CONFORMED COPY
                                                                  --------------

                              EMPLOYMENT AGREEMENT

         [As Amended through Amendment No. 3 effective October 13, 1998]


DATED:    August 27, 1991 [original date]

BETWEEN:  FRED MEYER STORES, INC.
          3800 SE 22nd Avenue
          Portland, OR  97202                                          "Company"

AND:      ROBERT G. MILLER
          0305 SW Montgomery # F508
          Portland, OR  97201                                         "Employee"

          The parties agree as follows:

     1. General.

        This Agreement sets forth the terms upon which Employee shall be
employed by the Company. Notwithstanding the foregoing, the Company may
terminate the Employee's employment at any time, and Employee's employment
hereunder will be considered "at will," subject to the Company's providing the
benefits hereinafter specified in accordance with the terms hereof.

     2. Employment.

        Employee shall be employed by Company on a full-time basis to perform
duties as Chief Executive Officer and member of the Board of Directors of the
Company.

     3. Compensation and Disability Benefits.

          3.1 Salary. For services performed during the term of Employee's
employment with the Company, the Company shall pay Employee an annual salary
(prorated for any portion of a year), payable in equal periodic installments not
less than monthly, of $1,000,000, subject to annual review by the Compensation
Committee of the Board of Directors of the Company.

                                       1

<PAGE>
          3.2 Bonus. Employee will be eligible to participate in the Company's
bonus plan on the same basis as other executives. Employee's bonuses for the
Company's 1998 fiscal year and for fiscal years thereafter will be up to 60
percent (or such higher percent as may be determined by the Company's Board of
Directors) of his annual salary, to be determined upon the achievement of
financial objectives approved in advance by the Company's Board of Directors.


          3.3 Insurance/Profit Sharing. Employee shall be entitled to
participate as an executive officer in all existing Company insurance, profit
sharing and other benefit plans in which executive officers may participate,
including the Company's Excess Deferral Plan, on the same basis as other
executive officers of the Company.

          3.4 Long Term Disability Benefits. The Company will provide to
Employee the long term disability benefits described in Appendix A to this
Agreement. This benefit is in addition to benefits under any group disability
benefit plan purchased by the Employee, but shall not be payable in the event of
a termination under Paragraph 4. In the event of Total Disability as defined in
Appendix A, Employee's salary provided for in Paragraph 3.1, will be continued
during the elimination period.

          3.5 Retiree Medical Benefits. After termination of Employee's
employment for any reason, the Company shall pay Employee upon obtaining age 55,
or shall pay Mrs. Sharon Miller (his Spouse) if she and Employee are married on
his date of death and she survives him, as applicable, a medical supplement to
the extent determined as follows:

                (a) The supplement shall compensate for the premium value to
          Employee of medical coverage comparable to that

                                       2

<PAGE>
          provided under the Company's program applicable to retirees generally
          (the Fred Meyer Plan) during any period in which the following
          applies:

                    (1) Neither Employee nor his surviving Spouse is eligible
               for coverage under the Fred Meyer Plan.

                    (2) Neither employee nor his surviving Spouse is eligible
               under a plan of a successor employer for medical benefits that
               are reasonably comparable to benefits under the Fred Meyer Plan.

                    (3) Employee is at least 55 years old.

               (b) The supplement shall not exceed the smallest of the following
          amounts, as applicable, reduced by the employee cost applicable at the
          time under the Fred Meyer Plan (references to Employee shall include
          his Spouse): 

                    (1) The cost of COBRA continuation coverage available from
               the Company that Employee could have received by timely election.

                    (2) The cost to Employee for coverage if Employee had timely
               exercised all available conversion rights under the Company's
               medical program for active employees.

                                        3

<PAGE>
                    (3) The cost to Employee of the coverage actually in effect
               for Employee from time to time to the extent the coverage is
               reasonably comparable to coverage under the Fred Meyer Plan at
               the time. 

               (c) The supplement shall be paid only with respect to benefits
          Employee would have received under the Fred Meyer Plan if Employee had
          terminated when eligible under that Plan. 

               (d) The supplement shall be paid in cash to Employee or his
          surviving Spouse or, at the Company's election, by direct payment of
          the appropriate portion of the cost of coverage. The amount paid shall
          constitute compensation income to Employee or his surviving Spouse,
          shall be reported on IRS form W-2 and any applicable state form, and
          shall be subject to all applicable state and federal withholding as
          non-qualified deferred compensation. 

     4. Severance. 

          4.1 In the event Employee is terminated by the Company for any reason
other than for Cause as defined in Paragraph 4.5, death or permanent disability
and the termination is not a Qualifying Termination as defined in Paragraph 4.3,
Employee shall be entitled to payment of compensation at Employee's last
determined salary (payable on the Company's normal payroll dates and without
interest) for two years or until the date of his death if earlier.

                                        4

<PAGE>
          4.2 In the event Employee's employment with the Company ends in a
Qualifying Termination, Employee shall receive Severance Compensation as
provided below. 

          4.3 Qualifying Termination means: 

               (a) Termination by the Company, for any reason other than for
          Cause, in anticipation of or within three years after a Change in
          Control. 

               (b) Termination in anticipation of or within three years after a
          Change in Control, if such termination is initiated by Mr. Miller due
          to Constructive Discharge. Constructive Discharge means a material
          reduction (other than for Cause) in Employee's compensation, benefits
          or responsibilities in the capacity specified in Paragraph 2, or an
          irreconcilable disagreement with the Board of Directors of the Company
          over policy matters materially impairing Mr. Miller's ability to carry
          out his responsibilities as Chief Executive Officer of the Company.

               (c) Termination within 18 months after a Change in Control if
          such termination is initiated by Mr. Miller for any reason. 

          4.4 "Severance Compensation" means:

               (a) Lump sum payment within 15 days after termination of
          employment of the amount determined by adding Employee's Monthly Pay
          Rate (MPR) projected for 36 months

                                        5

<PAGE>
          and converted to an immediate lump sum payment using an interest
          assumption equal to the Prime Rate published in the Wall Street
          Journal on the date of termination (or on the date next published in
          the Wall Street Journal if not published on the date of termination).
          Subject to the following sentence, MPR means 1.6 times Employee's
          highest annualized base salary rate during his employment with the
          Company, divided by 12. If, on or after January 1, 1999, the bonus
          rate applicable under the Company's executive bonus plan referred to
          in Paragraph 3.2 with respect to the plan year during which the
          termination of employment occurs is higher than 60 percent (but not
          above 100 percent), the fraction above 1.0 shall be increased to
          reflect the increased percentage. For example, if the bonus percentage
          is 80 percent for the applicable year, the MPR will be 1.8. Elective
          deferred compensation, if any is deferred from base salary, shall be
          attributed to the period when earned. Bonuses and all other taxable
          income or non-taxable income from sources other than base salary (such
          as stock options, fringe benefits and other non-salary compensation of
          any kind) shall be disregarded. Salary reductions, if any, set by the
          Board of Directors after October 16, 1998 shall be disregarded. 

               (b) Payment within 15 days after termination of employment (or as
          soon thereafter as the amount can reasonably

                                        6

<PAGE>
          be calculated) of the Employee's Imputed Retirement Benefits (IRB)
          projected for 36 months and converted to an immediate lump sum
          payment, using the interest rate specified in (a). IRB means benefits
          Employee would have earned under all qualified and non-qualified
          pension and savings plans of the Company in which Employee was
          participating immediately prior to the Qualifying Termination or the
          Change in Control relating to the Qualifying Termination, whichever is
          more favorable to Employee. The 36-month projection shall be made in
          accordance with the applicable plan terms, assuming no change in
          Employee's pay rate, plan terms and other pertinent factors. Severance
          Compensation paid under this agreement shall not be counted as covered
          compensation under any benefit plan of the Company. 

               (c) Subject to Paragraph 4.6, during the three year period
          following the Qualifying Termination, the Company will continue to
          provide Employee and his dependents who are eligible for coverage as
          at the Qualifying Termination with all health and welfare benefit
          coverage in effect for him (and for his eligible dependents as
          applicable) to the fullest extent possible as though Employee's
          eligible employment continued during the three-year period, except
          that fringe benefits associated with ongoing employment such as
          automobile and

                                        7

<PAGE>
          other transportation and club memberships shall not be continued. All
          such coverage shall be provided at the level in effect when the
          Qualifying Termination occurred, or when the Change of Control
          occurred if more favorable to Employee and his dependents. Where
          continued coverage under the terms of the Company's health and welfare
          plans is not possible, the Company shall secure alternative benefit
          coverage which is comparable in terms to that provided under such
          plans, for Employee and his eligible dependents. Such continuation
          shall be contingent upon ongoing payment of any co-payments and
          application of any deductibles required to be paid under the
          applicable terms of each benefit program. This continuation shall
          apply before commencement of retiree medical coverage for Employee as
          provided in Paragraph 3.5. 

               (d) A single sum payment, to be paid to Employee as soon as
          reasonably practicable, but in no event more than 15 days following
          the effective date of the Qualified Termination, of a cash amount
          equal to the sum of (i) any accrued but unpaid salary and (ii) the
          product of (A) the annual incentive bonus to which Employee would have
          been entitled under the executive bonus plan or arrangement of the
          Company in effect for Employee for the plan year that includes such
          effective date had Employee continued in employment until the last day
          of such

                                        8

<PAGE>
          plan year (or other date required to be eligible to receive an annual
          bonus for such year) and assuming that the maximum performance
          objectives for such plan year had been achieved, multiplied by (B) a
          fraction, the numerator of which equals the number of days in the plan
          year that have elapsed as of such effective date and the denominator
          of which equals 365. 

               (e) Payment to Employee at a suitable time or times of the amount
          or amounts specified in Appendix B as an excise tax Gross-Up Payment
          in connection with this Agreement. In this connection, the Company and
          Executive agree to the provisions of Appendix B, which are
          incorporated herein by this reference. 

          4.5 "Cause" is defined for the purposes of this Agreement as: 

               (a) Conviction of a felony which in the judgment of the Board of
          Directors of the Company adversely affects the business or reputation
          of the Company; 

               (b) Material and willful dishonesty, extreme misconduct or other
          failure to perform substantial duties as Chief Executive Officer or as
          a member of the Board of Directors, that is demonstrably and
          materially injurious to the Company and which has not been cured
          within 30 days after a written demand for substantial performance is
          delivered to Employee by or on behalf of the Board of Directors, which

                                        9

<PAGE>
          demand specifically identifies the manner in which the Board of
          Directors believes that Employee has not substantially performed his
          duties. 

          4.6 Employee will not have any duty to mitigate the costs to the
Company of the Severance Compensation. Any compensation payable to Employee by
an employer unaffiliated with the Company with respect to employment after a
Qualifying Termination will not offset Severance Compensation payable or require
return of Severance Compensation paid under this Agreement, except that health
or welfare benefit coverage provided to Employee will be reduced to the extent
that he (and his eligible dependents, if applicable) receive comparable health
or welfare benefit coverage from subsequent employment. This provision does not
limit the application of Paragraph 4.7.

          4.7 Except as provided below, Employee's receipt and retention of any
and all Severance Compensation is conditioned on Employee's not making
unauthorized disclosure of confidential information relating to the Company for
a period of three years after a Qualifying Termination, and not engaging
directly or indirectly in competition with the Company, whether as an employee,
sole proprietor, partner, independent contractor, director or otherwise, within
the geographical area in which the Company has offices or other business
locations for a period of three years after a Qualifying Termination. Membership
by Employee on the board of directors of a publicly held corporation, if such
membership has continued for at least six months as of the date of the
Qualifying Termination, may be continued and such continuation shall not
constitute competition (but Employee still must not disclose confidential
information). Competition means providing services or information or material
financing, without prior written approval of the Board of

                                       10

<PAGE>
Directors of the Company, to any enterprise other than the Company if the
enterprise is engaged in the same business as the Company and has sales or gross
income of $250,000,000 or more in a year during which the competition occurs, or
in any of the five prior years. Financing includes lending money to or owning
stock or other securities or any partnership or other ownership interest in an
enterprise, but shall not include purchase or ownership of securities of an
enterprise (including a publicly held or privately held corporation) so long as
Employee does not own in the aggregate more than 5 percent of the outstanding
securities of the enterprise at the time of purchase of any such securities. For
purposes of this Paragraph 4.7, the term "Company" includes all affiliates of
the Company as of the date of the Qualifying Termination or, if earlier, the
date immediately before the Change in Control to which the Qualifying
Termination relates. If the Board of Directors of the Company reasonably
determines that Employee has violated this provision, it shall notify Employee
in writing of the violation and Employee shall have 60 days from the date of the
notice to cure the violation. If the violation is not so cured by the end of the
60-day period, the Board of Directors may refuse to pay any as yet unpaid
portion of Severance Compensation and Employee shall return to the Company all
Severance Compensation Employee has received, thereby forfeiting all benefit
from such Severance Compensation. The three year limitation referred to in the
foregoing sentences does not limit or otherwise qualify Employee's general
obligations of loyalty to the Company and duty not to compete with the Company
or disclose confidential information arising as a result of Employee's service
as an employee, officer and director of the Company. Any forfeiture of Severance
Compensation under this provision shall not be an offset against claims for
damages or impair other remedies the Company may

                                       11

<PAGE>
have as a result of any unauthorized disclosure or competition in violation of
those general obligations of Employee to the Company.

     5. Pension and Benefits.

          5.1 Normal Retirement Benefit. Employee's normal retirement benefit
shall be a pension starting at the end of the first month after Employee's
normal retirement date or termination of employment if later and continuing for
Employee's life equal to $25,000 per month. Normal retirement date is the later
of age 62 or the third anniversary of Employee's Qualifying Termination if that
anniversary is after Employee reaches age 62. 

          5.2 Early Retirement Benefit. Employee may elect to receive the
accrued normal retirement benefit starting at the end of any month following
termination of employment provided that no such early retirement benefit shall
be payable before age 55 or during the three-year period following a Qualifying
Termination. If benefits start before the end of the first month after normal
retirement date, the amount referred to in Paragraph 5.1 shall be reduced 5/12
of one percent for each month by which the benefit starts early. 

          5.3 Spouse's Death Benefit. If Employee dies while married to his
Spouse, she shall receive a monthly pension for her life as follows: 

               (a) If Employee had retired and was receiving benefits or dies
          during the first month for which benefits were to be paid, one half of
          Employee's monthly benefit shall continue to the Spouse. 

               (b) If (a) does not apply, the Spouse may elect to start a
          benefit as of the end of any month after the later of the date of
          death or the date Employee would have reached age 55.

                                       12

<PAGE>
          The benefit shall be one half of the amount Employee would have
          received if he had terminated just before death and elected to start
          benefits at the date benefits start to the Spouse.

          5.4 Additional Benefit. Retirement and Spouse's death benefit under
5.1 through 5.3 shall be in addition to and shall not reduce or be reduced by
any benefits under the Supplemental Income Plan, the Excess Deferral Plan, the
Profit Sharing Plan or any other plan maintained by the Company or an affiliate.

     6. Miscellaneous Benefits.

          6.1 Club Membership. The Company shall pay the cost of one club
membership for Employee during the terms of Employee's employment with the
Company. 

          6.2 Automobile. The Company will provide an automobile for Employee's
use while he is employed by the Company. The Company will also pay all operating
expenses associated with the automobile. 

          6.3 Vacation. Employee will be entitled to five weeks of vacation
annually. 

          6.4 Medical Expenses. Beginning on the date Employee commences
employment with the Company, the Company will provide reimbursement for medical
expenses of Employee and his dependents under the Company's medical
reimbursement plan, without any waiting or qualification period and without
exclusions for any existing conditions. 

     7. Change in Control.

          7.1 Subject to 7.2, Change in Control means the occurrence of any of
the following events:

                                       13

<PAGE>
               (a) The shareholders of the Company approve: (i) any merger,
          statutory plan of exchange or other business combination involving the
          Company, other than any such transaction immediately following which
          the holders of the Company's capital stock immediately prior to such
          transaction continue to own equity securities of the surviving entity
          representing more than 50 percent of the equity securities of such
          entity entitled to vote generally in the election of directors of such
          entity, or (ii) any sale, lease, exchange, or other transfer (in one
          transaction or a series of related transactions) of all or
          substantially all of the assets of the Company or the adoption by the
          Company of any plan or proposal for the liquidation or dissolution of
          the Company; 

               (b) The commencement of a tender or exchange offer (other than
          one made by the Company) for any capital stock of the Company (or
          securities convertible into such capital stock), provided a Change in
          Control shall be deemed to have occurred only if such offer results in
          a portion of those securities being purchased and the offeror after
          the consummation of the offer is the beneficial owner (as determined
          pursuant to Section 13(d) of the Securities Exchange Act of 1934, as
          amended (the "Exchange Act")), directly or indirectly, of securities

                                       14

<PAGE>
          representing at least 20 percent of the voting power of outstanding
          securities of the Company; 

               (c) A report on Schedule 13D of the Exchange Act is filed with
          the Securities and Exchange Commission or is received by the Company
          reporting the beneficial ownership by any person of securities
          representing 20 percent or more of the voting power of outstanding
          securities of the Company, except that if such report shall be filed
          or so received during a tender offer or exchange offer described in
          subparagraph (b) above, the provisions of such subparagraph shall
          apply in determining whether a Change in Control occurs; or 

               (d) During any period of 12 consecutive months or less,
          individuals who at the beginning of such period constituted a majority
          of the Board of Directors of the Company cease for any reason to
          constitute a majority thereof unless the nomination or election of
          such new directors was approved by a vote of at least two-thirds of
          the directors then still in office who were directors at the beginning
          of such period. 

          7.2 Notwithstanding anything in 7.1 to the contrary, no Change in
Control shall be deemed to have occurred for purposes of this Agreement by
virtue of any transaction which results in Employee, or a group (within the
meaning of Section 13(d)(3) of the Exchange Act) of persons which includes
Employee, acquiring, directly or indirectly,

                                       15

<PAGE>
securities representing 20 percent or more of the voting power of outstanding
securities of the Company. 

     8. Successors and Assigns; Entire Agreement.

          8.1 The rights and benefits of Employee under this Agreement are
personal to him and, except as may be set forth herein, may not be transferred
or assigned voluntarily or involuntarily.

          8.2 This Agreement shall be binding on the Company, its successors and
assigns, including any person acquiring control of the Company's business and
operations. 

          8.3 This Agreement contains the entire agreement and understanding by
and between the Employee and the Company with respect to the employment of
Employee and the payments provided for in this Agreement shall be in lieu of any
other claims of Employee relating to his employment or benefits, including
claims relating to termination of employment. 

     9. Applicable Law. This Agreement shall be construed in accordance with the
laws of the State of Oregon. 

AGREEMENT DATED AUGUST 27, 1991 EXECUTED AS FOLLOWS:
---------------------------------------------------

                                   FRED MEYER, INC.


                                   By:  KENNETH THRASHER, SR. V.P.
                                        ----------------------------------------


                                   ROBERT G. MILLER
                                   ---------------------------------------------
                                   Robert G. Miller

                                       16

<PAGE>
AMENDMENT NO. 1 DATED AUGUST 1, 1994 EXECUTED AS FOLLOWS:
--------------------------------------------------------

                                   FRED MEYER, INC.


                                   By:  ROGER A. COOKE
                                        ----------------------------------------
                                   Executed:  July 14, 1994

                                   ROBERT G. MILLER
                                   ---------------------------------------------
                                   Robert G. Miller
                                   Executed:  July 19, 1994


AMENDMENT NO. 2 DATED SEPTEMBER 9, 1997 EXECUTED AS FOLLOWS:
-----------------------------------------------------------

                                   FRED MEYER STORES, INC.


                                   By:  ROGER A. COOKE
                                        ----------------------------------------
                                   Executed:  December 5, 1997

                                   ROBERT G. MILLER
                                   ---------------------------------------------
                                   Robert G. Miller
                                   Executed:  December 5, 1997


AMENDMENT NO. 3 DATED OCTOBER 13, 1998 EXECUTED AS FOLLOWS:
----------------------------------------------------------

                                   FRED MEYER STORES, INC.


                                   By:   ROGER A. COOKE
                                         ---------------------------------------
                                   Executed: October 18, 1998


                                   ROBERT G. MILLER
                                   ---------------------------------------------
                                   Robert G. Miller
                                   Executed: October 18, 1998

                                       17

<PAGE>
                                   APPENDIX A
                             TO EMPLOYMENT AGREEMENT
                                     BETWEEN
                   FRED MEYER STORES, INC. (the "Company") and
                           ROBERT MILLER ("Employee")
                          LONG TERM DISABILITY BENEFITS


     1. Definition of "Total Disability".

          "Total Disability" means the complete inability of an employee to
perform any and every duty of his or her regular occupation for up to 24 months.
After 24 months, the term "Total Disability" means the complete inability of an
employee to perform any and every duty of any gainful occupation for which he or
she is reasonably fitted by training, education, or experience, or may
reasonably become qualified based on his or her training, education, or
experience.

     2. Long Term Disability Benefits.

          2.1 Upon receipt of proof that Employee has suffered a Total
Disability as a direct result, independent of all other causes, of an injury or
illness, monthly benefits will be effective after the expiration of the
elimination period, which is the period of six consecutive months of continuous
Total Disability.

          2.2 The benefit in the event of Total Disability will be $4,500 per
month.

          2.3 The monthly benefit will be reduced by the following:

               1. The amount available under any Worker's Compensation law or
     similar law.

               2. The amount of disability provided under any plan to which the
     Company makes contributions on behalf of the Employee.

               3. Any disability income benefits provided under an act or law.

                                        1

<PAGE>
               4. Disability income benefits provided or available from any
     pension plan participated in by the Company.

               5. Social Security Disability benefits provided or available.

               6. Any salary, sick pay, or other income replacement benefits
     provided by the employer.

               7. Any retirement income provided or available from the
     Employment Agreement between the Company and Employee, or from any Company
     sponsored pension or retirement plan, including Social Security retirement
     income.

                           8. Any retirement  income  provided or available from
         any prior employer of Employee.

     3. General Limitations.

          3.1 No benefits shall be paid with respect to any injury or sickness:

               1. Resulting from suicide, attempted suicide, or intentionally
     self- inflicted injury, while sane or insane.

               2. Resulting from war, whether declared or undeclared, or any act
     or hazard of war.

               3. Resulting from being engaged in an illegal occupation,
     commission of, or attempted commission of an assault or other illegal act,
     or resulting from injury caused by participation in a civil insurrection,
     rebellion and/or riot.

               4. Sustained while on full-time active duty in any branch of the
     Armed Forces of any country, except for temporary active duty assignments
     of note more than 90 days.

               5. Sustained while learning to operate an aircraft, operating or
     serving as a crew member of an aircraft, while traveling or flying in any
     aircraft

                                        2

<PAGE>
     operated by or under the direction of any military authority, or while in
     any aircraft being used for test or experimental purposes.

               6. Resulting from or related to alcoholism, narcotism or the
     abuse of other controlled substances.

          3.2 Mental Illness Limitation - No benefits are provided with respect
to disabilities due to neuroses, psychoneuroses, psychopathies, psychoses, and
emotional diseases and disorders of any type.

     4. Notice and Proof of Claim.

          To make a claim for benefits proof of disability must be submitted to
and received by the Company within 20 days after Employee suffers a Total
Disability.

     5. Termination of Coverage.

          The Long Term Disability benefits provided above will only be provided
if Employee is employed by the Company at the time he suffers a Total
Disability.

                                   APPENDIX B
                             TO EMPLOYMENT AGREEMENT
                                     BETWEEN
                   FRED MEYER STORES, INC. (the "Company") and
                           ROBERT MILLER ("Employee")
                                Gross-Up Payment


     1. Subject to the following provisions of this Appendix B, but otherwise
anything in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to or for
the benefit of Employee (whether paid or payable or distributed or distributable
pursuant to the terms of the Agreement or otherwise, but determined without
regard to any additional payments required under this Appendix B (a "Payment")
would be subject to the excise tax imposed by

                                        3

<PAGE>
Section 4999 of the 1986 Internal Revenue Code, as amended (the "Code"), or any
interest or penalties are incurred by the Employee with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Company shall
make a payment (a "Gross-Up Payment") to Employee in an amount such that, after
payment by Employee of all income or other taxes (and any interest and penalties
imposed with respect thereto) and Excise Taxes imposed on the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed on the Payments. 

     2. Subject to the provisions of paragraph 3 of this Appendix B, all
determinations required to be made under this Appendix B, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by a certified public accounting firm designated by Employee (the Employee
Accounting Firm) which shall provide detailed supporting calculations both to
the Company and to Employee within fifteen business days of the receipt of
notice from Employee that there has been a Payment, or such earlier times as is
requested by Employee. If the Employee Accounting Firm determines that no Excise
Tax is payable by Employee, it shall, upon the written request of Employee,
furnish Employee with a written opinion that failure to report the Excise Tax on
the Employee's applicable federal income tax return would not result in the
imposition of a negligence or similar penalty. The calculations prepared by the
Employee Accounting Firm shall be reviewed on behalf of the Company by the
Company's independent auditors (the "Company Accounting Firm") which shall
provide its conclusions, together with detailed supporting calculations, both to
the Company and Employee within fifteen business days after receipt of the
calculations and supporting materials prepared by the Employee Accounting Firm.
In the

                                        4

<PAGE>
event of a dispute between the Employee Accounting Firm and the Company
Accounting firm, such firms shall, within five business days of receipt of the
conclusions and supporting materials prepared by the Company Accounting Firm,
jointly select a third nationally recognized certified public accounting firm
(the "Third Accounting Firm") to resolve the dispute. The Third Accounting Firm
shall submit its conclusions to the Company and Employee within fifteen business
days after receipt of notice of its appointment hereunder and the decision of
the Third Accounting Firm shall be final, binding and conclusive upon Employee
and the Company. All fees and expenses of all such accounting firms shall be
borne sole by the Company. Any Gross-Up Payment shall be paid by the Company to
Employee within five business days after the earlier of acceptance by the
Company of the calculations prepared by the Employee Accounting Firm or the
Company's receipt of the Third Accounting Firm's determination.

     3. As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination of whether any Gross-Up Payment
should be made hereunder, it is possible that a Gross-Up Payment will have been
due but not made by the Company (an "Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant this Appendix B and Employee thereafter is
required to make a payment of any Excise Tax, the Employee's Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Employee.

     4. Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-up Payment. Such notification shall be given as soon as
practicable but no later than

                                        5

<PAGE>
ten business days after Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. Employee shall not pay such claim prior to the
expiration of the thirty day period following the date on which it gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies
Employee in writing prior to the expiration of such period that it desires to
contest such claim, Employee shall:

               (a) Give the Company any information reasonably requested by it
          relating to such claim;

               (b) Take such action in connection with contesting such claim as
          the Company shall reasonably request in writing from time to time,
          including, without limitation, accepting legal representation with
          respect to such claim by an attorney reasonably selected by the
          Company and acceptable to Employee;

               (c) Cooperate with the Company in good faith in order effectively
          to contest such claim; and

               (d) Permit the Company to participate in any proceedings relating
          to such claim.

     5. The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with a
contest of a claim under Paragraph 4 of this Appendix B and shall indemnify and
hold Employee harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and

                                        6

<PAGE>
expenses. Without limitation on the foregoing provisions of this Appendix B, the
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct Employee to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
Employee agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine. If the Company directs
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Employee on an interest-free basis and shall indemnify
and hold Employee harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance. Any extension of the statute of limitations relating to payment of
taxes for the taxable year of Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and Employee
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.

     6. If, after the receipt by Employee of an amount advanced by the Company
pursuant to this Appendix B, Executive becomes entitled to receive any refund
with respect to such claim, Employee shall (subject to the Company's complying
with the requirements of this Appendix B) promptly pay to the Company the amount
such refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by Employee of an amount advanced by
the Company pursuant to this Appendix B, a

                                        7

<PAGE>


determination is made that Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify Employee in writing of its
intent to contest such denial of refund prior to the expiration of thirty days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

                                        8