STORAGE TECHNOLOGY CORPORATION
                         1995 EQUITY PARTICIPATION PLAN
                       (As amended through March 5, 1999)

                                    SECTION 1

                                  INTRODUCTION

      1.1 Establishment. Effective as provided in Section 22, the Company hereby
establishes a plan of long-term stock-based compensation incentives for selected
employees,   directors  and  consultants  of  the  Company  and  its  affiliated
corporations. The plan shall be known as the Storage Technology Corporation 1995
Equity Participation Plan (the "1995 Plan").

      1.2  Purpose.  The  purpose  of the  1995  Plan is to  provide  employees,
directors and consultants selected for participation in the 1995 Plan with added
incentives to continue in the service of the Company and its  affiliates  and to
create in such  employees,  directors and  consultants a more direct interest in
the  future  success  of  the  operations  of the  Company  and  its  affiliated
corporations by relating incentive  compensation to the achievement of long-term
corporate  economic  objectives.  The 1995 Plan is also  designed to attract key
employees,  directors and consultants  and to retain and motivate  participating
employees,  directors and  consultants  by providing an  opportunity  for equity
investment in the Company.

      1.3 No  Effect on 1987  Plan  Options.  Options  granted  pursuant  to the
Storage Technology  Corporation 1987 Equity Participation Plan (the "1987 Plan")
shall be governed by the terms and provisions of the option agreements  covering
such grants and by the provisions of the 1987 Plan.


                                   SECTION 2

                                   DEFINITIONS

      2.1  Definitions.  The  following  terms shall have the meanings set forth
below:

            (a) "Affiliated  Corporation" means any corporation that is either a
parent corporation with respect to the Company or a subsidiary  corporation with
respect  to the  Company  (within  the  meaning  of  Sections  424(e)  and  (f),
respectively, of the Internal Revenue Code).

            (b) "Board" means the Board of Directors of the Company.
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            (c) "Cause"  means  performance  or conduct  problems  resulting  in
discharge,   as  determined  by  the  Company  or  Affiliated   Company,   which
determination will be conclusive.

            (d)  "Committee"  means  a  committee  designated  by the  Board  to
administer the Plan or, if no committee is so designated, the Board.

            (e) "Common  Stock" means the Company's $.10 par value voting common
stock.

            (f) "Common Stock  Equivalent" means a right to receive Common Stock
in the future that may be granted to a  Participant  pursuant to Sections 12, 13
or 15 in  lieu of a  current  issuance  of  Common  Stock,  subject  to  certain
conditions and limitations imposed in accordance with such Sections.

            (g)  "Consultant"  means a natural person who performs  services for
the Company, or any Affiliated Corporation,  or any division thereof in exchange
for consideration, but who is not an Employee.

            (h) "Director" means a member of the Board.

            (i)  "Effective  Date" means the effective date of the 1995 Plan, as
set forth in Section 22 hereof.

            (j) "Eligible  Employees" means those Employees upon whose judgment,
initiative  and efforts the Company or the Affiliated  Corporations  are, or are
expected  to  become,  largely  dependent  for the  successful  conduct of their
business.

            (k)  "Employee"  means a natural  person  who is deemed an  employee
(including,  without limitation, an officer or director who is also an employee)
of the Company,  or any  Affiliated  Corporation,  in accordance  with the rules
contained in Section  3401(c) of the Internal  Revenue Code and the  regulations
thereunder.

            (l) "Fair Market  Value" means with respect to Common  Stock,  as of
any date,  the  closing  price of a share of Common  Stock on the New York Stock
Exchange as reported by The Wall Street  Journal for the last  trading day prior
to that date. If no such prices are reported,  then Fair Market Value shall mean
the average of the high and low sale prices for the Common  Stock (or if no sale
prices are reported,  the average of the high and low bid prices) as reported by
the principal  regional stock  exchange,  or if not so reported,  as reported by
Nasdaq or a quotation system of general circulation to brokers and dealers.
<PAGE>

            (m)  "Incentive  Stock  Option"  means the right to purchase  Common
Stock granted to an Employee  pursuant to Sections 6 and 7, which constitutes an
incentive stock option within the meaning of Section 422 of the Internal Revenue
Code, and which may or may not be issued with related Stock Appreciation Rights.

            (n) "Internal Revenue Code" means the Internal Revenue Code of 1986,
as it may be amended from time to time.

            (o)  "Long-Term  Employee"  means a person who, as of the date he or
she ceases to be an Employee of the Company or any Affiliated  Corporation,  has
been an Employee of the Company or any Affiliated  Corporation  for six years or
more, with no break in such employment of longer than one year.

            (p) "MBO Payment"  means a payment to a Participant  pursuant to the
Company's MBO Plan,  which payment may be made either in shares of Common Stock,
Common Stock Equivalents or in cash, or partly in Common Stock, partly in Common
Stock  Equivalents  and partly in cash, as  determined  in  accordance  with the
provisions of Section 13.

            (q) "MBO Equity Plan" means the  Company's  Management  By Objective
Plan, as established  by the Board or the Committee from time to time,  pursuant
to which MBO  Payments  are made from time to time in the  manner  and under the
conditions established by the Board or the Committee.

            (r)  "Non-Qualified  Option" means a right to purchase  Common Stock
granted to a Participant pursuant to Sections 6 and 8, which does not qualify as
an Incentive Stock Option or which is designated as a Non-Qualified  Option, and
which may or may not be issued with related Stock Appreciation Rights.

            (s) "Outside Director" means a Director who is not an Employee.

            (t) "Participant" means an Eligible Employee, Director or Consultant
designated by the  Committee  from time to time during the term of the 1995 Plan
to receive one or more of the stock-based compensation incentives provided under
the 1995 Plan.

            (u) "Reduction in Force" means any  termination of employment  that,
in the sole  judgment of the Company,  is (i) made at the request of the Company
or an Affiliated  Corporation  and is due to the  elimination  of the Employee's
position,  or (ii) a reduction in the

<PAGE>

number of persons employed by the Company,
either  overall or in the  Employee's  function,  department,  division or other
relevant workplace unit.

            (v) "Restricted  Stock Award" means an award of Common Stock granted
to a Participant  pursuant to Section 10 that is subject to certain restrictions
imposed in accordance with the provisions of such Section.

            (w) "Retire" means any  termination of employment  that is deemed to
be a "Retirement" by a resolution of the Board of Directors,  or any termination
of  employment  made at the request of the  Employee  if, as of the date of such
termination,  such  Employee  (a) is age 62 or older and (b) has, at the time of
such termination, been employed by the Company or any Affiliated Corporation for
six years or more, with no break in such employment of longer than one year.

            (x) "Retired"  means the status of any former  Employee  after he or
she Retires.

            (y)  "Stock   Appreciation   Right"  means  a  right  granted  to  a
Participant pursuant to Section 9 to receive a payment from the Company equal to
the  difference  between the Fair  Market  Value of one or more shares of Common
Stock  subject to a  Non-Qualified  Option or an Incentive  Stock Option and the
exercise price of such shares under the terms of such Stock Option.

            (z)  "Stock   Option"   means  an   Incentive   Stock  Option  or  a
Non-Qualified Option.

      2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine  gender,  and the definition of
any term herein in the singular shall also include the plural.


                                  SECTION 3

                               PLAN ADMINISTRATION

      3.1 Administration  Generally.  The 1995 Plan shall be administered by the
Board or Committee.  In  accordance  with the  provisions of the 1995 Plan,  the
Committee, in its sole discretion:
<PAGE>

                 (i)    shall   select   the   Participants    from   Eligible
Employees, Directors and Consultants;

                (ii) shall  determine the number of shares of Common Stock to be
subject to Incentive Stock Options,  Non-Qualified  Options,  Stock Appreciation
Rights,  Restricted  Stock  Awards  and  other  Common  Stock  or  Common  Stock
Equivalent awards granted pursuant to the 1995 Plan;

               (iii)  shall  determine  the number of shares of Common  Stock or
Common Stock Equivalents to be issued as MBO Payments;

                (iv) shall  determine  the time at which such  options,  rights,
awards and payments are to be granted;

                 (v) shall fix the  exercise  price,  period  and the  manner in
which a Stock Option becomes exercisable;

                (vi) shall establish the duration and nature of Restricted Stock
Award restrictions;

               (vii) shall  determine the Fair Market Value of the Common Stock,
in accordance with Section 2.1(l) of the 1995 Plan;

              (viii) shall determine  whether and under what  circumstances,  if
any, a Stock Option or Stock Appreciation Right may be settled in cash or Common
Stock Equivalents instead of Common Stock;

                (ix) may reduce the exercise  price of any Stock Option or Stock
Appreciation  Right to the then  current  Fair  Market  Value if the Fair Market
Value of the Common  Stock  covered by such option or right shall have  declined
since the date the Stock Option was granted;

                 (x) may modify or amend the terms and  conditions  of any Stock
Option,  Stock Appreciation Right,  Restricted Stock Award or other Common Stock
award,  subject  to  Section  19 of the Plan  (including,  but not  limited  to,
accelerating vesting or waiving forfeiture restrictions);

                (xi)    may institute an option exchange program;
<PAGE>

               (xii)  may  authorize  any  person  to  execute  on behalf of the
Company any  instrument  required to effect the grant of a Stock  Option,  Stock
Appreciation Right, Restricted Stock Award or other Common Stock or Common Stock
Equivalent award previously granted by the Committee; and

              (xiii) shall  establish such other terms and  requirements  of the
various  compensation  incentives  under the 1995 Plan as the Committee may deem
necessary or desirable and consistent with the terms of the 1995 Plan.

The  Committee  shall  determine  the  form  or  forms  of the  agreements  with
Participants, which shall evidence the particular provisions, terms, conditions,
rights and duties of the Company and the Participants  with respect to Incentive
Stock Options,  Non-Qualified  Options,  Stock Appreciation Rights, Common Stock
Equivalent and Restricted  Stock Awards granted pursuant to the 1995 Plan, which
provisions need not be identical except as may be provided herein. The Committee
may from time to time adopt  such rules and  regulations  for  carrying  out the
purposes of the 1995 Plan as it may deem proper and in the best interests of the
Company.  The  Committee  may  correct  any  defect or supply  any  omission  or
reconcile any  inconsistency  in the 1995 Plan or in any agreement  entered into
hereunder  in the manner and to the extent it shall deem  expedient to carry the
1995  Plan  into  effect,  and it  shall be the  sole  and  final  judge of such
expediency.  No  member  of the  Committee  shall be  liable  for any  action or
determination made in good faith. The determinations,  interpretations and other
actions of the  Committee  pursuant to the  provisions of the 1995 Plan shall be
binding and conclusive for all purposes and on all persons,  subject only to the
review  and  control  of the  Board  on all Plan  matters  except  selection  of
Participants.

      3.2 Multiple  Administrative  Bodies. If permitted by Rule 16b-3, the 1995
Plan may be administered  by different  bodies with respect to Directors who are
Employees, Outside Directors, officers (within the meaning of Rule 16a-1(f)) who
are not Directors, and Employees who are neither Directors nor officers.

      3.3 Administration With Respect to Directors and Officers. With respect to
grants of Stock Options,  Stock Appreciation Rights,  Restricted Stock Awards or
other  Common  Stock or Common  Stock  Equivalent  awards under the 1995 Plan to
Employees  who  are  also  officers  or  Directors,   the  1995  Plan  shall  be
administered by:

            (a) the Board,  if the Board may  administer the 1995 Plan and still
have transactions under the 1995 Plan qualify for exemption under Rule 16b-3, or

            (b) a Committee designated by the Board to administer the 1995 Plan,
which  Committee  shall be constituted  (i) in such a manner as to permit awards
granted under

<PAGE>

the 1995 Plan to qualify for  exemption  under Rule 16b-3 and (ii)
in such a manner as to satisfy applicable laws.

      3.4 Administration  With Respect to Other Persons.  With respect to grants
of Stock Options,  Stock Appreciation  Rights,  Restricted Stock Awards or other
Common Stock or Common  Stock  Equivalent  awards to  Employees  who are neither
Directors nor officers, the 1995 Plan shall be administered by:

            (a)   the Board or

            (b) a Committee  designated by the Board,  which  Committee shall be
constituted in such a manner as to satisfy applicable laws.

      3.5 Committee Composition. Once a Committee has been appointed pursuant to
Section 3.3 or 3.4, such  Committee  shall  continue to serve in its  designated
capacity until otherwise  directed by the Board. From time to time the Board may
increase  the size of any  Committee  and appoint  additional  members  thereof,
remove members (with or without  cause) and appoint new members in  substitution
therefor, fill vacancies (however caused) or remove all members of the Committee
and thereafter  directly  administer  the Plan,  all to the extent  permitted by
applicable laws and, in the case of a Committee  appointed under Section 3.3, to
the extent  permitted  by Rule 16b-3 as it applies to  transactions  intended to
qualify thereunder as exempt transactions.


                                   SECTION 4

                            STOCK SUBJECT TO THE PLAN

      4.1  Number of  Shares.  Thirteen  Million  Five  Hundred  Fifty  Thousand
(13,550,000)  shares of Common Stock are  authorized for issuance under the 1995
Plan in  accordance  with the  provisions  of the 1995 Plan and  subject to such
restrictions  or other  provisions  as the  Committee may from time to time deem
necessary.  This authorization may be increased from time to time by approval of
the Board and the  stockholders of the Company.  Shares of Common Stock that are
issued upon exercise of Incentive Stock Options, Non-Qualified Options, or Stock
Appreciation Rights or pursuant to MBO Payments, shares of Common Stock that are
issued as  Restricted  Stock  Awards,  shares of Common Stock that are issued in
connection  with Common Stock  Equivalents,  and shares of Common Stock that are
issued  pursuant to a plan  adopted  pursuant to Section 15, shall be applied to
reduce  the  number of shares of Common  Stock  remaining  available  for future
issuance under the 1995 Plan.
<PAGE>

      4.2  Unused  and  Forfeited  Stock.  Any  shares of Common  Stock that are
subject to an Incentive Stock Option or a  Non-Qualified  Option that expires or
for any reason is terminated  unexercised,  and with respect to which no related
Stock Appreciation Right has been exercised, any shares of Common Stock that are
subject to Common Stock  Equivalents or to a Restricted Stock Award and that are
forfeited (the  "Forfeited  Restricted  Stock"),  and any shares of Common Stock
that for any other reason are not issued to a Participant  (not including shares
withheld  pursuant to Section 20.2) or are forfeited (if  forfeited,  the "Other
Forfeited Stock"),  shall automatically  become available for use under the 1995
Plan;  provided,  however,  that (i) no shares of Forfeited  Restricted Stock or
Other  Forfeited  Stock may be subject to Incentive  Stock Options and (ii) such
shares shall not be returned to the 1995 Plan if prohibited by Rule 16b-3.

      4.3   Capital Adjustments.

            (a) Changes in Capitalization. Subject to any required action by the
stockholders  of the Company,  the number of shares of Common  Stock  covered by
each  outstanding  Stock  Option,  Stock  Appreciation  Right and  Common  Stock
Equivalent  ("Rights"),  and the number of shares of Common Stock that have been
authorized for issuance  under the Plan but as to which no Stock Options,  Stock
Appreciation  Rights or Common Stock  Equivalents  have yet been granted or that
have  been  returned  to the Plan upon  cancellation  or  expiration  of a Stock
Option,  Stock  Appreciation  Right or Common  Stock  Equivalents  (the  "Shares
Available  for Future  Grant"),  as well as the price per share of Common  Stock
covered by each outstanding Stock Option or Stock  Appreciation  Right, shall be
proportionately  adjusted  for any  increase or decrease in the number of issued
and  outstanding  shares of Common Stock  resulting from a stock split,  reverse
stock split,  stock  dividend,  combination  or  reclassification  of the Common
Stock, or any other increase or decrease in the number of issued and outstanding
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   proportionate   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 or exercisable for shares of stock of any
class,  shall affect,  and no  adjustment  by reason  thereof shall be made with
respect  to, the number of Shares  Available  for Future  Grant or the number or
price of shares of Common Stock  subject to  outstanding  Stock Options or Stock
Appreciation Rights.

            (b)  Dissolution  or  Liquidation.  In the  event  of  the  proposed
dissolution or liquidation of the Company,  to the extent that a Stock Option or
Stock  Appreciation Right

<PAGE>

has not been previously  exercised,  it will terminate
immediately  prior to the  consummation of such proposed  action.  The Committee
may, in the exercise of its sole discretion in such instances,  declare that any
Stock Option or Stock  Appreciation  Right shall terminate as of a date fixed by
the Committee and give each  Participant  the right to exercise his or her Stock
Option or Stock Appreciation  Right in whole or in part,  including with respect
to shares as to which the Stock  Option or Stock  Appreciation  Right  would not
otherwise be exercisable.  Unless determined otherwise by the Committee,  Common
Stock Equivalents shall convert into shares of Common Stock immediately prior to
the consummation of any such dissolution or liquidation.

            (c) Merger or Asset Sale. In the event of a merger or  consolidation
of  the  Company  with  or  into  another  corporation,  or the  sale  of all or
substantially  all of the assets of the Company,  each outstanding Stock Option,
Stock  Appreciation  Right and  Common  Stock  Equivalent  may be  assumed or an
equivalent Stock Option, Stock Appreciation Right or Common Stock Equivalent may
be  substituted  by the successor  corporation  or a parent or subsidiary of the
successor  corporation.  The  Committee  may,  in  lieu of  such  assumption  or
substitution  of Stock  Options  and  Stock  Appreciation  Rights,  provide  for
Optionees  to have the  right  to  exercise  his or her  Stock  Option  or Stock
Appreciation  Right in whole or in part,  including with respect to shares as to
which it would not otherwise be  exercisable.  If the  Committee  makes a Common
Stock Equivalent convertible into shares of Common Stock or makes a Stock Option
or Stock Appreciation Right exercisable in lieu of assumption or substitution in
the event of a merger,  consolidation  or sale of assets,  the  Committee  shall
notify the Participants and, in the case of a Stock Option or Stock Appreciation
Right,  shall  notify the Optionee  that the Stock Option or Stock  Appreciation
Right shall be fully  exercisable for a period of thirty (30) days from the date
of such notice, and the Stock Option or Stock Appreciation Right shall terminate
upon the  expiration  of such period.  For the purposes of this  paragraph,  the
Stock  Option,  Stock  Appreciation  Right or Common Stock  Equivalent  shall be
considered  assumed if,  following the merger,  consolidation or sale of assets,
the Stock Option,  Stock  Appreciation  Right or Common Stock Equivalent confers
the right to purchase or receive,  for each share of Common Stock subject to the
Stock Option,  Stock Appreciation  Right or Common Stock Equivalent  immediately
prior to the merger, consolidation or sale of assets, the consideration (whether
stock,   cash  or  other  securities  or  property)   received  in  the  merger,
consolidation  or sale of assets by holders of Common  Stock for each share held
on the effective date of the transaction  (and, if holders were offered a choice
of consideration,  the type of consideration chosen by the holders of a majority
of the  outstanding  shares);  provided,  however,  that if  such  consideration
received in the merger,  consolidation  or sale of assets was not solely  common
stock of the successor  corporation  or its parent,  the Committee may, with the
consent  of the  successor  corporation,  provide  for the  consideration  to be
received upon  conversion  of a Common Stock  Equivalent or upon the exercise of
the Stock  Option or Stock  Appreciation  Right,  for each share of Common Stock
<PAGE>

subject to the Stock Option, Stock Appreciation Right or Common Stock Equivalent
to be solely  common stock of the successor  corporation  or its parent equal in
fair market value to the per share  consideration  received by holders of Common
Stock in the merger, consolidation or sale of assets.


                                   SECTION 5

                                  PARTICIPATION

      5.1  Eligibility.  Participants  in the 1995 Plan shall be those  Eligible
Employees,  Directors and Consultants who, in the judgment of the Committee, are
performing,  or during the term of their  service to the Company are expected to
perform,  vital  services in the  management,  operation and  development of the
Company  or an  Affiliated  Corporation,  and  significantly  contribute  or are
expected to significantly  contribute to the achievement of long-term  corporate
economic objectives.  Participants who are Employees may be granted from time to
time one or more  Incentive  Stock Options  (with or without Stock  Appreciation
Rights), and Participants (whether or not they are Employees) may be granted one
or more Non-Qualified  Options (with or without Stock Appreciation  Rights), one
or more  Restricted  Stock  Awards,  one or more MBO  Payments  in Common  Stock
Equivalents or in shares of Common Stock,  Common Stock equivalents  pursuant to
Section 12, and one or more other Common Stock or Common Stock Equivalent awards
pursuant to Section 15; provided,  however,  that the grant of each such option,
right,  award or payment  shall be  separately  approved by the  Committee,  and
receipt  of one such  option,  right,  award or  payment  shall  not  result  in
automatic  receipt  of  any  other  option,   right,  award  or  payment.   Upon
determination by the Committee that a Stock Option,  Stock  Appreciation  Right,
Restricted  Stock  Award,  MBO  Payment or other  Common  Stock or Common  Stock
Equivalent  award is to be granted to a  Participant,  written  notice  shall be
given to such  person,  specifying  the  terms,  conditions,  rights  and duties
related  thereto.  Each Participant  shall, if required by the Committee,  enter
into an  agreement  with  the  Company,  in such  form  as the  Committee  shall
determine and as is consistent with the provisions of the 1995 Plan,  specifying
such terms,  conditions,  rights and duties.  Stock Options,  Stock Appreciation
Rights,  Restricted Stock Awards,  MBO Payments and other Common Stock or Common
Stock  Equivalent  awards shall be deemed to be granted as of the date specified
in the grant  resolution of the  Committee,  which date shall be the date of any
related  agreement  with the  Participant.  In the  event  of any  inconsistency
between the  provisions  of the 1995 Plan and any such  agreement  entered  into
hereunder, the provisions of the 1995 Plan shall govern.

      5.2 Limitations.  The following limitations shall apply to grants of Stock
Options and Stock Appreciation Rights to Participants:
<PAGE>

            (a) No  Participant  shall be  granted,  in any  fiscal  year of the
Company,  Stock  Options and Stock  Appreciation  Rights to  purchase  more than
500,000 shares.

            (b) The foregoing  limitation shall be adjusted  proportionately  in
connection  with any change in the  Company's  capitalization  as  described  in
Section 4.3.

            (c) If a Stock Option or Stock Appreciation Right is canceled in the
same  fiscal  year  of the  Company  in  which  it was  granted  (other  than in
connection  with a  transaction  described in Section 4.3),  the canceled  Stock
Option or Stock  Appreciation Right shall be counted against the limit set forth
in Section 5.2(a). For this purpose,  if the exercise price of a Stock Option or
Stock  Appreciation  Right is  reduced,  the  transaction  will be  treated as a
cancellation of the Stock Option or Stock  Appreciation Right and the grant of a
new Stock Option or Stock Appreciation Right.

            (d) Incentive Stock Options may not be granted to Outside  Directors
or to Consultants.

      5.3 Rule 16b-3. Stock Options, Stock Appreciation Rights, Restricted Stock
Awards,  MBO Payments and other Common Stock or Common Stock  Equivalent  awards
granted to Participants who are subject to Section 16 of the Securities Exchange
Act of 1934, as amended (the  "Exchange  Act"),  must comply with the applicable
provisions  of Rule  16b-3 and  shall  contain  such  additional  conditions  or
restrictions as may be required  thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to 1995 Plan transactions.


                                  SECTION 6

                                  STOCK OPTIONS

      6.1 Grant of Stock Options.  Coincident with or following  designation for
participation  in the 1995 Plan, a Participant  may be granted one or more Stock
Options.  The Committee in its sole  discretion  may  designate  whether a Stock
Option granted to an Employee is to be considered an Incentive Stock Option or a
Non-Qualified Option. The Committee may grant both an Incentive Stock Option and
a  Non-Qualified  Option to the same  Employee at the same time or at  different
times. Incentive Stock Options and Non-Qualified Options, whether granted at the
same or  different  times,  shall be  deemed to have been  awarded  in  separate
grants,  shall be clearly  identified,  and in no event will the exercise of one
Stock  Option  affect the right to exercise any other Stock Option or affect the
number
<PAGE>

of shares of Common  Stock  for  which  any other  Stock  Option  may be
exercised. All Stock Options granted to Participants who are not Employees shall
be Non-Qualified Options.

      6.2 Manner of Stock Option Exercise.  A Stock Option may be exercised by a
Participant  in whole or in part from time to time,  subject  to the  conditions
contained  herein,  (i) by delivery of written notice of exercise to the Company
at  its  principal  office  in  Louisville,   Colorado   (Attention:   Corporate
Secretary),  in person or through  mail,  facsimile or  electronic  mail,  or by
delivery of notice of exercise in such other method as has been  approved by the
Committee, and (ii) by paying in full, with the written notice of exercise or at
such other time as the Committee may  establish,  the total exercise price under
the Stock Option for the shares being purchased.  Such notice shall be in a form
satisfactory to the Committee and shall specify the particular  Stock Option (or
portion  thereof) that is being  exercised and the number of shares with respect
to which the Stock Option is being  exercised.  The exercise of the Stock Option
shall be deemed effective upon receipt of such notice by the Corporate Secretary
and payment to the Company.  As soon as practicable after the effective exercise
of the  Stock  Option,  and  upon  satisfaction  of all  applicable  withholding
requirements  pursuant to Section 20, the  Participant  shall be recorded on the
stock transfer books of the Company as the owner of the shares purchased and the
Company  shall deliver to the  Participant  one or more duly issued and executed
stock certificates evidencing such ownership.

      6.3 Payment of Stock Option Exercise Price. At the time of the exercise of
a Stock Option,  payment of the total Stock Option exercise price for the shares
to be purchased  shall be made in the manner  specified in the option  agreement
relating to such Stock  Option,  which may  include any or all of the  following
methods of payment:

                 (i)    in cash or by check;

                (ii) by transfer from the  Participant  to the Company of shares
of Common Stock (other than shares of Common Stock that the Committee determines
by rule may not be used to exercise Stock Options) with a then current aggregate
Fair Market Value equal to the total Stock Option exercise price;

               (iii) delivery to the Company of (A) a properly executed exercise
notice, (B) irrevocable  instructions to a broker to sell a sufficient number of
the shares being  exercised to cover the exercise price and to promptly  deliver
to the Company the amount of sale  proceeds  required to pay the exercise  price
and any required tax  withholding  relating to the exercise,  and (C) such other
documentation as the Committee and the broker shall require to effect a same-day
exercise and sale;
<PAGE>

                (iv) delivery to the Company of (A) a properly executed exercise
notice, (B) irrevocable instructions to a broker or other third party acceptable
to the Company to hold the shares being  exercised as  collateral  for a loan to
the Optionee of an amount sufficient to cover the exercise price and to promptly
deliver to the Company the amount of loan proceeds  required to pay the exercise
price and any  required  tax  withholding  relating to the exercise and (C) such
other  documentation  as the Committee and the broker or other third party shall
require to effect the transaction;

                 (v) a reduction  in the amount of any Company  liability to the
Optionee,  including any liability attributable to the Optionee's  participation
in any Company-sponsored deferred compensation program or arrangement;

                (vi)    any  combination of the foregoing  methods of payment;
or

               (vii) such  other  consideration  and  method of payment  for the
issuance  of  Shares to the  extent  permitted  by  applicable  laws,  rules and
regulations and by the agreement relating to the Stock Option being exercised.

In the event that the option  agreement does not specify the acceptable  methods
of payment of the  exercise  price,  payment  may be made by any of the  methods
specified in clauses (i) through (iii),  inclusive,  of this Section 6.3, or any
combination of such methods of payment.

      6.4  Stockholder  Privileges.  No  Participant  shall have any rights as a
stockholder with respect to any shares of Common Stock covered by a Stock Option
until the Participant  becomes the holder of record of such Common Stock, and no
adjustments  shall be made for dividends or other  distributions or other rights
as to which there is a record date preceding the date such  Participant  becomes
the holder of record of such Common Stock.


                                   SECTION 7

                             INCENTIVE STOCK OPTIONS

      7.1 Incentive Stock Option Exercise Price.  The per share price to be paid
by a  Participant  at the time an Incentive  Stock Option is exercised  shall be
determined by the Committee at the time an Incentive Stock Option is granted (or
deemed to have been granted under  applicable tax rules),  but in no event shall
such exercise price be less than:
<PAGE>

            (a) one hundred  percent of the Fair Market  Value,  on the date the
Incentive  Stock  Option  is  granted  (or  deemed to have  been  granted  under
applicable  tax  rules),  of one share of the stock to which such  Stock  Option
relates; or

            (b) one hundred and ten  percent of the Fair  Market  Value,  on the
date the Incentive Stock Option is granted (or deemed to have been granted under
applicable  tax  rules),  of one share of the stock to which such  Stock  Option
relates if, at the time the Incentive  Stock Option is granted,  the Participant
owns,  directly or indirectly (as  determined  pursuant to Section 424(d) of the
Internal  Revenue Code),  ten percent or more of the total combined voting power
of all classes of stock of the Company or of any Affiliated  Corporation (such a
Participant is referred to as a "10% Holder").

      7.2 Number of Option Shares.  The number of shares of Common Stock subject
to an Incentive  Stock Option shall be  designated  by the Committee at the time
the Committee decides to grant an Incentive Stock Option.

      7.3 Aggregate Limitation of Stock Exercisable Under Options. To the extent
the aggregate  Fair Market Value,  determined as of the time an Incentive  Stock
Option is granted, of the shares of Common Stock with respect to which Incentive
Stock  Options  are  exercisable  for the first time by an Option  Holder in any
calendar  year  under the 1995 Plan or  otherwise,  granted by the  Company  and
Affiliated  Corporations,  exceeds  $100,000,  such excess shall be treated as a
Non-Qualified Option.

      7.4  Duration of  Incentive  Stock  Options.  The period  during  which an
Incentive Stock Option may be exercised shall be fixed by the Committee,  but in
no event shall such period be more than ten years from the date the Stock Option
is granted,  or, in the case of Participants who are 10% Holders as described in
Section  7.1(b),  five  years  from the date the  Stock  Option is  granted.  No
Incentive Stock Option with respect to which Stock Appreciation Rights have been
granted may be exercised during the six-month period following the date on which
such Stock Option was granted.  Upon the expiration of such exercise period, the
Incentive  Stock  Option,  to the extent not then  exercised,  shall  terminate.
Except as otherwise  provided in Section 11, all Incentive Stock Options granted
to a Participant hereunder shall terminate and may no longer be exercised if the
Participant ceases to be an Employee.

      7.5  Restrictions on Exercise of Incentive Stock Options.  Incentive Stock
Options may be granted subject to such restrictions as to the timing of exercise
of all or various portions thereof as the Committee may determine at the time it
grants Incentive Stock Options to Participants.
<PAGE>

      7.6  Disposition of Stock  Acquired  Pursuant to the Exercise of Incentive
Stock Options C Withholding. In the event that a Participant makes a disposition
(as defined in Section 424(c) of the Internal  Revenue Code) of any Common Stock
acquired  pursuant to the  exercise of an  Incentive  Stock  Option prior to the
expiration  of two years from the date on which the  Incentive  Stock Option was
granted or prior to the  expiration of one year from the date on which the Stock
Option was exercised,  the Participant  shall send written notice to the Company
at its principal office in Louisville, Colorado (Attention: Corporate Secretary)
of the date of such disposition, the number of shares disposed of, the amount of
proceeds  received from such disposition and any other  information  relating to
such disposition as the Company may reasonably  request.  The Participant shall,
in the  event of such a  disposition,  make  appropriate  arrangements  with the
Company to provide for the amount of additional withholding required by federal,
state and local income and other tax laws.


                                   SECTION 8

                              NON-QUALIFIED OPTIONS

      8.1  Option  Exercise  Price.  The  per  share  price  to be  paid  by the
Participant at the time a Non-Qualified  Option is exercised shall be determined
by the  Committee at the time the Stock Option is granted or amended,  but in no
event shall such exercise  price per share be less than  eighty-five  percent of
the Fair Market  Value of one share of Common Stock on the date the Stock Option
is granted or amended.

      8.2 Number of Option Shares.  The number of shares of Common Stock subject
to a  Non-Qualified  Option shall be designated by the Committee at the time the
Committee decides to grant a Non-Qualified Option.

      8.3 Duration of  Non-Qualified  Options;  Restrictions  on  Exercise.  The
period during which a Non-Qualified Option may be exercised, and the installment
restrictions on option  exercise  during such period,  if any, shall be fixed by
the Committee, but in no event shall such period be more than ten years from the
date the Stock Option is granted,  and no  Non-Qualified  Option with respect to
which Stock  Appreciation  Rights have been granted may be exercised  during the
six-month period  immediately  following the date on which such Stock Option was
granted.  Upon the expiration of such exercise period, the Non-Qualified Option,
to the extent not then exercised, shall terminate.  Except as otherwise provided
in Section 11, all  Non-Qualified  Options  granted to a  Participant  hereunder
shall terminate and may no longer be exercised if the  Participant  ceases to be
an Employee, Director or Consultant.
<PAGE>


                                   SECTION 9

                            STOCK APPRECIATION RIGHTS

      9.1  Grant of  Rights.  A Stock  Appreciation  Right may be  granted  to a
Participant  in  conjunction  with any Incentive  Stock Option or  Non-Qualified
Option granted to such Participant,  as determined by the Committee,  (i) at the
time of the grant of such Stock Option in the case of an Incentive  Stock Option
or (ii) at the time of grant,  or at any subsequent  time during the term of the
Stock Option, in the case of a Non-Qualified Option. Once granted, the term of a
Stock Appreciation Right shall be equal to the term of its related Stock Option.
Upon  exercise of a Stock  Appreciation  Right by a  Participant  for a share of
Common Stock,  the related Stock Option shall be terminated with respect to such
share.   Incentive  Stock  Options  and  Non-Qualified   Options  shall  not  be
exercisable with respect to shares of Common Stock for which Stock  Appreciation
Rights have been exercised.  Upon such Stock  Appreciation  Right exercise,  the
Participant  shall be  entitled  to  receive  the  economic  value of such Stock
Appreciation Right determined in the manner prescribed in Section 9.2.

      9.2 Exercise of Stock Appreciation Rights. Stock Appreciation Rights shall
be subject to such terms and conditions  consistent with other provisions of the
1995  Plan as may be  determined  from time to time by the  Committee  and shall
include the following:

            (a) A Stock Appreciation Right shall be exercisable,  in whole or in
part,  at such time or times  and only to the  extent  that the Stock  Option to
which it  relates  shall be  exercisable;  provided,  however,  that,  except as
otherwise  provided  in  Section  11,  no  Stock  Appreciation  Right  shall  be
exercisable during the six-month period following the date of its grant. A Stock
Appreciation Right shall be exercised by the giving of notice in the same manner
as the Stock Option to which it relates may be exercised.

            (b) Upon the exercise of a Stock  Appreciation  Right, a Participant
shall be entitled to receive the economic value thereof, which shall be equal to
(i) the excess of the then Fair Market  Value of one share of Common  Stock over
the exercise price per share  specified in the related Stock Option,  multiplied
by (ii) the number of shares in respect of which the Stock Appreciation Right is
being exercised.

            (c) The  Committee  shall,  in the  agreement  relating to the Stock
Appreciation Right, either (i) specify the form in which payment of the economic
value of exercised  Stock  Appreciation  Rights will be made to the  Participant
upon exercise  thereof (i.e.,  cash,  Common Stock,  or a specified  combination
thereof)  or (ii) grant the  Participant

<PAGE>

the right to elect to receive  cash in
full or partial payment of such economic value, at the Participant's discretion.
If the agreement  relating to the Stock  Appreciation Right does not so specify,
then the Participant shall have the right to elect cash or Common Stock,  Common
Stock  Equivalents  or any  combination  thereof.  If the  Participant is not an
"officer" or "director" of the Company,  as those terms are defined in the rules
under  Section 16 of the  Exchange  Act, at the time of grant or exercise of the
Stock  Appreciation  Right,  then the  Committee  may retain the right to either
consent to or disapprove of Participant's elected method of payment.

      9.3  Stockholder  Privileges.  No  Participant  shall have any rights as a
stockholder  with  respect  to any  shares of Common  Stock  covered  by a Stock
Appreciation  Right until the  Participant  becomes the holder of record of such
Common  Stock,  and  no  adjustments  shall  be  made  for  dividends  or  other
distributions  or other rights as to which there is a record date  preceding the
date such Participant becomes the holder of record of such Common Stock.


                                  SECTION 10

                             RESTRICTED STOCK AWARDS

      10.1 Awards Granted by Committee. Coincident with or following designation
for  participation  in the 1995 Plan, a  Participant  may be granted one or more
Restricted  Stock Awards  consisting  of shares of Common  Stock.  The number of
shares granted as a Restricted Stock Award shall be determined by the Committee.
The Committee may, in its discretion,  require the payment by the Participant of
cash in an amount  equal to the par value of the  Common  Stock  subject  to the
Restricted Stock Award as a condition  precedent to the issuance of Common Stock
to the Participant.

      10.2  Restrictions.  A  Participant's  right to retain a Restricted  Stock
Award  granted  to him or her  under  Section  10.1  shall  be  subject  to such
restrictions,  including but not limited to the Participant's  continuous status
as an Employee, Director or Consultant for a restriction period specified by the
Committee,  or the attainment of specified performance goals and objectives,  as
may be established  by the Committee  with respect to such award.  The Committee
may in its sole discretion  require  different  periods of employment,  director
service or consulting service or different performance goals and objectives with
respect to different  Participants,  to different  Restricted Stock Awards or to
separate,  designated  portions  of  the  Common  Stock  shares  constituting  a
Restricted  Stock Award.  Subject to the  provisions of Sections 11 and 14, if a
Participant's   continuous  status  as  an  Employee,   Director  or  Consultant
terminates prior to the end of such restriction period or the attainment of such
goals and objectives as may be specified by the Committee,  the Restricted Stock
<PAGE>

Award shall be forfeited and all shares of Common Stock related thereto shall be
immediately returned to the Company.

      10.3  Privileges of a Stockholder;  Transferability.  A Participant  shall
have all voting,  dividend,  liquidation and other rights with respect to Common
Stock in accordance with its terms received by him or her as a Restricted  Stock
Award under this  Section 10 upon  becoming  the holder of record of such Common
Stock;  provided,  however,  that the Participant's right to sell, encumber,  or
otherwise transfer such Common Stock (and any other securities issued in respect
of such  shares of Common  Stock as a stock  dividend,  stock split or the like)
shall be subject to the limitations of Section 16.2 hereof.

      10.4 Enforcement of Restrictions. The Committee may in its sole discretion
require  one or more of the  following  methods of  enforcing  the  restrictions
referred to in Section 10.2 and 10.3:

            (a)   Placing a legend on the stock certificates  referring to the
restrictions;

            (b) Requiring the Participant to keep the stock  certificates,  duly
endorsed, in the custody of the Company while the restrictions remain in effect;
or

            (c) Requiring that the stock certificates, duly endorsed, be held in
the custody of a third party while the restrictions remain in effect.


                                  SECTION 11

              EFFECT OF TERMINATION OF SERVICE ON STOCK OPTIONS,
             STOCK APPRECIATION RIGHTS AND RESTRICTED STOCK AWARDS

      11.1  Effect  of  Termination  of  Service  on  Stock  Options  and  Stock
Appreciation  Rights.  No  Stock  Option  or  Stock  Appreciation  Right  may be
exercised unless, at the time of such exercise,  the Participant is an Employee,
Director or Consultant, except as follows:

            (a) The Stock  Option or Stock  Appreciation  Right may be exercised
within such period of time after  termination  of service as is specified in the
Stock Option or Stock Appreciation Right agreement or instrument,  but (i) in no
event may such  post-termination  period extend  beyond the original  expiration
date of the Stock Option or Stock Appreciation Right and (ii) only to the extent
that the  Participant  was entitled to exercise it at the date of termination of
service.  In the  absence  of a  specified  time in the  Stock  Option  or Stock
Appreciation   Right  agreement  or  instrument,   the  Stock  Option  or  Stock
Appreciation Right
<PAGE>

shall remain exercisable for the applicable period and to the
extent specified in Section 11.5 below following the  Participant's  termination
of service as an Employee,  Director or Consultant.  In the case of an Incentive
Stock  Option,  such  period of time  shall not  exceed 90 days from the date of
termination of status as an Employee;  provided, however, that the agreement may
specify  a  longer  period,  in which  case  Stock  Option  shall  convert  to a
Non-Qualified Option on the 91st day following termination of employment.

            (b) If the Participant  dies while serving as an Employee,  Director
or Consultant, or within three months after the Participant ceases such service,
the Stock Option or Stock  Appreciation  Right may be exercised by the person to
whom it is  transferred by will or the laws of descent and  distribution  within
such period of time after  death as is  specified  in the Stock  Option or Stock
Appreciation Right agreement or instrument,  but in no event may such post-death
period extend beyond the original  expiration  date of the Stock Option or Stock
Appreciation  Right.  In the absence of a specified  time in the Stock Option or
Stock  Appreciation  Right  agreement or  instrument,  the Stock Option or Stock
Appreciation Right shall remain exercisable for the applicable period and to the
extent specified in Section 11.5 below.

            (c) If the  Participant  becomes  disabled  (within  the  meaning of
Section  22(e)(3) of the Internal  Revenue  Code) while  serving as an Employee,
Director or  Consultant,  the Stock  Option or Stock  Appreciation  Right may be
exercised  within  such  period  of time  after  termination  of  service  as is
specified  in  the  Stock  Option  or  Stock  Appreciation  Right  agreement  or
instrument,  but in no event may such post-termination  period extend beyond the
original expiration date of the Stock Option or Stock Appreciation Right. In the
absence of a  specified  time in the Stock  Option or Stock  Appreciation  Right
agreement  or  instrument,  the Stock Option or Stock  Appreciation  Right shall
remain  exercisable  for the  applicable  period and to the extent  specified in
Section 11.5 below.

      11.2 Effect of Termination of Service on Restricted  Stock Awards.  In the
event  of  the  death  or  disability  (as  defined  in  Section  11.1(c))  of a
Participant,  all  period  of  service  and  other  restrictions  applicable  to
Restricted  Stock Awards then held by such  Participant  shall  lapse,  and such
awards  shall  become  fully  vested  and  nonforfeitable.  In  the  event  of a
Participant's  termination of service for any other reason, any Restricted Stock
Awards as to which the  employment  period or other  restrictions  have not been
satisfied shall be forfeited.

      11.3  Meaning of  Employment.  For all  purposes  of the 1995 Plan and any
Stock Option or Stock Appreciation  Right granted hereunder,  "employment" shall
be defined in accordance  with the provisions of Section 3401(c) of the Internal
Revenue Code and the regulations thereunder.
<PAGE>

      11.4 Meaning of Continuous Status. Unless otherwise specified in the Stock
Option  or  Stock  Appreciation  Right  agreement  or  instrument,  so long as a
Participant is either an Employee or a Director or a Consultant, he or she shall
be considered to be in continuous status as an Employee, Director or Consultant,
even if the  person is  serving in one  capacity  when the award is granted  and
subsequently  changes to service in a different  capacity,  such as  terminating
employment but continuing to serve as a Consultant.

      11.5 Default Provisions for Termination of Service.  In the event that the
Stock Option or Stock  Appreciation Right agreement or instrument do not specify
the  post-termination  period of exercisability,  the following provisions shall
apply:

            (a) Subject to 11.5(f),  if such  termination is due to the death of
the  Participant,  or the  Participant  dies  within  three  months  after  such
termination,  or if  such  termination  occurs  after  the  Participant  becomes
disabled  (within the meaning of Section 22(e)(3) of the Internal Revenue Code),
the Stock Option or Stock Appreciation Right may be exercised by the Participant
(or, in the case of death,  by the person to whom it is  transferred  by will of
the laws of  descent  and  distribution):  (i) for all  Incentive  Stock  Option
grants, or for  Non-Qualified  Stock Option grants or Stock  Appreciation  Right
grants made before May 22, 1997,  or for  Non-Qualified  Stock Option  grants or
Stock  Appreciation  Right grants made on or after May 22, 1997, if, at the time
of the Participant's termination, such Participant was not a Long-Term Employee,
then within a period of one year after the date of death (but in no event longer
than the term of the Stock  Option or Stock  Appreciation  Right);  and (ii) for
grants  made on or  after  May 22,  1997,  if the  Participant  was a  Long-Term
Employee at the time of the Participant's  termination,  the Non-Qualified Stock
Option or Stock Appreciation Right may be exercised,  to the extent it is vested
as of the date of the Participant's  termination,  for the entire remaining term
of such Stock Option or Stock Appreciation Right.

            (b)  Subject  to  11.5(f),  if such  termination  occurs  after  the
Participant  becomes  disabled  (within the  meaning of Section  22(e)(3) of the
Internal  Revenue  Code),  the Stock Option or Stock  Appreciation  Right may be
exercised: (i) for all Incentive Stock Option grants, or for Non-Qualified Stock
Option or Stock  Appreciation  Right  grants  made before May 22,  1997,  or for
Non-Qualified  Stock Option grants or Stock Appreciation Right grants made on or
after May 22,  1997,  if,  at the time of the  Participant's  termination,  such
Participant was not a Long-Term Employee, then within a period of one year after
the date of such  termination (but in no event longer than the term of the Stock
Option or Stock  Appreciation  Right);  and (ii) for grants made on or after May
22, 1997, if the  Participant is a Long-Term  Employee,  a  Non-Qualified  Stock
Option or Stock  Appreciation  Right may be
<PAGE>
exercised to the extent it is vested
as of the date of the Participant's termination for the entire remaining term of
such Stock Option or Stock Appreciation Right.

            (c) Subject to 11.5(f), if such termination is due to a Reduction in
Force,  then,  for grants on or after May 22,  1997,  the Stock  Option or Stock
Appreciation  Right shall be  exercisable,  to the extent  vested at the time of
such termination, for a period of six months from the date of such termination.

            (d) Subject to 11.5(f), if the Participant Retires, then, for grants
on or after May 22, 1997, the Stock Option or Stock  Appreciation Right shall be
exercisable,  to the extent vested at the time the Participant  Retires, for the
entire remaining term of such Stock Option or Stock Appreciation Right.

            (e)  Subject  to  11.5(f),   if  the  Participant's   employment  is
terminated for any reason other than those reasons  covered by  subsections  (a)
through (d) of this Section  11.5,  then the Stock Option or Stock  Appreciation
Right  shall  be  exercisable,  to  the  extent  vested  at  the  time  of  such
termination,  for  a  period  of  ninety  (90)  days  after  the  date  of  such
termination.

            (f)   Notwithstanding  the provisions of Section 11.5(a) through (e)
                  above:

                  (i) With  respect  to all  grants  of Stock  Options  or Stock
Appreciation  Rights occurring on or after May 22, 1997, no such grants shall be
exercisable   after  the  date  of  termination  of  employment  if  either  the
termination was for Cause, or if the former Employee,  Consultant or Director is
then,  in  the  sole  judgement  of  the  Company,  in  material  breach  of any
contractual, statutory, fiduciary or other legal obligation to the Company.

                  (ii) In addition to the  provisions  of  paragraph  (i) above,
unless otherwise  provided in the Option or Stock  Appreciation Right agreement,
with  respect  to all  grants  of Stock  Options  or Stock  Appreciation  Rights
occurring on or after March 4, 1998 (or earlier date if agreed to by the Company
and the participant):  (x) if at any time within six months after termination of
the  optionee=s  employment  or  service,  the former  Employee,  Consultant  or
Director is, in the sole  judgement  of the Company,  engaging or has engaged in
any activity in  competition  with any  activity of the  Company,  or harmful or
contrary  to the  interests  of the  Company,  including,  but not  limited  to:
accepting  employment with or serving as a consultant or advisor to any employer
that is in  competition  with the Company or acting against the interests of the
Company,  including  employing or  recruiting  any  Employee of the Company;  or
disclosing or misusing any  confidential,  proprietary  or material  information
concerning  the  Company  (such  information   includes,   without   limitation,

<PAGE>

information regarding the Company's operations,  its products,  product designs,
business  plans,   strategic  plans,   marketing  and  distribution   plans  and
arrangements,  customers, and financial statements,  budgets and forecasts);  or
participating  in any  hostile  takeover  attempt of the  Company,  then (I) any
Options  or  Stock  Appreciation   Rights  still  held  by  the  optionee  shall
immediately  cease to be exercisable and shall be canceled,  and (II) any shares
issued upon exercise of Options or Stock  Appreciation  Rights after the date of
termination  of  employment  or service shall be sold back to the Company at the
exercise  price paid for such shares,  and any cash  received upon exercise of a
Stock  Appreciation  Right after  termination  of employment or service shall be
returned to the Company; (y) if the Employee,  Consultant or Director leaves the
employment of the Company within six months of exercising Stock Options or Stock
Appreciation Rights for any reason except death, disability or retirement,  then
any gain  represented  by the fair market value on the date of exercise over the
exercise  price  multiplied  by the number of shares such  individual  purchased
("option  gain"),  without  regard to any  subsequent  market price  decrease or
increase, shall be paid by such individual to the Company; and (z) shares issued
upon  exercise of Options or Stock  Appreciation  Rights  after  termination  of
employment  or service  shall be  non-transferable  until six months  after such
termination  and shall be held in escrow by the  Company  until such  time.  The
Compensation  Committee,  in  its  sole  discretion,  may,  with  respect  to  a
particular  Option or Stock  Appreciation  Right,  omit the  provisions  of this
paragraph (ii) or release the optionee from the operation of such  provisions if
the Compensation  Committee determines that such action is in the best interests
of the Company.


                                   SECTION 12

                      DIRECTOR STOCK AND STOCK EQUIVALENTS

      12.1 Director Stock and Stock Equivalents. Effective with the beginning of
the Company's fiscal year beginning December 28, 1996, each Outside Director may
receive  all or a portion of his or her annual  retainer  and any  meeting  fees
(which shall include any additional  annual retainer or fees paid to a committee
chair) in shares of Common Stock or, if elected by the Director, in Common Stock
Equivalents.  An election pursuant to this Section 12 must be made in writing on
or before  the first  day of the  beginning  of the  Outside  Director's  annual
retainer period and shall entitle the Outside  Director to a number of shares of
Common Stock or Common Stock  Equivalents  determined by dividing (i) the dollar
amount of the portion of the retainer  for the fiscal  period that is to be paid
in shares of Common  Stock or Common Stock  Equivalents  by (ii) the Fair Market
Value of one  share of  Common  Stock  as of the  last day of each  such  fiscal
period,  rounded up to the next full  number of shares.  In the event any person
becomes an Outside  Director  other than at the beginning of an annual  retainer
period, such person may elect, within thirty (30) days of the

<PAGE>

date on which such
person  becomes an Outside  Director,  to receive  his or her  retainer  and any
meeting fees in shares of Common Stock or Common Stock  Equivalents as described
above for the  balance of such annual  retainer  period in  accordance  with the
formula set forth in the preceding sentence.

      For purposes of this Section 12, an annual  retainer period shall begin on
the date of an Annual Meeting of the  Stockholders  of the Company and shall end
on the day immediately preceding the next following Annual Meeting.

      12.2 Stock Equivalents.  The number of Common Stock Equivalents determined
under Section 12.1 for each Outside  Director shall be credited to a bookkeeping
account  established in the name of that Director subject to the following terms
and conditions:

            (i) If the Company pays a cash  dividend  with respect to the Common
Stock at any time while  Common  Stock  Equivalents  are  credited to an Outside
Director's  account,  there shall be credited to the Outside  Director's account
additional  Common Stock  Equivalents equal to (a) the dollar amount of the cash
dividend the Director would have received had he or she been the actual owner of
the Common  Stock to which the Common  Stock  Equivalents  then  credited to the
Director's account relate,  divided by (b) the Fair Market Value of one share of
the Company's  Common Stock on the dividend  payment date.  The Company will pay
the Director a cash payment in lieu of fractional stock  equivalents on the date
of such dividend payment.

            (ii) Upon the death or other  termination of the Outside  Director's
service on the Board,  or, if  authorized by the  Committee,  such other time or
times as  specified  by the  Outside  Director  at the time of his or her annual
election(s),  the Company shall  deliver to the Outside  Director (or his or her
designated  beneficiary  or estate) a number of shares of Common  Stock equal to
the whole number of Common Stock  Equivalents  then  credited to the  Director's
account,  together  with a cash  payment  equal to the Fair Market  Value of any
fractional Common Stock Equivalent.

            (iii)  The  Company's   obligation  with  respect  to  Common  Stock
Equivalents  shall not be funded or secured in any manner,  nor shall an Outside
Director's   right  to  receive   Common  Stock   equivalents   be  assigned  or
transferable, voluntarily or involuntarily, except as expressly provided herein.

            (iv) An  Outside  Director  shall not be  entitled  to any voting or
other  stockholder  rights as a result of the credit of Common Stock Equivalents
to the Director's account until certificates representing shares of Common Stock
are delivered to the Director (or his or her  designated  beneficiary or estate)
hereunder.
<PAGE>

      12.3  Elections.  The  Committee  shall  determine  the  form  of  Outside
Director's  elections pursuant to this Section 12, which form shall evidence the
particular provisions,  terms, conditions,  rights and duties of the Company and
the Outside  Directors with respect to Common Stock and Common Stock Equivalents
paid with respect to the Director's annual retainer and any meeting fees.


                                  SECTION 13

                                  MBO PAYMENTS

      13.1 Participant Election As to MBO Payment. At such time as the Committee
determines  that a  Participant  has or may become  eligible  for an MBO Payment
pursuant to the MBO Plan, the Committee may notify the Participant as to whether
or not the  Participant  will be required by the  Committee to, or will be given
the right to elect to,  accept all or a part of such MBO  Payment in the form of
shares of Common Stock or Common Stock Equivalents.  If the Committee grants the
Participant the right to elect whether to accept the MBO Payment in Common Stock
or Common Stock  Equivalents,  then the Participant shall have ten (10) business
days after the receipt of such notice from the Committee to make such  election.
The  Participant  shall notify the Committee with respect to his or her election
on such form as may be provided for this purpose by the Committee, setting forth
thereon  the  dollar  value of the  portion of the MBO  Payment  which he or she
desires to receive in shares of Common Stock or Common Stock  Equivalents.  If a
Participant  fails to make an election  pursuant to this Section with respect to
the mode of payment of an MBO Payment,  the entire MBO Payment  shall be made in
cash.

      13.2  Determination  of Number of  Shares.  The number of shares of Common
Stock or Common  Stock  Equivalents  that shall be issued or  credited as an MBO
Payment  shall be  determined by dividing the dollar value of the portion of the
MBO  Payment  that is to be paid in  shares  of  Common  Stock or  Common  Stock
Equivalents  (whether as elected above or as adjusted by the Committee  pursuant
to Section  13.3) by the Fair Market  Value of the Common  Stock on the date the
shares are issued or credited with respect to such Payment. No fractional shares
of Common Stock or Common Stock Equivalent shall be issued or credited as a part
of an MBO  Payment  and the  value  of any  such  fractional  share  that  would
otherwise  be issued  pursuant to the  Participant's  election  shall be paid in
cash.

      13.3 Decision of Committee.  The Committee  shall have the sole discretion
to either  accept the  Participant's  election with respect to the payment of an
MBO  Payment,  in whole or in part,  in shares of Common  Stock or Common  Stock
Equivalents or to determine

<PAGE>

that a lesser  portion,  or none, of the MBO Payment
will be made in shares of Common  Stock or  Common  Stock  Equivalents,  and the
Committee's  determination  in this  regard  shall be final and  binding  on the
Participant.


                                  SECTION 14

                         TENDER OFFERS AND ACQUISITIONS

      If any person or entity  (other  than the  Company or any person or entity
that is controlled by the Company)  shall make a tender offer or exchange  offer
for all or any part of the Common Stock or other  capital  shares of the Company
and shall purchase any part of the Common Stock or other capital shares tendered
to it, and the Board opposes or does not affirmatively  recommend  acceptance of
such tender offer or exchange offer, then:

            (a) all Stock  Options with  respect to which no Stock  Appreciation
Rights have been  granted,  and all Stock  Options  with  respect to which Stock
Appreciation  Rights have been issued (and all such related  Stock  Appreciation
Rights)  that  have  been  outstanding  for at least six  months,  shall  become
immediately  exercisable in full during the remaining  term thereof,  whether or
not the  Participants  to whom such options and rights have been granted  remain
Employees,  Directors or Consultants  of the Company;  provided,  however,  that
Stock  Appreciation  Rights shall remain subject to the  requirements of Section
9.2(a) with respect to the exercise thereof only within prescribed periods after
public release of Company financial information;

            (b) all  restrictions  with respect to outstanding  Restricted Stock
Awards shall immediately lapse; and

            (c) all Common Stock Equivalents shall convert into shares of Common
Stock as of the date determined by the Committee.


                                  SECTION 15

                           OTHER COMMON STOCK PROGRAMS

      From time to time during the duration of the 1995 Plan,  the Board may, in
its sole discretion,  adopt one or more incentive compensation  arrangements for
Eligible  Employees,  Directors or  Consultants  pursuant to which such Eligible
Employees, Directors or Consultants may acquire shares of Common Stock or Common
Stock Equivalents,  whether

<PAGE>

by purchase,  outright grant or otherwise.  Any such
arrangements shall be subject to the general provisions of the 1995 Plan and all
shares of Common Stock or Common Stock  Equivalents  issued or credited pursuant
to such arrangements shall be issued under the 1995 Plan if so designated by the
Committee.


                                  SECTION 16

                             RIGHTS OF PARTICIPANTS

      16.1  Employment,   Directorship  or  Consulting   Relationship.   Nothing
contained in the 1995 Plan or in any Stock  Option,  Stock  Appreciation  Right,
Restricted  Stock Award or other Common Stock or Common Stock  Equivalent  award
granted  under the 1995 Plan shall  confer upon any  Participant  any right with
respect to the  continuation of his or her employment,  service as a director or
consulting  relationship  with the  Company or any  Affiliated  Corporation,  or
interfere  in  any  way  with  the  right  of  the  Company  or  any  Affiliated
Corporation,  subject to the terms of any separate agreement to the contrary, at
any time to terminate  such service or to increase or decrease the  compensation
of the  Participant  from the rate in  existence  at the time of the  grant of a
Stock Option,  Stock Appreciation Right,  Restricted Stock Award or other Common
Stock or Common Stock Equivalent award.  Whether an authorized leave of absence,
or absence in military or government  service,  shall constitute  termination of
service shall be determined by the Committee at the time.

      16.2 Nontransferability. Except as otherwise approved by the Committee and
set forth in the agreement between the Company and the Participant,  no right or
interest of any  Participant in a Stock Option,  a Stock  Appreciation  Right, a
Restricted  Stock  Award  prior  to the  completion  of the  restriction  period
applicable  thereto,  or other  Common Stock or Common  Stock  Equivalent  award
granted pursuant to the 1995 Plan shall be assignable or transferable during the
lifetime of the Participant,  either voluntarily or involuntarily,  or subjected
to any  lien,  directly  or  indirectly,  by  operation  of law,  or  otherwise,
including execution,  levy, garnishment,  attachment,  pledge or bankruptcy.  If
permitted  by  applicable  law  (including  Rule 16b-3,  as amended from time to
time),  the Committee  may (but need not) permit the transfer of Stock  Options,
Stock Appreciation Rights,  Restricted Stock Awards and/or other Common Stock or
Common Stock Equivalent awards either  generally,  to a limited class of persons
or  on  a  case-by-case  basis.  In  the  event  of  a  Participant's  death,  a
Participant's  rights and interest in Stock Options,  Stock Appreciation Rights,
Restricted Stock Awards and other Common Stock or Common Stock Equivalent awards
shall  be  transferable  by  testamentary  will  or  the  laws  of  descent  and
distribution,  and  payment of any amounts due under the 1995 Plan shall be made
to, and exercise of any Stock Options or Stock  Appreciation  Rights may be made
by,  the  Participant's  legal  representatives,  heirs or  legatees.

<PAGE>

If in the
opinion of the  Committee a person  entitled  to payments or to exercise  rights
with  respect to the 1995 Plan is  disabled  from  caring for his or her affairs
because of mental condition, physical condition, or age, payment due such person
may be made to, and such rights shall be exercised by, such  person's  guardian,
conservator or other legal personal representative upon furnishing the Committee
with evidence satisfactory to the Committee of such status.


                                   SECTION 17

                              GENERAL RESTRICTIONS

      17.1  Investment  Representations.  The  Company may require any person to
whom a Stock Option,  Stock  Appreciation  Right,  Restricted  Stock Award,  MBO
Payment or other Common Stock or Common Stock Equivalent award is granted,  as a
condition  of  exercising  such Stock  Option or Stock  Appreciation  Right,  or
receiving such Restricted  Stock Award,  MBO Payment or other Common Stock award
or Common Stock  Equivalent  award, to give written  assurances in substance and
form  satisfactory to the Company and its counsel to the effect that such person
is acquiring the Common Stock subject to the Stock  Option,  Stock  Appreciation
Right,  Restricted  Stock  Award,  MBO Payment or Common  Stock or Common  Stock
Equivalent  award for his or her own  account  for  investment  and not with any
present  intention of selling or otherwise  distributing  the same,  and to such
other effects as the Company deems  necessary or  appropriate in order to comply
with federal and applicable state securities laws.

      17.2   Compliance  with   Securities   Laws.  Each  Stock  Option,   Stock
Appreciation  Right  and  Common  Stock  Equivalent  shall  be  subject  to  the
requirement that, if at any time counsel to the Company shall determine that the
listing,  registration  or  qualification  of the  shares  subject to such Stock
Option,  Stock Appreciation Right or Common Stock Equivalent upon any securities
exchange  or under any state or federal  law,  or the consent or approval of any
governmental  or  regulatory  body,  is  necessary  as a  condition  of,  or  in
connection  with,  the  issuance or purchase  of shares  thereunder,  such Stock
Option,  Stock Appreciation Right or Common Stock Equivalent may not be accepted
or   exercised  in  whole  or  in  part  unless  such   listing,   registration,
qualification,  consent or  approval  shall have been  effected  or  obtained on
conditions  acceptable  to the  Committee.  Nothing  herein  shall be  deemed to
require  the  Company to apply for or to obtain such  listing,  registration  or
qualification.

      17.3 Changes in Accounting Rules.  Notwithstanding  any other provision of
the 1995 Plan to the contrary, if, during the term of the 1995 Plan, any changes
in the financial or tax  accounting  rules  applicable to Stock  Options,  Stock
Appreciation Rights, Restricted

<PAGE>

Stock Awards, MBO Payments or other Common Stock
or Common Stock Equivalent  awards shall occur that, in the sole judgment of the
Committee,  may have a material adverse effect on the reported earnings,  assets
or liabilities of the Company,  the Committee  shall have the right and power to
modify as necessary,  or cancel,  any then  outstanding  and  unexercised  Stock
Options or Stock  Appreciation  Rights,  any then  outstanding  Restricted Stock
Awards as to which the  applicable  restriction  has not been  satisfied and any
other Common Stock awards or Common Stock Equivalent.


                                  SECTION 18

                                 OTHER BENEFITS

      The  amount of any  compensation  deemed to be  received  by an  Employee,
Director or Consultant  as a result of the exercise of a Stock  Option,  a Stock
Appreciation  Right or the sale of shares  received  upon such  exercise  or the
vesting of any Restricted  Stock Awards or the receipt of any other Common Stock
or Common Stock Equivalent award will not constitute  "earnings" with respect to
which any other benefits provided by the Company or an Affiliated Corporation to
such person are  determined,  including  without  limitation  benefits under any
pension, profit sharing, life insurance or salary continuation plan.


                                  SECTION 19

                 PLAN AMENDMENT, MODIFICATION AND TERMINATION

      19.1  Amendment or  Termination.  The Board,  upon  recommendation  of the
Committee or at its own  initiative,  at any time may  terminate and at any time
and from time to time and in any respect, may amend or modify the 1995 Plan. The
Company  shall  obtain  stockholder  approval  of any  amendment  to the  extent
necessary and desirable to comply with Applicable Laws.  "Applicable Laws" means
the requirements relating to the administration of stock option plans under U.S.
state  corporate  laws, U.S.  federal and state  securities  laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted
and the  applicable  laws of any  foreign  country or  jurisdiction  where Stock
Options,  Stock  Appreciation  Rights,  Restricted  Stock Awards or other Common
Stock or Common Stock Equivalent  awards are, or will be, granted under the 1995
Plan.

      19.2 Effect of Amendment.  Any Stock  Option,  Stock  Appreciation  Right,
Restricted  Stock Award or other Common Stock or Common Stock  Equivalent  award
granted to a Participant prior to the date the 1995 Plan is amended, modified or
terminated will

<PAGE>

remain in effect  according to its terms unless otherwise agreed
upon by the Participant;  provided, however, that this sentence shall not impair
the right of the Committee to take whatever  action it deems  appropriate  under
Section 4.3,  Section 14 or Section 17.3. The termination or any modification or
amendment  of the 1995 Plan shall not,  without  the  consent of a  Participant,
affect  his or her  rights  under  a Stock  Option,  Stock  Appreciation  Right,
Restricted  Stock Award or other Common Stock or Common Stock  Equivalent  award
previously granted to him or her. With the consent of the Participant  affected,
the  Committee  may  amend  outstanding   option  agreements  in  a  manner  not
inconsistent with the 1995 Plan.
      19.3  Preservation  of Incentive  Stock Options.  The Board shall have the
right to amend or modify  the terms and  provisions  of the 1995 Plan and of any
outstanding  Incentive  Stock Options  granted under the 1995 Plan to the extent
necessary to qualify any or all such Stock Options for such favorable  treatment
as may be afforded  Incentive  Stock  Options  under Section 422 of the Internal
Revenue Code.


                                  SECTION 20

                                   WITHHOLDING

      20.1 Withholding Requirement.  The Company's obligations to deliver shares
of Common  Stock upon the  exercise  of any Stock  Option or Stock  Appreciation
Right granted under the 1995 Plan or upon any MBO Payment under the 1995 Plan or
pursuant to any other Common Stock or Common Stock  Equivalent  award,  shall be
subject to the Participant's  satisfaction of all applicable federal,  state and
local income and other tax withholding requirements.

      20.2  Withholding  With  Common  Stock.  The  Committee  may,  in its sole
discretion,  allow Participants to pay all or any portion of any tax withholding
obligation  that results from Stock  Options,  Stock  Appreciation  Rights,  MBO
Payments,  or any  other  Common  Stock or Common  Stock  Equivalent  award,  by
electing to transfer to the Company, or to have the Company withhold from shares
otherwise  issuable to the  Participant,  shares of Common  Stock having a value
equal to the amount  required to be  withheld  or such  lesser  amount as may be
elected by the Participant.  Any such  withholding  election shall be subject to
such terms and  conditions as the Committee  may, from time to time,  establish;
provided,  that, in the case of a  Participant  who is an officer or director of
the  Company  within the  meaning of Section 16 of the  Exchange  Act,  then the
approval by the  Committee  of the grant of the award shall be deemed to include
approval by the  Committee of the election by such  Participant  to utilize this
withholding  provision,  unless otherwise specified in the agreement relating to
the award.
<PAGE>


                                  SECTION 21

                               REQUIREMENTS OF LAW

      21.1  Requirements  of Law.  The issuance of stock and the payment of cash
pursuant  to the 1995 Plan shall be subject to all  applicable  laws,  rules and
regulations.

      21.2 Governing Law. The 1995 Plan and all  agreements  hereunder  shall be
construed in accordance with and governed by the laws of the State of Colorado.


                                  SECTION 22

                         EFFECTIVE DATE OF THE 1995 PLAN

      22.1  Effective  Date. The 1995 Plan is effective as of March 8, 1995, the
date it was adopted by the Board of  Directors  of the  Company,  subject to the
approval of the stockholders of the Company prior to the one-year anniversary of
such date. Stock Options, Stock Appreciation Rights, Restricted Stock Awards and
other Common Stock awards may be granted prior to  stockholder  approval if made
subject to stockholder approval.

      22.2 Duration of the 1995 Plan. The 1995 Plan shall  terminate at midnight
on March 7, 2005, which is the day before the tenth anniversary of the Effective
Date, and may be terminated prior thereto by Board action;  and no Stock Option,
Stock Appreciation Right, Restricted Stock Award or other Common Stock or Common
Stock Equivalent award shall be granted after such  termination.  Stock Options,
Stock  Appreciation  Rights,  Restricted Stock Awards and other Common Stock and
Common  Stock  Equivalent  awards  outstanding  at the  time  of the  1995  Plan
termination  may continue to be exercised,  or become free of  restrictions,  in
accordance with their terms.