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                                                                      APPENDIX A

                               TWINLAB CORPORATION

                            1998 STOCK INCENTIVE PLAN

                                                                      June, 1998

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                               Table of Contents
                                                                          Page
                                                                          ----
                                   ARTICLE I

                                    GENERAL

1.1         Purpose.....................................................    1
1.2         Administration..............................................    1
1.3         Persons Eligible for Awards.................................    3
1.4         Types of Awards Under Plan..................................    3
1.5         Shares Available for Awards.................................    3
1.6         Adjustments Upon Changes in Capitalization or Merger .......    5
1.7         Definitions of Certain Terms................................    6

                                  ARTICLE II

                             AWARDS UNDER THE PLAN

2.1         Agreements Evidencing Awards................................    9
2.2         No Rights as a Shareholder..................................    9
2.3         Grant of Stock Options, Stock Appreciation
              Rights and Reload Options.................................   10
2.4         Exercise of Options and Stock Appreciation
              Rights....................................................   13
2.5         Termination of Employment; Death............................   14
2.6         Grant of Restricted Stock...................................   16
2.7         Grant of Restricted Stock Units.............................   17
2.8         Grant of Performance Shares.................................   18
2.9         Other Stock-Based Awards....................................   19
2.10        Grant of Dividend Equivalent Rights.........................   19
2.11        Right of Recapture..........................................   20

                                  ARTICLE III

                                 MISCELLANEOUS

3.1         Amendment of the Plan; Modification
              of Awards.................................................   21
3.2         Tax Withholding.............................................   22
3.3         Restrictions................................................   23
3.4         Nonassignability............................................   23
3.5         Requirement of Notification of Election
              Under Section 83(b) of the Code...........................   23
3.6         Requirement of Notification Upon
              Disqualifying Disposition Under
              Section 421(b) of the Code................................   23
3.7         Right of Discharge Reserved.................................   24
3.8         Nature of Payments..........................................   24
3.9         Non-Uniform Determinations..................................   24
3.10        Other Payments or Awards....................................   25


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3.11        Section Headings............................................   25
3.12        Effective Date and Term of Plan.............................   25
3.13        Governing Law...............................................   26


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                                   ARTICLE I

                                    GENERAL

1.1 Purpose

            The purpose of the Twinlab Corporation 1998 Stock Incentive Plan
(the "Plan") is to provide for officers, other employees and directors of, and
consultants to, Twinlab Corporation (the "Company") and its subsidiaries an
incentive (a) to enter into and remain in the service of the Company, (b) to
enhance the long-term performance of the Company, and (c) to acquire a
proprietary interest in the success of the Company. 1.2 Administration

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

            1.2.2 The Committee shall have the authority (a) to exercise all of
the powers granted to it under the Plan, (b) to construe, interpret and
implement the Plan and any plan agree-


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ments executed pursuant to Section 2.1, (c) to prescribe, amend and rescind
rules and regulations relating to the Plan, including rules governing its own
operations, (d) to make all determinations necessary or advisable in
administering the Plan, (e) to correct any defect, supply any omission and
reconcile any inconsistency in the Plan, (f) to amend the Plan to reflect
changes in applicable law, (g) to determine whether, to what extent and under
what circumstances awards may be settled or exercised in cash, Shares of Common
Stock, other securities, other awards or other property, or canceled, forfeited
or suspended and the method or methods by which awards may be settled, canceled,
forfeited or suspended, and (h) to determine whether, to what extent and under
what circumstances cash, shares of Common Stock, other securities, other awards
or other property and other amounts payable with respect to an award shall be
deferred either automatically or at the election of the holder thereof or of the
Committee.

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

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

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

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


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and responsibility granted to the Committee herein.

1.3 Persons Eligible for Awards

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

1.4 Types of Awards Under Plan

            Awards may be made under the Plan in the form of (a) incentive stock
options (within the meaning of section 422 of the Code), (b) nonqualified stock
options, (c) stock appreciation rights, (d) dividend equivalent rights, (e)
restricted stock, (f) restricted stock units (g) performance shares and (h)
other stock-based awards, all as more fully set forth in Article II. The term
"award" means any of the foregoing. No incentive stock option (other than an
incentive stock option that may be assumed or issued by the Company in
connection with a transaction to which section 424(a) of the Code applies) may
be granted to a person who is not an employee of the Company on the date of
grant. 1.5 Shares Available for Awards

            1.5.1 Total shares available. The total number of shares of common
stock of the Company, par value $1.00 per share ("Common Stock"), which may be
transferred in satisfaction of awards granted under the Plan shall not exceed
1,000,000 shares plus additional shares determined as follows. As of January 1,
1999 and each January 1 thereafter, the Board in its discretion may increase the
number of shares authorized under this Section 1.5.1 by an amount not in excess
of one percent (1%) of the total number of shares of Common Stock then
outstanding. 


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The increments authorized pursuant to the preceding sentence shall be
cumulative, so that any amount of permitted increase in shares not implemented
in one year may in the Board's discretion be implemented in a subsequent year.
Notwithstanding the foregoing, no more than 1,000,000 shares of Common Stock
shall be available for issuance upon the exercise of incentive stock options.
Shares issued pursusnt to the Plan may be authorized but unissued Common Stock
or authorized and issued Common Stock held in the Company's treasury or acquired
by the Company for the purposes of the Plan. The Committee may direct that any
stock certificate evidencing shares issued pursuant to the Plan shall bear a
legend setting forth such restrictions on transferability as may apply to such
shares pursuant to the Plan. If, after the effective date of the Plan, any award
is forfeited or any award otherwise terminates or is cancelled without the
delivery of shares of Common Stock, then the shares covered by such award or to
which such award relates shall again become available for transfer pursuant to
awards granted or to be granted under this Plan. Any shares of Common Stock
delivered by the Company, any shares of Common Stock with respect to which
awards are made by the Company and any shares of Common Stock with respect to
which the Company becomes obligated to make awards, through the assumption of,
or in substitution for, outstanding awards previously granted by an acquired
entity, shall not be counted against the shares available for awards under this
Plan.

            1.5.2 Individual Limit. The total number of shares of Common Stock
with respect to which stock options and stock appreciation rights may be granted
to any one employee of the Company or a subsidiary during any one -year period
shall not exceed 250,000.

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


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1.6 Adjustments Upon Changes in Capitalization or Merger

            1.6.1 Subject to any required action by the shareholders of the
Company, the number of shares of Common Stock covered by each outstanding award,
the number of shares available for awards, the number of shares that may be
subject to awards to any one employee, and the price per share of Common Stock
covered by each such outstanding award shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an award.
After any adjustment made pursuant to this Section 1.6.1, the number of shares
subject to each outstanding award shall be rounded to the nearest whole number.

            1.6.2 In the event of the proposed dissolution or liquidation of the
Company, all outstanding awards will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. The Committee may, in the exercise of its sole discretion in such
instances, accelerate the date on which any award becomes exercisable or fully
vested and/or declare that any award shall terminate as of a specified date.


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            1.6.3 In the event of a merger or consolidation ("merger") of the
Company with or into any other corporation or entity ("successor corporation"),
outstanding awards shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the Committee determines, in the exercise of its
sole discretion, to accelerate the date on which an award becomes exercisable or
fully vested. In the absence of an assumption or substitution of awards, awards
shall, to the extent not exercised, terminate as of the date of the closing of
the merger. For the purposes of this Section 3.7.4, an award shall be considered
assumed if, for every share of Common Stock subject thereto immediately prior to
the merger, the grantee has the right, following the merger, to acquire the
consideration received in the merger transaction by holders of shares of Common
Stock (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares);
provided, however, that if such consideration received in the merger was not
solely common stock of the successor corporation or its parent, the Committee
may, with the consent of the successor corporation and the participant, provide
for the consideration to be acquired pursuant to the award, for each share of
Common Stock subject thereto, to be solely common stock of the successor
corporation or its parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger. For purposes
hereof, the term "merger" shall include any transaction in which another
corporation acquires all of the issued and outstanding Common Stock of the
Company.

1.7 Definitions of Certain Terms

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

                  (a) If the principal market for the Common Stock (the
"Market") is a 


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national securities exchange or the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") National Market, the last sale price or,
if no reported sales take place on the applicable date, the average of the high
bid and low asked price of Common Stock as reported for such Market on such date
or, if no such quotation is made on such date, on the next preceding day on
which there were quotations, provided that such quotations shall have been made
within the ten (10) business days preceding the applicable date;

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

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

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

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


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            1.7.4 A grantee shall be deemed to have a "termination of
employment" upon ceasing to be employed by the Company and all of its
subsidiaries or by a corporation assuming awards in a transaction to which
section 424(a) of the Code applies. The Committee may in its discretion
determine (a) whether any leave of absence constitutes a termination of
employment for purposes of the Plan, (b) the impact, if any, of any such leave
of absence on awards theretofore made under the Plan, and (c) when a change in a
non-employee's association with the Company constitutes a termination of
employment for purposes of the Plan. The Committee shall have the right to
determine whether a grantee's termination of employment is a dismissal for cause
and the date of termination in such case, which date the Committee may
retroactively deem to be the date of the action that is cause for dismissal.
Such determinations of the Committee shall be final, binding and conclusive.

            1.7.5 The term "cause," when used in connection with termination of
a grantee's employment, shall have the meaning set forth in any then-effective
employment agreement between the grantee and the Company or a subsidiary
thereof. In the absence of such an employment agreement provision, "cause"
means: (a) conviction of any crime (whether or not involving the Company)
constituting a felony in the jurisdiction involved; (b) conduct related to the
grantee's employment for which either criminal or civil penalties against the
grantee or the Company may be sought; (c) material violation of the Company's
policies, including, without limitation, those relating to sexual harassment,
the disclosure or misuse of confidential information, or those set forth in
Company manuals or statements of policy; (d) serious neglect or misconduct in
the performance of the grantee's duties for the Company or willful or repeated
failure or refusal to perform such duties; in each case as determined by the
Committee, which determination shall be final, binding and conclusive.


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                                   ARTICLE II

                              AWARDS UNDER THE PLAN

2.1 Agreements Evidencing Awards

            Each award granted under the Plan (except an award of unrestricted
stock) shall be evidenced by a written agreement ("plan agreement") which shall
contain such provisions as the Committee in its discretion deems necessary or
desirable. Such provisions may include, without limitation, a requirement that
the grantee become a party to a shareholders' agreement with respect to any
shares of Common Stock acquired pursuant to the award, a requirement that the
grantee acknowledge that such shares are acquired for investment purposes only,
and a right of first refusal exercisable by the Company in the event that the
grantee wishes to transfer any such shares. The Committee may grant awards in
tandem with or in substitution for any other award or awards granted under this
Plan or any award granted under any other plan of the Company or any subsidiary.
Payments or transfers to be made by the Company or any subsidiary upon the
grant, exercise or payment of an award may be made in such form as the Committee
shall determine, including cash, shares of Common Stock, other securities, other
awards or other property and may be made in a single payment or transfer, in
installments or on a deferred basis, in each case in accordance with rules
established by the Committee. By accepting an award pursuant to the Plan, a
grantee thereby agrees that the award shall be subject to all of the terms and
provisions of the Plan and the applicable plan agreement. 

2.2 No Rights as a Shareholder

            No grantee of an option or stock appreciation right (or other person
having the right to exercise such award) shall have any of the rights of a
shareholder of the Company with respect to shares subject to such award until
the issuance of a stock certificate to such person for such 


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shares. Except as otherwise provided in Section 1.5.3, no adjustment shall be
made for dividends, distributions or other rights (whether ordinary or
extraordinary, and whether in cash, securities or other property) for which the
record date is prior to the date such stock certificate is issued.

2.3 Grant of Stock Options, Stock Appreciation Rights and Reload Options

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

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

            2.3.3 The grantee of a stock appreciation right shall have the
right, subject to the terms of the Plan and the applicable plan agreement, to
receive from the Company an amount equal to (a) the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over (b) the exercise price of such right as set forth in the
plan agreement (or over the option exercise price if the stock appreciation
right is granted in connection with an option), multiplied by (c) the number of
shares with respect to which the stock appreciation right is exercised. Payment
upon exercise of a stock appreciation right shall be in cash or in shares 


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of Common Stock (valued at their Fair Market Value on the date of exercise of
the stock appreciation right) or both, all as the Committee shall determine in
its discretion. Upon the exercise of a stock appreciation right granted in
connection with an option, the number of shares subject to the option shall be
correspondingly reduced by the number of shares with respect to which the stock
appreciation right is exercised. Upon the exercise of an option in connection
with which a stock appreciation right has been granted, the number of shares
subject to the stock appreciation right shall be correspondingly reduced by the
number of shares with respect to which the option is exercised.

            2.3.4 Each plan agreement with respect to an option shall set forth
the amount (the "option exercise price") payable by the grantee to the Company
upon exercise of the option evidenced thereby. The option exercise price per
share shall be determined by the Committee in its discretion; provided, however,
that the option exercise price of an incentive stock option shall be at least
100% of the Fair Market Value of a share of Common Stock on the date the option
is granted (except as permitted in connection with the assumption or issuance of
options in a transaction to which section 424(a) of the Code applies), and
provided further that in no event shall the option exercise price be less than
the par value of a share of Common Stock.

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

            2.3.6 The Committee may in its discretion include in any plan
agreement with respect to an option (the "original option") a provision that an
additional option (the "additional option") shall be granted to any grantee who,
pursuant to Section 2.4.3(b), delivers shares of


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

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

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


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2.4 Exercise of Options and Stock Appreciation Rights

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

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

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

            2.4.3 Any written notice of exercise of an option shall be
accompanied by payment for the shares being purchased. Such payment shall be
made: (a) by certified or official bank check (or the equivalent thereof
acceptable to the Company) for the full option exercise price; or (b) unless the
applicable plan agreement provides otherwise, by delivery of shares of Common
Stock (which, if acquired pursuant to exercise of a stock option, were acquired
at least six months prior to the option exercise date) and having a Fair Market
Value (determined as of the exercise date) equal to all or part of the option
exercise price and a certified or official bank check (or the 


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equivalent thereof acceptable to the Company) for any remaining portion of the
full option exercise price; or (c) at the discretion of the Committee and to the
extent permitted by law, by such other method as the Committee may from time to
time prescribe.

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

2.5 Termination of Employment; Death

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

            2.5.2 If a grantee's employment terminates by reason of the
grantee's disability or retirement, then except as otherwise provided in the
applicable Plan Agreement, the grantee may exercise any outstanding option or
stock appreciation right on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was entitled to exercise the award
on the date of employment termination; and (b) exercise must occur within one
year after employment terminates, but in no event after the expiration date of
the award as set forth in the Plan Agreement. The term "disability" for purposes
of the preceding sentence has the meaning given to it by 


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section 422(c)(6) of the Code, and the term "retirement" means retirement from
the Company at or after attaining age 62 with at least ten (10) years of service
with the Company, as determined by the Committee.

            2.5.3 If a grantee dies while employed by the Company or any
subsidiary, or after employment termination but during the period in which the
grantee's awards are exercisable pursuant to Section 2.5.2, then except as
otherwise provided in the applicable Plan Agreement, any outstanding option or
stock appreciation right shall be exercisable on the following terms and
conditions: (a) exercise may be made only to the extent that the grantee was
entitled to exercise the award on the date of death; and (b) exercise must occur
by the earlier of the first anniversary of the grantee's death or the expiration
date of the award. Any such exercise of an award following a grantee's death
shall be made only by the grantee's executor or administrator, unless the
grantee's will specifically disposes of such award, in which case such exercise
shall be made only by the recipient of such specific disposition. If a grantee's
personal representative or the recipient of a specific disposition under the
grantee's will shall be entitled to exercise any award pursuant to the preceding
sentence, such representative or recipient shall be bound by all the terms and
conditions of the Plan and the applicable Plan Agreement which would have
applied to the grantee including, without limitation, the provisions of Sections
3.3 and 3.9 hereof.

            2.5.4 If a grantee's employment is involuntarily terminated by the
Company other than for Cause, then except as otherwise provided in the
applicable Plan Agreement, the grantee may exercise any outstanding option or
stock appreciation right on the following terms and conditions: (a) exercise may
be made only to the extent that the grantee was entitled to exercise the award
on the date of employment termination; and (b) exercise must occur within ninety
(90) days after employment terminates, but in no event after the expiration date
of the award as set forth in the Plan Agreement.


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            2.5.5 If at any time within one year after the exercise of all or
any portion of an option or stock appreciation right the grantee either (a) is
terminated for Cause or (b) engages in any activity determined in the sole
discretion of the Committee to be in competition with any activity of the
Company, or otherwise inimical, contrary or harmful to the interests of the
Company (including, but not limited to accepting employment with or serving as a
consultant, adviser or in any other capacity to an entity that is in competition
with or acting against the interests of the Company), then any option gain
realized by the grantee from exercising such option or stock appreciation right
shall be paid by the grantee to the Company upon notice from the Company. For
purposes of this Section, "option gain" means the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the option or stock
appreciation right over the option exercise price (or the Fair Market Value of a
share of Common Stock on the date of grant of the stock appreciation right),
multiplied by the number of shares with respect to which the option or stock
appreciation right was exercised, without regard to any subsequent decrease or
increase in the Fair Market Value of such shares. The Company shall have the
right to offset such option gain against any amounts otherwise owed to the
grantee by the Company (whether as wages, vacation pay, or pursuant to any
benefit plan or other compensatory arrangement). 

2.6 Grant of Restricted Stock

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


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<PAGE>   20

the Company by certified or official bank check (or the equivalent thereof
acceptable to the Company) in such amount as the Committee may determine.

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

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

            2.6.4 Shares of restricted stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided in this Plan or the applicable plan agreement. The
Committee at the time of grant shall specify the date or dates (which may depend
upon or be related to the attainment of performance goals and other conditions)
on which the nontransferability of the restricted stock shall lapse. Unless the
applicable plan agreement provides otherwise, additional shares of Common Stock
or other property distributed to the grantee in respect of shares of restricted
stock, as dividends or otherwise, shall be subject to the same restrictions
applicable to such restricted stock.

            2.6.5 During the 120 days following termination of the grantee's
employment for any reason, the Company shall have the right to require the
return of any shares to which restrictions on transferability apply, in exchange
for which the Company shall repay to the grantee (or the grantee's estate) any
amount paid by the grantee for such shares. 


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<PAGE>   21

2.7 Grant of Restricted Stock Units

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

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

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

2.8 Grant of Performance Shares

            2.8.1 The Committee may grant performance share awards to such key
persons, and in such amounts and subject to such terms and conditions, as the
Committee shall in its sole discretion determine, subject to the provisions of
the Plan. Such an award shall entitle the grantee


                                      -18-
<PAGE>   22

to acquire shares of Common Stock, or to be paid the value thereof in cash, as
the Committee shall determine, if specified performance goals are met.
Performance shares may be awarded independently of or in connection with any
other award under the Plan. A grantee shall have no rights with respect to a
performance share award unless such grantee accepts the award by executing a
Plan Agreement at such time and in such form as the Committee shall determine.

            2.8.2 The grantee of a performance share award will have the rights
of a shareholder only as to shares for which a certificate has been issued
pursuant to the award and not with respect to any other shares subject to the
award.

            2.8.3 Except as may otherwise be provided by the Committee at any
time prior to termination of employment, the rights of a grantee of a
performance share award shall automatically terminate upon the grantee's
termination of employment for any reason.

2.9 Other Stock-Based Awards

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


                                      -19-
<PAGE>   23

2.10 Grant of Dividend Equivalent Rights

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

2.11  Right of Recapture

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


                                      -20-
<PAGE>   24

gain against any amounts otherwise owed to the participant by the Company
(whether as wages, vacation pay, or pursuant to any benefit plan or other
compensatory arrangement).


                                      -21-
<PAGE>   25

                                  ARTICLE III

                                 MISCELLANEOUS

3.1 Amendment of the Plan; Modification of Awards

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

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

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


                                      -22-
<PAGE>   26

3.2 Tax Withholding

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

            3.2.2 If the event giving rise to the withholding obligation is a
transfer of shares of Common Stock, then, unless otherwise specified in the
applicable plan agreement, the grantee may satisfy the withholding obligation
imposed under Section 3.2.1 by electing to have the Company withhold shares of
Common Stock having a Fair Market Value equal to the amount of tax to be
withheld. For this purpose, Fair Market Value shall be determined as of the date
on which the amount of tax to be withheld is determined (and any fractional
share amount shall be settled in cash).

3.3 Restrictions

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


                                      -23-
<PAGE>   27

            3.3.2 The term "consent" as used herein with respect to any plan
action means (a) any and all listings, registrations or qualifications in
respect thereof upon any securities exchange or under any federal, state or
local law, rule or regulation, (b) any and all written agreements and
representations by the grantee with respect to the disposition of shares, or
with respect to any other matter, which the Committee shall deem necessary or
desirable to comply with the terms of any such listing, registration or
qualification or to obtain an exemption from the requirement that any such
listing, qualification or registration be made and (c) any and all consents,
clearances and approvals in respect of a plan action by any governmental or
other regulatory bodies. 3.4 Nonassignability

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

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

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


                                      -24-
<PAGE>   28

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

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

3.7 Right of Discharge Reserved

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

3.8 Nature of Payments

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

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


                                      -25-
<PAGE>   29

3.9  Non-Uniform Determinations

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

3.10 Other Payments or Awards

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

3.11 Section Headings

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


                                      -26-
<PAGE>   30

3.12 Effective Date and Term of Plan

            3.12.1 The Plan was adopted by the Board on January 27, 1998,
subject to approval by the Company's shareholders. All awards under the Plan
prior to such shareholder approval are subject in their entirety to such
approval. If such approval is not obtained prior to the first anniversary of the
date of adoption of the Plan, the Plan and all awards thereunder shall terminate
on that date.

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

3.13 Governing Law

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


                                      -27-