PALOMAR MEDICAL TECHNOLOGIES, INC.

                             1996 STOCK OPTION PLAN

                                TABLE OF CONTENTS

                                                                           Page

ARTICLE I.                 Purpose of the Plan                               1

ARTICLE II.                Definitions                                       1

ARTICLE III.               Administration of the Plan                        2

ARTICLE IV.                Eligibility                                       3

ARTICLE V.                 Stock Option Awards                               4

ARTICLE VI.                Exercise of Option                                5

ARTICLE VII.               Reporting Person Limitations                      7

ARTICLE VIII.              Terms and Conditions of Options                   7

ARTICLE IX.                Benefit Plans                                     8

ARTICLE X.                 Amendment, Suspension or Termination
                             of the Plan                                     8

ARTICLE XI.                Changes in Capital Structure                      9

ARTICLE XII.               Effective Date and Term of the Plan              10

ARTICLE XIII.              Conversion of ISOs into Non-Qualified
                                Options; Termination of ISOs                10

ARTICLE XIV.               Application of Funds                             10

ARTICLE XV.                Governmental Regulation                          11

ARTICLE XVI.               Withholding of Additional Income Taxes           11

ARTICLE XVII.              Notice to Company of Disqualifying
                                Disposition                                 11

ARTICLE XVIII.             Governing Law; Construction                      11


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                       PALOMAR MEDICAL TECHNOLOGIES, INC.

                             1996 STOCK OPTION PLAN

                                    ARTICLE I

                               Purpose of the Plan

     The purpose of this Plan is to encourage and enable employees, consultants,
directors and others who are in a position to make significant  contributions to
the  success  of  PALOMAR  MEDICAL  TECHNOLOGIES,  INC.  and of  its  affiliated
corporations  upon whose  judgment,  initiative,  and  efforts  the  Corporation
depends  for the  successful  conduct  of its  business,  to  acquire  a  closer
identification  of their  interests  with those of the  Corporation by providing
them with opportunities to purchase stock in the Corporation pursuant to options
granted  hereunder,   thereby   stimulating  their  efforts  on  behalf  of  the
Corporation  and  strengthening   their  desire  to  remain  involved  with  the
Corporation.

                                   ARTICLE II

                                   Definitions

     2.1  "Affiliated  Corporation"  means  any  stock  corporation  of  which a
          majority of the voting  common or capital  stock is owned  directly or
          indirectly by the Corporation.

     2.2  "Award" means an Option granted under Article V.

     2.3  "Board" means the Board of Directors of the Corporation.

     2.4  "Code" means the internal  Revenue Code of 1986,  as amended from time
          to time.

     2.5  "Committee"  means a  committee  of not less than two  members  of the
          Board appointed by the Board to administer the Plan, each of whom is a
          "disinterested  person"  within the  meaning  of Rule 16b-3  under the
          Securities  Exchange  Act  of  1934,  as  amended,  or  any  successor
          provision.  In the  event  that two  "disinterested  persons"  are not
          available  to  administer  the  Plan,  the Board  may  appoint  to the
          Committee  two  members of the  Board,  either or both of whom are not
          "disinterested  persons,"  in which  event this Plan shall not qualify
          under Rule 16b-3,  but this Plan shall be valid and  operative  in all
          other respects.

     2.6  "Corporation"  means PALOMAR  MEDICAL  TECHNOLOGIES,  INC., a Delaware
          corporation, or its successor.

     2.7  "Employee"  means any person who is a regular  full-time  or part-time
          employee of the Corporation or an Affiliated

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          Corporation on or after May 17, 1996.

     2.8  "Option"  means an  Incentive  Stock  Option or  Non-Qualified  Option
          granted by the Committee under Article V of this Plan in the form of a
          right to purchase  Stock  evidenced by an instrument  containing  such
          provisions as the Committee may establish.

     2.9  "Participant"  means a person  selected by the Committee to receive an
          award under the Plan.

     2.10 "Plan" means this 1996 Stock Option Plan.

     2.11 "Incentive Stock Option" ("ISO") means an option which qualifies as an
          incentive  stock  option as  defined in  Section  422 of the Code,  as
          amended.

     2.12 "Non-Qualified  Option" means any option not intended to qualify as an
          Incentive Stock Option.

     2.13 "Stock" means the Common Stock,  $.01 par value, of the Corporation or
          any  successor,  including any  adjustments in the event of changes in
          capital structure of the type described in Article XI.

     2.14 "Reporting  Person"  means  a  person  subject  to  Section  16 of the
          Securities  Exchange  Act  of  1934,  as  amended,  or  any  successor
          provision.

     2.15 "Restricted Period" means the period of time selected by the Committee
          during which an Award may be forfeited by the person.

                                   ARTICLE III

                           Administration of the Plan

     3.1 ADMINISTRATION BY THE COMMITTEE. This Plan shall be administered by the
Committee as defined  herein.  From time to time the Board may increase the size
of the Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor,  fill vacancies
however caused,  or remove all members of the Committee and thereafter  directly
administer  the Plan. No member of the Committee  shall be liable for any action
or  determination  made in good  faith with  respect to the Plan or any  options
granted under it.

     3.2 POWERS.  The Committee  shall have full and final authority to operate,
manage,  and  administer the Plan on behalf of the  Corporation.  This authority
includes, but is not limited to:

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     (a)  The power to grant Awards conditionally or unconditionally,

     (b)  The power to prescribe the form or forms of the instruments evidencing
          Awards granted under this Plan,

     (c)  The power to interpret the Plan,

     (d)  The power to provide  regulations  for the  operation of the incentive
          features  of  the  Plan,   and  otherwise  to  prescribe  and  rescind
          regulations for  interpretation,  management and administration of the
          Plan,

     (e)  The power to delegate  responsibility  for Plan operation,  management
          and  administration  on such terms,  consistent  with the Plan, as the
          Committee may establish,

     (f)  The  power  to  delegate  to  other  persons  the   responsibility  of
          performing ministerial acts in furtherance of the Plan's purpose, and

     (g)  The  power  to  engage  the   services  of  persons,   companies,   or
          organizations in furtherance of the Plan's purpose,  including but not
          limited  to,  banks,   insurance   companies,   brokerage  firms,  and
          consultants.

     3.3 ADDITIONAL  POWERS. In addition,  as to each Option to buy Stock of the
Corporation,   the  Committee  shall  have  full  and  final  authority  in  its
discretion:  (a) to  determine  the  number of shares of Stock  subject  to each
Option; (b) to determine the time or times at which Options will be granted, (c)
to  determine  the option  price of the shares of Stock  subject to each Option,
which price shall be not less than the minimum  price  specified in Article V of
this Plan;  (d) to  determine  the time or times when each Option  shall  become
exercisable and the duration of the exercise period  (including the acceleration
of any exercise period),  which shall not exceed the maximum period specified in
Article  V;  and (e) to  determine  whether  each  Option  granted  shall  be an
Incentive Stock Option or a Non-Qualified Option.

     In no event may the  Corporation  grant an  Employee  any  Incentive  Stock
Option that is first exercisable  during any one calendar year to the extent the
aggregate fair market value of the Stock (determined at the time the options are
granted)  exceeds $100,000 (under all stock options plans of the Corporation and
any Affiliated Corporation);  provided,  however, that this paragraph shall have
no force and effect if its  inclusion in the Plan is not necessary for Incentive
Stock  Options  issued  under the Plan to  qualify as such  pursuant  to Section
422(d)(1) of the Code.

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                                   ARTICLE IV

                                   Eligibility

     4.1 ELIGIBLE EMPLOYEES. All Employees (including Directors and Officers who
are  Employees  and  who  have  not  irrevocably  elected  to be  ineligible  to
participate in the Plan) are eligible to be granted  Incentive  Stock Option and
Non-Qualified Option Awards under this Plan.

     4.2  CONSULTANTS,   DIRECTORS  AND  OTHER  NON-EMPLOYEES.  Any  Consultant,
Director (whether or not an Employee) and any other  Non-Employee is eligible to
be granted  Non-Qualified  Option  Awards under the Plan provided the person has
not  irrevocably  elected  to be  ineligible  to  participate  in the Plan,  and
provided  further that upon  appointment  to the Committee at the first Board of
Directors  meeting  following  the  Annual  Meeting  of the  Shareholders,  each
non-employee  director  appointed  to  the  Committee  shall  be  deemed  to  be
ineligible to participate  under the Plan during his or her period of service on
the Committee.

     4.3 RELEVANT  FACTORS.  In  selecting  individual  Employees,  Consultants,
Directors,  and  other  Non-Employees  to whom  Awards  shall  be  granted,  the
Committee  shall weigh such factors as are relevant to accomplish the purpose of
the Plan as stated in Article 1. An individual who has been granted an Award may
be granted one or more additional  Awards,  if the Committee so determines.  The
granting of an Award to any individual shall neither entitle that individual to,
nor disqualify him from, participation in any other grant of Awards.

                                    ARTICLE V

                               Stock Option Awards

     5.1 NUMBER OF SHARES. Subject to the provisions of Article XI of this Plan,
the  aggregate  number of shares of Stock for which Options may be granted under
this Plan shall not exceed  2,500,000  shares.  The shares to be delivered  upon
exercise of Options under this Plan shall be made  available,  at the discretion
of the Committee,  either from authorized but unissued shares or from previously
issued  and  reacquired  shares of Stock  held by the  Corporation  as  treasury
shares, including shares purchased in the open market.

     Stock  issuable  upon  exercise of an option  granted under the Plan may be
subject  to  such   restrictions  on  transfer,   repurchase   rights  or  other
restrictions as shall be determined by the Committee.

     5.2 EFFECT OF EXPIRATION, TERMINATION OR SURRENDER. If an Option under this
Plan shall expire or terminate  unexercised as to any shares covered thereby, or
shall  cease for any  reason to be  exercisable  in whole or in part,  or if the
Company shall reacquire any unvested shares issued pursuant to Options under the
Plan,  such shares  shall  thereafter  be  available  for the  granting of other
Options under this Plan,

     5.3 TERM OF OPTIONS.  The full term of each Option granted  hereunder shall
be for such period as the Committee  shall  determine.  In the case of incentive
Stock Options granted  hereunder,  the term shall not exceed ten (10) years from
the  date  of  granting  thereof.  Each  Option  shall  be  

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subject  to  earlier   termination   as  provided  in  Sections   6.4  and  6.5.
Notwithstanding  the  foregoing,  the term of  options  intended  to  qualify as
"Incentive  Stock  Options"  shall not  exceed  five (5) years  from the date of
granting  thereof if such option is granted to any employee who at the time such
option is granted owns more than ten percent (10%) of the total combined  voting
power of all classes of stock of the Corporation.

     5.4 OPTION PRICE.  The option price shall be determined by the Committee at
the time any Option is granted.  In the case of  Incentive  Stock  Options,  the
exercise  price  shall  not be less than  100% of the fair  market  value of the
shares covered thereby at the time the Incentive Stock Option is granted (but in
no event less than par  value),  provided  that in the case  where an  Incentive
Stock Option is granted  hereunder to any Employee who at the time of grant owns
Stock  possessing  more than 10% of the combined  voting power of all classes of
stock of the Corporation and its Corporations,  the Incentive Stock Option price
shall  equal not less than 110% of the fair market  value of the shares  covered
thereby  at the time the  Incentive  Stock  Option  is  granted.  In the case of
Non-Qualified  Stock  Options,  the  exercise  price  shall not be less than par
value.

     5.5 FAIR MARKET VALUE. If, at the time an Option is granted under the Plan,
the Corporation's Stock is publicly traded,  "fair market shall be determined as
of the last  business  day for which the  prices  or  quotes  discussed  in this
sentence are  available  prior to the date such Option is granted and shall mean
(i) the  average  (on that  date) of the high and low prices of the Stock on the
principal  national  securities  exchange  on which the Stock is traded,  if the
Stock  is then  traded  on a  national  securities  exchange;  or (ii)  the last
reported  sale price (on that date) of the Stock on the NASDAQ  National  Market
List,  if the Stock is not then  traded on a national  securities  exchange;  or
(iii) the  closing  bid price (or  average of bid  prices)  last quoted (on that
date) by an established  quotation service for over-the-counter  securities,  if
the Stock is not reported on the NASDAQ  National Market List.  However,  if the
Stock is not  publicly  traded at the time in Option is granted  under the Plan,
"fair  market  value"  shall  be  deemed  to be the fair  value of the  Stock as
determined by the Committee under Section 3.3.

     5.6  NON-TRANSFERABILITY  OF OPTIONS.  Except as provided  below, no Option
granted under this Plan shall be transferable  by the grantee  otherwise than by
will or the laws of descent and  distribution,  and such Option may be exercised
during the grantee's lifetime only by the grantee. Notwithstanding the above, in
the event the federal  securities laws and the relevant tax laws change so as to
permit the  transferability  of the  options  provided by this Plan then to such
extent permitted by law, such options may be transferred in accordance with this
Plan.

     5.7  FOREIGN  NATIONALS.  Awards  may be granted  to  Participants  who are
foreign  nationals  or  employed  outside  the  United  States on such terms and
conditions different from those specified in the plan as the Committee considers
necessary  or  advisable  to  achieve  the  purpose  of the Plan or comply  with
applicable laws.

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                                   ARTICLE VI

                               Exercise of Option

     6.1 EXERCISE.  Each Option  granted under the Plan shall be  exercisable on
such date or dates and during such period and for such number of shares as shall
be determined  pursuant to the  provisions  of the  instrument  evidencing  such
Option. The Committee shall have the right to accelerate the date of exercise of
any option.

     6.2 NOTICE OF EXERCISE AND PAYMENT. A person electing to exercise an Option
shall give written notice to the  Corporation of such election and of the number
of shares he or she has  elected to  purchase  and shall at the time of exercise
tender the full purchase price, in cash,  Corporation  Stock owned by him or her
for at least six months, or by such other means as is authorized by the Board of
Directors, for the shares he or she has elected to purchase.

     6.3  DELIVERY  OF  STOCK.  No shares  shall be  delivered  pursuant  to any
exercise  of an Option  until  payment in full of the option  price  therefor is
received  by the  Corporation.  Such  payment may be made in whole of in part in
cash or, to the extent  permitted  by the  Committee at or after the grant of an
Option,  by  delivery  of a note or shares of the Stock  owned by the  optionee,
including  Restricted  Stock,  valued at their fair market  value on the date of
delivery,  or such other lawful  consideration  as the Committee may  determine.
Until such person has been issued a certificate or  certificates  for the shares
so purchased,  he or she shall possess no rights of a record holder with respect
to any of such shares.

     6.4 OPTION UNAFFECTED BY CHANGE IN DUTIES. No Incentive Stock Option,  and,
unless otherwise determined by the Committee, no Non-Qualified Option granted to
a person who is, on the date of the grant,  an Employee of the Corporation or an
Affiliated Corporation, shall be affected by any change of duties or position of
the optionee (including transfer to or from an Affiliated Corporation),  so long
as he or she  continues to be an Employee.  Employment  shall be  considered  as
continuing  and  uninterrupted  during any bona fide  leave of absence  (such as
those  attributable to illness,  military  obligations or governmental  service)
provided  that the  period of such  leave does not exceed 90 days or, if longer,
any period during which such  optionee's  right to reemployment is guaranteed by
statute. A bona fide leave of absence with the written approval of the Committee
shall not be considered an interruption of employment  under the Plan,  provided
that such  written  approval  contractually  obligates  the  Corporation  or any
Affiliated  Corporation  to continue the  employment  of the optionee  after the
approved period of absence.

     If the  optionee  shall cease to be an Employee  for any reason  other than
death,  such Option shall  thereafter be  exercisable  only to the extent of the
purchase  rights,  if any, which have accrued as of the date of such  cessation;
provided  that  (i) the  Committee  may in its  absolute  discretion,  upon  any
cessation of employment,  determine (but be no under no obligation to determine)
that such accrued purchase rights shall be deemed to include  additional  shares
covered by such Option, and (ii) unless the Committee shall otherwise provide in
the instrument evidencing

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any Option,  upon any such  cessation of employment,  such  remaining  rights to
purchase shall in any event  terminate upon the earlier of (A) the expiration of
the original term of the Option; or (B) where such cessation of employment is on
account  of  disability,  the  expiration  of one  year  from  the  date of such
cessation of employment and, otherwise, the expiration of three months from such
date. For purposes of the Plan, the term "disability"  shall mean "permanent and
total disability" as defined in Section 22(e)(3) of the Code.

     6.5 DEATH OF OPTIONEE.  Should an optionee die while in  possession  of the
legal right to exercise an Option or Options  under this Plan,  such  persons as
shall have  acquired,  by will or by the laws of descent and  distribution,  the
right to  exercise  any  Options  theretofore  granted,  may,  unless  otherwise
provided by the Committee in any instrument evidencing any Option, exercise such
Options  at any time  prior to one year from the date of death;  provided,  that
such Option or Options  shall expire in all events no later than the last day of
the original  term of such Option;  provided,  further,  that any such  exercise
shall be limited to the  purchase  rights that have  accrued as of the date when
the optionee ceased to be an Employee, whether by death or otherwise, unless the
Committee  provides  in the  instrument  evidencing  such  Option  that,  in the
discretion of the Committee, additional shares covered by such Option may become
subject to purchase immediately upon the death of the optionee.

     6.6 RELOAD OPTION GRANTS. The Committee, in its discretion,  may also grant
stock options with "reload provisions" that permit the option holder to exercise
his or her stock options and receive new stock option grants for the  equivalent
amount of stock  underlying the option  exercise at the fair market value on the
date of such exercise. The reload options shall have the same expiration date as
the options they replace.

                                   ARTICLE VII

                          Reporting Person Limitations

     Notwithstanding  any other provision of the Plan, to the extent required to
qualify for the exemption  provided by Rule 16b-3 under the Securities  Exchange
Act of 1934,  as amended,  and any successor  provision,  (i) any Stock or other
equity security offered under the Plan to a Reporting Person may not be sold for
at least six (6) months  after  grant of an option  acquire  such Stock or other
equity security,  except in case of death or disability and (ii) any Option,  or
other similar right  related to an equity  security,  issued under the Plan to a
Reporting  Person  shall not be  transferable  other than by will or the laws of
descent and distribution or in accordance with section 5.6 hereof,  shall not be
exercisable  for at  least  six  (6)  months  except  in the  case of  death  or
disability,  provided  in  the  provisions  of  section  5.6  hereof,  shall  be
exercisable  during the  Participant's  lifetime only by the  Participant or the
Participant's guardian or legal representative.

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                                  ARTICLE VIII

                         Terms and Conditions of Options

     Options shall be evidenced by instruments  (which need not be identical) in
such forms as the  Committee  may from time to time  approve.  Such  instruments
shall conform to the terms and  conditions set forth in Articles V and VI hereof
and may contain such other  provisions as the Committee deems advisable that are
not inconsistent with the Plan, including  restrictions  applicable to shares of
Stock issuable upon exercise of Options.  In granting any Non-Qualified  Option,
the Committee may specify that such Non-Qualified Option shall be subject to the
restrictions  set forth herein with respect to Incentive  Stock  Options,  or to
such  other  termination  and  cancellation  provisions  as  the  Committee  may
determine.   The  Committee   may  from  time  to  time  confer   authority  and
responsibility  on one or more of its own members and/or one or more officers of
the Corporation to execute and deliver such instruments.  The proper officers of
the Corporation are authorized and directed to take any and all action necessary
or advisable from time to time to carry out the terms of such instruments.

                                   ARTICLE IX

                                  Benefit Plans

     Awards  under  the Plan  are  discretionary  and are not a part of  regular
salary. Awards may not be used in determining the amount of compensation for any
purpose  under  the  benefit  plans  of  the   Corporation,   or  an  Affiliated
Corporation,  except as the Committee may from time to time  expressly  provide.
Neither the Plan, an Option or any instrument  evidencing an Option confers upon
any  Employee  the right to  continued  employment  with the  Corporation  or an
Affiliated Corporation.

                                    ARTICLE X

                Amendment, Suspension or Termination of the Plan

     The  Board  may  suspend  the Plan or any part  thereof  at any time or may
terminate  the Plan in its  entirety.  Awards  shall not be  granted  after Plan
termination.

     The Board may also amend the Plan from time to time, except that amendments
which affect the  following  subjects  must be approved by  stockholders  of the
Corporation,  unless and to such extent, that applicable federal or state law or
regulation permit amendment thereto:

     (a)  Except as  provided in Article XI  relative  to capital  changes,  and
          except as  permitted  by law or  regulation  where such  change is not
          deemed  material,  the  number of shares  as to which  Options  may be
          granted pursuant to Article V;

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     (b)  The maximum term of Options granted;

     (c)  The minimum price at which Options may be granted;

     (d)  The term of the Plan; and

     (e)  The requirements as to eligibility for participation in the Plan.

     Awards  granted prior to suspension or  termination  of the Plan may not be
cancelled  solely  because of such  suspension or  termination,  except with the
consent of the grantee of the Award.

                                   ARTICLE XI

                          Changes in Capital Structure

     The instruments  evidencing  Options granted  hereunder shall be subject to
adjustment in the event of changes in the  outstanding  Stock of the Corporation
by reason of stock dividends, stock splits, recapitalizations,  reorganizations,
mergers,  consolidations,  combinations,  exchanges or other relevant changes in
capitalization  occurring after the date of an Award to the same extent as would
affect an actual share of stock issued and  outstanding on the effective date of
such change. Such adjustment to outstanding Options shall be made without change
in the total price applicable to the unexercised portion of such options,  and a
corresponding adjustment in the applicable option price per share shall be made.
In the event of any such change,  the aggregate number and classes of shares for
which  Options may  thereafter  be granted under Section 5.1 of this Plan may be
appropriately  adjusted as  determined  by the  Committee  so as to reflect such
change.  Notwithstanding  the foregoing,  any adjustments  made pursuant to this
Article XI with respect to Incentive  Stock Options shall be made only after the
Committee, after consulting with counsel for the Corporation, determines whether
such  adjustments  would  constitute a  "modification"  of such Incentive  Stock
Options  (as that term is defined in Section 425 of the Code) or would cause any
adverse tax consequences for the holders of such Incentive Stock Options. If the
Committee  determines that such adjustments made with respect to Incentive Stock
Options would constitute a modification of such Incentive Stock Options,  it may
refrain from making such adjustments.

     In the event of the proposed dissolution or liquidation of the Corporation,
each  Option  will  terminate  immediately  prior  to the  consummation  of such
proposed  action or at such other time and subject to such other  conditions  as
shall be determined by the Committee.

     Except as expressly  provided  herein,  no issuance by the  Corporation  of
shares of stock of any class, or securities  convertible into shares of stock of
any class,  shall affect, and no adjustment by reason thereof shall be made with
respect  to, the number or price of shares  subject to Options.  No  adjustments
shall be made for dividends paid in cash or in property other than securities of
the Corporation.

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     No fractional  shares shall be issued under the Plan and the optionee shall
receive from the Corporation cash in lieu of such fractional shares,

                                   ARTICLE XII

                       Effective Date and Term of the Plan

     The Plan shall become effective upon its adoption the Board,  PROVIDED THAT
the stockholders of the Corporation  shall have approved this Plan within twelve
months following the adoption of this Plan by the Board. The Plan shall continue
until  such  time as it may be  terminated  by action  of the  Board;  provided,
however,  that no Options  may be granted  under this Plan on or after the tenth
anniversary of the effective date hereof.

                                  ARTICLE XIII

                 Conversion of ISO's into Non-Qualified Options;

                              Termination of ISO's

     The  Committee,  at  the  written  request  of  any  optionee,  may  in its
discretion  take such actions as may be  necessary  to convert  such  optionee's
Incentive Stock Options, that have not been exercised on the date of conversion,
into Non-Qualified Options at any time prior to the expiration of such Incentive
Stock  Options,  regardless  of  whether  the  optionee  is an  employee  of the
Corporation or an Affiliated  Corporation at the time of such  conversion.  Such
actions may include,  but not be limited to,  extending  the exercise  period or
reducing the exercise price of such Options. At the time of such conversion, the
Committee  (with the consent of the optionee) may impose such  conditions on the
exercise  of  the  resulting  Non-Qualified  Options  as  the  Committee  in its
discretion  may  determine,   provided  that  such   conditions   shall  not  be
inconsistent  with the  Plan.  Nothing  in the Plan  shall be deemed to give any
optionee the right to have such  optionee's  Incentive  Stock Options  converted
into Non-Qualified  Options, and no such conversion shall occur until and unless
the Committee takes appropriate  action. The Committee,  with the consent of the
optionee,  may also terminate any portion of any Incentive Stock Option that has
not been exercised at the time of such termination.

                                   ARTICLE XIV

                              Application of Funds

     The proceeds  received by the Corporation  from the sale of shares pursuant
to Options granted under the Plan shall be used for general corporate purposes.

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                                   ARTICLE XV

                             Governmental Regulation

     The Corporation's obligation to sell and deliver shares of Stock under this
Plan is  subject to the  approval  of any  governmental  authority  required  in
connection with the authorization, issuance or sale of such shares.

                                   ARTICLE XVI

                     Withholding of Additional Income Taxes

     Upon  the  exercise  of  a   Non-Qualified   Option  or  the  making  of  a
Disqualifying  Disposition  as  defined  in  Article  XVII the  Corporation,  in
accordance  with  Section  3402(a) of the Code,  may require the optionee to pay
additional  withholding  taxes  in  respect  of the  amount  that is  considered
compensation  includable  in such person's  gross  income.  The Committee in its
discretion  may  condition  the  exercise  of an Option on the  payment  of such
additional withholding taxes.

                                  ARTICLE XVII

                 Notice to Company of Disqualifying Disposition

     Each  employee who receives an Incentive  Stock Option must agree to notify
the Corporation in writing  immediately after the employee makes a Disqualifying
Disposition of any Stock acquired pursuant to the exercise of an Incentive Stock
Option. A Disqualifying  Disposition is any disposition  (including any sale) of
such Stock  before the later of (a) two years  after the date the  employee  was
granted the  Incentive  Stock Option or (b) one year after the date the employee
acquired  Stock by exercising  the Incentive  Stock Option.  If the employee has
died before such stock is sold,  these holding period  requirements do not apply
and no Disqualifying Disposition can occur thereafter.

                                  ARTICLE XVIII

                           Governing Law; Construction

     The validity and  construction of the Plan and the  instruments  evidencing
Options  shall be governed by the laws of the State of Delaware.  In  construing
this Plan, the singular shall include the plural and the masculine  gender shall
include the feminine and neuter, unless the context otherwise requires.