<PAGE>

                                 Exhibit 10.7
                                 ------------


                       CAPITAL ONE FINANCIAL CORPORATION

                           1994 STOCK INCENTIVE PLAN

                        (As Amended November 18, 1999)


     1.   Purpose.  The purpose of the Capital One Financial Corporation 1994
Stock Incentive Plan (the "Plan") is to further the long term stability and
financial success of Capital One Financial Corporation (the "Company") by
attracting and retaining key employees of the Company through the use of stock
incentives. It is believed that ownership of Company Stock will stimulate the
efforts of those employees of the Company upon whose judgment and interest the
Company is and will be largely dependent for the successful conduct of its
business. It is also believed that Awards granted to such employees under this
Plan will strengthen their desire to remain with the Company and will further
the identification of those employees' interests with those of the Company's
shareholders. The Plan was adopted by the Board of Directors and approved by the
Company's sole shareholder on October 28, 1994.

     The Plan is intended to satisfy the requirements of Securities and Exchange
Commission Rule 16b-3 ("Rule 16b-3").

     2.   Definitions.  As used in the Plan, the following terms have the
meanings indicated:

          (a)  "Award" means, collectively, the award of an Option, Stock
     Appreciation Right, Restricted Stock or Incentive Stock under the Plan.

          (b)  "Board" means the board of directors of the Company.
<PAGE>

          (c)  "Change of Control" means:

               (i)  The acquisition by an individual, entity or group (within
          the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
          Act of 1934, as amended (the "Exchange Act")) of beneficial ownership
          (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
          of 20% (or, if such shares are purchased from the Company, 40%) or
          more of either (A) the then outstanding shares of common stock of the
          Company (the "Outstanding Company Common Stock") or (B) the combined
          voting power of the then outstanding voting securities of the Company
          entitled to vote generally in the election of directors (the "Company
          Voting Securities"), provided, however, that any acquisition by (x)
                               --------  -------
          the Company or any of its subsidiaries, or any employee benefit plan
          (or related trust) sponsored or maintained by the Company or any of
          its subsidiaries or (y) any corporation with respect to which,
          immediately following such acquisition, more than 60% of,
          respectively, the then outstanding shares of common stock of such
          corporation and the combined voting power of the then outstanding
          voting securities of such corporation entitled to vote generally in
          the election of directors is then beneficially owned, directly or
          indirectly, by all or substantially all of the individuals and
          entities who were the beneficial owners, respectively, of the
          Outstanding Company Common Stock and Company Voting Securities
          immediately prior to such acquisition in substantially the same
          proportion as their ownership, immediately prior to such acquisition,
          of the

                                       2
<PAGE>

          Outstanding Company Common Stock and Company Voting Securities, as the
          case may be, shall not constitute a Change of Control; or

               (ii)  Individuals who constitute the Board as of September 1,
          1995 (the "Incumbent Board") cease for any reason to constitute at
          least a majority of the Board, provided that any individual becoming a
          director subsequent to September 1, 1995 whose appointment to fill a
          vacancy or to fill a new Board position or whose nomination for
          election by the Company's shareholders was approved by a vote of at
          least a majority of the directors then comprising the Incumbent Board
          shall be considered as though such individual were a member of the
          Incumbent Board, but excluding, for this purpose, any such individual
          whose initial assumption of office is in connection with an actual or
          threatened election contest relating to the election of the Directors
          of the Company (as such terms are used in Rule 14a-11 of Regulation
          14A promulgated under the Exchange Act); or

               (iii) Approval by the shareholders of the Company of a
          reorganization, merger or consolidation (a "Business Combination"), in
          each case, with respect to which all or substantially all of the
          individuals and entities who were the respective beneficial owners of
          the Outstanding Company Common Stock and Company Voting Securities
          immediately prior to such Business Combination do not in the
          aggregate, immediately following such Business Combination,
          beneficially own, directly or indirectly, more than 60% of,
          respectively, the then outstanding shares of common stock and the
          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors,

                                       3
<PAGE>

          as the case may be, of the corporation resulting from such Business
          Combination in substantially the same proportion as their ownership
          immediately prior to such Business Combination of the Outstanding
          Company Common Stock and Company Voting Securities, as the case may
          be; or

               (iv) (A)  a complete liquidation or dissolution of the Company or
          (B) sale or other disposition of all or substantially all of the
          assets of the Company other than to a corporation with respect to
          which, immediately following such sale or disposition, more than 60%
          of, respectively, the then outstanding shares of common stock and the
          combined voting power of the then outstanding voting securities
          entitled to vote generally in the election of directors is then
          beneficially owned, directly or indirectly, in the aggregate by all or
          substantially all of the individuals and entities who were the
          beneficial owners, respectively, of the Outstanding Company Common
          Stock and Company Voting Securities immediately prior to such sale or
          disposition in substantially the same proportion as their ownership of
          the Outstanding Company Common Stock and Company Voting Securities, as
          the case may be, immediately prior to such sale or disposition.

               (v)  Neither the sale of Company common stock in an initial
          public offering, nor the distribution of Company common stock by
          Capital One Financial Corporation's parent corporation to its
          shareholders in a transaction to which Section 355 of the Internal
          Revenue Code applies, nor any restructuring of the

                                       4
<PAGE>

          Company or its Board of Directors in contemplation of or as the result
          of either of such events, shall constitute a Change of Control.

          (d)  "Code" means the Internal Revenue Code of 1986, as amended.

          (e)  "Company" means Capital One Financial Corporation, a Delaware
     corporation.

          (f)  "Company Stock" means Common Stock of the Company. If the par
     value of the Company Stock is changed, or in the event of a change in the
     capital structure of the Company (as provided in Section 15), the shares
     resulting from such a change shall be deemed to be Company Stock within the
     meaning of the Plan.

          (g)  "Date of Grant" means the date on which an Award is granted by
     the Committee or such later date specified by the Committee as the date as
     of which the Award is to be effective.

          (h)  "Disability" or "Disabled" means, as to an Incentive Stock
     Option, a Disability within the meaning of Code section 22(e)(3). As to all
     other Awards, the Committee shall determine whether a Disability exists and
     such determination shall be conclusive.

          (i)  "Distribution" means the distribution of the Company's common
     stock to shareholders of the Company's parent corporation in a transaction
     to which Code Section 355 applies.

          (j)  "Distribution Date" means the date on which the Distribution
     occurs.

          (k)  "Fair Market Value" means, on the date shares of the Company
     Stock are offered in an initial public offering, the offering price, and on
     any given date thereafter,

                                       5
<PAGE>

     the average of the high and low price on such date as reported on The New
     York Stock Exchange-Composite Transactions Tape. In the absence of any such
     sale, fair market value means the average of the highest bid and lowest
     asked prices of a share of Company Stock on such date as reported by such
     source. In the absence of such average or if shares of Company Stock are no
     longer traded on The New York Stock Exchange, the fair market value shall
     be determined by the Committee using any reasonable method in good faith.

          (l)  "Incentive Stock" means Company Stock awarded when performance
     goals are achieved pursuant to an incentive plan as provided in Section 9.

          (m)  "Incentive Stock Option" means an Option intended to meet the
     requirements of, and qualify for favorable Federal income tax treatment
     under, Code section 422.

          (n)  "Insider" means a person subject to Section 16(b) of the
     Securities Exchange Act of 1934.

          (o)  "Nonstatutory Stock Option" means an Option, which does not meet
     the requirements of Code section 422, or even if meeting the requirements
     of Code section 422, is not intended to be an Incentive Stock Option and is
     so designated.

          (p)  "Option" means a right to purchase Company Stock granted under
     the Plan, at a price determined in accordance with the Plan.

          (q)  "Parent" means, with respect to any corporation, a "parent
     corporation" of that corporation within the meaning of Code section 424(e).

          (r)  "Participant" means any employee who receives an Award under the
     Plan.


                                       6
<PAGE>

          (s)  "Reload Feature" means a feature of an Option described in an
     employee's stock option agreement that provides for the automatic grant of
     a Reload Option in accordance with the provisions described in Section
     10(d).

          (t)  "Reload Option" means an Option granted to an employee equal to
     the number of shares of already owned Company Stock delivered by the
     employee to exercise an Option described in Section 10(d).

          (u)  "Restricted Stock" means Company Stock awarded upon the terms and
     subject to the restrictions set forth in Section 8.

          (v)  "Restricted Stock Award" means an award of Restricted Stock
     granted under the Plan.

          (w)  "Rule 16b-3" means Rule 16b-3 of the Securities Exchange Act of
     1934. A reference in the Plan to Rule 16b-3 shall include a reference to
     any corresponding rule (or number redesignation) of any amendments to Rule
     16b-3 enacted after the effective date of the Plan's adoption.

          (x)  "Stock Appreciation Right" means a right granted under the Plan
     to receive from the Company amounts in cash or shares of Company Stock upon
     the surrender of an Option.

          (y)  "Stock Option Committee" or "Committee" means the committee
     appointed by the Board as described under Section 16.

          (z)  "Subsidiary" means, with respect to any corporation, a
     "subsidiary corporation" of that corporation within the meaning of Code
     section 424(f).

                                       7
<PAGE>

          (aa) "10% Shareholder" means a person who owns, directly or
     indirectly, stock possessing more than 10% of the total combined voting
     power of all classes of stock of the Company or any Parent or Subsidiary of
     the Company. Indirect ownership of stock shall be determined in accordance
     with Code section 424(d).

     3.   General. The following types of Awards may be granted under the Plan:
Options, Stock Appreciation Rights, Restricted Stock or Incentive Stock. Options
granted under the Plan may be Incentive Stock Options or Nonstatutory Stock
Options.

     4.   Stock. Subject to Section 15 of the Plan, there shall be reserved for
issuance under the Plan an aggregate of 43,112,640 shares of Company Stock, of
which 41,612,640 shares (the "Existing Reserve") may be used for the grant of
any Award and 1,500,000 shares (the "New Reserve") may be used for the grant of
any Award except Incentive Stock Options, which shall be authorized, but
unissued shares. Shares granted under the Plan that expire or otherwise
terminate unexercised and shares forfeited pursuant to restrictions on
Restricted Stock or Incentive Stock may again be subjected to an Award under the
Plan. The Committee is expressly authorized to make an Award to a Participant
conditioned upon the surrender for cancellation of an existing Award. For
purposes of determining the number of shares that are available for Awards under
the Plan, such number shall include the number of shares surrendered by an
optionee or retained by the Company in payment of federal and state income tax
withholding liabilities upon exercise of a Nonstatutory Stock Option or a Stock
Appreciation Right.

     5.   Eligibility.

          (a)  Any employee of the Company (or Parent or Subsidiary of the
Company) who, in the judgment of the Committee has contributed or can be
expected to contribute to the

                                       8
<PAGE>

profits or growth of the Company (or Parent or Subsidiary) shall be eligible to
receive Awards under the Plan. Directors of the Company who are employees and
are not members of the Committee are eligible to participate in the Plan. The
Committee shall have the power and complete discretion, as provided in Section
16, to select eligible employees to receive Awards and to determine for each
employee the terms and conditions, the nature of the award and the number of
shares to be allocated to each employee as part of each Award.

          (b)  The grant of an Award shall not obligate the Company or any
Parent or Subsidiary of the Company to pay an employee any particular amount of
remuneration, to continue the employment of the employee after the grant or to
make further grants to the employee at any time thereafter.

     6.   Stock Options.

          (a)  Whenever the Committee deems it appropriate to grant Options,
notice shall be given to the eligible employee stating the number of shares for
which Options are granted, the Option price per share, whether the Options are
Incentive Stock Options or Nonstatutory Stock Options, the extent to which Stock
Appreciation Rights are granted (as provided in Section 7), and the conditions
to which the grant and exercise of the Options are subject. This notice shall
constitute the stock option agreement between the Company and the eligible
employee.

          (b)  The exercise price of shares of Company Stock covered by an
Option shall be not less than 100% of the Fair Market Value of such shares on
the Date of Grant. If the employee is a 10% Shareholder and the Option is an
Incentive Stock Option, the exercise price shall be not less than 110% of the
Fair Market Value of such shares on the Date of Grant.

                                       9
<PAGE>

          (c)  Options may be exercised in whole or in part at such times as may
be specified by the Committee in the employee's stock option agreement; provided
that the exercise provisions for Incentive Stock Options shall in all events not
be more liberal than the following provisions:

               (i)  No Incentive Stock Option may be exercised after the first
          to occur of (x) ten years (or, in the case of an Incentive Stock
          Option granted to a 10% Shareholder, five years) from the Date of
          Grant, (y) three months from the employee's retirement or termination
          of employment with the Company and its Parent and Subsidiary
          corporations for reasons other than Disability or death, or (z) one
          year from the employee's termination of employment on account of
          Disability or death.

               (ii) Except as otherwise provided in this paragraph, no Incentive
          Stock Option may be exercised unless the employee is employed by the
          Company or a Parent or Subsidiary of the Company at the time of the
          exercise (or was so employed not more than three months before the
          time of the exercise) and has been employed by the Company or a Parent
          or Subsidiary of the Company at all times since the Date of Grant. If
          an employee's employment is

                                       10
<PAGE>

          terminated other than by reason of his Disability or death at a time
          when the employee holds an Incentive Stock Option that is exercisable
          (in whole or in part), the employee may exercise any or all of the
          exercisable portion of the Incentive Stock Option (to the extent
          exercisable on the date of termination) within three months after the
          employee's termination of employment. If an employee's employment is
          terminated by reason of his Disability at a time when the employee
          holds an Incentive Stock Option that is exercisable (in whole or in
          part), the employee may exercise any or all of the exercisable portion
          of the Incentive Stock Option (to the extent exercisable on the date
          of Disability) within one year after the employee's termination of
          employment. If an employee's employment is terminated by reason of his
          death at a time when the employee holds an Incentive Stock Option that
          is exercisable (in whole or in part), the Incentive Stock Option may
          be exercised (to the extent exercisable on the date of death) within
          one year after the employee's death by the person to whom the
          employee's rights under the Incentive Stock Option shall have passed
          by will or by the laws of descent and distribution.

               (iii) An Incentive Stock Option by its terms, shall be
          exercisable in any calendar year only to the extent that the aggregate
          Fair Market Value (determined at the Date of Grant) of the Company
          Stock with respect to which incentive stock options are exercisable
          for the first time during the calendar year does not exceed $100,000
          (the "Limitation Amount"). Incentive Stock Options granted under the
          Plan and similar incentive options granted after 1986 under all other
          plans of the Company and any Parent or Subsidiary of the Company shall
          be aggregated for purposes of determining whether the Limitation
          Amount has been exceeded. The Board may impose such conditions as it
          deems appropriate on an Incentive Stock Option to ensure that the
          foregoing requirement is met. If Incentive Stock Options that first
          become exercisable in a calendar year exceed the Limitation

                                       11
<PAGE>

          Amount, the excess Options will be treated as Nonstatutory Stock
          Options to the extent permitted by law.

          (d)  The Committee may, in its discretion, grant Options which by
their terms become fully exercisable upon a Change of Control, notwithstanding
other conditions on exercisability in the stock option agreement.

          (e)  The maximum number of shares with respect to which Nonstatutory
Options or Stock Appreciation Rights may be granted in any calendar year to an
employee eligible to participate in the Plan is as follows: the Chief Executive
Officer, 1,500,000; each of the next four most highly compensated employees,
1,000,000; each other eligible employee, 500,000.

          (f)  The Committee may, in its discretion, grant Options containing or
amend Options previously granted to provide for a Reload Feature subject to the
limitations of Section 10(d).

          (g)  Notwithstanding paragraph (c) above, the Committee may, in its
discretion, amend a previously granted Incentive Stock Option to provide for
more liberal exercise provisions; provided however if the Incentive Stock Option
as amended no longer meets the requirements of Code section 422, and as a result
such Option no longer qualifies for favorable Federal income tax treatment under
Code section 422, the amendments shall not become effective without the written
consent of the Participant and provided further that no Incentive Stock Option
may be exercised after ten (10) years (or, in the case of an Incentive Stock
Option granted to a 10% Shareholder, five (5) years) from the Date of Grant.

                                       12
<PAGE>

     7.   Stock Appreciation Rights.

          (a)  Whenever the Committee deems it appropriate, Stock Appreciation
Rights may be granted in connection with all or any part of an Incentive Stock
Option. At the discretion of the Committee, Stock Appreciation Rights may also
be granted in connection with all or any part of a Nonstatutory Stock Option,
either concurrently with the grant of the Nonstatutory Stock Option or at any
time thereafter during the term of the Nonstatutory Stock Option. The following
provisions apply to all Stock Appreciation Rights that are granted in connection
with Options:

               (i)  Stock Appreciation Rights shall entitle the employee, upon
          exercise of all or any part of the Stock Appreciation Rights, to
          surrender to the Company unexercised that portion of the underlying
          Option relating to the same number of shares of Company Stock as is
          covered by the Stock Appreciation Rights (or the portion of the Stock
          Appreciation Rights so exercised) and to receive in exchange from the
          Company an amount in cash or shares of Company Stock (as provided in
          the Stock Appreciation Right) equal to the excess of (x) the Fair
          Market Value on the date of exercise of the Company Stock covered by
          the surrendered portion of the underlying Option over (y) the exercise
          price of the Company Stock covered by the surrendered portion of the
          underlying Option. The Committee may limit the amount that the
          employee will be entitled to receive upon exercise of the Stock
          Appreciation Right.

                                       13
<PAGE>

               (ii)  Upon the exercise of a Stock Appreciation Right and
          surrender of the related portion of the underlying Option, the Option,
          to the extent surrendered, shall not thereafter be exercisable.

               (iii) Subject to any further conditions upon exercise imposed by
          the Committee, a Stock Appreciation Right issued in tandem with an
          Option shall be exercisable only to the extent that the related Option
          is exercisable and shall expire no later than the date on which the
          related Option expires.

               (iv)  A Stock Appreciation Right may only be exercised at a time
          when the Fair Market Value of the Company Stock covered by the Stock
          Appreciation Right exceeds the exercise price of the Company Stock
          covered by the underlying Option.

          (b)  The manner in which the Company's obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be determined by the
Committee and shall be set forth in the employee's Option or the related Stock
Appreciation Rights agreement. The Committee may provide for payment in Company
Stock or cash, or a fixed combination of Company Stock or cash, or the Committee
may reserve the right to determine the manner of payment at the time the Stock
Appreciation Right is exercised. Shares of Company Stock issued upon the
exercise of a Stock Appreciation Right shall be valued at their Fair Market
Value on the date of exercise.

     8.   Restricted Stock Awards.

          (a)  Whenever the Committee deems it appropriate to grant a Restricted
Stock Award, notice shall be given to the Participant stating the number of
shares of Restricted Stock

                                       14
<PAGE>

for which the Restricted Stock Award is granted and the terms and conditions to
which the Restricted Stock Award is subject. This notice, when accepted in
writing by the Participant shall become an award agreement between the Company
and the Participant and certificates representing the shares shall be issued and
delivered to the Participant. A Restricted Stock Award may be made by the
Committee in its discretion without cash consideration.

          (b)  Restricted Stock issued pursuant to the Plan shall be subject to
     the following restrictions:

               (i)   Unless otherwise provided by the Committee, Restricted
          Stock may not be sold, assigned, transferred or disposed of within a
          six-month period beginning on the Date of Grant.

               (ii)  None of such shares may be sold, assigned, transferred,
          pledged, hypothecated, or otherwise encumbered or disposed of until
          the restrictions on such shares shall have lapsed or shall have been
          removed pursuant to paragraph (d) or (e) below.

               (iii) If a Participant ceases to be employed by the Company or a
          Parent or Subsidiary of the Company, the Participant shall forfeit to
          the Company any shares of Restricted Stock, the restrictions on which
          shall not have lapsed or shall not have been removed pursuant to
          paragraph (d) or (e) below, on the date such Participant ceases to be
          so employed.

          (c)  Upon the acceptance by a Participant of a Restricted Stock Award,
     such Participant shall, subject to the restrictions set forth in paragraph
     (b) above, have all the rights of a shareholder with respect to the shares
     of Restricted Stock

                                       15
<PAGE>

Award, including, but not limited to, the right to vote such shares of
Restricted Stock and the right to receive all dividends and other distributions
paid thereon. Certificates representing Restricted Stock shall bear a legend
referring to the restrictions set forth in the Plan and the Participant's award
agreement.

          (d) The Committee shall establish as to each Restricted Stock Award
the terms and conditions upon which the restrictions set forth in paragraph (b)
above shall lapse. Such terms and conditions may include, without limitation,
the passage of time, the meeting of performance goals, the lapsing of such
restrictions as a result of the Disability, death or retirement of the
Participant, or the occurrence of a Change of Control.

          (e) Notwithstanding the forfeiture provisions of paragraph (b)(iii)
above, the Committee may at any time, in its sole discretion, accelerate the
time at which any or all restrictions will lapse or remove any and all such
restrictions.

          (f) Each Participant shall agree at the time his Restricted Stock
Award is granted, and as a condition thereof, to pay to the Company, or make
arrangements satisfactory to the Company regarding the payment to the Company
of, the aggregate amount of any Federal, state or local taxes of any kind
required by law to be withheld with respect to the shares of Restricted Stock
subject to the Restricted Stock Award. Until such amount has been paid or
arrangements satisfactory to the Company have been made, no stock certificate
free of a legend reflecting the restrictions set forth in paragraph (b) above
shall be issued to such Participant.

          (g) The Company may place on any certificate representing Company
Stock issued in connection with an Incentive Award any legend deemed desirable
by the Company's

                                       16
<PAGE>

counsel to comply with Federal or state securities laws, and the Company may
require a customary written indication of the Participant's investment intent.

  9.  Incentive Stock Awards.

      (a) Incentive Stock may be issued pursuant to the Plan in connection with
incentive programs established from time to time by the Committee when
performance criteria established by the Committee as part of the incentive
program have been achieved. If the objectives established by the Committee as a
prerequisite to the receipt of Incentive Stock have not been achieved, no stock
will be issued, except as provided in (c). A Participant eligible for the
receipt or issuance of incentive shares will have no rights as a stockholder
before actual receipt of the Incentive Stock.

     (b) Whenever the Committee deems it appropriate, the Committee may
establish an incentive program and notify Participants of their participation in
and the terms of the incentive program. More than one incentive program may be
established by the Committee and they may operate concurrently or for varied
periods of time and a Participant may be permitted to participate in more than
one incentive program at the same time. Incentive Stock will be issued only
subject to the incentive program and the Plan and consistent with meeting the
performance goals set by the Committee. Incentive Stock may be issued without
cash consideration.

     (c) The Committee may provide in the incentive program, or subsequently,
that Incentive Stock will be issued if a Change of Control occurs even though
the performance goals set by the Committee have not been met.

                                       17
<PAGE>

       (d) A Participant's interest in an incentive program may not be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered.

       (e) Each Participant shall agree as a condition of his participation in
an incentive program and the receipt of Incentive Stock, to pay to the Company,
or make arrangements satisfactory to the Company regarding the payment to the
Company of, the aggregate amount of any Federal, state or local taxes of any
kind required by law to be withheld with respect to the shares of Incentive
Stock received. Until such amount has been paid or arrangements satisfactory to
the Company have been made, no stock certificate free of a legend reflecting the
restrictions set forth in paragraph (b) above shall be issued to such
Participant.

       (f) The Company may place on any certificate representing Company Stock
issued in connection with an Incentive Award any legend deemed desirable by the
Company's counsel to comply with Federal or state securities laws, and the
Company may require a customary written indication of the Participant's
investment intent.

  10.  Method of Exercise of Options and Stock Appreciation Rights.

       (a) Options and Stock Appreciation Rights may be exercised by the
employee giving written notice of the exercise to the Company, stating the
number of shares the employee has elected to purchase under the Option or the
number of Stock Appreciation Rights he has elected to exercise. In the case of
the purchase of shares under an Option, such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that if the terms of
an Option so permit, the employee may (i) deliver Company Stock that the
Participant has owned for at least six (6) months (valued at Fair Market Value
on the date of exercise) in satisfaction of all or any part of the exercise
price, (ii) deliver a properly executed exercise notice together with

                                       18
<PAGE>

irrevocable instructions to a broker to promptly deliver to the Company the
amount of the sale or loan proceeds to pay the exercise price, or (iii) deliver
an interest bearing promissory note, payable to the Company, in payment of all
or part of the exercise price together with such collateral as may be required
by the Committee at the time of exercise. The interest rate under any such
promissory note shall be equal to the minimum interest rate required at the time
to avoid imputed interest to the Participant under the Code.

     (b) Options and Stock Appreciation Rights may also be exercised by the
employee in accordance with any other method or methods of exercise as may be
approved from time to time by the Committee;

     (c) The Company may place on any certificate representing Company Stock
issued upon the exercise of an Option or Stock Appreciation Right any legend
deemed desirable by the Company's counsel to comply with Federal or state
securities laws, and the Company may require of the employee a customary written
indication of his investment intent. Until the employee has made any required
payment, including any applicable Federal, state and local withholding taxes,
and has had issued to him a certificate for the shares of Company Stock
acquired, he shall possess no shareholder rights with respect to the shares.

     (d) If an employee exercises an Option that has a Reload Feature by
delivering already owned shares of Company Stock, the employee shall
automatically be granted a Reload Option. The Reload Option shall be subject to
the following provisions:

          (i) The Reload Option shall cover the number of shares of Company
      Stock delivered by the employee to the Company to exercise the Option with
      the Reload Feature;

                                       19
<PAGE>

          (ii)  The Reload Option will not have a Reload Feature;

          (iii) The exercise price of shares of Company Stock covered by a
       Reload Option shall be 100% of the Fair Market Value of such shares on
       the date the employee delivers shares of Company Stock to the Company to
       exercise the Option that has a Reload Feature;

          (iv)  The Reload Option shall be subject to the same restrictions on
       exercisability as those imposed on the underlying Option (possessing the
       Reload Feature);

          (v)   The Reload Option shall not be exercisable until the expiration
       of any retention holding period imposed on the disposition of any shares
       of Company Stock covered by the underlying Option (possessing the Reload
       Feature).

The Committee may, in its discretion, cause the Company to place on any
certificate representing Company Stock issued to a Participant upon the exercise
of an underlying Option (possessing a Reload Feature as evidenced by the stock
option agreement for such Option) delivered pursuant to this subsection (d), a
legend restricting the sale or other disposition of such Company Stock.

       (e) Notwithstanding anything herein to the contrary, Awards shall always
be granted and exercised in such a manner as to conform to the provisions of
Rule 16b-3, or any replacement rule adopted, as the same now exists or may, from
time to time, be amended.

  11.  Applicable Withholding Taxes.  As an alternative to making a cash payment
to the Company to satisfy tax withholding obligations, the Committee may
establish procedures permitting the Participant to elect to (a) deliver shares
of already owned Company Stock or (b)

                                       20
<PAGE>

have the Company retain that number of shares of Company Stock that would
satisfy all or a specified portion of the Federal, state and local tax
liabilities of the Participant arising in the year the Award becomes subject to
tax. Any such election shall be made only in accordance with procedures
established by the Committee.

  12.  Transferability of Awards and Options.  To the extent required by the
Code, Awards, by their terms, shall not be transferable by the Participant
except by will or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the Participant or by
his guardian or legal representative.  The Committee is expressly authorized, in
its discretion, to provide that all or a portion of a Nonstatutory Stock Option
or Stock Appreciation Right may be granted to a Participant upon terms that
permit transfer of the Nonstatutory Stock Option or Stock Appreciation Right in
a form and manner determined by the Committee.

  13.  Effective Date of the Plan.  This Plan having been adopted by the
Company's Board and approved by the Company's sole shareholder shall be
effective on October 28, 1994.  Until the requirements of any applicable federal
and state securities laws have been met, no Option or Stock Appreciation Right
shall be exercisable and no award of Restricted Stock or Incentive Stock shall
be made.

  14.  Termination, Modification, Change.  If not sooner terminated by the
Board, this Plan shall terminate at the close of business on October 27, 2004.
No Awards shall be made under the Plan after its termination.  The Board may
terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided, that, if and to the extent required by the Code, no change
shall be made that materially increases the total number of shares of Company
Stock

                                       21
<PAGE>

reserved for issuance pursuant to Awards granted under the Plan (except pursuant
to Section 15), materially expands the class of persons eligible to receive
Awards, or materially increases the benefits accruing to Participants under the
Plan, unless such change is authorized by the shareholders of the Company.
Notwithstanding the foregoing, the Board may amend the Plan and unilaterally
amend Awards as it deems appropriate to ensure compliance with Rule 16b-3 and to
cause Incentive Stock Options to meet the requirements of the Code and
regulations thereunder. Except as provided in the preceding sentence, a
termination or amendment of the Plan shall not, without the consent of the
Participant, detrimentally affect a Participant's rights under an Award
previously granted to him.

  15.  Change in Capital Structure.

       (a) In the event of a stock dividend, stock split or combination of
shares, spin-off, recapitalization or merger in which the Company is the
surviving corporation or other change in the Company's capital stock (including,
but not limited to, the creation or issuance to shareholders generally of
rights, options or warrants for the purchase of common stock or preferred stock
of the Company), the number and kind of shares of stock or securities of the
Company to be subject to the Plan and to Awards then outstanding or to be
granted under the Plan, the maximum number of shares or securities which may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons. If the adjustment would produce fractional shares with respect
to any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.

                                       22
<PAGE>

       (b) If the Company is a party to a consolidation or a merger in which the
Company is not the surviving corporation, a transaction that results in the
acquisition of substantially all of the Company's outstanding stock by a single
person or entity, or a sale or transfer of substantially all of the Company's
assets, the Committee may take such actions with respect to outstanding
Incentive Awards as the Committee deems appropriate.

       (c) Notwithstanding anything in the Plan to the contrary, the Committee
may take the foregoing actions without the consent of any Participant, and the
Committee's determination shall be conclusive and binding on all persons for all
purposes.

  16.  Administration of the Plan.  The Plan shall be administered by the
Committee consisting solely of two or more nonemployee directors of the Company
(within the meaning of Rule 16b-3), who shall be appointed by the Board.  The
Committee shall have general authority to impose any limitation or condition
upon an Award the Committee deems appropriate to achieve the objectives of the
Award and the Plan and, in addition, and without limitation and in addition to
powers set forth elsewhere in the Plan, shall have the following specific
authority:

       (a) The Committee shall have the power and complete discretion to
  determine (i) which eligible employees shall receive an Award and the nature
  of the Award, (ii) the number of shares of Company Stock to be covered by each
  Award, (iii) whether Options shall be Incentive Stock Options or Nonstatutory
  Stock Options, (iv) when, whether and to what extent Stock Appreciation Rights
  shall be granted in connection with Options, (v) whether to include a Reload
  Feature in an Option and to impose limitations on the use of shares acquired
  through the exercise of a Reload Option to exercise Options, (vi) the fair
  market value of Company Stock, (vii) the time or times when an Award shall be
  granted,

                                       23
<PAGE>

     (viii) whether an Award shall become vested over a period of time and when
     it shall be fully vested, (ix) conditions relating to the length of time
     before disposition of Company Stock received in connection with an Award is
     permitted, (x) the terms and conditions on which restrictions upon
     Restricted Stock shall lapse, (xi) whether to accelerate the time of
     receipt of Incentive Stock or the time when any or all restrictions with
     respect to Restricted Stock will lapse or be removed, (xii) the terms of
     incentive programs, performance criteria and other factors relevant to the
     issuance of Incentive Stock or the lapse of restrictions on Restricted
     Stock, (xiii) when Options and Stock Appreciation Rights may be exercised,
     (xiv) whether a Disability exists, (xv) the manner in which payment will be
     made upon the exercise of Options or Stock Appreciation Rights, (xvi)
     whether to approve a Participant's election (x) to deliver shares of
     already owned Company Stock to satisfy tax liabilities arising upon the
     exercise of a Nonstatutory Stock Option or Stock Appreciation Right or (y)
     to have the Company withhold from the shares to be issued upon the exercise
     or receipt of an Award that number of shares necessary to satisfy tax
     liabilities arising from such exercise or receipt, (xvii) notice provisions
     relating to the sale of Company Stock acquired under the Plan, and (xviii)
     any additional requirements relating to Awards that the Committee deems
     appropriate. Notwithstanding the foregoing, no "tandem stock options"
     (where two stock options are issued together and the exercise of one option
     affects the right to exercise the other option) may be issued in connection
     with Incentive Stock Options. The Committee shall also have the power to
     amend the terms of previously granted Awards so long as the terms as
     amended are consistent with the terms of the Plan and provided that the
     consent of the Participant is

                                       24
<PAGE>

     obtained with respect to any amendment that would be detrimental to him,
     except that such consent will not be required if such amendment is for the
     purpose of complying with Rule 16b-3 or any requirement of the Code
     applicable to the Award.

          (b) The Committee may adopt rules and regulations for carrying out the
     Plan. The interpretation and construction of any provision of the Plan by
     the Committee shall be final and conclusive. The Committee may consult with
     counsel, who may be counsel to the Company, and shall not incur any
     liability for any action taken in good faith in reliance upon the advice of
     counsel.

          (c) A majority of the members of the Committee shall constitute a
     quorum, and all actions of the Committee shall be taken by a majority of
     the members present. Any action may be taken by a written instrument signed
     by all of the members, and any action so taken shall be fully effective as
     if it had been taken at a meeting.

          (d) The Board of Directors from time to time may appoint members
     previously appointed and may fill vacancies, however caused, in the
     Committee.

     17. Notice. All notices and other communications required or permitted to
be given under this Plan shall be in writing and shall be deemed to have been
duly given if delivered as follows: (a) if to the Company - delivery shall be
made personally or by first class mail, postage prepaid at its principal
business address to the attention of the Company's Director of Human Resources;
and (b) if to any Participant - personally, including by delivery through the
Company's internal electronic system with a return receipt requested or
interoffice mail system, or by first class mail, postage prepaid, at the last
known address of the Participant known to the sender at the time the notice or
other communication is sent.

                                       25
<PAGE>

       18. Interpretation. The terms of this Plan are subject to all present and
future regulations and rulings of the Secretary of the Treasury or his delegate
relating to the qualification of Incentive Stock Options under the Code.  If any
provision of the Plan conflicts with any such regulation or ruling, then that
provision of the Plan shall be void and of no effect.

       19. Foreign Equity Incentive Plans. The Committee may authorize any
foreign Subsidiary or any foreign unincorporated division of the Company or of a
Subsidiary to adopt a plan for granting Awards (a "Foreign Equity Incentive
Plan"). All Awards granted under a Foreign Equity Incentive Plan shall be
treated as grants under this Plan. A Foreign Equity Incentive Plan shall have
such terms as the Committee permits; provided that such terms are not
inconsistent with the provisions of this Plan; and provided further that such
terms may be more restrictive than those in this Plan. Awards granted under a
Foreign Equity Incentive Plan shall be governed by the terms of this Plan except
to the extent that the terms of the Foreign Equity Incentive Plan are more
restrictive than the terms of this Plan, in which case such terms of the Foreign
Equity Incentive Plan shall control.

       20. Substitute Award. The Committee may make a grant of an Award to an
employee of another corporation who becomes an employee of the Company (or
Parent or Subsidiary of the Company) by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization, liquidation or
similar transaction involving the Company (or Parent or Subsidiary of the
Company) in substitution for any award made by such corporation. The terms and
conditions of the substitute Award may vary from the terms and conditions
required by the Plan and from those of the substituted award. The Committee
shall prescribe the provisions of the substitute Award.

                                       26
<PAGE>

     21. Provisions Applicable to French Employees. Notwithstanding any other
provision of the Plan to the contrary, the following provisions shall apply to
Options granted to any employee who is employed by a French company or who works
primarily in France (hereinafter collectively referred to as a "French
Employee").

         (a) Notwithstanding anything to the contrary herein, whether a
Disability exists for a French Employee shall be determined in accordance with
French law.

         (b) Notwithstanding the provisions of Section 3 herein, only Options
may be granted to French Employees to the exclusion of any other type of Awards.
Moreover, Options granted under the Plan to French Employees may be Nonstatutory
Stock Options only.

         (c) Notwithstanding anything to the contrary herein, no Option shall
be granted to any French Employee who holds more than ten percent of the
Company's capital as of the Date of Grant.

         (d) Notwithstanding the provisions of Section 4 herein, (i) at no time
shall the number of shares underlying Options granted to French Employees but
not exercised exceed one-third of the total number of shares of Company Stock
issued and outstanding, and (ii) the Committee shall not make an Award to any
French Employee conditioned upon the surrender for cancellation of an existing
Award.

         (e) Notwithstanding the provisions of Section 6(b) herein, all Options
granted to French Employees shall be granted at an exercise price per share
equal to the greater of (i) the Fair Market Value per share of Company Stock as
of the Date of Grant and (ii) 80% of the average Fair Market Value per share of
Company Stock for the 20 trading days preceding the Date of Grant.

                                       27
<PAGE>

          (f) Notwithstanding anything to the contrary herein, in respect of a
Participant who is a French Employee, upon such French Employee's death, the
vested portion of such Participant's Option shall remain exercisable for a six-
month period after the date of his death and shall be exercisable by his heirs,
provided his heirs agree to comply with and be bound by the Plan and the
employee's stock option agreement, if applicable.

          (g) Notwithstanding anything to the contrary herein, in respect of a
Participant who is a French Employee, the method of exercise shall comply with
applicable French law.

          (h) Notwithstanding the provisions of Section 12 herein, no Option
granted to a French Employee shall be transferable except as provided in
paragraph (f) above.

          (i) Notwithstanding the provisions of Section 14 herein, no Options
shall be granted to any French Employee under the Plan five years after the
later of (i) the date the Company's shareholders initially approved the Plan or
(ii) the date on which the Plan has been subsequently re-authorized, in its
original form or as amended from time to time by the Board, by the Company's
shareholders.

          (j) Notwithstanding anything to the contrary herein, no portion of any
Option granted to a French Employee shall become exercisable before the second
anniversary of the Date of Grant. Moreover, notwithstanding anything to the
contrary herein, no share of the Company Stock received pursuant to the exercise
of an Option by a French Employee may be sold for a three-year period after the
date the Option is exercised, unless (i) such sale occurs on or after the fifth
anniversary of the Option's Date of Grant; (ii) the Optionee is dismissed or
retired from the Company (to the extent that the Optionee has exercised Options
at least three months prior to notice of such dismissal or retirement); (iii)
the Optionee's dies or terminates due to

                                       28
<PAGE>

disability. The stock option agreements with respect to French Employees shall
reflect these restrictions and may provide that if the Optionee sells shares in
breach of the foregoing restrictions, he or she shall be responsible for his or
her share of any taxes or social charges arising from such sale.

          (k) Notwithstanding anything to the contrary herein, the Company shall
not amend or terminate all or a portion of an Option granted to any French
Employee without the consent of such French Employee.

          (l) Notwithstanding the provisions of Section 15 herein, any
adjustment made to any Option granted to a French Employee shall comply with
applicable French law.

                                       29