<PAGE>
 
                                                                      EXHIBIT A
 
                     BROWN & SHARPE MANUFACTURING COMPANY
                          1999 EQUITY INCENTIVE PLAN
 
1. PURPOSE
 
  The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of Brown & Sharpe Manufacturing Company (the "Company") and its
subsidiaries by enhancing their ability to attract and retain employees and
other individuals or entities who are in a position to make significant
contributions to the success of the Company and its subsidiaries through
awards based on the Company's common stock, either Class A Common Stock, $1
par value or Class B Common Stock, $1 par value ("Stock"), and cash
incentives.
 
  The Plan is intended to accomplish these goals by enabling the Company to
grant awards ("Awards") in the form of Options, Stock Appreciation Rights,
Restricted Stock or Unrestricted Stock Awards, Deferred Stock Awards,
Performance Awards, Other Stock-Based Awards, or loans or supplemental grants,
or combinations thereof, all as more fully described below.
 
2. ADMINISTRATION
 
  Unless otherwise determined by the Board of Directors of the Company (the
"Board"), the Plan will be administered by a committee of the Board designated
for such purpose (the "Committee"). The Committee shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority
of the Committee members. During such times as any Stock is registered under
the Securities Exchange Act of 1934 (the "1934 Act"), at least two members of
the Committee shall be "non-employee directors" within the meaning of Rule
16b-3 promulgated under the 1934 Act and "outside directors" within the
meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as
amended (the "Code") (the "Outside Directors"). If any member of the Committee
is not an Outside Director, or a non-employee director, a sub-committee (the
"Sub-Committee") consisting solely of the non-employee directors and Outside
Directors shall administer the Plan in connection with Awards to "officers" of
the Company within the meaning of Section 16(b) of the 1934 Act or with
respect to any Award intended to be exempt under Section 162(m)(3) of the
Code. Any references to the Committee in this Plan shall also mean the Sub-
Committee.
 
  The Committee will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b)
determine the size of each Award, including the number of shares of Stock
subject to the Award; (c) determine the type or types of each Award; (d)
determine the terms and conditions of each Award, including provisions for
accelerated vesting upon the achievement of Company stock price levels; (e)
waive compliance by a holder of an Award with any obligations to be performed
by such holder under the Award and waive any terms or conditions of an Award;
(f) subject to the provisions of Section 6.1(b), amend or cancel an existing
Award in whole or in part (and if an award is canceled, grant another Award in
its place on such terms and conditions as the Committee shall specify), except
that the Committee may not, without the consent of the holder of an Award,
take any action under this clause with respect to such Award if such action
would adversely affect the rights of such holder; (g) prescribe the form or
forms of any instruments to be used under the Plan, including any written
notices and elections required of Participants (as defined below), and change
such forms from time to time; (h) adopt, amend and rescind rules and
regulations for the administration of the Plan; and (i) interpret the Plan and
decide any questions and settle all controversies and disputes that may arise
in connection with the Plan. Such determinations and actions of the Committee,
and all other determinations and actions of the Committee made or taken under
authority granted by any provision of the Plan, will be conclusive and will
bind all parties. Nothing in this paragraph shall be construed as limiting the
power of the Committee to make adjustments under Section 7.3 or
 
                                      A-1
<PAGE>
 
Section 8.6. In the case of any Award intended to be eligible for the
performance-based compensation exception under Section 162(m), the Committee
shall exercise its discretion consistent with qualifying the Award for such
exception.
 
3. EFFECTIVE DATE AND TERM OF PLAN
 
  The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Awards may be made prior to such stockholder
approval if made subject thereto. No Award may be granted under the Plan after
February 11, 2009 (the 10th anniversary of day before Board approval), but
Awards previously granted may extend beyond that date.
 
4. SHARES SUBJECT TO THE PLAN
 
  (a) Number of Shares. Subject to adjustment as provided in Section 8.6, the
aggregate number of shares of Stock that may be delivered under the Plan will
be 1,800,000. If any Award requiring exercise by the Participant for delivery
of Stock terminates without having been exercised in full, or if any Award
payable in Stock or cash is satisfied in cash rather than Stock, the number of
shares of Stock as to which such Award was not exercised or for which cash was
substituted will be available for future grants. Shares of Restricted Stock
that have been forfeited in accordance with the terms of the applicable Award
and shares held back, in satisfaction of the exercise price or tax withholding
requirements, from shares that would otherwise have been delivered pursuant to
an Award shall also be available for future grants. The number of shares of
Stock delivered under an Award shall be determined net of any previously
acquired Shares tendered by the Participant in payment of the exercise price
or of withholding taxes.
 
  (b) Special Limitations Applicable to Certain Awards. Subject to adjustment
as provided in Section 8.6(a) to the extent such adjustment is consistent with
the continued satisfaction with respect to Awards of the requirements of
Section 162(m)(4)(C) of the Code, the maximum number of shares of Stock for
which Options and Stock Appreciation Rights may be awarded under the Plan to
any participant during any one year period is in the case of each such form of
Award 350,000 shares. For maximum limits relating to Performance Awards, see
Section 6.5 below.
 
  (c) Shares to be Delivered. Stock delivered under the Plan may be either
authorized but unissued Stock or previously issued Stock acquired and held by
the Company. No fractional shares of Stock will be delivered under the Plan.
 
5. ELIGIBILITY AND PARTICIPATION
 
  Each key employee of the Company or any of its subsidiaries (an "Employee")
and each other individual or entity (other than employees of the Company or
any of its subsidiaries, but including without limitation directors of the
Company or a subsidiary of the Company) who, in the opinion of the Committee,
is in a position to make a significant contribution to the success of the
Company or its subsidiaries will be eligible to receive Awards under the Plan
(each such Employee, other individual or entity receiving an Award, "a
Participant"). Participants shall also include individuals who have accepted
an offer of employment from the Company and who the Company reasonably
believes will be key employees upon commencing employment with the Company (a
"New Hire"). For purposes of the Plan, a "subsidiary" is any corporation
(other than the employer corporation) in an unbroken chain of corporations
beginning with the employer corporation if, at the time of the granting of the
option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in or of the other corporation in such
chain. Eligibility for ISOs is further limited to those individuals whose
employment status would qualify them for the tax treatment described in
Sections 421 and 422 of the Code.
 
 
                                      A-2
<PAGE>
 
6. TYPES OF AWARDS
 
 6.1 Options.
 
  (a) Nature of Options. An option ("Option") is an Award giving the recipient
the right on exercise thereof to purchase Stock.
 
  Both "incentive stock options," as defined in Section 422(b) of the Code
(any Option intended to qualify as an incentive stock option being hereinafter
referred to as an "ISO"), and Options that are not ISOs, may be granted under
the Plan. ISOs shall be awarded only to Employees. An Option awarded under the
Plan shall be a non-ISO unless it is expressly designated as an ISO at time of
grant. Once an ISO has been granted, no action by the Committee that would
cause the Option to lose its status under the Code as an incentive stock
option will be effective without consent of the Option holder.
 
  (b) Exercise Price. The exercise price of an Option will be determined by
the Committee subject to the following:
 
    (1) The exercise price of an Option shall not be less than 100% of the
  fair market value of the Stock subject to the Option, determined as of the
  effective date of the Option.
 
    (2) In no case may the exercise price paid for Stock which is part of an
  original issue of authorized Stock be less than the par value per share of
  the Stock.
 
    (3) The Committee may not reduce the exercise price of an Option at any
  time after the time of grant, with or without the consent of the Option
  holder, thereby prohibiting the cancellation of higher prices and the
  reissue of lower priced Options ("Repriced Options")
 
  (c) Duration of Options. The latest date on which an Option may be exercised
will be the tenth anniversary of the day immediately preceding the date the
Option was granted, or such earlier date as may have been specified by the
Committee at the time the Option was granted.
 
  (d) Exercise of Options. An Option will become exercisable at such time or
times, and on such conditions as the Committee may specify, including
provisions for acceleration of vesting upon the achievement of certain Company
stock price levels. The Committee may at any time and from time to time
accelerate the time at which all or any part of the Option may be exercised.
Except as otherwise determined by the Committee, any period during which a
Participant who is an Employee is on an unpaid leave of absence (or other
unpaid absence) from the Company shall toll the period of time over which an
option becomes exercisable. Any exercise of an Option must be in writing,
signed by the proper person and delivered or mailed to the Company,
accompanied by (1) any documents required by the Committee and (2) payment in
full in accordance with paragraph (e) below for the number of shares for which
the Option is exercised. If desired the Committee may provide for vesting
prior to the date the Option becomes exercisable.
 
  (e) Payment for Stock. Stock purchased on exercise of an Option must be paid
for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing his Option (or in the case of an Option which is not an
ISO, by the Committee at or after the grant of the Option), (i) through the
delivery of shares of Stock which have been held for at least six months
(unless the Committee approves a shorter period) and which have a fair market
value on the last business day preceding the date of exercise equal to the
exercise price, (ii) by delivery of a promissory note of the Participant to
the Company containing such terms as are specified by the Committee (provided
that if the Stock delivered upon exercise of the Option is an original issue
of authorized but unissued Stock, at least so much of the exercise price as
represents the par value of the Stock shall be paid in cash), (iii) by
delivery of an unconditional and irrevocable undertaking by a broker to
deliver promptly to the Company sufficient funds to pay the exercise price, or
(iv) by any combination of the foregoing permissible forms of payment.
 
  (f) Discretionary Payments. If (i) the market price of shares of Stock
subject to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2) exceeds the exercise
 
                                      A-3
<PAGE>
 
price of the Option at the time of its exercise, and (ii) the person
exercising the Option so requests in writing, the Committee may in its sole
discretion cancel the Option and cause the Company to pay in cash or in shares
of Common Stock (valued at fair market value) to the person exercising the
Option an amount equal to the difference between the fair market value of the
Stock which would have been purchased pursuant to the exercise (determined on
the date the Option is canceled) and the aggregate exercise price which would
have been paid.
 
  (g) Reload Awards. The Committee may provide that upon the exercise of an
Award through the tender of previously owned shares of Stock, the Participant
or other person exercising the award will automatically receive a new Award of
like kind covering a number of shares of Stock tendered in payment of the
exercise price of the first Award.
 
 6.2 Stock Appreciation Rights.
 
  (a) Nature of Stock Appreciation Rights. A Stock Appreciation Right ("Stock
Appreciation Right" or "SAR") is an Award entitling the holder on exercise to
receive an amount in cash or Stock or a combination thereof (such form to be
determined by the Committee) determined in whole or in part by reference to
appreciation, from and after the date of grant, in the fair market value of a
share of Stock. SARs may be based solely on appreciation in the fair market
value of Stock or on a comparison of such appreciation with some other measure
of market growth such as (but not limited) to appreciation in a recognized
market index. The date as of which such appreciation or other measure is
determined shall be the exercise date unless another date is specified by the
Committee.
 
  (b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan.
 
    (1) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
  granted in tandem with Options, (A) the Stock Appreciation Right will be
  exercisable only at such time or times, and to the extent, that the related
  Option is exercisable and will be exercisable in accordance with the
  procedure required for exercise of the related Option and may be exercised
  only when the market price of the Stock, subject to the Option, exceeds the
  exercise price; (B) the Stock Appreciation Right will terminate and no
  longer be exercisable upon the termination or exercise of the related
  Option, except that a Stock Appreciation Right granted with respect to
  fewer than the full number of shares covered by an Option will not be
  reduced until the number of shares as to which the related Option has been
  exercised or has terminated exceeds the number of shares not covered by the
  Stock Appreciation Right; (C) the Option will terminate and no longer be
  exercisable upon the exercise of the related Stock Appreciation Right; and
  (D) the Stock Appreciation Right will be transferable only with the related
  Option.
 
    (2) Exercise of Independent Stock Appreciation Rights. A Stock
  Appreciation Right not granted in tandem with an Option will become
  exercisable at such time or times, and on such conditions, as the Committee
  may specify. Except as otherwise determined by the Committee, any period
  during which a Participant who is an Employee is on an unpaid leave of
  absence (or other unpaid absence) from the Company shall toll the period of
  time over which a Stock Appreciation Right becomes exercisable. The
  Committee may at any time accelerate the time at which all or any part of
  the Right may be exercised.
 
    Any exercise of an independent Stock Appreciation Right must be in
  writing, signed by the proper person and delivered or mailed to the
  Company, accompanied by any other documents required by the Committee.
 
 6.3 Restricted and Unrestricted Stock.
 
  (a) Grant of Restricted Stock. Subject to the terms and provisions of the
Plan, the Committee may grant or sell shares of Stock in such amounts and upon
such terms and conditions as the Committee shall determine subject to the
restrictions described below ("Restricted Stock").
 
 
                                      A-4
<PAGE>
 
  (b) Restricted Stock Agreement. The Committee may require, as a condition to
an Award, that a recipient of a Restricted Stock Award enter into a Restricted
Stock Award Agreement, setting forth the terms and conditions of the Award and
making payment of the purchase price. In lieu of a Restricted Stock Award
Agreement, the Committee may provide the terms and conditions of an Award in a
notice to the Participant of the Award, in the resolution approving the Award,
or in such other manner as it deems appropriate. The stock certificate
representing the Restricted Stock shall be appropriately legended to reflect
the applicable restrictions.
 
  (c) Transferability and Other Restrictions. Except as otherwise provided in
this Section 6.3, the shares of Restricted Stock granted herein may not be
sold, transferred, pledged, assigned, or otherwise alienated or hypothecated
until the end of the applicable period or periods established by the Committee
and the satisfaction of any other conditions or restrictions established by
the Committee (such period during which a share of Restricted Stock is subject
to such restrictions and conditions is referred to as the "Restricted
Period"). Except as the Committee may otherwise determine under Section 7.1 or
Section 7.2, if a Participant dies or suffers a Status Change (as defined at
Section 7.2(a)) for any reason during the Restricted Period, the Company may
purchase the shares of Restricted Stock subject to such restrictions and
conditions for the amount of cash paid by the Participant for such shares;
provided, that if no cash was paid by the Participant such shares of
Restricted Stock shall be automatically forfeited to the Company.
 
  During the Restricted Period with respect to any shares of Restricted Stock,
the Company shall have the right to retain in the Company's possession the
certificate or certificates representing such shares.
 
  (d) Removal of Restrictions. Except as otherwise provided in this Section
6.3, a share of Restricted Stock covered by a Restricted Stock grant shall
become free from restrictions under the Plan upon completion of the Restricted
Period, including the passage of any applicable period of time and
satisfaction of any conditions to vesting. Except as otherwise determined by
the Committee, any period during which a Participant who is an Employee is on
leave of absence (or other unpaid absence) from the Company shall, to the
extent the Restricted Period relates to the passage of time, toll such time
period. The Committee shall have the right at any time, in its sole
discretion, immediately to waive or accelerate all or any part of the
restrictions and conditions with regard to all or any part of the shares held
by any Participant.
 
  (e) Notice of Election. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must give a copy of the
election to the Company within ten days after filing with the Internal Revenue
Service.
 
  (f) Voting Rights, Dividends and Other Distributions. During the Restricted
Period, Participants holding shares of Restricted Stock granted hereunder may
exercise full voting rights and shall receive all regular cash dividends paid
with respect to such shares. Except as the Committee shall otherwise
determine, any other cash dividends and other distributions paid to
Participants with respect to shares of Restricted Stock, including any
dividends and distributions paid in shares, shall be subject to the same
restrictions and conditions as the shares of Restricted Stock with respect to
which they were paid.
 
  (g) Other Awards Settled with Restricted Stock. The Committee may, at the
time any Award described in this Section 6 is granted, provide that any or all
of the Stock delivered pursuant to the Award will be Restricted Stock.
 
  (h) Unrestricted Stock. Subject to the terms and provisions of the Plan, the
Committee may grant shares of Stock free of restrictions under the Plan in
such amounts and upon such terms and conditions as the Committee shall
determine.
 
 6.4 Deferred Stock.
 
  A Deferred Stock Award ("Deferred Stock Award") is an unfunded and unsecured
promise by the Company to deliver shares of Stock in the future ("Deferred
Stock"). Delivery of the Stock will take place at
 
                                      A-5
<PAGE>
 
such time or times, and on such conditions, as the Committee may specify. The
Committee may at any time accelerate the time at which delivery of all or any
part of the Stock will take place. At the time any Award described in this
Section 6 is granted, the Committee may provide that any or all of the Stock
delivered pursuant to the Award will be Deferred Stock.
 
 6.5 Performance Awards.
 
  The Committee may, at the time an Award described in Sections 6.1, 6.2, 6.3,
6.4 or 6.7 is granted, impose the additional condition that performance goals
must be met prior to the Participant's realization of any vesting, payment or
benefit under the Award. In addition, the Committee may make awards entitling
the Participant to receive an amount in cash upon attainment of specified
performance goals (a "Cash Incentive"). Any Award or Cash Incentive made
subject to performance goals as described in the preceding two sentences shall
be a "Performance Award" subject to the provisions of this Section 6.5 in
addition to any other applicable provisions of the Plan or the Award.
Performance Awards may consist of Cash Incentives or Awards that are intended
to qualify for the performance-based compensation exception under Section
162(m) of the Code, other than Options or Stock Appreciation Rights intended
to qualify for such exception by reason of the special rules under Section
162(m) of the Code applicable to stock options and stock appreciation rights
granted at an exercise price not less than fair market value on the date of
grant ("Qualified Performance Awards") or Cash Incentives or Awards that
either are not intended so to qualify or are Options or Stock Appreciation
Rights intended to qualify for such exception by reason of the special rules
under Section 162(m) of the Code applicable to stock options and stock
appreciation rights granted at an exercise price not less than fair market
value on the date of grant ("Other Performance Awards"). The Committee will
determine the performance measures, the period or periods during which
performance is to be measured, and all other terms and conditions applicable
to the Performance Award. The performance measures to which a Performance
Award is subject may be related to personal performance, corporate
performance, departmental performance, or any other category of performance
established by the Committee, including the achievement of specified Company
stock price levels. In the case of a Qualified Performance Award, payment
under the Award or of the Cash Incentive must be conditioned on the
satisfaction of one or more "qualified performance measures" preestablished by
the Committee in accordance with the rules under Section 162(m) of the Code
and on certification (within the meaning of the rules under Section 162(m) of
the Code) by the Committee that such measure or measures have been met or
exceeded. For purposes of the preceding sentence, a qualified performance
measure is an objectively determinable measure of performance based on any one
or more of the following (on a consolidated, divisional, subsidiary, line of
business or geographical basis or in combinations thereof): (i) sales;
revenues; assets; expenses; earnings before or after deduction for all or any
portion of interest, taxes, depreciation or amortization, whether or not on a
continuing operations or an aggregate or per share basis; return on equity,
investment, capital or assets; inventory level or turns; one or more operating
ratios; borrowing levels, leverage ratios or credit rating; market share;
capital expenditures; cash flow; stock price; stockholder return; or any
combination of the foregoing; or (ii) acquisitions and divestitures (in whole
or in part); joint ventures and strategic alliances; spin-offs, split-ups and
the like; reorganizations; recapitalizations, restructurings, financings
(issuance of debt or equity) and refinancings; transactions that would
constitute a change of control; or any combination of the foregoing. A
qualified performance measure and targets with respect thereto determined by
the Committee need not be based upon an increase, a positive or improved
result or avoidance of loss. The maximum number of shares of Stock subject to
Performance Awards (other than Cash Incentives) awarded to any Participant in
any one year period shall be 350,000 shares. The maximum amount payable under
Cash Incentives to any Participant for any year shall be $500,000.
 
 6.6 Loans and Supplemental Grants.
 
  (a) Loans. The Company may make a loan to a Participant, either at the time
of or after the grant to him or her of any Award. Such a loan may be made in
connection with either the purchase of Stock under the Award or the payment of
any federal, state, and local income tax in respect of income recognized as a
result of the Award. The Committee will have full authority to decide whether
to make such a loan and to determine the amount, terms and conditions of the
loan, including the interest rate (which may be zero), whether the loan is to
 
                                      A-6
<PAGE>
 
be secured or unsecured or with or without recourse against the borrower, the
terms on which the loan is to be repaid and the conditions, if any, under
which it may be forgiven. However, no loan may have a term (including
extensions) exceeding ten years in duration.
 
  (b) Cash Grants. In connection with any Award, the Committee may at the time
such Award is made or at a later date provide for and make a cash payment to
the Participant not to exceed an amount equal to (a) the amount of any
federal, state and local income tax on ordinary income for which the
Participant will be liable with respect to the Award, plus (b) an additional
amount on a grossed-up basis necessary to make him or her whole after tax,
discharging all the Participant's income tax liabilities arising from all
payments under this Section 6, all based on such reasonable estimates of
applicable tax rates as the Committee may determine.
 
 6.7 Other Stock-Based Awards.
 
  (a) Nature of Awards. The Committee may grant other Awards under which Stock
is or may in the future be acquired ("Other Stock-Based Awards"). Such awards
may include, without limitation, debt securities convertible into or
exchangeable for shares of Stock upon such conditions, including attainment of
performance goals, as the Committee shall determine. Such convertible or
exchangeable securities may have such terms and conditions as the Committee
may determine at the time of grant. However, no convertible or exchangeable
debt shall be issued unless the Committee shall have provided (by Company
right of repurchase, right to require conversion or exchange, or other means
deemed appropriate by the Committee) a means of avoiding any right of the
holders of such debt to prevent a Company transaction by reason of covenants
in such debt.
 
  (b) Purchase Price; Form of Payment. The Committee may determine the
consideration, if any, payable upon the issuance or exercise of an Other
Stock-Based Award. The Committee may permit payment by certified check or bank
check or other instrument acceptable to the Committee or by surrender of other
shares of Stock (excluding shares then subject to restrictions under the
Plan).
 
  (c) Forfeiture of Awards; Repurchase of Stock; Acceleration or Waiver of
Restrictions. The Committee may determine the conditions under which an Other
Stock-Based Award shall be forfeited or, in the case of an Award involving a
payment by the recipient, the conditions under which the Company may or must
repurchase such Award or related Stock. At any time the Committee may in its
sole discretion accelerate, waive, or, amend any or all of the limitations or
conditions imposed under any Other Stock-Based Award.
 
7. EVENTS AFFECTING OUTSTANDING AWARDS
 
 7.1 Death or Disability.
 
  Except as the Committee may otherwise determine, if a Participant dies or
becomes permanently and totally disabled (as determined by the Committee), the
following will apply:
 
    (a) All Options and Stock Appreciation Rights held by the Participant
  immediately prior to death or such permanent and total disability, to the
  extent then exercisable, may be exercised by the Participant's executor or
  administrator or the person or persons to whom the Option or Right is
  transferred by will or the applicable laws of descent and distribution or
  the Participant's guardian, at any time within the one year period ending
  with the first anniversary of the Participant's death or permanent and
  total disability as the case may be (or such shorter or longer period as
  the Committee may determine), and shall thereupon terminate, and if such a
  participant thereafter dies while the option is still exercisable, the
  option will be exercisable for one year from that date. In no event,
  however, shall an Option or Stock Appreciation Right remain exercisable
  beyond the latest date on which it could have been exercised without regard
  to this Section 7. All Options and Stock Appreciation Rights held by a
  Participant immediately prior to death or such permanent and total
  disability that are not then exercisable shall accelerate and become vested
  at death or such permanent and total disability.
 
    (b) All Restricted Stock held by the Participant must be transferred to
  the Company (and, in the event the certificates representing such
  Restricted Stock are held by the Company, such Restricted Stock will be so
  transferred without any further action by the Participant in accordance
  with Section 6.3(c)).
 
                                      A-7
<PAGE>
 
    (c) Any payment or benefit under a Deferred Stock Award, Performance
  Award, Supplemental Grant, or Other Stock-Based Award to which the
  Participant was not irrevocably entitled prior to death or such permanent
  and total disability will be forfeited and the Award canceled as of the
  time of death or such permanent and total disability.
 
 7.2 Termination of Service (Other Than By Death or Disability).
 
  If (i) a Participant who is an Employee ceases to be an Employee for any
reason other than death or disability (as defined above), (ii) there is a
termination (other than by reason of death or disability or satisfactory
completion of the project or service as determined by the Committee) of the
consulting, service or similar relationship in respect of which a non-Employee
Participant was granted an Award hereunder or (iii) a New Hire's offer of
employment is terminated prior to the New Hire commencing employment with the
Company or the New Hire does not commence his or her employment with the
Company within two months after receipt of an Award hereunder (such
termination of the employment or other relationship being hereinafter referred
to as a "Status Change"), then, except as the Committee may otherwise
determine, the following will apply:
 
    (a) All Options and Stock Appreciation Rights held by the Participant
  that were not exercisable immediately prior to the Status Change shall
  terminate at the time of the Status Change. Any Options or Rights that were
  exercisable immediately prior to the Status Change will continue to be
  exercisable for a period of three months (or one year in the case of
  retirement at or after age 60 with the consent of the Company), and shall
  thereupon terminate, unless the Award provides by its terms for immediate
  termination in the event of a Status Change or unless the Status Change
  results from a discharge for cause which in the opinion of the Committee
  casts such discredit on the Participant as to justify immediate termination
  of the Award. In no event, however, shall an Option or Stock Appreciation
  Right remain exercisable beyond the latest date on which it could have been
  exercised without regard to this Section 7. For purposes of this paragraph,
  in the case of a Participant who is an Employee, a Status Change shall not
  be deemed to have resulted by reason of (i) a sick leave or other bona fide
  leave of absence approved for purposes of the Plan by the Committee, so
  long as the Employee's right to reemployment is guaranteed either by
  statute or by contract, or (ii) a transfer of employment between the
  Company and a subsidiary or between subsidiaries, or to the employment of a
  corporation (or a parent or subsidiary corporation of such corporation)
  issuing or assuming an option in a transaction to which Section 424(a) of
  the Code applies. A Status Change will be deemed to have occurred, in the
  case of an employee Participant, upon termination of the Participant's
  employment with the Company and its Subsidiaries (whether or not the
  Participant continues in the service of the Company or its Subsidiaries in
  some capacity other than that of an employee of the Company or its
  Subsidiaries) and in the case of any other Participant, when the service
  relationship in respect of which the Award was granted terminates (whether
  or not the Participant continues in the service of the Company or its
  Subsidiaries in some other capacity).
 
    (b) All Restricted Stock held by the Participant at the time of the
  Status Change must be transferred to the Company (and, in the event the
  certificates representing such Restricted Stock are held by the Company,
  such Restricted Stock will be so transferred without any further action by
  the Participant) in accordance with Section 6.3(c) above.
 
    (c) Any payment or benefit under a Deferred Stock Award, Performance
  Award, Supplemental Grant, or Other Stock-Based Award to which the
  Participant was not irrevocably entitled prior to the Status Change will be
  forfeited and the Award canceled as of the date of such Status Change.
 
 7.3.1 Change in Control Provision.
 
  As used herein, a Change in Control and related definitions shall have the
meanings as set forth in Section 7.3.3 below.
 
    Immediately prior to the occurrence of a Change in Control:
 
      (a) Each Option and Stock Appreciation Right shall automatically
    become fully exercisable unless the Committee shall otherwise expressly
    provide at the time of grant.
 
 
                                      A-8
<PAGE>
 
      (b) Restrictions and conditions on Restricted Stock, Deferred Stock,
    Performance Award, Supplemental Grant, and Other Stock-based Awards
    shall automatically be deemed waived to the extent, if any, specified
    (whether at or after time of grant) by the Committee.
 
  In addition to the foregoing and Sections 6.1(d), 6.2(b), 6.3(d) and 6.4,
the Committee may at any time prior to or after a Change in Control accelerate
the exercisability of any Options and Stock Appreciation Rights and may waive
restrictions, limitations and conditions on Restricted Stock, Deferred Stock,
Performance Awards, Supplemental Grants, and Other Stock-based Awards to the
extent it shall in its sole discretion determine.
 
 7.3.2 Certain Corporate Transactions.
 
  (a) In the event of a consolidation or merger in which the Company is not
the surviving corporation or which results in the acquisition of substantially
all the Company's outstanding Stock by a single person or entity or by a group
of persons and/or entities acting in concert, or in the event of the complete
liquidation of the Company or the sale or transfer of substantially all of the
Company's assets (a "Covered Transaction"), all outstanding Options will
terminate as of the effective date of the Covered Transaction, provided that
at least twenty (20) days prior to the effective date of any such merger,
consolidation, liquidation or sale of assets, but subject to Paragraphs (c)
and (d) below, the Committee shall make all outstanding Options exercisable
immediately prior to consummation of such Covered Transaction (to the extent
that such Options are not exercisable immediately prior to the consummation of
the Covered Transaction pursuant to Section 7.3.1).
 
  (b) Subject to Paragraphs (c) and (d) below, the Committee may, in its sole
discretion, prior to the effective date of the Covered Transaction, (1) remove
the restrictions from each outstanding share of Restricted Stock, (2) cause
the Company to make any payment and provide any benefit under each outstanding
Deferred Stock Award, Performance Award, and Supplemental Grant which would
have been made or provided with the passage of time had the transaction not
occurred and the Participant remained an employee, and (3) forgive all or any
portion of the principal of or interest on a loan.
 
  (c) If an outstanding Option or Other Award is subject to performance or
other conditions (other than conditions relating the mere passage of time and
continued employment) which will not have been satisfied at the time of the
Covered Transaction, the Committee may, in its sole discretion, remove such
conditions. If it does not do so however, such Option or Other Award will
terminate, because the conditions have not been satisfied, as of the date of
the Covered Transaction notwithstanding Paragraph (a) and (b) above.
 
  (d) With respect to an outstanding Option or Other Award held by the
participant who, following the Covered Transaction, will be employed by a
corporation which is a surviving or acquiring corporation in such transaction
or an affiliate of such a corporation, the Committee may, in lieu of the
action of the Committee described in Paragraphs (a) or (b) above or in
addition to any Option being exercisable immediately prior to consummation of
the Covered Transaction pursuant to Section 7.3.1 above, arrange to have such
surviving or acquiring corporation or affiliate assume the Option or Other
Award or grant to the Participant a replacement Option or other Award which,
in the judgment of the Committee, is substantially equivalent to the Option or
Other Award. In the case of an assumed or substitute Option intended to be an
Incentive Stock Option, the requirements of Section 424 (a) of the Code shall
be satisfied except as otherwise provided by the Committee.
 
 7.3.3 Change in Control and Related Definitions.
 
  A "Change in Control" shall be deemed to have occurred if the conditions set
forth in any one of the following paragraphs shall have been satisfied:
 
    (a) any Person is or becomes the Beneficial Owner, directly or
  indirectly, of securities of the Company representing 30% or more of the
  combined voting power of the Company's then outstanding securities; or
 
    (b) during any period of not more than two consecutive years (not
  including any period prior to January 1, 1997), individuals who at the
  beginning of such period constitute the Board and any new director
 
                                      A-9
<PAGE>
 
  (other than a director designated by a Person who has entered into an
  agreement with the Company to effect a transaction described in Clause (a),
  (b), or (c) of Section 7.3.3) whose election by the Board or nomination for
  election by the Company's stockholders 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, cease for any reason to constitute
  a majority thereof; or
 
    (c) the shareholders of the Company approve a merger or consolidation of
  the Company with any other corporation, other than
 
      (1) a merger or consolidation which would result in the voting
    securities of the Company outstanding immediately prior thereto
    continuing to represent (either by remaining outstanding or being
    converted into voting securities of the surviving entity) 65% or more
    of the combined voting power of the voting securities of the Company or
    such surviving entity outstanding immediately after such merger or
    consolidation, or
 
      (2) a merger or consolidation effected to implement a re-
    capitalization of the Company (or similar transaction) in which no
    person acquires 30% or more of the combined voting power of the
    Company's then outstanding securities; or
 
    (d) the shareholders of the Company approve a plan of complete
  liquidation of the Company or an agreement for the sale or disposition by
  the Company of all or substantially all the Company's assets; or
 
    (e) the Company enters into an agreement, the consummation of which would
  result in the occurrence of a Change in Control, provided, however, that if
  such agreement requires approval by the Company's shareholders of the
  agreement or transaction or the satisfaction of other conditions, a Change
  in Control shall not be deemed to have taken place unless and until such
  approval is secured and all conditions are satisfied (but upon any such
  approval and the satisfaction of such conditions and the consummation of
  the transaction, a Change in Control shall be deemed to have occurred on
  the date of execution of such agreement); or
 
    (f) the Company or any person publicly announces an intention to take or
  to consider taking actions which, if consummated, would constitute a Change
  in Control, provided that a Change in Control will not be deemed to have
  taken place unless and until actions are taken that constitute a Change in
  Control (but upon the taking of any such actions a Change in Control shall
  be deemed to have occurred on the date of such announcement); or
 
    (g) the Board adopts a resolution to the effect that, for purposes of
  this Agreement, a Change in Control will occur upon the taking of certain
  action provided that the Change in Control shall not be deemed to have
  taken place unless and until such action is taken (but upon the taking of
  such action, a Change in Control shall be deemed to have occurred on the
  date of such resolution of the Board).
 
  "Person" shall have the meaning given in Section 3(a)(9) of the Securities
Exchange Act of 1934, as modified and used in Sections 13(d) and 14(d)
thereof, and shall also include its Affiliates and Associates (as such terms
are used in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934); however, a Person shall not include
 
    (1) the Company, or any wholly owned or controlled subsidiary of the
  Company,
 
    (2) a trustee or other fiduciary holding securities under an employee
  benefit plan of the Company or
 
    (3) a corporation or other entity owned, directly or indirectly, by the
  shareholders of the Company in substantially the same proportions as their
  ownership of stock of the Company.
 
  "Beneficial Owner" shall have the meaning defined in Rule 13d-3 under the
Securities Exchange Act of 1934 as amended from time to time.
 
 
                                     A-10
<PAGE>
 
8. GENERAL PROVISIONS
 
 8.1 Documentation of Awards.
 
  Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Committee from time to time. Such instruments may be in the
form of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by
the Participant but acceptance of which will evidence agreement to the terms
thereof.
 
 8.2 Rights as a Stockholder, Dividend Equivalents.
 
  Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the Participant will obtain
such rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, only upon the issuance of Stock. However, the Committee
may, on such conditions as it deems appropriate, provide that a Participant
will receive a benefit in lieu of cash dividends that would have been payable
on any or all Stock subject to the Participant's Award had such Stock been
outstanding. Without limitation, the Committee may provide for payment to the
Participant of amounts representing such dividends, either currently or in the
future, or for the investment of such amounts on behalf of the Participant.
 
 8.3 Conditions on Delivery of Stock.
 
  The Company will not be obligated to deliver any shares of Stock pursuant to
the Plan or to remove restriction from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulation have been complied with, (c) if the outstanding
Stock is at the time listed on any stock exchange or The Nasdaq National
Market, until the shares to be delivered have been listed or authorized to be
listed on such exchange or market upon official notice of issuance, and (d)
until all other legal matters in connection with the issuance and delivery of
such shares have been approved by the Company's counsel. If the sale of Stock
has not been registered under the Securities Act of 1933, as amended, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
 
  If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
 
 8.4 Tax Withholding.
 
  The Company will withhold from any cash payment made pursuant to an Award an
amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
 
  In the case of an Award pursuant to which Stock may be delivered, the
Committee will have the right to require that the Participant or other
appropriate person remit to the Company an amount sufficient to satisfy the
withholding requirements, or make other arrangements satisfactory to the
Committee with regard to such requirements, prior to the delivery of any Stock
or removal of restrictions thereon. If and to the extent that such withholding
is required, the Committee may permit the Participant or such other person to
elect at such time and in such manner as the Committee provides to have the
Company hold back from the shares to be delivered, or to deliver to the
Company, Stock having a value calculated to satisfy the withholding
requirement. The Committee may make such share withholding mandatory with
respect to any Award at the time such Award is made to a Participant. The
Committee may also, but need not, permit a Participant to tender previously
owned shares of Stock in satisfaction of tax withholding requirements on any
Award.
 
  If at the time an ISO is exercised the Committee determines that the Company
could be liable for withholding requirements with respect to the exercise or
with respect to a disposition of the Stock received upon
 
                                     A-11
<PAGE>
 
exercise, the Committee may require as a condition of exercise that the person
exercising the ISO agree (a) to provide for withholding under the preceding
paragraph of this Section 8.4, if the Committee determines that a withholding
responsibility may arise in connection with the exercise, (b) to inform the
Company promptly of any disposition (within the meaning of section 424(c) of
the Code) of Stock received upon exercise, and (c) to give such security as
the Committee deems adequate to meet the potential liability of the Company
for other withholding requirements and to augment such security from time to
time in any amount reasonably deemed necessary by the Committee to preserve
the adequacy of such security.
 
 8.5 Transferability of Awards.
 
  Unless otherwise permitted by the Committee, no Award (other than an Award
in the form of an outright transfer of cash or Unrestricted Stock) may be
transferred other than by will or by the laws of descent and distribution, and
during a Participant's lifetime, an Award requiring exercise may be exercised
only by the Participant (or in the event of the Participant's incapacity, the
person or persons legally appointed to act on the Participant's behalf).
 
 8.6 Adjustments in the Event of Certain Transactions.
 
  (a) In the event of a stock dividend, stock split or combination of shares,
re-capitalization or other change in the Company's capitalization, or other
distribution to holders of Stock other than normal cash dividends, after the
effective date of the Plan, the Committee will make any appropriate
adjustments to the maximum number of shares that may be delivered under the
Plan under Section 4(a), Section 4(b), and Section 6.5.
 
  (b) In any event referred to in paragraph (a), the Committee will also make
any appropriate adjustments to the number and kind of shares of Stock or
securities subject to Awards then outstanding or subsequently granted, any
exercise prices relating to Awards and any other provision of Awards affected
by such change. The Committee may also make such adjustments to take into
account material changes in law or in accounting practices or principles,
mergers, consolidations, acquisitions, dispositions or similar corporate
transactions, or any other event, if it is determined by the Committee that
adjustments are appropriate to avoid distortion in the operation of the Plan.
 
  (c) In the case of ISOs or Awards intended to qualify for the "performance-
based compensation" exception under Section 162(m)(4)(C) of the Code, the
adjustments described in (a) and (b) will be made only to the extent
consistent with continued qualification of the Option or other Award under
Section 422 of the Code or Section 162(m) of the Code, as the case may be.
 
 8.7 Employment or Other Rights, Etc.
 
  Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary
as an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Committee in any particular case,
the loss of existing or potential profit in Awards granted under the Plan will
not constitute an element of damages in the event of termination of an
employment, service or similar relationship even if the termination is in
violation of an obligation of the Company or any of its subsidiaries to the
Participant.
 
 8.8 Deferral of Payments.
 
  The Committee may agree at any time, upon request of the Participant, to
defer the date on which any payment under an Award will be made.
 
 8.9 Past Services as Consideration.
 
  Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock the Committee may determine that such price has been
satisfied by past services rendered by the Participant.
 
                                     A-12
<PAGE>
 
9. EFFECT, AMENDMENT AND TERMINATION
 
  Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock may be
issued to Employees or other persons.
 
  The Committee may at any time or times amend the Plan or any outstanding
Award for any purpose which may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of Awards, provided that
(except to the extent expressly required or permitted by the Plan) no such
amendment will, without the approval of the stockholders of the Company,
effectuate a change for which stockholder approval is required in order for
the Plan to continue to qualify for the award of ISOs under Section 422 of the
Code or for the award of performance-based compensation under Section 162(m)
of the Code, where the compensation is intended by the Committee so to comply.
 
10. GOVERNING LAW
 
  The Plan shall be construed in accordance with the General Corporation Law
of the State of Delaware.
 
                                     A-13