<PAGE>
 
                                                                    EXHIBIT 10.3

                        NOBEL EDUCATION DYNAMICS, INC.
                           1995 STOCK INCENTIVE PLAN

                         EFFECTIVE DATE: JUNE 21, 1995
      AS AMENDED:  JUNE 12, 1997, SEPTEMBER 19, 1997 AND AUGUST 31, 1998
<PAGE>
 
                               TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                   PAGE
                                                                   ----
<S>          <C>                                                   <C>
SECTION 1    Purpose...............................................   1

SECTION 2    Administration........................................   1

SECTION 3    Eligibility...........................................   2

SECTION 4    Stock.................................................   3

SECTION 5    Granting of Options to Key Employees..................   3

SECTION 6    Granting of NQSOs to Outside Directors................   4

SECTION 7    Annual Limit for ISOs.................................   4

SECTION 8    Options and SARs......................................   5

SECTION 9    Restricted Stock Awards...............................  10

SECTION 10   Unrestricted Stock Awards.............................  12

SECTION 11   Capital Adjustments...................................  12

SECTION 12   Change in Control.....................................  13

SECTION 13   Amendment or Discontinuance of the Plan...............  13

SECTION 14   Termination of Plan...................................  14

SECTION 15   Shareholder Approval..................................  14

SECTION 16   Miscellaneous.........................................  15
</TABLE>
<PAGE>
 
                        NOBEL EDUCATION DYNAMICS, INC.
                           1995 STOCK INCENTIVE PLAN
                           -------------------------


                                   SECTION 1
                                    PURPOSE
                                    -------

  This NOBEL EDUCATION DYNAMICS, INC. 1995 STOCK INCENTIVE PLAN ("Plan") is
intended to provide a means whereby NOBEL EDUCATION DYNAMICS, INC. ("Company")
and any Subsidiary of the Company (as hereinafter defined) may, through the
grant of incentive stock options and non-qualified stock options (collectively
"Options"), stock appreciation rights ("SARs"), stock subject to restrictions
("Restricted Stock") and stock not subject to restrictions ("Unrestricted
Stock") to Key Employees and Outside Directors (both as defined in Section 3),
attract and retain such Key Employees and Outside Directors and motivate such
individuals to exercise their best efforts on behalf of the Company and of any
Subsidiary.

  As used in the Plan, the term "incentive stock option" ("ISO") means an Option
which qualifies as an incentive stock option within the meaning of section 422
of the Internal Revenue Code of 1986, as amended from time to time (the "Code"),
at the time it is granted and which is either designated as an ISO in the Option
Agreement (as hereinafter defined) covering such Option or which is designated
as an ISO by the Committee (as defined in Section 2 hereof) at the time of
grant.  The term "non-qualified stock option" ("NQSO") means any other Option
granted under the Plan.  The term "Subsidiary" means any corporation (whether or
not in existence at the time the Plan is adopted) which, at the time an Award is
granted, is a subsidiary of the Company under the definition of "subsidiary
corporation" contained in section 424(f) of the Code, or any successor thereto.


                                   SECTION 2
                                ADMINISTRATION
                                --------------

  The Plan shall be administered by the Company's Compensation Committee (the
"Committee"), which shall consist of two or more Outside Directors who shall be
appointed by, and shall serve at the pleasure of, the Company's Board of
Directors (the "Board").  Each member of the Committee, while serving as such,
shall be deemed to be acting in his capacity as a director of the Company.
Except as otherwise permitted under Section 6 and under section 16(b) of the
Securities Exchange Act of 1934 (the "Exchange Act"), and paragraph (c)(2)(i) of
Rule 16b-3 thereunder, no member of the Committee shall be granted, nor shall
have been granted, Awards (as defined below) pursuant to the Plan or equity
securities (within the meaning of 17 C.F.R. (S)240.16a-1(d)) pursuant to any
other plan of the Company or of any of its affiliates, as defined in or under
the Exchange Act, at any time during the period commencing with the date which
is one year prior to the date his service on the Committee began and ending on
the date which is one day after the date on which his service on the Committee
ceased.  Each member of the Committee shall also be an "outside director" within
the meaning of Prop. Treas. Reg. (S) 1.162-27(e)(3), or any successor thereto.
<PAGE>
 
  The Committee shall have full and final authority in its absolute discretion,
subject to the terms of the Plan, to select the Key Employees to be granted
ISOs, NQSOs, SARs, Restricted Stock and Unrestricted Stock (collectively
"Awards") under the Plan, to grant Awards on behalf of the Company, and to set
the date of grant and the other terms of such Awards.  With respect to the
eligibility of Outside Directors, the Plan is intended to comply with Rule 16b-3
and its successors promulgated under the Exchange Act as a "formula award" plan
described in Rule 16b-3(c)(2)(ii), and any provision of this Plan applicable to
Outside Directors that is to the contrary shall be deemed null and void.
Consequently, the award of Options to Outside Directors shall be as set forth in
Section 6, and the Committee shall not have any discretionary authority with
respect thereto.

  The Committee may correct any defect, supply any omission and reconcile any
inconsistency in the Plan and in any Award granted hereunder in the manner and
to the extent it shall deem desirable.  The Committee also shall have the
authority to establish such rules and regulations, not inconsistent with the
provisions of the Plan, for the proper administration of the Plan, and to amend,
modify or rescind any such rules and regulations, and to make such
determinations and interpretations under, or in connection with, the Plan, as it
deems necessary or advisable.  All such rules, regulations, determinations and
interpretations shall be binding and conclusive upon the Company, its
shareholders and all officers and employees and former officers and employees,
and upon their respective legal representatives, beneficiaries, successors and
assigns and upon all other persons claiming under or through any of them.

  No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Award granted
hereunder.

                                   SECTION 3
                                  ELIGIBILITY
                                  -----------

  (a) IN GENERAL.  Key Employees and Outside Directors shall be eligible to
      ----------                                                           
receive Awards under the Plan.  Key Employees and Outside Directors who have
been granted an Award under the Plan shall be referred to as "Grantees."  More
than one Award may be made to a Grantee under the Plan.

  (b) KEY EMPLOYEES.  Key Employees are (1) officers of the Company or a
      -------------                                                     
Subsidiary, (2) school principals, center directors, and regional managers of
the Company or a Subsidiary, and (3) any other employees of the Company or a
Subsidiary so designated by the Committee.  Key Employees shall be eligible to
receive any type of Award available under the Plan.

  (c) OUTSIDE DIRECTORS.  Outside Directors are directors of the Company who are
      -----------------                                                         
not officers or employees thereof.  Outside Directors shall only be eligible to
receive NQSOs pursuant to Section 6.

                                       2
<PAGE>
 
                                   SECTION 4
                                     STOCK
                                     -----

          The number of common shares of the Company, par value $.001 per share
("Common Shares"), that may be subject to Awards under the Plan shall be 750,000
shares (such number of shares reflecting adjustment for effectiveness of the
Company's Plan of Recapitalization effected on September 28, 1995), subject to
adjustment as hereinafter provided; provided that no Key Employee shall receive
Options for more than 40,000 Common Shares (such number of shares also
reflecting adjustment for effectiveness of the Company's Plan of
Recapitalization) during any calendar year (i.e., any period from January 1
through December 31 of the same year).  Common Shares issuable under the Plan
may be authorized but unissued shares or reacquired shares, as the Company may
determine from time to time.

          Any Common Shares subject to an Option which expires or otherwise
terminates for any reason whatever (including, without limitation, the Key
Employee's surrender thereof) without having been exercised, and any shares of
Restricted Stock which are forfeited, shall continue to be available for the
granting of Awards under the Plan; provided, however, that (a) if an Option is
cancelled, the Common Shares covered by the cancelled Option shall be counted
against the maximum number of shares specified in this Section 4 for which
Options may be granted to a single Key Employee, and (b) if the exercise price
of an Option is reduced after the date of grant, the transaction shall be
treated as a cancellation of the original Option and the grant of a new Option
for purposes of counting the maximum number of shares for which Options may be
granted to a Key Employee.  Common Shares subject to an Option cancelled upon
the exercise of a SAR shall not again be available for Awards under the Plan.


                                   SECTION 5
                     GRANTING OF OPTIONS TO KEY EMPLOYEES
                     ------------------------------------

          From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Employees under the Plan such Options as it determines are warranted,
subject to the limitations of the Plan; provided, however, that grants of ISOs
and NQSOs shall be separate and not in tandem.  The granting of an Option under
the Plan shall not be deemed either to entitle the Key Employee to, or to
disqualify the Key Employee from, any other Awards under the Plan.  In making
any determination as to whether a Key Employee shall be granted an Option, the
type of Option to be granted, and the number of Common Shares to be covered by
the Option, the Committee shall take into account the duties of the Key
Employee, his present and potential contributions to the success of the Company
or a Subsidiary, the tax implications to the Company and the Key Employee of any
Options granted, and such other factors as the Committee shall deem relevant in
accomplishing the purposes of the Plan.  Moreover, the Committee may provide in
the Option Agreement that the Option may be exercised only if certain
conditions, as determined by the Committee, are fulfilled.

                                       3
<PAGE>
 
                                   SECTION 6
                    GRANTING OF NQSOS TO OUTSIDE DIRECTORS
                    --------------------------------------

          As of the date 90 days following the close of each fiscal year of the
Company ("Base Fiscal Year") commencing with the fiscal year ending June 30,
1999, until the expiration or earlier suspension or discontinuance of the Plan,
each individual serving as an Outside Director on such date shall be granted a
NQSO to purchase 2,000 Common Shares (such number of shares reflecting
adjustment for effectiveness of the Company's Plan of Recapitalization) (as
adjusted pursuant to section 11, if necessary), provided that (a) the individual
served as a director for the entire Base Fiscal Year, and (b) the Company's pre-
tax income for the Base Fiscal Year exceeds by at least 20% the Company's pre-
tax income for the previous fiscal year, as calculated in accordance with
generally accepted accounting principles ("GAAP").  Outside Directors shall also
retain NQSOs which have been granted to them under the Plan in 1996 and 1997.

                                   SECTION 7
                             ANNUAL LIMIT FOR ISOS
                             ---------------------

          (a) ANNUAL LIMIT. The aggregate Fair Market Value (determined as of
              ------------                                                   
the date the ISO is granted) of the Common Shares with respect to which ISOs
become exercisable for the first time by a Key Employee during any calendar year
(under this Plan and any other ISO plan of the Company or any parent corporation
(within the meaning of section 424(e) of the Code ("Parent")) or Subsidiary)
shall not exceed $100,000.  The term "Fair Market Value" shall mean the value of
the Common Shares arrived at by a good faith determination of the Committee and
shall be:

          (1) The mean between the highest and lowest quoted selling price, if
     there is a market for the Common Shares on a registered securities exchange
     or in an over the counter market, on the date specified;

          (2) The weighted average of the means between the highest and lowest
     sales on the nearest date before and the nearest date after the specified
     date, if there are no such sales on the specified date but there are such
     sales on dates within a reasonable period both before and after the
     specified date;

          (3) The mean between the bid and asked prices, as reported by the
     National Quotation Bureau on the specified date, if actual sales are not
     available during a reasonable period beginning before and ending after the
     specified date; or

          (4) Such other method of determining Fair Market Value as shall be
     authorized by the Code, or the rules or regulations thereunder, and adopted
     by the Committee.

          Where the Fair Market Value of Common Shares is determined under (2)
     above, the average of the means between the highest and lowest sales on the
     nearest date before and the nearest date after the specified date shall be
     weighted inversely by the respective numbers of trading days between the
     dates of reported sales and the specified date (i.e., the valuation date),
                                                     ----                      
     in accordance with Treas. Reg. (S) 20.2031-2(b)(1), or any successor
     thereto.

                                       4
<PAGE>
 
     (b) OPTIONS OVER ANNUAL LIMIT.  If an Option intended as an ISO is granted
         -------------------------                                             
to a Key Employee and such Option may not be treated in whole or in part as an
ISO pursuant to the limitation in (a) above, such Option shall be treated as an
ISO to the extent it may be so treated under such limitation and as a NQSO as to
the remainder.  For purposes of determining whether an ISO would cause such
limitation to be exceeded, ISOs shall be taken into account in the order
granted.

     (c) NQSOS, SARS, RESTRICTED STOCK AND UNRESTRICTED STOCK. The annual limit
         ----------------------------------------------------                  
set forth above for ISOs shall not apply to NQSOs, SARs, Restricted Stock and
Unrestricted Stock.

                                   SECTION 8
                               OPTIONS AND SARS
                               ----------------

     (a) TERMS AND CONDITIONS OF OPTIONS.  The Options granted pursuant to the
         -------------------------------                                      
Plan shall include expressly or by reference the following terms and conditions,
as well as such other provisions not inconsistent with the provisions of this
Plan as the Committee shall deem desirable, and for ISOs granted under this
Plan, the provisions of section 422(b) of the Code:

          (1) NUMBER OF COMMON SHARES.  The Option Agreement shall state the
              -----------------------                                       
     number of Common Shares to which the Option pertains.

          (2)  PRICE.
               ----- 

               (A) KEY EMPLOYEES.  With respect to Options granted to Key
                   -------------                                         
          Employees, the Option exercise price shall be determined and fixed by
          the Committee in its discretion at the time of grant, but shall not be
          less 100% (110% in the case of an ISO granted to a more than 10%
          shareholder as provided in Subsection (10) below) of the Fair Market
          Value of the optioned Common Shares on the date the Option is granted.

               (B) OUTSIDE DIRECTORS.  With respect to Options granted to
                   -----------------                                     
          Outside Directors, the Option exercise price shall be the Fair Market
          Value of the optioned Common Shares on the date the Option is granted.

          (3)  TERM.
               ---- 

               (A) ISOS.  Subject to earlier termination as provided in
                   ----                                                
          Subsections (5), (6) and (7) below, the term of each ISO shall be not
          more than 10 years (5 years in the case of a more than 10% shareholder
          as provided in Subsection (10) below) from the date of grant.

               (B) NQSOS GRANTED TO KEY EMPLOYEES.  Subject to earlier
                   ------------------------------                     
          termination as provided in Subsections (5), (6) and (7) below, the
          term of each NQSO granted to a Key Employee shall be not more than 10
          years from the date of grant.

                                       5
<PAGE>
 
               (C) NQSOS GRANTED TO OUTSIDE DIRECTORS.  Subject to earlier
                   ----------------------------------                     
          termination as provided in Subsection (8) below, the term of each NQSO
          granted to an Outside Director shall be 10 years from the date of
          grant.

          (4)  EXERCISE.
               -------- 

               (A) OPTIONS GRANTED TO KEY EMPLOYEES.  Options granted to Key
                   --------------------------------                         
          Employees shall be exercisable in such installments and on such dates,
          commencing not earlier than 6 months from the later of the date of
          grant or the date the Plan is approved by the Company's shareholders,
          as the Committee may specify, provided that:

                      (i)  In the case of new Options granted to a Key Employee
               in replacement for options (whether granted under the Plan or
               otherwise) held by the Key Employee, the new Options may be made
               exercisable, if so determined by the Committee, in its
               discretion, at the earliest date the replaced options were
               exercisable; and

                     (ii)  The Committee may accelerate the exercise date of any
               outstanding Options granted to Key Employees in its discretion,
               if it deems such acceleration to be desirable.

               (B) OPTIONS GRANTED TO OUTSIDE DIRECTORS.  Options granted to
                   ------------------------------------                     
          Outside Directors shall be exercisable commencing six months after the
          later of the date of grant or the date the Plan is approved by the
          Company's shareholders.

               (C) GENERAL.  Any Common Shares, the right to the purchase of
                   -------                                                  
          which has accrued, under an Option may be purchased at any time up to
          the expiration or termination of the Option.  Exercisable Options may
          be exercised, in whole or in part, from time to time by giving written
          notice of exercise to the Company at its principal office, specifying
          the number of Common Shares to be purchased and accompanied by payment
          in full of the aggregate Option exercise price for such shares.  Only
          full shares shall be issued under the Plan, and any fractional share
          which might otherwise be issuable upon the exercise of an Option
          granted hereunder shall be forfeited.

               (D) MANNER OF PAYMENT.  The Option price of an Option granted to
                   -----------------                                           
          an Outside Director shall be payable in cash or its equivalent.

               The Option price of an Option granted to a Key Employee shall be
          payable:

                      (i)  In cash or its equivalent;

                     (ii)  In the case of an ISO, if the Committee, in its
               discretion, causes the Option Agreement so to provide, and in the
               case of a NQSO if the

                                       6
<PAGE>
 
               Committee, in its discretion, so determines at or prior to the
               time of exercise, in Common Shares previously acquired by the
               Grantee, provided that (1) if such shares were acquired through
               the exercise of an ISO and are used to pay the Option exercise
               price of an ISO, such shares have been held by the Key Employee
               for a period of not less than the holding period described in
               section 422(a)(1) of the Code on the date of exercise, or (2) if
               such shares were acquired through the exercise of a NQSO and are
               used to pay the Option exercise price of an ISO, or if such
               shares were acquired through exercise of a NQSO or of an option
               under a similar plan or through exercise of an ISO and are used
               to pay the Option exercise price of a NQSO, or if such shares
               were acquired under a SAR, or through the grant of Restricted or
               Unrestricted Stock, such shares have been held by the Key
               Employee for a period of more than 12 months on the date of
               exercise; or

                    (iii)  In the discretion of the Committee, in any
               combination of (i) and (ii) above.

               In the event such Option exercise price is paid, in whole or in
          part, with Common Shares, the portion of the Option exercise price so
          paid shall equal the Fair Market Value on the date of exercise of the
          Common Shares surrendered in payment of such Option exercise price.

          (5) EXERCISE UPON TERMINATION OF KEY EMPLOYEE. If a Key Employee's
              -----------------------------------------                     
     employment by the Company (and Subsidiaries) is terminated by either party
     prior to the expiration date fixed for his or her Option for any reason
     other than death or disability, such Option may be exercised, to the extent
     of the number of Common Shares with respect to which the Key Employee could
     have exercised it on the date of such termination, or to any greater extent
     permitted by the Committee, by the Key Employee at any time prior to the
     earlier of:

               (A) The expiration date specified in such Option; or

               (B) Three months after the date of such termination of 
          employment.

          (6)  EXERCISE UPON DISABILITY OF KEY EMPLOYEE. If a Key Employee shall
               ----------------------------------------
become disabled (within the meaning of section 22(e)(3) of the Code) during his
or her employment and, prior to the expiration date fixed for his or her Option,
his or her employment is terminated as a consequence of such disability, such
Option may be exercised, to the extent of the number of Common Shares with
respect to which the Key Employee could have exercised it on the date of such
termination, or to any greater extent permitted by the Committee, by the Key
Employee at any time prior to the earlier of:

               (A) The expiration date specified in such Option; or

               (B) One year after the date of such termination of employment.

                                       7
<PAGE>
 
          In the event of the Key Employee's legal disability, such Option may
     be so exercised by the Key Employee's legal representative.

          (7)  EXERCISE UPON DEATH OF KEY EMPLOYEE. If a Key Employee shall die
               -----------------------------------                             
     during his or her employment and prior to the expiration date fixed for his
     or her Option, or if a Key Employee whose employment is terminated for any
     reason shall die following his or her termination of employment but prior
     to the earliest of:

               (A)  The expiration date fixed for his or her Option;

               (B)  The expiration of the period determined under Subsections
          (5) and (6) above; or

               (C)  In the case of an ISO, three months following termination of
          employment,

     such Option may be exercised, to the extent of the number of Common Shares
     with respect to which the Key Employee could have exercised it on the date
     of his or her death, or to any greater extent permitted by the Committee,
     by the Key Employee's estate, personal representative or beneficiary who
     acquired the right to exercise such Option by bequest or inheritance or by
     reason of the death of the Key Employee, at any time prior to the earlier
     of:

                      (i)  The expiration date specified in such Option; or

                     (ii)  One year after the date of death.

          (8)  EXERCISE UPON TERMINATION OF OUTSIDE DIRECTOR'S SERVICE.  If an
               -------------------------------------------------------        
     Outside Director's service on the Board is terminated prior to the
     expiration date fixed for his or her Option, such Option may be exercised
     by the Outside Director at any time prior to the earlier of:

               (A) The expiration date specified in such Option; or

               (B) One year after such termination of service.

               Notwithstanding the above, if an Outside Director dies during
          this period, such Option may be exercised, to the extent of the number
          of Common Shares with respect to which the Outside Director could have
          exercised it on the date of his or her death, by the Outside
          Director's estate, personal representative or beneficiary who acquired
          the right to exercise such Option by bequest or inheritance or by
          reason of the death of the Outside Director, at any time prior to the
          earlier of:

                    (i)  The expiration date specified in such Option; or

                   (ii)  One year after the date of the Outside Director's
               death.

                                       8
<PAGE>
 
          (9)  RIGHTS AS A SHAREHOLDER. A Grantee shall have no rights as a
               -----------------------                                     
     shareholder with respect to any Common Shares covered by his or her Option
     until the issuance of a stock certificate to him or her for such shares.

          (10) TEN PERCENT SHAREHOLDER. If a Key Employee owns more than 10% of
               -----------------------                                         
     the total combined voting power of all shares of stock of the Company or of
     a Subsidiary or Parent at the time an ISO is granted to such Key Employee,
     the Option exercise price for the ISO shall be not less than 110% of the
     Fair Market Value of the optioned Common Shares on the date the ISO is
     granted, and such ISO, by its terms, shall not be exercisable after the
     expiration of five years from the date the ISO is granted.  The conditions
     set forth in this Subsection (10) shall not apply to NQSOs.

          (11) OPTION AGREEMENTS.  Options granted under the Plan shall be
               -----------------                                          
     evidenced by written documents ("Option Agreements") in such form as the
     Committee shall, from time to time, approve.  Option Agreements shall
     contain such provisions, not inconsistent with the provisions of the Plan
     for NQSOs granted pursuant to the Plan, and such conditions, not
     inconsistent with section 422(b) of the Code or the provisions of the Plan,
     for ISOs granted pursuant to the Plan, as the Committee shall deem
     advisable.  An Option Agreement shall specify whether the Option is an ISO
     or NQSO; provided, however, if the Option is not designated in the Option
     Agreement as an ISO or NQSO, the Option shall constitute an ISO if it
     complies with the terms of section 422 of the Code, and otherwise, it shall
     constitute a NQSO.  Each Grantee who receives an Option shall enter into,
     and be bound by, the terms of an Option Agreement.

     (b) SARS.  An Option Agreement may, in the discretion of the Committee,
         ----                                                               
include a provision under which a Key Employee shall have the right, in lieu of
exercising all or a portion of the Key Employee's Option, to elect instead to
receive an amount equal to the difference between the Fair Market Value of all,
or a specified number, of the Common Shares subject to such Option on the date
such right is exercised and the exercise price under such Option, such amount to
be paid in cash or in Common Shares (based on their Fair Market Value on the
date such right is exercised), or in a combination of cash and Common Shares, as
the Committee shall determine.  Such right is referred to in this Plan as a
stock appreciation right ("SAR").  Any SAR shall be exercisable only at a time
when the Option to which it is related is exercisable; provided, however, that
if the Key Employee is a director or officer of the Company within the meaning
of Section 16 of the Exchange Act, cash may be paid to the Key Employee upon the
exercise of a SAR only if the Key Employee exercises the SAR (by giving the
notice described in Section 8(a)(4)(C) hereof) during the period beginning on
the third business day following the release for publication of the Company's
quarterly and annual summary statements of sales and earnings, and ending on the
twelfth business day following such date.

     A SAR shall be granted in tandem with the related Option, and the Option-
SAR shall be considered exercised when, and to the extent that, either the
underlying Option or the SAR is exercised.  Any SAR shall be subject to the
following additional conditions:

                                       9
<PAGE>
 
          (1)  The SAR will expire no later than the termination of the Option
     to which it relates;

          (2)  The SAR will be transferable only if and when the underlying
     Option is transferable, and under the same conditions; and

          (3)  The SAR may be exercised only when there is a positive spread,
     i.e., when the Fair Market Value of the Common Shares subject to the Option
     ----                                                                       
     exceeds the exercise price of such Option.


                                   SECTION 9
                            RESTRICTED STOCK AWARDS
                            -----------------------

     From time to time until the expiration or earlier termination of the Plan,
the Committee may, on behalf of the Company, make such Restricted Stock Awards
under the Plan to Key Employees as it determines are warranted.  Restricted
Stock Awards shall be subject to the following terms and conditions, as well as
such other terms and conditions as the Committee may prescribe:

     (a)  VESTING PERIOD; CONDITIONS.  At the time of granting a Restricted
          --------------------------     
Stock Award, the Committee may establish one or more vesting periods ("Vesting
Periods") with respect to the Common Shares covered by the Award. The length of
any such Vesting Period(s) applicable to a Restricted Stock Award shall be
within the discretion of the Committee. At the time of grant, the Committee may
also establish such additional conditions to the payment of a Restricted Stock
Award ("Conditions") as it may deem advisable in its sole discretion, such as
the achievement of corporate or individual goals. Subject to the provisions of
this Section 9 and any other Conditions prescribed by the Committee, Common
Shares subject to a Restricted Stock Award shall vest in the Key Employee upon
the expiration of the Vesting Period with respect to such Common Shares. The
Committee may accelerate the vesting date of any unvested Common Shares subject
to a Restricted Stock Award in its discretion, if it deems such acceleration to
be desirable.

     (b)  ISSUANCE AND DELIVERY OF CERTIFICATES.  Upon the granting of a
          -------------------------------------                         
Restricted Stock Award, the Company may, if so determined by the Committee at
the time of the grant, issue certificates representing the Common Shares subject
to the Restricted Stock Award in the name of the Key Employee.  Any such Common
Shares shall bear a legend indicating that they are subject to the terms of the
Plan and the Restricted Stock Award Agreement (as hereinafter defined) and that
they may not be sold, exchanged, transferred, pledged, hypothecated or otherwise
disposed of except in accordance with the terms of the Plan and the Restricted
Stock Award Agreement.  Upon issuance of such certificates, the Key Employee
shall immediately execute a stock power or other instrument of transfer,
appropriately endorsed in blank, to be held with the certificates by the Company
pursuant to the terms of the Plan and the Restricted Stock Award Agreement.
Only full shares shall be issued, and any fractional shares which might
otherwise be issuable pursuant to a Restricted Stock Award shall be forfeited.
After the Key Employee becomes vested in Common Shares subject to the Restricted
Stock Award, the Company shall deliver the vested Common Shares to the Key
Employee or his or her beneficiary or estate, as applicable.

                                       10
<PAGE>
 
     (c)  RIGHTS AS A SHAREHOLDER.  If the Company issues certificates
          -----------------------                                     
representing the Common Shares subject to a Restricted Stock Award prior to the
expiration of the Vesting Period for the Common Shares subject to such Award or
prior to the satisfaction of the Conditions, if any, pertaining to such Award,
the Key Employee shall be entitled to receive dividends paid on such Common
Shares, shall have the right to vote such Common Shares, and shall have all
other shareholder's rights with respect to such Common Shares, except that (1)
the Key Employee will not be entitled to delivery of the stock certificate, (2)
the Company will retain custody of the Common Shares, and (3) the Common Shares
subject to the Restricted Stock Award will revert to the Company to the extent
all Vesting Periods and Conditions applicable to such Award are not satisfied.

     (d)  TERMINATION OF EMPLOYMENT.  At the time of granting a Restricted Stock
          -------------------------                                             
Award, the Committee shall specify in the Restricted Stock Award Agreement, the
manner of determining the number, if any, of the unvested Common Shares subject
to the Award which shall become vested in the Key Employee, or in his or her
beneficiary or estate, if the Key Employee's employment by the Company (and
Subsidiaries) is terminated prior to the later of the expiration of the Vesting
Period or the satisfaction of all of the Conditions with respect to such Common
Shares.  Any Restricted Stock Award Agreement may provide different vesting
provisions upon a Key Employee's termination due to death or disability.  Any
remaining unvested Common Shares covered by the Key Employee's Restricted Stock
Award shall immediately be forfeited upon termination of employment, except that
the Committee, if it determines that the circumstances warrant, may direct that
all or a portion of such remaining unvested Common Shares also be vested in the
Key Employee, or in his or her beneficiary or estate, subject to such further
terms and conditions, if any, as the Committee may determine.

     (e)  PAYMENT FOR RESTRICTED STOCK.  The Committee may, on behalf of the
          ----------------------------                                      
Company, grant Restricted Stock Awards under which the Key Employee shall not be
required to make any payment for the Restricted Stock or, in the alternative,
under which the Key Employee, as a condition to the Restricted Stock Award,
shall pay all (or any lesser amount than all) of the Fair Market Value of the
Common Stock, determined as of the date the Restricted Stock Award is granted.
If the latter, such purchase price shall be paid as provided in the Restricted
Stock Award Agreement.

     (f)  RESTRICTED STOCK AWARD AGREEMENT.  Restricted Stock Awards under the
          --------------------------------                                    
Plan shall be evidenced by written documents ("Restricted Stock Award
Agreements") in such form as the Committee shall, from time to time, approve.
Restricted Stock Award Agreements shall contain such provisions, not
inconsistent with the provisions of the Plan, as the Committee shall deem
advisable.  Each Key Employee granted a Restricted Stock Award shall enter into,
and be bound by the terms of, a Restricted Stock Award Agreement.

                                       11
<PAGE>
 
                                  SECTION 10
                           UNRESTRICTED STOCK AWARDS
                           -------------------------

     (a)  AWARDS OF UNRESTRICTED STOCK.  From time to time until the expiration
          ---------------------------- 
or earlier termination of the Plan, the Committee may, on behalf of the Company,
make such Unrestricted Stock Awards under the Plan to Key Employees as it
determines are warranted.

     (b)  REGISTRATION.  Each certificate for unrestricted Common Shares shall
          ------------
be registered in the name of the Key Employee and immediately be delivered to
him or her.


                                   SECTION 11
                              CAPITAL ADJUSTMENTS
                              -------------------

     The number of Common Shares which may be issued under the Plan, the maximum
number of Common Shares with respect to which Options may be granted to any Key
Employee under the Plan, both as stated in Section 4 hereof, the number of
Common Shares per NQSO granted to an Outside Director as stated in Section 6,
the number of Common Shares issuable upon the exercise of outstanding Options
under the Plan (as well as the Option exercise price per share under such
outstanding Options), and the number of Common Shares to be delivered upon the
vesting of outstanding Restricted Stock Awards (as well as the purchase price,
if any, for such Common Shares) shall, subject to the provisions of section
424(a) of the Code, be adjusted to reflect any stock dividend, stock split,
share combination, or similar change in the capitalization of the Company.

     In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Award shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options granted to Key Employees effective upon
closing of such corporate transaction if it determines that such termination is
in the best interests of the Company. If the Committee decides so to terminate
outstanding Options, the Committee shall give each Key Employee holding an
Option to be terminated not less than seven days' notice prior to any such
termination by reason of such a corporate transaction, and, at the closing of
such corporate transaction, such Options shall be terminated (unless previously
exercised) and the Company shall pay to each Key Employee who holds an Option so
terminated (except for any Option which terminated prior to the date of such
closing otherwise than by reason of such Committee action) an amount equal to
the consideration paid, or to be paid, per share of Common Stock to holders of
Common Stock in connection with such corporate transaction (as determined in
good faith by the Committee) less the applicable exercise price of the Option.
Further, as provided in Section 8(a)(4)(A)(ii) hereof, the Committee, in its
discretion, may accelerate, in whole or in part, the date on which any or all
Options granted to Key Employees become exercisable.

     The Committee also may, in its discretion, change the terms of any
outstanding Awards granted to Key Employees to reflect any such corporate
transaction, provided that, in the case of

                                       12
<PAGE>
 
ISOs, such change is excluded from the definition of a "modification" under
section 424(h) of the Code.


                                   SECTION 12
                               CHANGE IN CONTROL
                               -----------------

     Upon a Change in Control, the Committee (as it is constituted on the day
preceding the date of the Change in Control) may, in its discretion, accelerate
the vesting and exercisability of outstanding Options and SARs granted to Key
Employees and accelerate the vesting of Restricted Stock Awards granted to Key
Employees. "Change in Control" shall mean the point in time when any person (as
such term is used in Section 13 of the Exchange Act and the rules and
regulations thereunder and including any Affiliate or Associate of such person,
as defined in Rule 12b-2 under the Exchange Act, and any person acting in
concert with such person) directly or indirectly acquires or otherwise becomes
entitled to vote more than 50 percent of the voting power entitled to be cast at
elections for directors of the Company. At the discretion of the Committee, an
Option Agreement may include a provision that an Option will vest and become
exercisable upon a Change of Control and a Restricted Stock Award Agreement may
include a provision that the Restricted Stock Award will vest upon a Change of
Control.

                                   SECTION 13
                    AMENDMENT OR DISCONTINUANCE OF THE PLAN
                    ---------------------------------------

     (a)  IN GENERAL.  The Board from time to time may suspend or discontinue
          ----------
the Plan or amend it in any respect whatsoever, except that, without the
approval of the shareholders (given in the manner set forth in Subsection (b)
below): (1) the class of persons eligible to receive Awards shall not be changed
nor shall any other requirement as to eligibility for participation in the Plan
be materially modified; (2) the maximum number of Common Shares with respect to
which Awards may be granted under the Plan shall not be increased except as
permitted under Section 11; (3) the benefits accruing to individuals
participating in the Plan shall not be materially increased; (4) the duration of
the Plan under Section 14 shall not be extended; and (5) no amendment which
would require shareholder approval pursuant to Prop. Treas. Reg. (S) 1.162-
27(e)(4)(vi), or any successor thereto, may be made.

     (b)  MANNER OF SHAREHOLDER APPROVAL.
          ------------------------------ 

          (1)  The approval of shareholders must be by a majority of the
     outstanding Common Shares present, or represented, and entitled to vote at
     a meeting duly held in accordance with the applicable laws of the state of
     Delaware; and

          (2)  The approval of shareholders must occur --

               (i)  By a method and in a degree that would be treated as
          adequate under applicable state law in the case of an action requiring
          shareholder approval (i.e., an

                                       13
<PAGE>
 
          action on which shareholders would be entitled to vote if the action
          were taken at a duly held shareholders' meeting); or

               (ii) By a majority of the votes cast at a duly held shareholders'
          meeting at which a quorum representing a majority of all outstanding
          voting stock is, either in person or by proxy, present and voting on
          the Plan.

     (c)  AMENDMENTS AFFECTING OUTSIDE DIRECTORS.  Notwithstanding the
          --------------------------------------
foregoing, no amendment to any provision of the Plan that would affect (1) the
amount and price of Common Shares subject to NQSOs to be awarded to Outside
Directors, (2) the timing of such grants to Outside Directors, or (3) the
formula, if any, that determines the amount, price, and timing of NQSO grants to
Outside Directors, shall be made more than once every six months, other than to
comport with changes in the Code, the Employee Retirement Income Security Act,
or the rules promulgated thereunder.

     Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall terminate or affect the continued existence of rights created
under Awards issued and outstanding or materially impair the rights of any
holder of an outstanding Award without the consent of such holder.


                                   SECTION 14
                              TERMINATION OF PLAN
                              -------------------

     Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on May
31, 2005, which date is within 10 years after the date the Plan was adopted by
the Board, and no Awards hereunder shall be granted thereafter. Nothing
contained in this Section 14, however, shall terminate or affect the continued
existence of rights created under Awards issued hereunder and outstanding on May
31, 2005 which by their terms extend beyond such date.


                                   SECTION 15
                              SHAREHOLDER APPROVAL
                              --------------------

     This Plan shall become effective on June 21, 1995 (the date the Plan was
adopted by the Board); provided, however, that if the Plan is not approved by
the shareholders, in the manner described in Section 13(b), within 12 months
after said date, the Plan and all Awards granted hereunder shall be null and
void and no additional Awards shall be granted hereunder.

                                       14
<PAGE>
 
                                  SECTION 16
                                 MISCELLANEOUS
                                 -------------

     (a)  GOVERNING LAW.  The Plan, and the Option Agreements and Restricted
          -------------
Stock Award Agreements (collectively the "Award Agreements") entered into, and
the Awards granted thereunder, shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the operation of, and the
rights of Grantees under, the Plan, the Award Agreements, and the Awards shall
be governed by applicable federal law and otherwise by the laws of the state of
Delaware.

     (b)  RIGHTS.  Neither the adoption of the Plan nor any action of the Board
          ------
or the Committee shall be deemed to give any individual any right to be granted
an Award, or any other right hereunder, unless and until the Committee shall
have granted such individual an Award, and then his or her rights shall be only
such as are provided by the Plan and the Award Agreement.

     Any Option under the Plan shall not entitle the holder thereof to any
rights as a shareholder of the Company prior to the exercise of such Option and
the issuance of the Common Shares pursuant thereto. Further, notwithstanding any
provisions of the Plan or any Award Agreement with a Key Employee, the Company
shall have the right, in its discretion, to retire a Key Employee at any time
pursuant to its retirement rules or otherwise to terminate his or her employment
at any time for any reason whatsoever.

     (c)  NO OBLIGATION TO EXERCISE OPTION.  The granting of an Option shall
          --------------------------------
impose no obligation upon a Grantee to exercise such Option.

     (d)  NON-TRANSFERABILITY. Other than Unrestricted Stock Awards, no Award
          -------------------
shall be assignable or transferable by a Grantee otherwise than by will or by
the laws of descent and distribution, and during the lifetime of the Grantee,
any Options or related SARs shall be exercisable only by the Grantee or by his
or her guardian or legal representative. If a Grantee is married at the time of
exercise of an Option and if the Grantee so requests at the time of exercise,
the certificate or certificates issued shall be registered in the name of the
Grantee and the Grantee's spouse, jointly, with right of survivorship.

     (e)  WITHHOLDING AND USE OF COMMON SHARES TO SATISFY TAX OBLIGATIONS. The
          ---------------------------------------------------------------
obligation of the Company to deliver Common Shares or pay cash to a Key Employee
pursuant to any Award under the Plan shall be subject to applicable federal,
state and local tax withholding requirements.

     In connection with an Award in the form of Common Shares, subject to the
withholding requirements of applicable federal tax laws, the Committee, in its
discretion (and subject to such withholding rules ("Withholding Rules") as shall
be adopted by the Committee), may permit the Key Employee to satisfy the minimum
required federal withholding tax, in whole or in part, by electing to have the
Company withhold (or by returning to the Company) Common Shares, which shares
shall be valued, for this purpose, at their Fair Market Value on the date of
exercise of the Option or the date of vesting in the case of Restricted Stock
(or if later, the date on which the Key Employee recognizes ordinary income with
respect to such Option or Restricted Stock) (the "Determination

                                       15
<PAGE>
 
Date"); provided, however, that with respect to Key Employees who are subject to
section 16 of the Exchange Act, any such amount of minimum federal taxes
required to be withheld shall be satisfied by withholding Common Shares.  An
election to use Common Shares to satisfy federal tax withholding requirements
must be made in compliance with and subject to the Withholding Rules. The
Company may not withhold Common Shares in excess of the number necessary to
satisfy the minimum federal income tax withholding requirements.  In the event
Common Shares acquired under the exercise of an ISO are used to satisfy such
withholding requirement, such Common Shares must have been held by the Key
Employee for a period of not less than the holding period described in section
422(a)(1) of the Code on the Determination Date, or if such Common Shares were
acquired through the exercise of a NQSO or of an option under a similar plan,
such option must have been granted to the Key Employee at least six months prior
to the Determination Date.

     (f)  LISTING AND REGISTRATION OF COMMON SHARES. Each Award shall be subject
          -----------------------------------------
to the requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the Common Shares
covered thereby upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Award
or the purchase or vesting of Common Shares thereunder, or that action by the
Company or by the Grantee should be taken in order to obtain an exemption from
any such requirement, no such Option may be exercised, in whole or in part, and
no Common Shares shall be delivered pursuant to a Restricted or Unrestricted
Stock Award, unless and until such listing, registration, qualification,
consent, approval, or action shall have been effected, obtained, or taken under
conditions acceptable to the Committee. Without limiting the generality of the
foregoing, each Grantee or his or her legal representative or beneficiary may
also be required to give satisfactory assurance that Common Shares purchased
upon exercise of an Option or received pursuant to a Restricted or Unrestricted
Stock Award are being purchased for investment and not with a view to
distribution, and certificates representing such Common Shares may be legended
accordingly.

                                       16