieu of cash bonuses which would otherwise be payable to such Employees and
consultants, pursuant to such policies which may be adopted by the Committee
from time to time.

                                   ARTICLE V.

                                TERMS OF OPTIONS

            V.1. Option Price. The price per share of the shares subject to each
Option granted to Employees, consultants and Directors shall be set by the
Committee; provided, however, that such price shall be no less than the par
value of a share of Common Stock, unless otherwise permitted by applicable state
law, and (i) in the case of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, such price shall
not be less than 100% of the Fair Market Value of a share of Common Stock on the
date the Option is granted; (ii) in the case of Incentive Stock Options such
price shall not be less than 100% of the Fair Market Value of a share of Common
Stock on the date the Option is granted (or the date the Option is modified,
extended or renewed for purposes of Section 424(h) of the Code); and (iii) in
the case of Incentive Stock Options granted to an individual then owning (within
the meaning of Section 424(d) of the Code) more than 10% of the total combined
voting power of all classes of stock of the Company or any Subsidiary or parent
corporation thereof (within the meaning of Section 422 of the Code), such price
shall not be less than 110% of the Fair Market Value of a share of Common Stock
on the date the Option is granted (or the date the Option is modified, extended
or renewed for purposes of Section 424(h) of the Code).

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            V.2. Option Term. The term of an Option granted to an Employee,
consultant or Director shall be set by the Committee in its discretion;
provided, however, that, in the case of Incentive Stock Options, the term shall
not be more than ten (10) years from the date the Incentive Stock Option is
granted, or five (5) years from such date if the Incentive Stock Option is
granted to an individual then owning (within the meaning of Section 424(d) of
the Code) more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or parent corporation thereof (within the
meaning of Section 422 of the Code). Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such Option
relating to such a termination.

            V.3. Option Vesting

                  (a) The period during which the right to exercise, in whole or
            in part, an Option granted to an Employee, consultant or Director
            vests in the Optionee shall be set by the Committee and the
            Committee may determine that an Option may not be exercised in whole
            or in part for a specified period after it is granted. The Committee
            may also, in its sole and absolute discretion and subject to
            whatever terms and conditions it selects, provide for an
            acceleration of vesting subsequent to Termination of Employment,
            Termination of Consultancy or Termination of Service as a Director
            without cause, or following a Change in Control of the Company, or
            because of the Grantee's retirement, death or disability, or
            otherwise. In addition, at any time after grant of an Option, the
            Committee may, in its sole and absolute discretion and subject to
            whatever terms and conditions it elects, accelerate the period
            during which an Option granted to an Employee, consultant, or
            Director vests.

                  (b) No portion of an Option granted to an Employee, consultant
            or Director which is unexercisable at Termination of Employment,
            Termination of Consultancy or Termination of Service as a Director,
            as applicable, shall thereafter become exercisable, except as may be
            otherwise provided by the Committee either in the Award Agreement or
            by action of the Committee following the grant of the Option.

                  (c) To the extent that the aggregate Fair Market Value of
            stock with respect to which "incentive stock options" (within the
            meaning of Section 422 of the Code, but without regard to Section
            422(d) of the Code) are exercisable for the first time by an
            Optionee during any calendar year (under the Plan and all other
            incentive stock option plans of the Company and any parent or
            subsidiary corporation (within the meaning of Section 422 of the
            Code) of the Company exceeds $100,000, such Options shall be treated
            as Non-Qualified Options to the extent required by Section 422 of
            the Code. The rule set forth in the preceding sentence shall be
            applied by taking Options into account in the order in which they
            were granted. For purposes of this Section 5.3(c), the Fair Market
            Value of

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            stock shall be determined as of the time the Option with respect to
            such stock is granted.

                                  ARTICLE VI.

                               EXERCISE OF OPTIONS

            VI.1. Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.

            VI.2. Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or the Secretary's office:

                  (a) A written notice complying with the applicable rules
            established by the Committee stating that the Option, or a portion
            thereof, is exercised. The notice shall be signed by the Optionee or
            other person then entitled to exercise the Option or such portion of
            the Option;

                  (b) If required by the Committee, a signed Management
            Stockholders Agreement and Proxy in form as required by the
            Committee shall have been executed or is executed simultaneously
            with the exercise of the Option or any portion thereof.

                  (c) Such representations and documents as the Committee, in
            its absolute discretion, deems necessary or advisable to effect
            compliance with all applicable provisions of the Securities Act and
            any other federal or state securities laws or regulations. The
            Committee may, in its absolute discretion, also take whatever
            additional actions it deems appropriate to effect such compliance
            including, without limitation, placing legends on share certificates
            and issuing stop-transfer notices to agents and registrars;

                  (d) In the event that the Option shall be exercised pursuant
            to Section 11.1 by any person or persons other than the Optionee,
            appropriate proof of the right of such person or persons to exercise
            the Option;

                  (e) Full cash payment to the Secretary of the Company for the
            shares with respect to which the Option, or portion thereof, is
            exercised. However, the Committee, may in its discretion, or the
            Award Agreement may, (i) allow a delay in payment up to thirty (30)
            days from the date the Option, or portion thereof, is exercised;
            (ii) allow payment, in whole or in part, through the delivery of
            shares of Common Stock which have been owned by the Optionee for at
            least six months, duly endorsed for transfer to the Company with a
            Fair Market Value on the date of delivery equal to the aggregate
            exercise price of the Option or exercised portion thereof; (iii)
            allow payment, in whole or in part, through the

                                      -12-
<PAGE>

            surrender of shares of Common Stock then issuable upon exercise of
            the Option having a Fair Market Value on the date of Option exercise
            equal to the aggregate exercise price of the Option or exercised
            portion thereof, (iv) allow payment, in whole or in part, through
            the delivery of property of any kind which constitutes good and
            valuable consideration; (v) allow payment, in whole or in part,
            through the delivery of a full recourse promissory note bearing
            interest (at no less than such rate as shall then preclude the
            imputation of interest under the Code) and payable upon such terms
            as may be prescribed by the Committee or the Board; (vi) allow
            payment, in whole or in part, through the delivery of a notice that
            the Optionee has placed a market sell order with a broker with
            respect to shares of Common Stock then issuable upon exercise of the
            Option, and that the broker has been directed to pay a sufficient
            portion of the net proceeds of the sale to the Company in
            satisfaction of the Option exercise price; or (vii) allow payment
            through any combination of the consideration provided in the
            foregoing subparagraphs, (ii), (iii), (iv), (v) and (vi). In the
            case of a promissory note, the Committee may also prescribe the form
            of such note and the security to be given for such note. The Option
            may not be exercised, however, by delivery of a promissory note or
            by a loan from the Company when or where such loan or other
            extension of credit is prohibited by law; and

                  (f) Any other documentation required by the Committee or the
            Award Agreement is executed as required by the Committee.

            VI.3. Conditions to Issuance of Stock Certificates. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:

                  (a) The admission of such shares to listing on all stock
            exchanges on which such class of stock is then listed;

                  (b) Compliance with all applicable requirements of law in
            connection with the exercise of Options, including without
            limitation, the registration or other qualification of such shares
            under any state or federal law, or under the rulings or regulations
            of the Securities and Exchange Commission ("SEC"), or the securing
            of an exemption from such registration or qualification, provided
            that the Company shall not be obligated to effect any registration
            of shares with the SEC unless the Company previously has completed
            an initial public offering of its Common Stock and Form S-8 is
            available for such registration;

                  (c) The lapse of such reasonable period of time, not to exceed
            10 days, following the exercise of the Option as the Committee may
            establish from time to time for reasons of administrative
            convenience; and

                  (d) The receipt by the Company of full payment for such
            shares, including payment of any applicable withholding tax, which
            in the discretion of

                                      -13-
<PAGE>

            the Committee or the Board may be in the form of consideration used
            by the Optionee to pay for such shares under Section 6.2(d).

            VI.4. Rights as Stockholders/Dividend Equivalents. Optionees shall
not be, nor have any of the rights or privileges of, stockholders of the Company
in respect of any shares purchasable upon the exercise of any part of an Option
unless and until the Optionee has delivered notice of exercise and the
conditions of Section 6.3 have been met. Notwithstanding the foregoing, any
Optionee who is an Employee, consultant or Director selected by the Committee
may be granted Dividend Equivalents based on the dividends declared on Common
Stock, to be credited as of dividend payment dates, during the period between
the date an Option is granted, and the date such Option is exercised, vests or
expires, as determined by the Committee. Such Dividend Equivalents shall be
converted to cash or additional shares of Common Stock by such formula and at
such time and subject to such limitations as may be determined by the Committee.
With respect to Dividend Equivalents granted with respect to Options intended to
be qualified performance-based compensation for purposes of Section 162(m) of
the Code, such Dividend Equivalents shall be payable regardless of whether such
Option is exercised.

            VI.5. Ownership and Transfer Restrictions. The Committee, in its
absolute discretion, may impose such restrictions on the ownership and
transferability of the shares purchasable upon the exercise of an Option as it
deems appropriate. Any such restriction shall be set forth in the respective
Award Agreement and may be referred to on the certificates evidencing such
shares. Whenever an Optionee exercises the Option or any portion thereof, unless
the Committee determines otherwise, the Optionee shall execute a Management
Stockholders Agreement, Proxy, and any other agreements determined by the
Committee prior to such exercise.

            The Committee may require the Employee to give the Company prompt
notice of any disposition of shares of Common Stock acquired by exercise of an
Incentive Stock Option within (i) two years from the date of granting (including
the date the Option is modified, extended or renewed for purposes of Section
424(h) of the Code) such Option to such Employee or (ii) one year after the
transfer of such shares to such Employee. The Committee may direct that the
certificates evidencing shares acquired by exercise of any such Option refer to
such requirement to give prompt notice of disposition.

                                  ARTICLE VII.

                   AWARDS OF COMMON STOCK AND RESTRICTED STOCK

            VII.1. Eligibility. Subject to the Award Limit, Common Stock or
Restricted Stock may be awarded to any Employee who the Committee determines is
a key Employee or any consultant or Director who the Committee determines should
receive such an Award.

            VII.2. Award of Common Stock or Restricted Stock

                  (a) The Committee may from time to time, in its absolute
            discretion:

                                      -14-
<PAGE>

                        (i) Determine which Employees are key Employees and
            select from among the key Employees, consultants and Directors
            (including Employees, consultants and Directors who have previously
            received other awards under the Plan) such of them as in its opinion
            should be awarded Common Stock or Restricted Stock; and

                        (ii) Determine the purchase price, if any, and other
            terms and conditions applicable to such Common Stock or Restricted
            Stock, consistent with the Plan.

                        (iii) Determine the form of a Management Stockholders
            Agreement, Proxy, as well as such other agreements under which the
            sale or transfer of the Common Stock or Restricted Stock may be
            restricted.

                  (b) The Committee shall establish the purchase price, if any,
            and form of payment for Common Stock or Restricted Stock; provided,
            however, that such purchase price shall be no less than the par
            value of the Common Stock to be purchased, unless otherwise
            permitted by applicable state law. In all cases, legal
            consideration, which may include the performance of services, shall
            be required for each issuance of Common Stock and Restricted Stock.
            Such legal consideration may include a promissory note bearing
            interest (at no less than such rate as shall then preclude the
            imputation of interest under the Code) and payable upon such terms
            as may be prescribed by the Committee or the Board. In the case of a
            promissory note, the Committee may also prescribe the form of such
            note and the security, if any, to be given for such note. If the
            Common Stock is pledged as security for the loan and, unless the
            Committee determines otherwise, such loan terms may require the
            Optionee either to (i) repay the loan to the extent necessary to
            comply with applicable margin loan requirements under the Securities
            Act of 1933, as amended, and the Rules and Regulations promulgated
            thereunder or (ii) substitute other collateral for the Common Stock
            which is reasonably acceptable to the Company to replace the Common
            Stock as security. Notwithstanding the above, in no case may such
            legal consideration include a promissory note or a loan by the
            Company when or where such loan or other extension of credit is
            prohibited by law or contravenes any of the Company's contractual
            arrangements.

                  (c) Upon the selection of a key Employee, consultant or
            Director to be awarded Common Stock or Restricted Stock, the
            Committee shall instruct the Secretary of the Company to issue such
            Common Stock or Restricted Stock and may impose such conditions on
            the issuance of such Common Stock or Restricted Stock as it deems
            appropriate.

            VII.3. Rights as Stockholders. Subject to Section 7.4, upon delivery
of the shares of Restricted Stock to the escrow holder pursuant to Section 7.7,
the Restricted Stockholder shall have, unless otherwise provided by the
Committee, all the rights of a stockholder with respect to said shares, subject
to the restrictions in his Award Agreement and the Proxy Agreement, including
the right to receive all dividends and other distributions paid or

                                      -15-
<PAGE>

made with respect to the shares; provided, however that in the discretion of the
Committee, any extraordinary distributions with respect to the Common Stock
shall be subject to the restrictions set forth in Section 7.4.

            VII.4. Restriction. All shares of Common Stock and Restricted Stock
issued under the Plan (including any shares received by holders thereof with
respect to shares of Common Stock or Restricted Stock as a result of stock
dividends, stock splits or any other form of recapitalization) shall, in the
terms of each individual Award Agreement, be subject to such restrictions as the
Committee shall provide, which restrictions may include, without limitation,
restrictions concerning voting rights and transferability and restrictions based
on duration of employment with the Company, Company performance and individual
performance; provided, however, that, except with respect to shares of Common
Stock or Restricted Stock granted to Section 162(m) Participants, by action
taken after the Common Stock or Restricted Stock is issued, the Committee may,
on such terms and conditions as it may determine to be appropriate, remove any
or all of the restrictions imposed by the terms of the Award Agreement. Such
Common Stock or Restricted Stock may not be sold or encumbered until all
restrictions are terminated or expire. If no consideration was paid by the
Common or Restricted Stockholder upon issuance, a Common or Restricted
Stockholder's rights in unvested Common or Restricted Stock shall lapse upon
Termination of Employment or, if applicable, upon Termination of Consultancy or
Termination of Service as a Director with the Company; provided, however, that
the Committee in its sole and absolute discretion may provide that such rights
shall not lapse in the event of a Termination of Employment following a "change
of ownership or control" (within the meaning of Treasury Regulation Section
1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or because
of the Common or Restricted Stockholder's death or disability; provided,
further, except with respect to shares of Common or Restricted Stock granted to
Section 162(m) Participants, the Committee in its sole and absolute discretion
may provide that no such right of repurchase shall exist in the event of a
Termination of Employment, or a Termination of Consultancy without cause or
following any Change in Control of the Company or because of the Common or
Restricted Stockholder's retirement, or otherwise.

            VII.5. Repurchase of Restricted Stock. The Committee may provide in
the terms of each individual Award Agreement that the Company or its designee
shall have the right to repurchase from the Common or Restricted Stockholder the
Common or Restricted Stock then subject to restrictions under the Award
Agreement immediately upon a Termination of Employment or, if applicable, upon a
Termination of Consultancy or a Termination of Service as a Director between the
Common or Restricted Stockholder and the Company, at a price per share or by
such formula as set forth in the Award Agreement or to be determined in good
faith by the Committee at the time of the repurchase; provided, however, that
the Committee in its sole and absolute discretion may provide that no such right
of repurchase shall exist in the event of a Termination of Employment following
a "change of ownership or control" (within the meaning of Treasury Regulation
Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company or
because of the Common or Restricted Stockholder's death or disability; provided,
further, that, except with respect to shares of Common or Restricted Stock
granted to Section 162(m) Participants, the Committee in its sole and absolute
discretion may provide that no such right of repurchase shall exist in the event
of a Termination of Employment, Termination of Consultancy or Termination of
Service as a Director without cause or following any Change in

                                      -16-
<PAGE>

Control of the Company or because of the Common or Restricted Stockholder's
retirement, or otherwise.

            VII.6. Required Agreements. Unless the Committee determines
otherwise, as a condition to the receipt of Common Stock or Restricted Stock,
the Holder shall enter into a Management Stockholders Agreement, a Proxy, and/or
other agreements under which the sale or transfer of the Common Stock issuable
under the Award is restricted. Such Management Stockholders Agreement, Proxy and
all other agreements shall be in such form as determined by the Committee.

            VII.7. Escrow. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions imposed
under the Award Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.

            VII.8. Legend. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted Stock
that are still subject to restrictions under Award Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.

            VII.9. Section 83(b) Election. If a Restricted Stockholder makes an
election under Section 83(b) of the Code, or any successor section thereto, to
be taxed with respect to the Restricted Stock as of the date of transfer of the
Restricted Stock rather than as of the date or dates upon which the Restricted
Stockholder would otherwise be taxable under Section 83(a) of the Code, the
Restricted Stockholder shall deliver a copy of such election to the Company
immediately after filing such election with the Internal Revenue Service.

                                 ARTICLE VIII.

                    PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
                         DEFERRED STOCK, STOCK PAYMENTS

            VIII.1. Eligibility. Subject to the Award Limit, one or more
Performance Awards, Dividend Equivalents, awards of Deferred Stock, and/or Stock
Payments may be granted to any Employee whom the Committee determines is a key
Employee or any consultant or Director whom the Committee determines should
receive such an Award.

            VIII.2. Performance Awards. Any key Employee, consultant or Director
selected by the Committee may be granted one or more Performance Awards. The
value of such Performance Awards may be linked to any one or more of the
Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates or over
any period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions,
responsibilities and other compensation of the particular key Employee,
consultant or Director.

                                      -17-
<PAGE>

            VIII.3. Dividend Equivalents. Any key Employee, consultant or
Director selected by the Committee may be granted Dividend Equivalents based on
the dividends declared on Common Stock, to be credited as of dividend payment
dates, during the period between the date a Stock Appreciation Right, Deferred
Stock or Performance Award is granted, and the date such Stock Appreciation
Right, Deferred Stock or Performance Award is exercised, vests or expires, as
determined by the Committee. Such Dividend Equivalents shall be converted to
cash or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Committee.

            VIII.4. Stock Payments. Any key Employee, consultant or Director
selected by the Committee may receive Stock Payments in the manner determined
from time to time by the Committee. The number of shares shall be determined by
the Committee and may be based upon the Performance Criteria or other specific
performance criteria determined appropriate by the Committee, determined on the
date such Stock Payment is made or on any date thereafter.

            VIII.5. Deferred Stock. Any key Employee, consultant or Director
selected by the Committee may be granted an award of Deferred Stock in the
manner determined from time to time by the Committee. The number of shares of
Deferred Stock shall be determined by the Committee and may be linked to the
Performance Criteria or other specific performance criteria determined to be
appropriate by the Committee, in each case on a specified date or dates or over
any period or periods determined by the Committee. Common Stock underlying a
Deferred Stock award will not be issued until the Deferred Stock award has
vested, pursuant to a vesting schedule or performance criteria set by the
Committee. Unless otherwise provided by the Committee, a Holder of Deferred
Stock shall have no rights as a Company stockholder with respect to such
Deferred Stock until such time as the Award has vested and the Common Stock
underlying the Award has been issued.

            VIII.6. Term. The term of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment shall be set by the Committee in
its discretion.

            VIII.7. Exercise or Purchase Price. The Committee may establish the
exercise or purchase price of a Performance Award, shares of Deferred Stock, or
shares received as a Stock Payment; provided, however, that such price shall not
be less than the par value for a share of Common Stock, unless otherwise
permitted by applicable state law.

            VIII.8. Exercise Upon Termination of Employment, Termination of
Consultancy or Termination of Service as a Director. A Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment is exercisable
or payable only while the Holder is an Employee, consultant or Director;
provided, however, that the Committee in its sole and absolute discretion may
provide that the Performance Award, Dividend Equivalent, award of Deferred Stock
and/or Stock Payment may be exercised or paid subsequent to a Termination of
Employment following a "change of ownership or control" (within the meaning of
Section 1.162-27(e)(2)(v) or any successor regulation thereto) of the Company;
provided, further, that except with respect to Performance Awards granted to
Section 162(m) Participants, the Committee in its sole and absolute discretion
may provide that the Performance Awards, Dividend Equivalents, awards of
Deferred Stock and/or Stock Payments may be exercised or

                                      -18-
<PAGE>

paid following a Termination of Employment, a Termination of Consultancy, or a
Termination of Service as a Director without cause, or following a Change in
Control of the Company, or because of the Holder's retirement, death or
disability, or otherwise.

            VIII.9. Payment on Exercise. Payment of the amount determined under
Section 8.1 or 8.2 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VIII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 6.3.

            VIII.10. Required Agreements. Unless the Committee determines
otherwise, as a condition to the receipt of Performance Awards, Dividend
Equivalents, awards of Deferred Stock, and/or Stock Payments, and to the extent
such Awards are issuable in Common Stock, the Holder shall enter into a
Management Stockholders Agreement, a Proxy, and/or other agreements under which
the sale or transfer of the Common Stock issuable under the Award is restricted.
Such Management Stockholders Agreement, Proxy and all other agreements shall be
in such form as determined by the Committee.

                                  ARTICLE IX.

                            STOCK APPRECIATION RIGHTS

            IX.1. Grant of Stock Appreciation Rights. A Stock Appreciation Right
may be granted to any key Employee, consultant or Director selected by the
Committee. A Stock Appreciation Right may be granted (i) in connection and
simultaneously with the grant of an Option, (ii) with respect to a previously
granted Option, or (iii) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with the Plan as
the Committee shall impose and shall be evidenced by an Award Agreement. Without
limiting the generality of the foregoing, the Committee may, in its discretion
and on such terms as it deems appropriate, require as a condition of the grant
of a Stock Appreciation Right to an Employee, consultant or Director that the
Employee, consultant or Director surrender for cancellation some or all of the
unexercised Options, Awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments, or
other rights which have been previously granted to him under the Plan or
otherwise. A Stock Appreciation Right, the grant of which is conditioned upon
such surrender, may have an exercise price lower (or higher) than the exercise
price of the surrendered Option or other Award, may cover the same (or a lesser
or greater) number of shares as such surrendered Option or other award, may
contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered Option or other Award.

            IX.2. Coupled Stock Appreciation Rights.

                  (a) A Coupled Stock Appreciation Right ("CSAR") shall be
            related to a particular Option and shall be exercisable only when
            and to the extent the related Option is exercisable.

                                      -19-
<PAGE>

                  (b) A CSAR may be granted to the Holder for no more than the
            number of shares subject to the simultaneously or previously granted
            Option to which it is coupled.

                  (c) A CSAR shall entitle the Holder (or other person entitled
            to exercise the Option pursuant to the Plan) to surrender to the
            Company unexercised a portion of the Option to which the CSAR
            relates (to the extent then exercisable pursuant to its terms) and
            to receive from the Company in exchange therefor an amount
            determined by multiplying the difference obtained by subtracting the
            Option exercise price from the Fair Market Value of a share of
            Common Stock on the date of exercise of the CSAR by the number of
            shares of Common Stock with respect to which the CSAR shall have
            been exercised, subject to any limitations the Committee may impose.

            IX.3. Independent Stock Appreciation Rights.

                  (a) An Independent Stock Appreciation Right ("ISAR") shall be
            unrelated to any Option and shall have a term set by the Committee.
            An ISAR shall be exercisable in such installments as the Committee
            may determine. An ISAR shall cover such number of shares of Common
            Stock as the Committee may determine. The exercise price per share
            of Common Stock subject to each ISAR shall be set by the Committee.
            An ISAR is exercisable only while the Holder is an Employee,
            consultant or Director; provided that the Committee may determine
            that the ISAR may be exercised subsequent to Termination of
            Employment, Termination of Consultancy or Termination of Service as
            a Director without cause, or following a Change in Control of the
            Company, or because of the Grantee's retirement, death or
            disability, or otherwise.

                  (b) An ISAR shall entitle the Holder (or other person entitled
            to exercise the ISAR pursuant to the Plan) to exercise all or a
            specified portion of the ISAR (to the extent then exercisable
            pursuant to its terms) and to receive from the Company an amount
            determined by multiplying the difference obtained by subtracting the
            exercise price per share of the ISAR from the Fair Market Value of a
            share of Common Stock on the date of exercise of the ISAR by the
            number of shares of Common Stock with respect to which the ISAR
            shall have been exercised, subject to any limitations the Committee
            may impose.

            IX.4. Payment and Limitations on Exercise.

                  (a) Payment of the amount determined under Section 9.2(c) and
            9.3(b) above shall be in cash, in Common Stock (based on its Fair
            Market Value as of the date the Stock Appreciation Right is
            exercised) or a combination of both, as determined by the Committee.
            To the extent such payment is effected in Common Stock it shall be
            made subject to satisfaction of all provisions of Section 6.3 above
            pertaining to Options.

                                      -20-
<PAGE>

                  (b) Holders of Stock Appreciation Rights may be required to
            comply with any timing or other restrictions with respect to the
            settlement or exercise of a Stock Appreciation Right, including a
            window-period limitation, as may be imposed in the discretion of the
            Committee.

                  (c) Unless the Committee determines otherwise, as a condition
            to the receipt of Stock Appreciation Rights, to the extent such
            Stock Appreciation Rights are issuable in Common Stock, the Holder
            shall enter into a Management Stockholders Agreement, a Proxy,
            and/or other agreements under which the sale or transfer of the
            Common Stock issuable under the Award is restricted. Such Management
            Stockholders Agreement, Proxy and all other agreements shall be in
            such form as determined by the Committee.

                                   ARTICLE X.

                                 ADMINISTRATION

            X.1. Committee. The Committee shall consist of the entire Board;
provided, however, that upon appointment by the Board of a compensation
committee of the Board or other committee or subcommittee of the Board, the
Committee shall consist of such compensation committee or other committee or
subcommittee of the Board.

            X.2. Duties and Powers of Committee. It shall be the duty of the
Committee to conduct the general administration of the Plan in accordance with
its provisions. The Committee shall have the power to interpret the Plan and the
agreements pursuant to which Awards are granted or awarded, and to adopt such
rules for the administration, interpretation, and application of the Plan as are
consistent therewith and to interpret, amend or revoke any such rules. Any such
grant or award under the Plan need not be the same with respect to each Holder.
Any such interpretations and rules with respect to Incentive Stock Options shall
be consistent with the provisions of Section 422 of the Code.

            X.3. Majority Rule; Unanimous Written Consent. The Committee shall
act by a majority of its members in attendance at a meeting at which a quorum is
present or by a memorandum or other written instrument signed by all members of
the Committee.

            X.4. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of the Plan
shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Holders, the Company and all other interested persons. No members of the
Committee or Board shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or Awards, and all

                                      -21-
<PAGE>

members of the Committee and the Board shall be fully protected by the Company
in respect of any such action, determination or interpretation.

                                  ARTICLE XI.

                            MISCELLANEOUS PROVISIONS

            XI.1. Not Transferable. No Award under the Plan may be sold,
pledged, assigned or transferred in any manner other than by will or the laws of
descent and distribution or pursuant to a QDRO, unless and until such Award has
been exercised, or the shares underlying such Award have been issued, and all
restrictions applicable to such shares have lapsed. No Option, Restricted Stock
award, Deferred Stock award, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment or interest or right therein shall be
liable for the debts, contracts or engagements of the Holder or his successors
in interest or shall be subject to disposition by transfer, alienation,
anticipation, pledge, encumbrance, assignment or any other means whether such
disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null and
void and of no effect, except to the extent that such disposition is permitted
by the preceding sentence.

            During the lifetime of the Holder, only he may exercise an Option or
other Award (or any portion thereof) granted to him under the Plan, unless it
has been disposed of pursuant to a QDRO, After the death of the Holder, any
exercisable portion of an Option or other Award may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Award Agreement,
be exercised by his personal representative or by any person empowered to do so
under the deceased Holder's will or under the then applicable laws of descent
and distribution.

            XI.2. Amendment, Suspension or Termination of the Plan. Except as
otherwise provided in this Section 11.2, the Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 11.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under the Plan. No amendment,
suspension or termination of the Plan shall, without the consent of the Holder,
alter or impair any rights or obligations under any Award theretofore granted or
awarded, unless the Award itself otherwise expressly so provides. No Awards may
be granted or awarded during any period of suspension or after termination of
the Plan, and in no event may any Incentive Stock Option be granted under the
Plan after the first to occur of the following events:

                  (a) The expiration of ten years from the date the Plan is
            adopted by the Board; or

                  (b) The expiration of ten years from the date the Plan is
            approved by the Company's stockholders.

                                      -22-
<PAGE>

In addition, if the Board determines that Awards other than Options or Stock
Appreciation Rights which may be granted to Section 162(m) Participants should
continue to be eligible to qualify as performance-based compensation under
Section 162(m)(4)(C) of the Code, the Performance Criteria must be disclosed to
and approved by the Company's stockholders no later than the first stockholder
meeting that occurs in the fifth year following the year in which the Company's
stockholders previously approved the Performance Criteria.

            XI.3. Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company, Change in Control and Other Corporate Events.

                  (a) Subject to Section 11.3(d), in the event that the Board
            determines that any dividend or other distribution (whether in the
            form of cash, Common Stock, other securities, or other property),
            recapitalization, reclassification, stock split, reverse stock
            split, reorganization, merger, consolidation, split-up, spin-off,
            combination, repurchase, liquidation, dissolution, or sale,
            transfer, exchange or other disposition of all or substantially all
            of the assets of the Company (including, but not limited to, a
            Change in Control), or exchange of Common Stock or other securities
            of the Company, issuance of warrants or other rights to purchase
            Common Stock or other securities of the Company, or other similar
            corporate transaction or event, in the Board's reasonable and good
            faith discretion, affects the Common Stock such that an adjustment
            is determined by the Board to be appropriate in order to prevent
            dilution or enlargement of the benefits or potential benefits
            intended to be made available under the Plan or with respect to an
            Award, then the Board shall, in such manner as it may deem
            equitable, adjust any or all of;

                        (i) the number and kind of shares of Common Stock (or
            other securities or property) with respect to which Awards may be
            granted or awarded (including, but not limited to, adjustments of
            the limitations in Section 2.1 on the maximum number and kind of
            shares which may be issued and adjustments of the Award Limit),

                        (ii) the number and kind of shares of Common Stock (or
            other securities or property) subject to outstanding Options,
            Performance Awards, Stock Appreciation Rights, Dividend Equivalents,
            or Stock Payments, and in the number and kind of shares of
            outstanding Restricted Stock or Deferred Stock, and

                        (iii) the grant or exercise price with respect to any
            Award.

                  (b) Subject to Section 11.3(d), in the event of any Change in
            Control or other transaction or event described in Section 11.3(a),
            the Board, in its reasonable and good faith discretion, and on such
            terms and conditions as it deems appropriate, either by the terms of
            the Award or by action taken prior to the occurrence of such
            transaction or event and either automatically or upon the Holder's
            request, is hereby authorized to take any one or more of the
            following actions whenever the Board determines that such action is
            appropriate in order to

                                      -23-
<PAGE>

            prevent dilution or enlargement of the benefits or potential
            benefits intended to be made available under the Plan or with
            respect to any Award under the Plan or to facilitate such
            transactions or events:

                        (i) To provide for either the purchase of any such Award
            for an amount of cash equal to the amount that could have been
            attained upon the exercise of such Award or realization of the
            Holder's rights had such Award been currently exercisable or payable
            or fully vested or the replacement of such Award with other rights
            or property selected by the Board in its reasonable and good faith
            discretion;

                        (ii) To provide that such Award shall be exercisable as
            to all shares covered thereby, notwithstanding anything to the
            contrary in (i) Section 5.3 or (ii) the provisions of such Award;
            and in the case of a merger, consolidation, bankruptcy
            reorganization, liquidation or dissolution, to further provide that
            the Award cannot vest, be exercised or become payable after such
            event;

                        (iii) To provide that such Award be assumed by the
            successor or survivor corporation, or a parent or subsidiary
            thereof, or shall be substituted for by similar options, rights or
            awards covering the stock of the successor or survivor corporation,
            or a parent or subsidiary thereof, with appropriate adjustments as
            to the number and kind of shares and prices;

                        (iv) To make adjustments in the number and type of
            shares of Common Stock (or other securities or property) subject to
            outstanding Awards, and in the number and kind of outstanding
            Restricted Stock or Deferred Stock and/or in the terms and
            conditions of (including the grant or exercise price), and the
            criteria included in, outstanding Options, rights and Awards and
            Options, rights and awards which may be granted in the future; and

                        (v) To provide that, for a specified period of time
            prior to such event, the restrictions imposed under an Award
            Agreement upon some or all shares of Restricted Stock or Deferred
            Stock may be terminated, and, in the case of Restricted Stock, some
            or all shares of such Restricted Stock may cease to be subject to
            repurchase under Section 7.5 or forfeiture under Section 7.4 after
            such event.

                  (c) Subject to Section 11.3(d) and 11.6, the Committee may, in
            its discretion, include such further provisions and limitations in
            any Award, agreement or certificate, as it may deem equitable and in
            the best interests of the Company.

                  (d) With respect to Awards described in Article VII or VIII
            which are granted to Section 162(m) Participants and are intended to
            qualify as performance-based compensation under Section
            162(m)(4)(C), no adjustment or action described in this Section 11.3
            or in any other provision of the Plan shall be

                                      -24-
<PAGE>

            authorized to the extent that such adjustment or action would cause
            such Award to fail to so qualify under Section 162(m)(4)(C), or any
            successor provisions thereto. No adjustment or action described in
            this Section 11.3 or in any other provision of the Plan shall be
            authorized to the extent that such adjustment or action would cause
            the Plan to violate Section 422(b)(1) of the Code. Furthermore, no
            such adjustment or action shall be authorized to the extent such
            adjustment or action would result in short-swing profits liability
            under Section 16 or violate the exemptive conditions of Rule 16b-3
            unless the Committee determines that the Award is not to comply with
            such exemptive conditions. The number of shares of Common Stock
            subject to any Award shall always be rounded to the next whole
            number.

            XI.4. Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Holder of
any sums required by federal, state or local tax law to be withheld with respect
to the issuance, vesting, exercise or payment of any Award. The Committee may in
its discretion and in satisfaction of the foregoing requirement allow such
Holder to elect to have the Company withhold shares of Common Stock otherwise
issuable under such Award (or allow the return of shares of Common Stock) having
a Fair Market Value equal to the sums required to be withheld.

            XI.5. Loans. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or receipt of an
Award granted or awarded under the Plan, or the issuance of Common Stock,
Restricted Stock or Deferred Stock awarded under the Plan. The terms and
conditions of any such loan shall be set by the Committee.

            XI.6. Forfeiture Provisions. Pursuant to its general authority to
determine the terms and conditions applicable to Awards under the Plan, the
Committee shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide in the terms of Awards made under
the Plan, or to require a Holder to agree by separate written instrument at the
time the Award is granted, that (i) any proceeds, gains or other economic
benefit actually or constructively received by the Holder upon any receipt or
exercise of the Award, or upon the receipt or resale of any Common Stock
underlying the Award, must be paid to the Company, and (ii) the Award shall
terminate and any unexercised portion of the Award (whether or not vested) shall
be forfeited, if (a) a Termination of Employment, Termination of Consultancy or
Termination of Service as a Director occurs prior to a specified date, or within
a specified time period following receipt or exercise of the Award, or (b) the
Holder at any time, or during a specified time period, engages in any activity
in competition with the Company, or which is inimical, contrary or harmful to
the interests of the Company, as further defined by the Committee (or the Board,
as applicable) or the Holder incurs a Termination of Employment, Termination of
Consultancy or Termination of Service as a Director for cause.

            XI.7. Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of the Plan,
the Plan, and any Award granted or awarded to any individual who is then subject
to Section 16 of the Exchange Act, shall be subject to any additional
limitations set forth in any applicable exemptive rule under Section 16 of the
Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act)

                                      -25-
<PAGE>

that are requirements for the application of such exemptive rule. To the extent
permitted by applicable law, the Plan and Awards granted or awarded hereunder
shall be deemed amended to the extent necessary to conform to such applicable
exemptive rule. Furthermore, notwithstanding any other provision of the Plan,
any Award described in Article VII or VIII which is granted to a Section 162(m)
Participant and is intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall be subject to any additional
limitations set forth in Section 162(m) of the Code (including any amendment to
Section 162(m) of the Code) or any regulations or rulings issued thereunder that
are requirements for qualification as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed
amended to the extent necessary to conform to such requirements.

            XI.8. Effect of Plan Upon Options and Compensation Plans. The
adoption of the Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in the Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees or consultants of the Company or any
Subsidiary or (ii) to grant or assume options or other rights or awards
otherwise than under the Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.

            XI.9. Compliance with Laws. The Plan, the granting and vesting of
Awards under the Plan and the issuance and delivery of shares of Common Stock
and the payment of money under the Plan or under Awards granted or awarded
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including but not limited to state and federal securities
law and federal margin requirements) and to such approvals by any listing,
regulatory or governmental authority as may, in the opinion of counsel for the
Company, be necessary or advisable in connection therewith. Any securities
delivered under the Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Company, provide such
assurances and representations to the Company as the Company may deem necessary
or desirable to assure compliance with all applicable legal requirements. To the
extent permitted by applicable law, the Plan and Awards granted or awarded
hereunder shall be deemed amended to the extent necessary to conform to such
laws, rules and regulations.

            XI.10. Designees. The Company may designate another party to
repurchase, redeem or purchase any Award hereunder.

            XI.11. Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of the Plan.

            XI.12. Governing Law. The Plan and any agreements hereunder shall be
administered, interpreted and enforced under the internal laws of the State of
Delaware without regard to conflicts of laws thereof.

                                      -26-
<PAGE>

            I hereby certify that the foregoing Plan was duly adopted by the
Board of Directors of Alliance Entertainment Corp. on December 1999.

            Executed on this ____th day of December 1999.

                                                        ________________________
                                                        Secretary

                                      -27-