<PAGE>

                                                                  EXHIBIT 10.1

                              SCHMITT INDUSTRIES, INC.
                                AMENDED AND RESTATED
                                 STOCK OPTION PLAN


     1.   PURPOSES.  The purposes of this Schmitt Industries, Inc. Amended and
Restated Stock Option Plan ("Plan") are to:

          1.1  Closely associate the interests of the management of Schmitt
          Industries, Inc. ("Company") and its subsidiaries with the
          shareholders of the Company by reinforcing the relationship between
          the participants' rewards and shareholder gains;

          1.2  Provide management with an equity ownership in the Company
          commensurate with the Company's and its subsidiaries' performance as
          reflected in increased value of the Company's common shares;

          1.3  Maintain competitive compensation levels;

          1.4  Provide a means whereby the Company can continue to attract,
          motivate, and retain key employees who can contribute materially to
          the Company's and its subsidiaries' growth and success; and

          1.5  Provide a means whereby the Company and its subsidiaries can
          continue to attract, motivate and retain the services of selected 
          non-employee agents, consultants, advisors, persons involved in the 
          sale or distribution of the Company's and its subsidiaries' products 
          and independent contractors of the Company and its subsidiaries.

     2.   ADMINISTRATION.  This Plan shall be administered by the Board of
Directors of the Company ("Board") or, in the event the Board shall appoint
and/or authorize a committee to administer this Plan, by a committee of the
Board consisting of at least two (2) non-employee directors ("Committee").  The
administrator of this Plan, whether the Board or Committee, shall hereinafter be
referred to as the "Plan Administrator."  The Plan Administrator shall
administer the Plan in accordance with the following:

          2.1  INCAPACITY OF PLAN ADMINISTRATOR.  No member of the Board or the
          Committee shall vote with respect to the granting of an option created
          under this Plan ("Option(s)") to himself or herself.  Any Option
          granted to a director for his or her services as such shall not be
          effective until approved by the full Board.

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          2.2  REGISTRATION UNDER THE SECURITIES ACT.  If the Company registers
          any of its equity securities pursuant to Section 12(b) or 12(g) of the
          Securities Exchange Act of 1934, as amended ("Exchange Act") and any
          officers or directors are eligible to receive Options, the following
          provisions shall apply to the administration of this Plan with respect
          to grants made to directors, officers or other Optionees (as
          hereinafter defined) affected by Section 16(b) of the Exchange Act.
          The Plan Administrator shall be constituted at all times so as to meet
          the requirements of Section 16(b) of the Exchange Act, as amended from
          time to time.  The members of any committee serving as Plan
          Administrator shall be appointed by the Board for such term as the
          Board may determine. The Board may from time to time remove members
          from, or add members to, the committee.  Vacancies on the committee,
          however caused, may be filled by the Board.  Currently, the Plan
          Administrator is a committee.  If, at any time, an insufficient number
          of disinterested non-employee directors is available to serve on such
          committee, interested non-employee directors may serve on the
          committee; however, during such time, no Options shall be granted to
          any person if the granting of such Option would not meet the
          requirements of Section 16(b) of the Exchange Act.  For purposes of
          this Section 2, a disinterested director shall be a member of the
          Board who meets the definition of "disinterested person" as set forth
          in the rules and regulations promulgated under Section 16(b) of the
          Exchange Act, as amended from time to time (the "16(b) Rules").
          Currently, a disinterested director for purposes of this Section 2 is
          a member of the Board who for one (1) year prior to service as an
          administrator of this Plan has not been (and during service as a Plan
          Administrator, will not be) granted or awarded equity securities,
          including options for equity securities pursuant to this Plan or any
          other plan of the Company or its affiliates, except for certain
          exclusions described in Rule 16b-3.  For purposes of this Section 2, a
          non-employee director shall be a member of the Board who meets the
          definition of "non-employee director" as set forth in the 16(b) Rules.
          Currently, a non-employee director is a member of the Board who (i) is
          not currently an officer of the Company or a parent or subsidiary of
          the Company, or otherwise currently employed by the Company or a
          parent or subsidiary of the Company; (ii) does not receive
          compensation, either directly or indirectly, from the Company or a
          parent or subsidiary of the Company, for services rendered as a
          consultant or in any capacity other than as a director, except for an
          amount that does not exceed the dollar amount for which disclosure
          would be required pursuant to Item 404(a) of Regulation S-K
          promulgated under the Exchange Act (("S-K"); (iii) does not possess an
          interest in any other transaction for which disclosure would be
          required pursuant to Item 404(b) of S-K; and (iv) is not engaged in a
          business relationship for which disclosure would be required pursuant
          to Item 404(b) of S-K.

          2.3  PROCEDURES.  The Board may designate one of the members of the
          Plan Administrator as chairman.  The Plan Administrator may hold
          meetings at such times and places as it shall determine.  The acts of
          a majority of the members of the Plan Administrator present at
          meetings at which a quorum exists, or acts reduced to or approved in
          writing by all Plan Administrator members, shall be 

                                       2

<PAGE>

          valid acts of the Plan Administrator.

          2.4  RESPONSIBILITIES.  Except for the terms and conditions explicitly
          set forth in this Plan, the Plan Administrator shall have the
          authority, in its discretion, to determine all matters relating to the
          Options, including selection of the individuals to be granted Options,
          the number of shares to be subject to each Option, the exercise price
          for such Option ("Exercise Price"), and all other terms and conditions
          of the Options.  The interpretation and construction by the Plan
          Administrator of any terms or provisions of this Plan or any Option,
          or of any rule or regulation promulgated in connection with this Plan,
          shall be conclusive and binding on all interested parties, so long as
          such interpretation and construction with respect to incentive stock
          options correspond to the requirements of Section 422 of the Internal
          Revenue Code of 1986, as amended ("Code"), and the regulations issued
          thereunder, and any amendment or successor sections or regulations.

          2.5  SECTION 16(b) COMPLIANCE AND BIFURCATION OF PLAN.  If the Company
          registers any of its equity securities pursuant to Sections 12(b) and
          12(g) of the Exchange Act, it is the intention of the Company that
          this Plan then comply in all respects with Rule 16b-3 under the
          Exchange Act and, if any Plan provision is later found not to be in
          compliance with such Section, the provision shall be deemed null and
          void.  In all events, the Plan shall be construed in favor of its
          meeting the requirements of Rule 16b-3.  Notwithstanding anything in
          the Plan to the contrary, the Board, in its absolute discretion, may
          bifurcate the Plan so as to restrict, limit or condition the use of
          any provision of the Plan to participants who are officers and
          directors subject to Section 16(b) of the Exchange Act without so
          restricting, limiting or conditioning the Plan with respect to other
          participants.

     3.   STOCK SUBJECT TO THIS PLAN.  The stock subject to this Plan shall be
the Company's common stock ("Common Stock").  The Company shall have authorized
and have in reserve for issuance at the time of exercise of any Option a
sufficient number of shares of Common Stock to meet the Company's obligation.
The maximum number of shares of Common Stock which may be issued under the Plan
shall be eight hundred thousand (800,000).  If any Option expires or is
surrendered, exchanged for another Option, cancelled or terminated for any
reason without having been exercised in full, the unpurchased shares subject to
such Option shall again be available for purposes of this Plan, including for
replacement Options which may be granted in exchange for such expired,
exchanged, surrendered, cancelled or terminated Options.

     4.   ELIGIBILITY. An incentive stock option in accordance with Section 422
of the Code ("Incentive Option") may be granted only to an individual who, at
the time the option is granted, is an employee of the Company or a related
corporation, as defined below, and who the Plan Administrator may from time to
time select for participation in this Plan.  Members of the Board shall not be
eligible for grants of Incentive Options unless they are also employees of the
Company or any of its related corporations.  At the discretion of the Plan
Administrator, employees, officers, directors of the Company or any of its
related corporations (including non-employee directors), selected non-employee
agents, consultants, advisors, persons involved in the 

                                       3

<PAGE>

sale or distribution of the Company's or related corporations' products and 
independent contractors of the Company or any of its related corporations 
also may receive stock options which are not qualified under Section 422 of 
the Code ("Nonqualified Option") (Qualified and Nonqualified Options are 
included collectively within the term "Options" as used in this Plan).  Any 
party to whom an Option is granted shall be referred to as an "Optionee."

As used in this Plan, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock of one of the
other corporations in such chain.  When referring to a parent corporation, the
term "related corporation" shall mean any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company if, at the time of
granting of the Option, each of the corporations other than the Company owns
stock possessing fifty percent (50%) or more of the total combined voting power
of all classes of stock of one of the other corporations in such chain.


     5.   TERMS AND CONDITIONS OF OPTIONS.  Options granted under this Plan
shall be evidenced by written agreements which shall contain such terms,
conditions, limitations and restrictions as the Plan Administrator shall deem
advisable and which are not inconsistent with this Plan.  Notwithstanding the
foregoing, Option agreements shall include or incorporate by reference the
following terms and conditions:

          5.1  NUMBER OF SHARES.  Each Option agreement shall state the number
          of shares of stock subject to the Option.

          5.2  OPTION PRICE.  The Option agreement shall state the Exercise
          Price per share, and the Plan Administrator shall act in good faith to
          establish the Exercise Price as follows:

               5.2.1     INCENTIVE OPTIONS.  Subject to subsection 5.2.3, the
               Exercise Price of Incentive Options shall be not less than the
               fair market value per share of the Common Stock at the time the
               Incentive Option is granted.

               5.2.2     INCENTIVE OPTIONS TO GREATER THAN 10% SHAREHOLDERS.
               With respect to Incentive Options granted to shareholders then
               holding greater than ten percent (10%) of the then-issued and
               outstanding shares of voting stock of the Company, the Exercise
               Price shall be as required by Section 6.

               5.2.3     FAIR MARKET VALUE.  With respect to Incentive Options,
               the fair market value per share of the Common Stock shall be
               determined by the Plan Administrator in good faith at the time
               the Incentive Option is granted.

                                       4

<PAGE>

               5.2.4     SUBSTITUTED OPTIONS.  Options granted in substitution
               for outstanding Options in the Company in connection with the
               merger, consolidation, continuation acquisition of property or
               stock of the Company or a subsidiary of the Company or another
               corporation or any subsidiary of another corporation may be
               granted with an exercise price equal to the exercise price for
               the substituted option of the Company or other corporation,
               subject to any adjustment consistent with the terms of the
               transaction pursuant to which the substitution is to occur.

               5.2.5     NONQUALIFIED OPTIONS.  The Exercise Price of
               Nonqualified Options shall be as is determined by the Plan
               Administrator in good faith at the time of their issuance.

          5.3  TERM, MATURITY AND VESTING.  Subject to the restrictions
          contained in Sections 5.8 and 6, the term of each Incentive Option
          shall be ten (10) years from the date it is granted unless a shorter
          period of time is established by the Plan Administrator, but in no
          event shall the term of any Incentive Option exceed ten (10) years.
          The term of each Nonqualified Option shall also be ten (10) years from
          the date it is granted unless a shorter period of time is established
          by the Plan Administrator.  The Plan Administrator shall specify which
          Options granted hereunder are Incentive Options and which are
          Nonqualified Options.

          No Option shall be exercisable until it has vested.  The vesting
          schedule for each Option shall be specified by the Plan Administrator
          at the time of grant;  PROVIDED, that if no vesting schedule is
          specified at the time of grant, the Option shall vest according to the
          following schedule:

<TABLE>
<CAPTION>

                        NUMBER OF YEARS             PERCENTAGE OF TOTAL
                    FOLLOWING DATE OF GRANT            OPTION VESTED
                    -----------------------         -------------------
                    <S>                             <C>
                              One                            25%
                              Two                            50%
                              Three                          75%
                              Four                          100%

</TABLE>

          The Plan Administrator may specify a vesting schedule for all or any
          portion of an Option based on the achievement of performance
          objectives established in advance of the commencement by the Optionee
          of services related to the achievement of the performance objectives.
          Performance objectives shall be expressed in terms of one or more of
          the following:  return on equity, return on assets, share price,
          market share, sales, earnings per share, costs, net earnings, net
          worth, inventories, cash and cash equivalents, gross margin or the
          Company's performance relative to its internal business plan.
          Performance objectives may be in respect of the performance of the
          Company as a whole (whether on a consolidated or unconsolidated
          basis), a related corporation, or a subdivision, operating unit,
          product or product line of either of the foregoing.  Performance
          objectives may be absolute or relative and may be expressed in terms
          of a 

                                       5

<PAGE>

          progression or a range.  An option which is exercisable (in whole
          or in part) upon the achievement of one or more performance objectives
          may be exercised only following written notice to the  Optionee and
          the Company by the Plan Administrator that the performance objective
          has been achieved.

          5.4  EXERCISE.  Subject to the limitations on exercise described in
          subsection 5.3 above and any additional holding period required by
          applicable law, each Option may be exercised in whole or in part;
          provided, however, that only whole shares will be issued pursuant to
          the exercise of any Option.  During an Optionee's lifetime, any
          Options granted under this Plan are personal to him or her and are
          exercisable solely by such Optionee.  Options shall be exercised by
          delivery to the Company of a written notice of the number of shares
          with respect to which the Option is to be exercised, together with
          payment of the Exercise Price in accordance with Section 5.5.

          5.5  PAYMENT OF EXERCISE PRICE.  Payment of the Exercise Price shall
          be made in full at the time the written notice of exercise of an
          Option is delivered to the Company, and shall be in cash, bank
          certified or cashier's check or personal check (unless at the time of
          exercise the Plan Administrator in a particular case determines not to
          accept a personal check) for the Common Stock being purchased.  The
          Plan Administrator can determine in its discretion (i) at the time an
          Incentive Option is granted, or (ii) at any time before exercise of
          Nonqualified Options that additional forms of payment will be
          permitted, including installment payments on such terms and over such
          period as the Plan Administrator may determine.  To the extent
          permitted by the Plan Administrator and applicable laws and
          regulations (including, but not limited to, federal tax and securities
          laws and regulations and state corporate law), an option may be
          exercised by:

               5.5.1     DELIVERY OF COMMON STOCK.  Delivery of shares of Common
               Stock held by an Optionee having a fair market value equal to the
               Exercise Price, such fair market value to be determined in good
               faith by the Plan Administrator;

                                       6

<PAGE>

               5.5.2     DELIVERY OF PROMISSORY NOTE.  Delivery of a
               full-recourse promissory note executed by the Optionee; provided
               that (i) such note if delivered in connection with an Incentive
               Option shall, and such note if delivered in connection with a
               Nonqualified Option may, bear interest at a rate specified by the
               Plan Administrator, but in no case less than the rate required to
               avoid imputation of interest (taking into account any exceptions
               to the imputed interest rules) for federal income tax purposes;
               (ii) the Plan Administrator shall specify the term and other
               provisions of such note at the time an Incentive Option is
               granted or at any time prior to exercise of a Nonqualified
               Option; (iii) the Plan Administrator may require that the
               Optionee pledge the Optionee's shares to the Company for the
               purpose of securing the payment of such note, and may require
               that the certificate representing such shares be held in escrow
               to perfect the Company's security interest; (iv) the note
               provides that ninety (90) days following the Optionee's
               termination of employment with the Company or a related
               Corporation, the entire outstanding balance under the note shall
               become due and payable, if not previously due and payable; and
               (v) the Plan Administrator in its sole discretion may at any time
               after granting an Option restrict or rescind the right to pay
               using a promissory note upon written notification to any
               Optionee;

               5.5.3     DELIVERY OF SALE PROCEEDS.  Delivery of a properly
               executed written exercise notice, together with irrevocable
               instructions to a broker, all in accordance with the regulations
               of the Federal Reserve Board, to promptly deliver to the Company
               the amount of sale or loan proceeds to pay the exercise price and
               any federal, state or local withholding tax obligations that may
               arise in connection with the exercise; provided, that the Plan
               Administrator may at any time determine that this subsection
               5.5.3, to the extent the instructions to the broker call for an
               immediate sale of the shares, shall not be available to any
               Optionee who is subject to Section 16(b) of the Exchange Act if
               such transaction would result in a violation of Section 16(b), or
               if such Optionee is not an employee at the time of exercise; or

               5.5.4     DELIVERY OF WITHHOLDING NOTICE.  Delivery of a properly
               executed written exercise notice together with instructions to
               the Company to withhold upon exercise from the shares that would
               otherwise be issued that number of shares having a fair market
               value equal to the Exercise Price.

          5.6  WITHHOLDING TAX REQUIREMENT.  The Company or any related entity
          shall have the right to retain and withhold from any payment of cash
          or Common Stock under this Plan the amount of taxes required by any
          government to be withheld or otherwise deducted and paid with respect
          to such payment.  At its discretion, the Company may require an
          Optionee receiving shares of Common Stock to reimburse the Company for
          any such taxes required to be withheld by the Company, and may
          withhold any distribution in whole or in part until the 

                                       7

<PAGE>

          Company is so reimbursed.  In lieu of such withholding or 
          reimbursement, the Company shall have the right to withhold from any 
          other cash amounts due or to become due from the Company to the 
          Optionee an amount equal to such taxes or to retain and withhold a 
          number of shares having a market value not less than the amount of 
          such taxes required to be withheld by the Company to reimburse the 
          Company for any such taxes and cancel (in whole or in part) any such 
          shares so withheld.  If required by Section 16(b) of the Exchange 
          Act, the election to pay withholding taxes by delivery of shares held
          by any person who at the time of exercise is subject to Section 16(b)
          of the Exchange Act, shall be made during the quarterly 10-day window
          period required under Section 16(b) of the Exchange Act for exercises
          of stock appreciation rights.

          5.7  TRANSFERABILITY OF OPTION.  Options and the rights and privileges
          conferred by this Plan shall not be transferred, assigned or pledged
          in any manner (whether by operation of law or otherwise) other than
          (i) by will or by the applicable laws of descent and distribution, or
          (ii) by gift to members of the Optionee's family, including
          grandparents, parents, spouses, siblings, children, grandchildren and
          great-grandchildren, or trusts for the benefit of such family members
          or to charitable organizations, and shall not be subject to execution,
          attachment or similar process.  Any attempt to transfer, assign,
          pledge or otherwise dispose of any Option or of any right or privilege
          conferred by this Plan, contrary to the Code or to the provisions of
          this Plan, or the sale or levy or any attachment or similar process
          upon the rights and privileges conferred by this Plan shall be null
          and void.  Notwithstanding the foregoing, an Optionee may, during the
          Optionee's lifetime, designate a person who may exercise the Option
          after the Optionee's death by giving written notice of such
          designation to the Plan Administrator.  Such designation may be
          changed from time to time by the Optionee giving written notice to the
          Plan Administrator revoking any earlier designation and making a new
          designation.  In the event that no such designation is made, the
          executor or personal representative of the Optionee's estate shall
          have any rights then remaining to the Optionee or his estate under
          this Plan.

                                       8

<PAGE>

          5.8  DURATION OF OPTION.  Vested Options shall terminate, to the
          extent not previously exercised, upon the occurrence of the first of
          the following events:  (i) the expiration of the Option, as designated
          by the Plan Administrator in accordance with section 5.3; (ii)  the
          date of an Optionee's termination of employment with the Company or
          any related corporation for cause (as determined in the sole
          discretion of the Plan Administrator); (iii) the expiration of ninety
          (90) days from the date of an Optionee's termination of employment
          with the Company or any related corporation for any reason whatsoever
          other than cause, death or Disability (as defined below) unless, the
          exercise period is extended by the Plan Administrator until a date not
          later than the expiration date of the Option; or (iv) the expiration
          of one year from (A) the date of death of the Optionee or (B)
          cessation of an Optionee's employment by reason of Disability (as
          defined below) unless, the exercise period is extended by the Plan
          Administrator until a date not later than the expiration date of the
          Option.  If an Optionee's employment is terminated by death, any
          Option held by the Optionee shall be exercisable only by the person or
          persons to whom such Optionee's rights under such Option shall pass by
          the Optionee's will or by the laws of descent and distribution of the
          state or county of the Optionee's domicile at the time of death.  For
          purposes of the Plan, unless otherwise defined in the Agreement,
          "Disability" shall mean any physical, mental or other health condition
          which substantially impairs the Optionee's ability to perform his or
          her assigned duties for one hundred twenty (120) days or more in any
          two hundred forty (240) day period or that can be expected to result
          in death.  The Plan Administrator shall determine whether an Optionee
          has incurred a Disability on the basis of medical evidence acceptable
          to the Plan Administrator.  Upon making a determination of Disability,
          the Plan Administrator shall, for purposes of the Plan, determine the
          date of an Optionee's termination of employment.

          Unless accelerated in accordance with Section 7, unvested Options
          shall terminate immediately upon termination of employment of the
          Optionee by the Company for any reason whatsoever, including death or
          Disability.  For purposes of this Plan, transfer of employment between
          or among the Company and/or any related corporation shall not be
          deemed to constitute a termination of employment with the Company or
          any related corporation.  For purposes of this subsection with respect
          to Incentive Stock Options, employment shall be deemed to continue
          while the Optionee is on military leave, sick leave or other bona fide
          leave of absence (as determined by the Plan Administrator).  The
          foregoing not withstanding, employment shall not be deemed to continue
          beyond the first ninety (90) days of such leave, unless the Optionee's
          re-employment rights are guaranteed by statute or by contract.

          5.9  STATUS OF SHAREHOLDER.  Neither the Optionee nor any party to
          which the Optionee's rights and privileges under the Option may pass
          shall be, or shall have any of the rights or privileges of, a
          shareholder of the Company with respect to any of the shares issuable
          upon the exercise of any Option unless and until such Option has been
          exercised.

                                       9

<PAGE>

          5.10 RIGHT TO TERMINATE EMPLOYMENT.  Nothing in this Plan or in any
          Option shall confer upon any Optionee any right to continue in the
          employ of the Company or of a related entity, or to interfere in any
          way with the right of the Company or of any related corporation to
          terminate, at will, his or her employment or other relationship with
          the Company at any time.

          5.11 MODIFICATION AND AMENDMENT OF OPTION.  Subject to the
          requirements of Code Section 422 with respect to Incentive Options and
          to the terms, conditions and limitations of this Plan, the Plan
          Administrator may modify or amend outstanding Options.  The
          modification or amendment of an outstanding Option shall not, without
          the consent of the Optionee, impair or diminish any of his or her
          rights or any of the obligations of the Company under such Option.
          Except as otherwise provided in this Plan, no outstanding Option shall
          be terminated without the consent of the Optionee.  Unless the
          Optionee agrees otherwise, any changes or adjustments made to
          outstanding Incentive Options shall be made in such a manner so as not
          to constitute a "modification" as defined in Code Section 424(h) and
          so as not to cause any Incentive Option to fail to continue to qualify
          as an "incentive stock option" as defined in Code Section 422(b).

          5.12 LIMITATION ON VALUE FOR INCENTIVE OPTIONS.  As to all Incentive
          Options, to the extent that the aggregate fair market value of the
          Common Stock with respect to which Incentive Options are exercisable
          for the first time by the Optionee during any calendar year (under
          this Plan and all other incentive stock option plans of the Company, a
          related corporation or a predecessor corporation) exceeds $100,000,
          those Options (or the portion of an Option) beyond the $100,000
          threshold shall be treated as Nonqualified Options.  If the Internal
          Revenue Service publicly rules, issues a private ruling to the
          Company, any Optionee, or any legatee, personal representative or
          distributee of an Optionee or issues regulations changing or
          eliminating such annual limit, the dollar limitation in the preceding
          sentence shall be adjusted correspondingly.

     6.   GREATER THAN 10% SHAREHOLDERS.  In the case of Incentive Options
granted to employees who own at the time of their grant ten percent (10%) or
more of the then-issued and outstanding voting stock of the Company, the
following rules shall apply:

          6.1  EXERCISE PRICE AND TERM OF INCENTIVE OPTIONS.  If Incentive
          Options are granted to employees who own more than ten percent (10%)
          of the total combined voting power of all classes of stock of the
          Company or any related corporation, the term of such individual's
          Incentive Options shall not exceed five (5) years and the Exercise
          Price shall be not less than one hundred ten percent (110%) of the
          fair market value of the Common Stock at the time the Incentive Option
          is granted.  This provision shall control notwithstanding any contrary
          terms contained in an Option agreement or any other document.

          6.2  ATTRIBUTION RULE.  For purposes of subsection 6.1, in determining
          stock 

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<PAGE>

          ownership, an employee shall be deemed to own such shares as are
          owned by those persons or entities defined in Code Section 424.  For
          purposes of this Section 6, stock owned by an employee shall include
          all stock actually issued and outstanding immediately before the grant
          of the Incentive Option to the employee.

     7.   ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.  The aggregate number and
class of shares for which Options may be granted under this Plan, the number and
class of shares covered by each outstanding Option and the Exercise Price per
share thereof (but not the total price), and each such Option, shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or consolidation
of shares or any like capital adjustment, or the payment of any stock dividend.

          7.1  EFFECT OF LIQUIDATION, REORGANIZATION OR CHANGE IN CONTROL.

               7.1.1     CASH, STOCK OR OTHER PROPERTY FOR STOCK.  Except as
               provided in subsection 7.1.2, upon a merger (other than a merger
               of the Company in which the holders of Common Stock immediately
               prior to the merger have the same proportionate ownership of
               Common Stock in the surviving corporation immediately after the
               merger), consolidation, acquisition of property or stock,
               separation, reorganization (other than a mere reincorporation or
               the creation of a holding company) or liquidation of the Company,
               as a result of which the shareholders of the Company receive
               cash, stock or other property in exchange for or in connection
               with their shares of Common Stock, any Option granted under this
               Plan shall terminate, but the Optionee shall have the right
               immediately prior to any such merger, consolidation, acquisition
               of property or stock, separation, reorganization or liquidation
               to exercise such Option in whole or in part, to the extent the
               vesting requirements set forth in the Option agreement have been
               satisfied, unless stated otherwise in the Optionee's individual
               Option agreement.

               7.1.2     CONVERSION OF OPTIONS ON STOCK-FOR-STOCK EXCHANGE.  If
               the shareholders of the Company receive capital stock of another
               corporation ("Exchange Stock") in exchange for their shares of
               Common Stock in any transaction involving a merger (other than a
               merger of the Company in which the holders of Common Stock
               immediately prior to the merger have the same proportionate
               ownership of Common Stock in the surviving corporation
               immediately after the merger), consolidation, acquisition of
               property or stock, separation or reorganization (other than a
               mere reincorporation or the creation of a holding company), all
               Options granted under this Plan shall be converted into options
               to purchase shares of Exchange Stock unless the Company and the
               Corporation issuing the Exchange Stock, in their sole discretion,
               determine that any or all such Options shall not be converted
               into options to purchase shares of Exchange Stock, but instead
               shall terminate in accordance with the provisions of subsection
               7.1.1.  The amount and price of converted options shall be

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               determined by adjusting the amount and price of the Options in
               the same proportion as used for determining the number of shares
               of Exchange Stock the holders of the Common Stock receive in such
               merger, consolidation, acquisition of property or stock,
               separation or reorganization.  Unless accelerated by the Board,
               the exercise limitations set forth in the Option agreement and
               the Plan shall continue to apply for the Exchange Stock.

               7.1.3     CHANGE IN CONTROL.  In the event of a "Change in
               Control," as defined below, of the Company, unless otherwise
               determined by the Board prior to the occurrence of such Change in
               Control, any Options or portions of such Options outstanding as
               of the date such Change in Control is determined to have occurred
               that are not yet fully vested on such date shall become
               immediately exercisable in full.

               7.1.4     DEFINITION OF "CHANGE IN CONTROL".  For purposes of
               this Plan, a "Change in Control" shall mean (a) the first
               approval by the Board or by the stockholders of the Company of an
               Extraordinary Event, (b) a Purchase or (c) a Board Change.  For
               purposes of the Plan, such terms shall have the following
               meanings:

                    7.1.4.1  An "Extraordinary Event" shall mean any of the
                    following actions: (i) any consolidation or merger of the
                    Company in which the Company is not the continuing or
                    surviving corporation or pursuant to which shares of Common
                    Stock would be converted into cash, securities or other
                    property, other than a merger of the Company in which the
                    holders of Common Stock immediately prior to the merger have
                    the same proportionate ownership of common stock of the
                    surviving corporation immediately after the merger; (ii) any
                    sale, lease, exchange or other transfer (in one transaction
                    or a series of related transactions) of all, or
                    substantially all, the assets of the Company; or, (iii) the
                    adoption of any plan or proposal for liquidation or
                    dissolution of the Company.

                    7.1.4.2  A "Purchase" shall mean the acquisition by any
                    person (as such term is defined in Section 13(d) of the
                    Exchange Act) of any shares of Common Stock or securities
                    convertible into Common Stock without the prior approval of
                    a majority of the Continuing Directors (as defined below) of
                    the Company, if after making such acquisition such person is
                    the beneficial owner (as such term is defined in Rule 13d-3
                    under the Exchange Act) directly or indirectly of Securities
                    of the Company representing twenty percent (20%) or more of
                    the combined voting power of the Company's then outstanding
                    securities (calculated as provided in paragraph (d) of such
                    Rule 13d-3).

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                    7.1.4.3  A "Board Change" shall have occurred if individuals
                    who constitute the Board of the Company at the time of
                    adoption of this Plan (the "Continuing Directors") cease for
                    any reason to constitute at least a majority of the Board,
                    provided that any person becoming a Director subsequent to
                    the date of adoption of this Plan whose nomination for
                    election was approved by a vote of at least a majority of
                    the Continuing Directors (other than a nomination of an
                    individual whose initial assumption of office is in
                    connection with an actual 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 under
                    the Exchange Act) shall be deemed to be a Continuing
                    Director.

          7.2  FRACTIONAL SHARES.  In the event of any adjustment in the number
          of shares covered by any Option, any fractional shares resulting from
          such adjustment shall be disregarded and each such Option shall cover
          only the number of full shares resulting from such adjustment.

          7.3  DETERMINATION OF BOARD TO BE FINAL.  All Section 7 adjustments
          shall be made by the Board, and its determination as to what
          adjustments shall be made, and the extent of such adjustments, shall
          be final, binding and conclusive.  Unless an Optionee agrees
          otherwise, any change or adjustment to an Incentive Option shall be
          made in such a manner so as not to constitute a "modification" as
          defined in Code Section 424(h) and so as not to cause his or her
          Incentive Option to fail to continue to qualify as an incentive stock
          option as defined in Code Section 422(b).

     8.   SECURITIES REGULATION.  Shares shall not be issued with respect to an
Option unless the exercise of such Option and the issuance and delivery of such
shares pursuant to the exercise of such Option shall comply with all relevant
provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further subject
to the approval of counsel for the Company with respect to such compliance,
including the availability of an exemption from registration for the issuance
and sale of any shares under this Plan.  Inability of the Company to obtain from
any regulatory body having jurisdiction, the authority deemed by the Company's
counsel to be necessary for the lawful issuance and sale of any shares under
this Plan or the unavailability of an exemption from registration for the
issuance and sale of any shares under this Plan shall relieve the Company of any
liability in respect of the non-issuance or sale of such shares as to which such
requisite authority shall not have been obtained.

     As a condition to the exercise of any Option, the Company may require the
Optionee to represent and warrant at the time of any such exercise that the
shares are being purchased only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required by any relevant provision of the
aforementioned laws.  At the option of the Company, a stop-transfer order
against any shares of stock may be placed on the official stock books and
records of the Company, and a legend 

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indicating that the stock may not be pledged, sold or otherwise transferred 
unless an opinion of counsel is provided (concurred in by counsel for the 
Company) stating that such transfer is not in violation of any applicable law 
or regulation, may be stamped on stock certificates in order to assure 
exemption from registration.  The Plan Administrator may also require such 
other action or agreement by the Optionees as may from time to time be 
necessary to comply with the federal and state securities laws.  THIS 
PROVISION SHALL NOT OBLIGATE THE COMPANY TO UNDERTAKE REGISTRATION OF THE 
OPTIONS OR STOCK HEREUNDER.  Should any of the Company's capital stock of the 
same class as the stock subject to Options be listed on a national securities 
exchange, all stock issued under this Plan if not previously listed on such 
exchange shall be authorized by that exchange for listing on such exchange 
prior to the issuance of such stock.

     9.   AMENDMENT AND TERMINATION.  This Plan may be amended from time to time
as follows:

          9.1  BOARD ACTION.  The Board may at any time suspend, amend or
          terminate this Plan; provided, that except as set forth in Section 7,
          the approval of the Company's shareholders is necessary within twelve
          (12) months before or after the adoption by the Board of any amendment
          which will:

               9.1.1     increase the number of shares which are to be reserved
               for the issuance of Options;

               9.1.2     permit the granting of stock options to a class of
               persons other than those presently permitted to receive Options;
               or

               9.1.3     require shareholder approval under applicable law,
               including Section 16(b) of the Exchange Act.

          Any amendment made to this Plan which would constitute a
          "modification" to Incentive Options outstanding on the date of such
          amendment, shall not be applicable to such outstanding Incentive
          Options, but shall have prospective effect only, unless the Optionee
          agrees otherwise.

          9.2  AUTOMATIC TERMINATION.  Unless sooner terminated by the Board,
          this Plan shall terminate ten (10) years from the earlier of (i) the
          date on which this Plan is adopted by the Board or (ii) the date on
          which this Plan is approved by the shareholders of the Company.  No
          Option may be granted after such termination or during any suspension
          of this Plan.  The amendment or termination of this Plan shall not,
          without the consent of the option holder, alter or impair any rights
          or obligations under any option previously granted under this Plan.

     10.  EFFECTIVENESS OF THIS PLAN.  This Plan shall become effective upon
adoption by the Board so long as it is approved by the Company's shareholders
any time within twelve (12) months before or after the adoption of this Plan.

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