Document:

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                                  EXHIBIT 10.3

                                RAILAMERICA, INC.

                   1998 EXECUTIVE INCENTIVE COMPENSATION PLAN

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                                RAILAMERICA, INC.
                   1998 EXECUTIVE INCENTIVE COMPENSATION PLAN

<TABLE>
<CAPTION>
<S>                                                                                           <C>
1.       Purpose                                                                               1

2.       Definitions                                                                           1

3.       Administration                                                                        3
         (a)      Authority of the Committee                                                   3
         (b)      Manner of Exercise of Committee Authority                                    3
         (c)      Limitation of Liability                                                      4

4.       Stock Subject to Plan                                                                 4
         (a)      Limitation on Overall Number of Shares Subject to Awards                     4
         (b)      Application of Limitations                                                   4

5.       Eligibility; Per-Person Award Limitations                                             4

6.       Specific Terms of Awards                                                              4
         (a)      General                                                                      4
         (b)      Options                                                                      5
         (c)      Stock Appreciation Rights                                                    6
         (d)      Restricted Stock                                                             6
         (e)      Deferred Stock                                                               7
         (f)      Bonus Stock and Awards in Lieu of Obligations                                7
         (g)      Dividend Equivalents                                                         7
         (h)      Other Stock-Based Awards                                                     7

7.       Certain Provisions Applicable to Awards                                               8
         (a)      Stand-Alone, Additional, Tandem, and Substitute Awards                       8
         (b)      Term of Awards                                                               8
         (c)      Form and Timing of Payment Under Awards; Deferrals                           8
         (d)      Exemptions from Section 16(b) Liability                                      8

8.       Performance and Annual Incentive Awards                                               9
         (a)      Performance Conditions                                                       9
         (b)      Performance Awards Granted to Designated Covered Employees                   9
         (c)      Annual Incentive Awards Granted to Designated Covered Employees             10
         (d)      Written Determinations                                                      10
         (e)      Status of Section 8(b) and Section 8(c) Awards Under Code Section 162(m)    11

9.       Change in Control                                                                    11
         (a)      Effect of "Change in Control."                                              11
         (b)      Definition of "Change in Control"                                           11
         (c)      Definition of "Change in Control Price."                                    12

10.      General Provisions                                                                   12
         (a)      Compliance With Legal and Other Requirements                                12
         (b)      Limits on Transferability; Beneficiaries                                    12
         (c)      Adjustments                                                                 13
         (d)      Taxes                                                                       13
         (e)      Changes to the Plan and Awards                                              13
         (f)      Limitation on Rights Conferred Under Plan                                   14
         (g)      Unfunded Status of Awards; Creation of Trusts                               14
         (h)      Nonexclusivity of the Plan                                                  14
         (i)      Payments in the Event of Forfeitures; Fractional Shares                     14
         (j)      Governing Law                                                               14
         (k)      Awards Under Preexisting Plans                                              14
         (l)      Plan Effective Date and Stockholder Approval; Termination of Plan           14
</TABLE>

                                       (i)

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                                RAILAMERICA, INC.
                   1998 EXECUTIVE INCENTIVE COMPENSATION PLAN

         1.       Purpose. The purpose of this 1998 Executive Incentive
Compensation Plan (the "Plan") is to assist RAILAMERICA, INC. (the "Company")
and its subsidiaries in attracting, motivating, retaining and rewarding
high-quality executives and other employees, officers, directors and independent
contractors by enabling such persons to acquire or increase a proprietary
interest in the Company in order to strengthen the mutuality of interests
between such persons and the Company's stockholders, and providing such persons
with annual and long term performance incentives to expend their maximum efforts
in the creation of shareholder value. The Plan is also intended to qualify
certain compensation awarded under the Plan for tax deductibility under Section
162(m) of the Code (as hereafter defined) to the extent deemed appropriate by
the Committee (or any successor committee) of the Board of Directors of the
Company. This Plan is intended to supersede the Company's 1995 Stock Incentive
Plan (the "Preexisting Plan").

         2.       Definitions. For purposes of the Plan, the following terms
shall be defined as set forth below, in addition to such terms defined in
Section 1 hereof.

                  (a)      "Annual Incentive Award" means a conditional right
granted to a Participant under Section 8(c) hereof to receive a cash payment,
Stock or other Award, unless otherwise determined by the Committee, after the
end of a specified fiscal year.

                  (b)      "Award" means any Option, SAR (including Limited
SAR), Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of
another award, Dividend Equivalent, Other Stock-Based Award, Performance Award
or Annual Incentive Award, together with any other right or interest, granted to
a Participant under the Plan.

                  (c)      "Beneficiary" means the person, persons, trust or
trusts which have been designated by a Participant in his or her most recent
written beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.

                  (d)      "Beneficial Owner", "Beneficially Owning" and
"Beneficial Ownership" shall have the meanings ascribed to such terms in Rule
13d-3 under the Exchange Act and any successor to such Rule.

                  (e)      "Board" means the Company's Board of Directors.

                  (f)      "Change in Control" means Change in Control as
defined with related terms in Section 9 of the Plan.

                  (g)      "Change in Control Price" means the amount calculated
in accordance with Section 9(c) of the Plan.

                  (h)      "Code" means the Internal Revenue Code of 1986, as
amended from time to time, including regulations thereunder and successor
provisions and regulations thereto.

                  (i)      "Committee" means a committee designated by the Board
to administer the Plan; provided, however, that the Committee shall consist of
at least two Directors, and each member of which shall be (i) a "non-employee
director" within the meaning of Rule 16b-3 under the Exchange Act, unless
administration of the Plan by "non-employee Directors" is not then required in
order for exemptions under Rule 16b-3 to apply to transactions under the Plan,
and (ii) an "outside director" within the meaning of Section 162(m) of the Code,
unless administration of the Plan by "outside directors" is not then required in
order to qualify for tax deductibility under Section 162(m) of the Code.

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                  (j)      "Corporate Transaction" means a Corporate Transaction
as defined in Section 9(b)(i) of the Plan.

                  (k)      "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) of the Plan.

                  (l)      "Deferred Stock" means a right, granted to a
Participant under Section 6(e) hereof, to receive Stock, cash or a combination
thereof at the end of a specified deferral period.

                  (m)      "Director" means a member of the Board.

                  (n)      "Disability" means a permanent and total disability
(within the meaning of Section 22(e) of the Code), as determined by a medical
doctor satisfactory to the Committee.

                  (o)      "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.

                  (p)      "Effective Date" means the effective date of the
Plan, which shall be [APRIL 1, 1998].

                  (q)      "Eligible Person" means each Executive Officer of the
Company (as defined under the Exchange Act) and other officers, Directors and
employees of the Company or of any Subsidiary, and independent contractors with
the Company or any Subsidiary. The foregoing notwithstanding, only employees of
the Company or any Subsidiary shall be Eligible Persons for purposes of
receiving any Incentive Stock Options. An employee on leave of absence may be
considered as still in the employ of the Company or a Subsidiary for purposes of
eligibility for participation in the Plan.

                  (r)      "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, including rules thereunder and successor
provisions and rules thereto.

                  (s)      "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.

                  (t)      "Fair Market Value" means the fair market value of
Stock, Awards or other property as determined by the Committee or the Board, or
under procedures established by the Committee or the Board. Unless otherwise
determined by the Committee or the Board, the Fair Market Value of Stock as of
any given date shall be the closing sale price per share reported on a
consolidated basis for stock listed on the principal stock exchange or market on
which Stock is traded on the date as of which such value is being determined or,
if there is no sale on that date, then on the last previous day on which a sale
was reported.

                  (u)      "Incentive Stock Option" or "ISO" means any Option
intended to be designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.

                  (v)      "Incumbent Board" means the Incumbent Board as
defined in Section 9(b)(ii) of the Plan.

                  (w)      "Limited SAR" means a right granted to a Participant
under Section 6(c) hereof.

                  (x)      "Option" means a right granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.

                  (y)               "Other Stock-Based Awards" means Awards
granted to a Participant under Section 6(h) hereof.

                  (z)      "Parent Corporation" means any corporation (other
than the Company) in an unbroken chain of corporations ending with the Company,
if each of the corporations in the chain (other than the Company)

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owns stock possessing 50% or more of the combined voting power of all classes of
stock in one of the other corporations in the chain.

                  (aa)     "Participant" means a person who has been granted an
Award under the Plan which remains outstanding, including a person who is no
longer an Eligible Person.

                  (bb)     "Performance Award" means a right, granted to an
Eligible Person under Section 8 hereof, to receive Awards based upon performance
criteria specified by the Committee or the Board.

                  (cc)     "Person" shall have the meaning ascribed to such term
in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.

                  (dd)     "Preexisting Plan" means the Company's 1995 Stock
Incentive Plan.

                  (ee)     "Restricted Stock" means Stock granted to a
Participant under Section 6(d) hereof, that is subject to certain restrictions
and to a risk of forfeiture.

                  (ff)     "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3
and Rule 16a-1(c)(3), as from time to time in effect and applicable to the Plan
and Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act

                  (gg)     "Stock" means the Company's Common Stock, and such
other securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.

                  (hh)     "Stock Appreciation Rights" or "SAR" means a right
granted to a Participant under Section 6(c) hereof.

                  (ii)     "Subsidiary" means any corporation or other entity in
which the Company has a direct or indirect ownership interest of 50% or more of
the total combined voting power of the then outstanding securities or interests
of such corporation or other entity entitled to vote generally in the election
of directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.

         3.       Administration.

                  (a)      Authority of the Committee. The Plan shall be
administered by the Committee; provided, however, that except as otherwise
expressly provided in this Plan or in order to comply with Code Section 162(m)
or Rule 16b-3 under the Exchange Act, the Board may exercise any power or
authority granted to the Committee under this Plan. The Committee or the Board
shall have full and final authority, in each case subject to and consistent with
the provisions of the Plan, to select Eligible Persons to become Participants,
grant Awards, determine the type, number and other terms and conditions of, and
all other matters relating to, Awards, prescribe Award agreements (which need
not be identical for each Participant) and rules and regulations for the
administration of the Plan, construe and interpret the Plan and Award agreements
and correct defects, supply omissions or reconcile inconsistencies therein, and
to make all other decisions and determinations as the Committee or the Board may
deem necessary or advisable for the administration of the Plan. In exercising
any discretion granted to the Committee or the Board under the Plan or pursuant
to any Award, the Committee or the Board shall not be required to follow past
practices, act in a manner consistent with past practices, or treat any Eligible
Person in a manner consistent with the treatment of other Eligible Persons.

                  (b)      Manner of Exercise of Committee Authority. The
Committee, and not the Board, shall exercise sole and exclusive discretion on
any matter relating to a Participant then subject to Section 16 of the Exchange
Act with respect to the Company to the extent necessary in order that
transactions by such Participant shall be exempt under Rule 16b-3 under the
Exchange Act. Any action of the Committee or the Board shall be final,
conclusive and binding on all persons, including the Company, its subsidiaries,
Participants, Beneficiaries, transferees under Section 10(b) hereof or other
persons claiming rights from or through a Participant, and

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stockholders. The express grant of any specific power to the Committee or the
Board, and the taking of any action by the Committee or the Board, shall not be
construed as limiting any power or authority of the Committee or the Board. The
Committee or the Board may delegate to officers or managers of the Company or
any subsidiary, or committees thereof, the authority, subject to such terms as
the Committee or the Board shall determine, (i) to perform administrative
functions, (ii) with respect to Participants not subject to Section 16 of the
Exchange Act, to perform such other functions as the Committee or the Board may
determine, and (iii) with respect to Participants subject to Section 16, to
perform such other functions of the Committee or the Board as the Committee or
the Board may determine to the extent performance of such functions will not
result in the loss of an exemption under Rule 16b-3 otherwise available for
transactions by such persons, in each case to the extent permitted under
applicable law and subject to the requirements set forth in Section 8(d). The
Committee or the Board may appoint agents to assist it in administering the
Plan.

                  (c)      Limitation of Liability. The Committee and the Board,
and each member thereof, shall be entitled to, in good faith, rely or act upon
any report or other information furnished to him or her by any executive
officer, other officer or employee of the Company or a Subsidiary, the Company's
independent auditors, consultants or any other agents assisting in the
administration of the Plan. Members of the Committee and the Board, and any
officer or employee of the Company or a subsidiary acting at the direction or on
behalf of the Committee or the Board, shall not be personally liable for any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected by
the Company with respect to any such action or determination.

         4.       Stock Subject to Plan.

                  (a)      Limitation on Overall Number of Shares Subject to
Awards. Subject to adjustment as provided in Section 10(c) hereof, the total
number of shares of Stock reserved and available for delivery in connection with
Awards under the Plan shall be the sum of (i) 930,000 plus (ii) the number of
shares with respect to Awards previously granted under the Plan that terminate
without being exercised, expire, are forfeited or canceled, and the number of
shares of Stock that are surrendered in payment of any Awards or any tax
withholding with regard thereto, minus (iii) the number of shares that then are
subject to outstanding Awards or awards under the Preexisting Plan. Any shares
of Stock delivered under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares. Subject to adjustment as
provided in Section 10(c) hereof, in no event shall the aggregate number of
shares of Stock which may be issued pursuant to ISOs exceed 930,000 shares.

                  (b)      Application of Limitations. The limitation contained
in Section 4(a) shall apply not only to Awards that are settleable by the
delivery of shares of Stock but also to Awards relating to shares of Stock but
settleable only in cash (such as cash-only SARs). The Committee or the Board may
adopt reasonable counting procedures to ensure appropriate counting, avoid
double counting (as, for example, in the case of tandem or substitute awards)
and make adjustments if the number of shares of Stock actually delivered differs
from the number of shares previously counted in connection with an Award.

         5.       Eligibility; Per-Person Award Limitations. Awards may be
granted under the Plan only to Eligible Persons. In each fiscal year during any
part of which the Plan is in effect, an Eligible Person may not be granted
Awards relating to more than 400,000 shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as
an Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $1,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $2,000,000.

         6.       Specific Terms of Awards.

                  (a)      General. Awards may be granted on the terms and
conditions set forth in this Section 6. In addition, the Committee or the Board
may impose on any Award or the exercise thereof, at the date of grant or
thereafter (subject to Section 10(e)), such additional terms and conditions, not
inconsistent with the provisions of the Plan, as the Committee or the Board
shall determine, including terms requiring forfeiture of Awards in the event of
termination of employment by the Participant and terms permitting a Participant
to make elections relating to his or her Award. The Committee or the Board shall
retain full power and discretion to accelerate, waive or modify, at any

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time, any term or condition of an Award that is not mandatory under the Plan.
Except in cases in which the Committee or the Board is authorized to require
other forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of Florida law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.

                  (b)      Options. The Committee and the Board each is
authorized to grant Options to Participants on the following terms and
conditions:

                               (i)  Exercise Price. The exercise price
per share of Stock purchasable under an Option shall be determined by the
Committee or the Board, provided that such exercise price shall not, in the case
of Incentive Stock Options, be less than 100% of the Fair Market Value of the
Stock on the date of grant of the Option and shall not, in any event, be less
than the par value of a share of Stock on the date of grant of such Option. If
an employee owns or is deemed to own (by reason of the attribution rules
applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of stock of the Company or any Parent Corporation
and an Incentive Stock Option is granted to such employee, the option price of
such Incentive Stock Option (to the extent required by the Code at the time of
grant) shall be no less than 110% of the Fair Market Value of the Stock on the
date such Incentive Stock Option is granted.

                               (ii) Time and Method of Exercise.  The
Committee or the Board shall determine the time or times at which or the
circumstances under which an Option may be exercised in whole or in part
(including based on achievement of performance goals and/or future service
requirements), the time or times at which Options shall cease to be or become
exercisable following termination of employment or upon other conditions, the
methods by which such exercise price may be paid or deemed to be paid (including
in the discretion of the Committee or the Board a cashless exercise procedure),
the form of such payment, including, without limitation, cash, Stock, other
Awards or awards granted under other plans of the Company or any subsidiary, or
other property (including notes or other contractual obligations of Participants
to make payment on a deferred basis), and the methods by or forms in which Stock
will be delivered or deemed to be delivered to Participants.

                               (iii) ISOs.  The terms of any ISO granted under
the Plan shall comply in all respects with the provisions of Section 422 of the
Code. Anything in the Plan to the contrary notwithstanding, no term of the Plan
relating to ISOs (including any SAR in tandem therewith) shall be interpreted,
amended or altered, nor shall any discretion or authority granted under the Plan
be exercised, so as to disqualify either the Plan or any ISO under Section 422
of the Code, unless the Participant has first requested the change that will
result in such disqualification. Thus, if and to the extent required to comply
with Section 422 of the Code, Options granted as Incentive Stock Options shall
be subject to the following special terms and conditions:

                                    A.      the Option shall not be exercisable
more than ten years after the date such Incentive Stock Option is granted;
provided, however, that if a Participant owns or is deemed to own (by reason of
the attribution rules of Section 424(d) of the Code) more than 10% of the
combined voting power of all classes of stock of the Company or any Parent
Corporation and the Incentive Stock Option is granted to such Participant, the
term of the Incentive Stock Option shall be (to the extent required by the Code
at the time of the grant) for no more than five years from the date of grant;
and

                                    (D)      The aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted) of the shares
of stock with respect to which Incentive Stock Options granted under the Plan
and all other option plans of the Company or its Parent Corporation during any
calendar year exercisable for the first time by the Participant during any
calendar year shall not (to the extent required by the Code at the time of the
grant) exceed $100,000.

                  (c)      Stock Appreciation Rights. The Committee and the
Board each is authorized to grant SAR's to Participants on the following terms
and conditions:

                               (i)  Right to Payment.  A SAR shall confer on the
Participant to whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of stock on the date of
exercise (or, in the case of a "Limited SAR" that may be exercised only in the
event of a Change in Control, the Fair Market Value determined by reference to
the Change in Control Price, as defined under Section 9(c) hereof), over

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(B) the grant price of the SAR as determined by the Committee or the Board. The
grant price of an SAR shall not be less than the Fair Market Value of a share of
Stock on the date of grant except as provided under Section 7(a) hereof.

                               (ii) Other Terms. The Committee or the Board
shall determine at the date of grant or thereafter, the time or times at which
and the circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future service
requirements), the time or times at which SARs shall cease to be or become
exercisable following termination of employment or upon other conditions, the
method of exercise, method of settlement, form of consideration payable in
settlement, method by or forms in which Stock will be delivered or deemed to be
delivered to Participants, whether or not a SAR shall be in tandem or in
combination with any other Award, and any other terms and conditions of any SAR.
Limited SARs that may only be exercised in connection with a Change in Control
or other event as specified by the Committee or the Board, may be granted on
such terms, not inconsistent with this Section 6(c), as the Committee or the
Board may determine. SARs and Limited SARs may be either freestanding or in
tandem with other Awards.

                  (d)      Restricted Stock. The Committee and the Board each is
authorized to grant Restricted Stock to Participants on the following terms and
conditions:

                               (i)  Grant and Restrictions.  Restricted Stock
shall be subject to such restrictions on transferability, risk of forfeiture and
other restrictions, if any, as the Committee or the Board may impose, which
restrictions may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals and/or future
service requirements), in such installments or otherwise, as the Committee or
the Board may determine at the date of grant or thereafter. Except to the extent
restricted under the terms of the Plan and any Award agreement relating to the
Restricted Stock, a Participant granted Restricted Stock shall have all of the
rights of a stockholder, including the right to vote the Restricted Stock and
the right to receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee or the Board). During the restricted
period applicable to the Restricted Stock, subject to Section 10(b) below, the
Restricted Stock may not be sold, transferred, pledged, hypothecated, margined
or otherwise encumbered by the Participant.

                               (ii) Forfeiture.  Except as otherwise determined
by the Committee or the Board at the time of the Award, upon termination of a
Participant's employment during the applicable restriction period, the
Participant's Restricted Stock that is at that time subject to restrictions
shall be forfeited and reacquired by the Company; provided that the Committee or
the Board may provide, by rule or regulation or in any Award agreement, or may
determine in any individual case, that restrictions or forfeiture conditions
relating to Restricted Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee or the Board may
in other cases waive in whole or in part the forfeiture of Restricted Stock.

                               (iii)Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the Committee or the
Board shall determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee or the Board may
require that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock, that the
Company retain physical possession of the certificates, and that the Participant
deliver a stock power to the Company, endorsed in blank, relating to the
Restricted Stock.

                               (iv) Dividends and Splits.  As a condition to the
grant of an Award of Restricted Stock, the Committee or the Board may require
that any cash dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the purchase
of additional Awards under the Plan. Unless otherwise determined by the
Committee or the Board, Stock distributed in connection with a Stock split or
Stock dividend, and other property distributed as a dividend, shall be subject
to restrictions and a risk of forfeiture to the same extent as the Restricted
Stock with respect to which such Stock or other property has been distributed.

                  (e)      Deferred Stock. The Committee and the Board each is
authorized to grant Deferred Stock to Participants, which are rights to receive
Stock, cash, or a combination thereof at the end of a specified deferral period,
subject to the following terms and conditions:

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                               (i)  Award and Restrictions.  Satisfaction of an
Award of Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee or the Board (or, if
permitted by the Committee or the Board, as elected by the Participant). In
addition, Deferred Stock shall be subject to such restrictions (which may
include a risk of forfeiture) as the Committee or the Board may impose, if any,
which restrictions may lapse at the expiration of the deferral period or at
earlier specified times (including based on achievement of performance goals
and/or future service requirements), separately or in combination, in
installments or otherwise, as the Committee or the Board may determine. Deferred
Stock may be satisfied by delivery of Stock, cash equal to the Fair Market Value
of the specified number of shares of Stock covered by the Deferred Stock, or a
combination thereof, as determined by the Committee or the Board at the date of
grant or thereafter. Prior to satisfaction of an Award of Deferred Stock, an
Award of Deferred Stock carries no voting or dividend or other rights associated
with share ownership.

                               (ii) Forfeiture.  Except as otherwise determined
by the Committee or the Board, upon termination of a Participant's employment
during the applicable deferral period thereof to which forfeiture conditions
apply (as provided in the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to deferral (other
than a deferral at the election of the Participant) shall be forfeited; provided
that the Committee or the Board may provide, by rule or regulation or in any
Award agreement, or may determine in any individual case, that restrictions or
forfeiture conditions relating to Deferred Stock shall be waived in whole or in
part in the event of terminations resulting from specified causes, and the
Committee or the Board may in other cases waive in whole or in part the
forfeiture of Deferred Stock.

                               (iii)Dividend Equivalents.  Unless otherwise
determined by the Committee or the Board at date of grant, Dividend Equivalents
on the specified number of shares of Stock covered by an Award of Deferred Stock
shall be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair Market
Value equal to the amount of such dividends, or (B) deferred with respect to
such Deferred Stock and the amount or value thereof automatically deemed
reinvested in additional Deferred Stock, other Awards or other investment
vehicles, as the Committee or the Board shall determine or permit the
Participant to elect.

                  (f)      Bonus Stock and Awards in Lieu of Obligations. The
Committee and the Board each is authorized to grant Stock as a bonus, or to
grant Stock or other Awards in lieu of Company obligations to pay cash or
deliver other property under the Plan or under other plans or compensatory
arrangements, provided that, in the case of Participants subject to Section 16
of the Exchange Act, the amount of such grants remains within the discretion of
the Committee to the extent necessary to ensure that acquisitions of Stock or
other Awards are exempt from liability under Section 16(b) of the Exchange Act.
Stock or Awards granted hereunder shall be subject to such other terms as shall
be determined by the Committee or the Board.

                  (g)      Dividend Equivalents. The Committee and the Board
each is authorized to grant Dividend Equivalents to a Participant entitling the
Participant to receive cash, Stock, other Awards, or other property equal in
value to dividends paid with respect to a specified number of shares of Stock,
or other periodic payments. Dividend Equivalents may be awarded on a
free-standing basis or in connection with another Award. The Committee or the
Board may provide that Dividend Equivalents shall be paid or distributed when
accrued or shall be deemed to have been reinvested in additional Stock, Awards,
or other investment vehicles, and subject to such restrictions on
transferability and risks of forfeiture, as the Committee or the Board may
specify.

                  (h)      Other Stock-Based Awards. The Committee and the Board
each is authorized, subject to limitations under applicable law, to grant to
Participants such other Awards that may be denominated or payable in, valued in
whole or in part by reference to, or otherwise based on, or related to, Stock,
as deemed by the Committee or the Board to be consistent with the purposes of
the Plan, including, without limitation, convertible or exchangeable debt
securities, other rights convertible or exchangeable into Stock, purchase rights
for Stock, Awards with value and payment contingent upon performance of the
Company or any other factors designated by the Committee or the Board, and
Awards valued by reference to the book value of Stock or the value of securities
of or the performance of specified subsidiaries or business units. The Committee
or the Board shall determine the terms and conditions of such Awards. Stock
delivered pursuant to an Award in the nature of a purchase right granted under
this Section 6(h) shall be purchased for such consideration, paid for at such
times, by such methods, and in such forms, including, without limitation, cash,
Stock, other Awards or other property, as the Committee or the

                                       7
<PAGE>   10

Board shall determine. Cash awards, as an element of or supplement to any other
Award under the Plan, may also be granted pursuant to this Section 6(h).

         7.       Certain Provisions Applicable to Awards.

                  (a)      Stand-Alone, Additional, Tandem, and Substitute
Awards. Awards granted under the Plan may, in the discretion of the Committee or
the Board, be granted either alone or in addition to, in tandem with, or in
substitution or exchange for, any other Award or any award granted under another
plan of the Company, any subsidiary, or any business entity to be acquired by
the Company or a subsidiary, or any other right of a Participant to receive
payment from the Company or any subsidiary. Such additional, tandem, and
substitute or exchange Awards may be granted at any time. If an Award is granted
in substitution or exchange for another Award or award, the Committee or the
Board shall require the surrender of such other Award or award in consideration
for the grant of the new Award. In addition, Awards may be granted in lieu of
cash compensation, including in lieu of cash amounts payable under other plans
of the Company or any subsidiary, in which the value of Stock subject to the
Award is equivalent in value to the cash compensation (for example, Deferred
Stock or Restricted Stock), or in which the exercise price, grant price or
purchase price of the Award in the nature of a right that may be exercised is
equal to the Fair Market Value of the underlying Stock minus the value of the
cash compensation surrendered (for example, Options granted with an exercise
price "discounted" by the amount of the cash compensation surrendered).

                  (b)      Term of Awards. The term of each Award shall be for
such period as may be determined by the Committee or the Board; provided that in
no event shall the term of any Option or SAR exceed a period of ten years (or
such shorter term as may be required in respect of an ISO under Section 422 of
the Code).

                  (c)      Form and Timing of Payment Under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee or
the Board shall determine, including, without limitation, cash, Stock, other
Awards or other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Stock in connection with such settlement,
in the discretion of the Committee or the Board or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee or the Board (subject to
Section 10(e) of the Plan) or permitted at the election of the Participant on
terms and conditions established by the Committee or the Board. Payments may
include, without limitation, provisions for the payment or crediting of a
reasonable interest rate on installment or deferred payments or the grant or
crediting of Dividend Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock.

                  (d)      Exemptions from Section 16(b) Liability. It is the
intent of the Company that this Plan comply in all respects with applicable
provisions of Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure
that neither the grant of any Awards to nor other transaction by a Participant
who is subject to Section 16 of the Exchange Act is subject to liability under
Section 16(b) thereof (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such Participant shall
avoid liability under Section 16(b). In addition, the purchase price of any
Award conferring a right to purchase Stock shall be not less than any specified
percentage of the Fair Market Value of Stock at the date of grant of the Award
then required in order to comply with Rule 16b-3.

         8.       Performance and Annual Incentive Awards.

                  (a)      Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee or the Board. The Committee or the Board may use such business
criteria and other measures of performance as it may deem appropriate in
establishing any performance conditions, and may exercise its discretion to
reduce the amounts payable under any Award subject to performance conditions,
except as limited under Sections 8(b) and 8(c) hereof in the case of a
Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m). If and to the extent required under Code Section 162(m), any
power or authority relating to a

                                       8
<PAGE>   11

Performance Award or Annual Incentive Award intended to qualify under Code
Section 162(m), shall be exercised by the Committee and not the Board.

                  (b)      Performance Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that a Performance
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this Section 8(b).

                               (i)  Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more business criteria
and a targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section 8(b).
Performance goals shall be objective and shall otherwise meet the requirements
of Code Section 162(m) and regulations thereunder including the requirement that
the level or levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain." The Committee
may determine that such Performance Awards shall be granted, exercised and/or
settled upon achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise and/or
settlement of such Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to different Participants.

                               (ii) Business Criteria.  One or more of the
following business criteria for the Company, on a consolidated basis, and/or
specified subsidiaries or business units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall be used
exclusively by the Committee in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2) such total stockholder
return as compared to total return (on a comparable basis) of a publicly
available index such as, but not limited to, the Standard & Poor's 500 Stock
Index or the S&P Specialty Retailer Index; (3) net income; (4) pretax earnings;
(5) earnings before interest expense, taxes, depreciation and amortization; (6)
pretax operating earnings after interest expense and before bonuses, service
fees, and extraordinary or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11) return on investment;
(12) operating earnings; (13) working capital or inventory; and (14) ratio of
debt to stockholders' equity. One or more of the foregoing business criteria
shall also be exclusively used in establishing performance goals for Annual
Incentive Awards granted to a Covered Employee under Section 8(c) hereof that
are intended to qualify as "performance-based compensation" under Code Section
162(m).

                               (iii)Performance Period; Timing For Establishing
Performance Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up to ten
years, as specified by the Committee. Performance goals shall be established not
later than 90 days after the beginning of any performance period applicable to
such Performance Awards, or at such other date as may be required or permitted
for "performance-based compensation" under Code Section 162(m).

                               (iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Performance Awards.
The amount of such Performance Award pool shall be based upon the achievement of
a performance goal or goals based on one or more of the business criteria set
forth in Section 8(b)(ii) hereof during the given performance period, as
specified by the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Performance Award pool as a percentage
of any of such business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly mathematical
relationship to such business criteria.

                               (v)  Settlement of Performance Awards; Other
Terms. Settlement of such Performance Awards shall be in cash, Stock, other
Awards or other property, in the discretion of the Committee. The Committee may,
in its discretion, reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards. The Committee shall specify the
circumstances in which such Performance Awards shall be paid or forfeited in the
event of termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.

                                       9
<PAGE>   12

                  (c)      Annual Incentive Awards Granted to Designated Covered
Employees. If and to the extent that the Committee determines that an Annual
Incentive Award to be granted to an Eligible Person who is designated by the
Committee as likely to be a Covered Employee should qualify as
"performance-based compensation" for purposes of Code Section 162(m), the grant,
exercise and/or settlement of such Annual Incentive Award shall be contingent
upon achievement of preestablished performance goals and other terms set forth
in this Section 8(c).

                               (i)  Annual Incentive Award Pool.  The Committee
may establish an Annual Incentive Award pool, which shall be an unfunded pool,
for purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool shall be based
upon the achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with Section
8(b)(iii) hereof. The Committee may specify the amount of the Annual Incentive
Award pool as a percentage of any such business criteria, a percentage thereof
in excess of a threshold amount, or as another amount which need not bear a
strictly mathematical relationship to such business criteria.

                               (ii) Potential Annual Incentive Awards. Not later
than the end of the 90th day of each fiscal year, or at such other date as may
be required or permitted in the case of Awards intended to be "performance-based
compensation" under Code Section 162(m), the Committee shall determine the
Eligible Persons who will potentially receive Annual Incentive Awards, and the
amounts potentially payable thereunder, for that fiscal year, either out of an
Annual Incentive Award pool established by such date under Section 8(c)(i)
hereof or as individual Annual Incentive Awards. In the case of individual
Annual Incentive Awards intended to qualify under Code Section 162(m), the
amount potentially payable shall be based upon the achievement of a performance
goal or goals based on one or more of the business criteria set forth in Section
8(b)(ii) hereof in the given performance year, as specified by the Committee; in
other cases, such amount shall be based on such criteria as shall be established
by the Committee. In all cases, the maximum Annual Incentive Award of any
Participant shall be subject to the limitation set forth in Section 5 hereof.

                               (iii)Payout of Annual Incentive Awards.  After
the end of each fiscal year, the Committee shall determine the amount, if any,
of (A) the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Participant in the Annual Incentive Award
pool, or (B) the amount of potential Annual Incentive Award otherwise payable to
each Participant. The Committee may, in its discretion, determine that the
amount payable to any Participant as an Annual Incentive Award shall be reduced
from the amount of his or her potential Annual Incentive Award, including a
determination to make no Award whatsoever. The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid or forfeited in
the event of termination of employment by the Participant prior to the end of a
fiscal year or settlement of such Annual Incentive Award.

                  (d)      Written Determinations. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b), and the amount of any Annual Incentive Award pool or potential individual
Annual Incentive Awards and the amount of final Annual Incentive Awards under
Section 8(c), shall be made in writing in the case of any Award intended to
qualify under Code Section 162(m). The Committee may not delegate any
responsibility relating to such Performance Awards or Annual Incentive Awards if
and to the extent required to comply with Code Section 162(m).

                  (e)      Status of Section 8(b) and Section 8(c) Awards Under
Code Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including
the definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Code Section 162(m) and regulations
thereunder. The foregoing notwithstanding, because the Committee cannot
determine with certainty whether a given Participant will be a Covered Employee
with respect to a fiscal year that has not yet been completed, the term Covered
Employee as used herein shall mean only a person designated by the Committee, at
the time of grant of Performance

                                       10
<PAGE>   13

Awards or an Annual Incentive Award, as likely to be a Covered Employee with
respect to that fiscal year. If any provision of the Plan or any agreement
relating to such Performance Awards or Annual Incentive Awards does not comply
or is inconsistent with the requirements of Code Section 162(m) or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.

         9.       Change in Control.

                  (a)      Effect of "Change in Control." If and to the extent
provided in the Award, in the event of a "Change in Control," as defined in
Section 9(b), the following provisions shall apply:

                               (i) Any Award carrying a right to exercise that
was not previously exercisable and vested shall become fully exercisable and
vested as of the time of the Change in Control, subject only to applicable
restrictions set forth in Section 10(a) hereof;

                               (ii) Limited SARs (and other SARs if so provided
by their terms) shall become exercisable for amounts, in cash, determined by
reference to the Change in Control Price;

                               (iii) The restrictions, deferral of settlement,
and forfeiture conditions applicable to any other Award granted under the Plan
shall lapse and such Awards shall be deemed fully vested as of the time of the
Change in Control, except to the extent of any waiver by the Participant and
subject to applicable restrictions set forth in Section 10(a) hereof; and

                               (iv) With respect to any such outstanding Award
subject to achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if and to the
extent so provided by the Committee in the Award agreement relating to such
Award.

                  (b)      Definition of "Change in Control. A "Change in
Control" shall be deemed to have occurred upon:

                               (i)  Approval by the shareholders of the Company
of a reorganization, merger, consolidation or other form of corporate
transaction or series of transactions, in each case, with respect to which
persons who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation or other transaction do not, immediately
thereafter, own more than 50% of the combined voting power entitled to vote
generally in the election of directors of the reorganized, merged or
consolidated company's then outstanding voting securities, or a liquidation or
dissolution of the Company or the sale of all or substantially all of the assets
of the Company (unless such reorganization, merger, consolidation or other
corporate transaction, liquidation, dissolution or sale (any such event being
referred to as a "Corporate Transaction") is subsequently abandoned); or

                               (ii) Individuals who, as of the date hereof,
constitute the Board (as of the date hereof the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (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 Securities Exchange Act) shall be, for
purposes of this Agreement, considered as though such person were a member of
the Incumbent Board.

                  (c)      Definition of "Change in Control Price." The "Change
in Control Price" means an amount in cash equal to the higher of (i) the amount
of cash and fair market value of property that is the highest price per share
paid (including extraordinary dividends) in any Corporate Transaction triggering
the Change in Control under Section 9(b)(i) hereof or any liquidation of shares
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and the 60-day period following the Change in Control.

                                       11
<PAGE>   14

         10.      General Provisions.

                  (a)      Compliance With Legal and Other Requirements. The
Company may, to the extent deemed necessary or advisable by the Committee or the
Board, postpone the issuance or delivery of Stock or payment of other benefits
under any Award until completion of such registration or qualification of such
Stock or other required action under any federal or state law, rule or
regulation, listing or other required action with respect to any stock exchange
or automated quotation system upon which the Stock or other Company securities
are listed or quoted, or compliance with any other obligation of the Company, as
the Committee or the Board, may consider appropriate, and may require any
Participant to make such representations, furnish such information and comply
with or be subject to such other conditions as it may consider appropriate in
connection with the issuance or delivery of Stock or payment of other benefits
in compliance with applicable laws, rules, and regulations, listing
requirements, or other obligations. The foregoing notwithstanding, in connection
with a Change in Control, the Company shall take or cause to be taken no action,
and shall undertake or permit to arise no legal or contractual obligation, that
results or would result in any postponement of the issuance or delivery of Stock
or payment of benefits under any Award or the imposition of any other conditions
on such issuance, delivery or payment, to the extent that such postponement or
other condition would represent a greater burden on a Participant than existed
on the 90th day preceding the Change in Control.

                  (b)      Limits on Transferability; Beneficiaries. No Award or
other right or interest of a Participant under the Plan, including any Award or
right which constitutes a derivative security as generally defined in Rule
16a-1(c) under the Exchange Act, shall be pledged, hypothecated or otherwise
encumbered or subject to any lien, obligation or liability of such Participant
to any party (other than the Company or a Subsidiary), or assigned or
transferred by such Participant otherwise than by will or the laws of descent
and distribution or to a Beneficiary upon the death of a Participant, and such
Awards or rights that may be exercisable shall be exercised during the lifetime
of the Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs in
tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by such
transferees in accordance with the terms of such Award, but only if and to the
extent such transfers and exercises are permitted by the Committee or the Board
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee or the Board may impose thereon, and further
subject to any prohibitions or restrictions on such transfers pursuant to Rule
16b-3). A Beneficiary, transferee, or other person claiming any rights under the
Plan from or through any Participant shall be subject to all terms and
conditions of the Plan and any Award agreement applicable to such Participant,
except as otherwise determined by the Committee or the Board, and to any
additional terms and conditions deemed necessary or appropriate by the Committee
or the Board.

                  (c)      Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee or the
Board to be appropriate in order to prevent dilution or enlargement of the
rights of Participants under the Plan, then the Committee or the Board shall, in
such manner as it may deem equitable, substitute or adjust any or all of (i) the
number and kind of shares of Stock which may be delivered in connection with
Awards granted thereafter, (ii) the number and kind of shares of Stock by which
annual per-person Award limitations are measured under Section 5 hereof, (iii)
the number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment of cash or other
property in respect of any outstanding Award. In addition, the Committee (and
the Board if and only to the extent such authority is not required to be
exercised by the Committee to comply with Code Section 162(m)) is authorized to
make adjustments in the terms and conditions of, and the criteria included in,
Awards (including Performance Awards and performance goals, and Annual Incentive
Awards and any Annual Incentive Award pool or performance goals relating
thereto) in recognition of unusual or nonrecurring events (including, without
limitation, events described in the preceding sentence, as well as acquisitions
and dispositions of businesses and assets) affecting the Company, any Subsidiary
or any business unit, or the financial statements of the Company or any
Subsidiary, or in response to changes in applicable laws, regulations,
accounting principles, tax rates and regulations or business conditions or in
view of the Committee's assessment of the business strategy of the Company, any
Subsidiary or business unit thereof, performance of comparable organizations,
economic and business conditions, personal performance of a Participant, and any
other circumstances deemed relevant; provided

                                       12
<PAGE>   15

that no such adjustment shall be authorized or made if and to the extent that
such authority or the making of such adjustment would cause Options, SARs,
Performance Awards granted under Section 8(b) hereof or Annual Incentive Awards
granted under Section 8(c) hereof to Participants designated by the Committee as
Covered Employees and intended to qualify as "performance-based compensation"
under Code Section 162(m) and the regulations thereunder to otherwise fail to
qualify as "performance-based compensation" under Code Section 162(m) and
regulations thereunder.

                  (d)      Taxes. The Company and any Subsidiary is authorized
to withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee or the Board may deem advisable to enable the Company
and Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

                  (e)      Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue or terminate the Plan, or the Committee's authority
to grant Awards under the Plan, without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee or the Board may waive
any conditions or rights under, or amend, alter, suspend, discontinue or
terminate any Award theretofore granted and any Award agreement relating
thereto, except as otherwise provided in the Plan; provided that, without the
consent of an affected Participant, no such Committee or the Board action may
materially and adversely affect the rights of such Participant under such Award.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee or the Board may modify or adjust the right
so that pooling of interest accounting shall be available, including the
substitution of Stock having a Fair Market Value equal to the cash otherwise
payable hereunder for the right which caused the transaction to be ineligible
for pooling of interest accounting.

                  (f)      Limitation on Rights Conferred Under Plan. Neither
the Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ of the Company or a Subsidiary; (ii) interfering in
any way with the right of the Company or a Subsidiary to terminate any Eligible
Person's or Participant's employment at any time, (iii) giving an Eligible
Person or Participant any claim to be granted any Award under the Plan or to be
treated uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance with
the terms of an Award.

                  (g)      Unfunded Status of Awards; Creation of Trusts. The
Plan is intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee or the Board
may specify and in accordance with applicable law.

                                       13
<PAGE>   16

                  (h)      Nonexclusivity of the Plan. Neither the adoption of
the Plan by the Board nor its submission to the stockholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Code Section 162(m).

                  (i)      Payments in the Event of Forfeitures; Fractional
Shares. Unless otherwise determined by the Committee or the Board, in the event
of a forfeiture of an Award with respect to which a Participant paid cash or
other consideration, the Participant shall be repaid the amount of such cash or
other consideration. No fractional shares of Stock shall be issued or delivered
pursuant to the Plan or any Award. The Committee or the Board shall determine
whether cash, other Awards or other property shall be issued or paid in lieu of
such fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

                  (j)      Governing Law. The validity, construction and effect
of the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with the laws of the State of Florida without
giving effect to principles of conflicts of laws, and applicable federal law.

                  (k)      Awards Under Preexisting Plans Upon approval of the
Plan by stockholders of the Company, as required under Section 10(1) hereof, no
further Awards shall be granted under any Preexisting Plan.

                  (l)      Plan Effective Date and Stockholder Approval;
Termination of Plan. The Plan shall become effective on the Effective Date,
subject to subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Sections 162(m) and 422, Rule
16b-3 under the Exchange Act, applicable NASDAQ requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may
be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.

                                       14
<PAGE>   17

         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed the day and year first above written.

                                          RAILAMERICA INC.

Dated:                                    By:
       ----------------                      --------------------

                    FIRST AMENDMENT TO THE RAILAMERICA, INC.
                   1998 EXECUTIVE INCENTIVE COMPENSATION PLAN

         THIS FIRST AMENDMENT, made effective as of April 10, 2000, by
RAILAMERICA, INC. (the "Company") to the RAILAMERICA, INC. 1998 EXECUTIVE
INCENTIVE COMPENSATION PLAN (the "Plan").

                              W I T N E S S E T H:

         WHEREAS, the Company did establish the Plan for the sole and exclusive
benefit of its eligible participants and their respective beneficiaries so that
the Company could attract, motivate, retain and reward them, and

         WHEREAS, pursuant to Section 10(e) the Company reserved the right to
amend said Plan;

         NOW, THEREFORE, effective as of April 10, 2000, the Plan shall be
amended as follows:

1.       Section 4(a) is hereby amended to read as follows:

         "(a)     Limitation on Overall Number of Shares Subject to Awards.
         Subject to adjustment as provided in Section 10(c) hereof, the total
         number of shares of Stock reserved and that may be subject to Awards
         under the Plan shall be the sum of (i) 15% of the number of issued and
         outstanding shares of Stock as of April 15, 2000, plus (ii) 15% of the
         number of shares of Stock issued after April 15, 2000 (including any
         shares issued as a result of conversions of preferred stock and/or debt
         obligations of the Company into shares of Stock), plus (iii) the number
         of shares of Stock that are surrendered in payment of any Awards or any
         tax withholding with regard thereto, minus (iv) the number of shares of
         Stock that then are subject to outstanding awards under the Preexisting
         Plan. Any shares of Stock delivered under the Plan may consist, in
         whole or in part, of authorized and unissued shares or treasury Shares.
         Subject to adjustment as provided in Section 10(c) hereof, in no event
         shall the aggregate number of shares of Stock which may be issued
         pursuant to ISOs exceed 930,000 shares."

2.       The second sentence of Section 5 is hereby amended to read as follows:

         "In each fiscal year during any part of which the Plan is in effect,
         the total number of shares of stock that may be issued to an Eligible
         Person pursuant to Awards granted hereunder may not exceed four percent
         (4%) of the issued and outstanding shares of Stock as of April 15,
         2000, subject to adjustment as provided in Section 10(c)."

3.       In all other respects, the Plan shall remain unchanged by this
         Amendment.

<PAGE>   18

         IN WITNESS WHEREOF, the Company has caused this instrument to be
executed the day and year first above written.

                                          RAILAMERICA INC.

Dated:                                    By:
       ----------------                      --------------------<PAGE>   1

                                                                    EXHIBIT 10.4

                                RAILAMERICA, INC
                              AMENDED AND RESTATED
                  1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

         1.       Purpose. The 1995 Non-Employee Director Stock Option Plan (the
"Plan") is intended to promote the interests of RailAmerica, Inc. (the
"Company") by providing an inducement to obtain and retain the services of
qualified persons who are not employees of the Company or any affiliate to serve
as members of the Board of Directors of the Company or any of its direct or
indirect subsidiaries and to provide for a portion of their annual compensation
to be tied directly to shareholder return.

         2.       Rights to be Granted. Under the Plan, options are granted that
give an optionee the right for a specified time period to purchase a specified
number of shares of Common Stock, par value $0.001, of the Company (the "Common
Stock"). The option price is determined in each instance in accordance with the
terms of the Plan. Options granted under the Plan are not intended to be
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").

         3.       Available Shares. The total number of shares of Common Stock
for which options may be granted shall not exceed five hundred thousand
(500,000) shares, subject to adjustment in accordance with Section 12 hereof.
Shares subject to the Plan are authorized but unissued shares or shares that
were once issued and subsequently reacquired by the Company. If any options
granted under the Plan are surrendered before exercise or lapse without
exercise, in whole or in part, the shares reserved therefor revert to the option
pool and continue to be available for grant under the Plan.

         4.       Grant of Options.

                  (a)      Each non-employee director of the Company will be
granted options to purchase 50,000 shares of the Company's Common Stock
exercisable at the greater of (i) $3.50 per share, or (ii) the then Fair Market
Value as defined below. Thereafter, each new non-employee director of the
Company shall receive options to purchase 50,000 shares of the Company's Common
Stock at the great of (i) $3.50 per share, or (ii) the then Fair Market Value,
at the date of appointment as a director of the Company.

                  (b)      "Fair Market Value" means (i) the average (on that
date) of the high and low prices of the Common Stock on the principal national
securities exchange on which the Common Stock is traded, if the Common Stock is
then traded on a national securities exchange; or (ii) the last reported sale
price (on that date) of the Common Stock on the NASDAQ National Market List, if
the Common Stock is not then traded on a national securities exchange; or (iii)
the closing bid price (or average of bid prices) last quoted (on that date) by
an established quotation service for over-the-counter securities, if the Common
Stock is not reported on the NASDAQ National Market List. However, if the Common
Stock is not publicly-traded at the time an option is granted under the Plan,
"Fair Market Value" shall be deemed to be the fair market value of the Common
Stock as determined by the Compensation Committee of the Board of Directors of
the Company (the "Committee") after taking into consideration all factors which
it deems appropriate, including, without limitation, recent sale and offer
prices of the Common Stock in private transactions negotiated at arm's length.

         5.       Administration. The Plan shall be administered by the
Committee. The Committee is authorized, subject to the provisions of the Plan,
to establish such rules and regulations as it sees necessary for the proper
administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan it sees as necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants in the Plan and on their legal
representatives and beneficiaries.

         6.       Option Agreement. Each option granted under the provisions of
the Plan shall be evidenced by an Option Agreement, in such form as may be
approved by the Committee, which Agreement shall be duly executed

<PAGE>   2

and delivered on behalf of the Company and by the individual to whom such option
is granted. The Agreement shall contain such terms, provisions, and conditions
not inconsistent with the Plan as may be determined by the Committee.

         7.       Eligibility and Limitations. Options may be granted pursuant
to the Plan only to members of the Board of Directors of the Company (the
"Board") who are not employees of the Company or an affiliate at the time of
grant ("Non-Employee Directors").

         8.       Term of the Plan and Options. The options granted hereunder
shall expire on a date which is ten (10) years after the date of grant of the
options and the Plan shall terminate ten (10) years after the date of its
adoption by the Company.

         9.       Exercise of Option. Options shall be exercised by the delivery
to the Company at its principal office or at such other address as may be
established by the Committee (Attention: Chief Financial Officer) of written
notice of the number of shares of Common Stock with respect to which the option
is being exercised accompanied by payment in full of the purchase price of such
shares. Unless otherwise determined by the Committee at the time of grant,
payment for such shares may be made (i) in cash, (ii) by certified check or bank
cashier's check payable to the order of the Company in the amount of such
purchase price, (iii) by delivery to the Company of Common Stock having a Fair
Market Value equal to such purchase price, provided that such Common Stock has
been owned by the optionee for at least six months or such period as the
Committee may determine as necessary to avoid adverse accounting treatment by
the Company, (iv) by irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds necessary to pay such purchase
price and to sell the Common Stock to be issued upon exercise of the Option and
delivery the cash proceeds less commissions and brokerage fees to the optionee
or to deliver the remaining shares of Common Stock to the optionee, or (v) by
any combination of the methods of payment described in (i) through (iv) above.
Except as provided in Section 11 hereof, no option may be exercised unless the
holder thereof is then a director of the Company. An option holder shall have
none of the rights of a stockholder with respect to the Common Stock subject to
the option until such Common Stock shall be transferred to the holder upon the
exercise of his option.

         10.      Vesting of Shares and Non-Transferability of Options.

                  (a)      Vesting. Subject to Section 13 herein, options
granted under the Plan to new directors shall vest and become exercisable over a
two-year period at the rate of one-third of each grant on the date of
appointment as a director and then one-third annually on each of the two
consecutive anniversaries of the date of appointment provided the director's
service as a director continues through each anniversary. The Committee may, in
its discretion, provide for a longer vesting period at the time the option is
granted.

                  (b)      Legend on Certificates. The certificates representing
shares of Common Stock acquired under the Plan shall carry such appropriate
legend, and such written instructions shall be given to the Company's transfer
agent, as may be deemed necessary or advisable by counsel to the Company in
order to comply with the requirements of the Securities Act of 1933 or any state
securities laws.

                  (c)      Non-Transferability. Options granted pursuant to the
Plan shall not be assignable or transferable other than by the will or the laws
of descent and distribution, and shall be exercisable during an optionee's
lifetime only by the optionee.

         11.      Termination of Option Rights.

                  (a)      In the event an optionee ceases to be a member of the
Board for any reason other than retirement, death or disability, any then
unexercised options granted to such optionee which were exercisable at the time
the optionee ceased to be a member of the Board may be exercised within a period
of ninety (90) days following such time the optionee so ceased to be a member of
the Board, but in no event later than the expiration date of the option.

<PAGE>   3

                  (b)      In the event that an optionee ceases to be a member
of the Board by reason of his or her retirement, disability or death, any then
unexercised options granted to such optionee which were exercisable at the time
the optionee ceased to be a member of the Board may be exercised (by the
optionee's personal representative, heir or legatee, in the event of death)
during the period ending one year after the date the optionee so ceased to be a
member of the Board, but in no event later than the expiration date of the
option.

         12.      Adjustments Upon Changes in Capitalization and Other Matters.
Options and any agreements evidencing such options shall be subject to
adjustment or substitution, as determined by the Committee in its sole
discretion, as to the number, price or kind of a share of Common Stock or other
consideration subject to such options or as otherwise determined by the
Committee to be equitable (i) in the event of changes in the outstanding Common
Stock or in the capital structure of the Company, by reason of stock dividends,
stock splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges, or other relevant changes in capitalization occurring
after the date of grant of any such option or (ii) in the event of any change in
applicable laws or any change in circumstances which results in or would result
in any substantial dilution or enlargement of the rights granted to, or
available for, Non-Employee Directors, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of the Plan. In
addition, in the event of any such adjustments or substitution, the aggregate
number of shares of Common Stock available under the Plan shall be appropriately
adjusted by the Committee, whose determination shall be conclusive. Any
adjustment under this Section 13 shall be made in a manner which does not
adversely affect the exemption provided pursuant to Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
shall give each Non-Employee Director notice of an adjustment hereunder and,
upon notice, such adjustment shall be conclusive and binding for all purposes.

         13.      Effect of Change In Control.

                  (a)      In the event of a Change in Control (as hereunder
defined), notwithstanding any vesting schedule provided for hereunder or by the
Committee with respect to an award of options, such options shall become
immediately exercisable with respect to 100 percent of the shares subject to
such option.

                  (b)      "Change in Control" shall, unless the Board of the
Company otherwise directs by resolution adopted prior thereto, be deemed to
occur if (i) any "person" (as that term is used in Sections 13 and 14(d)(2) of
the Exchange Act) is or becomes the beneficial owner (as that term is used in
Section 13(d) of the Exchange Act), directly or indirectly, of 25% or more of
the voting stock of the Company, or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless the
election or the nomination for election by the Company's shareholders of each
new director was approved by a vote of at least three-quarters of the directors
of the Company then still in office who were directors at the beginning of the
period. Any merger, consolidation or corporate reorganization in which the
owners of the Company's capital stock entitled to vote in the election of
directors ("Voting Stock") prior to said combination, own 50% or more of the
resulting entity's Voting Stock shall not, by itself, be considered a Change in
Control.

                  (c)      The obligations of the Company under the Plan shall
be binding upon any successor corporation or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor corporation or organization succeeding to substantially all of the
assets and business of the Company. The Company agrees that it will make
appropriate provisions for the preservation of an optionee's rights under the
Plan in any agreement or plan which it may enter into or adopt to effect any
such merger, consolidation, reorganization or transfer of assets.

         14.      Restrictions on Issuance of Shares. Notwithstanding the
provisions of Section 9 hereof, the Company shall have no obligation to deliver
any certificate or certificates upon exercise of an option until the following
conditions shall be satisfied:

                  (a)      The shares with respect to which the option has been
exercised are at the time of the issue of such shares effectively registered
under applicable federal and state securities acts as now in force or hereafter
amended; or

<PAGE>   4

                  (b)      Counsel for the Company shall have given an option
that such shares are exempt from registration under federal and state securities
acts as now in force or hereafter amended; and the Company has complied with all
applicable laws and regulations, including without limitation all regulations
required by any stock exchange upon which the Common Stock is then listed.

         The Company shall use its best efforts to satisfy or cause to be
satisfied the above conditions within a reasonable time, except that the Company
shall be under no obligation to cause a registration statement or post-effective
amendment to any registration statement to be prepared at its expense solely for
the purpose of covering the issue of shares in respect of which any option may
be exercised.

         15.      Representation of Optionee. The Company may require the
optionee to deliver written warranties and representations upon exercise of the
option that are necessary to show compliance with federal and state securities
laws including to the effect that a purchase of shares under the option is made
for investment and not with a view to their distribution (as that term is used
in the Securities Act of 1933).

         16.      Approval of Stockholders. The effectiveness of this Plan and
of the grant of all options hereunder is in all respects subject to, and the
Plan and options granted under it shall be of no force and effect unless and
until, and no option granted hereunder shall in any way vest or become
exercisable in any respect unless and until, the approval of the Plan by the
affirmative vote of a majority of the Company's shares present in person or by
proxy and entitled to vote at a meeting of shareholders at which the Plan is
presented for approval, or by written consent of shareholders enforceable under
applicable state law.

         17.      Termination and Amendment of Plan. The Board of the Company
may at any time terminate the Plan or make such modification or amendment
thereof as it deems advisable; provided, however, that (i) the Board of the
Company may not, without approval by the affirmative vote of the holders of a
majority of the shares present in person or by proxy and entitled to vote at the
meeting, (a) increase the maximum number of shares for which options may be
granted under the Plan or the number of shares for which an option may be
granted to any Non-Employee Director hereunder; (b) change the provisions of the
Plan regarding the termination of the options or the time when they may be
exercised; (c) change the period during which any options may be granted or
remain outstanding or the date on which the Plan shall terminate; (d) change the
designation of the class of persons eligible to receive options; (e) change the
price at which options are to be granted; or (f) materially increase benefits
accruing to option holders under the Plan; and (ii) the Plan shall in no event
be amended more than once every six months other than to comport with changes in
the Code. Termination or any modification or amendment of the Plan shall not,
without consent of a Non-Employee Director, affect his rights under an option
previously granted to him.

         18.      Applicable Law. The Plan will be administered in accordance
with federal laws, or in the absence thereof, the laws of the State of Florida.

         19.      Compliance with Section 16. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provisions of the Plan or action by the Plan
administrators fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Plan administrators.
Moreover, in the event the Plan does not include a provision required by Rule
16b-3 to be stated therein, such provision (other than one relating to
eligibility requirements, or the price and amount of awards) shall be deemed
automatically to be incorporated by reference into the Plan insofar as
participants subject to Section 16 are concerned.

                                      * * *

As adopted by the Board of Directors of RailAmerica, Inc.
as of January 1, 1995

As amended and restated by the Board of Directors
of RailAmerica, Inc. as of April 8, 1999

<PAGE>   5

                             FIRST AMENDMENT TO THE
                     AMENDED AND RESTATED RAILAMERICA, INC.
                  1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

         THIS FIRST AMENDMENT, made effective as of April 13, 2000, by
RAILAMERICA, INC. (the "Company") to the RAILAMERICA, INC. AMENDED AND RESTATED
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN (the "Plan").

                                   WITNESSETH:

         WHEREAS, the Company did establish the Plan for the sole and exclusive
benefit of its eligible participants and their respective beneficiaries so that
the Company could attract, motivate, retain and reward them, and

         WHEREAS, pursuant to Section 17 the Company reserved the right to amend
said Plan;

         NOW, THEREFORE, effective as of April 10, 2000, the Plan shall be
amended as follows:

1.       The first sentence of Section 3 is hereby amended to read as follows:

         "The total number of shares of Common Stock for which options may be
         granted shall not exceed seven hundred fifty thousand (750,000) shares,
         subject to adjustment in accordance with Section 12 hereof."

2.       A new subsection 4(c) is hereby added to read as follows:

         "On or around the annual meeting of the shareholders of the Company for
         each year during the term of the Plan, the Committee may grant to each
         then non-employee director additional options to purchase the Company's
         Common Stock in such amounts as the Committee shall determine and
         exercisable at a price equal to the Fair Market Value of the Company's
         Common Stock on the date of grant."

3.       The first sentence of subsection 10(a) is hereby amended to read as
         follows:

                  "(a)     VESTING. Subject to Section 13 herein, options
         granted under the Plan to directors shall vest and become exercisable
         over a two-year period at a rate of one-third of each grant on the date
         of grant and then one-third annually on each of the two consecutive
         anniversaries of the date of grant provided that the director's service
         as a director with the Company continues through each anniversary. The
         Committee may, in its discretion, provide for a longer vesting period
         at the time the option is granted."

4.       In all other respects, the Plan shall remain unchanged by this
         Amendment.

<PAGE>   6

         IN WITNESS WHEREOF, the Employer has caused this instrument to be
executed the day and year first above written.

                                        RAILAMERICA INC.

Dated:                                  By:
      -----------------------               ------------------

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