<PAGE>
 
                                                                   EXHIBIT 10.41

================================================================================

                          GALILEO INTERNATIONAL, INC.

                           1997 STOCK INCENTIVE PLAN

                              AS OF MARCH 1, 1998


                      Established Effective July 30, 1997

================================================================================
<PAGE>
 
                          GALILEO INTERNATIONAL, INC.
                           1997 STOCK INCENTIVE PLAN

                               TABLE OF CONTENTS
                               -----------------
<TABLE> 
<CAPTION> 
                                                                            Page
                                                                            ----
    <S>            <C>                                                      <C>
ARTICLE I--INTRODUCTION......................................................
-----------------------

     Section 1.1    Establishment............................................
     Section 1.2    Purpose..................................................
     Section 1.3    Structure................................................
     Section 1.4    Shares Available.........................................

ARTICLE II--ADMINISTRATION...................................................
--------------------------

     Section 2.1    Administrative Committee.................................
     Section 2.2    Authority................................................
     Section 2.3    Protection...............................................

ARTICLE III--ELIGIBILITY.....................................................
------------------------

     Section 3.1    Eligibility for Stock Options............................
     Section 3.2    Eligibility for Other Awards............................
     Section 3.3    Eligibility of Foreign Employees........................
     Section 3.4    Factors to Consider.....................................

ARTICLE IV--AWARD OF STOCK OPTIONS..........................................
----------------------------------

     Section 4.1    Option Awards...........................................

     Section 4.2    Incentive Options.......................................
          (a)       Exercise Price..........................................
          (b)       Maximum Term............................................
          (c)       Time of Exercise........................................
          (d)       Limits on Incentive Awards..............................
          (e)       Payment.................................................
          (f)       Reload..................................................
          (g)       Loans...................................................
          (h)       Employee Status.........................................
          (i)       Minimum Exercise Amount.................................

     Section 4.3    Nonqualified Stock Options..............................
          (a)       Exercise Price..........................................
</TABLE>

<PAGE>
 
                                     -ii-

 <TABLE>
     <S>          <C>                                                        <C>

          (b)       Maximum Term..............................................
          (c)       Employee Status...........................................
          (d)       Taxation..................................................

[Optional] Section 4.4  Grants to Nonemployee Directors.......................


ARTICLE V--STOCK APPRECIATION RIGHTS..........................................
------------------------------------

     Section 5.1    SAR Awards................................................
     Section 5.2    Price.....................................................
     Section 5.3    Number of Shares..........................................
     Section 5.4    Maximum Term..............................................
     Section 5.5    Time of Exercise..........................................
     Section 5.6    Benefit Amount............................................
     Section 5.7    Payment of the Benefit....................................

ARTICLE VI--STOCK AWARDS......................................................
------------------------

     Section 6.1    Stock Awards..............................................
     Section 6.2    Grant or Sale.............................................
     Section 6.3    Issuance of Stock.........................................
     Section 6.4    Shareholder Rights........................................
     Section 6.5    Purchase and Taxation.....................................
     Section 6.6    Forfeiture or Resale......................................
     Section 6.7    Adjustments...............................................
     Section 6.8    Cash or Stock.............................................

ARTICLE VII--PERFORMANCE SHARE AWARDS.........................................
-------------------------------------

     Section 7.1    Awards Authorized.........................................
     Section 7.2    Performance Shares........................................
     Section 7.3    Performance Goals.........................................
     Section 7.5    Taxation..................................................

ARTICLE VIII--OTHER AWARDS....................................................
--------------------------

     Section 8.1    Other Awards..............................................

ARTICLE IX--ADJUSTMENTS.......................................................
-----------------------

     Section 9.1    Affecting Stock...........................................
     Section 9.2    Affecting the Company.....................................
</TABLE>


<PAGE>
 
                                     -iii-

<TABLE>
     <S>            <C>                                                      <C>
ARTICLE X--CHANGES IN CONTROL................................................
-----------------------------

     Section 10.1   Consequences.............................................
     Section 10.2   Changes in Control.......................................

ARTICLE XI--TERMINATION OF EMPLOYMENT........................................
-------------------------------------

     Section 11.1   Termination..............................................
     Section 11.2   Termination for Cause....................................
     Section 11.3   Non-Employees............................................

ARTICLE XII--TERMS AND CONDITIONS OF AWARDS..................................
-------------------------------------------

     Section 12.1   Contracts and Legends....................................
     Section 12.2   Stock Registration and Rights............................

ARTICLE XIII--NONTRANSFERABILITY.............................................
--------------------------------

     Section 13.1............................................................
     Section 13.2............................................................

ARTICLE XIV--AMENDMENT AND TERMINATION OF PLAN...............................
----------------------------------------------

     Section 14.1   Board Authority..........................................
     Section 14.2   Effect...................................................

ARTICLE XV--MISCELLANEOUS....................................................
-------------------------

     Section 15.1   No Contract of Employment................................
     Section 15.2   Effective Date of Plan...................................
     Section 15.3   Leaves of Absence........................................
     Section 15.4   Governing Law............................................
     Section 15.5   Successors...............................................
     Section 15.6   Notices..................................................
</TABLE>


<PAGE>
 
                          GALILEO INTERNATIONAL, INC.
                           1997 STOCK INCENTIVE PLAN


                            ARTICLE I--INTRODUCTION
                            -----------------------

     Section 1.1  Establishment. Galileo International, Inc. (the "Company")
has adopted the Galileo International, Inc. 1997 Stock Incentive Plan (the
"Plan"), as set forth in this document, effective as of the consummation of the
initial public offering of common stock by the Company on July 30, 1997.

     Section 1.2  Purpose. The purposes of the Plan are to attract, retain and
motivate officers, other key and non-key employees, directors, and consultants
of the Company, by compensating them for their contributions to the growth and
profitability of the Company and by encouraging their ownership of Company
common stock.

     Section 1.3  Structure. To achieve those purposes, the Plan is structured
to provide participating individuals with one or more forms of stock-based
benefits, including incentive stock options, nonqualified stock options, stock
appreciate rights, awards of restricted stock, performance share awards and such
other stock-based or cash awards as may from time to time be deemed appropriate
under the Plan.

     Section 1.4  Shares Available. The maximum aggregate number of shares of
common stock, par value $.01 per share, of the Company (the "Common Stock") as
to which 
<PAGE>
 
                                      -2-


awards may be granted under the Plan is 8,140,000 shares. The shares so awarded
may be authorized but unissued shares, treasury shares (issued shares reacquired
by the Company) or any combination of such shares, as determined from time to
time by the Committee authorized to administer the Plan, which Committee is
described in Article II.

     Such total available number of shares shall be adjusted in accordance with
Article IX below.  A share of Common Stock subject to an option which is
accompanied by tandem stock appreciation rights shall only be counted once (not
as two shares--an option share and an SAR share) towards that maximum.

     In the event that any shares of Common Stock for any reason cease to be
subject to an award without being issued to or on behalf of a Participant in the
Plan, or are reacquired in any way by the Company from the recipient of an award
under the Plan, such shares shall be added to the remaining number of shares of
Common Stock then available for subsequent awards under the Plan.

     The following limits on available awards under the Plan shall also apply:

               (i)   in accordance with applicable regulations under Section
                     162(m) of the Internal Revenue Code of 1986 
<PAGE>
 
                                      -3-

                      (the "Code"), no participant may be awarded, in any five-
                      year period, stock options or stock appreciation rights
                      which in aggregate relate to more than 750,000 shares of
                      Common Stock;

               (ii)   in accordance with applicable Code Section 162(m)
                      regulations, no participant may be awarded restricted
                      stock (subject to performance requirements) or performance
                      share units which in aggregate relate to more than 50,000
                      shares of Common stock for any one performance period; and

               (iii)  aggregate awards of restricted stock that are not subject
                      to performance requirements shall not exceed 814,000
                      shares of Common Stock.
<PAGE>
 
                                      -4-

                          ARTICLE II--ADMINISTRATION
                          --------------------------

     Section 2.1  Administrative Committee.  The Plan shall be administered by
the Compensation Committee of the Company's Board of Directors (the "Board"),
except to the following extent:

               (i)    The entire Board shall have exclusive authority to grant
                      and set the terms and conditions of stock options for
                      officers and any other individuals who are subject to
                      Section 16(b) of the Securities Exchange Act of 1934 (the
                      "Exchange Act");

               (ii)   The Board may, from time to time, assume administration of
                      the Plan or assign to another committee responsibility for
                      administration of all or designated portions of the Plan;

               (iii)  whatever Board or committee is responsible for
                      administration of the Plan, or any portion thereof, may
                      delegate some or all of its authority to one or more

<PAGE>
 
                                      -5-

                      officers of the Company; provided, however, that the
                      administration of stock options to officers and other
                      individuals who are subject to Section 16(b) of the
                      Exchange Act shall at all times rest with either the Board
                      (as provided in (i) above) or a committee designated by
                      the Board consisting of not less than two disinterested
                      nonemployee directors of the Company.

     For this purpose, a disinterested nonemployee director is a member of the
Board who:

               (i)    is not employed by the Company or by any Airline
                      Shareholder of the Company (as defined in Section 10.2
                      below),

               (ii)   has not (except as permitted by Rule 16b-3, or any
                      successor rule, under Section 16(b) of the Exchange Act)
                      received an Award entitling him to stock, restricted
                      stock, stock options, stock appreciation rights, other
                      rights to stock or any other derivative

<PAGE>
 
                                      -6-

                      security of the Company under this Plan or any similar
                      plan of the Company during his tenure on said
                      administrative committee or during the 12-month period
                      prior to commencing service on said committee, and

               (iii)  satisfies any and all other conditions and restrictions
                      necessary for disinterested administration of that stock
                      option aspect of the Plan as set forth in said Rule 16b-3,
                      or any successor thereto.

     For purposes of this Plan, the term "Committee" shall refer to whatever
committee, entity or individual is then authorized to administer the subject
portion of the Plan.

     Section 2.2  Authority.  The Committee shall have complete authority and
power, to be exercised in its discretion, to administer the Plan according to
its terms and applicable law, including, without limitation, the following
responsibilities:

          (a)  to select who shall be eligible for stock options, to grant stock
options and to set the terms and conditions of those options, to designate
options as incentive or

<PAGE>
 
                                      -7-

nonqualified options and to determine what other stock-based rights, if any,
will be awarded to accompany particular options;

          (b)  to select who shall be eligible for stock appreciation rights, to
grant such rights and to set the terms and conditions of those awards;

          (c)  to select who shall be eligible for awards of restricted stock,
to grant such awards and to set the terms and conditions of those awards;

          (d)  to select who shall be eligible for performance share awards, to
grant such awards and to set the terms and conditions of those awards, including
establishing and amending performance periods, measures and objectives on which
such awards are based;

          (e)  to determine eligibility for and the terms and conditions of any
other Common Stock-based or other awards, and to make any such awards, under the
Plan;

          (f)  to interpret the Plan and all options, rights and awards and
agreements entered into in connection with awards made under the Plan;

<PAGE>
 
                                      -8-

          (g)  to make such rules, regulations and procedures (including benefit
claim and appeal procedures) as it deems necessary or appropriate for
administering the Plan;

          (h)  to make such other determinations as it deems necessary or
appropriate for administering the Plan; and

          (i)  to employ such professional and clerical assistance as it deems
necessary for administering the Plan, including attorneys, consultants,
accountants and other persons (any or each of whom may also serve the Company).

The determinations of the Committee shall be final and binding on all interested
persons, subject to reconsideration only through the benefit claim and appeal
procedures established for the Plan.

     Section 2.3    Protection. The Committee shall be entitled to rely on:

                    (i)   Company records relating to eligible individuals, to
                          financial performance and to other matters pertinent
                          to the Plan, and
<PAGE>
 
                                      -9-

                    (ii)  advice, opinions and other work product of any 
                          professionals employed by the Committee.

     No member of the Committee shall be personally liable for any action,
determination or interpretation taken or made in good faith with respect to the
Plan or awards made thereunder, and all Committee members shall be fully
indemnified and protected by the Company for any and all reasonable expenses and
liabilities (including settlement payments) incurred by them with respect to
good faith conduct of the Committee.

                           ARTICLE III--ELIGIBILITY
                           ------------------------

     Section 3.1   Eligibility for Stock Options.  All full-time employees on
the domestic United States payroll of the Company shall be eligible for awards
of stock options under the Plan. Options may be awarded from time to time in the
Committee's discretion to one or more officers or other employees in the
Company's Executive Group. Options may be awarded to employees not in the
Executive Group only when the Committee determines to award stock options to all
such employees at the same time. Nonemployee Directors also shall be eligible
for the Plan to the extent they receive automatic grants of nonqualified stock
options pursuant to Article ___. Nonemployee consultants shall be eligible for
stock options on the same individualized basis as members of the Executive
Group.
<PAGE>
 
                                     -10-

     For purposes of Plan eligibility, the term "Executive Group" of the Company
shall mean all officers of the Company and such other management employees as
the Committee shall designate from time to time. For the same purpose, the term
"Non-Executive Employees" shall refer to all full-time employees on the
Company's domestic payroll who are not members of the Executive Group. The term
"Nonemployee Directors" shall mean those members of the Board who are not
employed by the Company or by any airline which is a Company stockholder.

     Section 3.2   Eligibility for Other Awards.  Only members of the Executive
Group are eligible for any awards other than stock options under the Plan,
except that the Committee may award stock appreciate rights in tandem with any
grant of stock options to any individual who is eligible for stock options.

     Section 3.3   Eligibility of Foreign Employees.  [Reserved]

     Section 3.4   Factors to Consider. In determining who shall receive what
awards and when under the Plan, the Committee shall take into account the nature
of the individual's duties, the person's past, present and potential
contributions to the Company's growth and success, and such other factors as it
shall deem relevant for accomplishing the purposes of the Plan.
<PAGE>
 
                                     -11-

     Awards may be granted singly, in combination or in tandem and may be made
in combination or in tandem with, in replacement of, or as alternatives to,
awards or grants previously made under this Plan or under any other plan or
agreement maintained by the Company (including its parents, its affiliates,
subsidiaries and successors). The Committee may grant to any eligible individual
a new award under this Plan, in exchange for the surrender and cancellation of
any prior award under this Plan or any other plan, having such terms and
conditions as the Committee deems appropriate.

                      ARTICLE IV--AWARD OF STOCK OPTIONS
                      ----------------------------------

     Section 4.1   Option Awards.  The Committee shall be authorized to grant
stock options from time to time to any one or more individuals or groups
eligible for stock options as described in Article III. Each option shall be
evidenced by a written agreement specifying the type of option granted, the
number of shares of Common Stock to which the option pertains, the option
exercise price, the terms for payment of the exercise price, the vesting
schedule for eligibility to exercise the option, the duration of the option, the
terms of any related stock appreciation rights or other awards granted in tandem
with the option, and such additional provisions as the Committee shall
determine. The terms and conditions of option grants and related option
agreements need not be identical or uniform, even as to options granted at the
same time to individuals within the same eligible class. Examples of
<PAGE>
 
                                      -12-

additional option provisions the Committee may choose to include, from time to
time, shall include, without limitation, a noncompetition agreement, a
confidentiality provision, and provisions for forfeiture in the event of
termination of employment involuntarily for Cause or voluntarily without Good
Reason, as those capitalized terms are defined elsewhere in this Plan. The
Committee also shall have the power, in its discretion, to accelerate the dates
for exercise of any or all options, or any part thereof.

      Section 4.2  Incentive Options. All options granted in accordance with the
following terms shall, unless otherwise specified by the Committee in the option
agreement, be incentive stock options intended and interpreted to comply with
Section 422 of the Code and the regulations thereunder.

          (a) Exercise Price.  Except as provided below, the purchase price of
the Common Stock covered by each option shall be no less than 100% of the fair
market value of the Common Stock on the date the option is granted. That fair
market value shall equal the mean between the highest and lowest sales prices of
the Common Stock as reported on the New York Stock Exchange for the date on
which the option is granted. If there are no sales on such date, then the fair
market value shall be the same mean value based on sales for the next preceding
day for which sales were reported on the NYSE. The exercise price shall be
subject to adjustment as provided in Article IX. The date the option is granted
shall

<PAGE>
 
                                      -13-

be the date on which the Committee adopts a resolution granting the option,
provided the recipient is promptly notified and an option agreement is duly
executed as of such date; otherwise the Committee shall determine the grant date
in a manner consistent with any applicable requirements of the Code and
regulations thereunder.

     If the recipient of a stock option grant is, at the time of the grant, the
owner (directly or by attribution) of stock of the Company (or its parents or
subsidiaries) possessing more than 10% of the combined voting power of all
classes of stock issued by any such corporation, then the exercise price instead
shall be at least 110% of the fair market value of the Common Stock covered by
the option, determined in the same manner as specified above. In no event may
the exercise price for any option awarded under the Plan be less than the par
value of the Common Stock covered by the option.

          (b) Maximum Term.  Subject to earlier termination as provided in
Articles IX - XI, each stock option shall expire on the date set in the
applicable option agreement. No option may continue more than ten (10) years
from the date it is granted. However, no option to any 10% owner described in
(a) above may continue more than five (5) years from the date it is granted.

<PAGE>
 
                                      -14-

          (c) Time of Exercise. Subject to acceleration at the Committee's
discretion or in the event of a change in control, as defined in Section 10.2,
each stock option may be exercised, in whole or in part, within such periods or
after such dates (but only during its term) as set forth in the applicable
option agreement. In no event, however, will any option be exercisable before
the one (1) year anniversary of the date of its grant, unless the option has
been accelerated as mentioned above.

     Unless otherwise required by the option agreement, multiple options awarded
to the same individual need not be exercised in the order in which they were
granted, but the individual exercising an option must specify, at the time of
exercise, which option or portion of an option is being exercised. Absent such
designation by the individual, his options will be treated as though exercised
in chronological order.

          (d) Limits on Incentive Awards. The aggregate fair market value
(determined at the time of grant in the manner described in 4.2(a) above) of
Common Stock covered by any and all incentive stock options which become
exercisable for the first time by any particular individual during a calendar
year shall not exceed $100,000. Incentive stock options granted under any other
plans of the Company, its parents, subsidiaries, predecessors or successors also
shall be counted for purposes of applying this $100,000 limit. To the extent any
options granted under this Plan cause that limit to be exceeded for any

<PAGE>
 
                                      -15-

particular individual during any calendar year, such excess portion of the
option(s) shall be considered a nonqualified stock option rather than an
incentive stock option. The most recently granted options shall be converted to
nonqualified status for this purpose before any longer-standing options. Other
than this change to nonqualified status, the option agreement for any such
affected option, or portion thereof, shall remain in full force and effect.

          (e) Payment. The exercise price shall be paid in full at the time of
exercise.  Payment may be made:

               (i)   in cash, using a personal, certified or cashier's check or
                     other instrument acceptable to the Company;

               (ii)  in shares of Common Stock; valued on the date of exercise
                     using the same mean value method described in (a) above;

               (iii) by surrender of any other outstanding awards under this
                     Plan or any other plan of the Company (or any parent,
                     subsidiary, predecessor or successor) to such

<PAGE>
 
                                      -16-

                     extent and in such manner as is acceptable to the
                     Committee; or

               (iv)  by any combination of those three methods.

The Committee may allow and approve arrangements for "cashless" exercise and
payment of stock options. In accordance with Section 4.2(g) below, the Company
may, but is not obligated to, issue loans to selected substantial option
holders, on such terms and conditions as it deems appropriate, to provide them
with cash for exercising options under the Plan.

          (f) Reload. In the discretion of the Committee, the grant of any
option may be accompanied by a reload option. A reload option may be granted for
use by any option holder who satisfies all or part of the exercise price with
shares of Common Stock. The reload option represents an additional option to
acquire the same number of shares of Common Stock as is used to pay the exercise
price on the original option. The reload option will be subject to all the same
terms and conditions as the original option, except that:

               (i)   the exercise price of the shares of Common Stock subject to
                     the reload option will be determined using

<PAGE>
 
                                      -17-

                     the mean value on the date the original option is
                     exercised, and

               (ii)  the reload option will conform to all provisions of the
                     Plan in effect at the time the original option is
                     exercised.

          (g) Loans. The Company may make loans to such option holders as the
Committee, in its discretion, recommends to the Company (including an option
holder who is an officer or director of the Company) in connection with the
option holder's exercise of one or more options granted under the Plan. No such
loan shall be made where it would constitute a "modification" (as defined in
Code Section 424) of any incentive stock option.

     Such loans shall be subject to the following terms and conditions and such
other terms and conditions as the Committee shall determine and which are not
inconsistent with the Plan. Such loans shall bear interest at such rates as the
Committee shall determine from time to time, which rates may be below then
current market rates (except in the case of incentive stock options). In no
event may any such loan exceed the fair market value, at the date of exercise,
of the shares covered by the option, or portion thereof, exercised by the option
holder. No loan shall have an initial term exceeding five years, but any such
loan may

<PAGE>
 
                                      -18-

be renewable at the discretion of the Committee. When a loan shall have been
made, shares of Common Stock having a fair market value at least equal to the
principal amount of the loan shall be pledged by the option holder to the
Company as security for payment of the unpaid balance of the loan. Every loan
shall comply with all applicable laws, regulations and rules of the Board of
Governors of the Federal Reserve System and any other governmental agency having
jurisdiction.

          (h) Employee Status. Except as provided in Article XI below, no
incentive stock option may be exercised at a time when the option holder is not
an employee of the Company, its parent, subsidiary or successor, as determined
in accordance with applicable regulations under Code Section 421.

          (i) Minimum Exercise Amount. Subject to the terms of the option
agreement, during any period in which an option may be exercised the option
holder may exercise his option to purchase any or all of the shares of Common
Stock as to which the option has become exercisable. However, the smallest
number of shares that can be exercised at any one time under an option shall be
100 shares (or the full number of shares then exercisable under the option, if
less than 100).

<PAGE>
 
                                      -19-

      Section 4.3   Nonqualified Stock Options.  The provisions of Section 4.2
above shall apply equally to the award of nonqualified stock options under the
Plan, with the following exceptions:
        
          (a) Exercise Price.  If the Committee so chooses, the exercise price
of a nonqualified stock option can be set at less than the fair market value of
the shares of Common Stock covered by the option, determined as of the date of
the grant.

          (b) Maximum Term.  The term of a nonqualified stock option, as set
forth in the option agreement, need not be limited to the five (5) and ten (10)
year maximums stated in Section 4.3(a) above.  In no event, however, shall the
term exceed twenty-five (25) years from the date of the grant.

          (c) Employee Status.  Nonqualified stock options may be awarded to
eligible individuals under Section 3.1 who are not employees of the Company, or
its parent, subsidiary or any successor.  Hence, at the time of exercise the
option holder also need not be such an employee.  However, such options shall
expire shortly after the option holder ceases his or her service relationship
with the Company as though the option holder had been an employee and his
employment terminated when the service relationship ended, applying the rules
stated in Article XI.
<PAGE>
 
                                      -20-

          (d) Taxation.  Upon exercise of a nonqualified stock option, any
federal, state or local income tax withholding obligations of the Company
relating to income becoming taxable to the option holder in connection with such
exercise shall be satisfied:

               (i)  by withholding any portion of the cash benefit, or

               (ii) by withholding from the option holder's allotment of
                    purchased shares a number of full shares of Common Stock.

Such withholding shall be sufficient in fair market value to meet the amount of
such withholding obligation.  The Company shall pay cash to the option holder
for the value of any fractional share remaining purchased but withheld and not
needed to satisfy the withholding amount.  Such tax withholding may be satisfied
instead by any other method authorized in Section 6.5 for such purpose.
              
      [Optional] Section 4.4  Grants to Nonemployee Directors.  Each nonemployee
director shall automatically be granted an award consisting of a nonqualified
stock option to purchase _____ shares of Common Stock.  That award shall be made
on the later of (i) the first anniversary of the Plan's effective date, or (ii)
the date the individual first becomes a 
<PAGE>
 
                                      -21-

nonemployee director of the Company. The terms of the award shall be governed by
Section 4.3, except as provided in this Section. The exercise price shall be
100% of the fair market value per share, determined as of the date of grant.
Each such option shall have a ten (10) year term.

                      ARTICLE V--STOCK APPRECIATION RIGHTS
                      ------------------------------------
           
      Section 5.1   SAR Awards.  The Committee shall be authorized to grant
awards of stock appreciation rights ("SARs") from time to time, in accordance
with this Article, to any one or more of the same individuals or groups who are
eligible for stock options as described in Article III, subject to Section 3.2.
Each SAR will be evidenced by a written agreement specifying such features as
the number of shares of Common Stock to which the SAR pertains, the base price
per share, the vesting schedule for eligibility to exercise the SAR, the
duration of the SAR, whether the SAR is freestanding or is granted in tandem
with a stock option, the terms for payment and settlement of the SAR benefits
upon exercise, and such additional provisions as the Committee shall determine,
including the sort of additional provisions and discretionary acceleration as
may apply to stock options under Section 4.1 above.  The terms and conditions of
SAR awards and related SAR agreements (which may consist of part of the stock
option agreement where the SAR is granted in tandem with a stock option) need
not be identical or uniform even as to SARs granted at the same time to
<PAGE>
 
                                      -22-

individuals within the same eligible class.  SAR awards may be granted in tandem
with stock option awards or may be freestanding.

      Section 5.2   Price.  The base price per share for any SAR award shall be
set by the Committee at not less than 100% of the fair market value per share of
the Common Stock which is subject to the SAR.  That fair market value shall
equal the mean between the highest and lowest sales price of the Common Stock as
reported on the NYSE for the date on which the SAR is granted.  As with the
value of stock options, determined under Section 4.2(a) above, if there are no
sales on the date of grant then the fair market value shall be the mean value,
determined the same way, based on sales for the next preceding day for which
sales of the Common Stock were reported on the NYSE.  The date an SAR is granted
shall be the date on which the Committee adopts a resolution awarding the SAR,
provided the recipient is promptly ratified and an SAR agreement is duly
executed as of such date; otherwise the Committee shall determine and declare
the grant date in the SAR agreement.
                                         
      Section 5.3   Number of Shares.  The number of shares of Common Stock to
which the SAR is subject shall be determined by the Committee and stated in the
SAR agreement. If the SAR is granted in tandem with a stock option award, the
number of shares covered by the SAR shall equal the number of shares covered by
the stock option.
<PAGE>
 
                                      -23-

      Section 5.4   Maximum Term.  Subject to earlier termination or
acceleration as provided in Articles IX - XI, each SAR shall expire on the date
set by the Committee in the applicable SAR agreement.  No SAR may continue more
than twenty-five (25) years from the date it is granted.  Each tandem SAR shall
have the same duration as the stock option to which it is linked.
                                  
      Section 5.5   Time of Exercise.  Subject to acceleration at the
Committee's discretion, or as provided in Articles IX - XI below, each SAR may
be exercised, in whole or in part, within such periods or after such dates (but
only during its term) as set forth in the applicable SAR agreement.  In no
event, however, will any SAR be exercisable before the one (1) year anniversary
of the date of its grant unless the SAR has been accelerated by the Committee or
as otherwise mandated by the Plan.

     Unless otherwise required by the SAR agreement, multiple SARs awarded to
the same individual need not be exercised in the order in which they were
granted, but the individual exercising an SAR must specify, at the time of
exercise, which SAR or portion of an SAR is being exercised.  Absent such
designation by the individual, his SARs will be treated as though exercised in
chronological order.
<PAGE>
 
                                      -24-

     If a freestanding SAR has not been exercised, or neither a tandem SAR nor
the related stock option has been exercised, before the end of the day on which
the SAR ceases to be exercisable, then the SAR shall be deemed exercised in full
on such expiration date, provided that the fair market value (as determined
under Section 5.6 below) of the SAR shares exceeds (i) the base price set for
the freestanding SAR or (ii) the option exercise price in the case of a tandem
SAR.
                                 
     A tandem SAR shall be exercisable only at such time(s) as the stock option
to which it relates is exercisable, and shall be subject to the restrictions,
conditions and other terms of exercise that are applicable to that stock option.
Upon the exercise of a tandem SAR, the unexercised option, or the portion of the
option to which the exercised portion of the tandem SAR is related, shall
simultaneously expire and shall be surrendered unexercised by the tandem SAR
holder.  Similarly, the exercise of all or any part of the stock option shall
cause the simultaneous expiration of the corresponding portion of the tandem
SAR, which shall be surrendered unexercised by the holder.  The exercise of any
part of a tandem SAR shall cause the corresponding option to expire with respect
to the same number of shares of Common Stock as was subject to the exercised
portion of the SAR, and the same one-to-one relationship holds true for shares
under a tandem SAR expiring when all or part of the corresponding stock option
is exercised.
<PAGE>
 
                                     -25-

     Notwithstanding the foregoing:

               (i)   no right shall be exercisable by an SAR holder who is
                     subject to Section 16(b) of the Exchange Act without the
                     prior consent of the Committee if such exercise would take
                     place within one year after the date of the initial sale of
                     shares of Common Stock of the Company to the public; and

               (ii)  a tandem SAR related to an incentive stock option may only
                     be exercised if the fair market value of a share of Common
                     Stock on the exercise date exceeds the option price.

     Section 5.6  Benefit Amount.  Upon exercise of an SAR, its holder shall be
entitled to receive from the Company a benefit having an aggregate value equal
to:

<PAGE>
 
                                     -26-

          (a)  the excess of:

               (i)   the fair market value on the exercise date of one share of
                     Common Stock, over

               (ii)  the base price per share of the freestanding SAR or the
                     option exercise price where the SAR was granted in tandem
                     with a stock option, as appropriate, times

          (b)  the number of shares of Common Stock with respect to which the
               SAR at that time is being exercised.

Such benefit, once so determined, shall then be adjusted (before payment) for
any tax withholding in accordance with Section 5.7 below.

     The fair market value of a share of Common Stock on the date of exercise of
an SAR shall be the mean between the highest and lowest sales price of the
Common Stock as reported on the NYSE for that date, or if no sales are reported
on that date then the mean value, determined the same way, based on sales for
the next preceding day for which sales of Common Stock were reported on the
NYSE. The date of exercise shall be the date on which the SAR holder releases
for delivery to the Committee his written election to exercise,

<PAGE>
 
                                     -27-

provided delivery follows promptly in the normal course; otherwise the Committee
shall determine the exercise date based on consideration of all relevant facts
and circumstances.

     Section 5.7  Payment of the Benefit.  The benefit determined under Section
5.6 above may be paid in the form of cash, full shares of Common Stock having
the equivalent fair market value (with cash paid in lieu of any fractional
share) or any combination thereof, as elected by the SAR holder. If the SAR
holder is subject to Section 16(b) of the Exchange Act, then no part of his
benefit may be paid in cash unless:

               (i)   his exercise of the SAR and his election to receive cash
                     both occur more than six (6) months after the grant date of
                     the SAR and both occur during the window period beginning
                     on the third business day following the date of release by
                     the Company for publication of its quarterly or annual
                     statement of sales and earnings and ending on the twelfth
                     business day following such release date, and

               (ii)  the Committee approves such cash form of payment.
<PAGE>
 
                                     -28-

     Upon exercise of an SAR, any federal, state or local income tax withholding
obligations of the Company relating to income becoming taxable to the SAR holder
in connection with such exercise shall be satisfied by withholding from the
benefit payment, in cash or an appropriate value of Common Stock as determined
by the Committee, a sufficient amount to satisfy the tax withholding obligation.
The benefit shall consist of the net amount after such tax withholding. Tax
withholding may be satisfied instead by any other method described for that
purpose in Section 6.5 below.

                           ARTICLE VI--STOCK AWARDS
                           ------------------------

     Section 6.1  Stock Awards.  The Committee shall be authorized to grant
stock awards from time to time, in accordance with this Article, to any one or
more of the same individuals or groups who are eligible for stock options as
described in Article III, subject to Section 3.2. Each stock award shall be
evidenced by a written agreement specifying such features as the number of
shares of Common Stock being awarded, the price per share (if any), whether the
stock award is freestanding or is granted in tandem with or in substitution of
any other award under this Plan, and such other terms and conditions as the
Committee shall determine; including any restrictions on vesting of the award
and on transferability of the shares so awarded. The terms and conditions of
stock awards may vary with each individual recipient and with each award.

<PAGE>
 
                                     -29-

     Section 6.2  Grant or Sale.  Common Stock may be awarded by grant or sale
to any eligible individual, either separately from or in tandem with any other
award under this Plan. If granted, the award shall be considered a bonus for
services rendered to the Company. If offered for sale, the Committee shall set
the purchase price at the date the award is made, and such price may be less
than the fair market value of the Common Stock on such date. The Committee shall
set the other terms of the offer, including the exercise period and payment
terms.

     If the award is made in tandem with another award under the Plan: (i) the
exercise of the stock award (if an offer to purchase Common Stock) shall cause
the simultaneous forfeiture of the tandem award as to the same number of shares
as are then purchased under the stock award; (ii) the lapse of restrictions on
vesting of the stock award shall cause the simultaneous forfeiture and
expiration of the tandem award as to the number of shares of Common Stock which
then became vested; and (iii) any exercise of the tandem award shall cause the
simultaneous forfeiture of any unvested or unexercised rights under the related
stock award as to the same number of shares of Common Stock as were subject to
the exercise of the tandem award. Stock awards not granted or sold in tandem
with another award under the Plan shall have no effect on, and shall not be
affected by, the exercise of any other award under the Plan.
<PAGE>
 
                                     -30-

     Section 6.3  Issuance of Stock.  Upon the declaration of a stock award, a
stock certificate representing the number of shares of Common Stock so awarded
shall be registered in the name of the award recipient but shall be held in
custody by the Secretary of the Company for that individual's account until such
time as those shares are forfeited, reacquired by the Company, or any
restrictions on their vesting lapse; as provided in Section 6.4 below.

     In no event, however, may the Committee impose restrictions on stock awards
to employees not in the Company's Executive Group that would lapse on or after
termination of such employee's employment.

     Upon the release of shares of Common Stock from custody due to the lapse of
restrictions, the Secretary of the Company shall deliver to the award recipient
(or the recipient's beneficiary or estate, as the case may be), as directed by
the Committee, a certificate for the number of shares so released. The Company
shall not be required to deliver any fractional share but will pay in lieu
thereof cash equal to the fair market value (using the closing price of the
Common Stock as of the date restrictions lapsed) of such fractional share.
<PAGE>
 
                                      -31-

     Section 6.4 Shareholder Rights. The recipient of a stock award, upon
purchasing Common Stock pursuant to the award or upon grant of an award without
a purchase price, generally shall have the rights and privileges of a
stockholder to the shares of Common Stock being held in custody for the
recipient under Section 6.3 above, including the right to vote such shares,
except that the following restrictions will apply:

               (i)   the recipient shall not be entitled to delivery of the 
                     stock certificates until the Committee instructs the
                     Secretary of the Company that all appropriate restrictions
                     and conditions for such delivery have lapsed or been
                     satisfied;

               (ii)  none of the shares awarded subject to any restrictions may
                     be sold, transferred, assigned, pledged or otherwise
                     encumbered or disposed of by or in respect of the award
                     recipient until such restrictions on vesting and
                     transferability, and any other conditions specified by the
                     Committee, have lapsed or been satisfied; and

               (iii) all of the shares awarded subject to any restrictions on 
                     vesting and transferability, and all rights of the award 
                     recipient to
<PAGE>
 
                                      -32-

                     such shares, shall be forfeited and terminated without
                     further obligation on the part of the Company unless the
                     award recipient has remained in service to the Company (or
                     its parents, subsidiaries or successor) until the lapse of
                     all restrictions and the satisfaction of all other
                     conditions applicable to such shares as prescribed by the
                     Committee.

At the discretion of the Committee, dividends with respect to any shares being
held in custody under this Article may be either currently paid to the award
recipient or withheld by the Company for the recipient's account, and interest
may be credited on the amount of cash dividends withheld at a rate and subject
to such terms as determined by the Committee. Upon the forfeiture of any shares
still held in custody, such shares and any withheld dividends related thereto
shall be transferred to the ownership and account of the Company without further
action by the award recipient who incurred the forfeiture. Any shares on which
dividends are currently paid may not, if later forfeited, be available for reuse
in subsequent awards under the Plan.

      Section 6.5 Purchase and Taxation. No payment will be required for an
award recipient upon the issuance or delivery of any shares under a stock award,
except:
<PAGE>
 
                                     -33-

                   (i)   any purchase price prescribed by the Committee, and

                   (ii)  any amount necessary to satisfy applicable federal,
                         state or local tax requirements shall be withheld or
                         paid promptly upon notification to the Committee of the
                         amount due.


The Committee may permit such amounts to be paid in:

                   (i)   shares of Common Stock previously owned by the award
                         recipient,

                   (ii)  withholding a portion of the shares of Common Stock
                         that would otherwise be distributed to the award
                         recipient in connection with the award, or

                   (iii) a combination of cash and shares of Common Stock.
<PAGE>
 
                                     -34-

Unless otherwise approved by the Committee, an election by an award recipient
who is subject to Section 16(b) of the Exchange Act to use shares of Common
Stock withheld from his award distribution under clause (ii) above shall be made
only during the window period described in Section 5.7(i) above and the
Committee shall have sole discretion to consent to or disapprove of any such
election (which consent or disapproval may be given at any time after the
election to which it relates).

     Section 6.6   Forfeiture or Resale.  Any share of stock awarded under this
Article shall be forfeited, and any share of Common Stock sold under this
Article shall, at the Company's option, be resold to the Company for an amount
equal to the purchase price paid therefore, and in either case such forfeited or
resold shares shall revert to the Company, if:

                   (i)   the award recipient violates any noncompetition or
                         confidentiality provision of his stock award agreement,
                         or breaches any other provision of said agreement;

                   (ii)  the award recipient's employment or service with the
                         Company (or its parents, subsidiaries and successors)
                         terminates before restrictions on his rights to vesting
                         and
<PAGE>
 
                                      -35-

                         transferability of the shares have lapsed, which date
                         cannot be earlier than the first anniversary of his
                         award; or

                   (iii) the award recipient's employment with the Company (or
                         its parents, subsidiaries and successors) terminated
                         for Cause.

     Section 6.7   Adjustments.  Stock awards shall be adjusted, in accordance
with Section 9.1, to reflect any changes in the number of shares, class or
features of Common Stock occurring while the award remains in effect. Thus,
additional or replacement shares of Common Stock shall be made subject to an
outstanding stock award as needed upon a material change in the Common Stock to
give that award the same proportionate Common Stock rights as it had when first
awarded.

     The Committee may accelerate the vesting or lapse of restrictions on stock
awards at any time in its sole discretion.

     Section 6.8   Cash or Stock.  [Reserved]
<PAGE>
 
                                     -36-

                     ARTICLE VII--PERFORMANCE SHARE AWARDS
                     -------------------------------------

     Section 7.1   Awards Authorized.  The Committee shall be authorized to
grant performance share awards from time to time, in accordance with this
Article, to any one or more of the same individuals or groups who are eligible
for stock options as described in Article III, subject to Section 3.2. Each
performance share award shall be governed by a written agreement specifying such
features as the number of shares of Common Stock being awarded, whether the
award is freestanding or is granted in tandem with or in substitution of any
other award under this Plan, the performance targets, goals, periods and
measures for determining whether, when and to what extent the shares subject to
the award will be delivered to the award recipient, and such other terms and
conditions as the Committee shall determine, including any restrictions on
vesting of the award and transferability of the shares so awarded. The terms and
conditions of performance share awards may vary with each individual recipient
and with each award.

     Section 7.2   Performance Shares.  Performance shares represent the right
to receive shares of Common Stock, by grant from the Company, at a future time,
provided the performance goals specified in the award agreement are satisfied.
The award agreement may provide for grants of less than all the shares made
subject to the award where the targeted performance goals are not met but lesser
stated goals are met. No stock certificate shall be
<PAGE>
 
                                     -37-

held in custody during the performance period as with stock awards during the
restriction period. The award recipient shall have no rights of a shareholder
with respect to any shares subject to a performance share award unless and until
such shares are actually delivered in accordance with the terms of the award
agreement and this Plan.

     Section 7.3   Performance Goals.  The Committee shall determine the period
over which performance shall be measured, the measures of performance, the
performance goals, the weighting of multiple performance goals where applicable,
and the levels of performance at which partial and full delivery of shares
subject to the award will become deliverable. The Committee shall have sole
discretion to modify performance goals in response to changing circumstances
during the term of an award, to determine the extent to which goals have been
met and to determine the number of shares, if any, to be distributed under an
award in recognition of the achieved levels of performance. Performance goals
may be based on Company-wide financial performance, based on performance by
smaller units of the Company's business, based on individual performance, or
based on any combination of such areas of performance. Performance periods shall
not be based on the individual award recipient's duration of employment, but if
an award recipient terminates employment before the end of a performance period,
that recipient may, if the award agreement so provides, receive a pro rata share
of any benefit that is earned for the entire performance period based on the
relative duration of his employment under an award in that performance period.
Any
<PAGE>
 
                                     -38-

shares not earned and distributable under the terms of a performance share award
shall be forfeited and remain with the Company for reuse under this Plan.

     Section 7.4   Settlement in Cash or Stock.  Within sixty (60) days after
the end of the performance period, or if later within thirty (30) days after
consolidated financial statements for such period are completed and accepted by
the Company, the Committee shall determine and declare any shares of Common
Stock earned and deliverable under any performance share awards for that
performance period. Distribution of such declared benefit shall be made as
promptly as practicable thereafter; provided, however, that each award recipient
entitled to a distribution may receive such benefit all or in part in cash equal
to the fair market value of the Common Stock, determined by its closing price on
the NYSE as of the last day of the performance period. The Committee has sole
discretion to determine the extent to which such benefit shall be distributed in
cash or in shares of Common Stock.

     Section 7.5   Taxation.  Any amount necessary to satisfy applicable
federal, state or local tax requirements shall be withheld and paid promptly
upon the award recipient's notification to the Committee of the amount due. Such
tax withholding and payment shall be made in the same manner as provided under
Section 6.5 above.
<PAGE>
 
                                     -39-

                          ARTICLE VIII--OTHER AWARDS
                          --------------------------

     Section 8.1   Other Awards.  The Committee has the authority and discretion
to declare and make from time to time other forms of awards based on Common
Stock rights and values, on such terms and conditions as the Committee deems
appropriate and consistent with the purposes of this Plan and the interests of
the Company. Such awards may provide for deferral of compensation through 
equity-based units, for cash payments based in whole or in part on the value or
future value of Common Stock, for the grant or acquisition (currently or in the
future) of Common Stock, for any combination of such awards, or for any other
equity-related awards. Other awards may also include cash benefits based on one
or more criteria determined by the Committee which may be unrelated to the value
of the Common Stock. Each award shall be evidenced and governed by a separate
award agreement.

                            ARTICLE IX--ADJUSTMENTS
                            -----------------------

     Section 9.1   Affecting Stock.  Appropriate adjustment in the maximum
number of shares of Common Stock issuable pursuant to the Plan, the number of
shares subject to awards under the Plan, the exercise price with respect to
options and tandem SARs and the base price with respect to freestanding SARs,
shall be made to give effect to any increase or
<PAGE>
 
                                     -40-

decrease in the number of shares of issued Common Stock resulting from a
subdivision or consolidation of shares whether through reorganization,
recapitalization, stock split, reverse stock split, spin-off, split-off, spin-
out, or other distribution of assets to stockholders, stock distributions or
combination of shares, assumption and conversion of outstanding awards due to an
acquisition by the Company of the stock or assets of any other corporation,
payment of stock dividends, other increase or decrease in the number of shares
with respect to which awards may be granted under the Plan, or in the number of
shares subject to outstanding awards, shall be made except in the event, and
then only to the extent that such adjustment, together with all respective prior
adjustments which were not made as a result of this provision, involves a net
change of more than ten (10) percent:

                    (i)   from the number of shares of Common Stock with respect
                          to which awards may be granted under the Plan, or

                    (ii)  with respect to each outstanding option, from the
                          respective number of shares of Common Stock subject
                          thereto on the date of grant thereof.
<PAGE>
 
                                     -41-

If the number of shares of Common Stock subject to an option has been adjusted
pursuant to this paragraph, and tandem SARs or freestanding SARs have been
granted to the holder of such option, or restricted stock has been granted or
sold to the holder of such option in tandem with the grant of such option, then
the number of such SARs or of such shares of restricted stock shall be adjusted
as necessary to maintain the ratio between the number of shares subject to such
option and the number of such SARs or shares of restricted stock. The decision
of the Committee as to the amount and timing of any such adjustments shall be
conclusive.

     Section 9.2   Affecting the Company.  In the case of dissolution of the
Company,

                   (i)   every option and SAR granted to an Executive Group
                         member outstanding hereunder shall terminate,
                         notwithstanding any restrictions and conditions that
                         may be contained in his option agreement, and

                   (ii)  the restrictions and conditions on restricted stock
                         held by such employee shall lapse and the holders of
                         such restricted stock shall have all the rights of a
<PAGE>
 
                                     -42-

                         stockholder with respect to participation in the
                         dissolution.

Each such option and SAR holder shall have 30 days prior written notice of such
event, during which time he shall have a right, subject to the $100,000 limit in
Section 4.2(d), to exercise his partly or wholly unexercised option and SAR
(without regard to installment exercise limitations, if any).

                         ARTICLE X--CHANGES IN CONTROL
                         -----------------------------

     Section 10.1  Consequences.  In the event of termination of a participant's
employment by the Company without Cause or, in certain cases, by the participant
for Good Reason, as such terms may be defined in the applicable award
agreements, within two years of a change in control, all such participant's
outstanding stock options and stock appreciation rights will become fully
exercisable, all restrictions and conditions of all stock awards then held by
such participant will lapse, and all performance share awards held by such
participant will be deemed to have been fully earned. In the case of a change in
control involving a merger or consolidation involving the Company in which the
Company is not the surviving corporation or becomes a wholly owned subsidiary of
another entity, outstanding and unexercised stock options held by a participant
will be converted into options to acquire
<PAGE>
 
                                      -43-

common stock of the survivor on substantially the same terms and conditions as
the original option, with appropriate adjustments as to the number and kind of
shares and exercise prices.

     Section 10.2 Changes in Control. For purposes of this Plan, a "change in
control" shall be deemed to have occurred when:

          (a) any "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of the Airline
Shareholders (an "Acquiring Person"), is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, or more
than 33 1/3 of the then outstanding voting stock of the Company (49% of the then
outstanding voting stock of the Company if such person or group includes any of
the Airline Shareholders);

          (b) the stockholders of the Company and a majority of the non-employee
directors of the Company approve a merger or consolidation of the Company with
any other corporation, other than 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 by being converted
into voting securities of the surviving entity) at least 66 2/3% of the combined
voting power of the voting securities of the Company, such
<PAGE>
 
                                      -44-

surviving entity or the parent of such surviving entity outstanding immediately
after such merger or consolidation;

          (c) the stockholders of the Company approve a plan of reorganization
(other than a reorganization or liquidation under the United States Bankruptcy
Code or complete liquidation of the Company) or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;

          (d) during any period of two consecutive years (beginning on or after
the effective date of the Plan), individuals who at the beginning of such period
constitute the Board and any new director (other than a director who is a
representative or nominee of an Acquiring Person) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least a majority 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, no longer constitute a majority of the
Board; provided, however, that a change in control shall not be deemed to have
occurred in the event of:

               (i)  a sale or conveyance in which the Company continues as a
                    holding company of an entity or entities that conduct the
                    business or businesses formerly
<PAGE>
 
                                     -45-

                    conducted by the Company if such sale or conveyance does not
                    materially affect the beneficial ownership of the Company's
                    capital stock; or

               (ii) any transaction undertaken for the purpose of
                    reincorporating the Company under the laws of another
                    jurisdiction, if such sale or conveyance does not materially
                    affect the beneficial ownership of the Company's capital
                    stock.

For this purpose of this definition of change in control, "Airline Shareholder"
means any of United Airlines, US Airways or KLM Royal Dutch Airlines.


                     ARTICLE XI--TERMINATION OF EMPLOYMENT
                     -------------------------------------


     Section 11.1 Termination. In the event that the employment of an employee
to whom an award has been granted under this Plan shall be terminated, such
outstanding award may be exercised (to the extent the employee was entitled to
do so at the termination of his employment), subject to all applicable
provisions of this Plan, by the earlier of:

<PAGE>
 
                                     -46-

                (i)  ninety (90) days after such termination date, or

                (ii) the date such award would otherwise expire according to the
                     award agreement.

The earlier of those dates shall become the new expiration date of the award and
the award shall become vested and exercisable as of such employment termination
date. However, if the award involves restricted stock, any shares as to which
the restrictions have not lapsed as of the date the employee's employment
terminates shall be forfeited immediately and reclaimed by the Company.

     If termination of employment is due to the employee's death or total
disability, then the ninety (90) day period for exercise under clause (i) above
shall instead be one year. The employee's designated beneficiary may exercise an
award during the remaining exercise period following the employee's death. For
this purpose, "total disability" shall mean the permanent inability of an
employee, as a result of accident or illness, to perform any and every duty
pertaining to such employee's occupation or employment for which the employee is
suited by reason of previous training, education and experience.

<PAGE>
 
                                      -47-

     Section 11.2  Termination for Cause.  If an employee's termination of
employment is for "Cause," then any outstanding awards granted to the employee
shall expire unexercised on the date his employment is terminated.  For this
purpose, the term "Cause" shall mean that the Committee has determined, in its
sole discretion, that one or more of the following has occurred:

               (i)   The employee is considered to have engaged in conduct that
                     has had or could have an adverse effect on the Company,
                     including (but not limited to): endangering the welfare of
                     the public or other employees; misappropriation or misuse
                     of Company funds, property or confidential information;
                     interference with the Company's relationships with
                     customers, suppliers and others; insubordination; gross
                     negligence; dishonesty or criminality;

               (ii)  The employee is considered to have breached any material
                     terms and conditions of employment, such as any Company
                     policy regarding safety, security, confidentiality,
                     courtesy, attendance, new ideas or 
 
<PAGE>
 
                                      -48-

                     inventions, other business activity, or any other Company
                     policy deemed material under the circumstances;

               (iii) The employee is considered to have breached, in any
                     material respect, any agreement with the Company (including
                     affiliates and business units) regarding any terms and
                     conditions relating to his employment or separation from
                     employment; or

               (iv)  For reasons of poor job performance, attitude, lack of
                     skills or other inability to perform the duties expected of
                     him in a satisfactory manner, it is determined at an
                     appropriate level within the Company that the employee's
                     employment should not continue.

     Section 11.3  Non-Employees.  The service for the Company (or any of its
parents, affiliates, subsidiaries or successors) of a non-employee who has
received an award under the Plan, such as a consultant or nonemployee director,
shall be treated under this Plan as though it were employment by an employee of
the Company under this Article.  Thus, 

<PAGE>
 
                                     -49-
 
Sections 12.1 and 12.2 also shall apply to such nonemployees in the event their
service is terminated.

                  ARTICLE XII--TERMS AND CONDITIONS OF AWARDS
                  -------------------------------------------

     Section 12.1  Contracts and Legends.  Each Key Employee shall agree to
such restrictions and conditions and other terms in connection with the exercise
of any award, including restrictions and conditions on the disposition of the
Common Stock acquired upon the exercise, grant or sale thereof, as the Committee
may deem appropriate.  The certificates delivered to a participant or to the
Secretary of the Company evidencing the shares of Common Stock acquired upon
exercise of an award may, and in the case of a grant or a sale under a stock
award shall, bear a legend referring to the restrictions and conditions and
other terms contained in the respective option agreement or award agreement and
the Plan, and the Company may place a stop transfer order with its transfer
agent against the transfer of such shares.  If requested to do so by the
Committee at the time of exercise of an option or sale of restricted stock, each
participant shall execute a written instrument stating that he is purchasing the
Common Stock for investment and not with any present intention to sell the same.
<PAGE>
 
                                     -50-

     Section 12.2  Stock Registration and Rights.  The obligation of the
Company to sell and deliver Common Stock under the Plan shall be subject to all
applicable laws, regulations, rules and approvals, including, but not by way of
limitation, the effectiveness of a registration statement under the Securities
Act of 1933, if deemed necessary or appropriate by the Committee, for the Common
Stock, options, SARs, and other securities reserved for issuance or that may be
offered under the Plan.  A participant shall have no rights as a stockholder
with respect to any shares covered by an option granted to, or exercised by, him
until the date of delivery of a stock certificate to him for such shares, or
with respect to restricted stock granted or sold to him under a stock award,
until the date of delivery of a stock certificate representing such vested
restricted stock to the Secretary of the Company on his behalf.  No adjustment
other than pursuant to Article IX hereof shall be made for dividends or other
rights for which the record date is prior to the date such stock certificate is
delivered.

                       ARTICLE XIII--NONTRANSFERABILITY
                       --------------------------------

     Section 13.1  Except as provided in Section 13.2 below, or in connection
with unrestricted Common Stock issued pursuant to an award, awards granted under
the Plan and any rights and privileges pertaining thereto, may not be
transferred, assigned, pledged or hypotheticated in any manner, by operation of
law or otherwise, other than by will or by the
<PAGE>
 
                                      -51-

laws of descent and distribution and shall not be subject to execution,
attachment or similar process.  The granting of an option or other award shall
impose no obligation upon the award recipient to exercise such option or award.

     Section 13.2  Notwithstanding the provisions of Section 13.1 above, a
participant, at any time prior to his death, may assign all or any portion of an
award granted to him (other than an incentive stock option) to:

                   (i)   his spouse or lineal descendant,

                   (ii)  the trustee of a trust for the primary benefit of his 
                         spouse or lineal descendant,

                   (iii) a partnership of which his spouse and lineal
                         descendants are the only partners, or

                   (iv)  a tax exempt organization as described in Section
                         501(c)(3) of the Code.
<PAGE>
 
                                     -52-

In such event, the spouse, lineal descendant, trustee, partnership or tax exempt
organization will be entitled to all of the rights of the participant with
respect to the assigned portion of such award, and such portion of the award
will continue to be subject to all of the terms, conditions and restrictions
applicable to the award, as set forth herein and in the related award agreement
immediately prior to the effective date of the assignment.

Any such assignment will be permitted only if:

                    (i)  the Participant does not receive any consideration
                         therefor, and

                    (ii) the assignment is expressly permitted by the applicable
                         award agreement as approved by the Committee.

Any such assignment shall be evidenced by an appropriate written document
executed by the participant, and a copy thereof shall be delivered to the
Company on or prior to the effective date of the assignment.
<PAGE>
 
                                     -53-

                ARTICLE XIV--AMENDMENT AND TERMINATION OF PLAN
                ----------------------------------------------

     Section 14.1  Board Authority. The Board may at any time terminate,
suspend or modify (by written amendment) the Plan without the authorization of
stockholders to the extent allowed by law, including without limitation any
rules issued by the Securities and Exchange Commission under Section 16 of the
Exchange Act. The Committee may amend in writing any award agreement made under
the Plan.

     Section 14.2  Effect.  No termination, suspension or modification of the
Plan shall adversely affect any right acquired by any participant under an award
granted before the date of such termination, suspension or modification, unless
such participant shall consent; but it shall be conclusively presumed that any
adjustment for changes in capitalization as provided for herein does not
adversely affect any such right.  Any member of the Board who is an officer or
employee of the Company shall be without vote on any proposed amendment to the
Plan, or on any other matter which might affect that member's individual
interest under the Plan.
<PAGE>
 
                                     -54-

                           ARTICLE XV--MISCELLANEOUS
                           -------------------------

     Section 15.1  No Contract of Employment.  Neither the adoption of the Plan
nor the grant of any award shall be deemed to obligate the Company or any
subsidiary to continue the employment of any employee for any particular period,
nor shall the granting of an award constitute a request or consent to postpone
the retirement date of any employee.

     Section 15.2  Effective Date of Plan.  The Plan shall become effective
upon adoption by the Board; provided, however, that it shall be submitted for
approval by the holders of a majority of the outstanding shares of common stock
of the Company present, or represented, and entitled to vote at a stockholders'
meeting held within 12 months thereafter, and awards granted prior to such
stockholder approval shall become null and void if such stockholder approval is
not obtained.

     Section 15.3  Leaves of Absence.  The Committee shall be entitled to make
such rules, regulations and determinations as it deems appropriate under the
Plan regarding any leave of absence taken by an employee who is the recipient of
any award.  Without limiting the generality of the foregoing, the Committee
shall be entitled to determine:
<PAGE>
 
                                     -55-

                    (i)  whether or not any such leave of absence shall
                         constitute a termination of employment within the
                         meaning of the Plan, and

                    (ii) the impact, if any, of any such leave of absence on
                         awards under the Plan theretofore made to any employee
                         who takes such leave of absence.

     Section 15.4  Governing Law.  The Plan, and all agreements hereunder,
shall be construed in accordance with and governed by the laws of the State of
Illinois and, where applicable, the federal laws and regulations referenced
herein.

     Section 15.5  Successors.  In the event of a sale of substantially all of
the assets of the Company, or a merger, consolidation or share exchange
involving the Company, all obligations of the Company under the Plan with
respect to awards granted hereunder shall be binding on the successor to the
transaction.  Employment of an employee with such a successor shall be
considered employment of the employee with the Company for purposes of the Plan.
<PAGE>
 
                                     -56-

     Section 15.6  Notices.  Notices given pursuant to the Plan shall be in
writing and shall be deemed received when personally delivered or five days
after mailed by United States registered or certified mail, return receipt
requested, addressee only, postage prepaid. Notice to the Company shall be
directed to:

                          ---------------------------

                          ---------------------------

                          ---------------------------


     IN WITNESS WHEREOF, this 1997 Stock Incentive Plan, having been first duly
adopted, is hereby executed below by a duly authorized officer, to take effect
as provided herein.

                                                     GALILEO INTERNATIONAL, INC.




                                                By:  ---------------------------

                                                Its: ---------------------------