Document:

EXHIBIT 10.1
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                           AMENDED AND RESTATED
                            ADVISORY AGREEMENT

      THIS AMENDED AND RESTATED ADVISORY AGREEMENT (this "Agreement"), is
dated as of January 1, 2000 (the "Effective Date"), by and between LASALLE
HOTEL PROPERTIES, a Maryland real estate investment trust (the "Company"),
and LASALLE HOTEL ADVISORS, INC., a Maryland corporation (the "Advisor").

      WHEREAS, the Company through its interest in LaSalle Hotel Operating
Partnership, L.P. (the "Operating Partnership") is in the business of
acquiring, developing, managing, owning and disposing of hotels (the
"Hotels") and leasing the Hotels to qualified lessees (the "Hotel Lessees")
pursuant to participating leases (the "Leases") (for purposes hereof unless
the context otherwise requires, the term "Company" shall include the
Company and the Operating Partnership); and

      WHEREAS, the Company is qualified, and intends in the future to
qualify, as a Real Estate Investment Trust (a "REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"); and

      WHEREAS, the Company desires to retain the services of the Advisor
with respect to the acquisition, leasing, investment management, financing,
ownership and disposition of the Hotels, and to provide certain services to
the Company in connection with such Hotels and Leases on the terms set
forth herein and consistent with the Company's initial and continued
qualification and operation in accordance with all requirements applicable
to a REIT; and

      WHEREAS, the Advisor is willing to provide such services to the
Company on the terms set forth herein; and

      WHEREAS, pursuant to the terms of that certain Advisory Agreement by
and between the Company and the Advisor dated as of April 23, 1998 (the
"Original Agreement"), the Advisor agreed to perform such services for the
Company; and

      WHEREAS, the Company and the Advisor hereby desire to amend and
restate the Original Agreement in its entirety;

      NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:

      1.  AMENDMENT AND RESTATEMENT OF ORIGINAL AGREEMENT/APPOINTMENT OF
ADVISOR.  As of the Effective Date, the Original Agreement is hereby
amended and restated in its entirety upon the terms and conditions
contained herein.  The Company hereby retains the Advisor on the terms
hereinafter set forth, and the Advisor hereby accepts such appointment.

      2.  DUTIES OF ADVISOR.  The Advisor shall perform the following
activities consistent with the Company's stated policy of maximizing
current returns to shareholders through increases in cash available for
distribution and to increase long term total returns to shareholders
through appreciation in the value of its common shares, subject to the
direction and supervision of the Company's Board of Trustees:

            (i)  identify, negotiate, review and analyze a continuing and
suitable investment program of Hotel acquisitions and developments,
consistent with the investment policies and objectives of the Company and
consistent with the Company's Declaration of Trust;

            (ii)  cause the Company to perform its responsibilities and
enforce its rights under the Leases so as to increase lease income and
enhance the Hotels' values;

<PAGE>

            (iii)  identify Hotels for sale consistent with the Company's
investment objectives and prevailing economic conditions and retain
investment banks, brokers or other intermediaries to market for sale such
Hotels;

            (iv)  advise the Company in connection with its financing
strategy including assisting the Company in the negotiation of any
borrowings which the Company may seek to incur;

            (v)  maintain or cause to be maintained, on behalf of the
Company, such books and records of account concerning the Company, the
Operating Partnership and the Hotels as are necessary for the proper
management and control of the assets of the Company, in accordance with
generally accepted accounting practices;

            (vi)  take all actions necessary to enable the Company to
comply with and abide by in all material respects all applicable laws and
regulations;

            (vii)  administer the day-to-day operations and perform all
necessary and reasonable administrative and "back office" functions with
respect to the Company, the Operating Partnership, the Hotels and the
Leases, including, but not limited to, collecting rents, paying debts,
depositing funds and investing funds in a manner consistent with the
Company's policies;

            (viii)  assist the Company in preparing reports to, and meeting
materials for, the Company and its shareholders;

            (ix)  prepare and deliver to the Company quarterly financial
statements within forty-five (45) days of the end of each fiscal quarter,
year end financial statements within ninety (90) days of the end of the
Company's fiscal year and such schedules, reports summaries and other
information regarding the Company's portfolio as may be requested by the
Company from time to time;

            (x)  oversee investment due diligence and provide research and
economic and statistical data to support the Company's investment program
and strategies;

            (xi)  retain and oversee third parties hired to conduct and
provide services to the Company such as development management, project
management, design, construction, investment banking services, property
disposition brokerage services, legal, independent accounting and auditing
services (including, without limitation, such reports and returns as may be
required by any governmental authority in connection with the ordinary
conduct of the Company's business, such as the Securities and Exchange
Commission and the Internal Revenue Service, and any state and local
securities commissions and taxing authorities) and providing tax reviews
and advice, feasibility studies or appraisals, engineering, or
environmental property inspections and consulting services.  Such services
may be provided by Affiliates of the Advisor (as defined below) provided
such Affiliates charge the Company no more than the fair market value for
such services and such services are approved by a majority of the Company's
Board of Trustees, including, a majority of the Independent Trustees; it
being understood that certain Affiliates of the Advisor will provide
certain "back office" services such as accounting, human resources, and
review of external consultant reports, as part of the services to be
performed by the Advisor, without additional charge to the Company.  For
purposes of this Agreement, "Independent Trustee" shall mean a trustee who,
on the date at issue, is currently serving on the Board of Trustees and is
"independent" as determined by application of the rules and regulations of
the New York Stock Exchange.  For purposes of this Agreement, "Affiliate"
means any company or other entity owned or controlled, directly or
indirectly, by Jones Lang LaSalle;

<PAGE>

            (xii)  manage the Company's short-term investments, including
the acquisition and sale of money market instruments in accordance with the
Company's policies; and

            (xiii)  take such other actions and render such other services
as may reasonably be requested by the Company consistent with the purpose
of this Agreement.

      3.  ADVISOR'S RESOURCES.  The Advisor shall, at its expense, maintain
such office space, facilities, equipment and, in accordance with that
certain Employee Lease Agreement dated as of the date hereof (the "Employee
Lease Agreement"), personnel trained and experienced in the business of
acquisitions, financing, investment management and hotel leasing sufficient
to enable the Advisor to fulfill its obligations under this Agreement and
shall provide, at its expense, administrative personnel as necessary to
provide the services herein.  The Advisor shall utilize its Affiliates or
unrelated third parties as necessary to supplement such resources
performing the services required by this Agreement.

      4.  PAYMENT OF EXPENSES.  Except as set forth below, in consideration
of the compensation provided under Section 5, the Advisor shall bear all
expenses attributable to the management services to be provided by the
Advisor to the Company hereunder including providing the resources required
by Section 3 above, without separate reimbursement from the Company.  The
Advisor, however, shall be reimbursed by the Company for any amounts the
Advisor expends to pay fees and expenses of third parties providing
services to the Company set forth in Section 2(xi) above (including
Affiliates providing services in accordance with 2(xi) above), all other
costs and expenses of third parties relating to the Company's operations,
including costs and expenses of acquiring, owning, protecting, insuring,
maintaining and disposing of the Company's investments, cost and expenses
connected with dividends, interest or other distributions, transfer agents
and registrar fees, costs and expenses associated with investor relations,
costs and expenses associated with the continuous reporting and other
requirements of governmental bodies or agencies, including dissemination of
materials to shareholders, or such other costs and expenses as approved by
a majority of the Company's Board of Trustees, including a majority of the
Company's Independent Trustees.

      5.  COMPENSATION.

      (a)  The Company shall pay to the Advisor in cash a base fee (the
"Base Fee"), at the following percentages of annual NOI as defined below,
minus Three Million Dollars ($3,000,000) (the "Reduction Amount") which
such Reduction Amount shall be increased in accordance with the CPI
Adjustment (as defined below).  For purposes of this Agreement, "CPI
Adjustment" shall mean the product of (x) the Reduction Amount in effect in
the most recently ended year multiplied by (y) the quotient of (a) the
average CPI (defined below) for the immediately preceding twelve (12)
months immediately preceding the applicable year divided by (b) the average
CPI for the twelve months in the prior year.  "CPI" shall mean the
"Consumer Price Index" published by the Bureau of Labor Statistics of the
United States of America Department of Labor, U.S. City Average, All Items
for Urban Wage Earners and Clerical Workers (1982-1984=100).

Incremental NOI
of Company                                Base Fee %
---------------                     ---------------------------------
                  Up to but
From              excluding
----              ---------

      0           $100,000,000                 5.0%
$100,000,000      $225,000,000      An additional 4.8% on such increment
$225,000,000      $350,000,000      An additional 4.6% on such increment
$350,000,000      $475,000,000      An additional 4.4% on such increment
$475,000,000      $600,000,000      An additional 4.2% on such increment
$600,000,000
and any excess                      An additional 4.0% on such increment

<PAGE>

For purposes of this Agreement, "NOI" for any period shall mean total
revenues (excluding gains or losses from the sale of Company assets, or any
refinancings thereof) applicable to such period, less the operating
expenses applicable to such period (excluding from such expenses (i)
advisory fees payable hereunder to the Advisor, (ii) lease payments payable
to the Advisor under the Employee Lease Agreement, and (iii) excluding
amounts attributable to depreciation and amortization, or reserves for bad
debts or other similar non-cash items or reserves) after adjustment for
unconsolidated partnerships and joint ventures and before adjustment for
minority interests in the Operating Partnership.

      The Base Fee shall be payable quarterly on an estimated basis, in
arrears within 45 days of the end of each fiscal quarter.  Within ten days
after the Company has received its audited financial statements for the
prior year, the Company shall make a final determination of the Base Fee
for such prior year, and the Company shall pay any deficiency or deduct any
over-payment made to the Advisor for such year from the next payment or
payments due to the Advisor pursuant to this Agreement.

     (b)    For the Calendar Year ending December 31, 2000, and for each
Calendar Year thereafter, the Company shall pay to the Advisor annually in
arrears an incentive fee (the "Incentive Fee") in an amount equal to 25% of
the product of (A) the amount by which the FFO per Share Amount for the
calendar year then ended (the "Measurement Year") exceeds a growth rate of
7% per annum of the FFO per Share Amount for the prior calendar year and
(B) the Shares Outstanding for the Measurement Year.  The Incentive Fee
shall be deemed to have been earned as of the end of the Management Year
and shall be paid as set forth below upon determination of the FFO per
share for the Management Year.  For fees payable for any year in which fees
are not payable for the entire calendar year, the fees shall be calculated
as if this Agreement had been in effect for the entire year, but shall be
pro rated and payable for only that portion of the year this Agreement was
in effect.

      For purposes of this Agreement, "Funds from Operations" shall mean
the Company's net income (loss) (computed in accordance with generally
accepted accounting principles ("GAAP")), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures.  Adjustments for unconsolidated
partnerships and joint ventures will be calculated to reflect Funds from
Operations on the same basis.

      "FFO per Share Amount" means an amount equal to the Funds from
Operations divided by the Shares Outstanding.

      "Shares Outstanding" means, for purposes of calculating the FFO per
Share Amount, the weighted average number of shares of beneficial interests
of the Company (the "Shares") outstanding (as determined by GAAP),
including any beneficial interests in the Operating Partnership (the
"Units"), for the period such calculation is made; provided, however, that
appropriate equitable adjustments shall be made when calculating the FFO
per Share Amount in the event of any extraordinary transactions such as
stock splits, stock dividends, etc.

      Payment of the Incentive Fee shall be made by the Operating
Partnership, at the option of the Advisor, in Cash, Shares or Units (with
one Unit convertible into one Share) unless and to the extent, receipt of
Shares would adversely affect the Company's status as a REIT, in which such
event the Advisor shall receive Units.  The number of Shares or Units shall
be the nearest whole number of Shares or Units, as the case may be,
obtained by dividing the Incentive Fee by the average closing price of the
Shares on the New York Stock Exchange (or such other exchange or national
market system on which the Shares are then traded) for the Measurement
Year.  Any such Shares or Units shall not be transferable, other than to
Affiliates of the Advisor, except by operation of law for a period of one
year from the date of issuance.

<PAGE>

      (c)   The Company shall purchase Officers and Trustees (or Directors)
insurance in reasonably acceptable and customary levels for the Officers
and Trustees of the Company and Officers and Directors of the Advisor.
Such policy shall constitute primary coverage for the individuals covered
thereby for their activities relating to the Company and the Advisor.

      (d)   Nothing in this Agreement shall preclude or restrict the
Company from the direct acquisition of Hotels or the negotiation and
execution of Leases without the assistance of the Advisor.

      6.  REIT STATUS.  Notwithstanding anything in this Agreement to the
contrary, the Advisor shall not take any action which would (a) adversely
affect the status of the Company as a REIT, (b) subject the Company to
regulation under the Investment Company Act of 1940, as amended or (c)
violate any law, rule, regulation or policy of any governmental body or
agency having jurisdiction over the Company or otherwise prohibited by the
Company's Declaration of Trust, its Bylaws or resolutions of the Board of
Trustees all as in effect from time to time.  In the event the Company
authorizes or directs the Advisor to take any actions which, in the
judgment of the Advisor would violate any of the foregoing, the Advisor
shall so advise the Company in writing specifying the basis for its
position and shall take no further action with respect to such matters
unless and until it receives clarification and instructions from the Board
of Trustees.

      7.  LIMITATION OF LIABILITY AND INDEMNIFICATION OF ADVISOR.

      7.1   Limitation on Liability.

      The Advisor shall have no responsibility other than to render the
services and take the actions described herein in good faith and with the
exercise of due care and shall not be responsible for any action of the
Board of Trustees in following or declining to follow any advice or
recommendation of the Advisor.  The Advisor, except by reason of its own
gross negligence, bad faith or willful misconduct, shall not be liable for
any action taken, omitted or suffered to be taken by it in good faith and
believed by it to be authorized or within its discretion or rights or
powers conferred upon it by this Agreement or in reliance upon the written
opinion of counsel of recognized expertise.

      7.2   Indemnification.

      (a)   The Company shall reimburse, indemnify and hold harmless the
Advisor and its partners, directors, officers, stockholders, agents and
employees and each other person or entity, if any, controlling the Advisor
(an "Indemnified Party"), to the full extent lawful, from and against any
and all losses, claims, damages or liabilities of any nature whatsoever
with respect to or arising from any acts or omission of the Advisor
(including ordinary negligence) in its capacity as such, except with
respect to losses, claims, damages or liabilities with respect to or
arising out of the Advisor's gross negligence, bad faith or willful
misconduct.

      Notwithstanding the indemnification provisions in Section 7.2(a)
above, indemnification will not be allowed for any liability imposed by
judgment, and costs associated therewith, including attorneys' fees,
arising from or out of a violation of state or federal securities laws
associated with the offer and sale of Company shares.  Indemnification will
be allowed for settlements and related expenses of lawsuits alleging
securities law violations, and for expenses incurred in successfully
defending such lawsuits, provided that a court either (i) approves the
settlement and finds that indemnification of the settlement and related
costs should be made, or (ii) approves indemnification of litigation costs
if a successful defense is made.  If indemnification is unavailable as a
result of this Section 7.2(a), the Company shall contribute to the
aggregate losses, claims, damages or liabilities to which the Advisor or
its partners, officers, directors, agents, employees or controlling persons
may be subject in such amount as is appropriate to reflect the relative
benefits received by each of the Company and the party seeking contribution

<PAGE>

on the one hand and the relative faults of the Company and party seeking
contribution on the other, as well as any other relevant equitable
considerations.

      (b)   Promptly after receipt by an Indemnified Party of notice of the
commencement of any action, such Indemnified Party shall, if a claim in
respect thereof is to be made against the Company, notify the Company in
writing of the commencement thereof; but the omission to so notify the
Company shall not relieve it from any liability that it may have to any
Indemnified Party pursuant to this Section 7.2.  In case any such action
shall be brought against an Indemnified Party and it shall notify the
Company of the commencement thereof, the Company shall be entitled to
participate therein and, to the extent that it shall wish, to assume the
defense thereof, with counsel satisfactory to such Indemnified Party and,
after notice from the Company to such Indemnified Party of its election to
assume the defense thereof, the Company shall not be liable to such
Indemnified Party under Section 7.2(a) hereof for any legal expenses of
other counsel or any of the expenses, in each case subsequently incurred by
such Indemnified Party, unless (i) the Company and the Indemnified Party
shall have mutually agreed to the retention of such counsel or, (ii) the
named parties to any such proceeding (including any impleaded parties)
include both the Company and Indemnified Party and representation of both
parties by the same counsel would be inappropriate in the reasonable
opinion of the Indemnified Party, due to actual or potential differing
interests between them.

      The obligations of the Company under this Section 7.2 shall be in
addition to any liability which the Company otherwise may have.

      8.  BOOKS AND RECORDS.  All books and records compiled by the Advisor
in the course of discharging its responsibilities under this Agreement
shall be the property of the Company and shall be delivered by the Advisor
to the Company immediately upon any termination of this Agreement and
regardless of the grounds for such termination (including, but not limited
to, a breach by the Company of this Agreement); provided, however, that the
Advisor shall have reasonable access to such books and records to the
extent reasonably necessary in connection with the conduct of its services
hereunder.  The Advisor shall not maintain or assert any lien against or
upon any of the books and records and all such books and records concerning
the Hotels and/or the Leases.  If requested by the Company, the Advisor
shall maintain records including, but not limited to (a) pro-rated costs
(including salaries, commissions, bonuses and benefits) of personnel
employed by the Advisor and who are involved in the acquisition, and
administrative process related to the acquisitions of Hotels which are
identified by the Advisor and acquired by the Company during the term of
this Agreement (the "Acquisition Process"); (b) all costs of fees, taxes
and assessments applicable to the Acquisition Process; (c) travel, lodging
and entertainment expenses related to the Acquisition Process and (d) other
general and administrative expenses, including expenses for administrative
personnel relating to the Acquisition Process;

      9.  TERM AND TERMINATION.

      (a)   This Agreement shall become effective upon the Effective Date
and shall be automatically extended for successive one year terms
thereafter without further action by either the Company or the Advisor
unless earlier terminated, as provided herein.  This Agreement shall be
automatically renewed for additional one (1) year terms unless either party
gives written notice to the other party of termination 180 days prior to
the expiration of the then current term.

<PAGE>

      (b)   The Company also may, at any time, terminate this Agreement:

            (i)   immediately upon providing written notice to the Advisor
if the Advisor is determined by unanimous vote of all Independent Trustees
of the Company, taken after at least fourteen (14) days prior written
notice to the Advisor of such vote, to have committed an act of actual
fraud, willful malfeasance, or gross negligence relating to its duties and
responsibilities under this Agreement or a material breach by the Advisor
of its obligations under this Agreement which is not remedied in a
reasonable period of time after receipt of written notice from the
Independent Trustees specifying such breach;

            (ii)  upon written notice effective immediately, given not
earlier than thirty (30) days after the Advisor shall (A) authorize or
agree to the commencement of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency, receivership or other similar law
now or hereafter in effect or the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, (B) make a general assignment for the benefit of its
creditors, or (C) have an involuntary or other proceeding commenced against
it seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
thereafter in effect, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period exceeding sixty (60) days.

      (c)   This Agreement shall automatically terminate upon termination
of the Employee Lease Agreement.

      (d)   Either the Advisor or the Company may terminate this Agreement,
upon five (5) days prior notice to the other party hereto, upon any Change
of Control (hereinafter defined) of the Company. "Change of Control" for
the purposes hereof means, with respect to the Company and subject to the
last sentence of this paragraph, any transaction or series of transactions
resulting in a change in the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of
the Company, whether through ownership of voting securities, by contract or
otherwise.  Notwithstanding anything to the contrary herein, no Change of
Control of the Company shall be deemed to occur as the result of sales in
the ordinary course of shares of stock (or certificates of trust) in any
entity whose stock, or certificates of trust are traded publicly.

      (e)   Upon any termination of this Agreement by the Company, the
Advisor shall, upon the Company's request, cooperate with and assist the
Company in finding a new entity to act as advisor to the Company and in
assisting the Company with the transition process.

      10.  NOTICES.  Any notices, instructions or other communications
required or contemplated by this Agreement shall be deemed to have been
properly given and to be effective upon delivery if delivered in person or
sent by telecopier or upon receipt if sent by courier service.

      All such communications to the Company shall be addressed as follows:

                        LaSalle Hotel Properties
                        4800 Montgomery Lane
                        Suite M25
                        Bethesda, Maryland 20814
                        Attention: President
                        Telecopier: (301) 941-1553

<PAGE>

      With a copy to:

                        Brown & Wood LLP
                        One World Trade Center
                        New York, New York  10048
                        Attention: Michael F. Taylor
                        Telecopier: (212) 839-5599

      All such communications to the Advisor shall be addressed as follows:

                        LaSalle Hotel Advisors, Inc.
                        4800 Montgomery Lane
                        Suite M25
                        Bethesda, Maryland 20814
                        Attention: President
                        Telecopier: (301) 941-1553

      With copies to:

                        Hagan & Associates
                        200 East Randolph Drive, Suite 4322
                        Chicago, Illinois  60601
                        Attention: R.K. Hagan
                        Telecopier: (312) 228-0982

      and;

                        Jones Lang LaSalle
                        200 East Randolph Drive
                        Chicago, Illinois  60601
                        Attention: Chief Financial Officer
                        Telecopier: (312) 228-0980

      Either party hereto may designate a different address by written
notice to the other party delivered in accordance with this Section 10.

      11.  DELEGATION OF RESPONSIBILITIES.  Notwithstanding anything
contained herein to the contrary, the Advisor may delegate any and all of
its responsibilities and obligations under this Agreement to its
Affiliates.  Any delegation of responsibilities by the Advisor shall not be
inconsistent with any express instructions of the Board of Trustees; shall
not cause the Company to incur any financial responsibility to the delegee
except to the extent specifically permitted under Section 4 and shall not
relieve the Advisor of its obligations to the Company with respect to the
responsibilities delegated and with respect to which delegated
responsibilities the Advisor shall remain liable to the Company.

      12.  NONCOMPETE AGREEMENT.  The Advisor and its Affiliates shall not
invest directly or indirectly or on behalf of others in any hotel
properties in the United States (the "Competitive Hotels"), other than
through the Company except for the excluded properties set forth in Exhibit
A hereto and except for hotels constituting part of a mixed-use property
where less than 40% of the property's NOI is attributable to the hotel.
Notwithstanding the foregoing, no Affiliate shall be restricted from
acquiring interests directly or indirectly, in Competitive Hotels or
providing asset management services with respect to Competitive Hotels to
the extent that such Affiliate (i) is a Registered Investment Advisor under
the Investment Advisors Act of 1940 and makes such acquisition or gives
such advice in the ordinary course of management activities for securities
investments, (ii) acquires a company or other entity which owns or provides
asset management services with respect to Competitive Hotels, provided (a)
it is not a material activity of such company or entity, (b) such company
or entity does not engage in activities relating to additional Competitive
Hotels, after such acquisition, and (c) the Advisor maintains a "Chinese
wall" between employees of the Advisor and those of such company or entity
with respect to such activities, or (iii) invests in debt or debt
securities, including debt or debt securities which have equity components,

<PAGE>

to the extent the intention of such Affiliate at the time such investment
was made was not to exercise its rights to directly hold such equity or
(iv) is engaged in financing, disposition, consulting, development
management or facility related (e.g., accounting or engineering) services
with respect to Competitive Hotels.  For purposes of this Agreement,
"material" shall mean twenty percent (20%) of the company's activities.

      13.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE ADVISOR.  The
Advisor represents and warrants to, and covenants and agrees with, the
Company as follows:

            (a)   The Advisor, taking into account its own personnel and
the personnel available to it through its Affiliates, has access to
personnel trained and experienced in the business of acquisitions, leasing
of hotels asset management, financing, and the ownership and dispositions
of hotels, and such other areas as may be necessary and sufficient to
enable the Advisor to perform its obligations under this Agreement.

            (b)   The Advisor shall comply with all laws, rules,
regulations and ordinances applicable to the performance of its obligations
under this Agreement.

            (c)   Neither the Advisor nor any of its Affiliates is party to
or otherwise bound by or, during the term of this Agreement (including any
extension thereof), will become party to or otherwise bound by, any
agreement that would restrict or prevent (i) except as set forth on Exhibit
A attached hereto, the Advisor from performing any obligation contemplated
by this Agreement or (ii) the Company from operating its business as
proposed to be conducted, including, without limitation, acquiring any
Hotel in any geographic market in the United States or any foreign country.

      14.  GOVERNING LAW.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to the conflict of laws principals thereof.

      15.  ENTIRE AGREEMENT.  This Agreement reflects the entire
understanding of the parties hereto with respect to the subject matter
hereof and supersedes and replaces all agreements between the Company and
the Advisor with respect to the subject matter hereof.

      16.  RELATIONSHIP OF PARTIES.  The parties intend that the Advisor
shall act as an independent contractor in performing services for the
Company hereunder.  Nothing contained herein is intended to, or shall be
construed to, constitute the Advisor as a partner, joint venturer or agent
of the Company.

      17.  SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the
benefit of and be binding upon the parties to this Agreement and their
respective successors and permitted assigns, and no other person or entity
shall acquire or have any right under, or by virtue of, this Agreement.
The Company shall be entitled to assign this Agreement to any successor to
all or substantially all of its assets, rights and/or obligations; the
Advisor shall have the right to assign this Agreement to any Affiliate (as
such term is defined in Section 12).

      18.  AMENDMENT, MODIFICATIONS AND WAIVER.  This Agreement hereto
shall not be altered or otherwise amended in any respect, except pursuant
to an instrument in writing signed by the parties hereto.  The waiver by a
party of a breach of any provisions of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.

      19.   COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of
which shall constitute one and the same agreement.

                     (SIGNATURES ARE ON THE NEXT PAGE)
                                 * * * * *

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.

                        LASALLE HOTEL PROPERTIES

                        By:         /s/ Hans Weger
                                    ------------------------------
                        Name:       Hans Weger
                        Title:      Chief Financial Officer

                        LASALLE HOTEL
                        OPERATING PARTNERSHIP, L.P.

                        By:   LASALLE HOTEL PROPERTIES
                              its general partner

                              By:         /s/ Hans Weger
                                          ------------------------------
                              Name:       Hans Weger
                              Title:      Chief Financial Officer

                        LASALLE HOTEL ADVISORS, INC.

                        By:         /s/ Robert K. Hagan
                                    ------------------------------
                        Name:       Robert K. Hagan
                        Title:      Vice President

<PAGE>

                                 EXHIBIT A
                                 ---------

      PROJECT
      -------

      Hotel Nikko,
      San Francisco, CA

      Orlando Peabody,
      Orlando, FL

      Greensboro Hilton Hotel,
      Greensboro, NC

      Holiday Inn on the Hill,
      Washington, D.C.

      The Camberly Gunter,
      San Antonio, TX

      The Radisson Charlotte Hotel,
      Charlotte, NC

<PAGE>

                         EMPLOYEE LEASE AGREEMENT
                         ------------------------

      THIS EMPLOYEE LEASE AGREEMENT (this "Agreement"), is dated as of
January 1, 2000 (the "Effective Date") by and between LASALLE HOTEL
PROPERTIES, a Maryland real estate investment trust (the "Company"), and
LASALLE HOTEL ADVISORS, INC., a Maryland corporation (the "Lessor").

      WHEREAS, the Company through its interest in LaSalle Hotel Operating
Partnership, L.P. (the "Operating Partnership"), is in the business of
acquiring, developing, managing, owning and disposing of hotels (the
"Hotels") and leasing the Hotels to qualified lessees (the "Hotel Lessees")
pursuant to participating leases (the "Leases") (for purposes hereof unless
the context otherwise requires, the term "Company" shall include the
Company and the Operating Partnership); and

      WHEREAS, the Company is qualified, and intends in the future to
qualify, as a Real Estate Investment Trust (a "REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"); and

      WHEREAS, the Company desires to lease any or all of the employees of
the Lessor, including, without limitation, administrative personnel (each
an "Employee" and collectively, the "Employees") for the purpose of the
acquisition, leasing, investment management, financing, ownership and
disposition of the Hotels on the terms set forth herein and consistent with
the Company's initial and continued qualification and operation in
accordance with all requirements applicable to a REIT; and

      WHEREAS, the Lessor is willing to lease such Employees to the Company
on the terms set forth herein;

      NOW, THEREFORE, in consideration of the mutual covenants set forth in
this Agreement, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:

      1.  LEASE OF EMPLOYEES.  The Company hereby leases the Employees on
the terms hereinafter set forth, and the Lessor hereby accepts such lease.
The Company shall provide Notice from time to time, in accordance with the
provisions of Section 8 hereof, of the names of the Employees which the
Company elects to lease in accordance with the terms hereof.

      2.  LESSOR'S RESOURCES.  The Lessor shall, at its expense, maintain
such office space, facilities, equipment and, subject to the provisions of
Section 6, below, personnel trained and experienced in the business of
acquisitions, financing, investment management and hotel leasing, together
with administrative personnel, sufficient to enable the Lessor to fulfill
its obligations under this Agreement.

      3.  PAYMENT OF EXPENSES.  Except as set forth below, in consideration
of the compensation provided under Section 4, the Lessor shall bear all
expenses, including, without limitation, payroll, unemployment, social
security, and all similar taxes, attributable to the Employees hereunder
without separate reimbursement from the Company.

      4.  COMPENSATION.

      (a)  The Company shall pay to the Lessor in cash a lease payment (the
"Lease Payment"), of Three Million Dollars ($3,000,000) which shall be
increased annually in accordance with the CPI Adjustment (as defined
below).

<PAGE>

      For purposes of this Agreement, "CPI Adjustment" shall mean the
product of (x) the Lease Payment in effect in the most recently ended year
multiplied by (y) the quotient of (a) the average CPI (defined below) for
the immediately preceding twelve (12) months immediately preceding the
applicable year divided by (b) the average CPI for the twelve months in the
prior year.  "CPI" shall mean the "Consumer Price Index" published by the
Bureau of Labor Statistics of the United States of America Department of
Labor, U.S. City Average, All Items for Urban Wage Earners and Clerical
Workers (1982-1984=100).

      The Lease Payment shall be for the purposes of compensating Lessor
for the expenses set forth in Section 3 above, together with an
administrative fee to the Lessor.  The Lease Payment shall be payable
quarterly in advance within 45 days of the beginning of each fiscal
quarter.

      5.  REIT STATUS.  Notwithstanding anything in this Agreement to the
contrary, the Lessor shall not take any action which would (a) adversely
affect the status of the Company as a REIT, (b) subject the Company to
regulation under the Investment Company Act of 1940, as amended or (c)
violate any law, rule, regulation or policy of any governmental body or
agency having jurisdiction over the Company or otherwise prohibited by the
Company's Declaration of Trust, its Bylaws or resolutions of the Board of
Trustees all as in effect from time to time.  In the event the Company
authorizes or directs the Lessor to take any actions which, in the judgment
of the Lessor would violate any of the foregoing, the Lessor shall so
advise the Company in writing specifying the basis for its position and
shall take no further action with respect to such matters unless and until
it receives clarification and instructions from the Board of Trustees.

      6.  EMPLOYEES.

      (a)  Throughout the term of this Agreement, subject to the provisions
of subsection (c) below, the Company shall have the exclusive right to
determine:

            (i)   the employment and termination of any and all Employees;

            (ii)  the nature and scope of each Employee's employment,
including, without limitation, training, location of employment, and the
procedures for completing relevant work assignments;

            (iii) the number of stock options with respect to shares of the
common stock of the Company (the "Options"), if any, the Company will grant
to the Employees and the date and conditions upon which any such Options
will vest; and

            (iv)  the compensation to be paid to each Employee.

      (b)  Throughout the term of this Agreement, the Company shall permit
the Employees to participate in the Company's employee benefit plans, if
any, on the same basis as other comparable employees of the Company.

      (c)  Notwithstanding the provisions of subsection (a), above, to the
contrary, Lessor shall have the non-exclusive right, upon prior written
approval of the Company which such approval shall not be unreasaonably
withheld, to take such actions and made such determinations as set forth in
subsections (a)(i) and (a)(ii) above.

      (d)  (i)  Lessor shall protect, indemnify and hold harmless Company
and any of its successors or assigns with respect to this Agreement
(collectively, the "Company Indemnitees" and, individually, a "Company
Indemnitee") for, from and against any and all debts, liens, claims, causes
of action, administrative orders or notices, costs, fines, penalties or
expenses (including, without limitation, reasonable attorney's fees and
expenses) imposed upon, incurred by or asserted against any Company
Indemnitee resulting from, either directly or indirectly, any claims by an

<PAGE>

Employee arising through the termination, release or similar action with
respect to such Employee, whether with or without cause, which such action
was made at the direction of Lessor.  Upon notice from Company and any
other of the Company Indemnitees, Lessor shall undertake the defense (with
counsel reasonably acceptable to Company), at Lessor's sole cost and
expense, of any indemnification duties set forth herein.  Lessor shall,
upon demand, pay to Company any cost, expense, loss or damage (including,
without limitation, reasonable attorneys' fees) incurred by Company and
arising under this Section, which amounts shall bear interest from the date
ten (10) days after written demand therefor is given to Lessor until paid
by Lessor to Company.  The provisions of this Section shall survive the
expiration or sooner termination of this Agreement.

           (ii)   Company shall protect, indemnify and hold harmless Lessor
and any of its successors or assigns with respect to this Agreement
(collectively, the "Lessor Indemnitees" and, individually, an "Lessor
Indemnitee") for, from and against any and all debts, liens, claims, causes
of action, administrative orders or notices, costs, fines, penalties or
expenses (including, without limitation, reasonable attorney's fees and
expenses) imposed upon, incurred by or asserted against any Lessor
Indemnitee resulting from, either directly or indirectly, any claims by an
Employee arising through the termination, release or similar action with
respect to such Employee, whether with or without cause, which such action
was made at the direction of Company.  Upon notice from Lessor and any
other of the Lessor Indemnitees, Company shall undertake the defense (with
counsel reasonably acceptable to Lessor), at Company's sole cost and
expense, of any indemnification duties set forth herein.  Company shall,
upon demand, pay to Lessor any cost, expense, loss or damage (including,
without limitation, reasonable attorneys' fees) incurred by Lessor and
arising under this Section, which amounts shall bear interest from the date
ten (10) days after written demand therefor is given to Company until paid
by Company to Lessor.  The provisions of this Section shall survive the
expiration or sooner termination of this Agreement.

      7.  TERM AND TERMINATION.

      (a)  This Agreement shall become effective upon the Effective Date
and shall be automatically extended for successive one year terms
thereafter without further action by either the Company or the Lessor
unless earlier terminated, as provided herein.  This Agreement shall be
automatically renewed for additional one (1) year terms unless either party
gives written notice to the other party of termination 180 days prior to
the expiration of the then current term.

      (b)   The Company also may, at any time, terminate this Agreement:

            (i)   immediately upon providing written notice to the Lessor
if the Lessor is determined by unanimous vote of all Independent Trustees
(as such term is defined in the Advisory Agreement) of the Company, taken
after at least fourteen (14) days prior written notice to the Lessor of
such vote, to have committed an act of actual fraud, willful malfeasance,
or gross negligence relating to its duties and responsibilities under this
Agreement or a material breach by the Lessor of its obligations under this
Agreement which is not remedied in a reasonable period of time after
receipt of written notice from the Independent Trustees specifying such
breach;

            (ii)  upon written notice effective immediately, given not
earlier than thirty (30) days after the Lessor shall (A) authorize or agree
to the commencement of a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its
debts under any bankruptcy, insolvency, receivership or other similar law
now or hereafter in effect or the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it

<PAGE>

            or any substantial part of its property, (B) make a general
assignment for the benefit of its creditors, or (C) have an involuntary or
other proceeding commenced against it seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or thereafter in effect, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period exceeding sixty (60) days.

      (c)  Upon any termination of this Agreement by the Company, the
Lessor shall, upon the Company's request, cooperate with and assist the
Company in finding a new entity to act as lessor to the Company and in
assisting the Company with the transition process.

      (d)  This Agreement shall automatically terminate upon termination of
the Advisory Agreement.

      8.    NOTICES.  Any notices, instructions or other communications
required or contemplated by this Agreement shall be deemed to have been
properly given and to be effective upon delivery if delivered in person or
sent by telecopier or upon receipt if sent by courier service.

      All such communications to the Company shall be addressed as follows:

                  LaSalle Hotel Properties
                  4800 Montgomery Lane
                  Suite M25
                  Bethesda, Maryland  20814
                  Attention: President
                  Telecopier: (301) 941-1553

      With a copy to:

                  Brown & Wood LLP
                  One World Trade Center
                  New York, New York  10048
                  Attention: Michael F. Taylor
                  Telecopier: (212) 839-5599

      All such communications to the Lessor shall be addressed as follows:

                  LaSalle Hotel Advisors, Inc.
                  4800 Montgomery Lane
                  Suite M25
                  Bethesda, Maryland  20814
                  Attention: President
                  Telecopier: (301) 941-1553

      With copies to:

                  Hagan & Associates
                  200 East Randolph Drive, Suite 4322
                  Chicago, Illinois  60601
                  Attention:  R.K. Hagan
                  Telecopier:  (312) 228-0982
and;
                  Jones Lang LaSalle
                  200 East Randolph Drive
                  Chicago, Illinois  60601
                  Attention:  Chief Financial Officer
                  Telecopier:  (312) 228-0980

      Either party hereto may designate a different address by written
notice to the other party delivered in accordance with this Section 8.

<PAGE>

      9.    DELEGATION OF RESPONSIBILITIES.  Notwithstanding anything
contained herein to the contrary, the Lessor may delegate any and all of
its responsibilities and obligations under this Agreement to any company or
other entity owned or controlled, directly or indirectly, by Jones Lang
LaSalle (collectively, an "Affiliate").  Any delegation of responsibilities
by the Lessor shall not be inconsistent with any express instructions of
the Board of Trustees (as such term is defined in the Advisory Agreement)
of the Company shall not cause the Company to incur any financial
responsibility to the delegee other than as expressly set forth herein, and
shall not relieve the Lessor of its obligations to the Company with respect
to the responsibilities delegated and with respect to which delegated
responsibilities the Lessor shall remain liable to the Company.

      10.   REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE LESSOR.  The
Lessor represents and warrants to, and covenants and agrees with, the
Company as follows:

            (a)   The Lessor, taking into account its own personnel and the
personnel available to it through its Affiliates, has access to personnel
trained and experienced in the business of acquisitions, leasing of hotels
asset management, financing, and the ownership and dispositions of hotels,
and such other areas as may be necessary and sufficient to enable the
Lessor to perform its obligations under this Agreement.

            (b)   The Lessor shall comply with all laws, rules, regulations
and ordinances applicable to the performance of its obligations under this
Agreement.

            (c)   Neither the Lessor nor any of its Affiliates is party to
or otherwise bound by or, during the term of this Agreement (including any
extension thereof), will become party to or otherwise bound by, any
agreement that would restrict or prevent (i) except as set forth on Exhibit
A attached hereto, the Lessor from performing any obligation contemplated
by this Agreement or (ii) the Company from operating its business as
proposed to be conducted, including, without limitation, acquiring any
Hotel in any geographic market in the United States or any foreign country.

            (d)   Neither the Lessor nor any Affiliates thereof shall grant
any options for the purchase of securities to the Employees with respect to
services provided to the Company.

      11.  GOVERNING LAW.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to the conflict of laws principals thereof.

      12.  ENTIRE AGREEMENT.  This Agreement reflects the entire
understanding of the parties hereto with respect to the subject matter
hereof and supersedes and replaces all agreements between the Company and
the Lessor with respect to the subject matter hereof.

      13.  RELATIONSHIP OF PARTIES.  The parties intend that the Lessor
shall act as an independent contractor.  Nothing contained herein is
intended to, or shall be construed to, constitute the Lessor as a partner,
joint venturer or agent of the Company.

      14.  SUCCESSORS AND ASSIGNS.  This Agreement shall inure to the
benefit of and be binding upon the parties to this Agreement and their
respective successors and permitted assigns, and no other person or entity
shall acquire or have any right under, or by virtue of, this Agreement.
The Company shall be entitled to assign this Agreement to any successor to
all or substantially all of its assets, rights and/or obligations; the
Lessor shall have the right to assign this Agreement to any Affiliate.

<PAGE>

      15.  AMENDMENT, MODIFICATIONS AND WAIVER.  This Agreement hereto
shall not be altered or otherwise amended in any respect, except pursuant
to an instrument in writing signed by the parties hereto.  The waiver by a
party of a breach of any provisions of this Agreement shall not operate or
be construed as a waiver of any subsequent breach.

      16.  COUNTERPARTS.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, and all of
which shall constitute one and the same agreement.

      17.  THIRD-PARTY BENEFICIARIES.  Nothing contained herein is, or
shall be deemed to be, intended to create any third-party beneficiaries,
and the provisions herein shall be for the benefit of the Company, Lessor
and their permitted successors and assigns, and shall not inure to the
benefit of third-parties.

                    (SIGNATURES BEGIN ON THE NEXT PAGE)

                                 * * * * *

<PAGE>

      IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.

                        LASALLE HOTEL PROPERTIES

                        By:         /s/ Hans Weger
                                    ------------------------------
                        Name:       Hans Weger
                        Title:      Chief Financial Officer

                        LASALLE HOTEL
                        OPERATING PARTNERSHIP, L.P.

                        By:   LASALLE HOTEL PROPERTIES
                              its general partner

                              By:         /s/ Hans Weger
                                          ------------------------------
                              Name:       Hans Weger
                              Title:      Chief Financial Officer

                        LASALLE HOTEL ADVISORS, INC.

                        By:    /s/ Robert K. Hagan
                               ------------------------------
                        Name:  Robert K. Hagan
                        Title: Vice President<PAGE>   1
                                                                 Exhibit 10.3

                               CELL PATHWAYS, INC.

                           1997 EQUITY INCENTIVE PLAN

                           ADOPTED SEPTEMBER 13, 1993
                      AMENDED AND RESTATED OCTOBER 14, 1997
                              AMENDED JUNE 22, 1998
                              AMENDED MAY 31, 2000

1.       PURPOSES.

         (a) The Cell Pathways, Inc. 1993 Stock Option Plan was originally
adopted by the Board of Directors of Cell Pathways, Inc., a Delaware corporation
(the "Company") in 1993, and is hereby continued, amended and restated with the
name of the Cell Pathways, Inc. 1997 Equity Incentive Plan (the "Plan"). The
purpose of the Plan is to provide a means by which selected Employees and
Directors of and Consultants to the Company, and its Affiliates, may be given an
opportunity to benefit from increases in value of the stock of the Company
through the granting of (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses, (iv) rights to purchase restricted stock, and (v)
stock appreciation rights, all as defined below.

         (b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.

         (c) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) stock
appreciation rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.

2.       DEFINITIONS.

         (a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.

         (b) "BOARD" means the Board of Directors of the Company.

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

         (d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.

         (e) "COMPANY" means Cell Pathways, Inc., a Delaware corporation.

                                       1.
<PAGE>   2
         (f) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 8(b)(2) of the Plan.

         (g) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.

         (h) "CONTINUOUS SERVICE" means that the service of an individual to the
Company, whether as an Employee, Director or Consultant, is not interrupted or
terminated. The Board or the chief executive officer of the Company may
determine, in that party's sole discretion, whether Continuous Service shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.

         (i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.

         (j) "DIRECTOR" means a member of the Board.

         (k) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.

         (l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

         (m) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows:

                  (1) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of common stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Company's common stock) on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable.

                  (2) In the absence of such markets for the common stock, the
Fair Market Value shall be determined in good faith by the Board.

         (n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock

                                       2.
<PAGE>   3
option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.

         (o) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means
a right granted pursuant to subsection 8(b)(3) of the Plan.

         (p) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.

         (q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.

         (r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.

         (s) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

         (t) "OPTION" means a stock option granted pursuant to the Plan.

         (u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

         (v) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

         (w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

                                       3.
<PAGE>   4
         (x) "PLAN" means this 1997 Equity Incentive Plan.

         (y) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3, as in effect with respect to the Company at the time discretion
is being exercised regarding the Plan.

         (z) "SECURITIES ACT" means the Securities Act of 1933, as amended.

         (aa) "STOCK APPRECIATION RIGHT" means any of the various types of
rights which may be granted under Section 8 of the Plan.

         (bb) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, any right to purchase restricted stock, and any
Stock Appreciation Right.

         (cc) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

         (dd) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 8(b)(1) of the Plan.

3.       ADMINISTRATION.

         (a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).

         (b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:

                  (1) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; whether a Stock Award will be an Incentive Stock Option,
a Nonstatutory Stock Option, a stock bonus, a right to purchase restricted
stock, a Stock Appreciation Right, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; whether a person shall be permitted to receive stock upon
exercise of an Independent Stock Appreciation Right; and the number of shares
with respect to which a Stock Award shall be granted to each such person.

                  (2) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

                                       4.
<PAGE>   5
                  (3) To amend the Plan or a Stock Award as provided in Section
14.

                  (4) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.

         (c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Additionally, prior to the Listing Date, and
notwithstanding anything to the contrary contained herein, the Board may
delegate administration of the Plan to a committee of one or more members of the
Board and the term "Committee" shall apply to any person or persons to whom such
authority has been delegated. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
(1) are not then subject to Section 16 of the Exchange Act and/or (2) are either
(i) not then Covered Employees and are not expected to be Covered Employees at
the time of recognition of income resulting from such Stock Award, or (ii) not
persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code.

4.       SHARES SUBJECT TO THE PLAN.

         (a) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate Five Million Six Hundred Thousand (5,600,000)
shares of the Company's common stock, including all shares authorized since the
inception of the Plan in 1993. If any Stock Award shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan. Shares subject to Stock Appreciation
Rights exercised in accordance with Section 8 of the Plan shall not be available
for subsequent issuance under the Plan.

         (b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

                                       5.
<PAGE>   6
5.       ELIGIBILITY.

         (a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.

         (b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of such stock at the date of
grant and such Option is not exercisable after the expiration of five (5) years
from the date of grant.

         (c) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options and
Stock Appreciation Rights covering more than one million five hundred thousand
(1,500,000) shares of the Company's common stock in any calendar year. This
subsection 5(c) shall not apply prior to the Listing Date and, following the
Listing Date, shall not apply until (i) the earliest of: (A) the first material
modification of the Plan (including any increase to the number of shares
reserved for issuance under the Plan in accordance with Section 4); (B) the
issuance of all of the shares of common stock reserved for issuance under the
Plan; (C) the expiration of the Plan; or (D) the first meeting of stockholders
at which directors are to be elected that occurs after the close of the third
calendar year following the calendar year in which occurred the first
registration of an equity security under section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.

6.       OPTION PROVISIONS.

         Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

         (a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

         (b) PRICE. The exercise price of each Option shall be not less than one
hundred percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

                                       6.
<PAGE>   7
         (c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment, or other arrangement (which may include,
without limiting the generality of the foregoing, the use of other common stock
of the Company) with the person to whom the Option is granted or to whom the
Option is transferred pursuant to subsection 6(d), or (C) in any other form of
legal consideration that may be acceptable to the Board.

         In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

         (d) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option shall
only be transferable by the Optionee upon such terms and conditions as are set
forth in the Option Agreement for such Nonstatutory Stock Option, as the Board
or the Committee shall determine in its discretion. The person to whom the
Option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.

         (e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.

         (f) TERMINATION OF CONTINUOUS SERVICES. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) within such
period of time specified in the Option Agreement, or (ii) the expiration of the
term of the Option as set forth in the Option Agreement. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If,

                                       7.
<PAGE>   8
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the Plan.

         An Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would result in liability under
Section 16(b) of the Exchange Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the Option
Agreement, or (ii) the tenth (10th) day after the last date on which such
exercise would result in such liability under Section 16(b) of the Exchange Act.
Finally, an Optionee's Option Agreement may also provide that if the exercise of
the Option following the termination of the Optionee's Continuous Service (other
than upon the Optionee's death or disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in the first
paragraph of this subsection 6(f), or (ii) the expiration of a period of three
(3) months after the termination of the Optionee's Continuous Service during
which the exercise of the Option would not be in violation of such registration
requirements.

         (g) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's disability, the Optionee may
exercise his or her Option (to the extent that the Optionee was entitled to
exercise it as of the date of termination), but only within such period of time
specified in the Option Agreement, or the expiration of the term of the Option
as set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to and again
become available for issuance under the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.

         (h) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Service, the Option may be exercised (to the extent
the Optionee was entitled to exercise the Option as of the date of death) by the
Optionee's estate, by a person who acquired the right to exercise the Option by
bequest or inheritance or by a person designated to exercise the option upon the
Optionee's death pursuant to subsection 6(d), but only within the period
specified in the Option Agreement, or the expiration of the term of such Option
as set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.

                                       8.
<PAGE>   9
         (i) EARLY EXERCISE. The Option Agreement may, but need not, include a
provision whereby the Optionee may elect at any time during Continuous Service
to exercise the Option as to any part or all of the shares subject to the Option
prior to the full vesting of the Option. Any unvested shares so purchased may be
subject to a repurchase right in favor of the Company or to any other
restriction the Board determines to be appropriate.

         (j) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
such an Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option which is an Incentive Stock Option and which is
granted to a 10% stockholder (as described in subsection 5(b)), shall have an
exercise price which is equal to one hundred ten percent (110%) of the Fair
Market Value of the stock subject to the Re-Load Option on the date of exercise
of the original Option and shall have a term which is no longer than five (5)
years.

         Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 12(e) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and the limits on the grants of Options under subsection
5(c) and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.

                                       9.
<PAGE>   10
7.       TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.

         Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:

         (a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement. Notwithstanding the
foregoing, the Board or the Committee may determine that eligible participants
in the Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.

         (b) TRANSFERABILITY. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable by the grantee only upon such terms and
conditions as are set forth in the applicable Stock Award Agreement, as the
Board or the Committee shall determine in its discretion, so long as stock
awarded under such Stock Award Agreement remains subject to the terms of the
agreement.

         (c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement, except that payment of the common stock's "par
value" (as defined in the Delaware General Corporation Law) shall not be made by
deferred payment, or other arrangement with the person to whom the stock is
sold; or (iii) in any other form of legal consideration that may be acceptable
to the Board or the Committee in its discretion. Notwithstanding the foregoing,
the Board or the Committee to which administration of the Plan has been
delegated may award stock pursuant to a stock bonus agreement in consideration
for past services actually rendered to the Company or for its benefit.

         (d) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.

         (e) TERMINATION OF CONTINUOUS SERVICE. In the event a Participant's
Continuous Service terminates, the Company may repurchase or otherwise reacquire
any or all of the shares of stock held by that person which have not vested as
of the date of termination under the terms of the stock bonus or restricted
stock purchase agreement between the Company and such person.

                                      10.
<PAGE>   11
8.       STOCK APPRECIATION RIGHTS.

         (a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the holder
must provide written notice of exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such right. Except as
provided in subsection 5(c), no limitation shall exist on the aggregate amount
of cash payments the Company may make under the Plan in connection with the
exercise of a Stock Appreciation Right.

         (b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:

                  (1) TANDEM STOCK APPRECIATION RIGHTS. Tandem Stock
Appreciation Rights will be granted appurtenant to an Option, and shall, except
as specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains.
Tandem Stock Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution. The
appreciation distribution payable on the exercised Tandem Right shall be in cash
(or, if so provided, in an equivalent number of shares of stock based on Fair
Market Value on the date of the Option surrender) in an amount up to the excess
of (A) the Fair Market Value (on the date of the Option surrender) of the number
of shares of stock covered by that portion of the surrendered Option in which
the Optionee is vested over (B) the aggregate exercise price payable for such
vested shares.

                  (2) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights
will be granted appurtenant to an Option and may apply to all or any portion of
the shares of stock subject to the underlying Option and shall, except as
specifically set forth in this Section 8, be subject to the same terms and
conditions applicable to the particular Option grant to which it pertains. A
Concurrent Right shall be exercised automatically at the same time the
underlying Option is exercised with respect to the particular shares of stock to
which the Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on the date of
the exercise of the Concurrent Right) in an amount equal to such portion as
shall be determined by the Board or the Committee at the time of the grant of
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Concurrent Right) of the vested shares of stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B) the
aggregate exercise price paid for such shares.

                  (3) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights
will be granted independently of any Option and shall, except as specifically
set forth in this Section 8, be subject to the same terms and conditions
applicable to Nonstatutory Stock Options as set forth in Section 6. They shall
be denominated in share equivalents. The appreciation distribution payable

                                      11.
<PAGE>   12
on the exercised Independent Right shall be not greater than an amount equal to
the excess of (A) the aggregate Fair Market Value (on the date of the exercise
of the Independent Right) of a number of shares of Company stock equal to the
number of share equivalents in which the holder is vested under such Independent
Right, and with respect to which the holder is exercising the Independent Right
on such date, over (B) the aggregate Fair Market Value (on the date of the grant
of the Independent Right) of such number of shares of Company stock. The
appreciation distribution payable on the exercised Independent Right shall be in
cash or, if so provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent Right.

9.       CANCELLATION AND RE-GRANT OF OPTIONS.

         (a) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) with the consent
of the affected holders of Options and/or Stock Appreciation Rights, the
cancellation of any outstanding Options and/or any Stock Appreciation Rights
under the Plan and the grant in substitution therefor of new Options and/or
Stock Appreciation Rights under the Plan covering the same or different numbers
of shares of stock, but having an exercise price per share not less than the
Fair Market Value or, in the case of a 10% stockholder (as described in
subsection 5(b)) receiving a new grant of an Incentive Stock Option, not less
than one hundred ten percent (110%) of the Fair Market Value) per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or the Committee
may grant an Option and/or Stock Appreciation Right with an exercise price lower
than that set forth above if such Option and/or Stock Appreciation Right is
granted as part of a transaction to which section 424(a) of the Code applies.

         (b) Shares subject to an Option or Stock Appreciation Right canceled
under this Section 9 shall continue to be counted against the maximum award of
Options and Stock Appreciation Rights permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option and/or Stock
Appreciation Right under this Section 9, resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original Option
and/or Stock Appreciation Right and the grant of a substitute Option and/or
Stock Appreciation Right; in the event of such repricing, both the original and
the substituted Options and Stock Appreciation Rights shall be counted against
the maximum awards of Options and Stock Appreciation Rights permitted to be
granted pursuant to subsection 5(c) of the Plan. The provisions of this
subsection 9(b) shall be applicable only to the extent required by Section
162(m) of the Code.

10.      COVENANTS OF THE COMPANY.

         (a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.

         (b) The Company shall seek to obtain from each regulatory commission or
agency

                                      12.
<PAGE>   13
having jurisdiction over the Plan such authority as may be required to issue and
sell shares of stock upon exercise of the Stock Award; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either the Plan, any Stock Award or any stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell stock upon exercise of such Stock Awards unless and until such
authority is obtained.

11.      USE OF PROCEEDS FROM STOCK.

         Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.

12.      MISCELLANEOUS.

         (a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e), 7(d) or 8(b),
notwithstanding the provisions in the Stock Award stating the time at which it
may first be exercised or the time during which it will vest.

         (b) Neither an Employee, Director or Consultant nor any person to whom
a Stock Award is transferred under subsection 6(d), 7(b), or 8(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.

         (c) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director, Consultant or
other holder of Stock Awards any right to continue in the employ of the Company
or any Affiliate (or to continue acting as a Director or Consultant) or shall
affect the right of the Company or any Affiliate to terminate the employment of
any Employee with or without cause, the right of the Company's Board of
Directors and/or the Company's stockholders to remove any Director as provided
in the Company's By-Laws and the provisions of the Delaware General Corporation
Law, or the right to terminate the relationship of any Consultant subject to the
terms of such Consultant's agreement with the Company or Affiliate of the
Company.

         (d) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.

         (e) The Company may require any person to whom a Stock Award is
granted, or any

                                      13.
<PAGE>   14
person to whom a Stock Award is transferred pursuant to subsection 6(d), 7(b) or
8(b), as a condition of exercising or acquiring stock under any Stock Award, (1)
to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.

         (f) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the participant
as a result of the exercise or acquisition of stock under the Stock Award; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.

13.      ADJUSTMENTS UPON CHANGES IN STOCK.

         (a) If any change is made in the stock subject to the Plan, or subject
to any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person during any calendar year pursuant to subsection 5(c), and
the outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company".)

         (b) If at any time while unexercised Options remain outstanding under
this Plan (a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than the

                                      14.
<PAGE>   15
Company or any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any person acquiring securities from the Company
solely pursuant to written agreement with the Company, or any corporation owned,
directly or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of stock in the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities, (b) during
any period of two consecutive years commencing the day after the first election
of directors following termination of the stockholder voting provisions of the
Company's Stockholders' Agreement dated as of December 10, 1992, as amended,
individuals who at the beginning of such period constitute the Board and any new
director (other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clauses (a) (c)
or (d) of this Section 13(b)) whose election by the board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a majority
thereof, (c) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation, other than a merger or consolidation
(i) where no person within the meaning of subsection (a) above becomes the
"beneficial owner" (as defined above) of 20% or more of the resulting voting
power and where the voting securities of the Company outstanding immediately
prior thereto continue to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or controlling entity) more
than 50% of the combined voting power of the voting securities of the Company or
such surviving or controlling entity outstanding immediately after such merger
or consolidation or (ii) (without derogating from the power of the Committee in
other situations) which the Committee determines should not, because of the
nature and purpose of the transaction, qualify as an Acceleration Event under
this subsection, or (d) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets (each of (a),
(b), (c) and (d) an "Acceleration Event"), then each outstanding Option that has
not theretofore become vested and/or exercisable according to its terms shall
become vested and/or exercisable. Upon the occurrence of an Acceleration Event,
the Committee shall provide for cancellation of the unexercised portions of all
Options outstanding as of the Cancellation Date; provided, however, that if an
Option has been held for less than six months, then for purposes of such
cancellation the Acceleration Event and/or Cancellation Date shall be restricted
in such manner as the Committee may determine necessary to comply with the
conditions and requirements of Rule 16b-3. "Cancellation Date" shall mean (i)
the 60th day following the occurrence of any Acceleration Event described in
clause (a) or (b) of the first sentence hereof, and (ii) the closing of any
merger, consolidation, liquidation or sale of assets stockholder approval of
which constituted an Acceleration Event under clause (c) or (d) of the first
sentence hereof. Upon cancellation of any Option pursuant to this Section 13(b)
following an Acceleration Event under clause (a), (b) or (d) of the first
sentence hereof, the Company shall make, and upon cancellation of any Option
pursuant to this Section 13(b) following an Acceleration Event under clause (c)
of the first sentence hereof, the Company may make, in exchange therefor, a cash
payment under such Option in an amount equal to the product of the number of
shares covered by

                                      15.
<PAGE>   16
the unexercised portion of the Option multiplied by the difference between the
per share exercise price of such Option and (i) in the case of a transaction
described in clause (a) or (b) of the first sentence hereof, the highest Fair
Market Value of such share at any time during the 60-day period immediately
preceding the Cancellation Date, and (ii) in the case of a transaction described
in clause (c) or (d) of the first sentence hereof, the Fair Market Value of such
share on the Cancellation Date. The instrument evidencing any Option may also
provide for acceleration of otherwise unexercisable portions of any Option upon
other specified events or occurrences as the Committee shall determine, such as
involuntary terminations of the Optionee's employment following certain changes
in the control of the Company.

14.      AMENDMENT OF THE PLAN AND STOCK AWARDS.

         (a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:

                  (i) Increase the number of shares reserved for Stock Awards
under the Plan;

                  (ii) Modify the requirements as to eligibility for
participation in the Plan (to the extent such modification requires stockholder
approval in order for the Plan to satisfy the requirements of Section 422 of the
Code); or

                  (iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code or to comply with the requirements of Rule 16b 3.

         (b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.

         (c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide eligible Employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to Incentive Stock
Options and/or to bring the Plan and/or Incentive Stock Options granted under it
into compliance therewith.

         (d) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.

                                      16.
<PAGE>   17
         (e) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.

15.      TERMINATION OR SUSPENSION OF THE PLAN.

         (a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on October 12, 2007, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

         (b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.

16.      EFFECTIVE DATE OF PLAN.

         The Plan shall become effective as determined by the Board, but no
Stock Awards granted under the Plan shall be exercised unless and until the Plan
has been approved by the stockholders of the Company, which approval shall be
within twelve (12) months before or after the date the Plan is adopted by the
Board.

                                      17.

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