INTERLINK ELECTRONICS, INC.

                         1996 STOCK INCENTIVE PLAN

     1. Purpose.  The purpose of this Stock  Incentive Plan (the "Plan") is
to enable Interlink Electronics, Inc. (the "Company") to attract and retain
the  services of (1)  selected  employees,  officers  and  directors of the
Company or of any  subsidiary  of the Company and (2) selected  nonemployee
agents, consultants, advisors, persons involved in the sale or distribution
of the Company's products and independent contractors of the Company or any
subsidiary.

     2. Shares Subject to the Plan. Subject to adjustment as provided below
and in paragraph  13, the shares to be offered under the Plan shall consist
of Common  Stock of the  Company,  and the total number of shares of Common
Stock that may be issued under the Plan shall not exceed 1,500,000  shares.
The shares issued under the Plan may be authorized  and unissued  shares or
reacquired  shares. If an option,  stock  appreciation right or performance
unit  granted  under  the Plan  expires,  terminates  or is  canceled,  the
unissued  shares  subject  to such  option,  stock  appreciation  right  or
performance unit shall again be available under the Plan. If shares sold or
awarded  as a  bonus  under  the  Plan  are  forfeited  to the  Company  or
repurchased by the Company,  the number of shares  forfeited or repurchased
shall again be available under the Plan.

     3. Effective Date and Duration of Plan.

          (a) Effective  Date. The Plan shall become  effective as of April
30, 1996. No option,  stock  appreciation right or performance unit granted
under  the  Plan to an  officer  who is  subject  to  Section  16(b) of the
Securities  Exchange Act of 1934, as amended (an  "Officer") or a director,
and no incentive stock option, shall become exercisable, however, until the
Plan is  approved by the  affirmative  vote of the holders of a majority of
the shares of Common Stock represented at a shareholders meeting at which a
quorum is present and any such awards under the Plan prior to such approval
shall be  conditioned  on and  subject  to such  approval.  Subject to this
limitation, options, stock appreciation rights and performance units may be
granted  and shares may be awarded as bonuses or sold under the Plan at any
time after the effective date and before termination of the Plan.

          (b) Duration.  The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions
on such shares have lapsed. The Board of Directors may suspend or terminate
the Plan at any time except with respect to options,  performance units and
shares subject to restrictions then outstanding under the Plan. Termination
shall not  affect  any  outstanding  options,  any right of the  Company to
repurchase shares or the forfeitability of shares issued under the Plan.


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     4. Administration.

          (a) Board of  Directors.  The Plan shall be  administered  by the
Board of Directors of the Company, which shall determine and designate from
time to time the  individuals  to whom awards shall be made,  the amount of
the awards and the other terms and conditions of the awards. Subject to the
provisions of the Plan,  the Board of Directors may from time to time adopt
and amend rules and  regulations  relating to  administration  of the Plan,
advance the lapse of any waiting  period,  accelerate  any  exercise  date,
waive  or  modify  any  restriction  applicable  to  shares  (except  those
restrictions  imposed  by law)  and make all  other  determinations  in the
judgment  of  the  Board  of  Directors  necessary  or  desirable  for  the
administration  of the Plan. The  interpretation  and  construction  of the
provisions  of the Plan and related  agreements  by the Board of  Directors
shall be final and  conclusive.  The Board of  Directors  may  correct  any
defect or supply any omission or reconcile any inconsistency in the Plan or
in any  related  agreement  in the  manner  and to the extent it shall deem
expedient to carry the Plan into effect, and it shall be the sole and final
judge of such expediency.

          (b) Committee. The Board of Directors may delegate to a committee
of the Board of  Directors or  specified  officers of the Company,  or both
(the  "Committee") any or all authority for  administration of the Plan. If
authority  is  delegated to a  Committee,  all  references  to the Board of
Directors in the Plan shall mean and relate to the Committee  except (i) as
otherwise  provided by the Board of Directors  and (ii) that only the Board
of Directors  may amend or terminate  the Plan as provided in  paragraphs 3
and 15. If awards are to be made under the Plan to Officers  or  directors,
authority for selection of Officers and  directors  for  participation  and
decisions concerning the timing, pricing and amount of a grant or award, if
not determined under a formula meeting the requirements of Rule 16b-3 under
the  Securities  Exchange Act of 1934, as amended,  shall be delegated to a
committee consisting of two or more disinterested directors.

     5. Types of Awards; Eligibility. The Board of Directors may, from time
to time, take the following  actions,  separately or in combination,  under
the Plan: (i) grant Incentive  Stock Options,  as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"),  as provided in
paragraphs  6(a) and 6(b);  (ii) grant options other than  Incentive  Stock
Options  ("Non-Statutory Stock Options") as provided in paragraphs 6(a) and
6(c);  (iii) award stock  bonuses as  provided  in  paragraph  7; (iv) sell
shares subject to  restrictions as provided in paragraph 8; (v) grant stock
appreciation  rights as  provided  in  paragraph  9; (vi)  grant cash bonus
rights as provided  in  paragraph  10;  (vii)  grant  performance  units as
provided in  paragraph  11 and (viii)  grant  foreign  qualified  awards as
provided  in  paragraph  12.  Any  such  awards  may be made to  employees,
including employees who are officers or directors, and to other individuals
described in paragraph 1 who the Board of Directors  believes  have made or
will make an important contribution to the Company or any subsidiary of the
Company;  provided,  however,  that only  employees of the Company shall be
eligible to receive Incentive

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Stock  Options  under the Plan.  The Board of  Directors  shall  select the
individuals to whom awards shall be made and shall specify the action taken
with respect to each individual to whom an award is made. At the discretion
of the  Board of  Directors,  an  individual  may be given an  election  to
surrender  an award in exchange  for the grant of a new award.  No employee
may be granted options or stock appreciation rights under the Plan for more
than an aggregate of 200,000 shares of Common Stock in connection  with the
hiring of the  employee or 50,000  shares of Common  Stock in any  calendar
year otherwise.

     6. Option Grants.

          (a) General Rules Relating to Options.

               (i) Terms of Grant. The Board of Directors may grant options
     under  the Plan.  With  respect  to each  option  grant,  the Board of
     Directors  shall determine the number of shares subject to the option,
     the option price, the period of the option, the time or times at which
     the option may be  exercised  and whether  the option is an  Incentive
     Stock Option or a Non-Statutory Stock Option. At the time of the grant
     of an option or at any time  thereafter,  the Board of  Directors  may
     provide that an optionee who  exercised an option with Common Stock of
     the  Company  shall  automatically  receive a new  option to  purchase
     additional  shares equal to the number of shares  surrendered  and may
     specify the terms and conditions of such new options.

               (ii)  Exercise of Options.  Except as provided in  paragraph
     6(a)(iv) or as determined by the Board of Directors, no option granted
     under the Plan may be  exercised  unless at the time of such  exercise
     the  optionee  is  employed by or in the service of the Company or any
     subsidiary  of the Company and shall have been so employed or provided
     such  service  continuously  since the date such  option was  granted.
     Absence on leave or on account of illness or  disability  under  rules
     established by the Board of Directors shall not, however, be deemed an
     interruption  of  employment  or  service  for  this  purpose.  Unless
     otherwise  determined  by the Board of  Directors,  vesting of options
     shall not continue  during an absence on leave  (including an extended
     illness) or on account of disability. Except as provided in paragraphs
     6(a)(iv) and 13, options  granted under the Plan may be exercised from
     time to time over the period stated in each option in such amounts and
     at such  times as  shall  be  prescribed  by the  Board of  Directors,
     provided that options shall not be exercised  for  fractional  shares.
     Unless otherwise determined by the Board of Directors, if the optionee
     does not  exercise an option in any one year with  respect to the full
     number of shares to which the  optionee is entitled in that year,  the
     optionee's  rights shall be  cumulative  and the optionee may purchase
     those  shares in any  subsequent  year  during the term of the option.
     Unless otherwise  determined by the Board of Directors,  if an Officer
     or a director exercises an option within six months of the

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     grant of the option,  the shares  acquired upon exercise of the option
     may not be sold  until  six  months  after  the  date of  grant of the
     option.

               (iii)  Nontransferability.  Each Incentive Stock Option and,
     unless otherwise  determined by the Board of Directors with respect to
     an option granted to a person who is neither an Officer nor a director
     of the Company,  each other option granted under the Plan by its terms
     shall be nonassignable  and  nontransferable  by the optionee,  either
     voluntarily  or by operation of law,  except by will or by the laws of
     descent  and  distribution  of the state or country of the  optionee's
     domicile at the time of death.

               (iv) Termination of Employment or Service.

                    (A) General Rule.  Unless  otherwise  determined by the
          Board of Directors, in the event the employment or service of the
          optionee  with the  Company or a  subsidiary  terminates  for any
          reason  other than  because of  physical  disability  or death as
          provided in subparagraphs  6(a)(iv)(B) and (C), the option may be
          exercised at any time prior to the expiration  date of the option
          or the expiration of 30 days after the date of such  termination,
          whichever  is the shorter  period,  but only if and to the extent
          the  optionee  was entitled to exercise the option at the date of
          such termination.

                    (B)  Termination  Because of Total  Disability.  Unless
          otherwise  determined by the Board of Directors,  in the event of
          the  termination  of  employment  or  service  because  of  total
          disability,  the option may be exercised at any time prior to the
          expiration  date of the  option  or the  expiration  of 12 months
          after  the date of such  termination,  whichever  is the  shorter
          period,  but only if and to the extent the  optionee was entitled
          to exercise the option at the date of such termination.  The term
          "total  disability"  means a  medically  determinable  mental  or
          physical impairment which is expected to result in death or which
          has lasted or is expected to last for a  continuous  period of 12
          months or more and which causes the optionee to be unable, in the
          opinion of the Company and two independent physicians, to perform
          his or her duties as an employee, director, officer or consultant
          of the  Company  and to be  engaged  in any  substantial  gainful
          activity.  Total  disability  shall be deemed to have occurred on
          the  first  day  after  the  Company  and  the  two   independent
          physicians  have furnished  their opinion of total  disability to
          the Company.

                    (C)  Termination  Because  of Death.  Unless  otherwise
          determined by the Board of  Directors,  in the event of the death
          of an  optionee  while  employed by or  providing  service to the
          Company or a subsidiary,  the option may be exercised at any time
          prior to the expiration

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<PAGE>

          date of the option or the  expiration of 12 months after the date
          of death, whichever is the shorter period, but only if and to the
          extent the  optionee  was  entitled to exercise the option at the
          date of death  and only by the  person  or  persons  to whom such
          optionee's  rights under the option shall pass by the  optionee's
          will or by the laws of descent and  distribution  of the state or
          country of domicile at the time of death.

                    (D)   Amendment  of  Exercise   Period   Applicable  to
          Termination.  The  Board of  Directors,  at the time of grant or,
          with respect to an option that is not an Incentive  Stock Option,
          at any time  thereafter,  may  extend  the  30-day  and  12-month
          exercise  periods any length of time not longer than the original
          expiration date of the option, and may increase the portion of an
          option that is exercisable,  subject to such terms and conditions
          as the Board of Directors may determine.

                    (E) Failure to Exercise Option.  To the extent that the
          option  of  any  deceased  optionee  or  of  any  optionee  whose
          employment  or service  terminates  is not  exercised  within the
          applicable period, all further rights to purchase shares pursuant
          to such option shall cease and terminate.

               (v)  Purchase  of  Shares.  Unless  the  Board of  Directors
     determines  otherwise,  shares may be  acquired  pursuant to an option
     granted  under the Plan only upon  receipt by the Company of notice in
     writing  from the  optionee of the  optionee's  intention to exercise,
     specifying  the number of shares as to which the  optionee  desires to
     exercise  the  option  and the date on which the  optionee  desires to
     complete the transaction,  and if required in order to comply with the
     Securities Act of 1933, as amended,  containing a representation  that
     it is the  optionee's  present  intention  to  acquire  the shares for
     investment  and not with a view to  distribution.  Unless the Board of
     Directors  determines  otherwise,  on or before the date specified for
     completion  of the  purchase  of shares  pursuant  to an  option,  the
     optionee  must have paid the Company the full  purchase  price of such
     shares in cash (including, with the consent of the Board of Directors,
     cash that may be the  proceeds  of a loan from the  Company  (provided
     that, with respect to an Incentive Stock Option, such loan is approved
     at the time of option  grant))  or,  with the  consent of the Board of
     Directors,  in whole or in part, in Common Stock of the Company valued
     at fair market value,  restricted  stock,  performance  units or other
     contingent  awards  denominated  in either  stock or cash,  promissory
     notes and  other  forms of  consideration.  The fair  market  value of
     Common  Stock  provided  in payment  of the  purchase  price  shall be
     determined  by the  Board of  Directors.  If the  Common  Stock of the
     Company is not  publicly  traded on the date the option is  exercised,
     the Board of Directors  may consider  any  valuation  methods it deems
     appropriate  and  may,  but is not  required  to,  obtain  one or more
     independent  appraisals  of the  Company.  If the Common  Stock of the
     Company is publicly  traded on the date the option is  exercised,  the
     fair market

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     value of Common Stock  provided in payment of the purchase price shall
     be the  closing  price of the  Common  Stock as  reported  in The Wall
     Street  Journal on the last trading day  preceding the date the option
     is  exercised,  or such other  reported  value of the Common  Stock as
     shall be  specified  by the Board of  Directors.  No  shares  shall be
     issued  until full  payment  for the  shares  has been made.  With the
     consent of the Board of Directors  (which, in the case of an Incentive
     Stock  Option,  shall be given only at the time of option  grant),  an
     optionee may request the Company to apply  automatically the shares to
     be received  upon the  exercise of a portion of a stock  option  (even
     though  stock  certificates  have not yet been  issued) to satisfy the
     purchase  price for additional  portions of the option.  Each optionee
     who has exercised an option shall immediately upon notification of the
     amount due, if any,  pay to the Company in cash  amounts  necessary to
     satisfy  any  applicable  federal,  state and  local  tax  withholding
     requirements.  If additional withholding is or becomes required beyond
     any amount deposited before delivery of the certificates, the optionee
     shall pay such amount to the Company on demand.  If the optionee fails
     to pay the amount demanded,  the Company may withhold that amount from
     other  amounts  payable  by the  Company  to the  optionee,  including
     salary,  subject to  applicable  law. With the consent of the Board of
     Directors  an optionee  may satisfy  this  obligation,  in whole or in
     part, by having the Company withhold from the shares to be issued upon
     the exercise that number of shares that would satisfy the  withholding
     amount due or by delivering to the Company Common Stock to satisfy the
     withholding  amount.  Upon the  exercise  of an option,  the number of
     shares  reserved for  issuance  under the Plan shall be reduced by the
     number of shares issued upon exercise of the option.

          (b) Incentive  Stock  Options.  Incentive  Stock Options shall be
subject to the following additional terms and conditions:

               (i)  Limitation  on Amount of  Grants.  No  employee  may be
     granted  Incentive  Stock Options under the Plan if the aggregate fair
     market value,  on the date of grant,  of the Common Stock with respect
     to which Incentive Stock Options are exercisable for the first time by
     that  employee  during any calendar  year under the Plan and under all
     incentive stock option plans (within the meaning of Section 422 of the
     Code) of the  Company  or any  parent  or  subsidiary  of the  Company
     exceeds $100,000.

               (ii)  Limitations on Grants to 10 Percent  Shareholders.  An
     Incentive  Stock  Option may be granted  under the Plan to an employee
     possessing  more than 10 percent of the total combined voting power of
     all classes of stock of the Company or of any parent or  subsidiary of
     the  Company  only if the option  price is at least 110 percent of the
     fair market value, as described in paragraph  6(b)(iv),  of the Common
     Stock  subject to the option on the date it is granted  and the option
     by its terms is not  exercisable  after the  expiration  of five years
     from the date it is granted.

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               (iii)  Duration of Options.  Subject to paragraphs  6(a)(ii)
     and 6(b)(ii),  Incentive  Stock  Options  granted under the Plan shall
     continue  in effect  for the period  fixed by the Board of  Directors,
     except that no Incentive  Stock Option shall be exercisable  after the
     expiration of 10 years from the date it is granted.

               (iv)  Option  Price.  The  option  price per share  shall be
     determined  by the Board of Directors at the time of grant.  Except as
     provided in  paragraph  6(b)(ii),  the option  price shall not be less
     than 100 percent of the fair market value of the Common Stock  covered
     by the Incentive  Stock Option at the date the option is granted.  The
     fair market value shall be determined  by the Board of  Directors.  If
     the Common Stock of the Company is not publicly traded on the date the
     option is granted,  the Board of Directors  may consider any valuation
     methods it deems  appropriate  and may, but is not required to, obtain
     one or more independent appraisals of the Company. If the Common Stock
     of the Company is publicly traded on the date the option is exercised,
     the fair market  value shall be deemed to be the closing  price of the
     Common  Stock  as  reported  in The  Wall  Street  Journal  on the day
     preceding  the date the  option is  granted,  or, if there has been no
     sale on that date, on the last preceding date on which a sale occurred
     or such other value of the Common  Stock as shall be  specified by the
     Board of Directors.

               (v) Limitation on Time of Grant.  No Incentive  Stock Option
     shall be granted on or after the tenth  anniversary  of the  effective
     date of the Plan.

               (vi)  Conversion of Incentive  Stock  Options.  The Board of
     Directors may at any time without the consent of the optionee  convert
     an Incentive Stock Option to a Non-Statutory Stock Option.

          (c)  Non-Statutory  Stock  Options.  Non-Statutory  Stock Options
shall be subject to the following terms and conditions in addition to those
set forth in Section 6(a) above:

               (i) Option Price. The option price for  Non-Statutory  Stock
     Options  shall be  determined by the Board of Directors at the time of
     grant and may be any amount determined by the Board of Directors.

               (ii)  Duration  of  Options.   Non-Statutory  Stock  Options
     granted  under the Plan shall  continue in effect for the period fixed
     by the Board of Directors.

     7. Stock  Bonuses.  The Board of Directors  may award shares under the
Plan as stock  bonuses.  Shares  awarded as a bonus shall be subject to the
terms,  conditions,  and restrictions determined by the Board of Directors.
The restrictions may include  restrictions  concerning  transferability and
forfeiture of the shares awarded, together with

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such other restrictions as may be determined by the Board of Directors.  If
shares are subject to forfeiture, all dividends or other distributions paid
by the Company  with respect to the shares shall be retained by the Company
until the shares are no longer  subject  to  forfeiture,  at which time all
accumulated amounts shall be paid to the recipient.  The Board of Directors
may require the recipient to sign an agreement as a condition of the award,
but may not require the recipient to pay any monetary  consideration  other
than  amounts  necessary  to  satisfy  tax  withholding  requirements.  The
agreement may contain any terms, conditions, restrictions,  representations
and  warranties  required  by the  Board  of  Directors.  The  certificates
representing  the shares  awarded  shall bear any  legends  required by the
Board of Directors.  Unless otherwise determined by the Board of Directors,
shares awarded as a stock bonus to an Officer or a director may not be sold
until six months  after the date of the award.  The Company may require any
recipient  of a stock  bonus  to pay to the  Company  in cash  upon  demand
amounts  necessary to satisfy any  applicable  federal,  state or local tax
withholding  requirements.  If  the  recipient  fails  to  pay  the  amount
demanded,  the Company may withhold that amount from other amounts  payable
by the Company to the  recipient,  including  salary or fees for  services,
subject to applicable  law.  With the consent of the Board of Directors,  a
recipient  may  deliver  Common  Stock  to  the  Company  to  satisfy  this
withholding  obligation.  Upon the issuance of a stock bonus, the number of
shares  reserved for issuance under the Plan shall be reduced by the number
of shares issued.

     8. Restricted Stock. The Board of Directors may issue shares under the
Plan for such  consideration  (including  promissory notes and services) as
determined by the Board of Directors. Shares issued under the Plan shall be
subject to the terms,  conditions and restrictions  determined by the Board
of  Directors.   The  restrictions  may  include  restrictions   concerning
transferability,  repurchase  by the Company and  forfeiture  of the shares
issued,  together with such other  restrictions as may be determined by the
Board of  Directors.  If shares are subject to  forfeiture or repurchase by
the Company,  all dividends or other distributions paid by the Company with
respect to the shares shall be retained by the Company until the shares are
no  longer  subject  to  forfeiture  or  repurchase,   at  which  time  all
accumulated amounts shall be paid to the recipient. All Common Stock issued
pursuant  to this  paragraph  8 shall be subject  to a purchase  agreement,
which shall be executed by the Company and the prospective recipient of the
shares prior to the delivery of  certificates  representing  such shares to
the recipient.  The purchase  agreement may contain any terms,  conditions,
restrictions,  representations  and  warranties  required  by the  Board of
Directors. The certificates  representing the shares shall bear any legends
required by the Board of  Directors.  Unless  otherwise  determined  by the
Board of Directors, shares issued under this paragraph 8 to an Officer or a
director may not be sold until six months after the shares are issued.  The
Company may require any purchaser of restricted stock to pay to the Company
in cash upon demand amounts  necessary to satisfy any  applicable  federal,
state or local tax withholding requirements.  If the purchaser fails to pay
the amount  demanded,  the  Company  may  withhold  that  amount from other
amounts payable by the Company to the purchaser,  including salary, subject
to applicable law. With the consent of the Board

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of  Directors,  a  purchaser  may  deliver  Common  Stock to the Company to
satisfy this withholding obligation. Upon the issuance of restricted stock,
the number of shares  reserved for issuance under the Plan shall be reduced
by the number of shares issued.

     9. Stock Appreciation Rights.

          (a) Grant.  Stock  appreciation  rights may be granted  under the
Plan  by the  Board  of  Directors,  subject  to  such  rules,  terms,  and
conditions as the Board of Directors prescribes.

          (b) Exercise.

               (i) Each stock  appreciation right shall entitle the holder,
     upon  exercise,  to receive  from the Company in exchange  therefor an
     amount  equal in value to the excess of the fair  market  value on the
     date of exercise of one share of Common  Stock of the Company over its
     fair  market  value on the date of grant  (or,  in the case of a stock
     appreciation right granted in connection with an option, the excess of
     the fair market value of one share of Common Stock of the Company over
     the  option  price  per  share  under  the  option  to which the stock
     appreciation  right  relates),  multiplied  by the  number  of  shares
     covered  by the stock  appreciation  right or the  option,  or portion
     thereof,  that is surrendered.  No stock  appreciation  right shall be
     exercisable  at  a  time  that  the  amount   determined   under  this
     subparagraph  is negative.  Payment by the Company upon  exercise of a
     stock  appreciation  right may be made in Common  Stock valued at fair
     market  value,  in cash, or partly in Common Stock and partly in cash,
     all as determined by the Board of Directors.

               (ii) A stock appreciation right shall be exercisable only at
     the time or times  established  by the Board of Directors.  If a stock
     appreciation  right is  granted  in  connection  with an  option,  the
     following rules shall apply: (1) the stock appreciation right shall be
     exercisable  only to the  extent and on the same  conditions  that the
     related option could be exercised;  (2) the stock appreciation  rights
     shall be  exercisable  only  when the fair  market  value of the stock
     exceeds  the  option  price  of the  related  option;  (3)  the  stock
     appreciation right shall be for no more than 100 percent of the excess
     of the fair market value of the stock at the time of exercise over the
     option price; (4) upon exercise of the stock  appreciation  right, the
     option  or  portion  thereof  to which the  stock  appreciation  right
     relates  terminates;  and (5) upon exercise of the option, the related
     stock  appreciation  right  or  portion  thereof  terminates.   Unless
     otherwise determined by the Board of Directors,  no stock appreciation
     right  granted to an Officer or director may be  exercised  during the
     first six months following the date it is granted.

               (iii)  The  Board  of  Directors   may  withdraw  any  stock
     appreciation  right  granted under the Plan at any time and may impose
     any conditions upon

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     the  exercise  of a  stock  appreciation  right  or  adopt  rules  and
     regulations from time to time affecting the rights of holders of stock
     appreciation  rights.  Such rules and regulations may govern the right
     to exercise  stock  appreciation  rights  granted prior to adoption or
     amendment of such rules and regulations as well as stock  appreciation
     rights granted thereafter.

               (iv) For purposes of this paragraph 9, the fair market value
     of the  Common  Stock  shall be  determined  as of the date the  stock
     appreciation  right is  exercised,  under  the  methods  set  forth in
     paragraph 6(b)(iv).

               (v) No fractional  shares shall be issued upon exercise of a
     stock  appreciation  right.  In lieu  thereof,  cash may be paid in an
     amount  equal  to the  value  of the  fraction  or,  if the  Board  of
     Directors  shall  determine,  the  number  of  shares  may be  rounded
     downward to the next whole share.

               (vi) Each stock  appreciation  right  granted in  connection
     with an Incentive Stock Option, and unless otherwise determined by the
     Board of Directors with respect to a stock  appreciation right granted
     to a person who is neither an Officer nor a director  of the  Company,
     each other  stock  appreciation  right  granted  under the Plan by its
     terms shall be nonassignable and nontransferable by the holder, either
     voluntarily  or by operation of law,  except by will or by the laws of
     descent  and  distribution  of the state or  country  of the  holder's
     domicile at the time of death,  and each stock  appreciation  right by
     its terms shall be  exercisable  during the holder's  lifetime only by
     the holder.

               (vii)   Each   participant   who  has   exercised   a  stock
     appreciation  right shall, upon notification of the amount due, pay to
     the  Company  in cash  amounts  necessary  to satisfy  any  applicable
     federal,  state  and  local  tax  withholding  requirements.   If  the
     participant fails to pay the amount demanded, the Company may withhold
     that  amount  from  other  amounts  payable  by  the  Company  to  the
     participant  including  salary,  subject to  applicable  law. With the
     consent of the Board of  Directors  a  participant  may  satisfy  this
     obligation,  in whole or in part, by having the Company  withhold from
     any shares to be issued upon the  exercise  that number of shares that
     would satisfy the withholding amount due or by delivering Common Stock
     to the Company to satisfy the withholding amount.

               (viii) Upon the exercise of a stock  appreciation  right for
     shares,  the number of shares  reserved  for  issuance  under the Plan
     shall be reduced  by the number of shares  issued.  Cash  payments  of
     stock  appreciation  rights  shall not  reduce the number of shares of
     Common Stock reserved for issuance under the Plan.


                                     10

<PAGE>

     10. Cash Bonus Rights.

          (a) Grant.  The Board of  Directors  may grant cash bonus  rights
under  the  Plan in  connection  with (i)  options  granted  or  previously
granted,  (ii) stock  appreciation  rights  granted or previously  granted,
(iii) stock bonuses  awarded or previously  awarded and (iv) shares sold or
previously sold under the Plan. Cash bonus rights will be subject to rules,
terms  and  conditions  as the Board of  Directors  may  prescribe.  Unless
otherwise determined by the Board of Directors with respect to a cash bonus
right  granted to a person who is neither an Officer  nor a director of the
Company, each cash bonus right granted under the Plan by its terms shall be
nonassignable and  nontransferable by the holder,  either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the holder's  domicile at the time of death. The
payment  of a cash  bonus  shall not  reduce the number of shares of Common
Stock reserved for issuance under the Plan.

          (b) Cash Bonus Rights in Connection  With  Options.  A cash bonus
right  granted in  connection  with an option will entitle an optionee to a
cash  bonus  when  the  related  option  is  exercised  (or  terminates  in
connection with the exercise of a stock  appreciation  right related to the
option)  in whole or in part if,  in the sole  discretion  of the  Board of
Directors,  the bonus right will result in a tax deduction that the Company
has sufficient  taxable income to use. If an optionee purchases shares upon
exercise of an option and does not  exercise a related  stock  appreciation
right,  the amount of the bonus, if any, shall be determined by multiplying
the excess of the total fair market value of the shares to be acquired upon
the exercise  over the total option price for the shares by the  applicable
bonus percentage.  If the optionee  exercises a related stock  appreciation
right in connection  with the  termination of an option,  the amount of the
bonus,  if any,  shall be determined by  multiplying  the total fair market
value of the shares and cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable  to a bonus right,  including a previously  granted bonus right,
may be  changed  from time to time at the sole  discretion  of the Board of
Directors but shall in no event exceed 75 percent.

          (c) Cash Bonus  Rights in  Connection  With Stock  Bonus.  A cash
bonus  right  granted in  connection  with a stock  bonus will  entitle the
recipient  to a cash  bonus  payable  when the stock  bonus is  awarded  or
restrictions,  if any, to which the stock is subject lapse.  If bonus stock
awarded is subject to  restrictions  and is  repurchased  by the Company or
forfeited by the holder,  the cash bonus right granted in  connection  with
the stock bonus shall  terminate and may not be  exercised.  The amount and
timing of  payment  of a cash  bonus  shall be  determined  by the Board of
Directors.

          (d) Cash Bonus Rights in Connection With Stock Purchases.  A cash
bonus right  granted in connection  with the purchase of stock  pursuant to
paragraph 8 will entitle the  recipient to a cash bonus when the shares are
purchased or restrictions, if any, to which the stock is subject lapse. Any
cash bonus right granted in connection  with shares  purchased  pursuant to
paragraph 8 shall terminate and may not be exercised

                                     11

<PAGE>

in the event the shares are  repurchased by the Company or forfeited by the
holder pursuant to applicable restrictions. The amount of any cash bonus to
be awarded and timing of payment of a cash bonus shall be determined by the
Board of Directors.

          (e) Taxes.  The Company  shall  withhold from any cash bonus paid
pursuant to  paragraph 10 the amount  necessary  to satisfy any  applicable
federal, state and local withholding requirements.

     11.  Performance  Units. The Board of Directors may grant  performance
units  consisting of monetary units which may be earned in whole or in part
if the Company achieves certain goals established by the Board of Directors
over a designated  period of time, but not in any event more than 10 years.
The goals  established  by the Board of Directors may include  earnings per
share, return on shareholders' equity, return on invested capital, and such
other goals as may be established  by the Board of Directors.  In the event
that the minimum  performance goal established by the Board of Directors is
not achieved at the conclusion of a period, no payment shall be made to the
participants.  In the event the maximum  corporate  goal is  achieved,  100
percent of the monetary value of the performance  units shall be paid to or
vested in the  participants.  Partial  achievement  of the maximum goal may
result in a payment or vesting  corresponding  to the degree of achievement
as determined by the Board of Directors.  Payment of an award earned may be
in cash or in Common  Stock or in a  combination  of both,  and may be made
when earned, or vested and deferred,  as the Board of Directors determines.
Deferred  awards shall earn interest on the terms and at a rate  determined
by the Board of  Directors.  Unless  otherwise  determined  by the Board of
Directors  with  respect to a  performance  unit granted to a person who is
neither an Officer nor a director of the  Company,  each  performance  unit
granted   under  the  Plan  by  its  terms  shall  be   nonassignable   and
nontransferable  by the holder,  either voluntarily or by operation of law,
except by will or by the laws of descent and  distribution  of the state or
country of the holder's domicile at the time of death. Each participant who
has been awarded a performance unit shall,  upon notification of the amount
due, pay to the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding  requirements.  If the participant
fails to pay the amount demanded, the Company may withhold that amount from
other amounts payable by the Company to the  participant,  including salary
or fees for services,  subject to  applicable  law. With the consent of the
Board of Directors a participant may satisfy this  obligation,  in whole or
in part,  by having the Company  withhold from any shares to be issued that
number of shares  that  would  satisfy  the  withholding  amount  due or by
delivering  Common Stock to the Company to satisfy the withholding  amount.
The  payment of a  performance  unit in cash shall not reduce the number of
shares of Common Stock  reserved for issuance under the Plan. The number of
shares  reserved for issuance under the Plan shall be reduced by the number
of shares issued upon payment of an award.

     12. Foreign Qualified Grants.  Awards under the Plan may be granted to
such  officers and employees of the Company and its  subsidiaries  and such
other persons described in paragraph 1 residing in foreign jurisdictions as
the Board of Directors may

                                     12

<PAGE>

determine  from  time to  time.  The  Board of  Directors  may  adopt  such
supplements  to the Plan as may be necessary to comply with the  applicable
laws of such foreign  jurisdictions  and to afford  participants  favorable
treatment  under  such  laws;  provided,  however,  that no award  shall be
granted under any such  supplement  with terms which are more beneficial to
the participants than the terms permitted by the Plan.

     13. Changes in Capital Structure.

          (a) Stock Splits;  Stock  Dividends.  If the  outstanding  Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different  number or kind of shares or other  securities of
the Company by reason of any stock split, combination of shares or dividend
payable  in  shares,   recapitalization  or  reclassification   appropriate
adjustment  shall be made by the Board of  Directors in the number and kind
of shares  available for grants under the Plan.  In addition,  the Board of
Directors  shall  make  appropriate  adjustment  in the  number and kind of
shares  as  to  which  outstanding   options,   or  portions  thereof  then
unexercised,  shall be  exercisable,  so that the optionee's  proportionate
interest  before  and after  the  occurrence  of the  event is  maintained.
Notwithstanding  the  foregoing,  the  Board  of  Directors  shall  have no
obligation  to effect  any  adjustment  that  would or might  result in the
issuance of fractional shares, and any fractional shares resulting from any
adjustment may be  disregarded or provided for in any manner  determined by
the Board of Directors. Any such adjustments made by the Board of Directors
shall be conclusive.

          (b)  Mergers,  Reorganizations,  Etc.  In the  event of a merger,
consolidation,   plan  of  exchange,  acquisition  of  property  or  stock,
separation,  reorganization  or  liquidation  to  which  the  Company  or a
subsidiary  is a  party  or a  sale  of  all  or  substantially  all of the
Company's assets (each, a "Transaction"),  the Board of Directors shall, in
its sole  discretion and to the extent  possible under the structure of the
Transaction,   select  one  of  the  following  alternatives  for  treating
outstanding options under the Plan:

               (i) Outstanding options shall remain in effect in accordance
     with their terms.

               (ii) Outstanding  options shall be converted into options to
     purchase stock in the  corporation  that is the surviving or acquiring
     corporation in the Transaction. The amount, type of securities subject
     thereto  and  exercise  price  of  the  converted   options  shall  be
     determined  by the Board of  Directors  of the  Company,  taking  into
     account  the  relative  values  of  the  companies   involved  in  the
     Transaction and the exchange rate, if any, used in determining  shares
     of the surviving  corporation to be issued to holders of shares of the
     Company.  Unless otherwise  determined by the Board of Directors,  the
     converted  options shall be vested only to the extent that the vesting
     requirements   relating  to  options   granted   hereunder  have  been
     satisfied.


                                     13

<PAGE>

               (iii) The Board of Directors  shall  provide a 30-day period
     prior to the consummation of the Transaction  during which outstanding
     options may be exercised to the extent then exercisable,  and upon the
     expiration  of such  30-day  period,  all  unexercised  options  shall
     immediately  terminate.  The  Board  of  Directors  may,  in its  sole
     discretion,  accelerate the exercisability of options so that they are
     exercisable in full during such 30-day period.

          (c)  Dissolution of the Company.  In the event of the dissolution
of the  Company,  options  shall be treated in  accordance  with  paragraph
13(b)(iii).

          (d) Rights Issued by Another Corporation.  The Board of Directors
may also grant options, stock appreciation rights, performance units, stock
bonuses and cash bonuses and issue  restricted  stock under the Plan having
terms,  conditions  and provisions  that vary from those  specified in this
Plan provided that any such awards are granted in  substitution  for, or in
connection with the assumption of,  existing  options,  stock  appreciation
rights, stock bonuses, cash bonuses, restricted stock and performance units
granted,  awarded or issued by another corporation and assumed or otherwise
agreed to be  provided  for by the  Company  pursuant  to or by reason of a
Transaction.

     14.  Amendment of Plan.  The Board of Directors  may at any time,  and
from time to time,  modify or amend the Plan in such  respects  as it shall
deem advisable because of changes in the law while the Plan is in effect or
for any other reason.  Except as provided in paragraphs 6(a)(iv), 9, 10 and
13,  however,  no change in an award already  granted shall be made without
the written consent of the holder of such award.

     15.  Approvals.  The  obligations  of the  Company  under the Plan are
subject to the approval of state and federal  authorities  or agencies with
jurisdiction  in the matter.  The Company will use its best efforts to take
steps required by state or federal law or applicable regulations, including
rules and  regulations of the  Securities  and Exchange  Commission and any
stock  exchange  on which  the  Company's  shares  may then be  listed,  in
connection  with the grants under the Plan. The foregoing  notwithstanding,
the Company  shall not be obligated to issue or deliver  Common Stock under
the Plan if such  issuance or delivery  would violate  applicable  state or
federal securities laws.

     16.  Employment and Service  Rights.  Nothing in the Plan or any award
pursuant  to the Plan shall (i) confer  upon any  employee  any right to be
continued in the  employment of the Company or any  subsidiary or interfere
in any way with the right of the  Company  or any  subsidiary  by whom such
employee is employed to terminate such  employee's  employment at any time,
for any  reason,  with or without  cause,  or to decrease  such  employee's
compensation  or  benefits,  or (ii) confer upon any person  engaged by the
Company  any right to be  retained  or  employed  by the  Company or to the
continuation,  extension,  renewal,  or modification  of any  compensation,
contract, or arrangement with or by the Company.


                                     14

<PAGE>


     17. Rights as a Shareholder. The recipient of any award under the Plan
shall have no rights as a  shareholder  with  respect  to any Common  Stock
until the date of issue to the  recipient of a stock  certificate  for such
shares.  Except as otherwise  expressly provided in the Plan, no adjustment
shall be made for  dividends  or other  rights  for which the  record  date
occurs prior to the date such stock certificate is issued.

     18. Option Grants to Non-Employee Directors.

          (a) Initial Board Grants.  Each person who becomes a Non-Employee
Director after the Plan is adopted shall be automatically granted an option
to  purchase  20,000  shares  of  Common  Stock on the he or she  becomes a
Non-Employee  Director. A "Non-Employee  Director" is a director who is not
an employee of the Company or any of its subsidiaries.

          (b)  Additional  Grants.  Each  Non-Employee  Director  shall  be
automatically  granted an option to  purchase  additional  shares of Common
Stock  in  each  calendar  year  subsequent  to  the  year  in  which  such
Non-Employee  Director was granted an option  pursuant to paragraph  18(a),
such option to be granted as of the date of the Company's annual meeting of
shareholders  held in such calendar  year,  provided that the  Non-Employee
Director continues to serve in such capacity as of such date. The number of
shares  subject to each  additional  grant  shall be 5,000  shares for each
NonEmployee Director.

          (c) Exercise  Price.  The exercise  price of all options  granted
pursuant  to this  paragraph  18 shall be equal to 100  percent of the fair
market value of the Common Stock determined pursuant to paragraph 6(b)(iv).

          (d) Term of Option.  The term of each option granted  pursuant to
this paragraph 18 shall be 10 years from the date of grant.

          (e) Exercisability.  Until an option expires or is terminated and
except as provided in paragraphs 18(f) and 13, an option granted under this
paragraph 19 shall be exercisable  according to the following schedule:  33
1/3% for each complete year of continuous  service after the date of grant,
rounded up to the next full share, until fully vested.

          For purposes of this  paragraph  18(e),  a complete year shall be
deemed to be the  period  which  starts on the day of grant and ends on the
same day of the following calendar year, so that each successive  "complete
year" ends on the same day of each successive calendar year.

          (f)  Termination  As a Director.  If an  optionee  ceases to be a
director of the Company for any reason,  including death, the option may be
exercised  at any time  prior to the  expiration  date of the option or the
expiration  of 30 days (or 12 months in the event of death)  after the last
day the optionee served as a director, whichever is the

                                     15

<PAGE>


shorter period,  but only if and to the extent the optionee was entitled to
exercise the option as of the last day the optionee served as a director.

          (g)  Nontransferability.  Each  option  by  its  terms  shall  be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the  optionee's  domicile  at the time of death,
and each option by its terms  shall be  exercisable  during the  optionee's
lifetime only by the optionee.

          (h) Exercise of Options. Options may be exercised upon payment of
cash or shares of Common Stock of the Company in accordance  with paragraph
6(a)(v).

Adopted:          April 30, 1996



                                     16