<PAGE>

                               VARLEN CORPORATION
                        1989 INCENTIVE STOCK OPTION PLAN
                          (as amended on May 14, 1999)

                                    ARTICLE I
                                     PURPOSE

            SECTION 1: Statement of Policy. The Board of Directors of VARLEN
CORPORATION believes that the maximum advantage to the Corporation can be
secured by establishing as close an identity as is feasible between the
interests of the Corporation and its Subsidiaries, and those of its or their
respective employees. The Board believes that it would be in the best interests
of the Corporation to adopt a 1989 Incentive Stock Option Plan which will
provide for the granting of both Incentive Stock Options (as defined in Section
2 of this Plan) and Non-Qualified Stock Options (as defined in Section 2 of this
Plan) and which will serve the function of providing a closer identification of
certain employees with the Corporation. Furthermore it will serve to retain
these employees in the service of the Corporation or its Subsidiaries and to
induce new executives and other key employees to become associated with the
Corporation or its Subsidiaries. It is the intent of the Board that the grant of
such Incentive Stock Options and Non-Qualified Stock Options shall be in
addition to any other compensation granted. It is for the accomplishment of
these several objectives that this Plan is formulated and adopted.

            SECTION 2: Definitions. When used in this Plan, unless the context
otherwise requires:

             (a) Affiliate. "Affiliate" shall mean any individual, corporation,
      partnership, association, joint-stock company trust, unincorporated
      association or other entity (other than the Corporation) that directly, or
      indirectly through one or more intermediaries, controls, or is controlled
      by, or is under common control with the Corporation.

            (b) Change of Control. "Change of Control" shall mean the occurrence
      of one of the following events:

                  (i) if any "person" or "group" as those terms are used in
            Sections 13(d) or 14(d) of the Exchange Act, other than a Exempt
            Person, is or becomes the "beneficial owner" (as defined in rule
            13d-3 under the Exchange Act), directly or indirectly, of securities
            of the Company representing 50% or more of the combined voting power
            of the Company's then outstanding securities; or

                  (ii) during any period of two consecutive years, individuals
            who at the beginning of such period constitute the Board and any new
            directors whose election by the Board or nomination for election by
            the Company's stockholders was approved by at least two-thirds of
            the directors then still in office who either were directors at the
            beginning of the period or whose election was previously so
            approved, cease for any reason to constitute a majority thereof; or

                  (iii) the stockholders of the Company approve a merger or
            consolidation of the Company with any other corporation, other than
            a merger or consolidation (A) which would result in all or a portion
            of the voting securities of the Company outstanding immediately
            prior thereto continuing to represent (either by remaining
            outstanding or by being converted into


                                       1
<PAGE>

            voting securities of the surviving entity) more than 50% of the
            combined voting power of the voting securities of the Company or
            such surviving entity outstanding immediately after such merger or
            consolidation or (B) following which the Company's chief executive
            officer and directors retain their positions with the surviving
            entity (and constitute at least a majority of the surviving entity's
            board of directors); or

                  (iv) the stockholders of the Company approve a plan of
            complete liquidation of the Company or an agreement for the sale or
            other disposition by the Company of all or substantially all the
            Company's assets, other than a sale to an Exempt Person;

      provided, however, that if the approval specified in clause (iii) or
      clause (iv) above is obtained but such transaction is terminated or
      abandoned by the parties thereto prior to its effectuation, then, from and
      after the date of such termination or abandonment, no Change of Control
      shall be deemed to have occurred by reason of such approval; and provided
      further, that no Change of Control shall be deemed to have occurred by
      reason of any event involving or arising out of a proceeding under Title
      11 of the United States Code (or the provisions of any future United
      States bankruptcy law), an assignment for the benefit of creditors or an
      insolvency proceeding under state or local law.

            (c) Code. "Code" shall mean the United States Internal Revenue Code
      of 1986, as amended from time to time, or any statutes succeeding thereto.

            (d) Committee. "Committee" shall mean the Compensation Committee
      hereinafter described in Section 3 of this Plan.

             (e) Common Stock. "Common Stock" and "Stock" shall each mean the
      Common Stock of the Corporation of the par value of $.10 per share.

             (f) Corporation. "Corporation" shall mean VARLEN CORPORATION, a
      Delaware corporation.

             (g) Directors. "Directors" and "Board of Directors" shall each mean
      the Board of Directors if the Corporation as constituted from time to
      time.

             (h) Disinterested Person. "Disinterested Person" shall mean an
      individual who is not at the time he exercises discretion in administering
      this Plan eligible and has not at any time within one (1) year prior
      thereto been eligible for selection as a person to whom stock options may
      be granted pursuant to this Plan or to whom stock may be allocated or to
      whom stock options or stock appreciation rights may be granted pursuant to
      any other plan of the Corporation or any of its Affiliates entitling the
      participants therein to acquire stock, stock options or stock appreciation
      rights of the Corporation or any of its Affiliates.

            (i) Exchange Act. "Exchange Act" shall mean the Securities Exchange
      Act of 1934, as amended, and the rules and regulations promulgated
      pursuant thereto.

            (j) Incentive Stock Options. "Incentive Stock Options" shall mean
      options which meet the requirements for Incentive Stock Options in Section
      422A of the Code.

            (k) New Option. "New Option" shall mean an option granted on or
      after May 14, 1999.


                                       2
<PAGE>

            (l) Non-Qualified Stock Options. "Non-Qualified Stock Options" shall
      mean stock options which do not meet the requirements for Incentive Stock
      Options, as defined in Paragraph (i) of this Section 2, and stock options
      which do meet such requirements but which the Committee designates as
      Non-Qualified Stock Options.

            (m) Old Option. "Old Option" shall mean an option granted prior to
      May 14, 1999.

            (n) Option Agreement. "Option Agreement" shall mean each Agreement
      referred to in Section 12 of this Plan between the Corporation and any
      person to whom an option is granted.

            (o) Optionees. "Optionees" shall mean those persons who receive
      Options under this Plan.

            (p) Options. "Options" shall mean options granted under this Plan.

            (q) Plan. "Plan" shall mean this 1989 Incentive Stock Option Plan
      adopted by the Board of Directors, as such Plan from time to time may be
      amended as herein provided.

            (r) Securities Act. "Securities Act" shall mean the Securities Act
      of 1933, as amended, and the rules and regulations promulgated pursuant
      thereto.

            (s) Subsidiary. "Subsidiary" shall mean any corporation (other than
      the Corporation) in an unbroken chain of corporations beginning with the
      Corporation if each of the corporations other than the last corporation in
      the unbroken chain owns stock possessing fifty percent (50%) or more of
      the total combined voting power of all classes of stock in one of the
      other corporations in such chain.

                                   ARTICLE II
                                 ADMINISTRATION

            SECTION 3: Committee.

            (a) This Plan shall be administered by a Compensation Committee, or
any other successor committee appointed by the Board of Directors, which shall
consist of such number (not less than three) of directors as the Board of
Directors shall determine, all of whom shall be Disinterested Persons. The
Committee shall have plenary authority in its discretion, but subject to the
express provisions of this Plan, (i) to determine the key employees to whom and
the time or times at which Options shall be granted, the number of shares to be
covered by each Option, and whether an Option shall be an Incentive Stock Option
or a Non-Qualified Stock Option; (ii) to interpret this Plan and to prescribe,
amend and rescind the rules and regulations relating to it; (iii) to determine
the terms and provisions of the respective Option Agreements (which need not be
identical), including without limitation such terms and provisions as may be
requisite in the judgment of the Committee (A) to cause the grant of the
Options, and the issuance of Common Stock upon exercise of the Options, pursuant
to this Plan to comply with the Securities Act and the applicable rules and
regulations thereunder, including, without limitation, to cause this Plan and
the Options and Common Stock to be registered on Form S-8 promulgated
thereunder, or any other appropriate form, (B) to provide for the reimbursement
of the Corporation for taxes paid or advanced in respect of the grant to
employees of Options or the issuance of Common Stock upon exercise of Options
under this Plan and (C) to set forth the form of restrictive legends, if any, to
be placed on certificates representing shares of Common Stock to be issued
pursuant to Options relating to obligations of the holders under, or to provide
notice of the applicability to such Common Stock of, the Federal and State


                                       3
<PAGE>

securities laws and the Code; and (iv) to make all other determinations deemed
necessary or advisable for the administration of this Plan.

            (b) Paragraph (a) of this Section 3 notwithstanding, the authority
vested in the Committee to administer this Plan may be exercised by the Board of
Directors as a whole acting in accordance with the By-laws of the Corporation
if, and only if, at the time such authority is exercised: (i) all members of the
Board of Directors are Disinterested Persons, (ii) a majority of the members of
the Board of Directors and a majority of directors acting on Plan matters are
Disinterested Persons or (iii) the Corporation is not the issuer of any "equity
security" (as such term is defined in the Exchange Act) subject to the
registration requirements of Section 12 of the Exchange Act.

            SECTION 4: Vacancies. If a member of the Committee for any reason
shall cease to serve, the vacancy may be filled by the Board of Directors.

            SECTION 5: Removal. Any member of the Committee may be removed at
any time, with or without cause, by the Board of Directors.

            SECTION 6: Chairman. The Board of Directors or the Committee may
select one of the members of the Committee as its Chairman.

            SECTION 7: Meetings. The Committee shall hold its meetings at such
times and places as it shall deem advisable. A majority of its members shall
constitute a quorum. All determinations of the Committee shall be made by a
majority of its members. Any decision or determination reduced to writing and
signed by all the members of the Committee shall be fully as effective as if it
had been made by the affirmative vote of a majority of its members at a meeting
duly called and held. The Committee may appoint a Secretary, shall keep minutes
of its meetings and shall make such rules and regulations for the conduct of its
business as it shall deem advisable.

                                   ARTICLE III
                                     OPTIONS

            SECTION 8: Shares Available. The Committee may, but shall not be
required to, allocate in accordance with this Plan both Incentive Stock Options
and Non-Qualified Stock Options to purchase not more than, in the aggregate,
200,000 shares of the Common Stock. Such shares may be authorized and unissued
shares or issued shares held in the Corporation's treasury. Such 200,000 shares
shall be computed prior to any adjustment resulting from stock dividends,
split-ups, reorganization, or other substitutions of securities for the present
Common Stock of the Corporation and upon the occurrence of any of the foregoing,
the aggregate number of shares available for allocation in accordance with this
Plan shall be appropriately and equitably adjusted in a manner similar to that
set forth in Section 25 hereof to make available for issuance under this Plan
the number of shares of Common Stock which would have been available had
allocation of an aggregate of 200,000 shares been made immediately prior to such
event.

            SECTION 9: Time for Granting of Options. Options may be granted by
the Committee pursuant to this Plan from time to time for a period beginning May
1, 1989 and ending April 30, 1999. Nothing herein shall be construed to prohibit
the granting of Options at different times to the same persons.

            SECTION 10: Persons Eligible. Persons eligible to receive Options
shall be such key employees (which term as used herein includes, without
limitation, officers) of the Corporation and its Subsidiaries as the


                                       4
<PAGE>

Committee in its sole discretion may select. However, a director of the
Corporation or of a Subsidiary who is not also an employee of the Corporation or
one of its Subsidiaries shall not be eligible to receive Options.

            SECTION 11: Number of Shares to be Optioned and Nature of Option.
Subject to Section 10 of this Plan, the total number of shares to be optioned to
any eligible person and whether an Option shall be an Incentive Stock Option or
a Non-Qualified Stock Option shall be determined by the Committee in its sole
discretion.

            SECTION 12: Form of Option Agreements. An Option Agreement signed by
the President, the Senior Vice President or a Vice President of the Corporation,
and attested by the Treasurer or Assistant Treasurer or Secretary or Assistant
Secretary of the Corporation, shall be issued to each person to whom an Option
is granted. The form and provisions of each Option Agreement shall be determined
by the Committee in accordance with the terms of this Plan. If any employee does
not execute an Option Agreement in the form prescribed by the Committee within
the later of (a) thirty (30) days from the grant thereof or (b) ten (10) days
after the receipt from the Corporation of an Option Agreement for execution, the
action of the Committee with respect to the Option granted to such employee
shall be of no further force or effect.

            SECTION 13: Duration of Options. The duration of each Option shall
be for such time as the Committee, in its sole discretion, may fix upon the
occasion of granting an Option; provided, however, an Option, whether an
Incentive Stock Option or a Non-Qualified Stock Option, by its terms will not
under any circumstances be exercisable more than ten (10) years (or such shorter
period, if any, as may be necessary to comply with the requirements of state
securities laws) from the date such Option is granted, except that, to the
extent provided in Section 18 of this Plan, a Non-Qualified Stock Option shall
be exercisable for a maximum of one (1) year following the death of an Optionee,
or the date on which he is determined to have a permanent physical or mental
disability, regardless of its original term.

            SECTION 14: Assignability of Options. Options and all rights
thereunder shall by their terms be non-assignable and non-transferable by the
holder of the option otherwise than by will or the laws of descent and
distribution, and shall be exercisable during the lifetime of the holder only by
the holder or his guardian or legal representative. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of any Option contrary to
the provisions of this Plan and any levy or any other attachment or similar
process upon an Option shall be null and void and without effect, and the Board
of Directors may, in its discretion, upon the happening of any such event,
terminate the Option forthwith. Nothing contained herein shall be deemed
inconsistent with the provisions hereinafter set forth pertaining to the
exercise of an Option by the estate of a deceased holder.

            SECTION 15: Option Price. The option price of the Stock subject to
an Incentive Stock Option shall not be less than the fair market value of the
Stock at the time the Incentive Stock Option is granted. The option price of the
Stock subject to a Non-Qualified Stock Option shall not be less than fifty
percent (50%) of the fair market value of the Stock at the time such
Non-Qualified Stock Option is granted; provided, however, that if such option
price is less than the fair market value of the Stock at the time such
Non-Qualified Stock Option is granted, the option price shall not be less than
the book value of the Stock at the time such Non-Qualified Stock Option is
granted as determined by the Committee. For the purposes of this Section 15, the
"fair market value" of the Stock shall be its fair market value determined as of
the business day prior to the date of grant of the Option by the Committee in
its good faith discretion.

                                   ARTICLE IV
                               EXERCISE OF OPTIONS


                                       5
<PAGE>

            SECTION 16: Terms of Exercise.

            (a) Each Option shall be exercisable in whole or in part as set
forth in the Option Agreement; provided, however, that no Option shall be
exercised as to less than twenty-five (25) shares of Common Stock at any one
time, unless the balance subject thereto at the time is less than twenty-five
(25) shares of Common Stock.

      (b) Although each Option Agreement may contain provisions providing for
      the exercisability of various portions of the Option granted thereunder at
      different time periods, each Old Option shall be exercisable prior to its
      expiration in accordance with the provisions of this Plan to the full
      extent thereof simultaneously with or at any time after a Change of
      Control.

            (c) Although each Option Agreement may contain provisions providing
for the exercisability of various portions of the Option granted thereunder at
different time periods, each New Option shall be exercisable prior to its
expiration in accordance with the provisions of this Plan to the full extent
thereof if there is a Change of Control and the Optionee is terminated from
being an employee of the Company or any of its Subsidiaries within one year
following such Change of Control. Subject to the remaining provisions of the
Plan, such New Options may be exercised simultaneous with or at any time after
such termination of employment.

            (d) Notwithstanding the provisions of Section 16(b) of this Plan, in
the event of a merger or consolidation in which the Corporation is a party but
not the surviving corporation, at the discretion of the Committee, each Option
shall either become fully exercisable with respect to all shares of Common Stock
subject to such Option immediately prior to (but subject to) the consummation of
the merger or consolidation, and shall remain so until the expiration of the
Option or as otherwise provided in Section 18 of this Plan, or the agreement
with respect to such merger or consolidation shall include a provision that
would automatically amend such Option to enable the Optionee, had such Option
been exercised in full immediately prior to the effectiveness of such merger or
consolidation, to acquire the same merger consideration in respect of the shares
of Common Stock issued upon exercise of the Option as a holder of Common Stock
of the Corporation immediately prior to such merger or consolidation would have
been entitled to receive.


            SECTION 17: Termination of Employment. In the event of the
termination for any reason of the employment of an Optionee (other than as
provided in Section 18 of this Plan), all Options granted to such Optionee which
have not been exercised by him prior to the time of such termination shall be
then terminated and thereafter may not be exercised. Options granted under this
Plan, however, shall not be affected by any change of employment so long as the
holder of the Option continues to be an employee of the Corporation or a
Subsidiary of the Corporation.

             SECTION 18: Death, Disability, Retirement or Termination of
Employment with Consent. As used herein, an Optionee's employment with the
Corporation shall be deemed to have been terminated "with consent" if the
Corporation or a Subsidiary has provided its express written consent to the
exercise of the Optionee's options following such termination. Notwithstanding
the provisions of Section 17 of this Plan, Options granted to an Optionee may be
exercised as follows:

             (a) In the event of the termination of the optionee's employment
with consent, then such Optionee's Option may be exercised, regardless of tax
consequences, to the extent then exercisable as provided in the Option Agreement
applicable to such Option (or, if so determined by the Committee in its sole
discretion,


                                       6
<PAGE>

up to the full extent thereof) at any time (i) within 90 days following such
termination if exercise by such Optionee during such period would not violate
Section 16(b) of the Exchange Act, or (ii) within 190 days following such
termination if exercise by such Optionee within 90 days following such
termination would violate Section 16(b) of the Exchange Act, but in any event
not thereafter.

            (b) In the event of the termination of the Optionee's employment
resulting from the Optionee's retirement under one or more of the Corporation's
retirement plans including, without limitation, any early retirement permitted
under such plans, then such Optionee's Options may be exercised, regardless of
tax consequences, to the full extent thereof at any time (i) within 90 days
following such termination if exercise by such Optionee during such period would
not violate Section 16(b) of the Exchange Act, or (ii) within 190 days following
such termination if exercise by such Optionee within 90 days following such
termination would violate Section 16(b) of the Exchange Act, but in any event
not thereafter, or (iii) at such later date as determined in the discretion of
the Committee.

            (c) In the event of the death or the permanent physical or mental
disability (as such disability shall be determined by a physician selected by
the Corporation) of the Optionee either (i) while employed by the Corporation or
a Subsidiary, or (ii) (with respect to a Non-Qualified Stock Option only) while
eligible to exercise his Option pursuant to Section 18(a) or (b) of this Plan
following the termination of his employment, then such Optionee's Option may be
exercised, to the full extent thereof, at any time within one (1) year following
the Optionee's death or such determination of physical or mental disability, by
the Optionee, the executors or administrators of the Optionee or by any person
who shall have acquired the Option from the Optionee by bequest or inheritance.

            (d) Notwithstanding the foregoing provisions, in no event may an
Option be exercised subsequent to the expiration of its term, except that a
Non-Qualified Stock Option shall be exercisable, to the extent provided in
Section 18(c) of this Plan, for a maximum of one (1) year following the death of
an Optionee, or the date on which he is determined to have a permanent physical
or mental disability, regardless of its original term.

            SECTION 19: How Exercisable.

            (a) An Option shall be exercisable by delivery of a duly signed
notice in writing to such effect and the full purchase price of the Stock
purchased pursuant to the exercise of the Option to the Treasurer of the
Corporation or to any other officer of the Corporation appointed by the
Committee for the purpose of receiving the same; provided, however, that no
Option issued pursuant to this Plan may be exercised at any time when the Option
or the granting or the exercise thereof violates any law or governmental order
or regulation. Delivery of the full purchase price shall be satisfied either:
(i) by payment in cash of the full purchase price, (ii) by tender of such number
of shares of Common Stock owned either (x) by the Optionee prior to exercise of
the Option or (y) with the consent of the Committee, by the Optionee as a result
of the exercise of the Option, as is equal in value (such value to be the fair
market value of such Stock, determined as of the business day prior to the date
of exercise of the Option by the Committee in its good faith discretion) to the
full purchase price or (iii) by delivery of any combination of cash and such
shares of Common Stock (valued as set forth above) which, in the aggregate, is
equal in value to the full purchase price, subject to compliance with applicable
securities laws.

            (b) An Option shall also be exercisable by Optionees (to the extent
such exercise would not violate Section 16(b) of the Exchange Act) by delivery
of a duly signed notice in writing to such effect (the "Exercise Notice") which
shall include irrevocable instructions to the Corporation to deliver the stock
certificates issuable in respect of such option exercise directly to a broker
named therein which has agreed to


                                       7
<PAGE>

participate in a "cashless" exercise on behalf of the Optionee. In connection
therewith, the Corporation shall acknowledge and, notwithstanding the provisions
of Section 20 hereof, forward a copy of the Exercise Notice to such broker and
the Corporation shall be authorized and entitled to deliver such stock
certificates directly to such broker against receipt of the exercise price and
any withholding taxes due in respect of such option exercise. The Committee
shall have the right to adopt such rules and regulations with respect to the
provisions of this paragraph as it deems appropriate.

            (c) In addition, the Committee shall have the right to require a
cash payment upon the exercise of any option in connection with any obligation
of the Corporation or a Subsidiary of the Corporation to withhold Federal, state
or local taxes (a "Withholding Obligation"). An Optionee may irrevocably elect
(the "Election"), subject to approval or disapproval by the Committee or the
Board of Directors and subject to the right of the Committee or the Board of
Directors to revoke its advance approval, to satisfy any Withholding Obligation
in connection with the exercise of the option granted to him by tender of such
number of shares of the Corporation's Common Stock (valued as set forth above)
owned either (x) by such Optionee prior to exercise of the Option or (y) with
the consent of the Committee, by the Optionee as a result of the exercise of the
Option, or a combination of such Common Stock (valued as set forth above) and
cash, which has a value equal to the full amount of the Withholding Obligation,
subject to compliance with applicable securities law; provided, however, if
required to permit compliance with Section 16(b) of the Exchange Act, that (i)
the Election is made either (A) no later than six (6) months prior to the date
on which exercise of such Option becomes taxable to the Optionee (the "Tax
Recognition Date"), (B) during the ten-day period beginning on the third
business day following, and ending on the twelfth business day following, the
date of release for publication of the Corporation's quarterly or annual summary
statements of sales and earnings, or (C) during such other period as may be
instead provided in Rule l6b-3(e)(3)(iii) promulgated pursuant to the Exchange
Act (or any successor rule) and (ii) the Election shall not be available with
respect to such Option to any extent during the first six (6) months of the term
thereof, except in the event death or disability of the Optionee occurs prior to
the expiration of such six-month period. If the Tax Recognition Date with
respect to the exercise of a Non-Qualified Stock Option will be a date other
than the date on which the Option is exercised, then (A) the Committee with the
cooperation of the Optionee shall estimate in good faith the amount of the
Withholding Obligation (the "Estimated Amount"), (B) the optionee shall deliver
(in conformity with any applicable Election) to the Corporation, on the date the
Optionee exercises the Option, cash, such number of shares of Common Stock
(valued as set forth above) or such combination of cash and Common Stock (valued
as set forth above) as is equal in value to the Estimated Amount, (C) the
Committee shall notify the Optionee in writing, within fifteen (15) days after
the Tax Recognition Date with respect to the exercise of the Option of the
amount of income recognized by the optionee and of the date which is the Tax
Recognition Date, (D) promptly after providing such notice, the Corporation
shall deliver to the Optionee (using the same method of payment as was used with
respect to payment of the Estimated Amount and in conformity with any applicable
Election) either (1) cash, shares of the Corporation's Common Stock or a
combination of cash and shares of the Corporation's Common Stock as is equal in
value to the amount, if any, by which the Estimated Amount exceeds the actual
Withholding Obligation, or (2) written notice of the amount, if any, by which
such actual Withholding Obligation exceeds the Estimated Amount, or (3) written
notice that the Estimated Amount and the amount of such actual Withholding
Obligation are equal, (E) the Optionee shall deliver (in conformity with any
applicable Election) to the Corporation within fifteen (15) days after the date
of the notice, if any, described in the preceding clause (D) (2) above, cash,
shares of the Corporation's Common Stock or a combination of cash and shares of
such Common Stock as is equal in value to the excess amount specified in such
notice, and (F) the value of any shares of the Corporation's Common Stock
delivered by the Corporation or the Optionee pursuant to the preceding clauses
(D) or (E) shall be the fair market value of such shares, determined, as of the
business day immediately prior to the Tax Recognition Date, by the Committee in
its good faith discretion.


                                       8
<PAGE>

             (d) Whenever all or any portion of (i) the purchase price payable
upon exercise of an Option or (ii) the Withholding Obligation of the Corporation
or a Subsidiary of the Corporation is paid by the delivery of shares of the
Corporation's Common Stock, tender of such shares shall be accompanied by a duly
executed stock power and by payment of the requisite stock transfer tax, if any.
The Committee may also require the Optionee to make such representations as to
his title, authority to transfer such title and any other facts as it may deem
appropriate.

            SECTION 20: Issuance of Shares. Within a reasonable time after the
exercise of an Option in accordance with its terms, the Corporation shall cause
to be delivered to the purchaser a certificate for the shares of Stock purchased
pursuant to the exercise of the Option.

            SECTION 21: Stockholder Rights of Optionee. No person entitled to
exercise any Option granted under this Plan shall have any rights or privileges
of a stockholder of the Corporation in respect of any shares issuable upon
exercise of such Option until certificates representing such shares shall have
been issued and delivered.

            SECTION 22: Termination of Options. Any Option not exercised within
the period fixed for its exercise in Section 13 of this Plan and this Article IV
shall terminate and become null and void.

            SECTION 23: Unexercised Options. Stock covered by Options which have
terminated in accordance with the provision of this Plan, to the extent to which
such Options have not been exercised, may be treated by the Committee as Stock
which is eligible for other and further granting of Options in accordance with
the terms of this Plan.

                                    ARTICLE V
                           NOT AN EMPLOYMENT CONTRACT

            SECTION 24: Not an Employment Contract. Nothing in this Plan or in
any Option granted pursuant to this Plan shall confer on an individual any right
to continue in the employ of the Corporation or any Subsidiary or interfere in
any way with the right of the Corporation or such Subsidiary at any time to
terminate or modify the terms or conditions of the employment of the holder of
the Option.

                                   ARTICLE VI
                            RECAPITALIZATION, MERGER,
                        CONSOLIDATION AND REORGANIZATION

            SECTION 25:  Change in Common Stock.

             (a) Appropriate and equitable adjustment shall be made in the
number of shares of Common Stock subject to each outstanding Option, or the
option prices or both, in the event of any changes in the outstanding Common
Stock by reason of Stock dividends, stock splits, recapitalizations,
reorganizations, mergers, consolidations, sales or exchanges of assets,
combinations or exchanges of shares or offerings of subscription rights, it
being the purpose of this provision to insure that an Option shall be adjusted
to give the Optionee, upon exercise of his Option, rights equivalent to the
rights of a person who had held shares of Common Stock in the amount subject to
the Option at the time the Option is granted. In applying this provision, an
adjustment shall be made for any changes occurring after May 1, 1989, the
effective date of this Plan.


                                       9
<PAGE>

            (b) In the event of a change in the Common Stock of the Corporation
as presently constituted, which is limited to a change of the par value status
of any or all of its authorized shares, the shares resulting from any such
change shall be deemed to be Common Stock or Stock within the meaning of this
Plan.

            (c) To the extent that the foregoing adjustments relate to stock or
securities of the Corporation, such adjustments shall be made by the Committee,
whose determination in that respect shall be final, binding and conclusive.

            SECTION 26: Dissolution or Liquidation. A dissolution or liquidation
of the Corporation shall cause each outstanding Option to terminate except as
provided in any Option Agreement.

            SECTION 27: Rights of Optionees and the Corporation.

            (a) Except as hereinbefore expressly provided in this Article VI, an
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class or the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by reason
of any dissolution, liquidation, merger, or consolidation or spinoff of assets
or stock of another corporation, and any issue by the Corporation of shares of
stock of any class or securities convertible into shares of stock of any class
shall not affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to any Option.

            (b) The grant of an Option pursuant to this Plan shall not affect in
any way the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes in its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell or
transfer all or any part of its business or assets.

            SECTION 28: Compliance With Securities Act. The Corporation may
postpone the issuance and delivery of shares upon any exercise of any Option
until (a) the admission of such shares to listing on any stock exchange on which
shares of the Corporation of the same class are then listed and the completion
of such registration or other qualification of such shares under any state or
Federal law, rule or regulation as the Corporation shall determine to be
necessary or advisable, (b) insofar as any local Blue Sky law might affect the
issuance of such shares, either the local Blue Sky Commission shall have ruled
or counsel to the Corporation shall have advised that the issue is not subject
to such local law or that such shares shall have been qualified under such law,
(c) counsel to the Corporation shall have advised either that the issuance of
such shares does not require registration under any Federal securities act or
that any such registration as may be required shall be effective as of the time
of issuance of such shares, (d) the employee to whom the Option is granted shall
have represented and agreed in writing that any shares purchased pursuant to the
Option are being purchased for investment and not with a view to the
distribution or resale thereof; provided, however, that an Optionee making such
representation and agreement may be released by the Corporation at its
discretion from such representation and agreement upon the shares being
registered or qualified in such manner as may be legally required at any time,
and (e) the Committee shall have been advised by counsel that all applicable
legal requirements pertaining to the issuance of such shares, including any
requirements of the Securities Act, have been complied with. Any person
exercising an option shall make such representations and furnish such
information as may be appropriate to permit the Corporation, in the light of the
then existence or nonexistence of an effective Registration Statement under the
Securities Act, with respect to such shares, to issue the shares in compliance
with the provisions of that or any comparable law. The Corporation shall not
have any liability with respect to any Option the exercise of which is prevented
by the provisions of this Section 28.


                                       10
<PAGE>

                                   ARTICLE VII
                    AMENDMENT, TERMINATION AND INTERPRETATION

            SECTION 29: Amendment and Termination. This Plan shall terminate on
April 30, 1999. The Board of Directors or the Committee may at any time prior to
that date terminate or from time to time amend this Plan and the terms and
conditions thereof as to Stock which is not then the subject matter of Options
granted pursuant to the terms of this Plan; and the Board of Directors or the
Committee, with the written consent of the affected holders of any Options
granted pursuant to this Plan, may at any time terminate or from time to time
amend this Plan and the terms and conditions of this Plan as it regards any such
Options held by any such consenting Optionees; provided, however, that if
required by law or by the applicable provisions of the securities exchange upon
which the Common Stock is listed, such amendments shall be conditioned upon
obtaining the approval of the stockholders of the Corporation.

            SECTION 30: Interpretation: A determination of the Committee as to
any question which may arise with respect to the interpretation of the
provisions of this Plan and of any Option or Option Agreement shall be final.

            SECTION 31: Rules and Regulations. The Committee may authorize and
establish such rules, regulations and revisions thereof not inconsistent with
the provisions of this Plan as it may determine advisable to make this Plan and
the Options effective and provide for their administration, and may take such
other actions with regard to this Plan and the Options as it shall deem
desirable to effect their purposes.

            SECTION 32: Evidence of Each Option. The Committee may include in
each agreement or document it may issue to the holder of any Option, evidencing
the existence of such Option given or granted pursuant to the terms of this
Plan, the text of this Plan by reference thereto in such certificate or
document; and in such event, all the terms of this Plan as it may exist and as
it may be amended from time to time shall be deemed included in such certificate
or document with the same force and effect as though this Plan were set forth in
its entirety in such agreement or document.

                                  ARTICLE VIII
                                  EFFECTIVENESS

            SECTION 33: Effectiveness of Plan. This Plan shall become effective
on May 1, 1989, subject, however, to approval by the stockholders of the
Corporation.

                                   ARTICLE IX
                                  MISCELLANEOUS

            SECTION 34: Substituted Options. Subject to the limitation in
Section 8 of this Plan on total shares available for Options, Options to
purchase shares of the Corporation's Common Stock may be granted under this Plan
on terms and conditions which differ from or conflict with the terms and
conditions set forth herein, provided that such Options are granted in
substitution for outstanding options held by persons who have become employees
of the Corporation or any of its Subsidiaries by reason of a corporate merger,
consolidation, acquisition of property or capital stock, separation,
reorganization or liquidation occurring after the date of adoption of this Plan.

            Nothing contained in this Plan shall be construed to limit the
authority of the Corporation to exercise its corporate rights and powers,
including, but not by way of limitation, the right of the Corporation to


                                       11
<PAGE>

grant or assume options for proper corporate purposes other than under this Plan
with respect to any employee or other person, firm, corporation or association.


                                       12