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                                                                   EXHIBIT 10.40




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                           R.H. DONNELLEY CORPORATION


                       2001 STOCK AWARD AND INCENTIVE PLAN










            Approved and adopted by the Board of Directors on February 27, 2001,
                         Approved and adopted by shareholders on May 1, 2001 and
            Amended and Restated by the Board of Directors effective May 1, 2001



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                           R.H. DONNELLEY CORPORATION

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                       2001 STOCK AWARD AND INCENTIVE PLAN

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<TABLE>
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<S>                                                                                                <C>
1.      Purpose.................................................................................      1

2.      Definitions.............................................................................      1

3.      Administration..........................................................................      4

4.      Stock Subject to Plan...................................................................      5

5.      Eligibility; Per-Person Award Limitations ..............................................      5

6.      Specific Terms of Awards................................................................      6

7.      Performance Awards, Including Annual Incentive Awards..................................       9

8.      Non-Employee Director Awards............................................................     12

9.      Certain Provisions Applicable to Awards.................................................     19

10.     Change in Control.......................................................................     20

11.     Additional Award Forfeiture Provisions..................................................     22

12.     General Provisions......................................................................     24
</TABLE>



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                           R.H. DONNELLEY CORPORATION


                       2001 STOCK AWARD AND INCENTIVE PLAN


        1.      PURPOSE. The purpose of this 2001 Stock Award and Incentive Plan
(the "Plan") is to aid R.H. Donnelley Corporation, a Delaware corporation
(together with its successors and assigns, the "Company"), in attracting,
retaining, motivating and rewarding employees and non-employee directors of the
Company or its subsidiaries or affiliates, to provide for equitable and
competitive compensation opportunities, to recognize individual contributions
and reward achievement of Company goals, and promote the creation of long-term
value for stockholders by closely aligning the interests of Participants with
those of stockholders. The Plan authorizes stock-based and cash-based incentives
for Participants.

        2.      DEFINITIONS. In addition to the terms defined in Section 1 above
and elsewhere in the Plan, the following capitalized terms used in the Plan have
the respective meanings set forth in this Section:

                (a)     "Annual Incentive Award" means a type of Performance
        Award granted to a Participant under Section 7(c) representing a
        conditional right to receive cash, Stock or other Awards or payments, as
        determined by the Committee, based on performance in a performance
        period of one fiscal year or a portion thereof.

                (b)     "Annual Limit" shall have the meaning specified in
        Section 5(b).

                (c)     "Award" means any Option, SAR, Restricted Stock,
        Deferred Stock, Stock granted as a bonus or in lieu of another award,
        Dividend Equivalent, Other Stock-Based Award, Performance Award or
        Annual Incentive Award, together with any related right or interest,
        granted to a Participant under the Plan.

                (d)     "Beneficiary" means the legal representatives of the
        Participant's estate entitled by will or the laws of descent and
        distribution to receive the benefits under a Participant's Award upon a
        Participant's death, provided that, if and to the extent authorized by
        the Committee, a Participant may be permitted to designate a
        Beneficiary, in which case the "Beneficiary" instead will be the person,
        persons, trust or trusts (if any are then surviving) which have been
        designated by the Participant in his or her most recent written and duly
        filed beneficiary designation to receive the benefits specified under
        the Participant's Award upon such Participant's death. Unless otherwise
        determined by the Committee, any designation of a Beneficiary other than
        a Participant's spouse shall be subject to the written consent of such
        spouse.

                (e)     "Board" means the Company's Board of Directors.

                (f)     "Cause" shall have the meaning defined in any employment
        agreement or severance agreement between the Participant and the Company
        or a subsidiary or affiliate then in effect or, if no such agreement is
        then in effect, "Cause" shall mean (i) the Participant's willful and
        continued failure substantially to perform the duties of his or her
        position after notice and opportunity to cure; (ii) any willful act or
        omission by the Participant constituting dishonesty, fraud or other
        malfeasance, which in any such case is demonstrably injurious to the
        financial condition or business reputation of the Company or any of its
        subsidiaries or affiliates; or (iii) a felony conviction in a court of
        law under the laws of the United States or any state thereof or any
        other jurisdiction in which the Company or a subsidiary or affiliate
        conducts business which materially impairs the value of the
        Participant's service to the Company or any of its subsidiaries or
        affiliates; provided, however, that for purposes of this definition, no
        act or failure to act shall be deemed "willful" unless effected by the
        Participant not in good faith and without a reasonable belief that such
        action or failure to act was in or not opposed to the Company's best
        interests, and no act or failure to act shall be deemed "willful" if it
        results from any incapacity of the Participant due to physical or mental
        illness.



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                (g)     "Change in Control" and related terms have the meanings
        specified in Section 10.

                (h)     "Code" means the Internal Revenue Code of 1986, as
        amended. References to any provision of the Code or regulation
        (including a proposed regulation) thereunder shall include any successor
        provisions and regulations.

                (i)     "Committee" means a committee of two or more directors
        designated by the Board to administer the Plan; provided, however, that,
        directors appointed or serving as members of a Board committee
        designated as the Committee shall not be employees of the Company or any
        subsidiary or affiliate. In appointing members of the Committee, the
        Board will consider whether a member is or will be a Qualified Member,
        but such members are not required to be Qualified Members at the time of
        appointment or during their term of service on the Committee. The full
        Board may perform any function of the Committee hereunder, in which case
        the term "Committee" shall refer to the Board.

                (j)     "Covered Employee" means an Eligible Person who is a
        Covered Employee as specified in Section 12(j).

                (k)     "Deferral Account" means the account established and
        maintained by the Company for Deferred Stock and/or deferred cash
        credited under Section 8. A Deferral Account shall include one or more
        subaccounts, including a Deferred Stock Account for forfeitable Deferred
        Stock under Section 8(c), a Deferred Stock Account for shares of
        Deferred Stock that have become nonforfeitable under Section 8(c) or
        that are at all times nonforfeitable under Section 8(e)(iii), a Deferred
        Stock Account for Deferred Stock resulting from Option exercises under
        Section 8(f)(i), and a Deferred Cash Account described in Section
        8(e)(iv). The Deferral Account and subaccounts, and Deferred Stock and
        deferred cash credited thereto, will be maintained solely as bookkeeping
        entries by the Company to evidence unfunded obligations of the Company.

                (l)     "Deferred Stock" means a right, granted under this Plan,
        to receive Stock or other Awards or a combination thereof at the end of
        a specified deferral period.

                (m)     "Disability" means, with respect to a non-employee
        director, termination of service as a director of the Company due to a
        physical or mental incapacity of long duration which renders the
        Participant unable to perform the duties of a director of the Company.

                (n)     "Dividend Equivalent" means a right, granted under this
        Plan, to receive cash, Stock, other Awards or other property equal in
        value to all or a specified portion of the dividends paid with respect
        to a specified number of shares of Stock.

                (o)     "Effective Date" means the effective date specified in
        Section 12(p).

                (p)     "Eligible Person" has the meaning specified in
        Section 5.

                (q)     "Exchange Act" means the Securities Exchange Act of
        1934, as amended. References to any provision of the Exchange Act or
        rule (including a proposed rule) thereunder shall include any successor
        provisions and rules.

                (r)     "Fair Market Value" means the fair market value of
        Stock, Awards or other property as determined by the Committee or under
        procedures established by the Committee. Unless otherwise determined by
        the Committee, the Fair Market Value of Stock shall be the average of
        the high and low sales prices per share of Stock reported on a
        consolidated basis for securities listed on the



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        principal stock exchange or market on which Stock is traded on the day
        immediately preceding the day as of which such value is being determined
        or, if there is no sale on that day, then on the last previous day on
        which a sale was reported.

                (s)     "Incentive Stock Option" or "ISO" means any Option
        designated as an incentive stock option within the meaning of Code
        Section 422 and qualifying thereunder.

                (t)     "Option" means a right, granted under this Plan, to
        purchase Stock.

                (u)     "Option Valuation Methodology" means the method for
        determining the number of shares to be subject to Options, and the
        exercise price thereof, granted in payment of Retainer Fees under
        Section 8(e)(ii).

                (v)     "Other Director Compensation" means fees payable to a
        director in his or her capacity as such, other than Retainer Fees, for
        attending meetings and other service on the Board and Board committees
        or otherwise.

                (w)     "Other Stock-Based Awards" means Awards granted to a
        Participant under Section 6(h).

                (x)     "Participant" means a person who has been granted an
        Award under the Plan which remains outstanding, including a person who
        is no longer an Eligible Person.

                (y)     "Performance Award" means a conditional right, granted
        to a Participant under Sections 6(i) and 7, to receive cash, Stock or
        other Awards or payments.

                (z)     "Plan Year" means, with respect to a non-employee
        director, the period commencing at the time of election of the director
        at an annual meeting of shareholders (or the election of a class of
        directors if the Company then has a classified Board of Directors), or
        the director's initial appointment to the Board if not at an annual
        meeting of shareholders, and continuing until the close of business of
        the day preceding the next annual meeting of shareholders; provided,
        however, that the initial Plan Year shall begin on the day of the
        Company's 2001 Annual Meeting of Stockholders.

                (aa)    "Preexisting Plans" means each of the following Company
        plans: the 1991 Key Employees' Stock Option Plan, as amended and
        restated; the Key Employees' Performance Unit Plan, as amended and
        restated; the 1998 Directors' Stock Plan, as amended and restated; and
        the Annual Incentive Plan, as amended and restated.

                (bb)    "Qualified Member" means a member of the Committee who
        is a "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) and
        an "outside director" within the meaning of Regulation 1.162-27 under
        Code Section 162(m).

                (cc)    "Restricted Stock" means Stock granted under this Plan
        which is subject to certain restrictions and to a risk of forfeiture.

                (dd)    "Retainer Fees" means annual Board and chair retainer
        fees payable to a director in his or her capacity as such for service on
        the Board and Board committees.

                (ee)    "Retirement" means, with respect to a non-employee
        director, termination of service as a director of the Company at or
        after age 65.

                (ff)    "Rule 16b-3" means Rule 16b-3, as from time to time in
        effect and applicable to Participants, promulgated by the Securities and
        Exchange Commission under Section 16 of the Exchange Act.



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                (gg)    "Stock" means the Company's Common Stock, par value
        $1.00 per share, and any other equity securities of the Company that may
        be substituted or resubstituted for Stock pursuant to Section 12(c).

                (hh)    "Stock Appreciation Rights" or "SAR" means a right
        granted to a Participant under Section 6(c).

                (ii)    "Valuation Date" shall mean the close of business on the
        last business day of each calendar quarter and, in the case of any final
        distribution from a Participant's Deferred Cash Account (described in
        Section 8(f)(iv)), the day preceding such distribution.

        3.      ADMINISTRATION.

                (a)     Authority of the Committee. The Plan shall be
        administered by the Committee, which shall have full and final
        authority, in each case subject to and consistent with the provisions of
        the Plan, to select Eligible Persons to become Participants; to grant
        Awards; to determine the type and number of Awards, the dates on which
        Awards may be exercised and on which the risk of forfeiture or deferral
        period relating to Awards shall lapse or terminate, the acceleration of
        any such dates, the expiration date of any Award, whether, to what
        extent, and under what circumstances an Award may be settled, or the
        exercise price of an Award may be paid, in cash, Stock, other Awards, or
        other property, and other terms and conditions of, and all other matters
        relating to, Awards; to prescribe documents evidencing or setting terms
        of Awards (such Award documents need not be identical for each
        Participant), amendments thereto, and rules and regulations for the
        administration of the Plan and amendments thereto; to construe and
        interpret the Plan and Award documents and correct defects, supply
        omissions or reconcile inconsistencies therein; and to make all other
        decisions and determinations as the Committee may deem necessary or
        advisable for the administration of the Plan. Decisions of the Committee
        with respect to the administration and interpretation of the Plan shall
        be final, conclusive, and binding upon all persons interested in the
        Plan, including Participants, Beneficiaries, transferees under Section
        12(b) and other persons claiming rights from or through a Participant,
        and stockholders. The foregoing notwithstanding, the Board shall perform
        the functions of the Committee for purposes of granting Awards under the
        Plan to non-employee directors (the functions of the Committee with
        respect to other aspects of non-employee director awards is not
        exclusive to the Board, however).

                (b)     Manner of Exercise of Committee Authority. The express
        grant of any specific power to the Committee, and the taking of any
        action by the Committee, shall not be construed as limiting any power or
        authority of the Committee. The Committee may delegate to officers or
        managers of the Company or any subsidiary or affiliate, or committees
        thereof, the authority, subject to such terms as the Committee shall
        determine, to perform such functions, including administrative
        functions, as the Committee may determine, to the extent (x) that such
        delegation will not result in the loss of an exemption under Rule
        16b-3(d) for Awards granted to Participants subject to Section 16 of the
        Exchange Act in respect of the Company and will not cause Awards
        intended to qualify as "performance-based compensation" under Code
        Section 162(m) to fail to so qualify, and (y) permitted by the Delaware
        General Corporation Law.

                (c)     Limitation of Liability. The Committee and each member
        thereof, and any person acting pursuant to authority delegated by the
        Committee, shall be entitled, in good faith, to rely or act upon any
        report or other information furnished by any executive officer, other
        officer or employee of the Company or a subsidiary or affiliate, the
        Company's independent auditors, consultants or any other agents
        assisting in the administration of the Plan. Members of the Committee,
        any person acting pursuant to authority delegated by the Committee, and
        any officer or employee of the Company or a subsidiary or affiliate
        acting at the direction or on behalf of the Committee or a delegee shall
        not be



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        personally liable for any action or determination taken or made in good
        faith with respect to the Plan, and shall, to the extent permitted by
        law, be fully indemnified and protected by the Company with respect to
        any such action or determination.

        4.      STOCK SUBJECT TO PLAN.

                (a)     Overall Number of Shares Available for Delivery. Subject
        to adjustment as provided in Section 12(c), the total number of shares
        of Stock reserved and available for delivery in connection with Awards
        under the Plan shall be (i) four million shares, plus (ii) the number of
        shares subject to awards under the Preexisting Plans which become
        available in accordance with Section 4(b) after the Effective Date, plus
        (iii) 10% of the number of shares issued or delivered by the Company
        during the term of the Plan other than issuances or deliveries under the
        Plan or other incentive compensation plans of the Company; provided,
        however, that the total number of shares with respect to which ISOs may
        be granted shall not exceed the number specified under clause (i) above;
        and provided further, that the total number of shares which may be
        issued and delivered in connection with Awards other than Options and
        SARs shall not exceed one million shares. Any shares of Stock delivered
        under the Plan shall consist of authorized and unissued shares or
        treasury shares.

                (b)     Share Counting Rules. The Committee may adopt reasonable
        counting procedures to ensure appropriate counting, avoid double
        counting (as, for example, in the case of tandem or substitute awards)
        and make adjustments if the number of shares of Stock actually delivered
        differs from the number of shares previously counted in connection with
        an Award. Shares subject to an Award or an award under the Preexisting
        Plans that is canceled, expired, forfeited, settled in cash or otherwise
        terminated without a delivery of shares to the Participant will again be
        available for Awards, and shares withheld in payment of the exercise
        price or taxes relating to an Award or Preexisting Plan award and shares
        equal to the number surrendered in payment of any exercise price or
        taxes relating to an Award or Preexisting Plan award shall be deemed to
        constitute shares not delivered to the Participant and shall be deemed
        to again be available for Awards under the Plan. In addition, in the
        case of any Award granted in assumption of or in substitution for an
        award of a company or business acquired by the Company or a subsidiary
        or affiliate or with which the Company or a subsidiary or affiliate
        combines, shares issued or issuable in connection with such substitute
        Award shall not be counted against the number of shares reserved under
        the Plan. This Section 4(b) shall apply to the number of shares reserved
        and available for ISOs only to the extent consistent with applicable
        regulations relating to ISOs under the Code.

        5.      ELIGIBILITY; PER-PERSON AWARD LIMITATIONS.

                (a)     Eligibility. Awards may be granted under the Plan only
        to Eligible Persons. For purposes of the Plan, an "Eligible Person"
        means an employee of the Company or any subsidiary or affiliate,
        including any executive officer or non-employee director of the Company
        or a subsidiary or affiliate, and any person who has been offered
        employment by the Company or a subsidiary or affiliate, provided that
        such prospective employee may not receive any payment or exercise any
        right relating to an Award until such person has commenced employment
        with the Company or a subsidiary or affiliate. An employee on leave of
        absence may be considered as still in the employ of the Company or a
        subsidiary or affiliate for purposes of eligibility for participation in
        the Plan. For purposes of the Plan, a joint venture in which the Company
        or a subsidiary has a substantial direct or indirect equity investment
        shall be deemed an affiliate, if so determined by the Committee. Holders
        of awards granted by a company or business acquired by the Company or a
        subsidiary or affiliate, or with which the Company or a subsidiary or
        affiliate combines, are eligible for grants of substitute awards granted
        in assumption of or in substitution for such outstanding awards
        previously granted under the Plan in connection with such acquisition or
        combination transaction.



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                (b)     Per-Person Award Limitations. In each calendar year
        during any part of which the Plan is in effect, an Eligible Person may
        be granted Awards intended to qualify as "performance-based
        compensation" under Code Section 162(m) under each of Section 6(b),
        6(c), 6(d), 6(e), 6(f), 6(g) or 6(h) relating to up to his or her Annual
        Limit (such Annual Limit to apply separately to the type of Award
        authorized under each specified subsection, except that the limitation
        applies to Dividend Equivalents under Section 6(g) only if such Dividend
        Equivalents are granted separately from and not as a feature of another
        Award). A Participant's Annual Limit, in any year during any part of
        which the Participant is then eligible under the Plan, shall equal two
        million shares plus the amount of the Participant's unused Annual Limit
        relating to the same type of Award as of the close of the previous year,
        subject to adjustment as provided in Section 12(c). In the case of an
        Award which is not valued in a way in which the limitation set forth in
        the preceding sentence would operate as an effective limitation
        satisfying applicable law (including Treasury Regulation
        1.162-27(e)(4)), an Eligible Person may not be granted Awards
        authorizing the earning during any calendar year of an amount that
        exceeds the Eligible Person's Annual Limit, which for this purpose shall
        equal $4 million plus the amount of the Eligible Person's unused cash
        Annual Limit as of the close of the previous year (this limitation is
        separate and not affected by the number of Awards granted during such
        calendar year subject to the limitation in the preceding sentence). For
        this purpose, (i) "earning" means satisfying performance conditions so
        that an amount becomes payable, without regard to whether it is to be
        paid currently or on a deferred basis or continues to be subject to any
        service requirement or other non-performance condition, and (ii) a
        Participant's Annual Limit is used to the extent an amount or number of
        shares may be potentially earned or paid under an Award, regardless of
        whether such amount or shares are in fact earned or paid.

        6.      SPECIFIC TERMS OF AWARDS.

                (a)     General. Awards may be granted on the terms and
        conditions set forth in this Section 6. In addition, the Committee may
        impose on any Award or the exercise thereof, at the date of grant or
        thereafter (subject to Section 12(e)), such additional terms and
        conditions, not inconsistent with the provisions of the Plan, as the
        Committee shall determine, including terms requiring forfeiture of
        Awards in the event of termination of employment or service by the
        Participant and terms permitting a Participant to make elections
        relating to his or her Award. The Committee shall retain full power and
        discretion with respect to any term or condition of an Award that is not
        mandatory under the Plan. The Committee shall require the payment of
        lawful consideration for an Award to the extent necessary to satisfy the
        requirements of the Delaware General Corporation Law, and may otherwise
        require payment of consideration for an Award except as limited by the
        Plan.

                (b)     Options. The Committee is authorized to grant Options to
        Participants on the following terms and conditions:

                        (i)     Exercise Price. The exercise price per share of
                Stock purchasable under an Option (including both ISOs and
                non-qualified Options) shall be determined by the Committee,
                provided that such exercise price shall be not less than the
                Fair Market Value of a share of Stock on the date of grant of
                such Option, subject to Section 9(a). Notwithstanding the
                foregoing, any substitute award granted in assumption of or in
                substitution for an outstanding award granted by a company or
                business acquired by the Company or a subsidiary or affiliate,
                or with which the Company or a subsidiary or affiliate combines
                may be granted with an exercise price per share of Stock other
                than as required above.

                        (ii)    Option Term; Time and Method of Exercise. The
                Committee shall determine the term of each Option, provided that
                in no event shall the term of any ISO or SAR in tandem therewith
                exceed a period of ten years from the date of grant. The
                Committee shall determine the time or times at which or the
                circumstances under which an Option may be exercised in whole or
                in part (including based on achievement of performance goals
                and/or future service



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                requirements), the methods by which such exercise price may be
                paid or deemed to be paid and the form of such payment (subject
                to Section 12(k)), including, without limitation, cash, Stock,
                other Awards or awards granted under other plans of the Company
                or any subsidiary or affiliate, or other property (including
                notes and other contractual obligations of Participants to make
                payment on a deferred basis, such as through "cashless exercise"
                arrangements, to the extent permitted by applicable law), and
                the methods by or forms in which Stock will be delivered or
                deemed to be delivered in satisfaction of Options to
                Participants (including deferred delivery of shares representing
                the Option "profit," at the election of the Participant or as
                mandated by the Committee, with such deferred shares subject to
                any vesting, forfeiture or other terms as the Committee may
                specify).

                        (iii)   ISOs. The terms of any ISO granted under the
                Plan shall comply in all respects with the provisions of Code
                Section 422, including but not limited to the requirement that
                no ISO shall be granted more than ten years after the Effective
                Date.

                (c)     Stock Appreciation Rights. The Committee is authorized
        to grant SAR's to Participants on the following terms and conditions:

                        (i)     Right to Payment. An SAR shall confer on the
                Participant to whom it is granted a right to receive, upon
                exercise thereof, the excess of (A) the Fair Market Value of one
                share of Stock on the date of exercise (or, in the case of a
                "Limited SAR," the Fair Market Value determined by reference to
                the Change in Control Price, as defined under Section 10(d)
                hereof) over (B) the grant price of the SAR as determined by the
                Committee.

                        (ii)    Other Terms. The Committee shall determine at
                the date of grant or thereafter, the time or times at which and
                the circumstances under which a SAR may be exercised in whole or
                in part (including based on achievement of performance goals
                and/or future service requirements), the method of exercise,
                method of settlement, form of consideration payable in
                settlement, method by or forms in which Stock will be delivered
                or deemed to be delivered to Participants, and whether or not a
                SAR shall be free-standing or in tandem or combination with any
                other Award. Limited SARs that may only be exercised in
                connection with a Change in Control or other event as specified
                by the Committee may be granted on such terms, not inconsistent
                with this Section 6(c), as the Committee may determine.

                (d)     Restricted Stock. Subject to Section 9(d), the Committee
        is authorized to grant Restricted Stock to Participants on the following
        terms and conditions:

                        (i)     Grant and Restrictions. Restricted Stock shall
                be subject to such restrictions on transferability, risk of
                forfeiture and other restrictions, if any, as the Committee may
                impose, which restrictions may lapse separately or in
                combination at such times, under such circumstances (including
                based on achievement of performance goals and/or future service
                requirements), in such installments or otherwise and under such
                other circumstances as the Committee may determine at the date
                of grant or thereafter. Except to the extent restricted under
                the terms of the Plan and any Award document relating to the
                Restricted Stock, a Participant granted Restricted Stock shall
                have all of the rights of a stockholder, including the right to
                vote the Restricted Stock and the right to receive dividends
                thereon (subject to any mandatory reinvestment or other
                requirement imposed by the Committee).

                        (ii)    Forfeiture. Except as otherwise determined by
                the Committee, upon termination of employment or service during
                the applicable restriction period, Restricted Stock that is at
                that time subject to restrictions shall be forfeited and
                reacquired by the Company; provided that the Committee may
                provide, by rule or regulation or in any Award document, or may
                determine in



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                any individual case, that restrictions or forfeiture conditions
                relating to Restricted Stock will lapse in whole or in part,
                including in the event of terminations resulting from specified
                causes.

                        (iii)   Certificates for Stock. Restricted Stock granted
                under the Plan may be evidenced in such manner as the Committee
                shall determine. If certificates representing Restricted Stock
                are registered in the name of the Participant, the Committee may
                require that such certificates bear an appropriate legend
                referring to the terms, conditions and restrictions applicable
                to such Restricted Stock, that the Company retain physical
                possession of the certificates, and that the Participant deliver
                a stock power to the Company, endorsed in blank, relating to the
                Restricted Stock.

                        (iv)    Dividends and Splits. As a condition to the
                grant of an Award of Restricted Stock, the Committee may require
                that any dividends paid on a share of Restricted Stock shall be
                either (A) paid with respect to such Restricted Stock at the
                dividend payment date in cash, in kind, or in a number of shares
                of unrestricted Stock having a Fair Market Value equal to the
                amount of such dividends, or (B) automatically reinvested in
                additional Restricted Stock or held in kind, which shall be
                subject to the same terms as applied to the original Restricted
                Stock to which it relates, or (C) deferred as to payment, either
                as a cash deferral or with the amount or value thereof
                automatically deemed reinvested in shares of Deferred Stock,
                other Awards or other investment vehicles, subject to such terms
                as the Committee shall determine or permit a Participant to
                elect. Unless otherwise determined by the Committee, Stock
                distributed in connection with a Stock split or Stock dividend,
                and other property distributed as a dividend, shall be subject
                to restrictions and a risk of forfeiture to the same extent as
                the Restricted Stock with respect to which such Stock or other
                property has been distributed.

                (e)     Deferred Stock. The Committee is authorized to grant
        Deferred Stock to Participants, subject to the following terms and
        conditions:

                        (i)     Award and Restrictions. Issuance of Stock will
                occur upon expiration of the deferral period specified for an
                Award of Deferred Stock by the Committee (or, if permitted by
                the Committee, as elected by the Participant). In addition,
                Deferred Stock shall be subject to such restrictions on
                transferability, risk of forfeiture and other restrictions, if
                any, as the Committee may impose, which restrictions may lapse
                at the expiration of the deferral period or at earlier specified
                times (including based on achievement of performance goals
                and/or future service requirements), separately or in
                combination, in installments or otherwise, and under such other
                circumstances as the Committee may determine at the date of
                grant or thereafter. Deferred Stock may be satisfied by delivery
                of Stock, other Awards, or a combination thereof (subject to
                Section 12(k)), as determined by the Committee at the date of
                grant or thereafter.

                        (ii)    Forfeiture. Except as otherwise determined by
                the Committee, upon termination of employment or service during
                the applicable deferral period or portion thereof to which
                forfeiture conditions apply (as provided in the Award document
                evidencing the Deferred Stock), all Deferred Stock that is at
                that time subject to such forfeiture conditions shall be
                forfeited; provided that the Committee may provide, by rule or
                regulation or in any Award document, or may determine in any
                individual case, that restrictions or forfeiture conditions
                relating to Deferred Stock will lapse in whole or in part,
                including in the event of terminations resulting from specified
                causes.

                        (iii)   Dividend Equivalents. Unless otherwise
                determined by the Committee, Dividend Equivalents on the
                specified number of shares of Stock covered by an Award of
                Deferred Stock shall be either (A) paid with respect to such
                Deferred Stock at the dividend payment date in cash or in shares
                of unrestricted Stock having a Fair Market Value equal to the
                amount of such dividends, or (B) deferred with respect to such
                Deferred Stock, either as a cash deferral



                                      -8-
<PAGE>   11


                or with the amount or value thereof automatically deemed
                reinvested in additional Deferred Stock, other Awards or other
                investment vehicles having a Fair Market Value equal to the
                amount of such dividends, as the Committee shall determine or
                permit a Participant to elect.

                (f)     Bonus Stock and Awards in Lieu of Obligations. The
        Committee is authorized to grant Stock as a bonus, or to grant Stock or
        other Awards in lieu of obligations of the Company or a subsidiary or
        affiliate to pay cash or deliver other property under the Plan or under
        other plans or compensatory arrangements, subject to such terms as shall
        be determined by the Committee.

                (g)     Dividend Equivalents. The Committee is authorized to
        grant Dividend Equivalents to a Participant, which may be awarded on a
        free-standing basis or in connection with another Award. The Committee
        may provide that Dividend Equivalents shall be paid or distributed when
        accrued or shall be deemed to have been reinvested in additional Stock,
        Awards, or other investment vehicles, and subject to restrictions on
        transferability, risks of forfeiture and such other terms as the
        Committee may specify.

                (h)     Other Stock-Based Awards. The Committee is authorized,
        subject to limitations under applicable law, to grant to Participants
        such other Awards that may be denominated or payable in, valued in whole
        or in part by reference to, or otherwise based on, or related to, Stock
        or factors that may influence the value of Stock, including, without
        limitation, convertible or exchangeable debt securities, other rights
        convertible or exchangeable into Stock, purchase rights for Stock,
        Awards with value and payment contingent upon performance of the Company
        or business units thereof or any other factors designated by the
        Committee, and Awards valued by reference to the book value of Stock or
        the value of securities of or the performance of specified subsidiaries
        or affiliates or other business units. The Committee shall determine the
        terms and conditions of such Awards. Stock delivered pursuant to an
        Award in the nature of a purchase right granted under this Section 6(h)
        shall be purchased for such consideration, paid for at such times, by
        such methods, and in such forms, including, without limitation, cash,
        Stock, other Awards, notes, or other property, as the Committee shall
        determine. Cash awards, as an element of or supplement to any other
        Award under the Plan, may also be granted pursuant to this Section 6(h).

                (i)     Performance Awards. Performance Awards, denominated in
        cash or in Stock or other Awards, may be granted by the Committee in
        accordance with Section 7.


        7.      PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS.

                (a)     Performance Awards Generally. Performance Awards may be
        denominated as a cash amount, number of shares of Stock, or specified
        number of other Awards (or a combination) which may be earned upon
        achievement or satisfaction of performance conditions specified by the
        Committee. In addition, the Committee may specify that any other Award
        shall constitute a Performance Award by conditioning the right of a
        Participant to exercise the Award or have it settled, and the timing
        thereof, upon achievement or satisfaction of such performance conditions
        as may be specified by the Committee. The Committee may use such
        business criteria and other measures of performance as it may deem
        appropriate in establishing any performance conditions, and may exercise
        its discretion to reduce or increase the amounts payable under any Award
        subject to performance conditions, except as limited under Sections 7(b)
        and 7(c) in the case of a Performance Award intended to qualify as
        "performance-based compensation" under Code Section 162(m).

                (b)     Performance Awards Granted to Covered Employees. If the
        Committee determines that a Performance Award to be granted to an
        Eligible Person who is designated by the Committee as likely to be a
        Covered Employee should qualify as "performance-based compensation" for
        purposes of Code Section 162(m), the grant, exercise and/or settlement
        of such Performance Award shall be



                                      -9-
<PAGE>   12


        contingent upon achievement of a preestablished performance goal and
        other terms set forth in this Section 7(b).

                        (i)     Performance Goal Generally. The performance goal
                for such Performance Awards shall consist of one or more
                business criteria and a targeted level or levels of performance
                with respect to each of such criteria, as specified by the
                Committee consistent with this Section 7(b). The performance
                goal shall be objective and shall otherwise meet the
                requirements of Code Section 162(m) and regulations thereunder,
                including the requirement that the level or levels of
                performance targeted by the Committee result in the achievement
                of performance goals being "substantially uncertain." The
                Committee may determine that such Performance Awards shall be
                granted, exercised and/or settled upon achievement of any one
                performance goal or that two or more of the performance goals
                must be achieved as a condition to grant, exercise and/or
                settlement of such Performance Awards. Performance goals may
                differ for Performance Awards granted to any one Participant or
                to different Participants.

                        (ii)    Business Criteria. One or more of the following
                business criteria for the Company, on a consolidated basis,
                and/or for specified subsidiaries or affiliates or other
                business units of the Company shall be used by the Committee in
                establishing performance goals for such Performance Awards: (1)
                advertising sales (either calendar cycle or publication cycle
                basis) or other sales or revenue measures; (2) operating income,
                earnings from operations, earnings before or after taxes,
                earnings before or after interest, depreciation, amortization,
                or extraordinary or special items, (3) net income or net income
                per common share (basic or diluted); (4) return on assets,
                return on investment, return on capital, or return on equity;
                (5) cash flow, free cash flow, cash flow return on investment,
                or net cash provided by operations; (6) interest expense after
                taxes; (7) economic profit or value created; (8) operating
                margin; (9) stock price or total stockholder return; and (10)
                strategic business criteria, consisting of one or more
                objectives based on meeting specified market penetration,
                geographic business expansion goals, cost targets, customer
                satisfaction, employee satisfaction, management of employment
                practices and employee benefits, supervision of litigation and
                information technology, and goals relating to acquisitions or
                divestitures of subsidiaries, affiliates or joint ventures. The
                targeted level or levels of performance with respect to such
                business criteria may be established at such levels and in such
                terms as the Committee may determine, in its discretion,
                including in absolute terms, as a goal relative to performance
                in prior periods, or as a goal compared to the performance of
                one or more comparable companies or an index covering multiple
                companies.

                        (iii)   Performance Period; Timing for Establishing
                Performance Goals. Achievement of performance goals in respect
                of such Performance Awards shall be measured over a performance
                period of up to one year or more than one year, as specified by
                the Committee. A performance goal shall be established not later
                than the earlier of (A) 90 days after the beginning of any
                performance period applicable to such Performance Award or (B)
                the time 25% of such performance period has elapsed.

                        (iv)    Performance Award Pool. The Committee may
                establish a Performance Award pool, which shall be an unfunded
                pool, for purposes of measuring performance of the Company in
                connection with Performance Awards. The amount of such
                Performance Award pool shall be based upon the achievement of a
                performance goal or goals based on one or more of the business
                criteria set forth in Section 7(b)(ii) during the given
                performance period, as specified by the Committee in accordance
                with Section 7(b)(iv). The Committee may specify the amount of
                the Performance Award pool as a percentage of any of such
                business criteria, a percentage thereof in excess of a threshold
                amount, or as another amount which need not bear a strictly
                mathematical relationship to such business criteria.



                                      -10-
<PAGE>   13


                        (v)     Settlement of Performance Awards; Other Terms.
                Settlement of Performance Awards shall be in cash, Stock, other
                Awards or other property, in the discretion of the Committee.
                The Committee may, in its discretion, increase or reduce the
                amount of a settlement otherwise to be made in connection with
                such Performance Awards, but may not exercise discretion to
                increase any such amount payable to a Covered Employee in
                respect of a Performance Award subject to this Section 7(b). Any
                settlement which changes the form of payment from that
                originally specified shall be implemented in a manner such that
                the Performance Award and other related Awards do not, solely
                for that reason, fail to qualify as "performance-based
                compensation" for purposes of Code Section 162(m). The Committee
                shall specify the circumstances in which such Performance Awards
                shall be paid or forfeited in the event of termination of
                employment by the Participant or other event (including a Change
                in Control) prior to the end of a performance period or
                settlement of such Performance Awards.

                (c)     Annual Incentive Awards Granted to Designated Covered
        Employees. The Committee may grant an Annual Incentive Award to an
        Eligible Person who is designated by the Committee as likely to be a
        Covered Employee. Such Annual Incentive Award will be intended to
        qualify as "performance-based compensation" for purposes of Code Section
        162(m), and its grant, exercise and/or settlement shall be contingent
        upon achievement of preestablished performance goals and other terms set
        forth in this Section 7(c).

                        (i)     Grant of Annual Incentive Awards. Not later than
                the earlier of 90 days after the beginning of any performance
                period applicable to such Annual Incentive Award or the time 25%
                of such performance period has elapsed, the Committee shall
                determine the Covered Employees who will potentially receive
                Annual Incentive Awards, and the amount(s) potentially payable
                thereunder, for that performance period. The amount(s)
                potentially payable shall be based upon the achievement of a
                performance goal or goals based on one or more of the business
                criteria set forth in Section 7(b)(ii) in the given performance
                period, as specified by the Committee. The Committee may
                designate an annual incentive award pool as the means by which
                Annual Incentive Awards will be measured, which pool shall
                conform to the provisions of Section 7(b)(iv). In such case, the
                portion of the Annual Incentive Award pool potentially payable
                to each Covered Employee shall be preestablished by the
                Committee. In all cases, the maximum Annual Incentive Award of
                any Participant shall be subject to the limitation set forth in
                Section 5.

                        (ii)    Payout of Annual Incentive Awards. After the end
                of each performance period, the Committee shall determine the
                amount, if any, of the Annual Incentive Award for that
                performance period payable to each Participant. The Committee
                may, in its discretion, determine that the amount payable to any
                Participant as a final Annual Incentive Award shall be reduced
                from the amount of his or her potential Annual Incentive Award,
                including a determination to make no final Award whatsoever, but
                may not exercise discretion to increase any such amount. The
                Committee shall specify the circumstances in which an Annual
                Incentive Award shall be paid or forfeited in the event of
                termination of employment by the Participant or other event
                prior to the end of a performance period or settlement of such
                Annual Incentive Award.

                (d)     Written Determinations. Determinations by the Committee
        as to the establishment of performance goals, the amount potentially
        payable in respect of Performance Awards and Annual Incentive Awards,
        the level of actual achievement of the specified performance goals
        relating to Performance Awards and Annual Incentive Awards, and the
        amount of any final Performance Award and Annual Incentive Award shall
        be recorded in writing in the case of Performance Awards intended to
        qualify under Section 162(m). Specifically, the Committee shall certify
        in writing, in a manner conforming to applicable regulations under
        Section 162(m), prior to settlement of each such Award



                                      -11-
<PAGE>   14


        granted to a Covered Employee, that the performance objective relating
        to the Performance Award and other material terms of the Award upon
        which settlement of the Award was conditioned have been satisfied.

                8.      NON-EMPLOYEE DIRECTOR AWARDS. Options, Deferred Stock,
        Restricted Stock and other Awards (which other Awards, if granted, will
        be governed by Sections 6 and 7 of this Plan) shall be granted to
        non-employee directors of the Company or a subsidiary or an affiliate in
        accordance with policies established from time to time by the Board
        specifying the classes of non-employee directors to be granted such
        Awards, the number of shares to be subject to each Award, and the time
        or times at which such Awards shall be granted. All Options granted to
        non-employee directors shall be non-qualified stock options.

                        (a)     Initial Policy -- Option Grants. The initial
                policy with respect to Options granted under this Section 8(a),
                effective as of the Effective Date and continuing until modified
                or revoked by the Board from time to time, shall be as follows:

                                (i)     Initial Grants. At the date of a
                        person's initial election or appointment as a member of
                        the Board after the Effective Date, such person, if he
                        or she is a non-employee director of the Company
                        eligible to participate upon such election or
                        appointment, shall be granted an Option to purchase
                        1,500 shares of Stock, subject to adjustment as provided
                        in Section 12(c). At the Effective Date, each person who
                        is a non-employee director of the Company eligible to
                        participate at that date shall be granted an Option to
                        purchase 1,500 shares of Stock, subject to adjustment as
                        provided in Section 12(c).

                                (ii)    Annual Grants. At the date of each
                        annual meeting of shareholders following the Effective
                        Date at which a director is elected or reelected as a
                        member of the Board (or at which members of another
                        class of directors are elected or reelected, if the
                        Company then has a classified Board), such director, if
                        he or she is a non-employee director of the Company
                        eligible to participate at that date and if he or she
                        has not been granted an Option under this Section 8(a)
                        previously during the same calendar year, shall be
                        granted an Option to purchase 1,500 shares of Stock,
                        subject to adjustment as provided in Section 12(c).

                        (b)     Terms of Options Granted Under Section 8(a).
                Each Option granted under Section 8(a) shall be subject to the
                following terms and conditions:

                                (i)     Exercise Price. The exercise price per
                        share of Stock purchasable under an Option shall be
                        equal to 100% of the Fair Market Value of Stock on the
                        date of grant of the Option, subject to Section 9(a).

                                (ii)    Option Term. Each Option shall expire
                        ten years after the date of grant, or such earlier date
                        as the Option may no longer be exercised and cannot, by
                        its terms, thereafter become exercisable.

                                (iii)   Vesting and Exercisability. The Board
                        may establish terms regarding the times at which Options
                        shall become vested and exercisable. Unless otherwise
                        determined by the Board, an Option granted under this
                        Section 8(a) and not previously forfeited shall vest and
                        become exercisable by a Participant as to one-third of
                        the number of shares subject to the Option at the close
                        of business on the day preceding each of the three
                        annual meetings of shareholders following the date of
                        grant of the Option, rounded to the nearest number of
                        whole shares. The foregoing notwithstanding, an Option
                        not previously forfeited shall vest and become
                        exercisable on an accelerated



                                      -12-
<PAGE>   15


                        basis upon a Change in Control or upon the termination
                        of the Participant's service as a director due to death,
                        Disability or Retirement. Unless otherwise determined by
                        the Board, an Option will cease to vest and become
                        exercisable upon the termination of the Participant's
                        service prior to a Change in Control for any reason
                        other than death, Disability or Retirement, and such
                        portion that has not vested and become exercisable at
                        the time of such termination shall be forfeited.

                                (iv)    Payment. The exercise price of an Option
                        shall be paid to the Company either in cash or by the
                        surrender of Stock, or any combination thereof, or in
                        such other form or manner as may be consistent with
                        Section 6(b)(ii).

                        (c)     Initial Policy -- Grant of Deferred Stock and
                Restricted Stock. The initial policy with respect to Awards
                granted under this Section 8(c), effective as of the Effective
                Date and continuing until modified or revoked by the Board from
                time to time, shall be as follows:

                                (i)     Initial Grant. At the date of a person's
                        initial election or appointment as a member of the Board
                        after the Effective Date, such person, if he or she is a
                        non-employee director of the Company eligible to
                        participate upon such election or appointment, shall be
                        granted 1,500 shares of Deferred Stock, subject to
                        adjustment as provided in Section 12(c). At the
                        Effective Date, each person who is a non-employee
                        director of the Company eligible to participate at that
                        date shall be granted 1,500 shares of Deferred Stock,
                        subject to adjustment as provided in Section 12(c).

                                (ii)    Annual Grants. At the date of each
                        annual meeting of shareholders following the Effective
                        Date at which a director is elected or reelected as a
                        member of the Board (or at which members of another
                        class of directors are elected or reelected, if the
                        Company then has a classified Board), such director, if
                        he or she is a non-employee director of the Company
                        eligible to participate at that date and if he or she
                        has not been granted Deferred Stock or Restricted Stock
                        under Section 8(c) previously during the same calendar
                        year, shall be granted 1,500 shares of Deferred Stock,
                        unless the director has elected, prior to such annual
                        meeting of shareholders, to receive such grant in the
                        form of an equal number of shares of Restricted Stock.
                        The number of shares subject to such annual grants shall
                        be subject to adjustment as provided in Section 12(c).

                        (d)     Terms of Deferred Stock and Restricted Stock
                Granted Under Section 8(c). Deferred Stock granted under Section
                8(c) shall be subject to the terms and conditions of Deferred
                Stock specified in Sections 8(f)(ii), (iii), and (iv), unless
                otherwise determined by the Board. Deferred Stock and Restricted
                Stock granted under this Section 8(c) shall also be subject to
                the following additional terms and conditions:

                                (i)     Vesting and Forfeiture. The Board may
                        establish terms regarding the times at which Deferred
                        Stock and Restricted Stock shall become vested and
                        non-forfeitable. Unless otherwise determined by the
                        Board, an Award granted under Section 8(c) and not
                        previously forfeited shall become vested and
                        non-forfeitable as to one-third of the number of shares
                        of Deferred Stock or Restricted Stock at the close of
                        business on the day preceding each of the three annual
                        meetings of shareholders following the date of grant of
                        such Award, rounded to the nearest number of whole
                        shares. The foregoing notwithstanding, an Award of
                        Deferred Stock or Restricted Stock not previously vested
                        or forfeited shall vest and become non-forfeitable on an
                        accelerated basis upon a Change in Control or upon the
                        termination of the Participant's service as a director
                        due to death, Disability or Retirement. Unless otherwise
                        determined by the Board, an Award of Deferred Stock or
                        Restricted Stock not previously vested or forfeited will
                        cease to vest



                                      -13-
<PAGE>   16


                        and will be forfeited upon the termination of the
                        Participant's service prior to a Change in Control for
                        any reason other than death, Disability or Retirement.

                                (ii)    Deferred Stock Credited as a Result of
                        Dividend Equivalents. Unless otherwise determined by the
                        Board, Deferred Stock credited as a result of Dividend
                        Equivalents under Section 8(f)(ii) shall be subject to
                        the same terms, including risk of forfeiture, as the
                        Deferred Stock with respect to which the dividend
                        equivalents were credited.

                                (iii)   Dividends on Restricted Stock. Unless
                        otherwise determined by the Board, dividends on
                        Restricted Stock declared and paid prior to the lapse of
                        the risk of forfeiture on such Restricted Stock shall be
                        automatically reinvested in additional shares of
                        Restricted Stock, which shall be subject to the same
                        terms, including risk of forfeiture, as the Restricted
                        Stock on which the dividend was paid.

                                (iv)    Awards Nontransferable. Deferred Stock
                        and Restricted Stock shall be nontransferable by the
                        Participant at any time that the Award remains subject
                        to a risk of forfeiture.

                        (e)     Options Granted in Payment of Fees and Deferral
                of Fees in Deferred Stock and Deferred Cash. Each non-employee
                director of the Company may elect, in accordance with Section
                8(e)(i), to be paid Retainer Fees in the form of Options under
                Section 8(e)(ii) or to defer receipt of Retainer Fees and Other
                Director Compensation in the form of Deferred Stock under
                Section 8(e)(iii) or deferred cash under Section 8(e)(iv).

                                (i)     Elections. A director shall elect to
                        participate and the terms of such participation by
                        filing an election with the Company prior to the
                        beginning of a Plan Year (the initial Plan Year will
                        begin August 14, 1998 and Plan Years thereafter
                        generally will begin at each annual meeting of
                        shareholders or, in the case of a new director, upon
                        initial appointment) or at such other date as may be
                        specified by the Board, provided that any date so
                        specified shall ensure effective deferral of taxation
                        and otherwise comply with applicable laws.

                                        (A)     Effect and Irrevocability of
                                Elections. Elections shall be deemed continuing,
                                and therefore applicable to Plan Years after the
                                initial Plan Year covered by the election, until
                                the election is modified or superseded by the
                                Participant. Elections other than those subject
                                to Section 8(f)(iv) shall become irrevocable at
                                the commencement of the Plan Year to which an
                                election relates, unless the Board specifies a
                                different time. Elections relating to the time
                                of settlement of a Deferral Account shall become
                                irrevocable at the time specified in Section
                                8(f)(iv). Elections may be modified or revoked
                                by filing a new election prior to the time the
                                election to be modified or revoked has become
                                irrevocable. The latest election filed with the
                                Board shall be deemed to revoke all prior
                                inconsistent elections that remain revocable at
                                the time of filing of the latest election.

                                        (B)     Matters To Be Elected. The
                                Company will provide a form of election which
                                will permit a director to make appropriate
                                elections with respect to all relevant matters
                                under this Section 8.

                                        (C)     Time of Filing Elections. An
                                election must be received by the Company prior
                                to the date specified by the Board. Under no
                                circumstances may a



                                      -14-
<PAGE>   17


                                Participant defer compensation to which the
                                Participant has attained, at the time of
                                deferral, a legally enforceable right to current
                                receipt of such compensation.

                                (ii)    Options Granted in Payment of Retainer
                        Fees. A Participant who has elected to be paid a
                        specified amount of Retainer Fees in the form of Options
                        shall be granted, at the close of business on the day
                        the Participant's Plan Year commences an Option to
                        purchase the number of whole shares of Stock determined
                        in accordance with the Option Valuation Methodology
                        specified by the Board. Each Option granted under this
                        Section 8(e)(ii) shall be subject to the following terms
                        and conditions:

                                        (A)     Option Valuation Methodology.
                                The Board shall determine the Option Valuation
                                Methodology which will be used to determine the
                                number of Options granted and the Option
                                exercise price. The Option Valuation Methodology
                                may be based upon a valuation of the Option, a
                                discounting of the aggregate exercise price of
                                the Options by the amount of Retainer Fees to be
                                paid in the form of Options, or such other
                                methodology as may be deemed reasonable for
                                purposes of this Section 8(e)(ii).

                                        (B)     Option Term. Each Option will
                                expire ten years after the date of grant;
                                provided, however, that, unless otherwise
                                determined by the Board, any portion of an
                                Option that is not yet exercisable as of the
                                date a Participant ceases to serve as a director
                                for any reason will expire at the date such
                                service ceases.

                                        (C)     Vesting and Exercisability.
                                Unless otherwise determined by the Board, each
                                Option will vest and become exercisable as to
                                25% of the underlying shares on the June 30,
                                September 30, December 31, and March 31
                                following the date of grant; provided, however,
                                that, in the case of a Plan Year which begins on
                                or after June 30 and before September 30, the
                                vesting percentage shall be 33%, and in the case
                                of a Plan Year which begins on or after
                                September 30 and before December 31, the vesting
                                percentage shall be 50%; and provided further,
                                that an Option will become fully vested and
                                exercisable at the close of business on the last
                                day of the Plan Year in which it was granted.
                                The number of shares as to which the Option
                                becomes vested and exercisable will be rounded
                                to the nearest whole number. The foregoing
                                notwithstanding, (i) upon a Change in Control a
                                Participant's Option not previously forfeited
                                shall vest and become exercisable in full, and
                                (ii) upon termination of the Participant's
                                service as a director due to death, Disability,
                                or Retirement, that portion of the Option which
                                would become vested and exercisable on the last
                                day of the calendar quarter in which such death,
                                Disability, or Retirement occurred will become
                                immediately vested and exercisable.

                                        (D)     Exercise Price. The exercise
                                price per share of Stock purchasable under an
                                Option will be determined in accordance with the
                                Option Valuation Methodology. The exercise price
                                of an Option shall be paid to the Company either
                                in cash or by the surrender of Stock, or any
                                combination thereof, or in such other form or
                                manner as may be established by the Board;
                                provided, however, that, unless otherwise
                                determined by the Board, shares shall not be
                                surrendered in payment of the exercise price if
                                such surrender would result in additional
                                accounting expense to the Company.

                                        (E)     Changes in Fees; Changes in
                                Service as a Committee Chair. If the amount of
                                Retainer Fees is increased during a Plan Year,
                                or if a Director is appointed chair of a Board
                                committee such that an additional Retainer Fee
                                is



                                      -15-
<PAGE>   18


                                payable during a Plan Year, such increased or
                                additional fees will not be paid in the form of
                                Options. If a Director has been granted an
                                Option in respect of a Plan Year in payment of
                                Retainer Fees which included committee-related
                                fees for service as chair or a member of any
                                Board committee, and during such Plan Year he or
                                she ceases such service but remains on the
                                Board, the Option will expire in part at the
                                time such service ceases, to the extent of that
                                portion of the Option which is not yet
                                exercisable multiplied by a fraction the
                                numerator of which is the amount of
                                committee-related fees included in such Retainer
                                Fees and the denominator of which is the total
                                amount of such Retainer Fees.

                                        (F)     Service During Part of a
                                Quarter. If a Participant ceases to serve as a
                                director or on committee at a date other than a
                                vesting date for the Option and if the Board
                                does not exercise its discretion to permit
                                vesting of the Participant's Option in
                                consideration for the Participant's service in
                                that final quarterly period, the Participant
                                shall be entitled to payment in cash for his or
                                her service in that final quarterly period if
                                and to the extent then provided in the Company's
                                regular non-employee director compensation
                                policies.

                                (iii)   Deferral of Retainer Fees and Other
                        Director Compensation in the Form of Deferred Stock. If
                        a Participant has elected to defer receipt of a
                        specified amount of Retainer Fees or Other Director
                        Compensation in the form of Deferred Stock, a number of
                        shares of Deferred Stock shall be credited to the
                        Participant's Deferred Stock Account, as of the date
                        such Retainer Fees or Other Director Compensation
                        otherwise would have been payable to the Participant but
                        for such election to defer, equal to (i) such amount
                        otherwise payable divided by (ii) the Fair Market Value
                        of a share of Stock at that date. Deferred Shares
                        credited under this Section 8(e)(iii) shall be subject
                        to the terms and conditions of Deferred Stock specified
                        in Sections 8(f)(ii), (iii) and (iv). The right and
                        interest of each Participant in Deferred Stock credited
                        to the Participant's Deferred Stock Account under this
                        Section 8(e)(iii) at all times will be nonforfeitable.

                                (iv)    Deferral of Retainer Fees and Other
                        Director Compensation in the Form of Deferred Cash. If a
                        Participant has elected to defer receipt of a specified
                        amount of Retainer Fees or Other Director Compensation
                        in the form of deferred cash, an amount equal to such
                        specified amount shall be credited to the Participant's
                        Deferred Cash Account as of the date such Retainer Fees
                        or Other Director Compensation otherwise would have been
                        payable to the Participant but for such election to
                        defer. Each Participant shall be entitled to direct the
                        manner in which his or her Deferred Cash Account will be
                        deemed to be invested, selecting among the same
                        investment alternatives (other than Company common
                        stock) as are offered from time to time to participants
                        in the Company's Deferred Compensation Plan. The right
                        and interest of each Participant relating to his or her
                        Deferred Cash Account at all times will be
                        nonforfeitable.

                                (v)     Cessation of Service as a Director. If
                        any Retainer Fee or Other Director Compensation
                        otherwise subject to an election would be paid to a
                        Participant after he or she has ceased to serve as a
                        director, such payment shall not be subject to deferral
                        under this Section 8(e), but shall instead be paid in
                        accordance with the Company's regular non-employee
                        director compensation policies.

                        (f)     Other Deferrals and Terms of Deferral Accounts.

                                (i)     Deferral of Certain Option Shares. Upon
                        any exercise of an Option or an option granted under any
                        other plan or program of the Company by a non-employee



                                      -16-
<PAGE>   19


                        director, if the exercise price of such option is paid
                        by surrender of shares of Stock to the Company, the
                        director may elect to defer receipt of all or a portion
                        of the shares deliverable upon exercise of the option in
                        excess of the number surrendered in payment of the
                        exercise price. In such case, the number of shares
                        deferred shall be credited to the Participant's Deferred
                        Stock Account.

                                (ii)    Dividend Equivalents on Deferred Stock.
                        Dividend Equivalents will be credited on Deferred Stock
                        credited to a Participant's Deferred Stock Account(s) as
                        follows:

                                        (A)     Cash and Non-Share Dividends. If
                                the Company declares and pays a dividend on
                                Stock in the form of cash or property other than
                                shares of Stock, then a number of additional
                                shares of Deferred Stock shall be credited to a
                                Participant's Deferred Stock Account(s) as of
                                the payment date for such dividend equal to (i)
                                the number of shares of Deferred Stock credited
                                to the respective Account as of the record date
                                for such dividend, multiplied by (ii) the amount
                                of cash plus the Fair Market Value of any
                                property other than shares actually paid as a
                                dividend on each share at such payment date,
                                divided by (iii) the Fair Market Value of a
                                share of Stock at such payment date.

                                        (B)     Share Dividends and Splits. If
                                the Company declares and pays a dividend on
                                Stock in the form of additional shares of Stock,
                                or there occurs a forward split of Stock, then a
                                number of additional shares of Deferred Stock
                                shall be credited to the Participant's Deferred
                                Stock Account(s) as of the payment date for such
                                dividend or forward Stock split equal to (i) the
                                number of shares of Deferred Stock credited to
                                the respective Account as of the record date for
                                such dividend or split multiplied by (ii) the
                                number of additional shares actually paid as a
                                dividend or issued in such split in respect of
                                each share of Stock.

                                (iii)   Reallocation of Accounts. A Participant
                        may allocate amounts credited to his or her Deferred
                        Cash Account to one or more of the investment vehicles
                        authorized under the Company's Deferred Compensation
                        Plan. Subject to the rules established by the Board and
                        subject to the provisions of this Section 8(f), a
                        Participant may reallocate amounts credited to his or
                        her Deferred Cash Account as of the Valuation Date
                        following the Participant's election, to one or more of
                        such investment vehicles, by filing with the Company a
                        notice, in such form, and in accordance with such
                        procedures, as the Board shall determine from time to
                        time. The Board may, in its discretion, restrict
                        allocation into or reallocation by specified
                        Participants into or out of special investment vehicles
                        or specify minimum or maximum amounts that may be
                        allocated or reallocated by Participants.
                        Notwithstanding the foregoing, a Participant shall have
                        no right to have amounts credited as cash to the
                        Participant's Deferred Cash Account reallocated or
                        switched to his or her Deferred Stock Account or amounts
                        credited to the Participant's Deferred Stock Account
                        reallocated or switched to his or her Deferred Cash
                        Account, except as may be permitted by the Board.

                                (iv)    Elections as to Settlement. Each
                        Participant, while still a director of the Company,
                        shall file an election with the Company specifying the
                        time or times at which the Participant's Deferral
                        Account will be settled, following the Participant's
                        termination of service as a director of the Company, and
                        whether distribution will be in a single lump sum or in
                        a number of annual installments not exceeding ten (or
                        such other number as may be determined by the Board);
                        provided, however, that, if no valid election has been
                        filed as to the time of settlement of a Participant's
                        Deferral Account or any portion thereof, such Deferral
                        Account or portion thereof shall be distributed in a
                        single lump sum



                                      -17-
<PAGE>   20


                        on the first business day of the year following the year
                        in which the Participant ceases to serve as a director.
                        If installments are elected, such installments must be
                        annual installments, unless otherwise determined by the
                        Board, commencing not later than the first year
                        following the year in which the Participant ceases to
                        serve as a director (on such annual installment date as
                        may be specified by the Board) and extending over a
                        period not to exceed ten years, unless otherwise
                        determined by the Board.

                                        (A)     Matters Covered by Election.
                                Subject to the terms of the Plan, the Board
                                shall determine whether all deferrals under the
                                Plan must be subject to a single election as to
                                the time or times of settlement, or whether
                                settlement elections may relate to a specified
                                sub-account (i.e., the Deferred Stock Account or
                                the Deferred Cash Account) and/or a specified
                                Plan Year. If the Board permits elections to
                                relate to a specified Plan Year, such election
                                shall apply to the amounts originally credited
                                to the specified subaccount in respect of such
                                Plan Year and to any additional amounts credited
                                as Dividend Equivalents or interest in respect
                                of such originally credited amounts and
                                previously credited additional amounts.

                                        (B)     Modifying Elections. A
                                Participant may modify a prior election as to
                                the time at which a Participant's Deferral
                                Account (including a specified subaccount) will
                                be settled at any time prior to the time the
                                Participant ceases to serve as a director,
                                subject to such requirements as may be specified
                                by the Company. Such modification shall be made
                                by filing a new election with the Company. The
                                foregoing notwithstanding, the Board may
                                disapprove or limit elections under this Section
                                8(f)(iv) in order to ensure that the Participant
                                will not be deemed to have constructively
                                received compensation in respect of the
                                Participant's Deferral Account prior to
                                settlement.

                                (v)     Election Forms. Elections under the Plan
                        shall be made in writing on such form or forms as may be
                        specified from time to time by the Board.

                                (vi)    Statements. The Company will furnish
                        statements to each Participant reflecting the amount
                        credited to a Participant's Deferral Account,
                        transactions therein, and other related information no
                        less frequently than once each calendar year.

                                (vii)   Fractional Shares. The amount of
                        Deferred Stock credited to a Deferred Stock Account
                        shall include fractional shares calculated to at least
                        three decimal places.

                        (g)     Settlement of Deferral Accounts. The Company
                will settle a Participant's Deferral Account by making one or
                more distributions to the Participant (or his or her
                Beneficiary, following Participant's death) at the time or
                times, in a lump sum or installments, as specified in the
                Participant's election filed in accordance with Section
                8(f)(iv); provided, however, that a Deferral Account will be
                settled at times earlier than those specified in such election
                in accordance with Sections 8(g)(ii), (iii), and (iv).

                                (i)     Form of Distribution. Distributions in
                        respect of a Participant's Deferred Stock Account shall
                        be made only in shares of Stock, together with cash in
                        lieu of any fractional share remaining at a time that
                        less than one whole share of Deferred Stock is credited
                        to such Deferred Stock Account. Shares may be delivered
                        in certificate form to a Participant (or his or her
                        Beneficiary) or to a nominee for the account of the
                        Participant (or his or her Beneficiary), or in such
                        other manner as the Board may determine. Distributions
                        in respect of a Participant's Deferred Cash Account
                        shall be made only in cash.



                                      -18-
<PAGE>   21


                                (ii)    Death. If a Participant ceases to serve
                        as a director due to death or dies prior to distribution
                        of all amounts from his or her Deferral Account, the
                        Company shall make a single lump-sum distribution to the
                        Participant's Beneficiary. Any such distribution shall
                        be made as soon as practicable following notification to
                        the Company of the Participant's death.

                                (iii)   Financial Emergency and Other Payments.
                        Other provisions of the Plan notwithstanding, if, upon
                        the written application of a Participant, the Board
                        determines that the Participant has a financial
                        emergency of such a substantial nature and beyond the
                        Participant's control that payment of amounts previously
                        deferred under the Plan is warranted, the Board may
                        direct the payment to the Participant of all or a
                        portion of the balance of a Deferral Account and the
                        time and manner of such payment.

                                (iv)    Change in Control. In the event of a
                        Change in Control, payments in settlement of any
                        Deferral Account (including a Deferral Account with
                        respect to which one or more installment payments have
                        previously been made) shall be made within fifteen (15)
                        business days following such Change in Control.

        9.      CERTAIN PROVISIONS APPLICABLE TO AWARDS.

                (a)     Stand-Alone, Additional, Tandem, and Substitute Awards.
        Awards granted under the Plan may, in the discretion of the Committee,
        be granted either alone or in addition to, in tandem with, or in
        substitution or exchange for, any other Award or any award granted under
        another plan of the Company, any subsidiary or affiliate, or any
        business entity to be acquired by the Company or a subsidiary or
        affiliate, or any other right of a Participant to receive payment from
        the Company or any subsidiary or affiliate. Awards granted in addition
        to or in tandem with other Awards or awards may be granted either as of
        the same time as or a different time from the grant of such other Awards
        or awards. Subject to Section 12(k), the Committee may determine that,
        in granting a new Award, the in-the-money value of any surrendered Award
        or award or the value of any other right to payment surrendered by the
        Participant may be applied to reduce the exercise price of any Option,
        grant price of any SAR, or purchase price of any other Award.

                (b)     Term of Awards. The term of each Award shall be for such
        period as may be determined by the Committee, subject to the express
        limitations set forth in Sections 6(b)(ii) and 8 or elsewhere in the
        Plan.

                (c)     Form and Timing of Payment under Awards; Deferrals.
        Subject to the terms of the Plan (including Section 12(k)) and any
        applicable Award document, payments to be made by the Company or a
        subsidiary or affiliate upon the exercise of an Option or other Award or
        settlement of an Award may be made in such forms as the Committee shall
        determine, including, without limitation, cash, Stock, other Awards or
        other property, and may be made in a single payment or transfer, in
        installments, or on a deferred basis. The settlement of any Award may be
        accelerated, and cash paid in lieu of Stock in connection with such
        settlement, in the discretion of the Committee or upon occurrence of one
        or more specified events (subject to Section 12(k)). Installment or
        deferred payments may be required by the Committee (subject to Section
        12(e)) or permitted at the election of the Participant on terms and
        conditions established by the Committee. Payments may include, without
        limitation, provisions for the payment or crediting of reasonable
        interest on installment or deferred payments or the grant or crediting
        of Dividend Equivalents or other amounts in respect of installment or
        deferred payments denominated in Stock.

                (d)     Limitation on Vesting of Certain Awards. Subject to
        Section 8, Restricted Stock will vest over a minimum period of three
        years except in the event of a Participant's death, disability, or



                                      -19-
<PAGE>   22


        retirement, or in the event of a Change in Control or other special
        circumstances. The foregoing notwithstanding, (i) Restricted Stock as to
        which either the grant or vesting is based on, among other things, the
        achievement of one or more performance conditions generally will vest
        over a minimum period of one year except in the event of a Participant's
        death, disability, or retirement, or in the event of a Change in Control
        or other special circumstances, and (ii) up to 5% of the shares of Stock
        authorized under the Plan may be granted as Restricted Stock without any
        minimum vesting requirements. For purposes of this Section 9(d), vesting
        over a three-year period or one-year period will include periodic
        vesting over such period if the rate of such vesting is proportional
        throughout such period.

        10.     CHANGE IN CONTROL.

                (a)     Effect of "Change in Control" on Non-Performance Based
        Awards. In the event of a "Change in Control," the following provisions
        shall apply to non-performance based Awards, including Awards as to
        which performance conditions previously have been satisfied or are
        deemed satisfied under Section 10(b), unless otherwise provided by the
        Committee in the Award document:

                        (i)     All deferral of settlement, forfeiture
                conditions and other restrictions applicable to Awards granted
                under the Plan shall lapse and such Awards shall be fully
                payable as of the time of the Change in Control without regard
                to deferral and vesting conditions, except to the extent of any
                waiver by the Participant or other express election to defer
                beyond a Change in Control and subject to applicable
                restrictions set forth in Section 12(a);

                        (ii)    Any Award carrying a right to exercise that was
                not previously exercisable and vested shall become fully
                exercisable and vested as of the time of the Change in Control
                and shall remain exercisable and vested for the balance of the
                stated term of such Award without regard to any termination of
                employment or service by the Participant other than a
                termination for Cause, subject only to applicable restrictions
                set forth in Section 12(a); and

                        (iii)   The Committee may, in its discretion, determine
                to extend to any Participant who holds an Option the right to
                elect, during the 60-day period immediately following the Change
                in Control, in lieu of acquiring the shares of Stock covered by
                such Option, to receive in cash the excess of the Change in
                Control Price over the exercise price of such Option, multiplied
                by the number of shares of Stock covered by such Option, and to
                extend to any Participant who holds other types of Awards
                denominated in shares the right to elect, during the 60-day
                period immediately following the Change in Control, in lieu of
                receiving the shares of Stock covered by such Award, to receive
                in cash the Change in Control Price multiplied by the number of
                shares of Stock covered by such Award.

                (b)     Effect of "Change in Control" on Performance-Based
        Awards. In the event of a "Change in Control," with respect to an
        outstanding Award subject to achievement of performance goals and
        conditions, such performance goals and conditions shall be deemed to be
        met or exceeded if and to the extent so provided by the Committee in the
        Award document governing such Award or other agreement with the
        Participant.

                (c)     Definition of "Change in Control." A "Change in Control"
        shall be deemed to have occurred if, after the Effective Date, there
        shall have occurred any of the following:

                        (i)     Any "person," as such term is used in Section
                13(d) and 14(d) of the Exchange Act (other than the Company, any
                trustee or other fiduciary holding securities under an employee
                benefit plan of the Company, or any company owned, directly or
                indirectly, by the shareholders of the Company in substantially
                the same proportions as their ownership of stock of the
                Company), acquires voting securities of the Company and
                immediately thereafter is a "20%



                                      -20-
<PAGE>   23


                Beneficial Owner." For purposes of this provision, a "20%
                Beneficial Owner" shall mean a person who is the "beneficial
                owner" (as defined in Rule 13d-3 under the Exchange Act),
                directly or indirectly, of securities of the Company
                representing 20% or more of the combined voting power of the
                Company's then-outstanding voting securities; provided that the
                term "20% Beneficial Owner" shall not include any person who, at
                all times following such an acquisition of securities, remains
                eligible to file a Schedule 13G pursuant to Rule 13d-1(b) under
                the Exchange Act, or remains exempt from filing a Schedule 13D
                under Section 13(d)(6)(b) of the Exchange Act, with respect to
                all classes of Company voting securities;

                        (ii)    During any period of two consecutive years
                commencing on or after the Effective Date, individuals who at
                the beginning of such period constitute the Board, and any new
                director (other than a director designated by a person (as
                defined above) who has entered into an agreement with the
                Company to effect a transaction described in subsections (i),
                (iii) or (iv) of this definition) whose election by the Board or
                nomination for election by the Company's shareholders was
                approved by a vote of at least two-thirds (2/3) of the directors
                then still in office who either were directors at the beginning
                of the period or whose election or nomination for election was
                previously so approved (the "Continuing Directors") cease for
                any reason to constitute at least a majority thereof;

                        (iii)   The shareholders of the Company have approved a
                merger, consolidation, recapitalization, or reorganization of
                the Company, or a reverse stock split of any class of voting
                securities of the Company, or the consummation of any such
                transaction if shareholder approval is not obtained, other than
                any such transaction which would result in at least 60% of the
                combined voting power of the voting securities of the Company or
                the surviving entity outstanding immediately after such
                transaction being beneficially owned by persons who together
                beneficially owned at least 80% of the combined voting power of
                the voting securities of the Company outstanding immediately
                prior to such transaction, with the relative voting power of
                each such continuing holder compared to the voting power of each
                other continuing holder not substantially altered as a result of
                the transaction; provided that, for purposes of this paragraph
                (iii), such continuity of ownership (and preservation of
                relative voting power) shall be deemed to be satisfied if the
                failure to meet such 60% threshold (or to substantially preserve
                such relative voting power) is due solely to the acquisition of
                voting securities by an employee benefit plan of the Company,
                such surviving entity or a subsidiary thereof; and provided
                further, that, if consummation of the corporate transaction
                referred to in this Section 10(c)(iii) is subject, at the time
                of such approval by shareholders, to the consent of any
                government or governmental agency or approval of the
                shareholders of another entity or other material contingency, no
                Change in Control shall occur until such time as such consent
                and approval has been obtained and any other material
                contingency has been satisfied;

                        (iv)    The shareholders of the Company have approved a
                plan of complete liquidation of the Company or an agreement for
                the sale or disposition by the Company of all or substantially
                all of the Company's assets (or any transaction having a similar
                effect); provided that, if consummation of the transaction
                referred to in this Section 10(c)(iv) is subject, at the time of
                such approval by shareholders, to the consent of any government
                or governmental agency or approval of the shareholders of
                another entity or other material contingency, no Change in
                Control shall occur until such time as such consent and approval
                has been obtained and any other material contingency has been
                satisfied; and

                        (v)     any other event which the Board of Directors of
                the Company determines shall constitute a Change in Control for
                purposes of this Plan.

                (d)     Definition of "Change in Control Price." The "Change in
        Control Price" means an amount in cash equal to the higher of (i) the
        amount of cash and fair market value of property that is the



                                      -21-
<PAGE>   24


        highest price per share paid (including extraordinary dividends) in any
        transaction triggering the Change in Control or any liquidation of
        shares following a sale of substantially all assets of the Company, or
        (ii) the highest Fair Market Value per share at any time during the
        60-day period preceding and 60-day period following the Change in
        Control.

                (e)     Termination of Employment After Change in Control
        Negotiations Have Commenced. For purposes of this Section 10, a
        termination of a Participant's employment by the Company without Cause
        after the commencement of negotiations with a potential acquirer or
        business combination partner will be deemed to be a termination of
        employment immediately after a Change in Control if such negotiations
        result in a transaction constituting a Change in Control within 24
        months of the commencement date of such negotiations.

        11.     ADDITIONAL AWARD FORFEITURE PROVISIONS.

                (a)     Forfeiture of Options and Other Awards and Gains
        Realized Upon Prior Option Exercises or Award Settlements. Unless
        otherwise determined by the Committee, each Award granted hereunder,
        other than Awards granted to non-employee directors, shall be subject to
        the following additional forfeiture conditions, to which the
        Participant, by accepting an Award hereunder, agrees. If any of the
        events specified in Section 11(b)(i), (ii), or (iii) occurs (a
        "Forfeiture Event"), all of the following forfeitures will result:

                        (i)     The unexercised portion of the Option, whether
                or not vested, and any other Award not then settled (except for
                an Award that has not been settled solely due to an elective
                deferral by the Participant and otherwise is not forfeitable in
                the event of any termination of service of the Participant) will
                be immediately forfeited and canceled upon the occurrence of the
                Forfeiture Event; and

                        (ii)    The Participant will be obligated to repay to
                the Company, in cash, within five business days after demand is
                made therefor by the Company, the total amount of Award Gain (as
                defined herein) realized by the Participant upon each exercise
                of an Option or settlement of an Award (regardless of any
                elective deferral) that occurred on or after (A) the date that
                is six months prior to the occurrence of the Forfeiture Event,
                if the Forfeiture Event occurred while the Participant was
                employed by the Company or a subsidiary or affiliate, or (B) the
                date that is six months prior to the date the Participant's
                employment by the Company or a subsidiary or affiliate
                terminated, if the Forfeiture Event occurred after the
                Participant ceased to be so employed. For purposes of this
                Section, the term "Award Gain" shall mean (i), in respect of a
                given Option exercise, the product of (X) the Fair Market Value
                per share of Stock at the date of such exercise (without regard
                to any subsequent change in the market price of shares) minus
                the exercise price times (Y) the number of shares as to which
                the Option was exercised at that date, and (ii), in respect of
                any other settlement of an Award granted to the Participant, the
                Fair Market Value of the cash or Stock paid or payable to
                Participant (regardless of any elective deferral) less any cash
                or the Fair Market Value of any Stock or property (other than an
                Award or award which would have itself then been forfeitable
                hereunder and excluding any payment of tax withholding) paid by
                the Participant to the Company as a condition of or in
                connection such settlement.

                (b)     Events Triggering Forfeiture. The forfeitures specified
        in Section 11(a) will be triggered upon the occurrence of any one of the
        following Forfeiture Events at any time during the Participant's
        employment by the Company or a subsidiary or affiliate and resulting in
        his or her termination of employment, or during the one-year period
        following termination of such employment:

                        (i)     The Participant, acting alone or with others,
                directly or indirectly, prior to a Change in Control, (A)
                engages, either as employee, employer, consultant, advisor, or
                director, or as an



                                      -22-
<PAGE>   25


                owner, investor, partner, or stockholder unless the
                Participant's interest is insubstantial, in any business in an
                area or region in which the Company conducts business at the
                date the event occurs, which is directly in competition with a
                business then conducted by the Company or a subsidiary or
                affiliate; (B) induces any customer or supplier of the Company
                or a subsidiary or affiliate, or telephone company with which
                the Company or a subsidiary or affiliate has a business
                relationship, to curtail, cancel, not renew, or not continue his
                or her or its business with the Company or any subsidiary or
                affiliate; or (C) induces, or attempts to influence, any
                employee of or service provider to the Company or a subsidiary
                or affiliate to terminate such employment or service. The
                Committee shall, in its discretion, determine which lines of
                business the Company conducts on any particular date and which
                third parties may reasonably be deemed to be in competition with
                the Company. For purposes of this Section 11(b)(i), a
                Participant's interest as a stockholder is insubstantial if it
                represents beneficial ownership of less than five percent of the
                outstanding class of stock, and a Participant's interest as an
                owner, investor, or partner is insubstantial if it represents
                ownership, as determined by the Committee in its discretion, of
                less than five percent of the outstanding equity of the entity;

                        (ii)    The Participant discloses, uses, sells, or
                otherwise transfers, except in the course of employment with or
                other service to the Company or any subsidiary or affiliate, any
                confidential or proprietary information of the Company or any
                subsidiary or affiliate, including but not limited to
                information regarding the Company's current and potential
                customers, organization, employees, finances, and methods of
                operations and investments, so long as such information has not
                otherwise been disclosed to the public or is not otherwise in
                the public domain, except as required by law or pursuant to
                legal process, or the Participant makes statements or
                representations, or otherwise communicates, directly or
                indirectly, in writing, orally, or otherwise, or takes any other
                action which may, directly or indirectly, disparage or be
                damaging to the Company or any of its subsidiaries or affiliates
                or their respective officers, directors, employees, advisors,
                businesses or reputations, except as required by law or pursuant
                to legal process; or

                        (iii)   The Participant fails to cooperate with the
                Company or any subsidiary or affiliate in any way, including,
                without limitation, by making himself or herself available to
                testify on behalf of the Company or such subsidiary or affiliate
                in any action, suit, or proceeding, whether civil, criminal,
                administrative, or investigative, or otherwise fails to assist
                the Company or any subsidiary or affiliate in any way,
                including, without limitation, in connection with any such
                action, suit, or proceeding by providing information and meeting
                and consulting with members of management of, other
                representatives of, or counsel to, the Company or such
                subsidiary or affiliate, as reasonably requested.

                (c)     Agreement Does Not Prohibit Competition or Other
        Participant Activities. Although the conditions set forth in this
        Section 11 shall be deemed to be incorporated into an Award, a
        Participant is not thereby prohibited from engaging in any activity,
        including but not limited to competition with the Company and its
        subsidiaries and affiliates. Rather, the non-occurrence of the
        Forfeiture Events set forth in Section 11(b) is a condition to the
        Participant's right to realize and retain value from his or her
        compensatory Options and Awards, and the consequence under the Plan if
        the Participant engages in an activity giving rise to any such
        Forfeiture Event are the forfeitures specified herein. The Company and
        the Participant shall not be precluded by this provision or otherwise
        from entering into other agreements concerning the subject matter of
        Sections 11(a) and 11(b).

                (d)     Committee Discretion. The Committee may, in its
        discretion, waive in whole or in part the Company's right to forfeiture
        under this Section, but no such waiver shall be effective unless
        evidenced by a writing signed by a duly authorized officer of the
        Company. In addition, the Committee may impose additional conditions on
        Awards, by inclusion of appropriate provisions in the document
        evidencing or governing any such Award.



                                      -23-
<PAGE>   26


        12.     GENERAL PROVISIONS.

                (a)     Compliance with Legal and Other Requirements. The
        Company may, to the extent deemed necessary or advisable by the
        Committee, postpone the issuance or delivery of Stock or payment of
        other benefits under any Award until completion of such registration or
        qualification of such Stock or other required action under any federal
        or state law, rule or regulation, listing or other required action with
        respect to any stock exchange or automated quotation system upon which
        the Stock or other securities of the Company are listed or quoted, or
        compliance with any other obligation of the Company, as the Committee
        may consider appropriate, and may require any Participant to make such
        representations, furnish such information and comply with or be subject
        to such other conditions as it may consider appropriate in connection
        with the issuance or delivery of Stock or payment of other benefits in
        compliance with applicable laws, rules, and regulations, listing
        requirements, or other obligations. The foregoing notwithstanding, in
        connection with a Change in Control, the Company shall take or cause to
        be taken no action, and shall undertake or permit to arise no legal or
        contractual obligation, that results or would result in any postponement
        of the issuance or delivery of Stock or payment of benefits under any
        Award or the imposition of any other conditions on such issuance,
        delivery or payment, to the extent that such postponement or other
        condition would represent a greater burden on a Participant than existed
        on the 90th day preceding the Change in Control.

                (b)     Limits on Transferability; Beneficiaries. No Award or
        other right or interest of a Participant under the Plan shall be
        pledged, hypothecated or otherwise encumbered or subject to any lien,
        obligation or liability of such Participant to any party (other than the
        Company or a subsidiary or affiliate thereof), or assigned or
        transferred by such Participant otherwise than by will or the laws of
        descent and distribution or to a Beneficiary upon the death of a
        Participant, and such Awards or rights that may be exercisable shall be
        exercised during the lifetime of the Participant only by the Participant
        or his or her guardian or legal representative, except that Awards and
        other rights (other than ISOs and SARs in tandem therewith) may be
        transferred to one or more transferees during the lifetime of the
        Participant, and may be exercised by such transferees in accordance with
        the terms of such Award, but only if and to the extent such transfers
        are permitted by the Committee, subject to any terms and conditions
        which the Committee may impose thereon (including limitations the
        Committee may deem appropriate in order that offers and sales under the
        Plan will meet applicable requirements of registration forms under the
        Securities Act of 1933 specified by the Securities and Exchange
        Commission). A Beneficiary, transferee, or other person claiming any
        rights under the Plan from or through any Participant shall be subject
        to all terms and conditions of the Plan and any Award document
        applicable to such Participant, except as otherwise determined by the
        Committee, and to any additional terms and conditions deemed necessary
        or appropriate by the Committee.

                (c)     Adjustments. In the event that any large, special and
        non-recurring dividend or other distribution (whether in the form of
        cash or property other than Stock), recapitalization, forward or reverse
        split, Stock dividend, reorganization, merger, consolidation, spin-off,
        combination, repurchase, share exchange, liquidation, dissolution or
        other similar corporate transaction or event affects the Stock such that
        an adjustment is determined by the Committee to be appropriate under the
        Plan, then the Committee shall, in such manner as it may deem equitable,
        adjust any or all of (i) the number and kind of shares of Stock which
        may be delivered in connection with Awards granted thereafter, (ii) the
        number and kind of shares of Stock by which annual per-person Award
        limitations are measured under Section 5, (iii) the number and kind of
        shares of Stock subject to or deliverable in respect of outstanding
        Awards and (iv) the exercise price, grant price or purchase price
        relating to any Award or, if deemed appropriate, the Committee may make
        provision for a payment of cash or property to the holder of an
        outstanding Option (subject to Section 12(k)). In addition, the
        Committee is authorized to make adjustments in the terms and conditions
        of, and the criteria included in, Awards (including Performance Awards
        and performance goals and any hypothetical funding pool relating


                                      -24-
<PAGE>   27


        thereto) in recognition of unusual or nonrecurring events (including,
        without limitation, events described in the preceding sentence, as well
        as acquisitions and dispositions of businesses and assets) affecting the
        Company, any subsidiary or affiliate or other business unit, or the
        financial statements of the Company or any subsidiary or affiliate, or
        in response to changes in applicable laws, regulations, accounting
        principles, tax rates and regulations or business conditions or in view
        of the Committee's assessment of the business strategy of the Company,
        any subsidiary or affiliate or business unit thereof, performance of
        comparable organizations, economic and business conditions, personal
        performance of a Participant, and any other circumstances deemed
        relevant; provided that no such adjustment shall be authorized or made
        if and to the extent that the existence of such authority (i) would
        cause Options, SARs, or Performance Awards granted under the Plan to
        Participants designated by the Committee as Covered Employees and
        intended to qualify as "performance-based compensation" under Code
        Section 162(m) and regulations thereunder to otherwise fail to qualify
        as "performance-based compensation" under Code Section 162(m) and
        regulations thereunder, or (ii) would cause the Committee to be deemed
        to have authority to change the targets, within the meaning of Treasury
        Regulation 1.162-27(e)(4)(vi), under the performance goals relating to
        Options or SARs granted to Covered Employees and intended to qualify as
        "performance-based compensation" under Code Section 162(m) and
        regulations thereunder.

                (d)     Tax Provisions.

                        (i)     Withholding. The Company and any subsidiary or
                affiliate is authorized to withhold from any Award granted, any
                payment relating to an Award under the Plan, including from a
                distribution of Stock, or any payroll or other payment to a
                Participant, amounts of withholding and other taxes due or
                potentially payable in connection with any transaction involving
                an Award, and to take such other action as the Committee may
                deem advisable to enable the Company and Participants to satisfy
                obligations for the payment of withholding taxes and other tax
                obligations relating to any Award. This authority shall include
                authority to withhold or receive Stock or other property and to
                make cash payments in respect thereof in satisfaction of a
                Participant's withholding obligations, either on a mandatory or
                elective basis in the discretion of the Committee. Other
                provisions of the Plan notwithstanding, only the minimum amount
                of Stock deliverable in connection with an Award necessary to
                satisfy statutory withholding requirements will be withheld.

                        (ii)    Required Consent to and Notification of Code
                Section 83(b) Election. No election under Section 83(b) of the
                Code (to include in gross income in the year of transfer the
                amounts specified in Code Section 83(b)) or under a similar
                provision of the laws of a jurisdiction outside the United
                States may be made unless expressly permitted by the terms of
                the Award document or by action of the Committee in writing
                prior to the making of such election. In any case in which a
                Participant is permitted to make such an election in connection
                with an Award, the Participant shall notify the Company of such
                election within ten days of filing notice of the election with
                the Internal Revenue Service or other governmental authority, in
                addition to any filing and notification required pursuant to
                regulations issued under Code Section 83(b) or other applicable
                provision.

                        (iii)   Requirement of Notification Upon Disqualifying
                Disposition Under Code Section 421(b). If any Participant shall
                make any disposition of shares of Stock delivered pursuant to
                the exercise of an Incentive Stock Option under the
                circumstances described in Code Section 421(b), such Participant
                shall notify the Company of such disposition within ten days
                thereof.

                (e)     Changes to the Plan. The Board may amend, suspend or
        terminate the Plan or the Committee's authority to grant Awards under
        the Plan without the consent of stockholders or Participants; provided,
        however, that any amendment to the Plan shall be submitted to the
        Company's stockholders for approval not later than the earliest annual
        meeting for which the record



                                      -25-
<PAGE>   28


        date is after the date of such Board action if such stockholder approval
        is required by any federal or state law or regulation or the rules of
        any stock exchange or automated quotation system on which the Stock may
        then be listed or quoted, or if such amendment would:

                        (i)     materially increase the number of shares
                reserved for issuance and delivery under Section 4 of the Plan;

                        (ii)    expand the class of Eligible Persons under
                Section 5(a) of the Plan;

                        (iii)   increase the per-person Annual Limits under
                Section 5(b) of the Plan;

                        (iv)    increase the number of shares that may be issued
                and delivered under the Plan in connection with awards other
                than Options and SARs under Section 4(a) of the Plan;

                        (v)     permit unrestricted Stock to be granted other
                than in lieu of such payments under the Plan or other incentive
                plans and programs of the Company and its subsidiaries and
                affiliates;

                        (vi)    allow for the creation of additional types of
                awards;

                        (vii)   with respect to Restricted Stock, permit
                shortening or lapsing of restrictions or waiving of performance
                goals, except to the extent specified in Section 9(d) of the
                Plan;

                        (viii)  amend or replace previously granted Options in a
                transaction that constitutes a "repricing," as such term is used
                in Instruction 3 to Item 402(b)(2)(iv) of Regulation S-K, as
                promulgated by the Securities and Exchange Commission; or

                        (ix)    amend any of the terms and conditions of this
                Section 12(e);

        and the Board may otherwise, in its discretion, determine to submit
        other amendments to the Plan to stockholders for approval. In addition,
        without the consent of an affected Participant, no such Board action may
        materially and adversely affect the rights of such Participant under any
        outstanding Award, except any such amendment made to cause the Plan to
        comply with applicable law, stock exchange rules and regulations or
        accounting or tax rules and regulations. With regard to other terms of
        Awards, the Committee shall have no authority to waive or modify any
        such Award term after the Award has been granted to the extent the
        waived or modified term would be mandatory under the Plan for any Award
        newly granted at the date of the waiver or modification

                (f)     Right of Setoff. The Company or any subsidiary or
        affiliate may, to the extent permitted by applicable law, deduct from
        and set off against any amounts the Company or a subsidiary or affiliate
        may owe to the Participant from time to time, including amounts payable
        in connection with any Award, owed as wages, fringe benefits, or other
        compensation owed to the Participant, such amounts as may be owed by the
        Participant to the Company, including but not limited to amounts owed
        under Section 11(a), although the Participant shall remain liable for
        any part of the Participant's payment obligation not satisfied through
        such deduction and setoff. By accepting any Award granted hereunder, the
        Participant agrees to any deduction or setoff under this Section 12(f).

                (g)     Unfunded Status of Awards; Creation of Trusts. The Plan
        is intended to constitute an "unfunded" plan for incentive and deferred
        compensation. With respect to any payments not yet made to a Participant
        or obligation to deliver Stock pursuant to an Award, nothing contained
        in the Plan or any Award shall give any such Participant any rights that
        are greater than those of a general creditor of the Company; provided
        that the Committee may authorize the creation of trusts and deposit
        therein cash, Stock, other Awards or other property, or make other
        arrangements to meet the



                                      -26-
<PAGE>   29


        Company's obligations under the Plan. Such trusts or other arrangements
        shall be consistent with the "unfunded" status of the Plan unless the
        Committee otherwise determines with the consent of each affected
        Participant.

                (h)     Nonexclusivity of the Plan. Neither the adoption of the
        Plan by the Board nor its submission to the stockholders of the Company
        for approval shall be construed as creating any limitations on the power
        of the Board or a committee thereof to adopt such other incentive
        arrangements, apart from the Plan, as it may deem desirable, including
        incentive arrangements and awards which do not qualify under Code
        Section 162(m), and such other arrangements may be either applicable
        generally or only in specific cases.

                (i)     Payments in the Event of Forfeitures; Fractional Shares.
        Unless otherwise determined by the Committee, in the event of a
        forfeiture of an Award with respect to which a Participant paid cash
        consideration, the Participant shall be repaid the amount of such cash
        consideration. No fractional shares of Stock shall be issued or
        delivered pursuant to the Plan or any Award. The Committee shall
        determine whether cash, other Awards or other property shall be issued
        or paid in lieu of such fractional shares or whether such fractional
        shares or any rights thereto shall be forfeited or otherwise eliminated.

                (j)     Compliance with Code Section 162(m). It is the intent of
        the Company that Options and SARs granted to Covered Employees and other
        Awards designated as Awards to Covered Employees subject to Section 7
        shall constitute qualified "performance-based compensation" within the
        meaning of Code Section 162(m) and regulations thereunder, unless
        otherwise determined by the Committee at the time of allocation of an
        Award. Accordingly, the terms of Sections 7(b), (c), and (d), including
        the definitions of Covered Employee and other terms used therein, shall
        be interpreted in a manner consistent with Code Section 162(m) and
        regulations thereunder. The foregoing notwithstanding, because the
        Committee cannot determine with certainty whether a given Participant
        will be a Covered Employee with respect to a fiscal year that has not
        yet been completed, the term Covered Employee as used herein shall mean
        only a person designated by the Committee as likely to be a Covered
        Employee with respect to a specified fiscal year. If any provision of
        the Plan or any Award document relating to a Performance Award that is
        designated as intended to comply with Code Section 162(m) does not
        comply or is inconsistent with the requirements of Code Section 162(m)
        or regulations thereunder, such provision shall be construed or deemed
        amended to the extent necessary to conform to such requirements, and no
        provision shall be deemed to confer upon the Committee or any other
        person discretion to increase the amount of compensation otherwise
        payable in connection with any such Award upon attainment of the
        applicable performance objectives.

                (k)     Certain Limitations Relating to Accounting Treatment of
        Awards. Other provisions of the Plan notwithstanding, the Committee's
        authority under the Plan (including under Sections 9(c), 12(c) and
        12(d)) is limited to the extent necessary to ensure that any Option or
        other Award of a type that the Committee has intended to be subject to
        fixed accounting with a measurement date at the date of grant or the
        date performance conditions are satisfied under APB 25 shall not become
        subject to "variable" accounting solely due to the existence of such
        authority, unless the Committee specifically determines that the Award
        shall remain outstanding despite such "variable" accounting. In
        addition, other provisions of the Plan notwithstanding, (i) if any right
        under this Plan would cause a transaction to be ineligible for
        pooling-of-interests accounting that would, but for the right hereunder,
        be eligible for such accounting treatment, such right shall be
        automatically adjusted so that pooling-of-interests accounting shall be
        available, including by substituting Stock or cash having a Fair Market
        Value equal to any cash or Stock otherwise payable in respect of any
        right to cash which would cause the transaction to be ineligible for
        pooling-of-interests accounting, and (ii) if any authority under Section
        10 would cause a transaction to be ineligible for pooling-of-interests
        accounting that would, but for



                                      -27-
<PAGE>   30


        such authority, be eligible for such accounting treatment, such
        authority shall be limited to the extent necessary so that such
        transaction would be eligible for pooling-of-interests accounting.

                (l)     Governing Law. The validity, construction, and effect of
        the Plan, any rules and regulations relating to the Plan and any Award
        document shall be determined in accordance with the laws of the State of
        Delaware, without giving effect to principles of conflicts of laws, and
        applicable provisions of federal law.

                (m)     Awards to Participants Outside the United States. The
        Committee may modify the terms of any Award under the Plan made to or
        held by a Participant who is then resident or primarily employed outside
        of the United States in any manner deemed by the Committee to be
        necessary or appropriate in order that such Award shall conform to laws,
        regulations, and customs of the country in which the Participant is then
        resident or primarily employed, or so that the value and other benefits
        of the Award to the Participant, as affected by foreign tax laws and
        other restrictions applicable as a result of the Participant's residence
        or employment abroad shall be comparable to the value of such an Award
        to a Participant who is resident or primarily employed in the United
        States. An Award may be modified under this Section 12(m) in a manner
        that is inconsistent with the express terms of the Plan, so long as such
        modifications will not contravene any applicable law or regulation or
        result in actual liability under Section 16(b) for the Participant whose
        Award is modified.

                (n)     Limitation on Rights Conferred under Plan. Neither the
        Plan nor any action taken hereunder shall be construed as (i) giving any
        Eligible Person or Participant the right to continue as an Eligible
        Person or Participant or in the employ or service of the Company or a
        subsidiary or affiliate, (ii) interfering in any way with the right of
        the Company or a subsidiary or affiliate to terminate any Eligible
        Person's or Participant's employment or service at any time (subject to
        the terms and provisions of any separate written agreements), (iii)
        giving an Eligible Person or Participant any claim to be granted any
        Award under the Plan or to be treated uniformly with other Participants
        and employees, or (iv) conferring on a Participant any of the rights of
        a stockholder of the Company unless and until the Participant is duly
        issued or transferred shares of Stock in accordance with the terms of an
        Award or an Option is duly exercised. Except as expressly provided in
        the Plan and an Award document, neither the Plan nor any Award document
        shall confer on any person other than the Company and the Participant
        any rights or remedies thereunder.

                (o)     Severability; Entire Agreement. If any of the provisions
        of this Plan or any Award document is finally held to be invalid,
        illegal or unenforceable (whether in whole or in part), such provision
        shall be deemed modified to the extent, but only to the extent, of such
        invalidity, illegality or unenforceability, and the remaining provisions
        shall not be affected thereby; provided, that, if any of such provisions
        is finally held to be invalid, illegal, or unenforceable because it
        exceeds the maximum scope determined to be acceptable to permit such
        provision to be enforceable, such provision shall be deemed to be
        modified to the minimum extent necessary to modify such scope in order
        to make such provision enforceable hereunder. The Plan and any Award
        documents contain the entire agreement of the parties with respect to
        the subject matter thereof and supersede all prior agreements, promises,
        covenants, arrangements, communications, representations and warranties
        between them, whether written or oral with respect to the subject matter
        thereof.



                                      -28-
<PAGE>   31


                (p)     Plan Effective Date and Termination. The Plan shall
        become effective if, and at such time as, the stockholders of the
        Company have approved it by the affirmative votes of the holders of a
        majority of the voting securities of the Company present, or
        represented, and entitled to vote on the subject matter at a duly held
        meeting of stockholders. Upon such approval of the Plan by the
        stockholders of the Company, no further awards shall be granted under
        the Preexisting Plans, but any outstanding awards under the Preexisting
        Plans shall continue in accordance with their terms. Any elections made
        by non-employee directors and their respective Deferral Accounts
        established pursuant to the 1998 Directors' Stock Plan shall continue as
        if made or established pursuant to the Plan until any such election is
        changed by such Participant in accordance with the provisions of this
        Plan. Unless earlier terminated by action of the Board of Directors, the
        Plan will remain in effect until such time as no Stock remains available
        for delivery under the Plan and the Company has no further rights or
        obligations under the Plan with respect to outstanding Awards under the
        Plan.



                                      -29-