CYBER DIGITAL, INC.
                            1997 STOCK INCENTIVE PLAN

                                Table of Contents
                                                                            Page
                                    ARTICLE I
                                     GENERAL
1.1 Purpose                                                                   1
1.2 Administration                                                            1
1.3 Persons Eligible for Awards                                               1
1.4 Types of Awards Under Plan                                                2
1.5 Shares Available for Awards                                               2
1.6 Definitions of Certain Terms                                              2

                                   ARTICLE II
                              AWARDS UNDER THE PLAN

2.1 Agreements Evidencing Awards                                              3
2.2 No Rights as a Shareholder                                                4
2.3     Grant of Stock Options, Stock Appreciation Rights 
    and Dividend Equivalent Rights                                            4
2.4     Exercise of Options and Stock Appreciation Rights                     5
2.5     Termination of Employment; Death                                      6
2.6     Grant of Restricted Stock                                             6
2.7     Grant of Restricted Stock Units                                       7
2.8     Other Stock-Based Awards                                              7
2.9     Grant of Dividend Equivalent Rights                                   7
2.10    Right of Recapture                                                    8
        
                                        ARTICLE III
        
                                        MISCELLANEOUS
        
3.1     Amendment of the Plan; Modification
                   of Awards                                                  8
3.2      Tax Withholding                                                      8
3.3  Restrictions                                                             9
3.4  Nonassignability                                                         9
3.5  Requirement of Notification of Election Under Section
     83(b) of the Code                                                        9
3.6  Requirement of Notification Upon Disqualifying 
     Disposition Under Section 421(b) of the Code                             9
3.7  Change in Control                                                        9
3.8  Right of Discharge Reserved                                             10
3.9  Nature of Payments                                                      10
3.10 Non-Uniform Determinations                                              10
3.11 Other Payments or Awards                                                10
3.12 Section Headings                                                        1
3.13 Effective Date and Term of Plan                                         11
3.14 Governing Law                                                           11
                                                                   

<PAGE>

                                 ARTICLE I

                                  GENERAL
1.1  Purpose
      
         The purpose of the Cyber Digital,  Inc. 1997 Stock  Incentive Plan (the
"Plan") is to provide  for  officers,  other  employees  and  directors  of, and
consultants  to, Cyber Digital,  Inc. (the  "Company") and its  subsidiaries  an
incentive  (a) to enter into and remain in the  service of the  Company,  (b) to
enhance  the  long-term  performance  of  the  Company,  and  (c) to  acquire  a
proprietary interest in the success of the Company.

1.2  Administration

         1.2.1 Subject to Section 1.2.6,  the Plan shall be  administered by the
Stock  Option  Committee  (the  "Committee")  of the board of  directors  of the
Company (the "Board"),  which shall consist of not less than two directors.  The
members of the  Committee  shall be appointed  by, and serve at the pleasure of,
the Board. To the extend required for transactions under the Plan to qualify for
the exemptions  available under Rule 16b-3 ("Rule 16b-3")  promulgated under the
Securities Exchange Act of 1934 (the "1934 Act"), all actions relating to awards
to  persons  subject  to  Section 16 of the 1934 Act shall be taken by the Board
unless  each person who serves on the  Committee  is a  "non-employee  director"
within the meaning of Rule 16b-3 or such actions are taken by a sub-committee of
the Committee (or the Board) comprised solely of  "non-employee  directors".  To
the extent required for  compensation  realized from awards under the Plan to be
deductible  by the Company  pursuant to section  162(m) of the Internal  Revenue
Code of 1986 (the  "Code"),  the  members  of the  Committee  shall be  "outside
directors" within the meaning of section 162(m).


         1.2.2 The Committee shall have the authority (a) to exercise all of the
powers  granted to it under the Plan,  (b) to construe,  interpret and implement
the Plan and any Plan  Agreements  executed  pursuant  to  Section  2.1,  (c) to
prescribe,  amend  and  rescind  rules  and  regulations  relating  to the Plan,
including  rules governing its own  operations,  (d) to make all  determinations
necessary  or advisable in  administering  the Plan,  (e) to correct any defect,
supply any omission and  reconcile  any  inconsistency  in the Plan,  and (f) to
amend the Plan to reflect changes in applicable law.

         1.2.3 Actions of the Committee shall be taken by the vote of a majority
of its  members.  Any  action may be taken by a written  instrument  signed by a
majority  of the  Committee  members,  and  action  so  taken  shall be fully as
effective as if it had been taken by a vote at a meeting.

         1.2.4 The determination of the Committee on all matters relating to the
Plan or any Plan Agreement shall be final, binding and conclusive.

         1.2.5 No member of the  Committee  shall be  liable  for any  action or
determination  made  in  good  faith  with  respect  to the  Plan  or any  award
thereunder.

         1.2.6  Notwithstanding  anything to the contrary  contained herein: (a)
until the Board shall  appoint the members of the  Committee,  the Plan shall be
administered by the Board; and (b) the Board may, in its sole discretion, at any
time and from time to time,  grant awards or resolve to administer  the Plan. In
either of the  foregoing  events,  the Board shall have all of the authority and
responsibility granted to the Committee herein.

1.3  Persons Eligible for Awards

         Awards under the Plan may be made to such directors, officers and other
employees of the Company and its subsidiaries  (including  prospective employees
conditioned on their becoming employees), and to such consultants to the Company
and its subsidiaries (collectively, "key persons") as the Committee shall in its
discretion select.


<PAGE>

1.4 Types of Awards Under Plan

         Awards  may be made under the Plan in the form of (a)  incentive  stock
options (within the meaning of section 422 of the Code), (b) nonqualified  stock
options,  (c) stock  appreciation  rights,  (d) dividend  equivalent rights, (e)
restricted  stock, (f) restricted stock units and (g) other stock- based awards,
all as more  fully set for in  Article  II.  The term  "award"  means any of the
foregoing.  No  incentive  stock option may be granted to a person who is not an
employee of the Company on the date of grant.

1.5  Shares Available for Awards

         1.5.1 The total number of shares of common  stock of the  Company,  par
value $.01 per share  ("Common  Stock"),  which may be  transferred  pursuant to
awards granted under the Plan shall not exceed 850,999  shares.  Such shares may
be authorized  but unissued  Common Stock or authorized  and issued Common Stock
held in the  Company's  treasury or acquired by the Company for the  purposes of
the Plan. The Committee may direct that any stock certificate  evidencing shares
issued pursuant to the Plan shall bear a legend setting forth such  restrictions
on transferability as may apply to such shares pursuant to the Plan.

         1.5.2 The total  number of shares of Common Stock with respect to which
stock options and stock  appreciation  rights may be granted to any one employee
or a subsidiary during any one-year period shall not exceed 500,000.

         1.5.3  Subject  to  any  required  action  by the  shareholders  of the
Company, the number of shares of Common Stock covered by each outstanding award,
the number of shares  available  for  awards,  the number of shares  that may be
subject to awards to any one  employee,  and th price per share of Common  Stock
covered by each such outstanding award shall be proportionately adjusted for any
increase or decrease in the number of issued  shares of Common  Stock  resulting
from a  stock  split,  reverse  stock  split,  stock  divident,  combination  or
reclassification  of the Common Stock,  or any other increase or decrease in the
number  of  issued  shares  of  Common  Stock   effected   without   receipt  of
consideration  by  the  Company;  provided,  however,  that  conversion  of  any
convertible securities of the Company shall not be deemed to have been "effected
without  receipt  of  consideration."  Such  adjustment  shall  be  made  by the
Committee,  whose  determination  in that  respect  shall be final,  binding and
conclusive.  Except as expressly  provided herein, no issuance by the Company of
shares of stock of any class, or securities  convertible into shares of stock of
any class,  shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common  Stock  subject to an award.
After any adjustment  made pursuant to this Seciton 1.5.3,  the number of shares
subject to each outstanding award shall be rounded to the nearest whole number.

         1.5.4  Except as  provided in this  Section  1.5 and in Section  2.3.8,
there shall be no limit on the number or the value of the shares of Common Stock
that may be subject to awards to any individual under the Plan.

1.6   Definitions of Certain Terms

         1.6.1 The  "Fair  Market  Value" of a share of Common  Stock on any day
shall be determined as follows:

         (a) If the  principal  market for the Common Stock (the  "Market") is a
national  securities exchange or the Nasdaq National Market, the last sale price
or, if no reported sales take place on the  applicable  date, the average of the
high bid and low asked price of Common Stock as reported for such Market on such
date, or if no such quotation is made on such date, on the next preceding day on
which there were quota-


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<PAGE>

tions,  provided that such  quotations  shall have been made within the ten (10)
business days preceding the applicable date;

         (b) If the Market is the Nasdaq SmallCap Market, the OTC Bulletin Board
or another  market,  the  average of the high bid and low asked price for Common
Stock on the applicable  date, or, if no such quotations shall have been made on
such date, on the next  preceding day on which there were  quotations,  provided
that such  quotations  shall have been made  within the ten (10)  business  days
preceding the applicable date; or,

         (c) In the event that neither  paragraph  (a) nor (b) shall apply,  the
Fair Market Value of a share of Common Stock on any day shall be  determined  in
good faith by the Committee.

         1.6.2  the  term  "incentive  stock  option"  means an  option  that is
intended to qualify for special federal income tax treatment pursuant to section
421 and 422 of the Code, as now constituted or subsequently amended, or pursuant
to a  successor  provision  of the  Code,  and  which  is so  designated  in the
applicable Plan Agreement.  Any option that is not specifically designated as an
incentive stock option shall under no  circumstances  be considered an incentive
stock  option.  Any option that is not an incentive  stock option is referred to
herein as a "nonqualified stock option."

         1.6.3 The term "employment" means, in the case of a grantee of an award
under the Plan who is not an employee of the Company, the grantee's  association
with the Company or a subsidiary as a director, consultant or otherwise.

         1.6.4 A grantee shall be deemed to have a  "termination  of employment"
upon ceasing to be employed by the Company and all of its  subsidiaries  or by a
corporation assuming awards in a transaction to which section 425(a) of the Code
applies.  The Committee may in its discretion determine (a) whether any leave of
absence  constitutes a termination  of employment  for purposes of the Plan, (b)
the  impact,  if any,  of any such leave of absence on awards  theretofore  made
under the Plan, and (c) when a change in a  non-employee's  association with the
Company  consititues a termination  of employment  for purposes of the Plan. The
Committe  shall  have the  right  to  determine  whether  the  termination  of a
grantee's  employment  is a dismissal for cause and the date of  termination  in
such case, which date the Committee may retroactively deem to be the date of the
action that is cause for dismissal.  Such  determinations of the Committee shall
be final, binding and conclusive.

         1.6.5 The term "cause," when used in connection  with  termination of a
grantee's  employment,  shall have the meaning  set forth in any  then-effective
employment  agreement  between  the  grantee  and the  Company  or a  subsidiary
thereof.  In the absence of such an employment  agreement,  "cause"  means:  (a)
conviction of any crime  (whether or not involving the Company)  constituting  a
felony in the  jurisdiction  involved;  (b)  engaging in any  substantiated  act
involving  moral  turpitude;  (c)  engaging  in any act  which,  in  each  case,
subjects, or if generally known would subject, the Company to public ridicule or
embarrassment;  (d) material  violation of the  Company's  policies,  including,
without  limitation,  those relating to sexual  harrassment or the disclosure or
misuse of confidential information;  or (e) serious neglect or misconduct in the
performance  of the grantee's  duties for the Company or a subsidiary or willful
or  repeated  failure  or  refusal  to  perform  such  duties;  in each  case as
determined by the Committee,  which  determination  shall be final,  binding and
conclusive.


                                   ARTICLE II

                              AWARDS UNDER THE PLAN

2.1     Agreements Evidencing Awards

         Each award  granted  under the Plan  (except  an award of  unrestricted
stock) shall be evidenced by a written agreement ("Plan  Agreement") which shall
contain such  provisions as the Committee in its discretion  deems  necessary or
desirable.  Such provisions may include,  without limitation, a requirement that
the grantee  become a party to a  shareholders'  agreement  with  respect to any
shares of Common Stock acquired  pursuant to the award,  a requirement  that the
grantee  acknowledge that such shares are acquired for investment purposes only,
and a right of first  refusal  exercisable  by the Company in the event that the
grantee  wishes to transfer any such shares.  By accepting an award  pursuant to
the Plan, a grantee thereby agrees that the award shall be subject to all of the
terms and provisions of the Plan and the applicable Plan Agreement.




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2.2     No Rights as a Shareholder

         No grantee of an option or stock  appreciation  right (or other  person
having  the right to  exercise  such  award)  shall  have any of the rights of a
shareholder  of the Company with  respect to shares  subject to such award until
the issuance of a stock  certificate  to such person for such shares.  Except as
otherwise  provided in Section 1.5.3, no adjustment shall be made for dividends,
distributions or other rights (whether ordinary or extraordinary, and whether in
cash,  securities  or other  property) for which the record date is prior to the
date such stock certificate is issued.

2.3 Grant of Stock Options,  Stock Appreciation  Rights and Dividend  Equivalent
Rights

         2.3.1 The Committee may grant incentive stock options and  nonqualified
stock options (collectively,  "options") to purchase shares of Common Stock from
the Company,  to such key persons, in such amounts and subject to such terms and
conditions,  as the Committee shall determine in its discretion,  subject to the
provisions of the Plan.

         2.3.2 The  Committee  may grant stock  appreciation  rights to such key
persons,  in such  amounts  and  subject  to such terms and  conditions,  as the
Committee shall  determine in its  discretion,  subject to the provisions of the
Plan.  Stock  appreciation  rights may be granted in connection  with all or any
part of, or  independently  of,  any  option  granted  under  the Plan.  A stock
appreciation right granted in connection with a nonqualified stock option may be
granted at or after the time of grant of such option. A stock appreciation right
granted in connection  with an incentive stock option may be granted only at the
time of grant of such option.

         2.3.3 The grantee of a stock  appreciation  right shall have the right,
subject to the terms of the Plan and the applicable Plan  Agreement,  to receive
from the Company an amount equal to (a) the excess of the Fair Market Value of a
share of Common  Stock on the date of exercise of the stock  appreciation  right
over (b) the exercise price of such right as set forth in the Plan Agreement (or
over the option  exercise  price if the stock  appreciation  right is granted in
connection with an option),  multiplied by (c) the number of shares with respect
to which the stock appreciation  right is exercised.  Payment upon exercise of a
stock  appreciation  right shall be in cash or in shares of Common Stock (valued
at their Fair Market  Value on the date of  exercise  of the stock  appreciation
right) or both, all as the Committee shall determine in its discretion. Upon the
exercise of a stock appreciation right granted in connection with an option, the
number of shares subject to the option shall be  correspondingly  reduced by the
number  of  shares  with  respect  to  which  the  stock  appreciation  right is
exercised.  Upon the  exercise  of an option in  connection  with  which a stock
appreciation  right has been granted,  the number of shares subject to the stock
appreciation right shall be correspondingly reduced by the number of shares with
respect to which the option is exercised.

         2.3.4 Each Plan Agreement with respect to an option shall set forth the
amount (the "option  exercise price") payable by the grantee to the Company upon
exercise of the option  evidenced  thereby.  The option exercise price per share
shall be determined by the Committee in its discretion;  provided, however, that
the option exercise price of an incentive stock option shall be at least 100% of
the Fair  Market  Value of a share of  Common  Stock on the date the  option  is
granted,  and provided  further that in no event shall the option exercise price
be less than the par value of a share of Common Stock.

         2.3.5  Each  Plan   Agreement  with  respect  to  an  option  or  stock
appreciation  right shall set forth the periods during which the award evidenced
thereby shall be exercisable, whether in whole or in part. Such periods shall be
determined  by the  Committee  in its  discretion;  provided,  however,  that no
incentive stock option (or a stock appreciation right granted in connection with
an incentive  stock  option) shall be  exercisable  more than 10 years after the
date of grant.

         2.3.6 The Committee may in its discretion include in any Plan Agreement
with respect to an option (the "original option") a provision that an additional
option (the "additional  option") shall be granted to any grantee who,  pursuant
to Section 2.4.3(b),  delivers shares of Common Stock in partial or full payment
of the exercise price of the original option. The additional option shall be for
a number of shares of Common  


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Stock equal to the number thus delivered,  shall have an exercise price equal to
the Fair Market  Value of a share of Common Stock on the date of exercise of the
original option,  and shall have an expiration date no later than the expiration
date of the original option. In the event that a Plan Agreement provides for the
grant of an  additional  option,  such  Agreement  shall also  provide  that the
exercise price of the original option be no less than the Fair Market Value of a
share of  Common  Stock  on its date of  grant,  and  that any  shares  that are
delivered  pursuant to Section  2.4.3(b) in payment of such exercise price shall
have been held for at least six months.

         2.3.7 To the extent that the aggregate Fair Market Value (determined as
of the time the option is granted) of the stock with respect to which  incentive
stock options granted under this Plan and all other plans of the Company and any
subsidiary are first  exercisable by any employee during any calendar year shall
exceed the maximum limit  (currently,  $100,000),  if any,  imposed from time to
time  under  section  422  of  the  Code,  such  options  shall  be  treated  as
nonqualified stock options.

         2.3.8  Notwithstanding  the provisions of Sections 2.3.4 and 2.3.5,  to
the extent required under section 422 of the Code, an incentive stock option may
not be granted  under the Plan to an  individual  who, at the time the option is
granted,  owns stock possessing more than 10% of the total combined voting power
of all  classes  of  stock  of his  employer  corporation  or of its  parent  or
subsidiary  corporations  (as such  ownership may be determined  for purposes of
section  422(b)(6)  of the Code)  unless  (a) at the time such  incentive  stock
option is granted the option  exercise price is at least 110% of the Fair Market
Value of the shares  subject  thereto and (b) the incentive  stock option by its
terms is not  exercisable  after the  expiration  of 5 years from the date it is
granted.

2.4     Exercise of Options and Stock Appreciation Rights

         Subject to the  provisions  of this  Article  II,  each option or stock
appreciation right granted under the Plan shall be exercisable as follows:

         2.4.1 Unless the  applicable  Plan  Agreement  otherwise  provides,  an
option  or  stock   appreciation   right  shall  become   exercisable   in  four
substantially equal installments, on each of the first, second, third and fourth
anniversaries  of the date of  grant,  and  each  installment,  once it  becomes
exercisable,   shall  remain  exercisable  until  expiration,   cancellation  or
termination of the award.

         2.4.2 Unless the  applicable  Plan  Agreement  otherwise  provides,  an
option or stock  appreciation right may be exercised from time to time as to all
or part of the shares as to which such award is then  exercisable  (but,  in any
event, only for whole shares).  A stock appreciation right granted in connection
with an option may be exercised  at any time when,  and to the same extent that,
the related option may be exercised. An option or stock appreciation right shall
be  exercised by the filing of a written  notice with the Company,  on such form
and in such manner as the Committee shall prescribe.

         2.4.3 Any written  notice of exercise of an option shall be accompanied
by payment for the shares being  purchased.  Such payment shall be made:  (a) by
certified or official bank check (or the  equivalent  thereof  acceptable to the
Company) for the full option  exercise  price; or (b) unless the applicable Plan
Agreement provides otherwise,  by delivery of shares of Common Stock acquired at
least six months  prior to the  option  exercise  date and having a Fair  Market
Value  (determined  as of the exercise  date) equal to all or part of the option
exercise price and a certified or official bank check (or the equivalent thereof
acceptable to the Company) for any remaining portion of the full option exercise
price; or (c) at the discretion of the Committee and to the extent  permitted by
law, by such other provision as the Committee may from time to time prescribe.

         2.4.4  Promptly  after  receiving  payment of the full option  exercise
price, or after receiving notice of the exercise of a stock  appreciation  right
for which payment will be made partly or entirely in shares,  the Company shall,
subject to the  provisions  of Section 3.3  (relating to certain  restrictions),
deliver to the  grantee  or to such  other  person as may then have the right to
exercise the award, a certificate or certificates for the shares of Common Stock
for which the award has been exercised.  If the method of payment  employed upon


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option  exercise so requires,  and if  applicable  law permits,  an optionee may
direct the Company to deliver the certificate(s) to the optionee's stockbroker.

2.5     Termination of Employment; Death

         2.5.1 Except to the extent otherwise provided in Section 2.5.2 or 2.5.3
or in the applicable Plan Agreement,  all options and stock appreciation  rights
not  theretofore  exercised  shall  terminate upon  termination of the grantee's
employment for any reason (including death).

         2.5.2 If a grantee's  employment  terminates  for any reason other than
death or dismissal for cause, the grantee may exercise any outstanding option or
stock appreciation right on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was  entitled to exercise  the award
on the date of employment termination;  and (b) exercise must occur within three
months after employment terminates,  except that the three-month period shall be
increased to one year if the  termination is by reason of disability,  but in no
event after the expiration date of the award as set forth in the Plan Agreement.
In the case of an incentive stock option,  the term "disability" for purposes of
the preceding  sentence shall have the meaning given to it by section  422(c)(7)
of the Code.

         2.5.3  If  a  grantee  dies  while  employed  by  the  Company  or  any
subsidiary,  or after employment  termination but during the period in which the
grantee's  awards are  exercisable  pursuant to Section 2.5.2,  any  outstanding
option or stock  appreciation  right shall be exercisable on the following terms
and conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of death; and (b) exercise must occur
by the earlier of the first anniversary of the grantee's death or the expiration
date of the award.  Any such  exercise of an award  following a grantee's  death
shall be made  only by the  grantee's  executor  or  administrator,  unless  the
grantee's will specifically  disposes of such award, in which case such exercise
shall be made only by the recipient of such specific disposition. If a grantee's
personal  representative  or the recipient of a specific  disposition  under the
grantee's will shall be entitled to exercise any award pursuant to the preceding
sentence,  such  representative or recipient shall be bound by all the terms and
conditions  of the Plan and the  applicable  Plan  Agreement  which  would  have
applied to the grantee including, without limitation, the provisions of Sections
3.3 and 3.7 hereof.

2.6     Grant of Restricted Stock

         2.6.1 The Committee may grant restricted shares of Common Stock to such
key persons,  in such amounts,  and subject to such terms and  conditions as the
Committee shall  determine in its  discretion,  subject to the provisions of the
Plan. Restricted stock awards may be made independently of or in connection with
any other award under the Plan. A grantee of a restricted stock award shall have
no rights  with  respect to such award  unless  such  grantee  accepts the award
within such period as the Committee  shall specify by executing a Plan Agreement
in such form as the Committee  shall  determine  and, if the Committee  shall so
require,  makes  payment to the Company by certified or official  bank check (or
the  equivalent  thereof  acceptable  to the  Company)  in  such  amount  as the
Committee may determine.

         2.6.2 Promptly after a grantee  accepts a restricted  stock award,  the
Company shall issue in the grantee's name a certificate or certificates  for the
shares  of  Common  Stock  covered  by the  award.  Upon  the  issuance  of such
certificate(s),  the grantee shall have the rights of a shareholder with respect
to the restricted  stock,  subject to the  nontransferability  restrictions  and
Company  repurchase  rights  described  in Sections  2.6.4 and 2.6.5 and to such
other restrictions and conditions as the Committee in its discretion may include
in the applicable Plan Agreement.

         2.6.3 Unless the Committee shall otherwise  determine,  any certificate
issued  evidencing  shares of restricted stock shall remain in the possession of
the Company  until such  shares are free of any  restrictions  specified  in the
applicable Plan Agreement.

         2.6.4  Shares  of   restricted   stock  may  not  be  sold,   assigned,
transferred,   pledged  or  otherwise   encumbered  or  disposed  of  except  as
specifically  provided  in  this  Plan or the  applicable  Plan  Agreement.  The


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<PAGE>

Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance  goals and other conditions)
on which the  nontransferability of the restricted stock shall lapse. Unless the
applicable  Plan  Agreement  provides  otherwise,  additional  shares  ed to the
grantee in respect of shares of  restricted  stock,  as dividends or  otherwise,
shall be subject to the same restrictions applicable to such restricted stock.

         2.6.5  During  the 90  days  following  termination  of  the  grantee's
employment  for any  reason,  the  Company  shall have the right to require  the
return of any shares to which restrictions on transferability apply, in exchange
for which the Company shall repay to the grantee (or the  grantee's  estate) any
amount paid by the grantee for such shares.

2.7     Grant of Restricted Stock Units

         2.7.1 The Committee may grant awards of restricted  stock units to such
key persons,  in such amounts,  and subject to such terms and  conditions as the
Committee shall  determine in its  discretion,  subject to the provisions of the
Plan.  Restricted  stock units may be awarded  independently of or in connection
with any other award under the Plan.

         2.7.2 At the time of grant,  the  Committee  shall  specify the date or
dates on which  the  restricted  stock  units  shall  become  fully  vested  and
nonforfeitable,  and  may  specify  such  conditions  to  vesting  as  it  deems
appropriate.  In the event of the termination of the grantee's employment by the
Company and its  subsidiaries  for any reason,  restricted stock units that have
not become nonforfeitable shall be forfeited and cancelled. The Committee at any
time may accelerate vesting dates and otherwise waive or amend any conditions of
an award of restricted stock units.

         2.7.3 At the time of grant,  the  Committee  shall specify the maturity
date applicable to each grant of restricted stock units, which may be determined
at the election of the grantee.  Such date may be later than the vesting date or
dates of the award.  On the maturity  date,  the Company  shall  transfer to the
grantee one  unrestricted,  fully  transferable  share of Common  Stock for each
restricted  stock unit  scheduled to be paid out on such date and not previously
forfeited. The Committee shall specify the purchase price, if any, to be paid by
the grantee to the Company for such shares of Common Stock.

2.8     Other Stock-Based Awards

         The Board may authorize  other types of stock-based  awards  (including
the grant of  unrestricted  shares),  which the  Committee may grant to such key
persons,  and in such amounts and subject to such terms and  conditions,  as the
Committee  shall in its discretion  determine,  subject to the provisions of the
Plan.  Such awards may entail the  transfer of actual  shares of Common Stock to
Plan participants, or payment in cash or otherwise of amounts based on the value
of shares of Common Stock.

2.9     Grant of Dividend Equivalent Rights

         The Committee may in its discretion  include in the Plan Agreement with
respect  to any award a  dividend  equivalent  right  entitling  the  grantee to
receive amounts equal to the ordinary  dividends that would be paid,  during the
time such award is outstanding  and  unexercised,  on the shares of Common Stock
covered by such award if such shares were then outstanding.  In the event such a
provision is included in a Plan Agreement, the Committee shall determine whether
such  payments  shall be made in cash,  in shares of Common  Stock or in another
form,  whether they shall be conditioned upon the exercise of the award to which
they relate, the time or times at which they shall be made, and such other terms
and conditions as the Committee shall deem appropriate.


                                       7

<PAGE>

2.10    Right of Recapture

         If at any time  within one year  after the date on which a  participant
exercises an option or stock  appreciation  right, or on which  restricted stock
vests,  or which is the maturity  date of  restricted  stock units,  or on which
income is realized by a  participant  in connection  with any other  stock-based
award (each of which events is a "Realization  Event"),  the  participant (a) is
terminated for cause or (b) engages in any activity determined in the discretion
of the  Committee to be in  competition  with any  activity of the  Company,  or
otherwise  inimical,  contrary  or  harmful  to the  interests  of  the  Company
(including,  but not  limited  to,  accepting  employment  with or  serving as a
consultant, adviser or in any other capacity to an entity that is in competition
with or acting  against the  interests of the  Company),  then any gain ("Gain")
realized  by the  participant  from the  Realization  Event shall be paid by the
participant  to the Company  upon notice  from the  Company.  Such Gain shall be
determined  as of the  date of the  Realization  Event,  without  regard  to any
subsequent  change  in the Fair  Market  Value of a share of Common  Stock.  The
Company  shall have the right to offset such Gain against any amounts  otherwise
owed to the  participant  by the  Company  (whether as wages,  vacation  pay, or
pursuant to any benefit plan or other compensatory arrangement).


                                   ARTICLE III

                                  MISCELLANEOUS

3.1     Amendment of the Plan; Modification of Awards

         3.1.1 The Board may from time to time suspend,  discontinue,  revise or
amend the Plan in any respect  whatsoever,  except that no such amendment  shall
materially  impair any rights or materially  increase any obligations  under any
award  theretofore  made under the Plan  without the consent of the grantee (or,
after the grantee's  death,  the person having the right to exercise the award).
For purposes of this Section 3.1, any action of the Board or the Committee  that
alters or affects  the tax  treatment  of any award shall not be  considered  to
materially impair any rights of any grantee.

         3.1.2  Shareholder  approval of any amendment  shall be obtained to the
extent  necessary to comply with section 422 of the Code  (relating to incentive
stock options) or other applicable law or regulation.

         3.1.3  The  Committee  may  amend  any   outstanding   Plan  Agreement,
including,  without limitation,  by amendment which would accelerate the time or
times at which the award becomes  unrestricted or may be exercised,  or waive or
amend any goals, restrictions or conditions set forth in the Agreement. However,
any such amendment (other than an amendment pursuant to Section 3.7.2,  relating
to change in control) that materially impairs the rights or materially increases
the obligations of a grantee under an outstanding  award shall be made only with
the consent of the grantee (or, upon the grantee's  death, the person having the
right to exercise the award).

3.2     Tax Withholding

         3.2.1 As a  condition  to the  receipt  of any  shares of Common  Stock
pursuant  to any  award or the  lifting  of  restrictions  on any  award,  or in
connection  with  any  other  event  that  gives  rise  to a  federal  or  other
governmental  tax withholding  obligation on the part of the Company relating to
an award  (including,  without  limitation,  FICA  tax),  the  Company  shall be
entitled to require that the grantee  remit to the Company an amount  sufficient
in the opinion of the Company to satisfy such withholding obligation.

         3.2.2 If the  event  giving  rise to the  withholding  obligation  is a
transfer of shares of Common  Stock,  then,  unless  otherwise  specified in the
applicable  Plan Agreement,  the grantee may satisfy the withholding  obligation
imposed under Section 3.2.1 by electing to have the Company  withhold  shares of
Common  Stock  having  a Fair  Market  Value  equal to the  amount  of tax to be
withheld. For this purpose, Fair 


                                       8

<PAGE>

Market Value shall be determined as of the date on which the amount of tax to be
withheld is  determined  (and any  fractional  share  amount shall be settled in
cash).

3.3     Restrictions

         3.3.1 If the Committee shall at any time determine that any consent (as
hereinafter  defined)  is  necessary  or  desirable  as a  condition  of,  or in
connection  with,  the  granting  of any award under the Plan,  the  issuance or
purchase of shares or other rights thereunder, or the taking of any other action
thereunder (each such action being hereinafter  referred to as a "plan action"),
then such plan action shall not be taken, in whole or in part,  unless and until
such consent  shall have been effected or obtained to the full  satisfaction  of
the Committee.

         3.3.2 The term "consent" as used herein with respect to any plan action
means (a) any and all  listings,  registrations  or  qualifications  in  respect
thereof upon any securities  exchange or under any federal,  state or local law,
rule or regulation,  (b) any and all written  agreements and  representations by
the grantee with respect to the  disposition  of shares,  or with respect to any
other matter,  which the Committee  shall deem  necessary or desirable to comply
with the terms of any such listing,  registration or  qualification or to obtain
an  exemption  from the  requirement  that any such  listing,  qualification  or
registration  be made and (c) any and all consents,  clearances and approvals in
respect of a plan action by any governmental or other regulatory bodies.

3.4     Nonassignability

         Except  to  the  extent  otherwise  provided  in  the  applicable  Plan
Agreement,  no award or right  granted  to any  person  under the Plan  shall be
assignable  or  transferable  other than by will or by the laws of  descent  and
distribution,  and all such awards and rights  shall be  exercisable  during the
life of the grantee only by the grantee or the grantee's legal representative.

3.5     Requirement of Notification of Election Under Section 83(b) of the Code

         If any grantee shall,  in connection  with the acquisition of shares of
Common Stock under the Plan, make the election  permitted under section 83(b) of
the Code  (that  is,  an  election  to  include  in gross  income in the year of
transfer the amounts specified in section 83(b)),  such grantee shall notify the
Company of such  election  within 10 days of filing  notice of the election with
the  Internal  Revenue  Service,  in  addition  to any filing  and  notification
required  pursuant to  regulations  issued  under the  authority of Code section
83(b).

3.6 Requirement of Notification  Upon  Disqualifying  Disposition  Under Section
421(b) of the Code

         If any grantee  shall make any  disposition  of shares of Common  Stock
issued  pursuant  to  the  exercise  of an  incentive  stock  option  under  the
circumstances  described  in  section  421(b) of the Code  (relating  to certain
disqualifying  dispositions),  such  grantee  shall  notify the  Company of such
disposition within 10 days thereof.

3.7     Change in Control

         3.7.1 For purposes of this Section 3.7, a "Change In Control"  shall be
deemed to have occurred upon the happening of any of the following events:

         (a) any  "person,"  including  a "group,"  as such terms are defined in
Sections 13(d) and 14(d) of the 1934 Act and the rules  promulgated  thereunder,
becomes the beneficial  owner,  directly or  indirectly,  whether by purchase or
acquisition  or agreement to act in concert or otherwise,  of 10% or more of the
outstanding shares of Common Stock of the Company;

         (b) a cash tender or exchange offer for 10% or more of the  outstanding
shares of Common Stock of the Company is commenced;


                                       9

<PAGE>

         (c) the  shareholders  of the Company  approve an  agreement  to merge,
consolidate,  liquidate,  or sell all or substantially  all of the assets of the
Company; or

         (d) two or more  directors  are  elected  to the Board  without  having
previously  been nominated and approved by the members of the Board incumbent on
the day immediately preceding such election.

         3.7.2 Upon the happening of a change in control:

         (a)  notwithstanding  any other  provision of this Plan,  any option or
stock  appreciation  right then outstanding whose date of grant was at least one
year prior to the date of the Change in Control  shall  become  fully vested and
immediately  exercisable  upon the  subsequent  termination of employment of the
grantee by the Company or its  successors  without  cause unless the  applicable
Plan Agreement expressly provides otherwise;

         (b) to the fullest  extent  permitted by law, the Committee may, in its
sole  discretion,   amend  any  Plan  Agreement  in  such  manner  as  it  deems
appropriate, including, without limitation, by amendments that advance the dates
upon which any or all outstanding awards of any type shall terminate.

         3.7.3 Whenever deemed appropriate by the Committee, any action referred
to in Section  3.7.2(b) may be made  conditional  upon the  consummation  of the
applicable Change in Control transaction.

3.8     Right of Discharge Reserved

         Nothing  in the Plan or in any Plan  Agreement  shall  confer  upon any
grantee  the right to  continue in the employ of the Company or affect any right
which the Company may have to terminate such employment.

3.9     Nature of Payments

         3.9.1 Any and all  grants of awards and  issuances  of shares of Common
Stock under the Plan shall be in  consideration  of services  performed  for the
Company by the grantee.

         3.9.2  All  such  grants  and  issuances  shall  constitute  a  special
incentive  payment  to the  grantee  and  shall  not be taken  into  account  in
computing the amount of salary or compensation of the grantee for the purpose of
determining any benefits under any pension, retirement,  profit-sharing,  bonus,
life  insurance  or other  benefit  plan of the  Company or under any  agreement
between the Company and the grantee,  unless such plan or agreement specifically
provides otherwise.

3.10    Non-Uniform Determinations

         The Committee's  determinations  under the Plan need not be uniform and
may be made by it  selectively  among  persons who  receive,  or are eligible to
receive,  awards  under the Plan  (whether  or not such  persons  are  similarly
situated). Without limiting the generality of the foregoing, the Committee shall
be  entitled,   among  other   things,   to  make   non-uniform   and  selective
determinations,  and to enter into non-uniform and selective Plan agreements, as
to (a) the  persons to receive  awards  under the Plan,  (b) the an, and (c) the
treatment of leaves of absence pursuant to Section 1.6.4.

3.11    Other Payments or Awards

         Nothing  contained  in the Plan  shall be deemed in any way to limit or
restrict  the Company  from making any award or payment to any person  under any
other plan,  arrangement or understanding,  whether now existing or hereafter in
effect.


                                       10

<PAGE>

3.12    Section Headings

         The  section   headings   contained  herein  are  for  the  purpose  of
convenience  only and are not  intended  to define or limit the  contents of the
sections.

3.13    Effective Date and Term of Plan

         3.13.1 The Plan was adopted by the Board on August 4, 1997,  subject to
approval by the Company's shareholders.  All awards under the Plan prior to such
shareholder  approval are subject in their  entirety to such  approval.  If such
approval is not obtained prior to the first  anniversary of the date of adoption
of the Plan, the Plan and all awards thereunder shall terminate on that date.

         3.13.2 Unless sooner  terminated  by the Board,  the  provisions of the
Plan  respecting the grant of incentive stock options shall terminate on the day
before the tenth  anniversary  of the adoption of the Plan by the Board,  and no
incentive  stock option  awards  shall  thereafter  be made under the Plan.  All
awards made under the Plan prior to its termination shall remain in effect until
such awards have been  satisfied or terminated in accordance  with the terms and
provisions of the Plan and the applicable Plan Agreements.

3.14    Governing Law

         All  rights  and  obligations  under the Plan  shall be  construed  and
interpreted in accordance with the laws of the State of New York, without giving
effect to principles of conflict of laws.