<PAGE>
 
                                                                    EXHIBIT 10.1


                      TRANSITIONAL HOSPITALS CORPORATION

                          DEFERRED  COMPENSATION PLAN



          WHEREAS, a Supplemental Retirement Agreement ("Old Plan") between
Richard L. Conte and Community Psychiatric Centers (now known as Transitional
Hospitals Corporation) was entered into on September 1, 1988; and,

          WHEREAS, in October 1994, the Compensation Committee decided to
terminate the Old Plan and pay Mr. Conte the total surrender cash value of the
company-owned life insurance policy as of July 31, 1994 to enable Transitional
Hospitals Corporation ("Company") to obtain approximately $4.5 million in cash
benefits from the Company owned life insurance policy for the Company's use;
and, further on January 26, 1995 the Compensation Committee agreed that the Old
Plan would be terminated effective May 31, 1995 with a replacement plan to be
developed for an effective date of June 1, 1995; and,

          WHEREAS, Mr. Conte consented to have the then current Plan terminated
with the proviso that a new written Plan would be developed with changes
approved by the Committee; and

          WHEREAS, the Company failed to develop a new written Plan for an
effective date of June 1, 1995, the Company has now developed a written Deferred
Compensation Plan to address the changes previously passed by the Compensation
Committee and the changes passed by the Compensation Committee since the
termination of the Old Plan, including those changes defining the basis of
deferred compensation.

          The Company hereby sets forth below the Deferred Compensation Plan.



                                   ARTICLE I

                               NAME AND PURPOSE
                               ----------------

          1.1  Name.  The Transitional Hospitals Corporation Deferred
               ----                                                  
Compensation Plan (the "Plan") is hereby established retroactive to January 1,
1997.

          1.2  Purpose.  The purpose of this Plan is to provide a source of
               -------                                                     
retirement income for certain executive officers of the Corporation through the
deferral of a portion of the compensation which they otherwise earn for each
year of service with the Corporation. The deferred amounts will earn an
investment return over the deferral period and will be paid out following the
officer's retirement, death, disability or other termination of employment.

          The obligation to pay the compensation deferred under the plan shall
be an unfunded liability of the Corporation, and all amounts which become due
under the Plan shall accordingly be paid either directly from the general assets
of the Corporation or through a grantor trust arrangement established in
accordance with the provisions of Article VII. The interest of each participant
(and his or her beneficiary) in any compensation deferred under the plan shall
be that of an unsecured creditor of the Corporation.

          This plan document also incorporates the individual deferred
compensation arrangement which has been in existence for Mr. Richard L. Conte,
the Corporation's President and Chief Executive Officer, for the period June 1,
1995 to March 31, 1997. The arrangement has been authorized and approved by
resolution of the Board without a formal plan document, and the compensation
deferred under such arrangement has been accrued by the Corporation on all
financial statements filed for all relevant periods from June 1, 1995. This new
plan document shall supersede Mr. Conte's existing arrangement, effective April
1, 1997, for all Years of Service completed after December 31, 1996

                                                                   Page 15 of 27
<PAGE>
 
                                  ARTICLE II

                                  DEFINITIONS
                                  -----------

          2.1  "Board" shall mean the Board of Directors of the Corporation.

          2.2  "Bonus Awards" shall mean (i) the incentive bonus earned for each
Fiscal Year, beginning with the Fiscal Year ending November 30, 1997, under the
Corporation's Annual Incentive Plan and paid to the Participant on a current
cash basis after the end of that Fiscal Year, (ii) any special recognition
bonus, whether paid in cash or in the form of loan forgiveness, earned for any
Fiscal Year, beginning with the Fiscal Year ending November 30, 1997, and (iii)
the long-term performance bonus earned for each three (3)-year performance cycle
completed under the Corporation's Long-Term Incentive Plan, beginning with the
performance cycle which started on December 1, 1996, and paid to the Participant
on a current cash basis after the end of the cycle.

          2.3  "Change in Control" shall mean any of the following transactions:

               (i)   the acquisition by any Person (or any group of related
Persons acting in concert) of beneficial ownership (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of THC securities representing
twenty percent (20%) or more of the total combined voting power of THC's then
outstanding securities; or
               (ii)  a merger or consolidation in which securities representing
twenty percent (20%) or more of the total combined voting power of THC's then
outstanding securities are transferred to a Person or Persons different from the
Persons holding those securities immediately prior to such merger or
consolidation; or

               (iii) the sale of all or substantially all of THC's assets in
complete liquidation or dissolution of THC.

          2.4  "Corporation" shall mean Transitional Hospitals Corporation, a
Nevada corporation, and any successor or assignee corporation, whether by way of
merger, acquisition or other reorganization.

          2.5  "Deferred Compensation" shall mean that portion of the
compensation earned by a Participant for a Year of Service which is deferred and
credited to the Deferred Compensation Account maintained for that Participant
under the Plan.

          2.6  "Deferred Compensation Account" shall mean the account maintained
on the books and records of the Corporation for each Participant who is credited
with Deferred Compensation for one or more Years of Service under the Plan.

          2.7  "Distribution Election" shall mean the election, in substantially
the form of attached Exhibit A, which the Participant must file under the Plan
for purposes of designating the payout event for his or her Deferred
Compensation Account and the method of payment.

          2.8  "Disability" shall mean any mental or physical illness, disease
or condition which in the opinion of two (2) physicians skilled in the specialty
does or will result in Mr. Conte's inability to perform the essential functions
of his job for a period of six (6) consecutive months or more.

          2.9  "Effective Date" shall mean (i) June 1, 1995 for the pre-existing
deferred compensation arrangement in effect for Mr. Conte for the period June 1,
1995 to December 31, 1996 and (ii) January 1, 1997 for the new deferred
compensation program to be in effect for him and one or more other Participants
under this Plan document.

          2.10 "Eligible Employee" shall mean each Employee who is an executive
officer of the Corporation.

          2.11 "Employee" shall mean any individual in the employ of the
Corporation who is subject to the Corporation's control and direction as to both
the work to be performed and the manner and method of performance.

          2.12 "Fiscal Year" shall mean the fiscal year of the Corporation for
financial accounting purposes which begins on December 1 each year and ends on
November 30 of the following year.

          2.13 "Hostile Take-Over" shall mean any of the following changes in
control or ownership of the Corporation:

                                                                   Page 16 of 27
<PAGE>
 
          (i)  the acquisition by any person or related group of persons, other
than the Corporation or a person that directly or indirectly controls, is
controlled by or is under common control with the Corporation, of beneficial
ownership of securities possessing twenty percent (20%) or more of the total
combined voting power of the Corporation's outstanding securities in a
transaction or series of related transactions not approved by at least a four-
fifths majority of those Board members who begun their Board service prior to
the first transaction, or

          (ii) a change in the composition of the Board over a period of twenty-
four (24) consecutive months or less such that a majority of the Board members
ceases for any reason to be comprised of individuals who either (A) have been
members of the Board contiguously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period by at
least a four-fifths majority of the Board members described in clause (A) who
were still in office at the time such election or nomination was approved by the
Board.

          2.14 "Investment Funds" shall mean the funds listed on Schedule I, as
such Schedule may be modified from time to time, which the Participant may
designate as the measure of the investment return on his or her Deferred
Compensation Account during the deferral period under the Plan, provided the
Investment Fund Program has been implemented under the Plan.

          2.15 "Investment Fund Program" shall mean the program which may, in
the Plan Administrator's discretion, be implemented at any time under the Plan
pursuant to which each Participant will have the right to designate the
particular Investment Fund or Funds which are to serve as the measure of the
investment return on his or her Deferred Compensation Account.

          2.16 "Investment Election" shall mean the election, in substantially
the form of attached Exhibit B, which the Participant must file under the Plan
for purposes of specifying the Investment Fund or Funds which are to serve as
the measure of the investment return on his or her Deferred Compensation
Account.

          2.17 "Participant" shall mean each Eligible Employee selected for
participation in the Plan.

          2.18 "Plan" shall mean the Corporation's Deferred Compensation Plan,
as set forth in this document and in amendments from time to time made hereto.

          2.19 "Plan Administrator" shall mean the Compensation Committee of the
Board acting in its capacity as administrator of this Plan.

          2.20 "Salary" shall mean the level of base salary in effect for the
Participant for each Year of Service coincident with his or her period of
participation under the Plan.

          2.21 "Valuation Date" shall mean the last business day of each
calendar quarter.

          2.22 "Year of Service" shall mean each calendar year of participation
in the Plan. The first Year of Service taken into account under the plan shall
be (i) the 1995 calendar year for the pre-existing deferred compensation
arrangement in effect for Mr. Conte and (ii) the 1997 calendar year for the new
deferred compensation arrangement to be in effect for him and one or more other
Participants under this new plan document.


                                  ARTICLE III

                                  PARTICIPANT
                                  -----------


          3.1  Commencement of Participation.
               ----------------------------- 

               A. The Plan Administrator shall, prior to the start of each Year
of Service, select the Eligible Employees who are to participate in the Plan for
that Year, and the selected individuals shall commence their participation in
the Plan as of the first day of that Year of Service. However, for the Year of
Service coincidental with the 1997 calendar year, the Plan Administrator may
select the Participants at any time during the thirty (30)0-day period
immediately following the Board's adoption of this new Plan on April 3, 1997.
Mr. Conte's participation in the prior deferred compensation arrangement
incorporated into this plan document commenced on June 1, 1995.

               B. A newly-hired Eligible Employee may commence participation in
the Plan after the start of a Year of Service, provided he or she is selected
for participation within the thirty (30)-day period measured from his or her
hire date.

                                                                   Page 17 of 27
<PAGE>
 
               C. The Plan Administrator shall have absolute discretion in
selecting the Eligible Employees who are to participate in the Plan for one or
more Years of Service.

          3.2  Cessation of Participation.  Every Eligible Employee who becomes
               --------------------------                                      
a Participant shall continue to participate in the Plan until the earliest of
                                                                  --------   
(i) his or her removal from the Plan upon written notice from the Plan
Administrator, (ii) his or her cessation of Employee status, or (iii) the
termination of the Plan.  Upon such individual's cessation of Participant
status, he or she shall not be entitled to any further Deferred Compensation
under the Plan, but his or her Deferred Compensation Account shall continue to
be credited with an investment return until the Corporation has paid out the
entire balance credited to that Account.



                                  ARTICLE IV

                PRE-EXISTING DEFERRED COMPENSATION ARRANGEMENT
                ----------------------------------------------


          This Article IV shall apply to (i) the compensation deferred on Mr.
Conte's behalf during the period from June 1, 1995 to December 31, 1996, (ii)
the investment return on that deferred compensation for such period, and (iii)
the subsequent payout of that deferred compensation amount.

          4.1  Amount.  The amount of Deferred Compensation earned by Mr. Conte
               ------                                                          
for each Year of Service coincidental with his or her period of participation in
the Plan for the period June 1, 1995 to December 31, 1996 has been determined as
follows:

                For the period from June 1, 1995 to May 31, 1996, the amount of
        such Deferred Compensation was equal to nine and one-half percent (9.5%)
        of (i) the Salary earned for that period, (ii) the incentive bonus
        accrued for that period under the Corporation's Annual Incentive Plan,
        and (iii) any special recognition bonus, whether payable in cash or in
        the form of loan forgiveness, accrued for that period.

                For the period from June 1, 1996 to December 31, 1996, the 
        amount of such Deferred Compensation was equal to nine and one-half
        percent (9.5%) of (i) the Salary earned for that period, (ii) the
        incentive bonus accrued for that period under the Corporation's Annual
        Incentive Plan, (iii) the incentive bonus accrued for that period with
        respect to the three (3)-year performance cycle which began under the
        Corporation's Long-Term Incentive Plan on December 1, 1995, (iv) any
        special recognition bonus, whether payable in cash or in the form of
        loan forgiveness, accrued for that period, and (v) the interim payouts
        made to him during such period under his December 1, 1995 Employment
        Contract in connection with the sale of the Corporation's U.K. and U.S.
        psychiatric care business operations.

          4.2  Credit to Deferred Compensation Account.  The applicable amount
               ---------------------------------------                        
of Deferred Compensation earned by Mr. Conte for the period June 1, 1995 to
December 31, 1996 Plan shall be credited to his or her Deferred Compensation
Account monthly, and the balance credited to that Account shall earn interest
for such period at the rate of eight percent (8%) per annum, compounded semi-
annually.

          4.3  Payment of Deferred Compensation Account.  The balance credited
               ----------------------------------------                       
to the Deferred Compensation Account maintained for Mr. Conte under this Article
IV shall be paid at the same time and in the same manner as his post-December
31, 1996 Deferred Compensation Account is paid in accordance with Article VII of
the Plan.

                                   ARTICLE V

                             DEFERRED COMPENSATION
                             ---------------------

          This Article V shall apply to all compensation deferred under the Plan
by Mr. Conte and any other Participant for all periods beginning after December
31, 1996.

                                                                   Page 18 of 27
<PAGE>
 
          5.1  Amount.  The amount of Deferred Compensation to be earned by the
               ------                                                          
Participant for each post-1996 Year of Service coincidental with his or her
period of participation in the Plan shall be determined as follows:

                For Mr. Conte, the amount of such Deferred Compensation shall 
        be equal to nine and one-half percent (9.5%) of the Salary earned for
        that Year of Service, (ii) the aggregate amount of Bonus Awards accrued
        for that Year of Service, (iii) any interim payouts made to him during
        that Year of Service under his December 1, 1995 Employment Contract, and
        (iv) all other cash compensation earned by him for services rendered the
        Corporation in such Year of Service.

                For all other Participants, the amount of such Deferred 
        Compensation shall be equal to seven percent (7%) of (i) the Salary-
        earned of that Year of Service, and (ii) the aggregate amount of Bonus
        Awards earned or accrued for that Year of Service.

          5.2  Credit to Deferred Compensation Account.  The applicable amount
               ---------------------------------------                        
of Deferred Compensation earned by the Participant for each Year of Service
completed under the Plan after December 31, 1996 shall be credited to his or her
Deferred Compensation Account as follows:

                Deferred Compensation attributable to his or her Salary shall be
        credited to the Deferred Compensation Account at the end of each
        calendar month during the Year of Service.

                Deferred Compensation attributable to his or her Bonus Awards
        shall be credited to the Deferred Compensation Account either as the
        Awards are accrued by the Corporation for financial reporting purposes
        or as those Awards are actually paid to the Participant to the extent
        not previously accrued.


                                  ARTICLE VI

                         DEFERRED COMPENSATION ACCOUNT
                         -----------------------------


          6.1  Investment Return.
               ----------------- 

               A. Until such time as the Plan Administrator elects to implement
the Investment Fund Program, the balance credited to each Deferred Compensation
Account maintained under the Plan shall earn interest at the rate of eight
percent (8%) per annum, compounded semi-annually until paid.

               B. The Plan Administrator may at any time during the term of the
Plan implement the Investment Fund Program pursuant to which the Deferred
Compensation Account of each Participant shall earn an investment return tied to
the Investment Fund or Funds selected from time to time by the Participant. The
Participant shall file his or her initial Investment Election with the Plan
Administrator within thirty (30) days after the later of (i) the implementation
                                                -----                          
of the Investment Fund Program by the Plan Administrator, or (ii) the
individual's selection for participation in the Plan. On each Valuation Date,
the Deferred Compensation Account shall be adjusted to reflect the investment
gains, earnings or losses which the Account would have actually realized had it
been invested for the valuation period in the Investment Fund or Funds
designated by the Participant. The Participant may redesignate his or her
Investment Funds once per calendar quarter, with the change to become effective
on the first day of the first calendar quarter following the date the new
Investment Election is filed with the Plan Administrator.

          6.2  Account Value.  The value of a Participant's Deferred
               -------------                                        
Compensation Account on any particular date in question shall be deemed to be
equal to the balance credited to that Account on the Valuation Date coincident
with or immediately preceding the date such value is to be determined, increased
by any Deferred Compensation credited to, or decreased by any payment made from,
that the Account after such Valuation Date  but before the actual date on which
the value of the Account is to be

                                                                   Page 19 of 27
<PAGE>
 
determined. The Participant shall receive a written statement of the value of
each of his or her Deferred Compensation Account at least once each calendar
year.

          6.3  Vested Interest.  The Participant shall at all times be fully
               ---------------                                              
vested in his or her Deferred Compensation Account.

                                  ARTICLE VII

                           DISTRIBUTION OF BENEFITS
                           ------------------------


          7.1  Payout Event.  The balance credited to the Deferred Compensation
               ------------                                                    
Account maintained for each Participant shall become distributable upon the
occurrence of any payout event listed in this Section 7.1 which the Participant
selects pursuant to his or her Distribution Election.  The Participant must file
his or her initial Distribution Election with the Plan Administrator within
thirty (30) days after his or her selection for participation in the Plan.  The
Participant may change the elected payout event at any time by filing a new
Distribution Election with the Plan Administrator; provided, however, that the
new election shall not be effective if the Distribution Election is filed with
the Plan Administrator within two (2) years prior to the actual occurrences of
the selected payout event.  The applicable payout events under the Plan shall be
as follows:

            -  termination of employment for any reason, including death or
          Disability.

            -  attainment of the age specified by the Participant in his or her
          Distribution Election.

            -  expiration of the period of years (not to exceed twenty (20)
          years) specified by the Participant in his or her Distribution
          Election.

              -  the earlier of (i) the Participant's attainment of the age
                   -------                                               
          specified in his or her Distribution Election, or (ii) the
          Participant's termination of employment.

              -  the later of (i) the Participant's attainment of the age
                   -----                                               
          specified by the Participant in his or her Distribution Election, or
          (ii) the Participant's termination of employment.

              -  In no event may the Participant designate an attained age
          beyond age seventy (70)

          7.2  Form of Distribution.  Upon the occurrence of the applicable
               --------------------                                        
payout event under Section 7.1, the Deferred Compensation Account shall become
payable in any form of distribution listed in this Section 7.2 which the
Participant selects pursuant to his or her initial Distribution Election filed
with the Plan Administrator within thirty (30) days after his or her selection
for participation in the Plan.  The Participant may change the elected for of
distribution at any time by filing a new Distribution election with the Plan
Administrator; provided, however, that the new election shall not be effective
if the Distribution Election is filed with the Plan Administrator within two (2)
years prior to the occurrence of the applicable payout event for the Deferred
Compensation Account.  The applicable forms of distribution under the Plan shall
be as follows:

                Lump Sum.  A Participant may elect to have the entire Deferred
                --------                                                      
        Compensation Account distributed in a lump sum. If such election is
        made, then the Plan Administrator shall distribute the Account to the
        Participant as soon as administratively feasible after the applicable
        payout event under Section 7.1, but in no event shall the distribution
        be made more than ninety (90) days after such payout event.

                Installments.  A Participant may elect to have the Deferred
                ------------                                               
        Compensation Account distributed in a series of installments over either
        a five (5) year or a ten (10)-year period. The first installment shall
        be paid within ninety (90) days after the applicable payout event under
        Section 7.1, and each subsequent installment shall be paid at quarterly
        intervals following each quarterly Valuation Date. The amount of each
        installment shall be determined by the following formula:

                                                                   Page 20 of 27
<PAGE>
 
               X = Y + Z, where

               X = the dollar amount of the current installment


               Y = the balance credited to the Deferred Compensation Account
               immediately prior to the payment of the current installment.

               Z = the number of quarterly installments (including the current
               installment) which remain to be paid over the balance of the
               applicable five (5)-year or ten (10)-year period.

          7.3  Investment Return over Payout Period.  If the Participant's
               ------------------------------------                       
Deferred Compensation Account is to be distributed in installments, then the
following provisions shall govern the investment return on the unpaid balance of
the Account over the installment payout period:

          -         Unless the Investment Fund Program has been implemented, the
unpaid balance shall continue to accrue interest over the installment period at
the rate of eight percent (8%) per annum, compounded semi-annually.

          -         If the Investment Fund Program is in effect, the Participant
may, during the installment period, continue to designate and redesignate the
Investment Funds which are to serve as the measure of the investment return
through the filing of one or more Investment Elections with the Plan
Administrator.  Such designations may not be made more than once per calendar
quarter over the installment period, with the new designation to become
effective on the first day of the first calendar quarter following the date the
new Investment Election is filed with the Plan Administrator.

          -         Prior to each installment distribution effected during the
period the Investment Fund Program is in effect, the Participant shall have the
right to select the Investment Fund or Funds which are to serve as the source of
that distribution, and the Participant's interest in those Funds as a measure of
his or her investment return shall be deemed to be liquidated to the extent of
such distribution.  In the absence of such designation, the distribution shall
be deemed to be funded pro-rata from each Investment Fund which at the time
serves as the measure of the investment return on the Deferred Compensation
Account.

          7.4  Hardship Withdrawal.  Should an unforeseeable and extraordinary
               -------------------                                            
financial hardship occur for which the Participant does not have any other
resources available, whether through reimbursement (by insurance or otherwise),
liquidation of existing assets (to the extent such liquidation would not itself
result in financial hardship), termination of his or her deferrals to an
Internal Revenue Code Section 401(k) plan or a loan from such plan or any
commercially reasonable source, then the Participant may apply to the Plan
Administrator for an immediate distribution from his or her Deferred
Compensation Account in an amount necessary to satisfy such financial hardship.
The Plan Administrator shall have complete discretion to accept or reject the
request and shall in no event authorize a distribution in an amount in excess of
that required to meet such financial hardship.

          7.5  Disability.  Should the Participant cease Employee status by
               ----------                                                  
reason of Disability, then such Participant may apply to the Plan Administrator
for an immediate distribution of all or part of the balance credited to his or
her Deferred Compensation Account.  The Plan Administrator shall have complete
discretion to honor such request to the extent the payout would not otherwise
have a materially adverse effect upon the Corporation's financial condition.

          7.6  Distribution Upon Hostile Take-Over.  Immediately prior to the
               -----------------------------------                           
consummation of a Hostile Take-Over, all Deferred Compensation Accounts
outstanding under the Plan shall be paid in full irrespective of any
Distribution elections to the contrary in effect for those Accounts.
Accordingly, this Section 7.6 shall supersede and take precedence over all
Distribution Elections in effect at the time of the Hostile Take-Over.

          7.7  Death before Distribution.  Should the Participant die prior to
               -------------------------                                      
distribution of the entire balance of his or her Deferred Compensation Account,
the unpaid 

                                                                   Page 21 of 27
<PAGE>
 
balance shall be paid to his or her beneficiary, as designated on the
Participant's most recently effective Distribution Election, at the same time as
such balance would have been paid to the Participant had he or she survived.


          7.8. Withholding.  All payments made under the Plan shall be subject
               -----------                                                    
to the Corporation's withholding of all required Federal, State and local income
and employment taxes, and all such payments shall be net of such tax
withholding.



                                 ARTICLE VIII

                                 MISCELLANEOUS
                                 -------------

 
          8.1  Benefits Not Funded.
               ------------------- 

               A.  The obligation to pay the balance of each Deferred
Compensation Account shall at all times be an unfunded and unsecured obligation
of the Corporation.  Except to the extent the Plan Administrator may in its sole
discretion elect to implement a so-called "Rabbi Trust" to serve as a funding
vehicle for the amounts which become payable under the Plan, the Corporation
shall have no obligation to establish any trust, escrow arrangement or other
segregated account for purposes of establishing a funding vehicle for the
payment of such amounts, nor shall the Corporation be under any obligation to
invest any portion of its general assets in mutual funds, insurance contracts,
stocks, bonds, securities or other similar investments in order to accumulate
funds for the satisfaction of its obligations under the Plan.  The Participant
(or his or her beneficiary) shall look solely and exclusively to the general
assets of the Corporation for the payment of the Deferred Compensation Account
maintained on the Participant's behalf under the Plan.

               B.  The Corporation shall, prior to the effective date of any
transaction that qualifies as a Change in Control, establish a Rabbit Trust and
irrevocably contribute to that trust sufficient funds to cover the Corporation's
total accrued liability existing at that time under the Plan, and the
contributed funds shall be invested by the trustee to provide for the investment
returns contemplated by Articles IV and VII of the Plan.  Payments from the
Rabbi Trust shall be made as and when benefits become payable to Participants in
accordance with the distribution provisions of Article VII of the Plan, with any
remaining balance due the Participants to be paid out of the Company's assets.

          8.2  No Employment Right.  Neither the action of the Corporation in
               -------------------                                           
establishing or maintaining the Plan, nor any action taken under the Plan by the
Plan Administrator, nor any provision of the Plan itself shall be construed so
as to grant any person the right to remain in the employ of the Corporation for
any period of specific duration, and the Participant may be discharged at any
time, with or without cause.

          8.3  Amendment/Termination.
               --------------------- 

               A.  The Board may at any time terminate the Plan in whole or in
part, and the Board may also at any time amend the provisions of the Plan to any
extent and in any manner the Board shall deem advisable, with such amendment to
become effective at the time of Board action.

               B.  No such amendment or termination of the Plan shall adversely
affect the benefits of Participants accrued to date under the Plan nor otherwise
reduce the then outstanding balances credited to their Deferred Compensation
Accounts, and all Deferred Compensation credited to those Accounts prior to the
date of any such plan amendment or termination shall continue to become due and
payable in accordance with the distribution provisions of Article VII.

          8.4  Applicable Law.  The Plan is intended to constitute an unfunded
               --------------                                                 
deferred compensation arrangement for a select group of management or other
highly compensation persons, and all rights hereunder shall be construed,
administered and governed in all respects in accordance with the provisions of
the Employee Retirement Income Security Act of 1974 (as amended from time to
time) applicable to such an 

                                                                   Page 22 of 27
<PAGE>
 
arrangement and, to the extent no pre-empted thereby, by the laws of the State
of Nevada without resort to that State's conflict-of-laws provisions. If any
provision of this Plan shall be held by a court of competent jurisdiction to be
invalid or unenforceable, the remaining provisions of the plan shall continue to
be fully effective.

          8.5  Satisfaction of Claims.  Any payment made to a Participant or his
               ----------------------                                           
or her legal representative or beneficiary in accordance with the terms of the
Plan shall to the extent thereof be in full satisfaction of all claims with
respect to such payment which such person may have against the Plan, the Plan
Administrator (or its delegate) and the Corporation, any of whom may require the
Participant or his or her legal representative or beneficiary, as a condition
precedent to such payment, to execute a receipt and release therefor in such
form as shall be determined by the Plan Administrator.

          8.6  Alienation of Benefits.  No persons entitled to any benefits
               ----------------------                                      
under the Plan shall have the right to alienate, pledge, hypothecate or
otherwise encumber his or her interest in such benefits, and such benefits shall
not, to the maximum extent permissible by law, be subject to claim of his or her
creditors or liable to attachment, execution or other process of law.

          8.7  Expenses.  All costs and expenses incurred in the operation and
               --------                                                       
administration of the Plan shall be borne by the Corporation.

          8.8  Successors and Assigns.  The obligations of the Corporation under
               ----------------------                                           
the Plan shall be binding upon the successors and assigns of the Corporation,
whether by merger, consolidation, acquisition or other reorganization.  No
amendment or termination of the Plan by any such successor assign shall
adversely affect or otherwise impair the rights of the Participants to receive
their benefit payments hereunder, to the extent attributable to any Deferred
Compensation credited to their Deferred Compensation Accounts prior to the date
of such amendment or termination, in accordance with the applicable distribution
provisions of Article VII of the Plan.


                                  ARTICLE IX

                                BENEFIT CLAIMS
                                --------------


          9.1  Claims Procedure.  No application is required for the payment of
               ----------------                                                
benefits under the Plan.  However, if any Participant (or beneficiary) believes
he or she is entitled to a benefit from the Plan which differs from the benefit
determined by the Plan Administrator, then such individual may file a written
claim for benefits with the Plan Administrator.  Each claim shall be acted upon
and approved or denied within ninety (90) days following receipt by the Plan
Administrator.

          9.2  Denial of Benefits.  In the event any claim for benefits is
               ------------------                                         
denied, in whole or in part, the Plan Administrator shall notify the claimant in
writing of such denial and of his or her right to a review by the Plan
Administrator and shall set forth, in a manner calculated to be understood by
the claimant, specific reasons for such denial, specific references to pertinent
provisions of this Plan on which the denial is based, a description of any
additional material or information necessary to perfect the claim, an
explanation of why such material or information is necessary, and an explanation
of the review procedure.

          9.3  Review.
               ------ 

               A.  Any person whose claim for benefits is denied in whole or in
part may appeal to the Plan Administrator for a full and fair review of the
decision by submitting to the Plan Administrator, within ninety (90) days after
receiving written notice from the Plan Administrator of such denial, a written
statement;

                   (i) Requesting a review by the Plan Administrator of his or
her claim for benefits;

                   (ii) Setting forth all of the grounds upon which the request
for the review is based and any facts in support thereof; and

                   (iii)     Setting forth any issues or comments which the
claimant deems pertinent to his or her claim.

                                                                   Page 23 of 27
<PAGE>
 
               B.  The Plan Administrator shall act upon each such claim within
sixty (60) days after receipt of the claimant's request for review by the Plan
Administrator, unless special circumstances require an extension of time for
processing.  If such an extension is required, written notice of the extension
shall be furnished to the claimant within the initial sixty (60)-day period, and
a decision shall be rendered as soon as possible, but not later than one hundred
twenty (120) days after receipt of the initial request for review.  The Plan
Administrator shall make a full and fair review of each such claim and any
written materials submitted by the claimant or the Corporation in connection
therewith and may require the Corporation or the claimant to submit such
additional facts, documents, or other evidence as the Plan Administrator any, in
its sole discretion, deem necessary or advisable in making such a review.  On
the basis of its review, the Plan Administrator shall make an independent
determination of the claimant's eligibility for benefits under the Plan.  The
decision of the Plan Administrator on any benefit claim shall be final and
conclusive upon all persons.

               C.  In the event the Plan Administrator denies an appeal in
whole or in part, the Plan Administrator shall give written notice of such
decision to the claimant, setting forth in a manner calculated to be understood
by the claimant the specific reasons for such denial and specific reference to
the pertinent Plan provisions on which the decision of the Plan Administrator
was based.

                                                                   Page 24 of 27
<PAGE>
 
                                  SCHEDULE I
                                  ----------

                      LIST OF AVAILABLE INVESTMENT FUNDS
                      ----------------------------------




                                                                   Page 25 of 27
<PAGE>
 
                                   EXHIBIT A
                                   ---------





                                                                   Page 26 of 27