Document:

STOCK OPTION AGREEMENT

     AGREEMENT, dated as of March 2, 2000, between SELECT THERAPEUTICS INC. (the
"Company"),  a Delaware  corporation  with offices at 124 Mount  Auburn  Street,
Suite  200  North,  Cambridge,  Massachusetts,  02138,  and DAWN  VAN ZANT  (the
"Optionee"),  residing at 145 Tyee Drive, Number 1573, Point Roberts, Washington
98281.

     WHEREAS,  the Company desires to recognize the Optionee's  achievements for
the Company  and provide  additional  incentive  to the  Optionee to utilize the
Optionee's  utmost  efforts to contribute to the  Company's  future  success and
prosperity  by giving the  Optionee an  opportunity  to  purchase  shares of its
common stock (the "Common Stock"), subject to the terms and conditions set forth
in this Agreement.

     NOW, THEREFORE, the parties hereto hereby agree as follows:

1. Option  Grant.  The Company  hereby  grants to the  Optionee  the option (the
"Option") to purchase 25,000 shares (the "Optioned Shares") of Common Stock from
the Company at a price of US $5.00 per share.  The Optionee shall have the right
to exercise the Option  immediately upon the execution of this Agreement through
and including March 1, 2007. The Option may be exercised in whole at any time or
in part  from  time  to time  during  the  exercise  period  and is  subject  to
adjustment as to price and number of shares as set forth in Section 5 hereof.

<PAGE>

2. Option Exercise;  Cashless Exercise. The Option may be exercised by notice to
the Company of the intent to exercise the Option,  an  acceptable  form of which
notice is set forth as Exhibit A hereto and made a part hereof,  specifying  the
number of Optioned  Shares in respect of which the Option is being exercised and
the Option  exercise  price and  accompanied by payment for such Shares by cash,
wire transfer or a bank or certified  check payable to the order of the Company.
This Option also is  exercisable  by a broker-  dealer,  acting on behalf of the
Optionee,  if (a) such broker-dealer and the Optionee shall agree to comply with
the applicable  provisions of Section 220.3(e)(4) of Regulation T of the Federal
Reserve  Board,  (b) if the  broker-dealer  agrees to remit the Option  exercise
price to the Company out of the net sales proceeds of the Optioned  Shares being
acquired and (c) if the Company  receives  written  instructions,  signed by the
Optionee,  requesting  the Company to deliver such Shares to such broker  dealer
and  specifying  the account  into which such Shares  should be  deposited.  The
Optionee  agrees to make adequate  provision for the payment of any  withholding
taxes due upon exercise of the Option.

3. Option  Transferable Only Upon the Death of the Optionee.  During the life of
the Optionee,  the Option shall not be transferable and may be exercised only by
the Optionee;  provided, however, that in the event of the death of the Optionee
prior  to the  Expiration  Date,  the  Option,  to the  extent  not  theretofore
exercised,  shall be  exercisable  in full by the  person to whom the  Option is
transferred by will or by the applicable laws of descent and  distribution,  and
the Option shall terminate upon its expiration date and not prior to such date.

                                       -2-
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4. Reservation of Common Stock. During the period within which the Option may be
exercised  the  Company  shall at all times have  authorized  and  reserved  for
issuance  upon such  exercise a  sufficient  number of shares of Common Stock to
provide for its exercise. The Company agrees that its issuance of this Agreement
shall constitute full authority to its officers who are charged with the duty of
causing  the  issuance of stock  certificates  of the Company to take all action
necessary or appropriate to cause to be issued the necessary stock  certificates
for the shares of Common Stock issuable upon the proper exercise of the Option.

5. Adjustment of Option Price and Number of Optioned Shares. With respect to the
Option granted hereunder, the Option price and the number and kind of securities
purchasable  upon the exercise of the Option shall be subject to adjustment from
time to time upon the occurrence of certain events as follows:

          (a) In case the  Company  shall  (i) pay a  dividend  in shares of its
     capital stock, (ii) subdivide its outstanding shares of Common Stock, (iii)
     reduce, consolidate, or combine its outstanding shares of Common Stock into
     a smaller number of shares, or (iv) issue by reclassification of its shares
     of Common Stock any shares of Common Stock of the Company, the Option price
     in effect  immediately  prior  thereto  shall be adjusted  to that  amount,
     determined by multiplying the Option price in effect  immediately  prior to
     such date by a  fraction,  of which the  numerator  shall be the  number of
     shares of Common Stock  outstanding  on such date before  giving  effect to
     such event,  and of which the denominator  shall be the number of shares of
     Common Stock outstanding after

                                       -3-
<PAGE>

     giving effect  thereto.  An  adjustment  made pursuant to this Section 5(a)
     shall become effective retroactively,  immediately after the record date in
     the case of a dividend,  and  immediately  after the effective  date in the
     case  of  a   subdivision,   reduction,   consolidation,   combination   or
     reclassification.  Each such adjustment shall be made successively whenever
     any such effective date or record date shall occur.

          (b) If the Common Stock issuable upon the exercise of the Option shall
     be changed  into the same or a  different  number of shares of any class or
     classes of stock,  whether by capital  reorganization,  reclassification or
     otherwise  (other  than a  subdivision  or  combination  of shares or stock
     dividend,  or a  reorganization,  merger,  consolidation  or sale of assets
     provided for in this Section 5), then, and in each such event, the Optionee
     shall  have  the  right  thereafter  to  receive,  without  payment  of any
     additional  consideration therefor, the kind and amount of shares of Common
     Stock and other securities  properly  receivable upon such  reorganization,
     reclassification  or other  change by  holders  of the  number of shares of
     Common Stock into which the Option might have been exercised, as reasonably
     determined by the Company's Board of Directors,  immediately  prior to such
     reorganization,   reclassification   or  change,  all  subject  to  further
     adjustment as provided in this Section 5.

          (c) If at any  time or from  time to time  there  shall  be a  capital
     reorganization of the Common Stock (other than a subdivision,  combination,
     reclassification or exchange of shares provided for in this Section 5) or a
     merger or consolidation of the Company with or into another corporation, or
     the sale of all or substantially all of the Company's properties and assets
     to any

                                       -4-
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     other person, then, as a part of such reorganization, merger, consolidation
     or sale, provision shall be made as reasonably  determined by the Company's
     Board of  Directors so that the Optionee  shall  thereafter  be entitled to
     receive  upon  exercise of the Option,  without  payment of any  additional
     consideration  therefor,  the  number of shares of  capital  stock or other
     securities  or  property  of the  Company or of the  successor  corporation
     resulting from such merger or  consolidation  or sale, to which a holder of
     Common  Stock  deliverable  upon  exercise  of the  Option  would have been
     entitled on such capital reorganization, merger, consolidation or sale.

          (d) Upon each adjustment in the Option price,  the number of shares of
     Common Stock purchasable  hereunder shall be adjusted, to the nearest whole
     share to the  product  obtained,  by  multiplying  the  number of shares of
     Common Stock purchasable immediately prior to such adjustment in the Option
     price by a  fraction,  the  numerator  of which  shall be the Option  price
     immediately  prior to such adjustment and the denominator of which shall be
     the Option price immediately thereafter.

          (e) The adjustments  provided for in this Section 5 are cumulative and
     shall   apply   to   successive   divisions,   subdivisions,    reductions,
     combinations,   consolidations,   issues,  distributions  or  other  events
     contemplated  herein  resulting in any  adjustment  under the provisions of
     this  Section  5;  provided,   however,  that,  notwithstanding  any  other
     provision  of this  Section 5, no  adjustment  of the Option price shall be
     required  if (1) the issue of Common  Stock is being made  pursuant  to any
     stock option or stock purchase plan in force from time to time for officers
     and/or employees of the Company, or any other option(including warrants)

                                       -5-
<PAGE>

     outstanding  at the date of  issuance  of this  Option or (2)  unless  such
     adjustment  would require an increase or decrease of more than five percent
     (5%) in the Option  price then in effect;  and provided  further,  however,
     that any  adjustments in the Option price,  which by reason of this Section
     5(e),  are not required then to be made shall be carried  forward and taken
     into account in any subsequent adjustment.

6. Certificate of Adjustment. Whenever the Option price is adjusted, as provided
in  Section 5 above,  the  Company  shall  promptly  deliver  to the  Optionee a
certificate of the principal  financial officer of the Company setting forth the
Option price after such  adjustment  and setting forth a brief  statement of the
facts requiring such adjustments and the calculation thereof.

7. No Fractional  Shares. No fractional shares of Common Stock will be issued in
connection  with any exercise of the Option.  In lieu of any  fractional  shares
which would  otherwise  be  issuable,  the  Company  shall pay cash equal to the
product of such fraction multiplied by the Option price in effect on the date of
exercise.

8.  Notice of Certain  Events.  If at any time prior to the  expiration  or full
exercise of the Option, the Company shall:

          (a) Take a record of the  holders  of any class of  securities  of the
     Company for the purpose of determining the holders thereof who are entitled
     to receive any dividend (other than a cash dividend at the same rate as the
     rate of the last cash dividend theretofore paid) or other distribution,  or
     any rights to subscribe  for,  purchase or otherwise  acquire any shares of
     capital

                                       -6-
<PAGE>

     stock of any class or any other  securities or property,  or to receive any
     other right;

          (b) Offer for  subscription pro rata to holders of Common Stock of the
     Company  any  additional  shares  of  capital  stock of any  class or other
     rights;

          (c)  Propose  any  capital   reorganization   of  the   Company,   any
     reclassification or recapitalization of the capital stock of the Company or
     any  consolidation  or  merger  of the  Company  with,  or  sale  of all or
     substantially  all  of its  assets  to,  another  corporation  or  business
     organization; or

          (d) Be  the  subject  of any  voluntary  or  involuntary  dissolution,
     liquidation or winding-up;

then,  in each such  event,  the  Company  shall  mail to the  Optionee a notice
specifying (i) the date or expected date on which any such record is to be taken
for the purpose of such dividend,  distribution  or right,  and (ii) the date or
expected   date   upon   which   any  such   reorganization,   reclassification,
recapitalization,  dissolution,  liquidation,  winding-up or offering is to take
place and the time,  if any,  to be fixed,  as of which the holders of record of
Common  Stock shall be entitled to  exchange  their  shares of Common  Stock for
securities   or   other   property   deliverable   upon   such   reorganization,
reclassification, recapitalization, dissolution, liquidation or winding-up. Such
notice shall be mailed at least forty-five (45) days prior to the earlier of the
dates specified in clauses (i) and (ii) above.

                                       -7-
<PAGE>

9. Rights as a Stockholder.

     (a) The Optionee  shall not be deemed for any purposes to be a  stockholder
of the Company with respect to any of the Optioned  Shares  except to the extent
that the Option shall have been duly  exercised  with respect  thereto.

     (b) The  existence  of an Option  shall not  affect in any way the right or
power  of the  Company  or its  stockholders  to  make or  authorize  any or all
adjustments, recapitalization, reorganizations or other changes in the Company's
capital  structure  or its  business,  or any  merger  or  consolidation  of the
Company, or any issue of bonds, debentures,  preferred or prior preference stock
ahead of or affecting the Common Stock or the rights thereof,  or dissolution or
liquidation  of the  Company or any sale or  transfer  of all or any part of its
assets or  business,  or any other  corporate  act or  proceeding,  whether of a
similar character or otherwise.

10. Compliance with Securities Laws.

     (a)  Until  such  time  as the  Optioned  Shares  shall  have  been  either
registered under the Securities Act of 1933, as amended (the "Securities  Act"),
or sold pursuant to an exemption  from  registration,  the Company shall utilize
its best efforts to comply with the  reporting  requirements  of Sections 13 and
15(d)  of the  Securities  Exchange  Act of 1934  (whether  or not it  shall  be
required to do so pursuant to such  sections)  and will use its best  efforts to
comply  with  all  other  public  information  reporting   requirements  of  the
Securities and Exchange  Commission (the "SEC") (including,  without limitation,
Rule 144  promulgated by the SEC under the Securities  Act) from time to time in
effect and relating

                                       -8-
<PAGE>

to the availability of an exemption from  registration  under the Securities Act
for the sale of restricted securities.  The Company also will cooperate with the
Optionee in supplying  such  information as may be necessary for the Optionee to
complete  and  file any  information  reporting  forms  presently  or  hereafter
required by the SEC as a condition to the availability of such an exemption.

     (b) Unless  prior to the  issuance  thereof the  Optioned  Shares  shall be
registered  under the  Securities  Act,  as a condition  precedent  to the valid
exercise of an Option the  Optionee  shall  represent  in writing to the Company
that he is acquiring  such Shares for his own account as an  investment  and not
with a view to, or for sale in connection with, the distribution of any thereof.
If the Optioned  Shares shall not be registered  under the  Securities Act at or
prior to the issuance  thereof,  each certificate  representing  Optioned Shares
shall bear a legend customary for securities not registered under the Securities
Act.

     (c) The Company will use its best efforts to qualify,  file or register the
Optioned  Shares in accordance  with the  securities  laws of such states of the
United States of America as may be reasonably  designated by the Optionee and to
obtain  the  consent,  authorization  or  approval  of any  governmental  agency
required in connection with the issuance of such Shares or which may be required
in order that the Optionee may otherwise publicly sell such Shares.

11. Notices.  All notices  required or desired to be given hereunder shall be in
writing and shall be deemed properly given to a party if personally delivered or
mailed by certified mail, return receipt requested, to such party at the address
set forth at the

                                       -9-
<PAGE>

head of this  Agreement or to such other address as shall be specified by notice
duly given. Notices given by certified mail shall be deemed given three business
days after the date of mailing,  and notices delivered in person shall be deemed
given on the date of delivery.

12. Entire  Agreement;  Breach and Waiver.  The provisions hereof constitute the
entire  agreement  between the parties with respect to the subject matter hereof
and supersede any prior written or oral understanding. This Agreement may not be
amended or modified in any manner,  except by an instrument in writing signed by
both parties  hereto.  The failure of either party hereto to enforce at any time
any of the provisions  hereof shall in no way be construed to be a waiver of any
such provision or any other provision,  or of the right of such party thereafter
to enforce each and every such  provision  or other  provision in the event of a
subsequent breach. Any waiver must be in writing and duly authorized.

13. Agreement Binding Upon Successors. This Agreement shall inure to the benefit
of, and shall be binding upon the Company,  its successors and assigns, and upon
the Optionee, his successors and assigns, heirs,  executors,  administrators and
legal representatives.

                                      -10-
<PAGE>

14. Counterparts.  This Agreement may be executed in several counterparts,  each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

15.  Construction.  This  Agreement  shall be  governed  by,  and  construed  in
accordance with, the local laws of the State of New York.

16.  Headings.  The headings  herein are solely for the convenience of reference
and shall be given no effect in the  construction or  interpretation  hereof and
shall not constitute, or be deemed to constitute, a part hereof.

     IN WITNESS  WHEREOF,  the  Company  and the  Optionee  have  executed  this
Agreement as of the day and year first above written.

                                              SELECT THERAPEUTICS INC.

                                              By:
                                                  ------------------------------
                                                  Robert Bender, Chairman

                                              Optionee:

                                              ----------------------------------
                                              Dawn van Zant

                                      -11-
<PAGE>

                                    EXHIBIT A

                                                  Date: __________________, 200_

Select Therapeutics Inc.
124 Mount Auburn Street
Suite 200 North
Cambridge, Massachusetts 02138

Attn: Chairman

          Re:  Exercise of Stock Option

Gentlemen:

     Please be advised  that I wish to  exercise my Stock  Option by  purchasing
_________  shares of Common Stock of the Company at the option price of US $ per
share. I enclose herewith a check in the amount of US  $_______________  in full
payment for said shares.

     Please deliver the certificate(s) to me at the following address:

                                                     Sincerely,

                                                     Name:
                                                          ----------------------

                                                     Address:
                                                             -------------------

                                                     ---------------------------

                                                     ---------------------------

                                                     Social Security Number:

                                                     ---------------------------

Enclosure

                                      -12-EXHIBIT 4.1

                   2000 Performance and Equity Incentive Plan

214820.1

                                       11
<PAGE>

                             HAUPPAUGE DIGITAL, INC.
                   2000 PERFORMANCE AND EQUITY INCENTIVE PLAN

                                    ARTICLE 1

                                NAME AND PURPOSE

1.1  Name The name of this Plan is the "Hauppauge Digital, Inc. 2000 Performance
     and Equity Incentive Plan".

1.2  Purpose The purpose of the Plan is to enhance the  profitability  and value
     of the Company  for the benefit of its  shareholders  by  providing  equity
     ownership  opportunities  and performance  based  incentives to attract and
     retain  the  services  of  key   employees,   directors  and   non-employee
     consultants  of the  Company  and its  Subsidiaries  and to  motivate  such
     individuals to put forth maximum efforts on behalf of the Company.

                                   ARTICLE II

                  DEFINITION OF TERMS AND RULES OF CONSTRUCTION

2.1  General  Definitions The following words and phrases when used in the Plan,
     unless  otherwise  specifically  defined  or  unless  the  context  clearly
     otherwise requires, shall have the following respective meanings:

     (a)  "Board" means the Board of Directors of the Company.

     (b)  "Change in Control"  and "Change in Control  Price" have the  meanings
          set forth in Sections 10.2 and 10.3, respectively.

     (c)  "Code" means the Internal  Revenue Code of 1986,  as amended from time
          to time.

     (d)  "Commission"  means the  Securities  and  Exchange  Commission  or any
          successor agency.

     (e)  "Committee"  means the  Committee  referred to in Section  4.1, or the
          Board.

     (f)  "Company" means Hauppauge Digital, Inc., a corporation organized under
          the laws of the State of Delaware, or any successor corporation.

     (g)  "Disability"  means permanent and total disability as determined under
          procedures established by the Committee for purposes of the Plan.

     (h)  "Early Retirement" means retirement, with the consent,

208438.1

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<PAGE>

          for  purposes of the Plan,  of the  Committee  or such  officer of the
          Company as may be designated from time to time by the Committee,  from
          active  employment  with the Company or a  Subsidiary  prior to Normal
          Retirement.

     (i)  "Exchange Act" means the  Securities  Exchange Act of 1934, as amended
          from time to time.

     (j)  "Fair Market Value" means the closing price of a share of Stock, as of
          any given date, on any Exchange or in the  over-the-counter  market on
          such date (or, if there is no reported  sale on such date, on the last
          preceding  date on which any reported  sale  occurred),  or if no such
          reported  sales  prices are  available,  the fair market  value of the
          Stock as established by a good faith determination of the Committee.

     (k)  "Holder" means an Optionee or a Transferee, as defined in this Section
          2.1 (p) and (y),  respectively  and shall include any person to whom a
          Stock Option has been  transferred  by will or the laws of descent and
          distribution.

     (l)  "Incentive Stock Option" means any Stock option intended to qualify as
          an "incentive  stock option"  within the meaning of Section 422 of the
          Code.

     (m)  "Long  Term  Performance  Award" or "Long Term  Award"  means an award
          under Article IX.

     (n)  "Non-Qualified  Stock  Option"  means any Stock  Option that is not an
          Incentive Stock Option.

     (o)  "Normal  Retirement"  means retirement from active employment with the
          Company or a Subsidiary at or after the  retirement  age determined by
          the Board.

     (p)  "Optionee"  means a person who is granted a Stock Option under Article
          VI.

     (q)  "Plan" means the Hauppauge  Digital,  Inc. 2000 Performance and Equity
          Incentive  Plan, as set forth herein and as  hereinafter  amended from
          time to time.

     (r)  "Restricted Stock" means an award under Article VIII.

     (s)  "Retirement" means Normal or Early Retirement.

     (t)  "Rule 16b-3" means Rule 16b-3 as promulgated  by the Commission  under
          Section 16(b) of the Exchange Act as amended from time to time.

     (u)  "Stock" means the Common Stock, $.01 par value, of the Company.

208438.1

                                       2
<PAGE>

     (v)  "Stock Appreciation Right" means a right granted under Article VII.

     (w)  "Stock Option" or "Option" means an option granted under Article VI.

     (x)  "Subsidiary" means any business entity in which the Company,  directly
          or indirectly,  owns 50 percent or more of the total  combined  voting
          power of all classes of stock or other equity interest.

     (y)  "Transferee"  means a member  of an  Optionee's  Immediate  Family,  a
          partnership  or a trust to whom or which any Option is  transferred as
          provided in Section 6.5(c).

2.2  Other Definitions In addition to the above  definitions,  certain words and
     phrases used in the Plan and any agreement may be defined in other portions
     of the Plan or in such agreement.

2.3  Conflicts in Plan In the case of any conflict in the terms of the Plan,  or
     between the Plan and an agreement, relating to a benefit, the provisions in
     the  Article of the Plan  which  specifically  grants  such  benefit  shall
     control.

                                   ARTICLE III

                              STOCK SUBJECT TO PLAN

3.1  Number of Shares The number of shares of Stock  reserved  for  distribution
     pursuant to Stock  Options or other awards under the Plan shall be equal to
     500,000 shares. Such shares may consist, in whole or in part, of authorized
     and unissued shares or issued shares  heretofore or hereafter  acquired and
     held as treasury shares.

3.2  Reusage If an outstanding  Stock Option or Stock  Appreciation  Right shall
     expire or  terminate  without  having  been  exercised  in full,  or if any
     Restricted Stock award or Long Term  Performance  Award is not earned or is
     forfeited in whole or in part,  the shares  subject to the  unexercised  or
     forfeited  portion of such award shall again be available for  distribution
     in connection  with awards under the Plan. In the event that a Stock Option
     is exercised by tendering  shares to the Company as full or partial payment
     of the option exercise  price,  only the number of shares issued net of the
     shares tendered shall be deemed delivered under the Plan.  Further,  shares
     tendered or withheld for the payment of taxes in connection  with any award
     shall again be available for  distribution  in connection with awards under
     the Plan.

3.3  Adjustments  In the  event of any  merger,  reorganization,  consolidation,
     recapitalization, stock dividend, stock split

208438.1

                                       3
<PAGE>

     (including  reverse stock splits),  or other change in corporate  structure
     affecting the Stock such  substitution or adjustments  shall be made in the
     aggregate  number of shares  reserved for issuance  under the Plan,  in the
     number and option price of shares subject to outstanding Stock Options,  in
     the  determination of the amount payable upon exercise of outstanding Stock
     Appreciation   Rights  and  in  the  number  of  shares  subject  to  other
     outstanding  awards  granted  under  the Plan as may be  determined  by the
     Committee,  in its sole discretion,  to be equitable to prevent substantial
     dilution or enlargement of the rights  granted to  participants  hereunder,
     provided,  however,  that the  number of shares  subject  to any award will
     always  be a  whole  number.  The  Committee  shall  give  notice  to  each
     participant of any  adjustment  made pursuant to this  paragraph,  and upon
     such  notice,  such  adjustment  shall be  effective  and  binding  for all
     purposes of the Plan.

3.4  Settlement  of Awards  Shares  issued  under the Plan as the  result of the
     settlement or assumption of, or  substitution of awards under the Plan for,
     any awards or obligations to grant future awards of any entity  acquired by
     or merging with the Company shall not reduce the number of shares available
     for delivery under the Plan.

3.5  Maximum Number of Shares for Incentive Stock Options and Awards The maximum
     number of shares  available for delivery  under the Plan through  Incentive
     Stock Options shall be 500,000 shares.

                                   ARTICLE IV

                                 ADMINISTRATION

4.1  Committee The Plan shall be administered  by the Committee  composed of two
     or more members who are who are  non-employee  directors  as defined  under
     Rule 16b-3 or the Board. With respect to grants to non-employee  directors,
     the grants shall be subject to Board approval.

4.2  Authorization of Committee  Except as limited by the express  provisions of
     the Plan, the Committee shall have the sole and complete authority:

     (a)  to select the  employees,  employee and  non-employee  directors,  and
          non-employee  consultants to whom Stock Options,  Stock,  Appreciation
          Rights,  Restricted  Stock and Long Term  Performance  Awards may from
          time to time be granted;

     (b)  to  determine  whether and to what  extent  Incentive  Stock  Options,
          Non-Qualified  Stock Options,  Stock Appreciation  Rights,  Restricted
          Stock, Long Term Performance Awards, or any combination thereof are to

208438.1

                                       4
<PAGE>

          be granted, hereunder,  provided that Incentive Stock Options may only
          be granted to employees.

     (c)  to determine  the number of shares to be covered by each award granted
          hereunder;

     (d)  to determine the terms and  conditions of any award granted  hereunder
          (including,  but not limited to, the share price,  any  restriction or
          limitation,   any  vesting   acceleration  or  any  forfeiture  waiver
          regarding  any  Stock  Option or other  award and the  shares of Stock
          relating  thereto),  based  on such  factors  as the  Committee  shall
          determine;

     (e)  to  adjust  the  performance  goal  and  measurements   applicable  to
          performance-based awards pursuant to the terms of the Plan; and

     (f)  to  determine  to what extent and under what  circumstances  Stock and
          other amounts payable with respect to an award shall be deferred;

4.3  Administrative  Rules The  Committee  shall  have the  authority  to adopt,
     alter,  and repeal such  administrative  rules,  guidelines  and  practices
     governing  the  Plan as it  shall  from  time to time  deem  advisable,  to
     interpret  the terms and  provisions of the Plan and any award issued under
     the Plan (and any agreement relating  thereto),  and otherwise to supervise
     the administration of the Plan. The Committee may act only by a majority of
     its members then in office,  except that the members  thereof may authorize
     any one or more of their  number or any  officer of the  Company to execute
     and deliver documents on behalf of the Committee. Any determination made by
     the  Committee  pursuant to the  provisions of the Plan with respect to any
     award shall be made in its sole  discretion at the time of the grant of the
     award or, unless in  contravention  of any express term of the Plan, at any
     time thereafter.  Whenever the Committee has the power, or right under this
     Plan  to  adjust,  alter,  amend,  award,  consent,  deem  advisable,  deem
     appropriate,   deem  desirable,  deem  necessary,   determined,   determine
     conditions,  determine criteria, determine factors, determine terms, elect,
     exercise authority, exercise discretion, grant, interpret, make a decision,
     provide, set, specify,  supervise, use criteria, use factors or any similar
     power  or  right,   the  Committee  shall  have  the  sole,   absolute  and
     uncontrolled  discretion in doing so. The Committee's  determinations under
     the Plan (including,  without limitation,  of the persons to receive grants
     or awards and the terms  thereof) need not be uniform and may be made by it
     selectively among persons who receive,  or are eligible to receive,  grants
     or  awards  under the  Plan,  whether  or not such  persons  are  similarly
     situated.

208438.1

                                       5
<PAGE>

                                    ARTICLE V

                                   ELIGIBILITY

5.1  Eligibility  All  employees,   employee  and  non-employee  directors,  and
     non-employee  consultants  to the Company and its  Subsidiaries  who in the
     opinion  of the  Committee  are  responsible  for,  or  contribute  to, the
     management, growth, and profitability of the business of the Company or its
     Subsidiaries  are  eligible  to  be  granted  awards  under  the  Plan,  as
     hereinafter provided.

                                   ARTICLE VI

                                  STOCK OPTIONS

6.1  Grants  Stock  Options may be granted  alone or in addition to other awards
     granted under the Plan and may be of two types: Incentive Stock Options and
     Non-Qualified Stock Options.  Any Stock Option granted under the Plan shall
     be in such  form as the  Committee  may  from  time  to time  approve.  The
     Committee  shall have the authority to grant any Optionee  Incentive  Stock
     Options,  Non-Qualified  Stock Options,  or both types of Stock Options (in
     each case with or without Stock Appreciation  Rights);  provided,  however,
     that the Committee  shall not have the authority to grant  Incentive  Stock
     Options to any  non-employee  consultant or non-employee  director.  To the
     extent that any Stock Option does not qualify as an Incentive Stock Option,
     it shall constitute a separate Non-Qualified Stock Option.

6.2  Option  Agreements  Stock Options shall be evidenced by option  agreements,
     the terms and  provisions of which may differ.  An option  agreement  shall
     indicate on its face whether it is an agreement for Incentive Stock Options
     or Non-Qualified Stock Options.  The grant of a Stock Option shall occur on
     the date the Committee by  resolution  selects an employee as a participant
     in any grant of Stock Options, determines the number of Stock Options to be
     granted to such  employee,  and specifies  the terms and  provisions of the
     option agreement;  provided,  however,  that the Committee may designate in
     such  resolution  a later  date as the  date of  grant of any or all of the
     Stock Options  covered  thereby.  The Company shall notify a participant of
     any grant of Stock  Options,  and a written  option  agreement or agreement
     shall be duly executed between the Company and the participant.

6.3  No Disqualifications  Under Section 422 of the Code Anything in the Plan to
     the contrary notwithstanding, no term of the

208438.1

                                       6
<PAGE>

     Plan relating to Incentive Stock Options shall be interpreted,  amended, or
     altered nor shall any  discretion  or authority  granted  under the Plan be
     exercised so as to  disqualify  the Plan under  Section 422 of the Code or,
     without the consent of the Optionee  affected,  to disqualify any Incentive
     Stock Option under such Section 422.

6.4  Terms and Conditions of Option Grants Options  granted under the Plan shall
     be subject to the  following  terms and  conditions  and shall contain such
     additional terms and conditions as the Committee shall deem desirable:

     (a)  Option Price. The option price per share of Stock purchasable under an
          Incentive  Stock Option shall be equal to the Fair Market Value of the
          Stock on the date of grant or such higher price as shall be determined
          by the Committee at grant. The option price per share of Stock for all
          other Options shall be as determined by the Committee.

     (b)  Option  Term.  The  term of each  Stock  Option  shall be fixed by the
          Committee,  but no Incentive  Stock Option shall be  exercisable  more
          than  10  years  after  the  date  of  grant  of  the  Option,  and no
          Non-Qualified Stock Option shall be exercisable more than 10 years and
          one month after the date of grant of the Option.

     (c)  Transferability of Options.

          (i)  No Stock Option shall be  transferable by the Optionee other than
               by will, by the laws of descent and distribution or in accordance
               with the provisions of Section 6.4(c)(ii).

          (ii) Subject  to  applicable   securities   laws,  the  Committee  may
               determine that a Non-Qualified Stock Option may be transferred by
               the Optionee to one or more members of the  Optionee's  Immediate
               Family,  as defined in Section  6.4(c)(iii),  to a partnership of
               which the only partners are members of the  Optionee's  Immediate
               Family, or to a trust established by the Optionee for the benefit
               of one or more members of the  Optionee's  Immediate  Family.  No
               Transferee  to whom or which a Non-  Qualified  Stock  Option  is
               transferred   may  further   transfer   such  Stock   Option.   A
               Non-Qualified  Stock Option transferred  pursuant to this Section
               shall remain  subject to the  provisions of the Plan,  including,
               but not limited to, the  provisions of this Section 6 relating to
               the  exercise  of the Stock  Option  upon the death,  Disability,
               Retirement  or other  termination  of employment of the Optionee,
               and shall be subject to such other rules as the  Committee  shall
               determine.

208438.1

                                       7
<PAGE>

          (iii)For  purposes  of  this  Article  VI,  "Immediate  Family"of  the
               Optionee  means the  Optionee's  spouse,  parents,  children  and
               grandchildren.

     (d)  Exercisability.  Stock  Options shall be  exercisable  at such time or
          times and subject to such terms and  conditions as shall be determined
          by the Committee.  If the Committee  provides that any Stock Option is
          exercisable only in installments,  the Committee may at any time waive
          such  installment  exercise  provisions,  in whole or in part based on
          such factors as the Committee may determine.

     (e)  Notwithstanding  the foregoing,  Incentive  Stock Options shall not be
          granted to any owner of 10% or more of the  combined  voting  power of
          the Company,  unless the  exercise  price is at least 110% of the Fair
          Market Value on the date of grant and the option states that it is not
          exercisable after the expiration of five years from the date of grant.

     (f)  The aggregate fair market value  (determined on the date the option is
          granted) of shares subject to an Incentive  Stock Option granted to an
          Optionee in any calendar year shall not exceed $100,000.

     (g)  Termination  by Death.  Subject to Section  6.4(d),  if an  Optionee's
          employment or service on the Board  terminates by reason of death, any
          Stock Option held by such Optionee or any  Transferee of such Optionee
          may thereafter be exercised, to the extent then exercisable or on such
          accelerated basis as the Committee may determine,  for a period of two
          years  from the date of such  death or  until  the  expiration  of the
          stated term of such Stock  Option,  whichever  period is the  shorter;
          provided,  however,  that if the  expiration of the stated term of any
          such  Stock  Option is less than one year  following  the death of the
          Optionee,  the Stock Option shall be  exercisable  for a period of one
          year from the date of such death.

     (h)  Termination by Reason of Disability.  Subject to Section 6.4(d), if an
          Optionee's  employment or service on the Board terminates by reason of
          Disability,  any Stock Option held by such Optionee or any  Transferee
          of such  Optionee may  thereafter  be exercised by the Holder,  to the
          extent  it was  exercisable  at the  time  of  termination  or on such
          accelerated basis as the Committee may determine,  for a period of two
          years from the date of such  termination  of  employment  or until the
          expiration of the stated term of such Stock Option,  whichever  period
          is the shorter; provided,  however, that, if the Holder dies while any
          such Stock Option remains  exercisable,  any unexercised  Stock Option
          held

208438.1

                                       8
<PAGE>

          by such Holder at death shall continue to be exercisable to the extent
          to which it was  exercisable  at the time of the Holder's  death for a
          period  of 12  months  from the date of such  death.  In the  event of
          termination  of  employment by reason of  Disability,  if an Incentive
          Stock Option is exercised after the expiration of the exercise periods
          that apply for purposes of Section 422 of the Code,  such Stock Option
          will thereafter be treated as a Non-Qualified Stock Option.

     (i)  Termination by Reason of Retirement.  Subject to Section 6.4(d), if an
          Optionee's  employment or service on the Board terminates by reason of
          Retirement,  any Stock Option held by such Optionee or any  Transferee
          of such  Optionee may  thereafter  be exercised by the Holder,  to the
          extent  it was  exercisable  at the  time  of  Retirement  or on  such
          accelerated  basis as the  Committee  may  determine,  for a period of
          three years from the date of such  termination  of employment or until
          the  expiration  of the stated  term of such Stock  Option,  whichever
          period is the  shorter;  provided,  however  that,  if the Holder dies
          within such three-year  period,  any unexercised  Stock Option held by
          such Holder shall,  notwithstanding  the expiration of such three-year
          period,  continue  to be  exercisable  to the  extent  to which it was
          exercisable  at the time of death for a period  of 12 months  from the
          date of such  death.  In the event of  termination  of  employment  by
          reason of Retirement,  if an Incentive Stock Option is exercised after
          the  expiration  of the  exercise  periods  that apply for purposes of
          Section 422 of the Code,  such Stock Option will thereafter be treated
          as a Non-Qualified Stock Option.

     (j)  Other  Termination.  Subject  to  Section  6.4(d),  if  an  Optionee's
          employment  terminates  for any reason  other than death,  Disability,
          Retirement,  or Cause (as hereinafter defined in Section 10.1(v)), any
          Stock Option held by such Optionee or any  Transferee of such Optionee
          may  thereafter  be  exercised  by the  Holder,  to the  extent it was
          exercisable at the time of  termination,  for a period of three months
          from  the  date  of  such  termination  of  employment  or  until  the
          expiration of the stated term of such Stock Option,  whichever  period
          is the shorter; provided, however, that if the Holder dies within such
          three-month  period, any unexercised Stock Options held by such Holder
          shall,  notwithstanding  the  expiration  of such three- month period,
          continue to be exercisable  to the extent to which it was  exercisable
          at the time of death for a period  of 12 months  from the date of such
          death.  If an  Optionee's  employment  is  terminated  for  Cause  (as
          determined pursuant to section 10.1 (a)(v)), all rights

208438.1

                                       9
<PAGE>

          under any Stock Option held by such Optionee or any Transferee of such
          Optionee shall expire  immediately  upon the giving to the Optionee of
          notice  of  such  termination,  unless  otherwise  determined  by  the
          Committee.  Notwithstanding anything to the contrary contained in this
          plan,  non-qualified  options,  at the determination of the Committee,
          may be exercised after an Optionee's employment terminates.

     (k)  Method of Exercise.  Stock Options shall be exercisable (i) during the
          Holder's  lifetime,  only by the  Holder or by the  guardian  or legal
          representative  of the  Holder,  and (ii)  following  the death of the
          Holder, only by the person to whom they are transferred by will or the
          laws of descent and distribution.  For purposes of this Section 6.4(k)
          only,  the term  "Holder"  shall  include  any  person to whom a Stock
          Option is transferred by will or the laws of descent and distribution.
          Subject to the  provisions  of this Article VI,  Stock  Options may be
          exercised,  in whole or in part, at any time during the option term by
          giving written notice of exercise to the Company specifying the number
          of shares to be purchased. Such notice shall be accompanied by payment
          in full of the purchase price in cash  (including  check,  bank draft,
          money  order,  or such other  instrument  as the Company may  accept).
          Unless otherwise  determined by the Committee at any time or from time
          to time, payment in full or in part may also be made (i) by delivering
          a  duly  executed  notice  of  exercise   together  with   irrevocable
          instructions  from the Holder to a broker to deliver  promptly  to the
          Company sufficient  proceeds from a sale or loan of the shares subject
          to the Stock Option to pay the purchase  price, or (ii) in the form of
          Stock which is not Restricted Stock already owned by the Holder or, in
          the case of the exercise of a Non-Qualified  Stock Option,  Restricted
          Stock subject to an award hereunder  (based, in each case, on the Fair
          Market Value of the Stock on the date the Stock Option is  exercised).
          If payment  of the  option  exercise  price of a  Non-Qualified  Stock
          Option  is made in whole or in part in the form of  Restricted  Stock,
          such Restricted  Stock (and any replacement  shares relating  thereto)
          shall remain  restricted in accordance  with the original terms of the
          Restricted Stock award in question,  and any additional Stock received
          upon  the   exercise   shall  be  subject   to  the  same   forfeiture
          restrictions, unless otherwise determined by the Committee.

     Notwithstanding  the  foregoing,  no shares of Stock shall be issued  until
full payment therefor has been made. Subject to any forfeiture restrictions that
may apply if a Stock Option is exercised using Restricted  Stock, a Holder shall
have all of the rights of a stockholder  of the Company,  including the right to
vote the shares and the right to receive dividends, with respect

208438.1

                                       10
<PAGE>

to shares  subject to the Stock Option when the Holder has given written  notice
of exercise, has paid in full for such shares, and, if requested,  has given the
representation described in Section 14.1.

     Shares  issued upon  exercise of a Stock Option shall be issued in the name
of the Holder or, at the request of the Holder,  in the names of such Holder and
the Holder's spouse with right of survivorship as community property,  community
property with right of survivorship or joint tenants.

     (l)  Cashing Out of Options.  In any case when a Stock  Option is exercised
          after the death of a Holder,  the  Committee may elect to cash out all
          or any part of the Stock Option by paying the person to whom the Stock
          Option  has been  transferred  by reason of the death of the Holder an
          amount,  in cash or shares of Stock,  equal in value to the  excess of
          the Fair  Market  Value of the  Stock  over  the  option  price on the
          effective date of such cash out.

     (m)  Substitute Options.  Stock Options or Stock Appreciation Rights may be
          granted  under the Plan from  time to time in  substitution  for stock
          options  or  stock  appreciation  rights  held  by  employees  of  any
          corporation  who,  as  the  result  of  a  merger,  consolidation,  or
          combination of such other  corporation with, or the acquisition of all
          or substantially  all of the assets or stock of such other corporation
          by, the Company or a Subsidiary,  become employees of the Company or a
          Subsidiary.  The terms and conditions of any substitute  Stock Options
          or Stock  Appreciation  Rights so granted  may vary from the terms and
          conditions  set forth in the Plan to such extent as the  Committee  at
          the time of grant  may deem  appropriate  to  conform,  in whole or in
          part, to the  provisions  of the stock  options or stock  appreciation
          rights in substitution for which they are granted; provided,  however,
          that in the event a stock option for which a  substitute  Stock Option
          is being granted is an incentive stock option, no such variation shall
          be  permitted  the effect of which  would be to  adversely  affect the
          status of any such  substitute  Stock  Options as an  Incentive  Stock
          Option.

     (n)  Deferral of Option  Gains.  An Optionee may elect to defer to a future
          date receipt of the shares of Stock to be acquired  upon exercise of a
          Stock Option. Such election shall be made by delivering to the Company
          not later than six months  prior to the exercise of the Stock Option a
          written  notice  of the  election  specifying  the  future  date  (the
          "Deferral Date") for receipt of the shares. At any time, and from time
          to time, prior to the delivery to the Optionee of shares

208438.1

                                       11
<PAGE>

          the receipt of which has been  deferred  as provided in this  section,
          the  Optionee  may  designate  by written  notice to the Company a new
          date,  which date shall be later than the Deferral  Date, and such new
          date  shall  thereafter  be the  Deferral  Date with  respect  to such
          shares.

                                   ARTICLE VII

                            STOCK APPRECIATION RIGHTS

7.1  (a)  Grant of Stock  Appreciation  Right A Stock  Appreciation Right may be
          granted in  conjunction  with all or part of any Stock Option  granted
          under the Plan.  In the case of a  Non-Qualified  Stock  Option,  such
          Right may be granted only at the time of grant of such Stock Option. A
          Stock  Appreciation Right independent of a Stock Option grant may also
          be awarded by the  Committee,  in which event the  provisions  of this
          Article VII shall be applied for purposes of determining the operation
          of such Stock  Appreciation  Right as if a Non-Qualified  Stock Option
          had been granted on the date of the grant of and in  conjunction  with
          such independent Stock Appreciation Right.

     (b)  A Stock  Appreciation  right  granted  with  respect to a given  Stock
          Option shall  terminate and no longer be  exercisable to the extent of
          the shares with respect to which the related Stock Option is exercised
          or terminates. A Stock Appreciation Right may be exercised by a Holder
          in accordance  with the provisions of this Article VII by surrendering
          the applicable  portion of the related Stock Option in accordance with
          procedures  established  by the  Committee.  Upon  such  exercise  and
          surrender,   the  Holder  shall  be  entitled  to  receive  an  amount
          determined  in the manner  prescribed in Section 7.2. The Stock Option
          which has been so  surrendered  shall no longer be  exercisable to the
          extent the related Stock Appreciation Right has been exercised.

     (c)  Stock  Appreciation   Rights  shall  be  subject  to  such  terms  and
          conditions as shall be determined by the Committee, including, but not
          limited to, the following:

          (i)  Exercisability.  A Stock  Appreciation Right shall be exercisable
               only at such  time or times  and to the  extent  that  the  Stock
               Option to which it relates is exercisable in accordance  with the
               provisions of Article VI and this Article VII; provided, however,
               that a Stock  Appreciation  Right shall not be exercisable during
               the first six months of its term by an Optionee who is actually

208438.1

                                       12
<PAGE>

               or  potentially  subject to Section  16(b) of the  Exchange  Act,
               unless  otherwise  determined  by the  Committee  in the event of
               death or  Disability of the Optionee  prior to the  expiration of
               the six- month period.

7.2  Payment Upon Exercise.  Upon the exercise of a Stock Appreciation  Right, a
     Holder shall be entitled to receive an amount in cash,  shares of Stock, or
     both equal in value to the excess of the Fair  Market  Value on the date of
     exercise  of one share of Stock  over the option  exercise  prior per share
     specified in the related Stock Option multiplied by the number of shares in
     respect of which the Stock  Appreciation  Right shall have been  exercised.
     The Committee shall have the right to determine the form of payment in each
     case.

     In the  case of a Stock  Appreciation  Right  held  by an  Optionee  who is
     actually or  potentially  subject to Section 16 of the  Exchange  Act,  the
     Committee may require that such Stock  Appreciation Right be exercised only
     in accordance with the applicable provisions of Rule 16b-3.

7.3  Non-transferability.  A Stock Appreciation Right shall be transferable only
     when and to the extent that the related Stock Option would be  transferable
     under Section 6.4(c).

7.4  Effect of Change in Control.  The  Committee  may  provide,  at the time of
     grant, that a Stock  Appreciation  Right can be exercised only in the event
     of a Change  in  Control,  subject  to such  terms  and  conditions  as the
     Committee may specify at grant. The Committee may also provide that, in the
     event of a Change in Control,  the amount to be paid upon the exercise of a
     Stock  Appreciation  Right  shall be based on the Change in Control  price,
     subject to such terms and conditions as the Committee may specify at grant.

                                  ARTICLE VIII

                                RESTRICTED STOCK

8.1  Administration. Shares of Restricted Stock may be issued either alone or in
     addition  to other  awards  granted  under the Plan.  The  Committee  shall
     determine   the   officers,   employee  and   non-employee   directors  and
     non-employee  consultants  to whom and the time or times at which grants of
     Restricted  Stock will be made, the number of shares to be awarded the time
     or times  within  which such awards may be subject to  forfeiture,  and any
     other terms and conditions of the awards, in addition to those contained in
     Section 8.3. The Committee may condition the grant of Restricted Stock upon
     the  attainment  of specified  performance  goals or such other  factors or
     criteria as the Committee shall determine.

208438.1

                                       13
<PAGE>

     The provisions of Restricted Stock awards need not be the same with respect
     to each recipient.

8.2  Awards and  Certificates.  Each  participant  receiving a Restricted  Stock
     award shall be issued a certificate in respect of such shares of Restricted
     Stock. Such certificate shall be registered in the name of such participant
     and shall bear an appropriate  legend  referring to the terms,  conditions,
     and restrictions  applicable to such award,  substantially in the following
     form or such other form as authorized by the Committee:

          "The  transferability  of this  certificate  and the  shares  of stock
          represented hereby are subject to the terms and conditions  (including
          forfeiture) of the Hauppauge Digital, Inc. 2000 Performance and Equity
          Incentive Plan and a Restricted Stock  Agreement.  Copies of such Plan
          and Agreement are on file at the offices of Hauppauge  Digital,  Inc.,
          91 Cabot Court, Hauppauge, New York 11788.

     The Committee may require that the  certificates  evidencing such shares be
     held in custody by the Company  until the  restrictions  thereon shall have
     lapsed  and  that,  as a  condition  of any  Restricted  Stock  award,  the
     participant shall have delivered a stock power, endorsed in blank, relating
     to the Stock covered by such award.

8.3  Terms and  Conditions.  Shares of Restricted  Stock shall be subject to the
     following terms and conditions:

          (i)  Subject to the  provisions of the Plan and the  Restricted  Stock
               Agreement  referred  to in Section  8.3(vi),  during  such period
               commencing  with  the  date of such  award as shall be set by the
               Committee (the "Restriction  Period"),  the participant shall not
               be  permitted to sell,  assign,  transfer,  pledge,  or otherwise
               encumber  shares of Restricted  Stock.  Within these limits,  the
               Committee  may  provide  for the  lapse of such  restrictions  in
               installments  and may accelerate or waive such  restrictions,  in
               whole or in part, based on service,  performance,  and such other
               facts or criteria as the Committee may determine.

          (ii) Except as provided in Section 8.3(i), the participant shall have,
               with respect to the shares of Restricted Stock, all of the rights
               of a stockholder of the Company,  including the right to vote the
               shares  and the  right to  receive  any cash  dividends  thereon;
               provided,  however, that the Committee may provide at the time of
               an award that

208438.1

                                       14
<PAGE>

               cash dividends shall be automatically  deferred and reinvested in
               additional Restricted Stock.  Dividends on Restricted Stock which
               are  payable  in Stock  shall  be paid in the form of  additional
               shares of Restricted Stock.

          (iii)Except  to  the  extent  otherwise  provided  in  the  applicable
               Restricted  Stock  Agreement and Sections  8.3(i) and (iv),  upon
               termination of a  participant's  employment for any reason during
               the Restriction  Period,  all shares still subject to restriction
               shall be forfeited by the participant.

          (iv) In the event of the death of a participant during the Restriction
               Period without a prior forfeiture of the Restricted Stock subject
               to such  Restriction  Period,  unlegended  certificates  for such
               shares shall be delivered to the participant, except as otherwise
               may be necessary with respect to any applicable securities laws.

          (v)  If and  when  the  Restriction  period  expires  without  a prior
               forfeiture of the  Restricted  Stock subject to such  Restriction
               Period,   unlegended   certificates  for  such  shares  shall  be
               delivered  to  the  participant,   except  as  otherwise  may  be
               necessary with respect to any applicable securities laws.

          (vi) Each award shall be confirmed by, and be subject to the terms of,
               a  Restricted  Stock  Agreement  which  shall be  executed by the
               Company and the recipient of the Restricted Stock.

                                   ARTICLE IX

                          LONG TERM PERFORMANCE AWARDS

9.1  Awards  and  Administration.  Long Term  Performance  awards may be awarded
     either alone or in addition to other  awards  granted  under the Plan.  The
     Committee  shall  determine  the nature,  length,  and starting date of the
     performance   period  (the   "Performance   Period")  for  each  Long  Term
     Performance  Award,  which shall be at least two years  (subject to Article
     X), and shall  determine the  performance  objectives to be used in valuing
     Long Term Performance  awards and determining the extent to which such Long
     Term  Performance  Awards  have  been  earned.  The  maximum  award for any
     individual with respect to any one year of any Performance  Period shall be
     100,000 shares of Stock.  Performance  objectives may vary from participant
     to participant and between groups of  participants  and shall be based upon
     one or  more  of the  following  Company,  Subsidiary,  business  unit,  or
     individual performance factors or criteria (on a pre- or post- tax

208438.1

                                       15
<PAGE>

     basis and on an  aggregate or per share  basis) as the  Committee  may deem
     appropriate;  earnings,  sales,  Stock price,  return on equity,  assets or
     capital,  economic value added, cash flow, total shareholder return, costs,
     margins,  market  share,  any  combination  of the  foregoing.  Performance
     Periods may overlap and  participants may participate  simultaneously  with
     respect to Long Term  performance  Awards  that are  subject  to  different
     Performance Periods and different  performance  factors and criteria.  Long
     Term Performance  Awards shall be confirmed by, and be subject to the terms
     of, a Long Term Performance Award Agreement.  The terms of such awards need
     not be the same with respect to each participant.

     (a)  Adjustment of Awards.  The Committee may adjust the performance  goals
          and measurements  applicable to Long Term  Performance  Awards to take
          into account  changes in law and  accounting and tax rules and to make
          such  adjustments as the Committee  deems  necessary or appropriate to
          reflect the inclusion or exclusion of the impact of  extraordinary  or
          unusual items, events, or circumstances in order to avoid windfalls or
          hardships.

     (b)  Termination of Employment.  Subject to Article X and unless  otherwise
          provided in the applicable Long Term Performance Award Agreement, if a
          participant  terminates employment during a Performance Period because
          of  death,  Disability,  or  Retirement,  such  participant  shall  be
          entitled  to a payment  with  respect  to each  outstanding  Long Term
          Performance Award at the end of the applicable Performance Period;

          (i)  based, to the extent relevant under the terms of the award,  upon
               the participant's  performance of the portion of such Performance
               Period ending on the date of termination  and the  performance of
               the  Company  or any  applicable  business  unit  for the  entire
               Performance Period, and

          (ii) prorated for the portion of the  Performance  Period during which
               the participant was employed by the Company or a Subsidiary,  all
               as determined by the Committee.  The Committee may provide for an
               earlier  payment in  settlement  of such award in such amount and
               under  such  terms  and   conditions  as  the   Committee   deems
               appropriate.  Subject  to  Article  X  and  except  as  otherwise
               provided in the applicable Long Term Performance Award Agreement,
               if a  participant  terminates  employment  during  a  Performance
               Period for any other reason,  then such participant  shall not be
               entitled to any payment with respect to the Long Term Performance
               Awards subject to such Performance Period, unless the

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<PAGE>

                      Committee shall otherwise determine.

     (c)  Form of Payment.  The earned portion of a Long Term Performance  Award
          may be paid  currently or on a deferred basis and may provide for such
          interest  or  earnings  equivalent  as the  Committee  may  determine.
          Payment  shall be made in the form of cash or whole  shares  of Stock,
          including Restricted Stock, or a combination thereof, either in a lump
          sum  payment or in annual  installments,  all as the  Committee  shall
          determine.

                                    ARTICLE X

                          CHANGE IN CONTROL PROVISIONS

10.1 Impact of Event. In the event of:

     (a)  a "Change in Control" as defined in Section  10.2,  but only if and to
          the extent so determined by the Committee,  the following acceleration
          and valuation provisions shall apply:

          (i)  Stock Options and Stock Appreciation Rights outstanding as of the
               date such Change in Control is  determined  to have  occurred and
               not then  exercisable  and vested shall become fully  exercisable
               and vested as provided in Section  10.1(a)(v)  below,  unless the
               terms of the award provide otherwise; provided, however, that, in
               the case of Stock Appreciation  rights held by an Optionee who is
               actually subject to Section 16(b) of the Exchange Act, such Stock
               Appreciation  Rights  shall not  become  exercisable  and  vested
               unless they shall have been  outstanding  for at least six months
               at the  date  such  Change  in  Control  is  determined  to  have
               occurred.

          (ii) The  restrictions  and  forfeiture  provisions  applicable to any
               restricted  Stock shall lapse,  and such  Restricted  Stock shall
               become  fully  vested,  unless  the  terms of the  award  provide
               otherwise.

          (iii)The value of all outstanding  Stock Options,  Stock  Appreciation
               Rights, and Restricted Stock shall,  unless otherwise  determined
               by the Committee at or after grant, if cashed out shall be on the
               basis of  the"Change  in  Control  Price",  as defined in Section
               10.3, as of the date such change in Control is determined to have
               occurred or such other date as the Committee may determine  prior
               to the Change in Control.

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<PAGE>

          (iv) Any outstanding  Long Term Performance  Awards shall,  unless the
               Committee otherwise  determines,  be vested and paid out based on
               the  prorated  target  results  for the  Performance  Periods  in
               question,  unless the Committee  provides  prior to the Change in
               Control event for a different payment.

          (v)  Each Option,  Stock  Appreciation  Right,  Long Term  Performance
               Award or  restricted  stock  award  granted to an employee of the
               Company  shall vest or be  exercisable  upon  termination  of the
               employee's  employment  within  twenty-four  (24) months from the
               date of the Change in Control,  unless the employee is terminated
               for "Cause" or the employee resigns his employment  without "Good
               Reason".  Except  for  death or  disability,  in which  event the
               Option,  Stock Appreciation Right, Long Term Performance Award or
               restricted  stock  award must be  exercised  within  twelve  (12)
               months thereafter, the Employee shall have 30 days from after his
               employment is terminated,  after a Change in Control, to exercise
               all unexercised  Options,  Stock Appreciation  Rights,  Long Term
               Performance  Awards,  or  restricted  stock  awards.  "Cause"  is
               defined herein as the failure of the employee to properly perform
               his duties on behalf of the Company, as reasonably  determined by
               the  Committee  in its  sole  discretion  or as  provided  in the
               Agreement making the grant. "Good Reason" shall be the assignment
               to the  Employee  of duties  inconsistent  with his or her duties
               prior to the Change in  Control,  or any other  action (but not a
               change in title) that results in a diminution  of the  Employee's
               duties or responsibilities, other than an isolated, insubstantial
               or  inadvertent  action which is remedied by the Company.  In the
               event that the  employee is offered a position  after a Change in
               Control  that has a salary and bonus level at least equal to that
               in effect  prior to the Change in  Control,  it shall be presumed
               that the employee did not have Good Reason.

10.2 Definition  of "Change in  Control".  For  purposes of Section  10.1(a),  a
     "Change in  Control"  means a change in control of the  Company of a nature
     that would be  required  to be  reported  in  response  to Item 1(a) of the
     Current Report on Form 8-K, as in effect on the effective date of the Plan,
     pursuant to Section 13 or 15(d) of the Exchange Act; provided that, without
     limitation, such a "Change in Control" shall be deemed to have occurred if:

     (a)  A third person, including a "group" as such term is

208438.1

                                       18
<PAGE>

          used in Section  13(d)(3) of the Exchange Act,  other than the trustee
          of a Company  employee  benefit plan,  becomes the  beneficial  owner,
          directly or  indirectly  of 20 percent or more of the combined  voting
          power of the company's outstanding voting securities ordinarily having
          the right to vote for the election of the Board;

     (b)  During any period of 24  consecutive  months  individuals  who, at the
          beginning of such consecutive 24-month period, constitute the Board of
          Directors  of  the  Company  (the  "Board"  generally  and  as of  the
          effective date of the Plan the "Incumbent Board") cease for any reason
          (other  than   Retirement   upon  reaching   Normal   Retirement  age,
          Disability,  or death) to constitute at least a majority of the Board;
          provided  that  any  person  becoming  a  director  subsequent  to the
          effective date of the Plan whose election,  or nomination for election
          by the  Company's  shareholders,  was  approved  by a vote of at least
          three-quarters of the Directors  comprising the Incumbent Board (other
          than  an  election  or  nomination  of  an  individual  whose  initial
          assumption  of office is in  connection  with an actual or  threatened
          election  contest  relating to the  election of the  Directors  of the
          Company,  as such  terms  are used in Rule  14a-11 of  Regulation  14A
          promulgated  under the  Exchange  Act) shall be, for  purposes of this
          Agreement,  considered  as  though  such  person  were a member of the
          Incumbent Board; or

          (i)  The Company shall cease to be a publicly owned corporation.

10.3 Change in Control  Price.  For  purposes  of this  Section  10,  "Change in
     Control  Price"  means the  highest  price per share paid or offered in any
     bona fide transaction related to an actual Change in Control of the Company
     at any time  during  the  preceding  60-day  period  as  determined  by the
     Committee,  except that,  in the case of Incentive  Stock Options and Stock
     Appreciation  Rights relating to Incentive Stock Options,  such price shall
     be based only on transactions  reported for the date on which the Committee
     decides to cash out such Stock Options.

                                   ARTICLE XI

                                 RELOAD OPTIONS

11.1 Authorization  of  Reload  Options  Concurrently  with an  award  of  Stock
     Options,  the Committee may authorize reload options ("Reload  Options") to
     purchase a number of shares of Stock.  The number of Reload  Options  shall
     equal to the extent authorized by the committee:

208438.1

                                       19
<PAGE>

     (a)  the number of shares of Stock used to exercise  the  underlying  Stock
          Options and

     (b)  the  number of shares of Stock  used to  satisfy  any tax  withholding
          requirement incident to the exercise of the underlying Stock Options.

     The grant of a Reload  Option will become  effective  upon the  exercise of
     underlying  Stock  Options  through  the use of shares of Stock held by the
     Optionee  for at  least  12  months.  Notwithstanding  the  fact  that  the
     underlying  option may be an Incentive Stock Option, a Reload Option is not
     intended to qualify as an Incentive Stock Option.

11.2 Reload  Option  Amendment  Each option  agreement  shall state  whether the
     Committee  has  authorized  Reload  Options with respect to the  underlying
     Stock Options.  Upon the exercise of an underlying Stock Option, the Reload
     Option will be evidenced by an  amendment  to the  underlying  stock option
     agreement.

11.3 Reload  Option Price The option price per share of Stock  deliverable  upon
     the  exercise of a Reload  Option shall be the Fair Market Value of a share
     of Stock on the date the grant of the Reload Option becomes effective.

11.4 Term and Exercise Each Reload Option is fully  exercisable  six months from
     the effective date of grant.  The term of each Reload Option shall be equal
     to the remaining option term of the underlying Stock Option.

11.5 Termination of Employment No additional  Reload Options shall be granted to
     Optionees  when Stock Options are  exercised  pursuant to the terms of this
     Plan following termination of the Optionee's employment.

                                   ARTICLE XII

                                   AMENDMENTS

12.1 Amendments to Plan The Board may amend, suspend, or discontinue the Plan or
     any  portion  thereof  at  any  time,  but  no  amendment,  suspension,  or
     discontinuation  shall be made  which  would  impair the rights of a Holder
     under  a  Stock  Option  or a  recipient  of a  Stock  Appreciation  Right,
     restricted stock award, or Long Term Performance Award theretofore  granted
     without the Holder's or  recipient's  consent or which without the approval
     of the Company's stockholders, would:

     (a)  except as expressly Provided in the Plan, increase the total number of
          shares reserved for the purpose of the Plan;

208438.1

                                       20
<PAGE>

     (b)  decrease  the option  price of any Stock  Option to less than the Fair
          Market Value on the date of grant;

     (c)  change the class of employees eligible to participate in the Plan; or

     (d)  extend the maximum option periods under Section 6.4.

12.2 Amendments to Stock Options or Amounts The Committee may amend the terms of
     any Stock  Option or other  award  theretofore  granted,  prospectively  or
     retroactively,  but no such amendment  shall impair the right of any holder
     without the holder's consent.  Subject to the above  provisions,  the Board
     shall have authority to amend the Plan to take into account  changes in law
     and tax and accounting rules, as well as other developments.

                                  ARTICLE XIII

                             UNFUNDED STATUS OF PLAN

13.1 It is presently  intended that the Plan  constitute an "unfunded"  plan for
     incentive  and deferred  compensation.  The  Committee  may  authorize  the
     creation of trusts or other  arrangements to meet the  obligations  created
     under the Plan to deliver Stock or make payments;  provided, however, that,
     unless the Committee otherwise determines,  the existence of such trusts or
     other arrangements is consistent with the "unfunded" status of the Plan.

                                   ARTICLE XIV

                               GENERAL PROVISIONS

14.1 Certificates  All  certificates  for  shares  of Stock or other  securities
     delivered under the Plan shall be subject to such transfer orders and other
     restrictions   as  the  Committee  may  deem  advisable  under  the  rules,
     regulations,  and other requirements of the Commission,  any stock exchange
     upon which the Stock is then listed,  and any  applicable  Federal or state
     securities  law, and the  Committee may cause a legend or legends to be put
     on  any  such   certificates   to  make   appropriate   reference  to  such
     restrictions.  The  Committee  may require any Optionee  purchasing  shares
     pursuant to a Stock  Option to  represent  to and agree with the Company in
     writing  that the Optionee is  acquiring  the shares  without a view to the
     distribution thereof.

14.2 Compensation  Arrangements Nothing contained in this Plan shall prevent the
     Company or a Subsidiary  from adoption of other or additional  compensation
     arrangements for its employees.

208438.1

                                       21
<PAGE>

14.3 No Rights to Continued  Employment Neither the adoption of the Plan nor the
     granting of any Stock Option, Stock Appreciation Right, Restricted Stock or
     Long Term Award  shall  confer  upon any  employee  any right to  continued
     employment  or constitute  an agreement or  understanding  that the Company
     will retain a director for any period of time or at any particular  rate of
     compensation, nor shall the same interfere in any way with the right of the
     Company or a Subsidiary to terminate the  employment of any employee or the
     service of any director at any time.

14.4 Withholding  and  Employment  Taxes  No later  than  the date on which  the
     Company is required to withhold federal or state income taxes or employment
     taxes in respect of an award, the participant shall pay to the Company,  or
     make arrangements satisfactory to the Company regarding the payment of, any
     Federal,  state,  local,  or other taxes of any kind  required by law to be
     withheld with respect to such award or any payment or distribution  made in
     connection  therewith.   Unless  otherwise  determined  by  the  Committee,
     withholding  or  employment  tax  obligations  may be settled  with  Stock,
     including  Stock  that  is  part  of  the  award  that  gives  rise  to the
     withholding or employment tax requirements;  provided, however, that in the
     case of any  Optionee  who is  actually  subject  to  Section  16(b) of the
     Exchange  Act,  any  such  settlement  shall  comply  with  the  applicable
     requirements of Rule 16(b)-3. The obligations of the Company under the Plan
     shall be conditional on such payment or  arrangements,  and the Company and
     its  Subsidiaries  shall, to the extent permitted by law, have the right to
     deduct any such taxes from any payment otherwise due to the participant.

14.5 Reinvestment  of Dividends  The  reinvestment  of  dividends in  additional
     Restricted  Stock at the time of any dividend  payment shall be permissible
     only if sufficient shares of Stock are available under Article III for such
     reinvestment  (taking into account then outstanding Stock Options and other
     Plan awards).

14.6 Beneficiaries  Designation The Committee shall establish such procedures as
     it deems  appropriate  for a participant to designate a beneficiary to whom
     any amounts  payable with respect to  outstanding  awards under the Plan in
     the event of the participant's death are to be paid.

14.7 Loan  Program The Board may  institute a loan program to assist one or more
     participants  in financing  the  exercise of  outstanding  options  through
     full-recourse  interest  bearing  promissory  notes.  However,  the maximum
     amount  of  financing  provided  any  optionee  may  not  exceed  the  cash
     consideration  payable  for the issued  shares  plus all  applicable  taxes
     incurred in connection with the acquisition of the shares.

14.8 Governing  Law The Plan and all awards  made and actions  taken  thereunder
     shall be governed by and construed in accordance with the laws of the State
     of New York, except

208438.1

                                       22
<PAGE>

     where Delaware may otherwise be applicable.

14.9 Rule  16b-3  Requirement  Notwithstanding  anything  in  this  Plan  to the
     contrary,  if the  Committee  determines  that  the  Plan or grant or award
     cannot  satisfy  the  requirements  of Rule  16b-3,  then it shall have the
     authority to waive or modify those provisions of the Plan or grant or award
     so as to enable compliance with Rule 16b-3.

                                   ARTICLE XV

                  EFFECTIVE DATE OF PLAN; SHAREHOLDER APPROVAL

15.1 The Plan  shall be  effective  as of May 9,  2000,  subject  however to the
     approval  of  the  Plan  by the  holders  of at  least  a  majority  of the
     outstanding  shares of Stock of the  Company  present  or  represented  and
     entitled to vote at a meeting of shareholders of the Company. Awards may be
     made under the Plan on and after its  effective  date;  provided,  however,
     that any such awards shall be null and void if shareholder  approval of the
     Plan is not  obtained  within 12 months of the  adoption of the Plan by the
     Board.

                                   ARTICLE XVI

                                  TERM OF PLAN

16.1 No Stock Option, Stock Appreciation Right,  restricted stock award, or Long
     Term Performance  award shall be granted on or after the tenth  anniversary
     of the effective  date of the Plan,  but awards granted prior to such tenth
     anniversary  (including,  without limitation,  Long Term Performance Awards
     for Performance  Periods  commencing  prior to such tenth  anniversary) may
     extend beyond that date.

208438.1

                                       23

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