EXHIBIT 10.3

                             STIMSONITE CORPORATION
                               EXECUTIVE OFFICERS
                        1997 INCENTIVE COMPENSATION PLAN


SUBJECT:

Incentive  Compensation  Plan for the Executive  Officers of the Company for the
time period of January 1, 1997 through December 31, 1997.

PURPOSE:

To institute a compensation  package providing a monetary  incentive to meet and
exceed predetermined financial goals and personal objectives.  Nothing herein is
meant to  guarantee  or should be construed  as  guaranteeing  employment  for a
specific term or the payment of any bonus (hereunder or otherwise).

INCENTIVE COMPENSATION:

Each Executive  Officer will be eligible for an annual  incentive bonus ("Target
Bonus") equal to a set  percentage of the Executive  Officer's  1997 year ending
base salary ("Base Salary"). The Target Bonus has two components:  (i) Financial
Objective Target Bonus; plus (ii) Personal  Objective Target Bonus. The criteria
for earning the  Financial  Objective  Target Bonus and the  Personal  Objective
Target  Bonus are  customized  for each  Executive  Officer and  approved by the
Compensation Committee of the Company's Board of Directors.  Refer to Schedule A
for details of the Target Bonus  components for each  Executive  Officer and the
calculation thereof.

Financial  Objectives  - A  Financial  Objective  Target  Bonus  is based on the
financial  performance  of the Company and/or  certain  product  lines.  It will
comprise  60%  to  90%  of  the  Target  Bonus,  depending  on  the  individual.
Calculation of the actual payout  requires a comparison of actual income against
pre-established  Income targets for the Company on a  consolidated  basis and/or
income  targets  for  various  product  lines (so  called  "Earnings  Targets").
Depending on the level of actual income of the Company  and/or  certain  product
lines, certain "points" will be earned by the Executive Officer. The points will
be used in a formula,  defined below, to compute the bonus payout. If the actual
income is equal to the related Earnings Target, then the Executive Officer would
earn 100  points.  If the actual  income is less than or more than the  Earnings
Target, then the Executive Officer would earn less than or more than 100 points,
as the case may be. No points will be earned  unless the actual  level of income
is equal to or more than 85% of the relevant Earnings Target.  The maximum award
is 200 points.

The award under the  financial  objective  portion of the program can exceed the
Financial Objective Target Bonus In the event that the Company or a product line
achieves  earnings in excess of the  Earnings  Target.  The  maximum  points are
awarded if relevant earnings are at the defined maximum  achievement  level. The
maximum  achievement  level  can be  earned if the  Company  or a  product  line
achieves a level of earnings from 110% to 200% of the related  Earnings  Target.
Upon reaching the maximum  achievement level, the Executive Officer receives 200
points.

Personal Performance Objectives - Personal Objectives should be measurable goals
jointly  developed by the  participant  and his or her immediate  supervisor and
then approved by the Compensation Committee of the Company's Board of Directors.
A Personal  Objective  Target  Bonus will equal 10% to 40% of the Target  Bonus,
depending upon the individual. The Personal Objective Target Bonus is calculated
based on the  percentage of completion  of each  assigned  objective.  Up to 100
points can be earned for full achievement of all personal objectives.

No Personal  Objective Target Bonus will be paid to any Executive Officer unless
the  Company's  consolidated  earnings are at least 85% of the defined  Earnings
Target.  Additionally,  no Personal  Objective  Target Bonus will be made to any
Executive  Officer if the expense level within the  functional  areas over which
the Executive Officer has defined  responsibilities exceeds the budgeted expense
level.

EFFECTIVE DATES:

This plan will be in effect during the 1997 fiscal year subject to the Company's
right to  terminate  or amend the plan upon  thirty (30) days'  written  notice.
Participants  who resign from or are terminated from the Company during the plan
year or prior to the payout date will not receive an award. The payout date will
occur when audited year end statements are available,  usually within 60 days of
the end of the fiscal year.

BENEFITS:

Life insurance,  long-term disability,  the savings and investment plan, and the
capital  accumulation  plan  benefits  will be based on the  participant's  Base
Salary only.

RESOLUTION OF DISPUTES:

In the event of any  dispute  as to the  interpretation  or  application  of the
provisions of this agreement,  the decision of the Compensation Committee of the
Company's Board of Directors shall be final and binding on all parties.

COMPLETE AGREEMENT:

This agreement amends,  supersedes and entirely replaces all previous agreements
and  understandings,  oral or written,  with respect to  incentive  compensation
payments and shall constitute the exclusive basis upon which such payments shall
be made during the period in which this agreement remains in effect.


<PAGE>
<TABLE>
                                                                     Schedule A
TARGET BONUS INFORMATION
------------------------


 <CAPTION>
                                                    Target           Composition of Target Bonus
Executive Officer          Title                    Bonus*         Financial     Personal Objectives
-----------------          -----                    ------         ---------     -------------------

<S>                        <C>                        <C>             <C>               <C>
Robert E. Stutz            President                  50%             90%               10%


Robert M. Pricone          VP - Engineering           50%             70%               30%


Michael A. Cherwin         VP-Human Resources         35%             60%               40%


Clifford S. Deremo         VP-Sales and Marketing     35%             60%               40%


Walter B. Finley           VP- Atlanta Operations     35%             60%               40%


Charles L. Hulsey          VP-Operations              35%             60%               40%


Thomas C. Ratchford        VP-Finance                 35%             60%               40%
</TABLE>


* expressed as a percentage of base salary

                                 Payment Formula

            Total Incentive Compensation Payment equals A + B where:


A = Financial Objective Target Bonus, under which payment is calculated as:

      (Points achieved / 100) x [60% to 90%, depending on the individual]
                                x (Target Bonus)

                                       AND

B = Personal Objective Target Bonus, under which payment is calculated as:

      (Points achieved / 100) x [10% to 40%, depending on the individual]
                                x (Target Bonus)