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                                                                   EXHIBIT 10.3

                            U.S. ENERGY SYSTEMS, INC.
                   1998 EXECUTIVE INCENTIVE COMPENSATION PLAN

         1. PURPOSE. The purpose of this 1998 Executive Incentive Compensation
Plan (the "Plan") is to assist U.S. ENERGY SYSTEMS, INC., a Delaware corporation
(the "Company") and its subsidiaries in attracting, motivating, retaining and
rewarding high-quality executives and other employees, officers, Directors and
independent contractors by enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company's stockholders, and providing
such persons with annual and long term performance incentives to expend their
maximum efforts in the creation of stockholder value. The Plan is also intended
to qualify certain compensation awarded under the Plan for tax deductibility
under Section 162(m) of the Code (as hereafter defined) to the extent deemed
appropriate by the Committee (or any successor committee) of the Board of
Directors of the Company.

         2. DEFINITIONS. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.

             (a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.

             (b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest, granted to a
Participant under the Plan.

             (c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

             (d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.

             (e) "Board" means the Company's Board of Directors.

             (f) "Change in Control" means Change in Control as defined with
related terms in Section 9 of the Plan.

             (g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.

             (h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.

             (i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist of at
least two directors, and each member of which shall be (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "non-employee directors" is not then required in
order for exemptions under Rule 16b-3 to apply to transactions under the Plan,
and (ii) an "outside director" within the meaning of Section 162(m) of the Code,
unless administration of the Plan by "outside directors" is not then required in
order to qualify for tax deductibility under Section 162(m) of the Code.



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             (j) "Corporate Transaction" means a Corporate Transaction as
defined in Section 9(b)(i) of the Plan.

             (k) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.

             (l) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end
of a specified deferral period.

             (m) "Director" means a member of the Board.

             (n) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.

             (o) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Stock, other Awards or other
property equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.

             (p) "Effective Date" means the effective date of the Plan, which
shall be June 1, 1998.

             (q) "Eligible Person" means each Executive Officer of the Company
(as defined under the Exchange Act) and other officers, Directors and employees
of the Company or of any Subsidiary, and independent contractors with the
Company or any Subsidiary. The foregoing notwithstanding, only employees of the
Company or any Subsidiary shall be Eligible Persons for purposes of receiving
any Incentive Stock Options. An employee on leave of absence may be considered
as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.

             (r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.

             (s) "Executive Officer" means an executive officer of the Company
as defined under the Exchange Act.

             (t) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or the Board, or under
procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.

             (u) "Incentive Stock Option" or "ISO" means any Option intended to
be designated as an incentive stock option within the meaning of Section 422 of
the Code or any successor provision thereto.

             (v) "Incumbent Board" means the Incumbent Board as defined in
Section 9(b)(ii) of the Plan.

             (w) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.

             (x) "Option" means a right granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.




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             (y) "Other Stock-Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.

             (z) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of the
other corporations in the chain.

             (aa) "Participant" means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer an
Eligible Person.

             (bb) "Performance Award" means a right, granted to an Eligible
Person under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee or the Board.

             (cc) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.

             (dd) "Preexisting Plans" means the Company's 1997 Stock Option Plan
and 1996 Stock Option Plan.

             (ee) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.

             (ff) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act

             (gg) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.

             (hh) "Stock Appreciation Rights" or "SAR" means a right granted to
a Participant under Section 6(c) hereof.

             (ii) "Subsidiary" means any corporation or other entity in which
the Company has a direct or indirect ownership interest of 50% or more of the
total combined voting power of the then outstanding securities or interests of
such corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.

             3. ADMINISTRATION.

             (a) AUTHORITY OF THE COMMITTEE. The Plan shall be administered by
the Committee; provided, however, that except as otherwise expressly provided in
this Plan or in order to comply with Code Section 162(m) or Rule 16b-3 under the
Exchange Act, the Board may exercise any power or authority granted to the
Committee under this Plan. The Committee or the Board shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee or the Board may deem necessary or advisable
for the administration of the Plan. In exercising any discretion granted to the
Committee or the Board under the Plan or pursuant to any Award, the Committee or
the Board shall not be required to follow past practices, act in a manner
consistent with past practices, or treat any Eligible Person in a manner
consistent with the treatment of other Eligible Persons.



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             (b) MANNER OF EXERCISE OF COMMITTEE AUTHORITY. The Committee, and
not the Board, shall exercise sole and exclusive discretion on any matter
relating to a Participant then subject to Section 16 of the Exchange Act with
respect to the Company to the extent necessary in order that transactions by
such Participant shall be exempt under Rule 16b-3 under the Exchange Act. Any
action of the Committee or the Board shall be final, conclusive and binding on
all persons, including the Company, its subsidiaries, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and stockholders. The express grant of any
specific power to the Committee or the Board, and the taking of any action by
the Committee or the Board, shall not be construed as limiting any power or
authority of the Committee or the Board. The Committee or the Board may delegate
to officers or managers of the Company or any subsidiary, or committees thereof,
the authority, subject to such terms as the Committee or the Board shall
determine, (i) to perform administrative functions, (ii) with respect to
Participants not subject to Section 16 of the Exchange Act, to perform such
other functions as the Committee or the Board may determine, and (iii) with
respect to Participants subject to Section 16, to perform such other functions
of the Committee or the Board as the Committee or the Board may determine to the
extent performance of such functions will not result in the loss of an exemption
under Rule 16b-3 otherwise available for transactions by such persons, in each
case to the extent permitted under applicable law and subject to the
requirements set forth in Section 8(d). The Committee or the Board may appoint
agents to assist it in administering the Plan.

             (c) LIMITATION OF LIABILITY. The Committee and the Board, and each
member thereof, shall be entitled to, in good faith, rely or act upon any report
or other information furnished to him or her by any executive officer, other
officer or employee of the Company or a Subsidiary, the Company's independent
auditors, consultants or any other agents assisting in the administration of the
Plan. Members of the Committee and the Board, and any officer or employee of the
Company or a subsidiary acting at the direction or on behalf of the Committee or
the Board, shall not be personally liable for any action or determination taken
or made in good faith with respect to the Plan, and shall, to the extent
permitted by law, be fully indemnified and protected by the Company with respect
to any such action or determination.

             4. STOCK SUBJECT TO PLAN.

             (a) LIMITATION ON OVERALL NUMBER OF SHARES SUBJECT TO AWARDS.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 1,500,000 plus (ii) the number of shares
with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of shares of
Stock that are surrendered in payment of any Awards or any tax withholding with
regard thereto. Any shares of Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury shares. Subject
to adjustment as provided in Section 10(c) hereof, in no event shall the
aggregate number of shares of Stock which may be issued pursuant to ISOs exceed
1,500,000 shares.

             (b) APPLICATION OF LIMITATIONS. The limitation contained in Section
4(a) shall apply not only to Awards that are settleable by the delivery of
shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee or the Board may adopt
reasonable counting procedures to ensure appropriate counting, avoid double
counting (as, for example, in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.

             5. ELIGIBILITY; PER-PERSON AWARD LIMITATIONS.

             (a) AWARDS UNDER THE PLAN. Awards may be granted under the Plan
only to Eligible Persons. In each fiscal year during any part of which the Plan
is in effect, an Eligible Person may not be granted Awards relating to more than
250,000 shares of Stock, subject to adjustment as provided in Section 10(c),
under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and 8(c).
In addition, the maximum amount that may be earned as an Annual Incentive Award
or other cash Award in any fiscal year by any one Participant shall be
$2,000,000, and the maximum amount that may be earned as a Performance Award or
other cash Award in respect of a performance period by any one Participant shall
be $5,000,000. (b) AWARDS UNDER PREEXISTING PLANS. Upon approval of the Plan by
stockholders of the Company, as required under Section 10(k) hereof, no further
Awards shall be granted under the Preexisting Plans.



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             6. SPECIFIC TERMS OF AWARDS.

             (a) GENERAL. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee or the Board may impose on
any Award or the exercise thereof, at the date of grant or thereafter (subject
to Section 10(e)), such additional terms and conditions, not inconsistent with
the provisions of the Plan, as the Committee or the Board shall determine,
including terms requiring forfeiture of Awards in the event of termination of
employment by the Participant and terms permitting a Participant to make
elections relating to his or her Award. The Committee or the Board shall retain
full power and discretion to accelerate, waive or modify, at any time, any term
or condition of an Award that is not mandatory under the Plan. Except in cases
in which the Committee or the Board is authorized to require other forms of
consideration under the Plan, or to the extent other forms of consideration must
be paid to satisfy the requirements of Florida law, no consideration other than
services may be required for the grant (but not the exercise) of any Award.

             (b) OPTIONS. The Committee and the Board each is authorized to
grant Options to Participants on the following terms and conditions:

                 (i) EXERCISE PRICE. The exercise price per share of Stock
             purchasable under an Option shall be determined by the Committee or
             the Board, provided that such exercise price shall not, in the case
             of Incentive Stock Options, be less than 100% of the Fair Market
             Value of the Stock on the date of grant of the Option and shall
             not, in any event, be less than the par value of a share of Stock
             on the date of grant of such Option. 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 10% of the combined voting
             power of all classes of stock of the Company or any Parent
             Corporation and an Incentive Stock Option is granted to such
             employee, the option price of such Incentive Stock Option (to the
             extent required by the Code at the time of grant) shall be no less
             than 110% of the Fair Market Value of the Stock on the date such
             Incentive Stock Option is granted.

                 (ii) TIME AND METHOD OF EXERCISE. The Committee or the Board
             shall determine the time or times at which or the circumstances
             under which an Option may be exercised in whole or in part
             (including based on achievement of performance goals and/or future
             service requirements), the time or times at which Options shall
             cease to be or become exercisable following termination of
             employment or upon other conditions, the methods by which such
             exercise price may be paid or deemed to be paid (including in the
             discretion of the Committee or the Board a cashless exercise
             procedure), the form of such payment, including, without
             limitation, cash, Stock, other Awards or awards granted under other
             plans of the Company or any subsidiary, or other property
             (including notes or other contractual obligations of Participants
             to make payment on a deferred basis), and the methods by or forms
             in which Stock will be delivered or deemed to be delivered to
             Participants.

                 (iii) ISOS. The terms of any ISO granted under the Plan shall
             comply in all respects with the provisions of Section 422 of the
             Code. Anything in the Plan to the contrary notwithstanding, no term
             of the Plan relating to ISOs (including any SAR in tandem
             therewith) shall be interpreted, amended or altered, nor shall any
             discretion or authority granted under the Plan be exercised, so as
             to disqualify either the Plan or any ISO under Section 422 of the
             Code, unless the Participant has first requested the change that
             will result in such disqualification. Thus, if and to the extent
             required to comply with Section 422 of the Code, Options granted as
             Incentive Stock Options shall be subject to the following special
             terms and conditions:

                       (A) the Option shall not be exercisable more than ten
             years after the date such Incentive Stock Option is granted;
             provided, however, that if a Participant owns or is deemed to own
             (by reason of the attribution rules of Section 424(d) of the Code)
             more than 10% of the combined voting power of all classes of stock
             of the Company or any Parent Corporation and the Incentive Stock
             Option is granted to such Participant, the term of the Incentive



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             Stock Option shall be (to the extent required by the Code at the
             time of the grant) for no more than five years from the date of
             grant; and

                       (B) The aggregate Fair Market Value (determined as of the
             date the Incentive Stock Option is granted) of the shares of stock
             with respect to which Incentive Stock Options granted under the
             Plan and all other option plans of the Company or its Parent
             Corporation during any calendar year exercisable for the first time
             by the Participant during any calendar year shall not (to the
             extent required by the Code at the time of the grant) exceed
             $100,000.

             (c) STOCK APPRECIATION RIGHTS. The Committee and the Board each is
authorized to grant SAR's to Participants
on the following terms and conditions:

                 (i) RIGHT TO PAYMENT. A SAR shall confer on the Participant to
             whom it is granted a right to receive, upon exercise thereof, the
             excess of (A) the Fair Market Value of one share of stock on the
             date of exercise (or, in the case of a "Limited SAR" that may be
             exercised only in the event of a Change in Control, the Fair Market
             Value determined by reference to the Change in Control Price, as
             defined under Section 9(c) hereof), over (B) the grant price of the
             SAR as determined by the Committee or the Board. The grant price of
             an SAR shall not be less than the Fair Market Value of a share of
             Stock on the date of grant except as provided under Section 7(a)
             hereof.

                 (ii) OTHER TERMS. The Committee or the Board shall determine at
             the date of grant or thereafter, the time or times at which and the
             circumstances under which a SAR may be exercised in whole or in
             part (including based on achievement of performance goals and/or
             future service requirements), the time or times at which SARs shall
             cease to be or become exercisable following termination of
             employment or upon other conditions, the method of exercise, method
             of settlement, form of consideration payable in settlement, method
             by or forms in which Stock will be delivered or deemed to be
             delivered to Participants, whether or not a SAR shall be in tandem
             or in combination with any other Award, and any other terms and
             conditions of any SAR. Limited SARs that may only be exercised in
             connection with a Change in Control or other event as specified by
             the Committee or the Board, may be granted on such terms, not
             inconsistent with this Section 6(c), as the Committee or the Board
             may determine. SARs and Limited SARs may be either freestanding or
             in tandem with other Awards.

             (d) RESTRICTED STOCK. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:

                 (i) GRANT AND RESTRICTIONS. Restricted Stock shall be subject
             to such restrictions on transferability, risk of forfeiture and
             other restrictions, if any, as the Committee or the Board may
             impose, which restrictions may lapse separately or in combination
             at such times, under such circumstances (including based on
             achievement of performance goals and/or future service
             requirements), in such installments or otherwise, as the Committee
             or the Board may determine at the date of grant or thereafter.
             Except to the extent restricted under the terms of the Plan and any
             Award agreement relating to the Restricted Stock, a Participant
             granted Restricted Stock shall have all of the rights of a
             stockholder, including the right to vote the Restricted Stock and
             the right to receive dividends thereon (subject to any mandatory
             reinvestment or other requirement imposed by the Committee or the
             Board). During the restricted period applicable to the Restricted
             Stock, subject to Section 10(b) below, the Restricted Stock may not
             be sold, transferred, pledged, hypothecated, margined or otherwise
             encumbered by the Participant.




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                 (ii) FORFEITURE. Except as otherwise determined by the
             Committee or the Board at the time of the Award, upon termination
             of a Participant's employment during the applicable restriction
             period, the Participant's Restricted Stock that is at that time
             subject to restrictions shall be forfeited and reacquired by the
             Company; provided that the Committee or the Board may provide, by
             rule or regulation or in any Award agreement, or may determine in
             any individual case, that restrictions or forfeiture conditions
             relating to Restricted Stock shall be waived in whole or in part in
             the event of terminations resulting from specified causes, and the
             Committee or the Board may in other cases waive in whole or in part
             the forfeiture of Restricted Stock.

                 (iii) CERTIFICATES FOR STOCK. Restricted Stock granted under
             the Plan may be evidenced in such manner as the Committee or the
             Board shall determine. If certificates representing Restricted
             Stock are registered in the name of the Participant, the Committee
             or the Board may require that such certificates bear an appropriate
             legend referring to the terms, conditions and restrictions
             applicable to such Restricted Stock, that the Company retain
             physical possession of the certificates, and that the Participant
             deliver a stock power to the Company, endorsed in blank, relating
             to the Restricted Stock.

                 (iv) DIVIDENDS AND SPLITS. As a condition to the grant of an
             Award of Restricted Stock, the Committee or the Board may require
             that any cash dividends paid on a share of Restricted Stock be
             automatically reinvested in additional shares of Restricted Stock
             or applied to the purchase of additional Awards under the Plan.
             Unless otherwise determined by the Committee or the Board, Stock
             distributed in connection with a Stock split or Stock dividend, and
             other property distributed as a dividend, shall be subject to
             restrictions and a risk of forfeiture to the same extent as the
             Restricted Stock with respect to which such Stock or other property
             has been distributed.

             (e) DEFERRED STOCK. The Committee and the Board each is authorized
to grant Deferred Stock to Participants, which are rights to receive Stock,
cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:

                 (i) AWARD AND RESTRICTIONS. Satisfaction of an Award of
             Deferred Stock shall occur upon expiration of the deferral period
             specified for such Deferred Stock by the Committee or the Board
             (or, if permitted by the Committee or the Board, as elected by the
             Participant). In addition, Deferred Stock shall be subject to such
             restrictions (which may include a risk of forfeiture) as the
             Committee or the Board may impose, if any, which restrictions may
             lapse at the expiration of the deferral period or at earlier
             specified times (including based on achievement of performance
             goals and/or future service requirements), separately or in
             combination, in installments or otherwise, as the Committee or the
             Board may determine. Deferred Stock may be satisfied by delivery of
             Stock, cash equal to the Fair Market Value of the specified number
             of shares of Stock covered by the Deferred Stock, or a combination
             thereof, as determined by the Committee or the Board at the date of
             grant or thereafter. Prior to satisfaction of an Award of Deferred
             Stock, an Award of Deferred Stock carries no voting or dividend or
             other rights associated with share ownership.

                 (ii) FORFEITURE. Except as otherwise determined by the
             Committee or the Board, upon termination of a Participant's
             employment during the applicable deferral period thereof to which
             forfeiture conditions apply (as provided in the Award agreement
             evidencing the Deferred Stock), the Participant's Deferred Stock
             that is at that time subject to deferral (other than a deferral at
             the election of the Participant) shall be forfeited; provided that
             the Committee or the Board may provide, by rule or regulation or in
             any Award agreement, or may determine in any individual case, that
             restrictions or forfeiture conditions relating to Deferred Stock
             shall be waived in whole or in part in the event of terminations
             resulting from specified causes, and the Committee or the Board may
             in other cases waive in whole or in part the forfeiture of Deferred
             Stock.

                 (iii) DIVIDEND EQUIVALENTS. Unless otherwise determined by the
             Committee or the Board at date of grant, Dividend Equivalents on
             the specified number of shares of Stock covered by an Award of
             Deferred Stock shall be either (A) paid with respect to such
             Deferred Stock at the dividend payment date in cash or in shares of
             unrestricted Stock having a Fair Market Value equal to the amount



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             of such dividends, or (B) deferred with respect to such Deferred
             Stock and the amount or value thereof automatically deemed
             reinvested in additional Deferred Stock, other Awards or other
             investment vehicles, as the Committee or the Board shall determine
             or permit the Participant to elect.

             (f) BONUS STOCK AND AWARDS IN LIEU OF OBLIGATIONS. The Committee
and the Board each is authorized to grant Stock as a bonus, or to grant Stock or
other Awards in lieu of Company obligations to pay cash or deliver other
property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Participants subject to Section 16 of the Exchange
Act, the amount of such grants remains within the discretion of the Committee to
the extent necessary to ensure that acquisitions of Stock or other Awards are
exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards
granted hereunder shall be subject to such other terms as shall be determined by
the Committee or the Board.

             (g) DIVIDEND EQUIVALENTS. The Committee and the Board each is
authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.

             (h) OTHER STOCK-BASED AWARDS. The Committee and the Board each is
authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the Board shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).

             7. CERTAIN PROVISIONS APPLICABLE TO AWARDS.

             (a) STAND-ALONE, ADDITIONAL, TANDEM, AND SUBSTITUTE AWARDS. Awards
granted under the Plan may, in the discretion of the Committee or the Board, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any subsidiary, or any business entity to be acquired by the Company or
a subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award or award, the Committee or the Board shall require
the surrender of such other Award or award in consideration for the grant of the
new Award. In addition, Awards may be granted in lieu of cash compensation,
including in lieu of cash amounts payable under other plans of the Company or
any subsidiary, in which the value of Stock subject to the Award is equivalent
in value to the cash compensation (for example, Deferred Stock or Restricted
Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair Market
Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price "discounted" by
the amount of the cash compensation surrendered).




                                       8
<PAGE>   9



             (b) TERM OF AWARDS. The term of each Award shall be for such period
as may be determined by the Committee or the Board; provided that in no event
shall the term of any Option or SAR exceed a period of ten years (or such
shorter term as may be required in respect of an ISO under Section 422 of the
Code).

             (c) FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS. Subject to
the terms of the Plan and any applicable Award agreement, payments to be made by
the Company or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee or the Board
shall determine, including, without limitation, cash, Stock that have been held
for at least 6 months, other Awards or other property, and may be made in a
single payment or transfer, in installments, or on a deferred basis. The
settlement of any Award may be accelerated, and cash paid in lieu of Stock in
connection with such settlement, in the discretion of the Committee or the Board
or upon occurrence of one or more specified events (in addition to a Change in
Control). Installment or deferred payments may be required by the Committee or
the Board (subject to Section 10(e) of the Plan) or permitted at the election of
the Participant on terms and conditions established by the Committee or the
Board. Payments may include, without limitation, provisions for the payment or
crediting of a reasonable interest rate on installment or deferred payments or
the grant or crediting of Dividend Equivalents or other amounts in respect of
installment or deferred payments denominated in Stock.

             (d) EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the intent of
the Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by a Participant who is subject
to Section 16 of the Exchange Act is subject to liability under Section 16(b)
thereof (except for transactions acknowledged in writing to be non-exempt by
such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b). In addition, the purchase price of any
Award conferring a right to purchase Stock shall be not less than any specified
percentage of the Fair Market Value of Stock at the date of grant of the Award
then required in order to comply with Rule 16b-3.

             8. PERFORMANCE AND ANNUAL INCENTIVE AWARDS.

             (a) PERFORMANCE CONDITIONS. The right of a Participant to exercise
or receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee or
the Board. The Committee or the Board may use such business criteria and other
measures of performance as it may deem appropriate in establishing any
performance conditions, and may exercise its discretion to reduce the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 8(b) and 8(c) hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Code Section 162(m). If and to the
extent required under Code Section 162(m), any power or authority relating to a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.

             (b) PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES. If
and to the extent that the Committee determines that a Performance Award to be
granted to an Eligible Person who is designated by the Committee as likely to be
a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(b).

                 (i) PERFORMANCE GOALS GENERALLY. The performance goals for such
             Performance Awards shall consist of one or more business criteria
             and a targeted level or levels of performance with respect to each
             of such criteria, as specified by the Committee consistent with
             this Section 8(b). Performance goals shall be objective and shall
             otherwise meet the requirements of Code Section 162(m) and
             regulations thereunder including the requirement that the level or
             levels of performance targeted by the Committee result in the
             achievement of performance goals being "substantially uncertain."
             The Committee may determine that such Performance Awards shall be




                                       9
<PAGE>   10


             granted, exercised and/or settled upon achievement of any one
             performance goal or that two or more of the performance goals must
             be achieved as a condition to grant, exercise and/or settlement of
             such Performance Awards. Performance goals may differ for
             Performance Awards granted to any one Participant or to different
             Participants.

                 (ii) BUSINESS CRITERIA. One or more of the following business
             criteria for the Company, on a consolidated basis, and/or specified
             subsidiaries or business units of the Company (except with respect
             to the total stockholder return and earnings per share criteria),
             shall be used exclusively by the Committee in establishing
             performance goals for such Performance Awards: (1) total
             stockholder return; (2) such total stockholder return as compared
             to total return (on a comparable basis) of a publicly available
             index such as, but not limited to, the Standard & Poor's 500 Stock
             Index or the S&P Specialty Retailer Index; (3) net income; (4)
             pretax earnings; (5) earnings before interest expense, taxes,
             depreciation and amortization; (6) pretax operating earnings after
             interest expense and before bonuses, service fees, and
             extraordinary or special items; (7) operating margin; (8) earnings
             per share; (9) return on equity; (10) return on capital; (11)
             return on investment; (12) operating earnings; (13) working capital
             or inventory; and (14) ratio of debt to stockholders' equity. One
             or more of the foregoing business criteria shall also be
             exclusively used in establishing performance goals for Annual
             Incentive Awards granted to a Covered Employee under Section 8(c)
             hereof that are intended to qualify as "performanced-based
             compensation under Code Section 162(m).

                 (iii) PERFORMANCE PERIOD; TIMING FOR ESTABLISHING PERFORMANCE
             GOALS. Achievement of performance goals in respect of such
             Performance Awards shall be measured over a performance period of
             up to ten years, as specified by the Committee. Performance goals
             shall be established not later than 90 days after the beginning of
             any performance period applicable to such Performance Awards, or at
             such other date as may be required or permitted for
             "performance-based compensation" under Code Section 162(m).

                 (iv) PERFORMANCE AWARD POOL. The Committee may establish a
             Performance Award pool, which shall be an unfunded pool, for
             purposes of measuring Company performance in connection with
             Performance Awards. The amount of such Performance Award pool shall
             be based upon the achievement of a performance goal or goals based
             on one or more of the business criteria set forth in Section
             8(b)(ii) hereof during the given performance period, as specified
             by the Committee in accordance with Section 8(b)(iii) hereof. The
             Committee may specify the amount of the Performance Award pool as a
             percentage of any of such business criteria, a percentage thereof
             in excess of a threshold amount, or as another amount which need
             not bear a strictly mathematical relationship to such business
             criteria.

                 (v) SETTLEMENT OF PERFORMANCE AWARDS; OTHER TERMS. Settlement
             of such Performance Awards shall be in cash, Stock, other Awards or
             other property, in the discretion of the Committee. The Committee
             may, in its discretion, reduce the amount of a settlement otherwise
             to be made in connection with such Performance Awards. The
             Committee shall specify the circumstances in which such Performance
             Awards shall be paid or forfeited in the event of termination of
             employment by the Participant prior to the end of a performance
             period or settlement of Performance Awards.

             (c) ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED
EMPLOYEES. If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Annual Incentive Award shall be contingent
upon achievement of preestablished performance goals and other terms set forth
in this Section 8(c).



                                       10
<PAGE>   11



                 (i) ANNUAL INCENTIVE AWARD POOL. The Committee may establish an
             Annual Incentive Award pool, which shall be an unfunded pool, for
             purposes of measuring Company performance in connection with Annual
             Incentive Awards. The amount of such Annual Incentive Award pool
             shall be based upon the achievement of a performance goal or goals
             based on one or more of the business criteria set forth in Section
             8(b)(ii) hereof during the given performance period, as specified
             by the Committee in accordance with Section 8(b)(iii) hereof. The
             Committee may specify the amount of the Annual Incentive Award pool
             as a percentage of any such business criteria, a percentage thereof
             in excess of a threshold amount, or as another amount which need
             not bear a strictly mathematical relationship to such business
             criteria.

                 (ii) POTENTIAL ANNUAL INCENTIVE AWARDS. Not later than the end
             of the 90th day of each fiscal year, or at such other date as may
             be required or permitted in the case of Awards intended to be
             "performance-based compensation" under Code Section 162(m), the
             Committee shall determine the Eligible Persons who will potentially
             receive Annual Incentive Awards, and the amounts potentially
             payable thereunder, for that fiscal year, either out of an Annual
             Incentive Award pool established by such date under Section 8(c)(i)
             hereof or as individual Annual Incentive Awards. In the case of
             individual Annual Incentive Awards intended to qualify under Code
             Section 162(m), the amount potentially payable shall be based upon
             the achievement of a performance goal or goals based on one or more
             of the business criteria set forth in Section 8(b)(ii) hereof in
             the given performance year, as specified by the Committee; in other
             cases, such amount shall be based on such criteria as shall be
             established by the Committee. In all cases, the maximum Annual
             Incentive Award of any Participant shall be subject to the
             limitation set forth in Section 5 hereof.

                 (iii) PAYOUT OF ANNUAL INCENTIVE AWARDS. After the end of each
             fiscal year, the Committee shall determine the amount, if any, of
             (A) the Annual Incentive Award pool, and the maximum amount of
             potential Annual Incentive Award payable to each Participant in the
             Annual Incentive Award pool, or (B) the amount of potential Annual
             Incentive Award otherwise payable to each Participant. The
             Committee may, in its discretion, determine that the amount payable
             to any Participant as an Annual Incentive Award shall be reduced
             from the amount of his or her potential Annual Incentive Award,
             including a determination to make no Award whatsoever. The
             Committee shall specify the circumstances in which an Annual
             Incentive Award shall be paid or forfeited in the event of
             termination of employment by the Participant prior to the end of a
             fiscal year or settlement of such Annual Incentive Award.

             (d) WRITTEN DETERMINATIONS. All determinations by the Committee as
to the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards if and to the
extent required to comply with Code Section 162(m).

             (e) STATUS OF SECTION 8(B) AND SECTION 8(C) AWARDS UNDER CODE
SECTION 162(M). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance Awards or an Annual Incentive Award, as likely
to be a Covered Employee with respect to that fiscal year. If any provision of
the Plan or any agreement relating to such Performance Awards or Annual
Incentive Awards does not comply or is inconsistent with the requirements of
Code Section 162(m) or regulations thereunder, such provision shall be construed
or deemed amended to the extent necessary to conform to such requirements.



                                       11
<PAGE>   12


             9. CHANGE IN CONTROL.

             (a) EFFECT OF "CHANGE IN CONTROL." If and to the extent provided in
the Award, in the event of a "Change in Control," as defined in Section 9(b),
the following provisions shall apply:

                 (i) Any Award carrying a right to exercise that was not
             previously exercisable and vested shall become fully exercisable
             and vested as of the time of the Change in Control, subject only to
             applicable restrictions set forth in Section 10(a) hereof;

                 (ii) Limited SARs (and other SARs if so provided by their
             terms) shall become exercisable for amounts, in cash, determined by
             reference to the Change in Control Price;

                 (iii) The restrictions, deferral of settlement, and forfeiture
             conditions applicable to any other Award granted under the Plan
             shall lapse and such Awards shall be deemed fully vested as of the
             time of the Change in Control, except to the extent of any waiver
             by the Participant and subject to applicable restrictions set forth
             in Section 10(a) hereof; and

                 (iv) With respect to any such outstanding Award subject to
             achievement of performance goals and conditions under the Plan,
             such performance goals and other conditions will be deemed to be
             met if and to the extent so provided by the Committee in the Award
             agreement relating to such Award.

             (b) DEFINITION OF "CHANGE IN CONTROL. A "Change in Control" shall
be deemed to have occurred upon:

                 (i) Approval by the stockholders of the Company of a
             reorganization, merger, consolidation or other form of corporate
             transaction or series of transactions, in each case, with respect
             to which persons who were the stockholders of the Company
             immediately prior to such reorganization, merger or consolidation
             or other transaction do not, immediately thereafter, own more than
             50% of the combined voting power entitled to vote generally in the
             election of directors of the reorganized, merged or consolidated
             company's then outstanding voting securities, or a liquidation or
             dissolution of the Company or the sale of all or substantially all
             of the assets of the Company (unless such reorganization, merger,
             consolidation or other corporate transaction, liquidation,
             dissolution or sale (any such event being referred to as a
             "Corporate Transaction") is subsequently abandoned);

                 (ii) Individuals who, as of the date on which the Award is
             granted, constitute the Board (the "Incumbent Board") cease for any
             reason to constitute at least a majority of the Board, provided
             that any person becoming a director subsequent to the date on which
             the Award was granted whose election, or nomination for election by
             the Company's stockholders, was approved by a vote of at least a
             majority of the directors then comprising the Incumbent Board
             (other than an election or nomination of an individual whose
             initial assumption of office is in connection with an actual or
             threatened election contest relating to the election of the
             Directors of the Company, as such terms are used in Rule 14a-11 of
             Regulation 14A promulgated under the Securities Exchange Act) shall
             be, for purposes of this Agreement, considered as though such
             person were a member of the Incumbent Board; or

                 (iii) The acquisition (other than from the Company) by any
             person, entity or "group", within the meaning of Section 13(d)(3)
             or 14(d)(2) of the Securities Exchange Act, of more than 50% of
             either the then outstanding shares of the Company's Common Stock or
             the combined voting power of the Company's then outstanding voting
             securities entitled to vote generally in the election of directors
             (hereinafter referred to as the ownership of a "Controlling
             Interest") excluding, for this purpose, any acquisitions by (1) the
             Company or its Subsidiaries, (2) any person, entity or "group" that
             as of the date on which the Award is granted owns beneficial
             ownership (within the meaning of Rule 13d-3 promulgated under the
             Securities Exchange Act) of a Controlling Interest or (3) any
             employee benefit plan of the Company or its Subsidiaries.



                                       12
<PAGE>   13



             (c) DEFINITION OF "CHANGE IN CONTROL PRICE." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of cash and
fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.

             10. GENERAL PROVISIONS.

             (a) COMPLIANCE WITH LEGAL AND OTHER REQUIREMENTS. The Company may,
to the extent deemed necessary or advisable by the Committee or the Board,
postpone the issuance or delivery of Stock or payment of other benefits under
any Award until completion of such registration or qualification of such Stock
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Stock or other Company securities are listed or
quoted, or compliance with any other obligation of the Company, as the Committee
or the Board, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Stock or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations. The foregoing notwithstanding, in connection with a Change in
Control, the Company shall take or cause to be taken no action, and shall
undertake or permit to arise no legal or contractual obligation, that results or
would result in any postponement of the issuance or delivery of Stock or payment
of benefits under any Award or the imposition of any other conditions on such
issuance, delivery or payment, to the extent that such postponement or other
condition would represent a greater burden on a Participant than existed on the
90th day preceding the Change in Control.

             (b) LIMITS ON TRANSFERABILITY; BENEFICIARIES. No Award or other
right or interest of a Participant under the Plan, including any Award or right
which constitutes a derivative security as generally defined in Rule 16a-1(c)
under the Exchange Act, shall be pledged, hypothecated or otherwise encumbered
or subject to any lien, obligation or liability of such Participant to any party
(other than the Company or a Subsidiary), or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution or to
a Beneficiary upon the death of a Participant, and such Awards or rights that
may be exercisable shall be exercised during the lifetime of the Participant
only by the Participant or his or her guardian or legal representative, except
that Awards and other rights (other than ISOs and SARs in tandem therewith) may
be transferred to one or more Beneficiaries or other transferees during the
lifetime of the Participant, and may be exercised by such transferees in
accordance with the terms of such Award, but only if and to the extent such
transfers and exercises are permitted by the Committee or the Board pursuant to
the express terms of an Award agreement (subject to any terms and conditions
which the Committee or the Board may impose thereon, and further subject to any
prohibitions or restrictions on such transfers pursuant to Rule 16b-3). A
Beneficiary, transferee, or other person claiming any rights under the Plan from
or through any Participant shall be subject to all terms and conditions of the
Plan and any Award agreement applicable to such Participant, except as otherwise
determined by the Committee or the Board, and to any additional terms and
conditions deemed necessary or appropriate by the Committee or the Board.

             (c) ADJUSTMENTS. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee or the Board shall, in
such manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be



                                       13
<PAGE>   14



exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive
Awards and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any Subsidiary
or any business unit, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided that no such adjustment shall be
authorized or made if and to the extent that such authority or the making of
such adjustment would cause Options, SARs, Performance Awards granted under
Section 8(b) hereof or Annual Incentive Awards granted under Section 8(c) hereof
to Participants designated by the Committee as Covered Employees and intended to
qualify as "performance-based compensation" under Code Section 162(m) and the
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Code Section 162(m) and regulations thereunder.

             (d) TAXES. The Company and any Subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

                  (e) CHANGES TO THE PLAN AND AWARDS. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.

             (f) LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ of the Company or a Subsidiary; (ii) interfering in any way with the
right of the Company or a Subsidiary to terminate any Eligible Person's or
Participant's employment at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.



                                       14
<PAGE>   15



             (g) UNFUNDED STATUS OF AWARDS; CREATION OF TRUSTS. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.

             (h) NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify under
Code Section 162(m).

             (i) PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES. Unless
otherwise determined by the Committee or the Board, in the event of a forfeiture
of an Award with respect to which a Participant paid cash or other
consideration, the Participant shall be repaid the amount of such cash or other
consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

             (j) GOVERNING LAW. The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award agreement shall be
determined in accordance with the laws of the State of Delaware without giving
effect to principles of conflicts of laws, and applicable federal law.

             (k) PLAN EFFECTIVE DATE AND STOCKHOLDER APPROVAL; TERMINATION OF
PLAN. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) and 422, Rule
16b-3 under the Exchange Act, applicable NASDAQ requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may
be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.






                                       15