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                                                                   Exhibit 10.40

                              K&F INDUSTRIES, INC.

                             1998 STOCK OPTION PLAN

1.    PURPOSES

      The purposes of this Plan are: (a) to further the growth and success of
K&F Industries, Inc. (the "Company") and its subsidiary corporations by enabling
selected employees and directors of, or consultants to, the Company or its
subsidiary corporations to acquire shares of its Common Stock, $.O1 par value
(the "Common Stock"), under the terms and conditions and in the manner
contemplated by this Plan, thereby increasing their personal involvement and
interest in the Company and its subsidiary corporations, encouraging their
continued service with the Company and its subsidiary corporations and promoting
the interest of the Company and all of its stockholders; (b) to enable the
Company or its subsidiary corporations to obtain and retain the service of
employees, directors or consultants necessary to the continued growth and
success of the Company and its subsidiary corporations; and (c) to provide a
means of rewarding outstanding performance to the Company and its subsidiary
corporations. Options granted under this Plan will be either options which are
intended to qualify as "incentive stock options" ("ISOs") under Section 422A of
the Internal Revenue Code of 1986, as amended (the "Code"), or as non-qualified
stock options ("NSOs") which are not intended to qualify as "incentive stock
options" under Section 422A of the Code. For the purposes of the Plan, the terms
"subsidiary" and "subsidiary corporation" shall mean "subsidiary corporation",
as such term is defined in Section 425(e) and (f) of the Code. Unless the
context otherwise requires, any ISO or NSO shall hereinafter be referred to as
an "Option".

2.    ADMINISTRATION OF PLAN

      (a) Option Committee. The Plan shall be administered by the Board of
Directors of the Company (the "Board") or an Option Committee (the "Committee")
consisting of two or more persons appointed to such Committee from time to time
by the Board; provided, however, that (i) to the extent necessary in order to
permit officers and directors of the Company to be exempt from the provisions of
Section 16(b) of the 1934 Act with respect to transactions pursuant to the Plan,
each of such persons shall be a "Non-Employee Director" within the meaning of
Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended (the "1934 Act") and (ii)
if such qualification is deemed necessary in order for the grant or exercise of
awards made under the Plan to qualify for any tax or other material benefit to
participants of
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the Company under applicable regulations under Section 162(m) of the Code, each
of such persons shall be an "outside director" (as defined in applicable
regulations thereunder).

      2.2 Committee Procedures. If a Committee has been appointed, it shall
select from its members a Chairman and shall adopt such rules and regulations as
it shall deem appropriate concerning the holding of meetings and the
administration of the Plan. A majority of the entire Committee shall constitute
a quorum and the actions of a majority of the members of the Committee present
at a meeting at which a quorum is present, or actions approved in writing by all
of the members of the Committee, shall be actions of the Committee.

      2.3 Authority and Interpretation. Subject to the provisions of the Plan,
the Board shall have authority: (a) to determine the fair market value of the
shares of Common Stock covered by each Option, (b) to select the employees or
directors of, or consultants to, the Company or its subsidiary corporations to
receive Options under the Plan, (c) to fix the number of shares which each
Optionee may purchase, (d) to set the terms and conditions of each Option,
including whether an Option should be an ISO or NSO and the extent to which
Options shall vest in installments and, with the consent of the holder thereof,
to modify or amend any provisions of an Option (other than provisions
incorporated directly or by reference from this Plan), (e) to interpret this
Plan, (f) to prescribe, amend and rescind rules and regulations relating to this
Plan, (g) to accelerate an exercise date of any Option, (h) to authorize any
person to execute on behalf of the Company any instrument required to effectuate
the grant of an Option already granted and (i) to determine all other matters
relating to the Plan. The Board shall have complete authority to construe,
interpret and administer this Plan. All decisions of the Board shall be
conclusive and binding on all participants in the Plan.

3.    ELIGIBLE EMPLOYEES, DIRECTORS AND INDEPENDENT CONTRACTORS; LIMITATION ON
      GRANTS

      3.1. Generally. From time to time, the Board may grant Options under this
Plan to any person (the "Optionee") who at the time of such grant is (a) any
employee of the Company or its subsidiary corporations, (b) any director of the
Company or one of its subsidiary corporations, including any employee of the
Company or its subsidiary corporations who is also a director of the Company or
(c) any consultant to the Company or one of its subsidiary corporations,
provided that the right to grant Options to consultants or other non-employees
does not disqualify the Plan from any qualification or right which would be
available if the Plan were limited to employees and directors. Options granted


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under the Plan shall be in such amounts, at such prices and upon such other
terms and conditions not inconsistent with this Plan as the Board, in its
discretion, may determine. Options granted to employees of the Company or its
subsidiary corporations will be either NSOs or ISOs, and Options granted to
directors of the Company or its subsidiary corporations, or consultants to the
Company or its subsidiary corporations will be NSOs. Any employee or director
of, or consultant to, the Company or its subsidiary corporations who has been
granted an Option may, if otherwise eligible, be granted additional Options.

      3.2. Certain Limitations. Anything contained in this Section 3 to the
contrary notwithstanding, no employee who owns, directly or indirectly (within
the meaning of Sections 422A(b)(6) and 425(d) of the Code), stock possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of a subsidiary corporation shall be eligible to receive
an ISO under the Plan, unless (i) the exercise price (as determined in
accordance with Section 6.3.1 and 6.3.2 hereof) of the shares of Common Stock
subject to such ISO is fixed at not less than 110% of the FMV on the date of
grant of such shares and (ii) such ISO by its terms is not exercisable after the
expiration of five years from the date it is granted.

4.    SHARES SUBJECT TO THE PLAN

      4.1. Number of Shares. The aggregate number of shares of Common Stock
which may be issued upon the exercise of all Options granted under this Plan,
excluding any such shares repurchased by the Company, shall be 50,000 shares of
Common Stock, subject to adjustment as provided in Sections 6.1.7, 6.1.8 and
6.1.9 hereof. Shares of Common Stock subject to unexercised portions of any
terminated or expired Option (including Options surrendered in accordance with
Section 7 hereof) and shares of Common Stock issued pursuant to the exercise of
Options and repurchased by the Company shall again be available for the granting
of Options under the Plan.

      4.2.2 Character of Shares. The shares of Common Stock issuable upon
exercise of an Option granted under the Plan shall be (a) authorized by unissued
shares of Common Stock, (b) shares of Common Stock held in the Company's
treasury or (c) a combination of the foregoing.

5.    GRANTING OF OPTIONS

      No Options shall be granted under this Plan after ten (10) years from the
date this Plan becomes effective (as provided in Section 15 hereof).


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      Options granted pursuant to the Plan shall be evidenced by written stock
option agreements specifying the number of shares covered thereby, in such form
as the Board shall from time to time establish, which agreements may incorporate
all or any of the terms of the Plan by reference and shall comply with and be
subject to the terms and conditions set forth in Section 6 hereof. Each
agreement shall specify whether the Option it evidences is an ISO or NSO.

      The Board may approve the grant of Options under this Plan, subject to
Section 3 hereof, to persons who are expected to become employees or directors
of, or consultants to, the Company or its subsidiary corporations but are not
employees, directors, or consultants at the date of the approval. In such cases,
the Option shall be deemed granted on the date the grantee becomes an employee
or director or consultant and must satisfy all requirements of this Plan for
Options granted on that date.

6.    TERMS, CONDITIONS AND FORM OF OPTIONS

      Each Option granted under this Plan shall be designated as an ISO or a NSO
and shall be subject to the terms and conditions set forth in Section 6.1. NSOs
and ISOs shall also be subject to the terms and conditions set forth in Section
6.2 and Section 6.3 hereof, respectively.

      6.1. Terms and Conditions to Which All Options are Subject. All Options
granted under this Plan shall be subject to the following terms and conditions.

      6.1.1. Exercise Period. Each stock option agreement shall state the period
or periods of time within which the Option may be exercised by the Optionee, in
whole or in part, which shall be such period or periods of time as may be
determined by the Board; provided, however, that if the Company files a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), for the initial public offering of its securities, no Option
granted under the Plan shall be exercisable during the 180-day period
immediately following the effective date of such registration statement; and
provided further, that no Option granted under this Plan shall be exercisable
more than ten (10) years after the date of its grant and no ISO granted to a
person described in Section 3.2 hereof shall be exercisable more than five (5)
years after the date of its grant. If an Option is not at the time of grant
immediately exercisable, the Board may (a) in the stock option agreement
evidencing such Option, provide for acceleration of the exercise date or dates
of the subject Option under the occurrence of specified events and/or (b) at any
time prior to the complete termination of an Option, accelerate the exercise
date or dates of such Option.


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      6.1.2. Exercise of Options. An Option granted under this Plan shall be
exercised by delivery to the Secretary of the Company of:

      (a) a notice in writing from the Optionee of his intention to purchase
      shares, (i) specifying the number of shares as to which the Optionee
      desires to exercise his Option, (ii) specifying whether the shares are
      issued pursuant to an ISO or NSO, (iii) specifying the date (the "Purchase
      Date") upon which the Optionee desires to complete his purchase (which
      must be within the exercise periods specified in the stock option
      agreement) and (iv) containing any representations of the Optionee
      required under Section 11 hereof and the stock option agreement of such
      Optionee;

      (b) a copy of any election filed by the Optionee pursuant to Section 83(b)
      of the Code;

      (c) in the event that such Option shall be exercised by any person other
      than the Optionee pursuant to Section 6.1.4 hereof, appropriate proof of
      the right of such person to exercise such Option;

      (d) such payments as are required by Section 6.1.5 hereof (including cash
      or Common Stock and, as applicable, any promissory notes to be delivered
      to the Company in payment of all or a portion of the exercise price); and

      (e) such further undertakings or agreements consistent with the Plan as
      the Board may require.

      Promptly after the later of the receipt of written notice of exercise of
an Option or the Purchase Date, the Company shall deliver, without stock issue
taxes or transfer taxes to the Optionee or other person entitled to exercise the
Option, to the Optionee or other person a certificate or certificates for the
requisite number of shares of Common Stock.

      6.1.3. Option Grant Date. The date of grant of an Option under this Plan
shall be the date as of which the Board approves the grant, except as otherwise
provided in Section 5 hereof.


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      6.1.4. Nonassignability of Option Rights. No Option granted under this
Plan shall be assignable or otherwise transferable by the Optionee except by
will or by the laws of descent and distribution (for purposes of this Plan, all
references to the Optionee shall be deemed to include any successor to the
Optionee by will or the laws of descent and distribution unless the context
otherwise requires). During the life of the Optionee an Option shall be
exercisable only by the Optionee.

      6.1.5. Payment. At the time a NSO or an ISO is granted, the Board, in the
exercise of its absolute discretion, may specify one or more of the following
forms of payment which may be used by an Optionee upon exercise of his Option
(absent such specification any combination of the following methods shall be
permitted):

      (a) cash or personal or certified check payable to the Company in an
      amount equal to the aggregate Option Price of the shares with respect to
      which the Option is being exercised; and/or

      (b) stock certificates (in negotiable form) representing shares of Common
      Stock having a FMV on the date of exercise (as determined in accordance
      with Section 6.3.2 as if the date of exercise were the date of grant)
      equal to the aggregate Option Price of the shares with respect to which
      the Option is being exercised; provided, however, that the par value of
      the shares with respect to which the Option is being exercised shall in
      any event be paid in cash or by personal or certified check.

      6.1.6 Termination of Unexercised Options Following Termination of
Association; Repurchase of Shares. No Option shall be affected by any change of
duties or position of the Optionee (including transfer to or from a subsidiary),
so long as he continues to be an employee or director of, or consultant to, the
Company or one of its subsidiaries. If an Optionee ceases to be an employee or
director of, or consultant to, the Company and its subsidiary corporations other
than because of his death or disability (within the meaning of Section 22(e)(3)
of the Code), any portion of the Optionee's Option which is otherwise
exercisable by its terms and has not been previously exercised shall expire
three (3) months following the date of such termination and shall thereafter be
of no further force and effect; provided, however, that if the Optionee shall
die during such three-month period, his Option shall expire one year following
the date of such termination. If an Optionee ceases to be an employee or
director of, or consultant to, the Company and


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its subsidiary corporations because of his death or disability (within the
meaning of Section 22(e)(3) of the Code), his Option shall expire one year
following the date of such termination and shall thereafter be of no further
force and effect.

      6.1.7. Changes in Capital Structure. Subject to Sections 6.1.8 and 6.1.9,
if the Common Stock of the Company is changed by reason of a stock split,
reverse stock split, stock dividend, or recapitalization, or converted into or
exchanged for other securities as a result of a merger, consolidation or
reorganization, the Board shall make appropriate adjustments, all as calculated
in its sole discretion, in (a) the number and class of shares of stock subject
to this Plan and each Option outstanding under this Plan and (b) the exercise
price of each outstanding Option. Notwithstanding the foregoing, such
adjustments shall be "appropriate" with respect to ISOs only where such
adjustments merely reflect a change in capitalization, do not constitute a
modification, extension or renewal of the Option with the meaning of Sections
422A and 425 of the Code and the Treasury Regulations thereunder, and do not
constitute the adoption of a new plan requiring stockholder approval under
Section 422A of the Code. Any adjustments determined by the Board shall be
final, conclusive and binding. The Company shall provide written notice to each
Optionee of the nature and effect of such adjustment as promptly as is
practicable.

      6.1.8. Corporate Transactions. The following rules shall apply in
connection with the dissolution or liquidation of the Company, a reorganization,
merger or consolidation in which the Company is not the surviving corporation,
or a sale of all or substantially all of the assets of the Company to another
person or entity (a "Corporate Transaction"):

      (a) Upon the occurrence of a Corporate Transaction, all Options granted
      under the Plan shall automatically terminate; provided, however, that each
      holder of an Option outstanding at such time shall be given (i) written
      notice of such Corporate Transaction at least twenty (20) days prior to
      its proposed effective date (as specified in such notice) and (ii) an
      opportunity, during the period commencing with delivery of such notice and
      ending ten (10) days prior to such proposed effective date, to exercise
      the Option to the full extent to which such Option would have been
      exercisable by the Optionee at the expiration of such ten-day period; and

      (b) Anything contained herein to the contrary notwithstanding, Section
      6.1.8(a) shall not be applicable if provision shall me made in connection
      with such Corporate


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      Transaction for the assumption of outstanding Options by, or the
      substitution for such Options of new Options covering the stock of, the
      surviving, successor or purchasing corporation, or a parent or subsidiary
      thereof, with appropriate adjustments as to the number, kind and Option
      Prices of shares subject to such Options; provided, however, that no such
      assumption or substitution shall be permitted with respect to ISOs if the
      effect thereof would be a modification, extension or renewal of the ISOs
      within the meaning of Section 425(h) of the Code and the Treasury
      Regulations promulgated thereunder.

      6.1.9. Special Adjustment Rules. The following rules shall apply in
connection with Sections 6.1.7 and 6.1.8 hereof:

      (a) No fractional shares shall be issued as a result of any such
      adjustment, and any fractional shares resulting from the computations
      pursuant to Sections 6.1.7 and 6.1.8 hereof shall be eliminated, without
      consideration, from the respective Options:

      (b) No adjustment shall be made for cash dividends or the issuance to
      stockholders of rights to subscribe for additional shares of Common Stock
      or other securities; and

      (c) Any adjustments referred to in Section 6.1.7 and 6.1.8 hereof shall be
      made by the Board in its sole discretion and shall be conclusive and
      binding on all persons holding Options granted under the Plan.

      6.1.10. Other Provisions. Each Option granted under this Plan may contain
such other terms, provisions, and conditions, and may obligate the Optionee to
become a party to such other agreements, in each case not inconsistent with this
Plan as may be determined by the Board, including provisions or agreements
concerning transfer restrictions, rights of first refusal and repurchase rights.
Each ISO granted under this Plan shall include such other provisions and
conditions as are necessary to qualify the Option as an "incentive stock option"
within the meaning of Section 422A of the Code and shall not include any tens or
conditions which are inconsistent therewith.

      6.2. Terms and Conditions to Which Only NSOs Are Subject. Options granted
under this Plan which are designated as NSOs shall be subject to the following
terms and conditions:


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      6.2.1. Exercise Price. The exercise price of a NSO shall be such price as
shall be determined by the Board but in any event shall be at least equal to the
lesser of (i) $20 below the FMV of the Common Stock on the effective date of the
grant or (ii) 25% of the FMV of the Common Stock on the effective date of the
grant.

      6.2.2. Withholding and Employment Taxes. At the time of exercise of an
NSO, the Optionee shall remit to the Company in cash all applicable Federal and
State withholding and employment taxes.

      6.3. Terms and Conditions to Which Only ISOs Are Subject. Options granted
under this Plan which are designated as ISOs shall be subject to the following
terms and conditions:

      6.3.1. Exercise Price. The exercise price of an ISO shall be the FMV of
the Common Stock subject to the Option on the date of grant.

      6.3.2. Determination of Fair Market Value. Subject to the requirements of
Section 422A of the Code, for purposes of the Plan, the "fair market value" or
"FMV" of shares of Common Stock shall be equal to:

      (a) if the Common Stock is publicly traded, (i) in the over-the-counter
      market, the closing price (or the mean between the last bid and asked
      prices if no sales took place) on the business day immediately preceding
      the date of grant, or, if lower, the average of the daily closing prices
      (or the means between the last bid and asked prices for days on which no
      sales took place) of the 30 business days immediately preceding the date
      of grant, in all cases as reported by NASDAQ or (ii) on a national
      securities exchange, the average of the high and low prices on the
      business day immediately preceding the date of grant, or, if lower, the
      average of the daily closing prices (or the means between the last bid and
      asked prices for days on which no sales took place) of the 30 business
      days immediately preceding the date of grant, in all cases on the
      principal national securities exchange on which it is so traded; or

      (b) if there is no public trading market for such shares, the fair market
      value of such shares as determined by the Board after taking into
      consideration all factors which it deems appropriate, including, without
      limitation, recent sale and offer prices of the Common Stock in private
      transactions negotiated at arms' length.


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      Anything contained herein to the contrary notwithstanding, all
determinations pursuant to this Section 6.3.2 shall be made without regard to
any restriction other than a restriction which, by its terms, will never lapse.

      6.3.3. Limitations on Exercise. Anything to the contrary contained herein
notwithstanding, an ISO granted under this Plan to an Optionee shall be
considered a NSO to the extent that the aggregate FMV on the date of the grant
of such ISO (as determined pursuant to Section 6.3.2) of the stock with respect
to which ISOs are exercisable for the first time by such Optionee during any
calendar year (under all plans of the Company and any parent or subsidiary
corporations) exceeds $100,000.

      6.3.4. Disqualifying Dispositions. If stock acquired by exercise of an ISO
granted pursuant to this Plan is disposed of within two (2) years from the date
of grant of the ISO or within one (1) year after the transfer of stock to the
Optionee, the holder of the stock immediately prior to the disposition shall
promptly notify the Company in writing of the date and terms of the disposition
and shall provide such other information regarding the disposition as the
Company may reasonably require.

      6.3.5. Withholding Taxes. Whenever under this Plan shares of Common Stock
are to be delivered by an Optionee upon exercise of an NSO, the Company shall be
entitled to require as a condition of delivery that the Optionee remit or, in
appropriate cases, agree to remit when due, an amount sufficient to satisfy all
current or estimated future Federal, state and local withholding tax and
employment tax requirements relating thereto. At the time of a disqualifying
disposition, the Optionee shall remit to the Company in cash any applicable
Federal and state withholding and employment taxes.

7.    SURRENDER OF OPTIONS

      The Board may, under such terms and conditions as it deems appropriate,
accept the surrender and termination by an Optionee of a right to exercise an
Option to purchases shares of Common Stock granted under an Option and authorize
a payment in consideration therefor of an amount equal to the difference
obtained by subtracting the exercise price of such Option from the fair market
value of the shares of Common Stock for which such Option is exercisable on the
date of such surrender as determined in the discretion of the Board, such
payment to be in cash, provided that the Board determines that such settlement
is consistent with the purposes set forth in Section 1 hereof. The Company shall
be entitled to withhold from any payment to the


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Optionee pursuant to this Section 7, within sixty (60) days following the date
of such settlement, any applicable Federal and state income and employment taxes
due in respect of such settlement.

8.    DURATION OF PLAN

      Except with respect to Options then outstanding, the Plan shall expire on
the first to occur of (a) the tenth anniversary of the date on which the Plan is
adopted by the Board, (b) the tenth anniversary of the date on which the Plan is
approved by the stockholders of the Company or (c) the date as of which the
Board, in its sole discretion, determines that the Plan shall terminate (the
"Expiration Date"). Any Options outstanding as of the Expiration Date shall
remain in effect until they have been exercised or terminated or have expired by
their respective terms.

9.    STOCKHOLDER RIGHTS

      An Optionee shall not have any privileges of a stockholder with respect to
any shares of stock subject to his Option until the date of the issuance to the
Optionee of a stock certificate evidencing such shares pursuant to his exercise
of the Option.

10.   AMENDMENT OR DISCONTINUANCE

      The Board at any time may terminate or amend this Plan; provided, however,
that the approval of the holders of a majority of the votes that may be cast by
all of the holders of shares of Common Stock and preferred stock of the Company,
if any, entitled to vote (voting as a single class) shall be obtained prior to
any such amendment becoming effective if such approval is required by law or is
necessary to comply with regulations promulgated by the SEC under Section 16(b)
of the 1934 Act or with Section 422A of the Code or the Treasury Regulations
thereunder.

11.   COMPLIANCE WITH SECURITIES LAWS

      No Options shall be granted under this Plan, and no shares shall be
purchased upon the exercise of any Option and no Option may be surrendered in
accordance with Section 7, unless and until any then applicable securities law
or requirements of any regulatory agencies having jurisdiction and of any
exchanges upon which stock subject to said Options of the Company may be listed
shall have been fully complied with.


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      At the time of the exercise or surrender of any Option hereunder, the
Board, in its discretion, may require assurances or representations satisfactory
to it from the person exercising or surrendering the Option appropriate to
satisfy the requirements of applicable Federal and state securities laws.

12.   EMPLOYMENT OR DIRECTORSHIP RIGHTS

      Nothing contained in this Plan shall be deemed to give any Optionee a
right to the continuation of his employment by, or retention as a consultant to,
or directorship with, the Company or any of its subsidiaries to which he is not
otherwise entitled, or to any increase or decrease in the compensation of the
Optionee from the rate in existence at the time of the grant of the Option, nor
shall the Company or its subsidiaries be under any obligation by virtue of this
Plan to retain any Optionee as an employee, consultant or director for any
period.

13.   NUMBER AND GENDER

      With respect to words used in this Plan, the singular form shall include
the plural form, the masculine gender shall include the feminine gender, and
vice versa, as the context requires.

14.   INDEMNIFICATION

      In addition to any other rights to indemnification which they may have as
members of the Board, the members of the Board administering the Plan shall be
indemnified by the Company against reasonable expenses, including reasonable
attorney's fees incurred, in connection with any action, suit or proceeding, or
in connection with any appeal thereof, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any Option granted hereunder, and against all amounts paid by
them in settlement thereof (provided such settlement is approved by independent
legal counsel selected by the Company) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Board member is liable for gross negligence or willful misconduct in the
performance of his duties; provided, that within sixty (60) days after
institution of any such action, suit or proceeding a Board member shall by
written notice offer the Company the opportunity, at its own expense, to handle
and defend such action, suit or proceeding.


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15.   EFFECTIVE DATE OF PLAN

      This Plan shall become effective upon adoption by the Board, provided,
however, that no Option shall be exercisable unless and until the written
consent of a majority (or such greater number as may be required by law or
applicable government regulations or orders) of the holders of the securities of
the Company entitled to vote, or approval by stockholders of the Company voting
at a validly called stockholders meeting and holding a majority (or such greater
number as may be required by law or applicable governmental regulations or
orders) of the shares voting at such meeting, is obtained within twelve (12)
months before or after adoption by the Board.

16.   SEVERABILITY

      If any provision of the Plan or any Option Agreement shall be determined
to be illegal and unenforceable by any court or law in any jurisdiction, the
remaining provisions hereof and thereof shall be severable and enforceable in
accordance with their terms, and all provisions shall remain enforceable in any
other jurisdiction.

17.   GOVERNING LAW

      The validity and construction of this Plan and the instruments evidencing
the Options shall be governed by the laws of the State of Delaware.

18.   ARBITRATION

      All disputes arising out of, or in connection with, the validity,
interpretation, construction, meaning, or execution of the Plan shall be finally
settled by arbitration to be held in New York City and conducted in accordance
with the Rules of the American Arbitration Association. Judgment upon any award
rendered may be entered in any court having jurisdiction or application may be
made to such court for judicial acceptance of the award and an order of
enforcement, as the case may be.


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