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                                 EXHIBIT 10(E)


                            KOLLMORGEN CORPORATION
                     1998 MANAGEMENT STOCK INCENTIVE PLAN



I.  DEFINITIONS
    -----------


    (a)  "Affiliate" means any "subsidiary corporation" of the Company, as such
         term is defined in Section  424(f) of the Code.

    (b)  "Award" means, individually or collectively, a grant under the Plan of
         Non-statutory Stock Options, Incentive Stock Options, Stock Awards and
         Restricted Stock Units.

    (c)  "Award Agreement" means an agreement evidencing and setting forth the
         terms of an Award granted under the Plan, in such form as the Committee
         may, from time to time, approve.

    (d)  "Board of Directors" means the board of directors of the Company.

    (e)  "Cause" means a Participant's engagement in (i) any dishonest act or
         common law fraud, in connection with the Participant's duties or in the
         course of the Participant's employment with the Company, (ii)
         intentional wrongful damage to property of the Company, (iii)
         intentional wrongful disclosure of confidential information of the
         Company, (iv) the use or possession of weapons or illegal substances on
         Company property, (v) failure or refusal to perform any duties
         reasonably required in the course of the Participant's employment, but
         only after notice from the Company followed by a repetition of such
         failure or refusal, (vi) violation by Participant of any material
         Company policy, (vii) absenteeism not related to illness, sick leave or
         vacation but only after notice from the Company followed by a
         repetitioon of such absenteeism.

    (f)  "Change in Control" means a change in control of the Company of a
         nature that would be required to be reported in response to Item 6(e)
         of Schedule 14A of Regulation 14A promulgated under the Exchange Act,
         whether or not the Company is then subject to such reporting
         requirement, provided, however, that, anything in this Plan to the
         contrary notwithstanding, a Change in Control shall be deemed to have
         occurred if:

        (i)    any individual, partnership, firm, corporation, association,
               trust, unincorporated organization or other entity or person, or
               any syndicate or group deemed to be a person under Section
               14(d)(2) of the Exchange Act, is or becomes the "beneficial
               owner" (as defined in Rule 13d-3 of the General Rules and
               Regulations under the Exchange Act), directly or indirectly, of
               securities of the Company representing 30% or more of the
               combined voting power of the Company's then outstanding
               securities entitled to vote in the election of directors of the
               Company;


        (ii)   during any period of two (2) consecutive years (not including any
               period prior to the execution of this Plan) individuals who at
               the beginning of such period constituted the Board and any new
               directors, whose election by the Board or nomination for election
               by the Company's shareholders was approved by a vote of at least
               three-fourths (3/4ths) of the directors then still in office who
               either were directors at the beginning of the period or whose
               election or nomination for election was previously so approved
               (the "Incumbent Directors"), cease for any reason to constitute a
               majority thereof;

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        (iii)  there occurs a reorganization, merger, consolidation or other
               corporate transaction involving the Company (a "Transaction"), in
               each case, with respect to which the shareholders of the Company
               immediately prior to such Transaction do not, immediately after
               the Transaction, own more than 50 percent of the combined voting
               power of the Company or other corporation resulting from such
               Transaction;

        (iv)   all or substantially all of the assets of the Company are sold,
               liquidation or distributed; or

        (v)    there is a "change in control" of the Company within the meaning
               of Section 280G of the Code and the regulations thereunder.

    (g)  "Change in Control Date" shall mean the earliest of (i) the date on
         which the Change in Control occurs, (ii) the date on which the Company
         executes an agreement, the consummation of which would result in the
         occurrence of a Change in Control, (iii) the date the Board approves a
         transaction or series of transactions, the consummation of which would
         result in a Change in Control, and (iv) the date the Company fails to
         have this Plan assumed by an successor to the Company. If the Change in
         Control Date occurs as a result of an agreement described in clause
         (ii) of the previous sentence or as a result of the approval of the
         Board described in clause (iii) of the previous sentence and the Change
         in Control to which such agreement or approval relates (the
         "Contemplated Change in Control") subsequently does not occur, then the
         Term shall expire on the sixtieth day (the "Reset Date") following the
         date the Board certifies by resolution duly adopted by three-fourths
         (3/4ths) of the Incumbent Directors then in office that the
         Contemplated Change in Control is not reasonably likely to occur;
         provided, however, that this sentence shall not apply if (A) an
         Involuntary Termination of employment with the Company has occurred on
         and after the Change in Control Date and on or prior to the Reset Date
         or (B) the Contemplated Change in Control subsequently occurs within
         three months of the Reset Date. Following the Reset Date, the
         provisions of this Agreement shall remain in effect and a new Term
         shall commence upon the occurrence of a subsequent Change in Control
         Date. Notwithstanding the first sentence of this section, if employment
         with the Company terminates prior to the Change in Control Date and it
         is reasonably demonstrated that such termination of employment (i) was
         at the request of the third party who has taken steps reasonably
         calculated to effect the Change in Control or (ii) otherwise arose in
         connection with or in anticipation of the Change in Control, then
         Change in Control Date shall mean the date immediately prior to the
         date of such termination of employment.

    (h)  "Code" means the Internal Revenue Code of 1986, as amended.

    (i)  "Committee" means the Personnel and Compensation Committee designated
         by the Board of Directors to administer the Plan pursuant to Section 2
         of the Plan.

    (j)  "Common Stock" means the Common Stock of the Company, par value, $2.50
         per share.

    (k)  "Company" means Kollmorgen Corporation.

    (l)  "Date of Grant" means the effective date of an Award.

    (m)  "Effective Date" means the date approved by the shareholders.

    (n)  "Employee" means any person employed by the Company or an Affiliate who
         is designated by the Board as a key contributor.

    (o)  "Exchange Act" means the Securities Exchange Act of 1934, as amended.

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    (p)  "Exercise Price" means the price at which a share of Common Stock may
         be purchased by a Participant pursuant to an Option.

    (q)  "Fair Market Value" means the market price of Common Stock, determined
         by the Committee as follows:

        (i)    If the Common Stock was traded on the date in question on The
               NASDAQ Stock Market then the Fair Market Value shall be equal to
               the last transaction price quoted for such date by The NASDAQ
               Stock Market;

        (ii)   If the Common Stock was traded on a stock exchange on the date in
               question, then the Fair Market Value shall be equal to the
               closing price reported by the applicable composite transactions
               report for such date; and

        (iii)  If neither of the foregoing provisions is applicable, then the
               Committee in good faith on such basis shall determine the Fair
               Market Value as it deems appropriate.



        Whenever possible, the determination of Fair Market Value by the
        Committee shall be based on the prices reported in The Wall Street
                                                           ---------------
        Journal.  Such determination shall be conclusive and binding on all
        -------
        persons.



    (r)  "Incentive Stock Option" means an Option granted to a Participant
         pursuant to Section 7 of the Plan that is intended to meet the
         requirements of Section 422 of the Code.

    (s)  "Restricted Stock Unit" means an Award granted to a Participant
         pursuant to Section 8 of the Plan.

    (t)  "Non-statutory Stock Option" means a stock option granted to a
         Participant pursuant to the terms of the Plan but which is not intended
         to be and is not identified as an Incentive Stock Option or a stock
         option granted under the Plan which is intended to be and is identified
         as an Incentive Stock Option but which does not meet the requirements
         of Section 422 of the Code.

    (u)  "Option" means an Incentive Stock Option or Non-statutory Stock Option.

    (v)  "Participant" means any person who holds an outstanding Award pursuant
         to the Plan.

    (w)  "Plan" means the Kollmorgen Corporation 1998 Management Stock Incentive
         Plan.

    (x)  "Stock Award" means an Award granted to a Participant pursuant to
         Section 9 of the Plan.

2.  ADMINISTRATION
    --------------

    (a)  The Plan shall be administered by the Committee. The Committee shall
         consist of two or more disinterested directors of the Company, who
         shall be appointed by the Board of Directors. A member of the Board of
         Directors shall be deemed to be "disinterested" only if he satisfies
         (i) such requirements as the Securities and Exchange Commission may
         establish for non-employee directors administering plans intended to
         qualify for exemption under Rule 16b-3 (or its successor) under the
         Exchange Act and (ii) such requirements as the Internal Revenue Service
         may establish for outside directors acting under plans intended to
         qualify for exemption under Section 162(m)(4)(C) of the Code. The Board
         of Directors may also appoint one or more separate committees of the
         Board of Directors, each composed of one or more directors of the
         Company or an Affiliate who need not be disinterested and who may grant
         Awards and administer the Plan with respect to Employees who are not
         considered officers or directors of the Company under Section 16 of the
         Exchange Act.

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    (b)  The Committee shall (i) select the Employees who are to receive Awards
         under the Plan, (ii) determine the type, number, vesting requirements
         and other features and conditions of such Awards, (iii) interpret the
         Plan and (iv) make all other decisions relating to the operation of the
         Plan. The Committee may adopt such rules or guidelines, as it deems
         appropriate to implement the Plan. The Committee's determinations under
         the Plan shall be final and binding on all persons.

    (c)  Each Award shall be evidenced by a written agreement ("Award
         Agreement") containing such provisions as may be approved by the
         Committee. Each Award Agreement shall constitute a binding contract
         between the Company or an Affiliate and the Participant, and the terms
         and restrictions of the Plan and the Award Agreement shall bind every
         Participant, upon acceptance of the Award Agreement. The terms of each
         Award Agreement shall be in accordance with the Plan, but each Award
         Agreement may include such additional provisions and restrictions
         determined by the Committee in its discretion provided that such
         additional provisions and restrictions are not inconsistent with the
         terms of the Plan. In particular, the Committee shall set forth in each
         Award Agreement (i) the type of Award granted (ii) the Exercise Price
         of an Option, (iii) the number of shares subject to the Award; (iv) the
         expiration date of the Award, (v) the manner, time, and rate
         (cumulative or otherwise) of exercise or vesting of such Award, (vi)
         the acceleration of the vesting schedule in the event of a Change in
         Control, and (vii) the restrictions, if any, placed upon such Award, or
         open shares which may be issued upon exercise of such Award. The
         Chairman of the Committee and such other directors and officers as
         shall be designated by the Committee are hereby authorized to execute
         Award Agreements on behalf of the Company or an Affiliate and to cause
         them to be delivered to the recipients of Awards.

    (d)  The Committee may delegate all authority for: (i) the determination of
         forms of payment to be made by or received by the Plan and (ii) the
         execution of any Award Agreement. The Committee may rely on the
         descriptions, representations, reports and estimate provided to it by
         the management of the Company or an Affiliate for determinations to be
         made pursuant to the Plan.

3.  TYPES OF AWARDS AND RELATED RIGHTS
    ----------------------------------

    The following Awards may be granted under the Plan:

    (a)  Non-statutory Stock Options
    (b)  Incentive Stock Options
    (c)  Stock Awards
    (d)  Restricted Stock Units

4.  STOCK SUBJECT TO THE PLAN
    -------------------------

    Subject to adjustment as provided in Section 13 hereof, the maximum number
of shares reserved for Awards under the Plan is 500,000.  Subject to adjustment
as provided in Section 13 hereof, the maximum number of shares reserved hereby
for purchase pursuant to the exercise of Options granted under the Plan is
500,000 minus the number of Stock Awards or Restricted Stock Units issued.  The
maximum number of shares reserved for Stock Awards and Restricted Stock Units is
150,000. The shares of Common Stock issued under the Plan may be either
authorized but unissued shares or authorized shares previously issued and
acquired or reacquired the Company, respectively.  To the extent that Options
and Stock Awards are granted under the Plan, the shares underlying such Awards
will be unavailable for any other use including future grants under the Plan
except that, to the extent that Stock Awards or Options terminate, expire, or
are forfeited without having vested or without having been exercised, new Awards
may be made with respect to these shares.


5.  ELIGIBILITY
    -----------

    Subject to the terms of the Plan, all Employees shall be eligible to receive
Awards under the Plan.

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6.  NON-STATUTORY STOCK OPTIONS
    ---------------------------

    The Committee may, subject to the limitations of this Plan and the
availability of shares of Common Stock reserved but unawarded under this Plan,
grant Non-statutory Stock Options upon such terms and conditions as it may
determine.  Non-statutory Stock Options granted under this Plan are subject to
the following terms and conditions.

    (a)  Exercise Price.  The Exercise Price of each Non-statutory Stock Option
         ---------------
         shall be determined by the Committee on the Date of Grant. Such
         Exercise Price shall not be less than 100% of the Fair Market Value of
         the Common Stock on the Date of Grant. Shares of Common Stock
         underlying a Non-statutory Stock Option may be purchased only upon full
         payment of the Exercise Price in a manner provided for in Section 10 of
         the Plan.

    (b)  Terms of Non-statutory Stock Options.  The term during which each Non-
         ------------------------------------
         statutory Stock Option may be exercised shall be determined by the
         Committee, but in no event shall a Non-statutory Stock Option be
         exercisable in whole or in part more than ten (10) years from the Date
         of Grant. The Committee shall determine the date on which each Non-
         statutory Stock Option shall become exercisable and any terms or
         conditions which must be satisfied prior to each Non-statutory Stock
         Option becoming exercisable. Any such terms or conditions shall be
         determined by the Committee as of the Date of Grant. The shares of
         Common Stock underlying each Non-statutory Stock Option installment may
         be purchased in whole or in part by the Participant at any time during
         the term of such Non-statutory Stock Option after such installment
         becomes exercisable.

    (c)  Non-Transferability.  Unless otherwise determined by the Committee in
         -------------------
         accordance with this Section 6(c), Non-statutory Stock Options shall
         not be transferred, assigned, hypothecated, or disposed of in any
         manner by a Participant other than by will or the laws of intestate
         succession. The Committee may, however, in its sole discretion, permit
         transferability or assignment of a Non-statutory 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 6(c), a transfer for valid estate planning purposes includes,
         but is not limited to: (a) a transfer to a revocable intervivos trust
         as to which the Participant is both the settlor and trustee, or (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 Family, (iii) any partnership whose only
         partners are members of the Participant's Immediate Family, and (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 6(c), "Immediate Family" includes,
         but is not necessarily limited to, a Participant's parents, spouse,
         children, grandchildren and great-grandchildren. Nothing contained in
         this Section 6(c) shall be construed to require the Committee to give
         its approval to any transfer or assignment of any Non-statutory Stock
         Option or portion thereof, and approval to any transfer or assignment
         of any Non-statutory Stock Option or portion thereof does not mean that
         such approval will be given with respect to any other Non-statutory
         Stock Option or portion thereof. The transferee or assignee of any Non-
         statutory Stock Option shall be subject to all of the terms and
         conditions applicable to such Non-statutory 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-
         statutory Stock Option.



    (d)  Termination of Employment or Service.  Unless otherwise determined by
         ------------------------------------
         the Committee, upon the termination of a Participant's employment or
         service for any reason other than death or termination for Cause, the
         Participant's Non-statutory Stock Options shall be exercisable only as
         to those shares that were immediately exercisable by the Participant at
         the date of termination and only for a period of three (3) months
         following termination. Unless otherwise determined by the

<PAGE>

         Committee, in the event of the termination of a Participant's
         employment or service due to death, all Non-statutory Stock Options
         that were immediately exercisable by the Participant at the date of
         death shall remain exercisable for a period of one (1) year following
         such death. Unless otherwise determined by the Committee, in the event
         of a Participant's termination for Cause, all rights under the
         Participant's Non-statutory Stock Options shall expire immediately upon
         the effective date of such termination for Cause.

7.  INCENTIVE STOCK OPTIONS
    -----------------------

    The Committee may, subject to the limitations of the Plan and the
availability of shares of Common Stock reserved but unawarded under this Plan,
grant Incentive Stock Options to an Employee.  Incentive Stock Options granted
pursuant to the Plan shall be subject to the following terms and conditions:



    (a)  Exercise Price.  The Exercise Price of each Incentive Stock Option
         --------------
         shall be not less than 100% of the Fair Market Value of the Common
         Stock on the Date of Grant. However, if at the time an Incentive Stock
         Option is granted, the Employee owns or is treated as owning, for
         purposes of Section 422 of the Code, Common Stock representing more
         than 10% of the total combined voting stock of the Company or an
         Affiliate ("10% owner"), the Exercise Price shall not be less than 110%
         of the Fair Market Value of the Common Stock on the Date of Grant.
         Shares of Common Stock may be purchased only upon payment of the full
         Exercise Price in a manner provided for in Section 10 of the Plan.

    (b)  Amounts of Incentive Stock Options.  To the extent the aggregate Fair
         ----------------------------------
         Market Value of shares of Common Stock with respect to which Incentive
         Stock Options that are exercisable for the first time by an Employee
         during any calendar year under the Plan and any other stock option plan
         of the Company or an Affiliate exceeds $100,000, or such higher value
         as may be permitted under Section 422d of the Code, such other
         Incentive Stock Options in excess of such limit shall be treated as
         Non-statutory Stock Options. Fair Market Value shall be determined as
         of the Date of Grant with respect to each such Incentive Stock Option.

    (c)  Terms of Incentive Stock Options. The term during which each Incentive
         --------------------------------
         Stock Option may be exercised shall be determined by the Committee, but
         in no event shall an Incentive Stock Option be exercisable in whole or
         in part more than ten (10) years from the Date of Grant. If at the time
         an Incentive Stock Option is granted to an Employee who is a 10% Owner,
         the Incentive Stock Option granted to such Employee shall not be
         exercisable after the expiration of five (5) years from the Date of
         Grant. The Committee shall determine the date on which each Incentive
         Stock Option shall become exercisable and any terms or conditions which
         must be satisfied prior to the Incentive Stock Option becoming
         exercisable. Any such terms or conditions shall be determined by the
         Committee as of the Date of Grant. The shares of Common Stock
         underlying each Incentive Stock Option installment may be purchased in
         whole or in part at any time during the term of such Incentive Stock
         Option after such installment becomes exercisable.

    (d)  Transferability.  An Incentive Stock Option shall not be transferable
         ---------------
         except by an Employee's will or the laws of descent and distribution
         and shall be exercisable, during an Employee's lifetime, only by the
         Employee to whom it is granted. The designation of a beneficiary does
         not constitute a transfer.

    (e)  Termination of Employment.  Unless otherwise determined by the
         -------------------------
         Committee, upon the termination of an Employee's employment for any
         reason other than death or termination for Cause, the Employee's
         Incentive Stock Options shall be exercisable only as to those Incentive
         Stock Options that were immediately exercisable by the Employee at the
         date of termination and only for a period of three (3) months following
         such termination. Unless otherwise determined by the Committee, in the
         event of the termination of an Employee's employment for death, all
         Incentive Stock Options that were immediately exercisable by the
         Participant at the date of death shall remain exercisable for one (1)
         year following such death. Unless otherwise determined by the
         Committee, in the event of an Employee's termination for Cause, all
         rights under such Employee's Incentive Stock Options shall expire
         immediately upon the effective date of such termination for Cause. Any
         Option, which, by

<PAGE>

         operation of this provision, does not meet the requirements of Section
         422 of the Code, shall be considered a Non-statutory Stock Option.

8.  RESTRICTED STOCK UNITS
    ----------------------

    Each year, the Committee shall, subject to the limitations of Section 4,
establish fixed limitations as to the percentage of the Participant's annual
incentive bonus that shall be paid in Restricted Stock Units ("RSU") and as to
the portion of the Participant's annual incentive bonus such Participant may
elect to defer and receive in the form of RSUs in lieu of such annual incentive
bonus.  Each RSU represents the right to receive one share of Common Stock upon
the terms and conditions stated herein.  Each RSU awarded to a Participant shall
be credited to a bookkeeping account established and maintained for that
Participant.

    (a)  Valuation of RSUs.  The value of each RSU, as designated by the
         -----------------
         Committee, shall be equal to no less than 75% of the Fair Market Value
         of each share of the Common Stock on the date of the award.

    (b)  Participation.  Each year, subject to the percent limitations
         --------------
         established by the Committee above the Participant shall be issued a
         RSU Subscription Agreement ("Subsequent Agreement) representing the
         percentage of the Participant's annual incentive bonus required be paid
         in RSUs. Each Subscription Agreement issued under this paragraph shall
         specify a deferral period for the RSUs to which it pertains. The
         deferral period shall be expressed as a number of whole years, not less
         than three, beginning on the award date.

              Each year, subject to the percentage limitation established by the
         Committee each Participant may elect to receive an award for RSUs under
         the Plan during the calendar year by completing a Bonus Deferral and
         RSU Subscription Agreement ("Subscription Agreement"). The Subscription
         Agreement shall provide that the Participant elects to receive RSUs in
         lieu of a specified portion of any annual incentive bonus. Such portion
         shall be expressed as a specified percentage of the Participant's
         actual bonus amount up to the limitation established by the Committee.
         Any percentage specified must be in 5% increments and not more than the
         limit established by the Committee and is entirely contingent on the
         amount of bonus actually awarded. Each Subscription Agreement, in
         addition, shall specify a deferral period for the RSUs to which it
         pertains. The deferral period shall be expressed as a number of whole
         years, not less than three, beginning on the award date. Subscription
         Agreements under this paragraph must be received by the Company no
         later than September 30/th/ of the fiscal year for which such bonus
         amount will be determined.

    (c)  Award of RSUs.  Once each year, on the date that annual incentive
         -------------
         bonuses are paid or would otherwise be paid, the Company shall award
         RSUs to each Participant as follows: Each Participant's account shall
         be credited with a whole number of RSUs determined by dividing the
         amount (expressed in dollars) that is determined under his Subscription
         Agreement(s) by the value of each RSU awarded on such date. No
         fractional RSU will be credited and the amount equivalent in value to
         the fractional RSU will be paid out to the Participant currently in
         cash.

    (d)  Vesting.  A Participant shall be fully vested in each RSU three years
         --------
         after the date such RSU was awarded.

    (e)  Settlement After Vesting.  With respect to each vested RSU, the Company
         -------------------------
         shall issue to the Participant one share of Common Stock at the end of
         the deferral period specified in the Participant's Subscription
         Agreement pertaining to such RSU(s), or upon the Participant's
         termination of employment or the termination of the Plan, if sooner.

    (f)  Voluntary Termination and Termination for Cause.  If a Participant
         ------------------------------------------------
         voluntarily terminates his employment with the Company for reasons
         other than death or permanent disability, or if the Participant is
         terminated for Cause, the Participant's nonvested RSUs shall be
         canceled and he shall receive a cash payment equal to the lesser of (a)
         the Fair Market Value of such RSUs at the time of

<PAGE>

         grant or (b) an amount equal to the number of such RSUs multiplied by
         the Fair Market Value of the Common Stock on the date of the
         Participant's termination of employment.

    (g)  Involuntary Termination other than for Cause.  If a Participant's
         ---------------------------------------------
         employment is terminated by the Company other than for Cause, or if the
         Participant's employment terminates as a result of death or permanent
         disability, the Participant's nonvested RSUs shall be canceled. The
         Participant shall receive cash in an amount equal to the greater of (a)
         the Fair Market Value of such RSUs at the time of grant or (b) an
         amount equal to the number of such RSUs multiplied by the Fair Market
         Value of the Common Stock on the date of the Participant's termination
         of employment.

    (h)  Committee's Discretion.  The Committee shall have complete discretion
         -----------------------
         to determine the circumstances of a Participant's termination of
         employment, including whether the same results from voluntary
         termination, permanent disability or involuntary termination by the
         Company, and the Committee's determination shall be final and binding
         on all parties and not subject to review or challenge by any
         Participant or other person.

    (i)  Treatment of Dividends.  Whenever dividends (other than dividends
         ----------------------
         payable only in shares of Stock) are paid with respect to Stock, each
         Participant shall be paid an amount in cash equal to the number of his
         vested RSUs multiplied by the dividend value per share. In addition,
         each Participant's account shall be credited with an amount equal to
         the number of such Participant's nonvested RSUs multiplied by the
         dividend value per share. Amounts credited with respect to each
         nonvested RSU shall be paid, without interest, on the date the
         Participant becomes vested in such RSU, or when the Participant
         receives payment of his nonvested RSUs.


9.  STOCK AWARDS
    ------------


    The Committee may, subject to the limitations of the Plan, make Stock
Awards, which shall consist of the grant of some number of shares of Common
Stock to a Participant.  Stock Awards shall be made subject to the following
terms and conditions.

    (a)  Payment of the Stock Award. Stock Awards may only be made in whole
         --------------------------
         shares of Common Stock. Stock Awards may only be granted from shares
         reserved under the Plan and available for award at the time the Stock
         Award is made to the Participant.

    (b)  Terms of the Stock Award. The Committee shall determine the dates on
         ------------------------
         which Stock Awards granted to a Participant shall vest and any terms or
         conditions which must be satisfied prior to the vesting of any
         installment or portion of the Stock Award. Any such terms, or
         conditions shall be determined by the Committee as of the Date of
         Grant.

    (c)  Termination of Employment or Service.  Unless otherwise determined by
         ------------------------------------
         the Committee, upon the termination of a Participant's employment or
         service for any reason other than termination for Cause, the
         Participant's unvested Stock Awards as of the date of termination shall
         be forfeited and any rights the Participant had to such unvested Stock
         Awards shall become null and void. Unless otherwise determined by the
         Committee, or in the event of the Participant's termination for Cause,
         all unvested Stock Awards held by such Participant as of the effective
         date of such termination for Cause shall be forfeited and any rights
         such Participant had to such unvested Stock Awards shall become null
         and void.

    (d)  Non-Transferability.
         -------------------

         (i)   The recipient of a Stock Award shall not sell, transfer, assign,
               pledge, or otherwise encumber shares subject to Stock Award until
               full vesting of such shares has occurred. For purposes of this
               section, the separation of beneficial ownership and legal title
               through the use of any "swap" transaction is deemed to be a
               prohibited encumbrance.

<PAGE>

         (ii)  Unless determined otherwise by the Committee and except in the
               event of the Participant's death or pursuant to a domestic
               relations order, a Stock Award is not transferable and may be
               earned in his lifetime only by the Participant to whom it is
               granted. Upon the death of a Participant, a Stock Award is
               transferable by will or the laws of descent and distribution. The
               designation of a beneficiary shall not constitute a transfer.

        (iii)  If a recipient of a Stock Award is subject to the provisions of
               Section 16 of the Exchange Act, shares of Common Stock subject to
               such Stock Award may not, without the written consent of the
               Committee (which consent may be given in the Award Agreement), be
               sold or otherwise disposed of within six (6) months following the
               date of grant of the Stock Award.

    (e)  Accrual of Dividends.  Whenever shares of Common Stock underlying a
         --------------------
         Stock Award are distributed to a Participant or beneficiary thereof
         under the Plan, such Participant or beneficiary shall also be entitled
         to receive, with respect to each such share distributed, a payment
         equal to any cash dividends and the number of shares of Common Stock
         equal to any stock dividends, declared and paid with respect to a share
         of the Common Stock if the record date for determining shareholders
         entitled to receive such dividends falls between the date the relevant
         Stock Award was granted and the date the relevant Stock Award or
         installment thereof is issued.

    (f)  Voting of Stock Awards.  After a Stock Award has been granted but for
         ----------------------
         which the shares covered by such Stock Award have not yet been vested,
         earned and distributed to the Participant pursuant to the Plan, the
         Participant shall be entitled to vote such shares of Common Stock which
         the Stock Award covers pursuant to the rules and procedures adopted by
         the Committee for this purpose.

10. METHOD OF EXERCISE
    ------------------

    Subject to any applicable Award Agreement, any Option may be exercised by
the Participant in whole or in part at such time or times, and the Participant
may make payment of the Exercise Price in such form or forms, including, without
limitation, payment by delivery of cash, Common Stock or other consideration
(including, where permitted by law and the Committee, Awards) having a Fair
Market Value on the exercise date equal to the total Exercise Price, or by any
combination of cash, shares of Common Stock and other consideration, including
exercises by means of a cashless exercise arrangement with a qualifying broker-
dealer, as the Committee may specify in the applicable Award Agreement.

11. RIGHTS OF PARTICIPANTS
    ----------------------

    No Participant shall have any rights as a shareholder with respect to any
shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such Common Stock.  Nothing contained herein or in any
Award Agreement confers on any person any right to continue in the employ or
service of the Company or an Affiliate or interferes in any way with the right
of the Company or an Affiliate to terminate a Participant's services.

12. DESIGNATION OF BENEFICIARY
    --------------------------

    A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Award to which the Participant
would then be entitled.  Such designation will be made upon forms supplied by
and delivered to the Company and may be revoked in writing.  If a Participant
fails effectively to designate a beneficiary, then the Participant's estate will
be deemed to be the beneficiary.

13. DILUTION AND OTHER ADJUSTMENTS
    ------------------------------

    In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other

<PAGE>

similar corporate change, or other increase or decrease in such shares without
receipt or payment of consideration by the Company, or in the event an
extraordinary capital distribution is made, the Committee may make such
adjustments to previously granted Awards, to prevent dilution, diminution, or
enlargement of the rights of the Participant, including any or all of the
following:

    (a)  adjustments in the aggregate number or kind of shares of Common Stock
         or other securities that may underlie future Awards under the Plan;

    (b)  adjustments in the aggregate number or kind of shares of Common Stock
         or other securities underlying Awards already made under the Plan;

    (c)  adjustments in the Exercise Price of outstanding Incentive and/or Non-
         statutory Stock Options, or any Limited Rights attached to such
         Options.

    No such adjustments may, however, materially change the value of benefits
available to a Participant under a previously granted Award.  All Awards under
this Plan shall be binding upon any successors or assigns of the Company.

14. TAX WITHHOLDING
    ---------------

    Notwithstanding any other provision of the Plan, Awards under this Plan
shall be subject to tax withholding to the extent required by any governmental
authority.  Any withholding shall comply with Rule 16b-3 or any amendment or
successive rule.  Shares of Common Stock withheld to pay for tax withholding
amounts shall be valued at their Fair Market Value on the date the Award is
deemed taxable to the Participant.  Participants shall be responsible for paying
any required tax withholding applicable  under the exercise of an Option.

15. AMENDMENT OF THE PLAN AND AWARDS
    --------------------------------

    The Board of Directors may at any time, and from time to time, modify or
amend the Plan in any respect, provided however, that provisions governing
grants of Incentive Stock Options, unless permitted by the rules and regulations
or staff pronouncements promulgated under the Code shall be submitted for
shareholder approval to the extent required by such law, regulation or
interpretation.

    Failure to ratify or approve amendments or modifications by shareholders
shall be effective only as to the specific amendment or modification requiring
such ratification.  Other provisions of this Plan will remain in full force and
effect.

    No such termination, modification or amendment may adversely affect the
rights of a Participant under an outstanding Award without the written
permission of such Participant.

16. EFFECTIVE DATE OF PLAN
    ----------------------

    The Plan shall become effective upon approval by the Company's shareholders.
The failure to obtain shareholder approval for such purposes will not effect the
validity of the Plan and any Awards made under the Plan; provided, however, that
if the Plan is not approved by shareholders the Plan shall remain in full force
and effect, and any Incentive Stock Options granted under the Plan shall be
deemed to be Non-statutory Stock Options and any Award intended to comply with
Section 162(m) of the Code shall not comply with Section 162(m) of the Code.

17. TERMINATON OF THE PLAN
    ----------------------

    The right to grant Awards under the Plan will terminate ten (10) years after
the Effective Date.  The Board of Directors has the right to suspend or
terminate the Plan at any time, provided that no such action will, without the
consent of a Participant, adversely affect a Participant's vested rights under a
previously granted Award.

<PAGE>

18. APPLICABLE LAW
    --------------

    The Plan and all Award Agreements entered into under the Plan shall be
construed in accordance with and governed by the laws of the State of New York.