1998 BROOKDALE LIVING COMMUNITIES, INC.

                              STOCK INCENTIVE PLAN


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                                TABLE OF CONTENTS


Section                                                                     Page
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1.  PURPOSE OF PLAN............................................................1

2.  DEFINITIONS................................................................1

3.  STOCK SUBJECT TO PLAN......................................................4
         3.1      Stock Subject to Plan........................................4
         3.2      Unexercised Options..........................................4
         3.3      Changes in Company Capitalization............................4

4.  GRANTING OF OPTIONS........................................................4
         4.1      Eligibility..................................................4
         4.2      Incentive Stock Options......................................4
         4.3      Granting of Options..........................................5
         4.4      Administration Of the Plan...................................5

5.  TERMS OF OPTIONS...........................................................6
         5.1      Option Agreement.............................................6
         5.2      Vesting of Options...........................................7
         5.3      Option Exercise Price........................................7
         5.4      Exercise Periods.............................................7
         5.5      Requirement of Continued Employment..........................8
         5.6      Adjustments in Outstanding Options...........................8
         5.7      Merger, Consolidation, Acquisition,
                    Liquidation or Dissolution.................................9
         5.8      No Right to Continued Employment.............................9

6.  EXERCISE OF OPTIONS........................................................9
         6.1      Person Eligible to Exercise..................................9
         6.2      Partial Exercise.............................................9
         6.3      Manner of Exercise..........................................10
         6.4      Conditions to Issuance of Stock Certificates................11
         6.5      Rights as Stockholders......................................11
         6.6      Transfer Restrictions.......................................11

7.  ADDITIONAL PROVISIONS.....................................................12
         7.1      Approval of Plan by Stockholders............................12
         7.2      Nontransferability..........................................12
         7.3      Death or Disability of Optionee.............................12
         7.4      Securities Act..............................................12
         7.5      Withholding of Tax..........................................12
         7.6      Termination and Amendment of Plan...........................13

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Section                                                                     Page
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         7.7      Duties of the Company.......................................13

8.  GENERAL PROVISIONS........................................................13


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                           SECTION 1. PURPOSE OF PLAN

         The  purpose  of the 1998  Brookdale  Living  Communities,  Inc.  Stock
Incentive  Plan (the  "Plan")  is to provide a means by which  Brookdale  Living
Communities,  Inc. (the "Company") may attract and retain  directors,  executive
officers and other key employees with outstanding qualifications and consultants
and advisers who provide  substantial and important services to the Company,  by
affording  those  individuals  with  incentives to exert maximum efforts for the
success of the  Company  through  opportunities  to  participate  in the growth,
development and financial success of the Company.

                             SECTION 2. DEFINITIONS

         Wherever the  following  capitalized  terms are used in the Plan,  they
shall have the following respective meanings:

         2.1      "Board  of  Directors"  means the  Board of  Directors  of the
Company.

         2.2      "Change in Control" shall be deemed to have occurred if

                  (a)   any "person" (as such term is used in Sections 13(d) and
          14(d) of the Exchange  Act),  other than a trustee or other  fiduciary
          holding  securities under an employee  benefit plan of the Company,  a
          corporation  owned directly or indirectly by the  stockholders  of the
          Company in  substantially  the same  proportions as their ownership of
          the Common Stock,  Michael W. Reschke or The Prime Group,  Inc. or any
          of their  respective  affiliates,  becomes the "beneficial  owner" (as
          defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
          of  securities  of the Company  representing  50% or more of the total
          voting power represented by the Company's then outstanding  securities
          which vote generally in the election of directors  (referred to herein
          as "Voting Securities");

                  (b)   during any period of two consecutive years,  individuals
          who at the beginning of such period  constitute the Board of Directors
          and any new  directors  whose  election by the Board of  Directors  or
          nomination for election by the Company's  stockholders was approved by
          a vote of at least  two-thirds  (2/3) of the  directors  then still in
          office who either were  directors  at the  beginning  of the period or
          whose  election or nomination for election was previously so approved,
          cease  for any  reason  to  constitute  a  majority  of the  Board  of
          Directors;

                  (c)   the  stockholders  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) more than 50% of the total
          voting power  represented  by the Voting  Securities of the Company or
          such surviving  entity  outstanding  immediately  after such merger or
          consolidation, or


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                  (d)   the  stockholders  of the  Company  approve  a  plan  of
          complete  liquidation  of the Company or an agreement  for the sale or
          disposition  by  the  Company  (in  one  transaction  or a  series  of
          transactions) of all or substantially all of the Company's assets.

         2.3      "Code" means the Internal Revenue Code of 1986, as amended.

         2.4      "Committee" means as specified in Section 4.4.

         2.5      "Common  Stock"  means the Common  Stock of the  Company,  par
value $0.01 per share.

         2.6      "Company" means Brookdale Living Communities, Inc., a Delaware
corporation.  In addition,  "Company"  shall mean any corporation  assuming,  or
issuing new employee stock options in substitution for,  Incentive Stock Options
outstanding under the Plan, in a transaction to which Section 424(a) of the Code
applies.

         2.7      "Date of Grant"  means the date as of which an Option has been
granted pursuant to the Plan.

         2.8      "Disability" means, with respect to an individual,  a physical
or mental condition resulting from any medically determinable physical or mental
impairment that renders such individual incapable of engaging in any substantial
gainful  employment  and that can be  expected  to  result  in death or that has
lasted or can be expected to last for a continuous  period of not less than four
consecutive months.

         2.9      "Eligible  Individual" means (i) any director,  officer or key
employee of the Company or a  Subsidiary,  (ii) any officer or key employee of a
partnership in which the Company owns directly or indirectly at least 50% of the
capital  or  profits  interest  or (iii)  any  consultant  or  adviser  whom the
Committee determines provides substantial and important service to the Company.

         2.10     "Exchange Act" means the  Securities  Exchange Act of 1934, as
amended.

         2.11     "Fair  Market  Value"  means the per share value of the Common
Stock as of a given date, determined as follows:

                  (a)   If the Common Stock is listed or admitted for trading on
          the New York Stock Exchange (or if not, on another national securities
          exchange upon which the Common Stock is listed), the Fair Market Value
          of the Common Stock is the closing  quotation  for such stock based on
          composite  transactions  for the New York  Stock  Exchange  (or if not
          listed on it, such other  national  securities  exchange)  on the last
          trading day for such stock prior to such given date.

                  (b)   If the  Common  Stock  is  not  traded  on any  national
          securities  exchange,  but is quoted on the  National  Association  of
          Securities Dealers, Inc. Automated Quotation System (NASDAQ System) or
          any similar system of automated dissemination of quotations

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         of prices in common use,  the Fair Market  Value of the Common Stock is
         the  average of the last sales  price (if the stock is then listed as a
         national  market issue under the NASDAQ System) or the mean between the
         closing  representative  bid and asked  prices (in all other cases) for
         the  stock on the last 5 trading  days for such  stock  preceding  such
         given date as reported by the NASDAQ System (or such similar  quotation
         system).

                  (c)   If neither  clause  (a) nor  clause (b) of this  Section
          2.12 is  applicable,  the Fair Market Value of the Common Stock is the
          fair market value per share as of such  valuation  date, as determined
          by the Board of Directors in good faith and in accordance with uniform
          principles consistently applied.

         2.12     "Incentive Stock Option" means an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive  Stock Option by
the Company or the Committee.

         2.13     "Non-Qualified  Option"  means  an  Option  which  is  not  an
Incentive Stock Option and which is designated as a Non-Qualified  Option by the
Company or the Committee.

         2.14     "Option"  means any  Incentive  Stock Option or  Non-Qualified
Option granted under this Plan.

         2.15     "Optionee"  means an Eligible  Individual to whom an Option is
granted under this Plan.

         2.16     "Plan" means the 1998 Brookdale Living Communities, Inc. Stock
Incentive Plan, as it may be amended from time to time.

         2.17     "Secretary" means the Secretary of the Company.

         2.18     "Securities Act" means the Securities Act of 1933, as amended.

         2.19     "Severance Date" means (i) as to an Eligible Individual who is
an employee of the Company,  a Subsidiary or a  Company-owned  partnership,  the
date the individual ceases to be so employed,  (ii) as to an Eligible Individual
who is a director of the Company or a Subsidiary  but not an employee  described
in (i) next above,  the date the  individual  ceases to be such a  director,  or
(iii) as to an Eligible Individual who is not included in (i) or (ii) above, the
date specified in the applicable Stock Option Agreement.

         2.20     "Stock Option  Agreement"  means the agreement  reflecting the
terms and conditions of an Option pursuant to Section 5.1.

         2.21     "Subsidiary"  means a  subsidiary  of the  Company  within the
meaning of Section 424(f) of the Code.


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                        SECTION 3. STOCK SUBJECT TO PLAN

         3.1      Stock Subject to Plan

                  The  stock  subject  to an  Option  shall  be  shares  of  the
Company's  Common Stock. The aggregate number of such shares which may be issued
upon  exercise of Options  granted  under Section 4 of the Plan shall not exceed
250,000  unless  and  until a larger  number  shall  have been  approved  by the
Company's stockholders pursuant to Section 7.6.

         3.2      Unexercised Options

                  If any Option  expires or is  cancelled  without  having  been
fully  exercised,  a new  Option or  Options  for the number of shares of Common
Stock that would have been issued upon  exercise of the  unexercised  portion of
such  Option may be  granted  under this  Plan,  subject to the  limitations  of
Section 3.1.

         3.3      Changes in Company Capitalization

                  In the event that the  outstanding  shares of Common Stock are
hereafter  changed into or exchanged for a different number or kind of shares or
other  securities  of the  Company,  or of  another  corporation,  by  reason of
reorganization,  merger, consolidation,  recapitalization,  reclassification, or
the number of shares is increased or decreased by reason of a stock split, stock
dividend,  combination of shares or any other increase or decrease in the number
of such shares of Common Stock effected  without receipt of consideration by the
Company  (provided,  however,  that conversion or exchange of any convertible or
exchangeable  securities  of the  Company  shall  not be  deemed  to  have  been
"effected  without  receipt  of   consideration"),   the  Committee  shall  make
appropriate  adjustments  in the number and kind of shares for the  purchase  of
which  Options may be  granted,  including  adjustments  of the  limitations  in
Section 3.1 and Section 4.1.

                         SECTION 4. GRANTING OF OPTIONS

         4.1      Eligibility

                  The  maximum  number of shares  of  Common  Stock  that may be
subject to Options  granted  during any calendar year to any one Optionee  shall
not exceed 250,000. Options granted to an Eligible Individual who is an employee
of the  Company  or a  Subsidiary  may be  either  Incentive  Stock  Options  or
Non-Qualified Options. Options granted to any other Eligible Individual may only
be Non-Qualified Options.

         4.2      Incentive Stock Options

                  No Incentive Stock Option shall be granted unless it qualifies
as an  "incentive  stock  option"  under  Section 422 of the Code on the Date of
Grant.


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         4.3      Granting of Options

                  (a)   Subject to the  availability of shares as provided under
          Sections 3.1 and 7.6, the  Committee  shall from time to time,  in its
          absolute discretion:

                        (i)   Determine  who are the  Eligible  Individuals  and
                  select from among them those to be granted Options;

                       (ii)   Determine  the  number of shares to be  subject to
                  such Options granted to such selected individuals,  and to the
                  extent permitted by the Code,  determine  whether such Options
                  are to be Incentive  Stock Options or  Non-Qualified  Options;
                  and

                      (iii)   Determine   the  terms  and   conditions  of  such
                  Options, consistent with the Plan.

                  (b)   Upon the  selection  of an  individual  to be granted an
          Option,  the  Committee  shall  instruct  the  Secretary to issue such
          Option and may impose such  conditions  on the grant of such Option as
          it deems appropriate. Without limiting the generality of the preceding
          sentence, the Committee may, in its discretion and on such terms as it
          deems appropriate, require as a condition on the grant of an Option to
          an individual that the individual  surrender for cancellation  some or
          all of the unexercised  Options which have been previously  granted to
          him. An Option the grant of which is  conditioned  upon such surrender
          may have an Option  price lower (or higher)  than the Option  price of
          the  surrendered  Option,  may cover the same (or a lesser or greater)
          number of shares as the  surrendered  Option,  may contain  such other
          terms as the Committee  deems  appropriate and shall be exercisable in
          accordance  with its  terms,  without  regard to the number of shares,
          price, Option period or any other term or condition of the surrendered
          Option.


         4.4      Administration Of the Plan

                  (a)   The  Plan  shall  be  administered  by the  Compensation
          Committee  of the Board,  or by any other  Committee  appointed by the
          Board,  which  Committee  (unless  otherwise  determined by the Board)
          shall satisfy the "nonemployee  director"  requirements of Rule 16 b-3
          under the  Exchange  Act and the  regulations  of Rule 16b-3 under the
          Exchange Act and the  "outside  director"  provisions  of Code Section
          162(m), or any successor regulations or provisions. The members of the
          Committee  shall be appointed from time to time by, and shall serve at
          the  discretion  of, the Board of  Directors.  Committee  members  may
          resign by delivering written notice to the Secretary.

                  (b)   Except as  otherwise  provided in the Plan and except as
          otherwise  expressly stated to the contrary in the Company's  Articles
          of Incorporation,  Bylaws, or elsewhere,  the Committee shall have the
          sole  discretionary  authority (i) to select the Eligible  Individuals
          who are to be granted  Options  under the Plan,  (ii) to determine the
          number of  Options to be granted  to any  Eligible  Individual  at any
          time, (iii) to authorize the granting of Options,  (iv) to impose such
          conditions and  restrictions on Options as it determines  appropriate,
          (v) to interpret the Plan, (vi) to prescribe,  amend and rescind rules
          and  regulations  relating  to the  Plan,  and (vii) to take any other
          actions in connection with the Plan as it may deem necessary

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         or advisable for the  administration of the Plan. The determinations of
         the  Committee  on the matters  referred to in this  Section 4 shall be
         conclusive.

                  (c)   A  majority  of  the  members  of  the  Committee  shall
          constitute a quorum. All determinations of the Committee shall be made
          by a majority of its members. Any decision or determination reduced to
          writing  and signed by all of the  members of the  Committee  shall be
          fully effective as if it had been made by a majority vote at a meeting
          duly called and held.

                  (d)   The Committee may delegate to one or more persons any of
          its powers, other than its power to authorize the granting of Options,
          or designate  one or more persons to do or perform those matters to be
          done or performed by the Committee,  including  administration  of the
          Plan.  Any person or persons  delegated or designated by the Committee
          shall be subject to the same obligations and  requirements  imposed on
          the Committee and its members under the Plan.

                  (e)   Members of the Committee shall receive such compensation
          for their  services  as members as may be  determined  by the Board of
          Directors.  All  expenses and  liabilities  incurred by members of the
          Committee in connection with the  administration  of the Plan shall be
          borne by the Company. The Committee may employ attorneys, consultants,
          accountants,  appraisers, brokers or other persons. The Committee, the
          Company and the Board of Directors  shall be entitled to rely upon the
          advice,  opinions or  valuations  of any such  persons.  All elections
          taken and all interpretations and determinations made by the Committee
          in good  faith  shall be final and  binding  upon all  Optionees,  the
          Company and all other interested  persons.  No member of the Committee
          shall  be  personally   liable  for  any  action,   determination   or
          interpretation made in good faith with respect to the Plan. Members of
          the  Committee  and each person or persons  designated or delegated by
          the Committee shall be entitled to  indemnification by the Company for
          any action or any failure to act in connection with services performed
          by or on behalf of the Committee for the benefit of the Company to the
          fullest  extent  provided or  permitted by the  Company's  Articles of
          Incorporation,   Bylaws,  any  insurance  policy  or  other  agreement
          intended for the benefit of the Committee, or by any applicable law.

                           SECTION 5. TERMS OF OPTIONS

         5.1      Option Agreement

                  Each  Option  shall be  evidenced  by a written  Stock  Option
Agreement,  which shall be executed by the Optionee and an authorized officer of
the  Company  and which shall  indicate  the Date of the Grant and contain  such
terms and  conditions  as the  Committee  shall  determine  with respect to such
Option,  consistent with the Plan. Stock Option Agreements  evidencing Incentive
Stock  Options  shall  contain such terms and  conditions as may be necessary to
qualify such Options as "incentive stock options" under Section 422 of the Code.

         5.2      Vesting of Options

                  (a)   Options  granted under the Plan shall vest as determined
          by the  Committee  and  set  forth  in  the  respective  Stock  Option
          Agreement.


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                  (b)   Unless otherwise provided in the Stock Option Agreement,
          in the  event of a Change  in  Control  on or  before  the  Optionee's
          Severance Date, each  outstanding  Option held by such Optionee to the
          extent not theretofore  vested shall fully vest as of the date of such
          Change in Control.

                  (c)   Subject to the provisions of Section 7.3,  Options which
          have been  granted but not yet vested  under this Section 5.2 as of an
          Optionee's Severance Date shall be forfeited unless otherwise provided
          in the Stock Option Agreement.

         5.3      Option Exercise Price

                  The  exercise  price per share for Options  granted  under the
Plan shall be set by the Committee;  provided, however, that the price per share
shall be not less than 100% of the Fair  Market  Value of such share on the Date
of Grant; provided, further, that, in the case of an Incentive Stock Option, the
price per share  shall  not be less than 110% of the Fair  Market  Value of such
share on the Date of Grant in the case of an individual  then owning (within the
meaning  of  Section  424(d)  of the Code)  more than 10% of the total  combined
voting power of all classes of stock of the Company or any Subsidiary.

         5.4      Exercise Periods

                  (a)   No Option may be  exercised in whole or in part until it
          has vested, except as may be provided in Section 5.7.

                  (b)   Subject to the  provisions of Sections  5.4(c),  5.7 and
          7.3,  Options  shall  become  exercisable  at such  times  and in such
          installments  (which may be cumulative) as the Committee shall provide
          in the terms of each  individual  Stock  Option  Agreement;  provided,
          however,  that, by resolution adopted after an Option is granted,  the
          Committee  may, on such terms and conditions as it may determine to be
          appropriate and subject to Sections  5.4(c),  5.7 and 7.3,  accelerate
          the time at which such Option or any portion thereof may be exercised.

                  (c)   To the extent that the  aggregate  Fair Market  Value of
          stock with  respect  to which  Incentive  Stock  Options  (within  the
          meaning  of Section  422 of the Code,  but  without  regard to Section
          422(d) of the Code) are  exercisable for the first time by an Optionee
          during any calendar year (under the Plan and all other incentive stock
          option plans of the Company) exceeds  $100,000,  such Options shall be
          treated as Non-Qualified  Options. The rule set forth in the preceding
          sentence  shall be applied by taking Options into account in the order
          in which they were granted.  For purposes of this Section 5.4(c),  the
          Fair Market Value of Common Stock shall be  determined  as of the time
          the Option with respect to such Common Stock is granted.

                  (d)   No Option may be exercised to any extent by anyone after
          the first to occur of the following events:

                        (i)  In the case of an Incentive Stock Option,

                             (A)  the  expiration  of ten years from the Date of
                           Grant; or


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                             (B)  in the case of an Optionee  owning (within the
                           meaning of Section  424(d) of the Code),  at the Date
                           of Grant,  more than 10% of the total combined voting
                           power of all  classes of stock of the  Company or any
                           subsidiary  of the Company,  the  expiration  of five
                           years from the Date of Grant; or

                             (C)  except  in the  case  of any  Optionee  who is
                           disabled  (within the meaning of Section  22(e)(3) of
                           the Code),  the  expiration  of three months from the
                           Optionee's   Severance   Date   unless   either  such
                           Severance Date occurs due to such Optionee's death or
                           the Optionee dies within said three-month period; or

                             (D)  in the  case of an  Optionee  who is  disabled
                           (within the meaning of Section 22(e)(3) of the Code),
                           the  expiration  of  one  year  from  the  Optionee's
                           Severance  Date  unless  either such  Severance  Date
                           occurs due to such  Optionee's  death or the Optionee
                           dies within said one-year period; or

                             (E)  the  expiration  of one year  from the date of
                           the Optionee's death.

                       (ii)  In the case of a Non-Qualified Option,

                             (A)  the  expiration  of ten years from the Date of
                           Grant; or

                             (B)  the expiration of one year from the Optionee's
                           Severance  Date unless the Optionee  dies within said
                           one-year period; or

                             (C)  the  expiration  of one year  from the date of
                           the Optionee's death.

                  (e)   Subject  to  the  provisions  of  Section  5.4(d),   the
          Committee shall provide,  in the terms of each individual Stock Option
          Agreement, when such Option expires and becomes unexercisable.

         5.5      Requirement of Continued Employment

                  An Option shall be forfeited if the Optionee's  Severance Date
occurs within one year from the Date of Grant unless such  Severance Date occurs
due to a Change in Control.

         5.6      Adjustments in Outstanding Options

                  In the event  that the  outstanding  shares  of  Common  Stock
subject to Options are changed into or exchanged for a different  number or kind
of shares of the Company or other securities of the Company by reason of merger,
consolidation,  recapitalization,  reclassification,  or the number of shares is
increased  or  decreased  by  reason  of  a  stock  split-up,   stock  dividend,
combination  of shares or any other  increase  or decrease in the number of such
shares of Common Stock effected  without receipt of consideration by the Company
(provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected  without receipt of  consideration"),
the  Committee  shall  make  appropriate  adjustments  in the number and kind of
shares  as  to  which  all  outstanding   Options,   or  portions  thereof  then
unexercised, shall be

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exercisable,  to the end that  after  such  event the  Optionee's  proportionate
interest  shall be  maintained  as before the  occurrence  of such  event.  Such
adjustment in an  outstanding  Option shall be made without  change in the total
price applicable to the Option or the unexercised  portion of the Option (except
for any change in the  aggregate  price  resulting  from  rounding-off  of share
quantities or prices) and with any necessary corresponding  adjustment in Option
price  per  share;  provided,  however,  that,  in the case of  Incentive  Stock
Options,  each such adjustment shall be made in such manner as not to constitute
a "modification"  within the meaning of Section  424(h)(3) of the Code. Any such
adjustment  made by the Committee shall be final and binding upon all Optionees,
the Company and all other interested persons.

         5.7      Merger, Consolidation, Acquisition, Liquidation or Dissolution

                  Notwithstanding the provisions of Section 5.6, in its absolute
discretion,  and on such  terms  and  condition  as it  deems  appropriate,  the
Committee  may  provide by the terms of any Option  that such  Option  cannot be
exercised after the merger or  consolidation of the Company with or into another
corporation,  the  acquisition by another  corporation or person  (excluding any
trustee or other fiduciary holding  securities under an employee benefit plan of
the Company) of all or  substantially  all of the Company's  assets or more than
50% of the Company's  then  outstanding  voting  stock,  or the  liquidation  or
dissolution  of the Company;  and if the  Committee so provides,  it may, in its
absolute  discretion and on such terms and  conditions as it deems  appropriate,
also  provide,  either by the terms of such  Option or by a  resolution  adopted
prior to the occurrence of such merger, consolidation,  acquisition, liquidation
or dissolution,  that, for some period of time prior to such event,  such Option
shall be exercisable to all shares covered thereby,  notwithstanding anything to
the contrary in Section 5.4(a), Section 5.4(b) and/or any installment provisions
of such Option.

         5.8      No Right to Continued Employment

                  Nothing  in  this  Plan  or  in  any  Stock  Option  Agreement
hereunder  shall confer upon any Optionee any right to continued  employment  or
retention in service or shall  interfere  with or restrict in any way the rights
of the Company,  a Subsidiary  or any other person to terminate or discharge any
Optionee at any time for any reason whatsoever.

                         SECTION 6. EXERCISE OF OPTIONS

         6.1      Person Eligible to Exercise

                  During the lifetime of the  Optionee,  only such  Optionee may
exercise an Option (or any portion thereof) granted to such Optionee.  After the
death of the Optionee,  any  exercisable  portion of an Option may, prior to the
time when such portion  becomes  unexercisable  under the Plan or the applicable
Stock Option  Agreement,  be exercised  by the personal  representative  of such
Optionee or by any person empowered to do so under the deceased  Optionee's will
or under the then applicable laws of descent and distribution.

         6.2      Partial Exercise

                  At any time and from  time to time  prior to the time when any
exercisable Option or exercisable  portion thereof becomes  unexercisable  under
the Plan or the  applicable  Stock  Option  Agreement,  such  Option or  portion
thereof may be exercised in whole or in part; provided, however,

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that the  Company  shall not be  required  to issue  fractional  shares  and the
Committee may, by the terms of the Stock Option  Agreement,  require any partial
exercise to be with respect to a specified minimum number of shares.

         6.3      Manner of Exercise

                  An exercisable Option, or any exercisable portion thereof, may
be  exercised  solely by delivery to the  Secretary  or his office of all of the
following   prior  to  the  time  when  such  Option  or  such  portion  becomes
unexercisable under the Plan or the applicable Stock Option Agreement:

                  (a)   notice in writing signed by the Optionee or other person
          then  entitled to exercise  such Option or portion,  stating that such
          Option  or  portion  is  exercised,  such  notice  complying  with all
          applicable rules established by the Committee; and

                  (b) (i) full payment (in cash or by check) for the shares with
                  respect to which such Option or portion is thereby  exercised;
                  or

                      (ii) if permitted  under the terms of an Optionee's  Stock
                  Option  Agreement  or with the consent of the  Committee,  (A)
                  shares of the  Company's  Common  Stock owned by the  Optionee
                  duly  endorsed for  transfer to the Company,  or (B) shares of
                  the  Company's  Common  Stock  issuable to the  Optionee  upon
                  exercise of the Option,  with a Fair Market  Value on the date
                  of Option exercise equal to the aggregate  Option price of the
                  shares with respect to which such Option or portion is thereby
                  exercised; or

                      (iii) with the consent of the  Committee,  a full recourse
                  promissory note bearing  interest (at least such rate as shall
                  then preclude the imputation of interest under the Code or any
                  successor  provision)  and  payable  upon such terms as may be
                  prescribed by the Committee.  The Committee may also prescribe
                  the form of such  note and the  security  to be given for such
                  note.  No Option may,  however,  be exercised by delivery of a
                  promissory  note or by a loan from the  Company  when or where
                  such loan or other  extension of credit is  prohibited by law;
                  or

                       (iv) with the consent of the Committee,  any  combination
                  of the  consideration  provided in the  foregoing  subsections
                  (i), (ii) and (iii); and

                  (c)   the payment to the  Company of all  amounts  which it is
          required to withhold under  federal,  state or local law in connection
          with the exercise of the Option;  provided  that,  with the consent of
          the Committee,  (i) shares of the Company's  Common Stock owned by the
          Optionee duly  endorsed for transfer,  or (ii) shares of the Company's
          Common  Stock  issuable to the Optionee  upon  exercise of the Option,
          valued at Fair Market Value as of the date of Option exercise,  may be
          used to make all or part of such payment; and

                  (d)   such representations and documents as the Committee,  in
          its  absolute  discretion,  deems  necessary  or  advisable  to effect
          compliance  with all  applicable  provisions of the Securities Act and
          any other federal or state  securities laws or regulations,  including
          the  representation  that the  shares  of the  Common  Stock are being
          acquired for  investment  and not resale.  The  Committee  may, in its
          absolute discretion, also take whatever additional

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<PAGE>



         actions  it deems  appropriate  to effect  such  compliance  including,
         without  limitation,  placing legends on share certificates and issuing
         stop-transfer orders to transfer agents and registrars; and

                  (e)   in the event that the Option or portion thereof shall be
          exercised  pursuant to Section 6.1 by any person or persons other than
          the Optionee, appropriate proof of the right of such person or persons
          to exercise the Option or portion thereof.

         6.4      Conditions to Issuance of Stock Certificates

                  The shares of Common Stock issuable and  deliverable  upon the
exercise  of an  Option,  or  any  portion  thereof,  may be  either  previously
authorized but unissued  shares or issued shares which have then been reacquired
by the  Company.  The  Company  shall not be  required  to issue or deliver  any
certificate  or  certificates  for  shares of Common  Stock  purchased  upon the
exercise of any Option or portion  thereof  prior to  fulfillment  of all of the
following conditions:

                  (a)   the  satisfaction  of  all  requirements  set  forth  in
          Section 6.3, including payment of the exercise price; and

                  (b)   the  obtaining of any approval or other  clearance  from
          any state or federal governmental agency which the Committee shall, in
          its absolute discretion, determine to be necessary or advisable; and

                  (c)   the lapse of such  reasonable  period of time  following
          the exercise of the Option as the Committee may establish from time to
          time for reasons of administrative convenience.

         6.5      Rights as Stockholders

                  The  holders  of  Options  shall  not be,  nor have any of the
rights or privileges  of,  stockholders  of the Company in respect to any shares
purchasable  upon the  exercise  of any part of an Option  unless  and until the
Option  is  exercised,  the  Option  price  has  been  paid to the  Company  and
certificates  representing  such  shares have been issued by the Company to such
holders.

         6.6      Transfer Restrictions

                  The  Committee,  in its absolute  discretion,  may impose such
restrictions on the  transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth in
the respective Stock Option Agreement and may be referred to on the certificates
evidencing  such  shares.  The  Committee  may require any  Optionee to give the
Company prompt notice of any disposition of shares of stock acquired by exercise
of an Incentive  Stock  Option,  within two years from the Date of Grant of such
Option or one year after the  acquisition of such shares by such  Optionee.  The
Committee  may  direct  that the  certificates  evidencing  shares  acquired  by
exercise  of an  Option  refer to such  requirement  to give  prompt  notice  of
disposition.


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<PAGE>



                        SECTION 7. ADDITIONAL PROVISIONS

         7.1      Approval of Plan by Stockholders

                  This Plan will be submitted  for the approval of the Company's
stockholders  within  twelve  months  before  or after  the date of the Board of
Directors'  initial  adoption of the Plan.  Options may be granted prior to such
stockholder  approval;  provided,  however,  that  such  Options  shall  not  be
exercisable  prior to the time when the Plan is  approved  by the  stockholders;
provided,  further,  that if such  approval has not been  obtained at the end of
said twelve-month  period,  all Options  previously granted under the Plan shall
thereupon be cancelled and become null and void.

         7.2      Nontransferability

                  No Option or interest or right  therein or part thereof  shall
be liable  for the  debts,  contracts  or  engagements  of the  Optionee  or any
successors  in interest to the  Optionee or shall be subject to  disposition  by
transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such  disposition  be voluntary or  involuntary or by operation of
law by judgment,  levy, attachment,  garnishment or any other legal or equitable
proceedings (including bankruptcy),  and any attempted disposition thereof shall
be null and void and of no  effect;  provided,  however,  that  nothing  in this
Section 7.2 shall prevent transfers by will or by the applicable laws of descent
and distribution.

         7.3      Death or Disability of Optionee

                  If an  Optionee  dies  or  incurs  a  Severance  Date  due  to
Disability,  any Option of such Optionee which has been outstanding for at least
one year shall fully and  immediately  be vested.  In the event of an Optionee's
death  the  executor,  administrator  or other  personal  representative  of the
Optionee's  estate,  or any heir,  successor,  assign or other transferee of the
Optionee  receiving  such  Options  by  will  or by  the  laws  of  descent  and
distribution,  shall have the  right,  subject to the  restrictions  hereof,  to
exercise all vested  Options to acquire  shares of Common Stock  subject to such
Options at any time within one year after the date of the Optionee's death.

         7.4      Securities Act

                  No shares of Common Stock of the Company  shall be required to
be  distributed  until the Company  shall have taken such action,  if any, as is
then required to comply with the  provisions of the  Securities Act or any other
then applicable securities law. The Company reserves the right to place a legend
on any stock  certificate  issued pursuant to the Plan to assure compliance with
this Section and with the vesting requirements of Section 5.2.

         7.5      Withholding of Tax

                  The Company  shall have the right to deduct from  compensation
otherwise  payable to an Optionee  any  federal,  state or local income or other
taxes required by law to be withheld with respect to any distributions under the
Plan.


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<PAGE>



         7.6      Termination and Amendment of Plan

                  The  Committee  may at any time suspend or terminate the Plan,
or make such modifications of the Plan as it shall deem advisable, provided that
the  Plan  shall  not be so  changed  to  increase  the  cost of the Plan to the
Company.  However,  without approval of the Company's  stockholders given within
twelve  months  before or after the  action by the  Committee,  no action of the
Committee may, except as provided in Section 3.3,  increase any limit imposed in
Section 3.1 on the maximum number of shares which may be issued upon exercise of
Options,  materially modify the eligibility  requirements of Section 4.1, reduce
the  minimum  Option  price  requirements  of Section  5.3,  or extend the limit
imposed in this Section 7.6 on the period  during which  Options may be granted.
No Option may be granted during any period of suspension  nor after  termination
of the Plan, and in no event may any Option be granted under this Plan after the
first to occur of the following events:

                  (a)   the  expiration  of ten years  from the date the Plan is
          adopted by the Board of Directors; or

                  (b)   the  expiration  of ten years  from the date the Plan is
          approved by the Company's stockholders under Section 7.1.

         7.7      Duties of the Company

                  The  Company  shall,  at all  times  during  the  term of each
Option,  reserve and keep  available  for  issuance  or delivery  such number of
shares of Common Stock as will be sufficient to satisfy the  requirements of all
Options at the time outstanding, shall pay all original issue taxes with respect
to the  issuance or delivery of shares  pursuant to the  exercise of such Option
and  all  other  fees  and  expenses  necessarily  incurred  by the  Company  in
connection therewith.

                          SECTION 8. GENERAL PROVISIONS

                  (a)   No  individual  shall  have  any  claim  or  right to be
          granted  Options under the Plan.  Neither the adoption and maintenance
          of the Plan nor the granting of Options  pursuant to the Plan shall be
          deemed to constitute a contract of employment  between the Company and
          any individual or to be a condition of the employment of any person.

                  (b)   The  Company   shall  pay  all  costs  and  expenses  of
          administering the Plan.

                  (c)   The  granting of Options  and the  issuance of shares of
          Common Stock under the Plan shall be subject to all  applicable  laws,
          rules,  and  regulations,  and to such  approvals by any  governmental
          agencies or national  securities  exchanges  as may be  required.  The
          provisions of this Plan shall be  interpreted so as to comply with the
          conditions or  requirements  of the Securities  Act, the Exchange Act,
          and  rules  and  regulations   issued  thereunder  unless  a  contrary
          interpretation  of  any  such  provision  is  otherwise   required  by
          applicable law.

                  (d)   The  granting of an Option  shall  impose no  obligation
          upon the Optionee to exercise such option.


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<PAGE>



                  (e)   Whenever  the  context so  indicates,  the  singular  or
          plural number, and the masculine, feminine or neuter gender shall each
          be deemed to include the other.

                  (f)   This  Plan  and  all  Option  agreements   entered  into
          pursuant  thereto shall be construed and enforced in accordance  with,
          and governed by, the laws of the State of Delaware, determined without
          regard to its conflict of interest rules.

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