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                           INTERLINK ELECTRONICS, INC.

                      1996 STOCK INCENTIVE PLAN, AS AMENDED

     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 4,500,000 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 14.

     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 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


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Stock in connection with the hiring of the employee or 100,000 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.

               (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.


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               (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 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


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          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 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


                                       5
<PAGE>

     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.

               (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


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     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 granted, 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 last action by the
     Board of Directors approving an increase in the number of shares available
     for issuance under the Plan, which action was subsequently approved within
     12 months by the stockholders.

               (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 such other restrictions as may be
determined by the Board of Directors. 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. 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


                                       7
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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. 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. 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 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


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     relates), multiplied by the number of shares covered by the stock
     appreciation right or the option, or portion thereof, that is surrendered.
     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 right 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.

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


                                       9
<PAGE>

               (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.  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, 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


                                       10
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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 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, 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


                                       11
<PAGE>

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 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 and in all other share amounts set forth in 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, spin-off,
split-off, 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


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<PAGE>

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 one or more corporations, including the Company, that are
     surviving or acquiring corporations 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(s) to be held by holders of shares of the Company following the
     Transaction. 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.

               (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.


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<PAGE>

     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.

     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 Non-Employee Director.


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<PAGE>

          (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 18 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 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. Except as otherwise determined by the
Board of Directors, 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
either cash or shares of Common Stock of the Company previously acquired by the
optionee and held for at least six months, and otherwise in accordance with
paragraph 6(a)(v).


Adopted: April 30, 1996
Amended: May 25, 1999
Amended: June 27, 2000

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