GENERAL DATACOMM INDUSTRIES, INC.

                            2003 Stock and Bonus Plan



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                        GENERAL DATACOMM INDUSTRIES, INC.
                                TABLE OF CONTENTS


SECTION 1.   GENERAL PURPOSE OF THE PLAN;
             DEFINITIONS.................................................  1

SECTION 2.   ADMINISTRATION OF PLAN;  COMMITTEE AUTHORITY TO SELECT
             PARTICIPANTS AND DETERMINE AWARDS...........................  2

SECTION 3.   SHARES ISSUABLE UNDER THE PLAN;
             MERGERS; SUBSTITUTION.......................................  4

SECTION 4.   ELIGIBILITY.................................................  5

SECTION 5.   STOCK OPTIONS...............................................  5

SECTION 6.   CONDITIONED STOCK AWARDS....................................  9

SECTION 7.   UNRESTRICTED STOCK AWARDS................................... 10

SECTION 8.   TERMINATION AND RESCISSION OF STOCK OPTIONS................. 10

SECTION 9.   TAX WITHHOLDING............................................. 12

SECTION 10.  TRANSFER, LEAVE OF ABSENCE, ETC............................. 13

SECTION 11.  AMENDMENTS AND TERMINATION ................................. 13

SECTION 12.  STATUS OF PLAN.............................................. 14

SECTION 13.  CHANGE OF CONTROL PROVISIONS................................ 14

SECTION 14.  GENERAL PROVISIONS.......................................... 15

SECTION 15.  EFFECTIVE DATE OF PLAN ..................................... 16

SECTION 16.  GOVERNING LAW............................................... 16

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                           GENERAL DATACOMM INDUSTRIES
                            2003 STOCK AND BONUS PLAN

               SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS

         The name of the plan is the  General  DataComm  Industries,  Inc.  2003
Stock and Bonus Plan (the  "PLAN").  The purpose of the Plan is to encourage and
enable the officers,  directors and  employees of General  DataComm  Industries,
Inc. (the "COMPANY") and its  Subsidiaries  upon whose judgment,  initiative and
efforts the Company largely depends for the successful  conduct of its business,
to either  acquire a  proprietary  interest  in the Company or  otherwise  being
additionally  compensated  for their  efforts  on behalf of the  Company.  It is
anticipated  that  providing  such persons with a direct stake in the  Company's
welfare  or  otherwise  being  additionally  compensated,  will  assure a closer
identification of their interests with those of the Company and its stockholders
thereby  stimulating  their  efforts on the Company's  behalf and  strengthening
their desire to remain with the Company.

         The following terms shall be defined as set forth below:

         "ACT" means the Securities Exchange Act of 1934, as amended.

         "AWARD" or "AWARDS", except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Conditioned Stock Awards and Unrestricted Stock Awards.

         "BOARD" means the Board of Directors of the Company.

         "CAUSE" means personal dishonesty with respect to the Company,  willful
misconduct,  breach of fiduciary duty  involving  personal  profit,  intentional
failure  to  perform  stated  duties,  willful  violation  of any  law,  rule or
regulation  (other than traffic  violations or similar  offenses) or final cease
and desist order.

         "CHANGE OF CONTROL" shall have the meaning set forth in Section 13.

         "CLASS B STOCK" means the Class B Common Stock,  $.01 par value, of the
Company, subject to adjustments pursuant to Section 3.

         "CODE" means the Internal  Revenue  Code of 1986,  as amended,  and any
successor Code, and related rules, regulations and interpretations.

         "COMMON STOCK" means the Common Stock,  $.01 par value, of the Company,
subject to adjustments pursuant to Section 3.

         "COMMITTEE" shall have the meaning set forth in Section 2.

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         "CONDITIONED STOCK AWARD" means an Award granted pursuant to Section 6.

         "DISABILITY"  means disability as set forth in Section 22(e) (3) of the
Code.

         "EFFECTIVE DATE" shall have the meaning set forth in Section 15.

         "ELIGIBLE PERSON" shall have the meaning set forth in Section 4.

         "FAIR MARKET VALUE" on any given date means the closing price per share
of the Stock on the trading day  immediately  preceding such date as reported by
the NASDAQ Stock Market or another nationally recognized stock exchange,  or, if
the Stock is not listed on such an exchange,  the fair market value of the Stock
as determined by the Committee.

         "INCENTIVE  STOCK  OPTION"  means  any  Stock  Option   designated  and
qualified as an "incentive stock option" as defined in Section 422 of the Code.

         "NON-QUALIFIED  STOCK  OPTION"  means any Stock  Option  that is not an
Incentive Stock Option.

         "NORMAL  RETIREMENT"  means retirement from active  employment with the
Company and its  Subsidiaries in accordance with the retirement  policies of the
Company and its Subsidiaries then in effect.

         "OPTION" or "STOCK OPTION" means any option to purchase shares of Stock
granted pursuant to Section 5.

         "PLAN  OF  REORGANIZATION"  means  the  plan of  reorganization  of the
Company in its Chapter 11 proceedings in the United States  Bankruptcy Court for
the District of Delaware.

         "STOCK"  means the Common Stock,  and/or Class B Common  Stock,  as the
case may be.

         "SUBSIDIARY" means a subsidiary as defined in Section 424 of the Code.

         "UNRESTRICTED  STOCK AWARD" means an Award granted  pursuant to Section
7.

         SECTION 2.  ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT
                     PARTICIPANTS AND DETERMINE AWARDS.

         (a)  COMMITTEE.  The Plan shall be  administered  by a committee of the
Board (the "Committee")  consisting of all members of the Stock Option Committee

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of the Company (not less than two (2) persons).  Except as specifically reserved
to the Board  under the terms of the Plan,  the  Committee  shall  have full and
final  authority  to operate,  manage and  administer  the Plan on behalf of the
Company.  Action  by the  Committee  shall  require  the  affirmative  vote of a
majority of all members thereof.

         (b)      POWERS OF COMMITTEE.  The Committee shall have the power and
authority to grant Awards  consistent with the terms of the Plan,  including the
power and authority:

                  (i) to select the officers, directors and other employees of
the  Company  and its  Subsidiaries  to whom  Awards  may  from  time to time be
granted;

                  (ii) to determine the time or times of grant,  and the extent,
if any, of Incentive  Stock Options,  Non-Qualified  Stock Options,  Conditioned
Stock and  Unrestricted  Stock  Awards,  or any  combination  of the  foregoing,
granted to any one or more participants;

                  (iii) to  determine  the number of shares to be covered by any
Award  and  whether  the  Award is of  Common  Stock or Class B Stock,  or both,
provided that no Award shall include Class B Stock after December 31, 2003;

                  (iv)  to  determine  and  modify  the  terms  and  conditions,
including  restrictions,  not  inconsistent  with the terms of the Plan,  of any
Award,  which  terms and  conditions  may  differ  among  individual  Awards and
participants,  and to approve  the form of written  instruments  evidencing  the
Awards;  PROVIDED,  HOWEVER,  that no such action shall adversely  affect rights
under any  outstanding  Award without the  participant's  consent;  and PROVIDED
FURTHER  that the  Committee  shall have no  authority to change the exercise or
purchase price of any Award after the initial grant of the Award;

                  (v) to accelerate the exercisability or vesting of all or
any portion of any Award;

                  (vi) subject to the provisions of Section 5(a) (ii), to extend
the period in which any  outstanding  Stock Option may be  exercised,  provided,
however,  that such  modification  of an  Incentive  Stock  Option may cause the
option to fail to satisfy the incentive  stock option  requirements  of the Code
and may not be effected without the consent of the holder;

                  (vii) to determine whether, and under what circumstances Stock
and other  amounts  payable  with  respect to an Award shall be deferred  either
automatically  or at the  election  of the  participant  and whether and to what
extent the  Company  shall pay or credit  amounts  equal to  interest  (at rates
determined by the Committee) or dividends or deemed dividends on such deferrals;
and

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                  (viii) to adopt,  alter and repeal such rules,  guidelines and
practices for administration of the Plan and for its own acts and proceedings as
it shall deem  advisable;  to interpret the terms and provisions of the Plan and
any Award (including related written instruments); to make all determinations it
deems  advisable  in the  administration  of the Plan;  to decide  all  disputes
arising  in  connection   with  the  Plan;   and  to  otherwise   supervise  the
administration of the Plan.

         All decisions and  interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

         SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION.

         (a) SHARES ISSUABLE. The maximum number of shares of Stock with respect
to which Awards may be granted under the Plan shall be nine million, one hundred
eighty five thousand,  three hundred and sixty1  (9,185,360)  consisting of four
million,  five hundred ninety two thousand,  six hundred and eighty  (4,592,680)
shares of Common Stock and four million,  five hundred ninety two thousand,  six
hundred and eighty  (4,592,680) shares of Class B Stock,2 provided that no Award
shall  include  Class B Stock after  December  31,  2003.  For  purposes of this
limitation,  the  shares of Stock  underlying  any Awards  which are  forfeited,
canceled,  reacquired  by the  Company or  otherwise  terminated  (other than by
exercise)  shall be added  back to the  shares of Stock  with  respect  to which
Awards may be granted  under the Plan so long as the  participants  to whom such
Awards had been  previously  granted  retained no benefits of  ownership  of the
underlying shares of Stock to which the Award related.  Likewise,  if any Option
is exercised by the delivery of a number of shares of Stock,  either actually or
by attestation, to the Company as full or partial payment in connection with the
exercise  of an Option  under  this or any prior plan of the  Company,  only the
number of shares of Stock issued net of the shares of Stock  delivered  shall be
deemed issued for purposes of determining  the maximum number of shares of Stock
available for issuance under the Plan. Subject to such overall  limitation,  any
type or types  of  Award  may be  granted  with  respect  to  shares,  including
Incentive  Stock  Options.  Shares issued under the Plan may be  authorized  but
unissued shares or shares reacquired by the Company.

         (b) STOCK DIVIDENDS, MERGERS, ETC. In the event that after approval of
the Company's  Plan of  Reorganization,  the Company  effects a stock  dividend,
stock  split,   reverse  stock  split,   combination,   or  similar   change  in
capitalization  affecting  the  Stock,  the  Committee  shall  make  appropriate
adjustments  in (i) the  number and kind of shares of stock or  securities  with

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1 an aggregate of 20% of the outstanding Stock of the Company on a fully diluted
  basis
2 Those  figures -- 9,185,360  maximum  shares,  4,592,680  common  shares,  and
  4,592,680  Class B shares --  reflect  the  number  of shares  prior to the
  1:10 reverse split  contemplated by the Debtor's Amended Joint Plan of
  Reorganization dated April 29, 2003 and will be adjusted to reflect the
  reverse split.


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respect to which Awards may thereafter be granted  (including without limitation
the  limitations  set forth in Section 3(a) above),  (ii) the number and kind of
shares remaining subject to Outstanding Awards, and (iii) the option or purchase
price in  respect of such  shares.  In the event of any  merger,  consolidation,
dissolution or liquidation of the Company,  the Committee in its sole discretion
may, as to any outstanding  Awards,  make such substitution or adjustment in the
aggregate  number  of shares  reserved  for  issuance  under the Plan and in the
number and  purchase  price (if any) of shares  subject to such Awards as it may
determine  and  as  may be  permitted  by the  terms  of  such  transaction,  or
accelerate,  amend or terminate such Awards upon such terms and conditions as it
shall provide  (which,  in the case of the  termination of the vested portion of
any Award,  shall  require  payment or other  consideration  which the Committee
deems equitable in the  circumstances),  subject,  however, to the provisions of
Section 14.

         (c) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution  for stock and stock  based  awards  held by  employees  of another
corporation who concurrently  become employees of the Company or a Subsidiary as
the result of a merger or  consolidation  of the employing  corporation with the
Company or a Subsidiary  or the  acquisition  by the Company or a Subsidiary  of
property or stock of the employing  corporation  (collectively,  "MERGER").  The
Committee  may direct  that the  substitute  awards be granted on such terms and
conditions as the Committee considers appropriate in the circumstances.

         SECTION 4. ELIGIBILITY.

         Awards may be granted only to  directors,  officers or employees of the
Company or its Subsidiaries ("ELIGIBLE PERSONS").

         SECTION 5. STOCK OPTIONS.

         Any Stock  Option  granted  under the Plan shall be in such form as the
Committee may from time to time approve.

         Stock  Options  granted  under the Plan may be either  Incentive  Stock
Options or Non-Qualified  Stock Options.  To the extent that any option does not
qualify as an Incentive Stock Option, it shall constitute a Non-Qualified  Stock
Option.

         No Incentive  Stock  Option  shall be granted  under the Plan after the
tenth anniversary of the Effective Date.

         (a)  GRANT  OF STOCK  OPTIONS.  The  Committee  in its  discretion  may
determine the effective date of Stock Options, PROVIDED, HOWEVER, that grants of
Incentive  Stock Options shall be made only to persons who are, on the effective
date of the grant,  employees of the Company or any  Subsidiary.  Stock  Options

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granted  pursuant to this Section 5(a) shall be subject to the  following  terms
and conditions and the terms and conditions of Section 12 and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable.

              (i) EXERCISE  PRICE.  The  exercise  price per share for the Stock
         covered by a Stock Option  granted  pursuant to this Section 5(a) shall
         be  determined  by the  Committee at the time of grant but shall be not
         less than one hundred  percent  (100%) of the Fair Market  Value on the
         date of grant.  If an  employee  owns or is deemed to own (by reason of
         the attribution rules applicable under Section 424(d) of the Code) more
         than ten percent  (10%) of the combined  voting power of all classes of
         stock of the Company or any  Subsidiary  or parent  corporation  and an
         Incentive  Stock Option is granted to such  employee,  the option price
         shall be not less  than one  hundred  ten  percent  (110%)  of the Fair
         Market Value on the grant date.

              (ii) OPTION TERM.  The term of each Stock Option shall be fixed by
         the Committee but no Incentive  Stock Option shall be exercisable  more
         than ten  (10)  years  after  the date the  option  is  granted.  If an
         employee owns or is deemed to own (by reason of the  attribution  rules
         of  Section  424(d) of the Code)  more  than ten  percent  (10%) of the
         combined  voting  power of all  classes of stock of the  Company or any
         Subsidiary  or parent  corporation  and an  Incentive  Stock  Option is
         granted to such employee, the term of such option shall be no more than
         five (5) years from the date of grant.

              (iii) EXERCISABILITY; RIGHTS OF A STOCKHOLDER. Stock Options shall
         become vested and exercisable at such time or times,  whether or not in
         installments,  as shall be  determined by the Committee at or after the
         grant date. The Committee may at any time accelerate the exercisability
         of all or any portion of any Stock Option.  An optionee  shall have the
         rights of a stockholder only as to shares acquired upon the exercise of
         a Stock Option and not as to unexercised Stock Options.

             (iv)  METHOD OF EXERCISE. Stock Options may be exercised in whole
        or in part, by delivering written notice of exercise to the Company,
        specifyingthe number of shares to be purchased.  Payment of the purchase
        price may be made by one or more of the following methods:

         (A)      In cash, by certified or bank check or other instrument
acceptable to the Committee;

           (B) If permitted by the Committee, in its discretion,  in the form of
"mature"  shares of Stock (as  defined  in the  Financial  Accounting  Standards
Board's  Emerging  Issues Task Force Issue 84-18  ("Issue  84-18")) that are not
then subject to  restrictions  under any Company plan. Such  surrendered  shares
shall be valued at Fair Market Value on the exercise date; or

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         (C) If permitted by the Committee,  in its discretion,  by the optionee
delivering  to the Company a properly  executed  exercise  notice  together with
irrevocable  instructions to a broker to promptly deliver to the Company cash or
a check  payable  and  acceptable  to the  Company  to pay the  purchase  price;
PROVIDED that in the event the optionee  chooses to pay the purchase price as so
provided,  the optionee and the broker  shall  comply with such  procedures  and
enter into such  agreements of indemnity  and other  agreements as the Committee
shall prescribe as a condition of such payment  procedure.  The Company need not
act upon such  exercise  notice until the Company  receives  full payment of the
exercise price; or

         (D) If permitted by the Committee,  in its discretion,  by reducing the
number of option shares otherwise  issuable to the optionee upon exercise of the
option by a number of shares of Stock  having a Fair Market  Value equal to such
aggregate  exercise price (it being  understood  that this  alternative  will be
available only if the optionee holds  sufficient  "mature"  shares as defined in
Issue 84-18);

         (E) By any other means (including, without limitation, by delivery of a
promissory  note of the optionee  payable on such terms as are  specified by the
Committee) which the Committee determines are consistent with the purpose of the
Plan and with applicable laws and regulations.

The  delivery  of  certificates  representing  shares  of Stock to be  purchased
pursuant to the exercise of a Stock Option will be contingent  upon receipt from
the  Optionee  (or a  purchaser  acting  in his  stead  in  accordance  with the
provisions of the Stock  Option) by the Company of the full  purchase  price for
such shares and the fulfillment of any other requirements contained in the Stock
Option or applicable provisions of laws.

              (v)  NON-TRANSFERABILITY  OF OPTIONS.  Except as otherwise  may be
         provided in this Section 5(a)(v) or in an option agreement governing an
         Option  granted under the Plan,  no Stock Option shall be  transferable
         other than by will or by the laws of descent and distribution,  and all
         Stock Options shall be  exercisable,  during the  optionee's  lifetime,
         only  by  the  optionee.  The  Committee  may,  however,  in  its  sole
         discretion,  permit  transferability  or assignment of a  Non-Qualified
         Stock  Option  if  such  transfer  or   assignment   is,  in  its  sole
         determination,  for valid estate planning purposes and such transfer or
         assignment  is  permitted  under  the  Code and Rule  16b-3  under  the
         Exchange  Act.  For purposes of this  Section  5(a)(v),  a transfer for
         valid estate planning purposes  includes,  but is not limited to: (a) a
         transfer to a revocable  inter-vivos  trust as to which the participant
         is both the settlor and trustee,  (b) a transfer  for no  consideration
         to:  (i) any member of the  participant's  Immediate  Family,  (ii) any
         trust solely for the benefit of members of the participant's  Immediate

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         Family,  (iii) any  partnership  whose only partners are members of the
         participant's   Immediate   Family,   or  (iv)  any  limited  liability
         corporation or corporate entity whose only members or equity owners are
         members of the  Participant's  Immediate  Family.  For purposes of this
         Section 5(a)(v),  "IMMEDIATE  FAMILY" includes,  but is not necessarily
         limited to, a Participant's parents,  spouse,  children,  grandchildren
         and  great-grandchildren.  Nothing  contained in this  Section  5(a)(v)
         shall be construed to require the Committee to give its approval to any
         transfer or  assignment  of any  Non-Qualified  Stock Option or portion
         thereof,  and  approval to transfer or assign any  Non-Qualified  Stock
         Option or  portion  thereof  does not mean that such  approval  will be
         given with respect to any other  Non-Qualified  Stock Option or portion
         thereof.  The transferee or assignee of any Non-Qualified  Stock Option
         shall be subject to all of the terms and conditions  applicable to such
         Non-Qualified  Stock  Option  immediately  prior  to  the  transfer  or
         assignment  and shall be subject to any  conditions  prescribed  by the
         Committee with respect to such Non-Qualified Stock Option.

              (vi)  ANNUAL  LIMIT ON  INCENTIVE  STOCK  OPTIONS.  To the  extent
         required for "incentive  stock option"  treatment  under Section 422 of
         the Code, the aggregate Fair Market Value (determined as of the time of
         grant) of the Stock  with  respect  to which  incentive  stock  options
         granted  under  this  Plan and any  other  plan of the  Company  or its
         Subsidiaries  become  exercisable  for the  first  time by an  optionee
         during any calendar year shall not exceed $100,000. Notwithstanding the
         foregoing,   to  the  extent  that  the  aggregate  Fair  Market  Value
         (determined as of the time of grant) of the Stock with respect to which
         Incentive  Stock Options  granted under this Plan and any other plan of
         the Company or its Subsidiaries  become  exercisable for the first time
         by an optionee  during any calendar  year exceeds  $100,000 said excess
         shall be treated as a Non-Qualified Stock Option.

              (vii) FORM OF SETTLEMENT. Shares of Stock issued upon exercise of
         a Stock Option shall be free of all restrictions under the Plan,
         except as otherwise provided in this Plan.

         (b) RELOAD OPTIONS. At the discretion of the Committee, Options granted
under Section 5(a) may include a so-called "reload" feature pursuant to which an
optionee  exercising  an option (the  "ORIGINAL  OPTION")  by the  delivery of a
number of shares of Stock in accordance  with Section  5(a)(iv)(B)  hereof would
automatically  be granted an additional  Option (with an exercise price equal to
the Fair Market Value of the Stock on the date the additional  Option is granted
and with the same expiration date as the original  Option being  exercised,  and
with such other terms as the  Committee  may provide) to purchase that number of
shares of Stock equal to the number  delivered to exercise the Original  Option;


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provided,  however, that the grant of such additional Option shall be subject to
the  availability  of shares of Stock under the Plan at the time of the exercise
of the Original Option.

         SECTION 6. CONDITIONED STOCK AWARDS.

         (a) NATURE OF CONDITIONED  STOCK AWARD. The Committee in its discretion
may grant  Conditioned  Stock Awards to any Eligible Person. A Conditioned Stock
Award  is an Award  entitling  the  recipient  to  acquire,  at no cost or for a
purchase  price  determined  by the  Committee,  shares of Stock subject to such
restrictions  and conditions as the Committee may determine at the time of grant
("CONDITIONED  STOCK").  Conditions may be based on continuing employment and/or
achievement of pre-established  performance goals and objectives. In addition, a
Conditioned  Stock Award may be granted to an employee by the  Committee in lieu
of a cash bonus due to such employee pursuant to any other plan of the Company.

         (b)  ACCEPTANCE OF AWARD.  A  participant  who is granted a Conditioned
Stock  Award  shall  have no  rights  with  respect  to such  Award  unless  the
participant  shall  have  accepted  the Award  within  sixty  (60) days (or such
shorter date as the  Committee  may specify)  following the award date by making
payment  to the  Company,  if  required,  by  certified  or bank  check or other
instrument or form of payment  acceptable to the Committee in an amount equal to
the specified  purchase price, if any, of the shares covered by the Award and by
executing and delivering to the Company a written instrument that sets forth the
terms and  conditions  of the  Conditioned  Stock in such form as the  Committee
shall determine.

         (c) RIGHTS AS A SHAREHOLDER.  Upon complying with Section 6(b) above, a
participant  shall  have all the  rights of a  stockholder  with  respect to the
Conditioned   Stock,   including   voting  and  dividend   rights,   subject  to
non-transferability  restrictions  and Company  repurchase or forfeiture  rights
described  in this Section 6 and subject to such other  conditions  contained in
the written instrument  evidencing the Conditioned  Award.  Unless the Committee
shall otherwise determine,  certificates  evidencing shares of Conditioned Stock
shall remain in the  possession  of the Company  until such shares are vested as
provided in Section 6(e) below.

         (d)  RESTRICTIONS.  Shares  of  Conditioned  Stock  may  not  be  sold,
assigned, transferred,  pledged or otherwise encumbered or disposed of except as
specifically  provided herein.  In the event of termination of employment by (or
termination  of services with) the Company and its  Subsidiaries  for any reason
(including  death,  Disability,  Normal  Retirement and for Cause),  the Company
shall have the right, at the discretion of the Committee,  to repurchase  shares
of Conditioned  Stock with respect to which  conditions have not lapsed at their
purchase  price,  or to  require  forfeiture  of such  shares to the  Company if
acquired  at  no  cost,  from  the  participant  or  the   participant's   legal
representative. The Company must exercise such right of repurchase or forfeiture

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within  ninety (90) days  following  such  termination  of employment or service
(unless  otherwise   specified,   in  the  written  instrument   evidencing  the
Conditioned Award).

         (e) VESTING OF CONDITIONED STOCK. The Committee at the time of grant
shall  specify  the date or  dates  and/or  the  attainment  of  pre-established
performance   goals,    objectives   and   other   conditions   on   which   the
non-transferability  of  the  Conditioned  Stock  and  the  Company's  right  of
repurchase  or forfeiture  shall lapse.  Subsequent to such date or dates and/or
the attainment of such  preestablished  performance goals,  objectives and other
conditions,  the shares on which all restrictions have lapsed shall no longer be
Conditioned  Stock and shall be deemed  "vested."  The Committee at any time may
accelerate  such date or dates and  otherwise  waive or,  subject to Section 12,
amend any conditions of the Award.

         (f)  WAIVER,  DEFERRAL  AND  REINVESTMENT  OF  DIVIDENDS.  The  written
instrument  evidencing  the  Conditioned  Stock  Award may require or permit the
immediate  payment,  waiver,  deferral or  investment  of dividends  paid on the
Restricted Stock.

         SECTION 7. UNRESTRICTED STOCK AWARDS.

         (a) GRANT OR SALE OF UNRESTRICTED STOCK. The Committee in its
discretion may grant or sell to any Eligible Person shares of Stock free of any
restrictions under the Plan ("UNRESTRICTED  STOCK") which in the case of a grant
shall be without the payment of a purchase  price and, in the case of a sale, at
a purchase price determined by the Committee.  Shares of Unrestricted  Stock may
be granted or sold as  described  in the  preceding  sentence in respect of past
services or other valid consideration.

         (b) RESTRICTIONS ON TRANSFERS. The right to receive unrestricted Stock
may not be sold, assigned, transferred, pledged or otherwise encumbered, other
than by will or the laws of descent and distribution.

         SECTION 8. TERMINATION AND RESCISSION OF STOCK OPTIONS.

         Unless otherwise provided in the applicable agreement pursuant to which
the Award was granted,

         (a) STOCK OPTIONS:

               (i)  TERMINATION  BY DEATH.  If any  participant's  employment or
          directorship  with the  Company  and its  Subsidiaries  terminates  by
          reason  of death,  any  Stock  Option  owned by such  participant  may
          thereafter  be  exercised  to the  extent  exercisable  at the date of
          death, by the legal representative or legatee of the participant,  for

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          a period of one year from the date of death,  or until the  expiration
          of the stated term of the Stock Option, if earlier.

             (ii) TERMINATION BY REASON OF DISABILITY OR NORMAL RETIREMENT.

                  (A) Any Stock Option held by a participant whose employment or
         directorship  with the Company and its  Subsidiaries  has terminated by
         reason of Disability may thereafter be exercised,  to the extent it was
         exercisable at the time of such  termination,  for a period of 180 days
         from the date of such  termination  of  employment or  directorship  or
         until the expiration of the stated term of the Option, if earlier.

                  (B) Any Stock Option held by a participant whose employment or
         directorship  with the Company and its  Subsidiaries  has terminated by
         reason of Normal Retirement may thereafter be exercised,  to the extent
         it was  exercisable  at the time of such  termination,  for a period of
         three (3) months from the date of such  termination  of  employment  or
         directorship  or until the expiration of the stated term of the Option,
         if earlier.

                  (C) The Committee  shall have sole authority and discretion to
         determine  whether a participant's  employment or directorship has been
         terminated by reason of Disability or Normal Retirement.

                  (D) Except as otherwise  provided by the Committee at the time
         of grant,  the death of a participant  during a period provided in this
         Section  9(a)(ii)  for the exercise of a Stock Option shall extend such
         period for one year from the date of death,  subject to  termination on
         the expiration of the stated term of the Option, if earlier.

             (iii)  TERMINATION  VOLUNTARILY OR FOR CAUSE. If any  participant's
         employment or directorship  with the Company and its  Subsidiaries  has
         been  terminated by the optionee  voluntarily  (other than by reason of
         Normal  Retirement)  or by the Company or any of its  Subsidiaries  for
         Cause,  any Stock  Option held by such  participant  shall  immediately

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<PAGE>

         terminate at the end of the last day of the  optionee's  employment  or
         directorship  and shall  thereafter  be of no further force and effect.
         The Committee  shall have sole  authority  and  discretion to determine
         whether a participant's  employment or directorship has been terminated
         by  the  optionee   voluntarily  or  by  the  Company  or  any  of  its
         Subsidiaries for Cause.

             (iv) TERMINATION WITHOUT CAUSE. Unless otherwise determined by the
         Committee, if a participant's employment or directorship with the
         Company and its subsidiaries is terminated by the Company or any of its
         Subsidiaries without cause, any Stock Option held by such participant
         may thereafter be exercised, to the extent it was exercisable on the
         date of termination of employment or directorship, for three (3) months
         from the last day of the  optionee's  employment or  directorship  (or
         such longer  period as the  Committee  shall  specify at any time,  it
         being understood that any Incentive  Options that are not exercised by
         such   terminated   optionee   within  three  (3)  months  after  such
         termination shall thereafter become Nonqualified Options) or until the
         expiration of the stated term of the Option, if earlier.

             (v)  COVENANT NOT TO COMPETE AND  CANCELLATION  AND  RESCISSION  OF
         OPTIONS.  As a condition for acceptance of Stock Options,  participants
         shall  agree  that  during  the one (1)  year  period  following  their
         termination   of  employment   for  any  reason   (excluding  any  such
         termination by the Company  without cause) the  participant  shall not,
         directly or indirectly,  work for or render any services to any person,
         firm or  business  located  within a 150 mile  radius of the  Company's
         office in Naugatuck,  Connecticut which offers products and/or services
         competitive  to the  products  and/or  services  of  participant.  Upon
         termination, in order to ascertain if future employment would be deemed
         to be in non-compliance with this covenant, a participant should notify
         the Company as to participant's  future employer and make a request for
         approval to retain  participant's  rights with respect to Stock Options
         on the basis of  demonstrating  that participant is not entering into a
         competitive situation.  If a non-competitive  situation is demonstrated
         to  the  Company's  satisfaction,  then  such  approval  shall  not  be
         unreasonably withheld. In the event participant fails to comply with or
         otherwise breaches this covenant in any way, during the two year period
         following any such termination,  the Company may notify  participant in
         writing of the  rescission  of any  options  exercised  by  participant
         within nine (9) months prior to any such  termination of  participant's
         employment. Within ten (10) days after receiving such a notice from the
         Company,  the  participant  shall  pay  to the  Company  in  cash,  the
         aggregate amount of any gain resulting from the exercise by participant
         of such  rescinded  options  and the  subsequent  sales  of the  shares
         received  on the  exercise  or,  if no such  sale of  said  shares  has
         occurred,  upon the Company's demand, return the shares received on the
         exercise of such rescinded options against the refund by the Company of
         the exercise price therefor.

         (b) OTHER AWARDS. All Awards other than Stock Options granted under the
Plan shall contain such terms and conditions  with respect to its termination as
the Committee, in its discretion, may from time to time determine.

         SECTION 9. TAX WITHHOLDING.

         (a) PAYMENT BY PARTICIPANT.  Each participant  shall, no later than the

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Date as of which the value of an Award or of any Stock or other amounts received
thereunder  first becomes  includable in the gross income of the participant for
Federal  income  tax  purposes,   pay  to  the  Company,  or  make  arrangements
satisfactory to the Committee  regarding payment of any Federal,  state or local
taxes of any kind  required by law to be withheld  with  respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

         (b) PAYMENT IN SHARES. A participant may elect, with the consent of the
Committee, in its discretion, to have such tax-withholding obligation satisfied,
in whole or in part, by authorizing the Company to withhold from shares of Stock
to be issued  pursuant  to an Award a number of shares  with an  aggregate  Fair
Market Value (as of the date the withholding is effected) that would satisfy the
withholding  amount due with respect to such Award.  If shares are withheld from
an Award in order to satisfy said  withholding tax or payroll tax  requirements,
only the number of Shares  with an  aggregate  Fair  Market  Value  equal to the
minimum withholding amount due shall be so withheld.

         SECTION 10. TRANSFER, LEAVE OF ABSENCE, ETC.

         For purposes of the Plan,  the  following  events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another;

         (b) an approved leave of absence for military  service or sickness,  or
for any other  purpose  approved  by the  Company,  if the  employee's  right to
re-employment  is  guaranteed  either by a statute or by  contract  or under the
policy  pursuant to which the leave of absence  was granted or if the  Committee
otherwise so provides in writing.

        SECTION 11. AMENDMENTS AND TERMINATION.

         The  Board  may at any  time  amend  or  discontinue  the  Plan and the
Committee  may at any time amend or cancel  any  outstanding  Award (or  provide
substitute  Awards at the same or reduced  exercise or purchase price or with no
exercise  or  purchase  price,   but  such  price,  if  any,  must  satisfy  the
requirements  which would apply to the  substitute  or amended  Award if it were
then initially granted under this Plan) for the purpose of satisfying changes in
law or for any other lawful purpose,  but no such action shall adversely  affect
rights under any outstanding  Award without the holder's  consent.  However,  no
such  amendment,  unless approved by the  stockholders of the Company,  shall be

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<PAGE>

effective  if it would  cause the Plan to fail to satisfy  the  incentive  stock
option requirements of the Code, or cause transactions under the Plan to fail to
satisfy the requirements of Rule 16b-3 or any successor rule under the Act as in
effect on the date of such amendment.

         SECTION 12. STATUS OF PLAN.

         With  respect to the portion of any Award which has not been  exercised
and any  payments  in cash,  Stock  or other  consideration  not  received  by a
participant,  a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards.  In its sole  discretion,  the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards  hereunder,
provided that the existence of such trusts or other  arrangements  is consistent
with the provision of the foregoing sentence.

         SECTION 13. CHANGE OF CONTROL PROVISIONS.

         (a) In the  event  of a  Change  of  Control  while  unexercised  Stock
Options,  Conditional Stock Awards, or Stock Awards remain outstanding under the
Plan,  then (i) the time for exercise of all  unexercised  and unexpired  Awards
shall be  automatically  accelerated,  effective as of the effective time of the
Change of Control (or such earlier  date as may be specified by the  Committee),
and (ii) after the effective time of such Change of Control,  unexercised  Stock
Options, Conditional Stock Awards, or Stock Awards, shall remain outstanding and
shall be exercisable for shares of Stock (or  consideration  based upon the Fair
Market Value of Stock) or cash, or if applicable, for shares of such securities,
cash or property (or consideration based upon shares of such securities, cash or
property)  as the holders of shares of Stock  received in  connection  with such
Change of Control.

         (b) "CHANGE OF CONTROL" shall mean the occurrence of any one of the
following events:

              (i) persons  who, as of July 1, 2003,  constituted  the  Company's
         Board (the "INCUMBENT  BOARD") cease for any reason,  including without
         limitation  as a result of a tender  offer,  proxy  contest,  merger or
         similar  transaction,  to  constitute at least a majority of the Board,
         provided that any person becoming a director of the Company  subsequent
         to July 1, 2003 whose  election was  approved by, or who was  nominated
         either with the approval of, at least a majority of the directors  then
         comprising  the Incumbent  Board or who was elected in accordance  with
         rights provided to Abelco Finance LLC and the Indenture Trustee for the
         Debentures  under the Plan of  Reorganization,  shall,  for purposes of

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<PAGE>

         this Plan,  be considered a member of the  Incumbent  Board,  including
         those persons initially elected as directors as provided in the Plan of
         Reorganization; or

               (ii)  the  stockholders  of  the  Company  approve  a  merger  or
          consolidation  of the  Company  with any  other  corporation  or other
          entity, other than a merger or consolidation which would result in the
          voting securities of the Company outstanding immediately prior thereto
          continuing to represent  (either by remaining  outstanding or by being
          converted  into voting  securities of the surviving  entity) more than
          sixty-five  percent  (65%) of the combined  voting power of the voting
          securities  of  the  Company  or  such  surviving  entity  outstanding
          immediately after such merger or consolidation; or

               (iii) the  stockholders of the Company approve a plan of complete
          liquidation of the Company or an agreement for the sale or disposition
          by the Company of all or substantially all of the Company's assets.

         SECTION 14. GENERAL PROVISIONS.

         (a) NO DISTRIBUTION;  COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee
may require each person  acquiring  shares  pursuant to an Award to represent to
and agree with the Company in writing that such person is  acquiring  the shares
without a view to distribution thereof.

         No  shares  of Stock  shall be issued  pursuant  to an Award  until all
applicable  securities laws and other legal and stock exchange requirements have
been  satisfied.  The  Committee may require the placing of such stop orders and
restrictive   legends  on  certificates   for  Stock  and  Awards  as  it  deems
appropriate.

         (b) DELIVERY OF STOCK  CERTIFICATES.  Delivery of stock certificates to
participants  under this Plan shall be deemed effected for all purposes when the
Company or a stock  transfer  agent of the  Company  shall have  delivered  such
certificates  in the United States mail,  addressed to the  participant,  at the
participant's last known address on file with the Company.

         (c) OTHER  COMPENSATION  ARRANGEMENTS;  NO EMPLOYMENT  RIGHTS.  Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements,  including trusts, subject to stockholder approval if
such  approval  is  required;  and such  arrangements  may be  either  generally
applicable or applicable only in specific cases. The adoption of the Plan or any
Award under the Plan does not confer upon any  employee  any right to  continued
employment with the Company or any Subsidiary.

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<PAGE>

         (d)  DELEGATION BY  COMMITTEE.  The Committee may delegate to the Chief
Executive Officer of the Company the authority to make decisions relating to the
grant or exercise of Options or other Awards (other than to himself),  including
without  limitation  the  authority  to permit the holder of an award to deliver
Stock in payment of the exercise  price and the  authority to permit a holder of
an Award to satisfy a tax  withholding  obligation by authorizing the Company to
withhold shares from the shares of Stock to be issued pursuant to an Award.

         SECTION 15. EFFECTIVE DATE OF PLAN.

         The Effective Date of the Plan of Reorganization shall be the effective
date of the adoption of this Plan.

         SECTION 16. GOVERNING LAW.

         This  Plan  shall  be  governed  by,  and  construed  and  enforced  in
accordance with, the substantive laws of the State of Delaware without regard to
its principles of conflicts of laws.

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