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                                                                    EXHIBIT 4.1

                             COOPER INDUSTRIES, INC.
                           SECOND AMENDED AND RESTATED
                        MANAGEMENT ANNUAL INCENTIVE PLAN
                                 AUGUST 4, 1998

                             I. PURPOSE OF THE PLAN

         The Cooper Industries, Inc. Amended and Restated Management Annual
Incentive Plan is intended to provide Cooper Industries, Inc. ("the Company") a
means by which it can engender and sustain a sense of personal commitment on the
part of its senior executives in the continued growth, development and financial
success of the Company and encourage them to remain with and devote their best
efforts to the business of the Company, thereby advancing the interests of the
Company and its shareholders. Accordingly, the Company may award to senior
executives annual incentive compensation on the terms and conditions established
herein.

         The total number of shares of Common Stock available for issuance under
this Plan is 500,000, subject to adjustment in the event of any change in the
number of outstanding shares by reason of a stock dividend, stock split,
recapitalization or similar corporate change. Shares available for issuance
under this Plan may be authorized and unissued shares or treasury shares, as the
Company may determine from time to time.

                                 II. DEFINITIONS

         2.1 "Affiliates" shall have the meaning set forth in Rule 12b-2 under
Section 12 of the Exchange Act.

         2.2 "Annual Incentive Award" or "Award" means the compensation payable
in cash or Shares granted under the Plan to a Participant by the Committee
pursuant to such terms, conditions, restrictions and limitations established by
the Committee and the Plan.

         2.3 "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act, except that a Person shall not be deemed to be the
Beneficial Owner of any securities which are properly filed on a Form 13-G.

         2.4 "Board" means the Board of Directors of the Company.

         2.5 For all purposes of the Plan, a "Change in Control" shall be deemed
to have occurred if any of the following events shall have occurred:

                  (i) any Person is or becomes the Beneficial Owner, directly or
         indirectly, of securities of the Company (not including in the
         securities beneficially owned by such Person any securities acquired
         directly from the Company or its affiliates) representing 25% or more
         of the combined voting power of the Company's then outstanding
         securities, excluding any Person who becomes such a Beneficial Owner in
         connection with a transaction described in clause (a) of paragraph
         (iii) below; or

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                  (ii) the following individuals cease for any reason to
         constitute a majority of the number of directors then serving:
         individuals who, on the date hereof, constitute the Board and any new
         director (other than a director whose initial assumption of office is
         in connection with an actual or threatened election contest, including
         but not limited to a consent solicitation, relating to the election of
         directors of the Company) whose appointment or election by the Board or
         nomination for election by the Company's stockholders was approved or
         recommended by a vote of at least two-thirds (2/3) of the directors
         then still in office who either were directors on the date hereof or
         whose appointment, election or nomination for election was previously
         so approved or recommended; or

                  (iii) there is consummated a merger or consolidation of the
         Company or any direct or indirect subsidiary of the Company with any
         other corporation, other than (a) a merger or consolidation which would
         result in the voting securities of the Company outstanding immediately
         prior to such merger or consolidation continuing to represent (either
         by remaining outstanding or by being converted into voting securities
         of the surviving entity or any parent thereof), at least 60% of the
         combined voting power of the securities of the Company or such
         surviving entity or any parent thereof outstanding immediately after
         such merger or consolidation, or (b) a merger or consolidation effected
         to implement a recapitalization of the Company (or similar transaction)
         in which no Person is or becomes the Beneficial Owner, directly or
         indirectly, of securities of the Company (not including in the
         securities Beneficially Owned by such Person any securities acquired
         directly from the Company or its Affiliates) representing 25% or more
         of the combined voting power of the Company's then outstanding
         securities; or

                  (iv) the stockholders of the Company approve a plan of
         complete liquidation or dissolution of the Company or there is
         consummated an agreement for the sale or disposition by the Company of
         all or substantially all of the Company's assets, other than a sale or
         disposition by the Company of all or substantially all of the Company's
         assets to an entity, at least 60% of the combined voting power of the
         voting securities of which are owned by stockholders of the Company in
         substantially the same proportions as their ownership of the Company
         immediately prior to such sale.

         Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record holders
of the common stock of the Company immediately prior to such transaction or
series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of the
Company immediately following such transaction or series of transactions.

         2.6 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.

         2.7 "Commission" means the Securities and Exchange Commission.

         2.8 "Committee" means the Management Development and Compensation
Committee of the Board, or such other committee designated by the Board to
administer the

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Plan, provided that the Committee shall consist of three or more persons each of
whom is an "outside director" within the meaning of Section 162(m) and a
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act.

         2.9 "Employee" means an employee of the Company or any of its
subsidiaries or affiliates.

         2.10 "Exchange Act" means the Securities Exchange Act of l934, as
amended from time to time.

         2.11 "Participant" means a Senior Executive Officer of the Company who
is selected by the Committee to participate in the Plan.

         2.12 "Plan" means the Cooper Industries, Inc. Amended and Restated
Management Annual Incentive Plan (dated November 7, 1995, as amended effective
February 11, 1998, subject to approval by the shareholders of the Company).

         2.13 "Performance Goals" shall be defined as the performance criterion
or criteria established by the Committee, pursuant to Section V hereof, for the
purpose of determining Awards under the Plan.

         2.14 "Performance Period" means the consecutive 12 month period that
constitutes the Company's fiscal year.

         2.15 "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its Affiliates, (ii)
a trustee or other fiduciary holding securities under an employee benefit plan
of the Company or any of its subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities or (iv) a
corporation owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.

         2.16 "Section 162(m)" means Section 162(m) of the Code and the
regulations promulgated thereunder.

         2.17 "Senior Executive Officer" means the Chairman; Chief Executive
Officer; any Executive Vice President, Operations; any Senior Vice President; or
any other senior officer reporting directly to the Chief Executive Officer.

         2.18 "Voting Stock" means securities entitled to vote in an election of
Directors of the Company.

         2.19 "Shares" shall mean the shares of Common Stock, par value $5.00 a
share, of the Company and other such securities of the Company as the Committee
may from time to time determine.

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                               III. ADMINISTRATION

         3.1 The overall administration of the Plan, including the final
determination of Awards to each Participant, is vested in the Committee.

         3.2 Determinations of the Committee in administering the Plan shall be
final and binding upon all Participants.

                                 IV. ELIGIBILITY

         Participation in the Plan shall be limited to Senior Executive
officers. Participants will be selected for participation annually by the
Committee not later than 90 days after the commencement of the Performance
Period. The Committee may withdraw its approval for participation in the Plan
for a Participant at any time. In the event of such withdrawal, such Participant
shall cease to be a Participant as of the date designated by the Committee and
the employee shall be notified of such withdrawal as soon as practicable
following such action. Further, such Employee shall cease to have any right to
an Award for the Performance Period in which such withdrawal is effective;
provided, however, that the Committee may, in its sole discretion, authorize a
prorated award based on the number of full months of participation prior to the
effective date of such withdrawal and the Company's performance during such
period.

                        V. PERFORMANCE GOALS AND MEASURES

         5.1 Performance Goals shall be established by the Committee not later
than 90 days after commencement of the Performance Period relating to a specific
Award. The Performance Goals may be identical for all Participants or, at the
discretion of the Committee, may be different to reflect more appropriate
measures of individual performance. The criterion or criteria used in
establishing Performance Goals may, at the discretion of the Committee, include
one or any combination of the following: (i) the Company's return on equity,
assets, capital or investment; (ii) pre-tax or after-tax profit levels expressed
in absolute dollars or earnings per share of the Company; or (iii) cash flow or
similar measure. The Performance Goals established by the Committee shall
include a threshold level of performance below which no Award will be payable
and a maximum Award opportunity for each Senior Executive Officer. The
determination of attainment of the Performance Goals shall be determined in
accordance with generally accepted accounting principles and certified in
writing by the Committee.

         5.2 The Committee shall be authorized to make adjustments in the method
of calculating attainment of Performance Goals in recognition of: (i)
extraordinary or non-recurring items, (ii) changes in tax laws, (iii) changes in
generally accepted accounting principles or changes in accounting policies, (iv)
charges related to restructured or discontinued operations, (v) restatement of
prior period financial results, and (vi) any other unusual, non-recurring gain
or loss that is separately identified and quantified in the Company's financial
statements. Notwithstanding the foregoing, the Committee may, at its sole
discretion, reduce the performance results upon which Awards are based under the
Plan, to offset any unintended result(s) arising from events not anticipated
when the Performance Goals were established, provided that such adjustment is
permitted by Section 162(m).

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                                   VI. AWARDS

         6.1 Awards under the Plan shall be paid in cash or Shares, or a
combination of cash and Shares, as provided in Sections 6.3 and 6.4.

         6.2 At the first meeting of the Committee after the expiration of the
Performance Period, the Committee shall review the prior year's performance in
relation to the Performance Goals and determine the level of achievement of the
Performance Goals. Payment of Annual Incentive Awards to Participants under the
Plan shall occur only after the Committee has certified in writing that the
Performance Goals have been achieved for the relevant Performance Period.
Notwithstanding the attainment of Performance Goals for the Company as a whole,
Awards for individual Participants under the Plan may be denied or adjusted
downward by the Committee, in its sole judgment, based on its assessment of the
Participant's performance. The maximum Annual Incentive Award that may be
granted to a Senior Executive Officer under the Plan for any Performance Period
shall be $1.5 million.

         6.3 The Committee in its sole discretion may determine to pay any
earned Annual Incentive Awards in cash or Shares or a combination of cash and
Shares.

         6.4 A Participant may request to have all or a portion of the Annual
Incentive Award, when earned, paid in Shares. Such request shall be made by
delivering to the Company at the office of its Secretary a notice setting forth
that portion (expressed as a percentage) of the Award for which the Participant
desires to receive Shares. The Committee shall consider the request and have
absolute discretion to determine the extent to which the request shall be
approved.

         6.5 With respect to any Awards paid in Shares, the number of Shares to
be paid shall be determined by dividing the amount of the Award to be paid in
Shares by the fair market value of a Share on the date the Committee approves
the Award pursuant to Section 6.2. Only whole Shares will be distributed;
fractional Shares will be paid in cash.

         6.6 Shares will be issued to the Participant as soon as practicable
after the Committee makes its determination under Section 6.2, unless the
Participant elects to defer receipt of all or a portion of the Annual Incentive
Award that is to be paid in Shares as provided in Section 7.2.

                         VII. DEFERRALS AND SETTLEMENTS

         7.1 The Committee may permit Participants to elect to defer receipt of
all or a portion of the Annual Incentive Award under administrative policies
established pursuant to the Company's Management Incentive Compensation Deferral
Plan. It also may provide that amounts be credited with interest.

         7.2 If the Participant elects to defer the receipt of Shares, the
Shares shall be credited to a deferral account in the Participant's name and
shall be credited with all dividends or other distributions, as and when paid by
the Company with respect to Shares. Accrued dividends shall be credited with
interest. Until the Shares are issued to the Participant, the Participant shall
have

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no other rights as a shareholder of the Company. Upon a Change in Control, any
Shares credited to a Participant's deferral account shall be issued immediately.

                            VIII. WITHHOLDING TAXES

         The Company shall have the right to deduct from any payment to be made
pursuant to the Plan the amount of any taxes required by law.

                IX.  NO RIGHT TO CONTINUED EMPLOYMENT OR AWARDS

         No person shall have any claim or right to be granted an Award, and the
granting of an Award shall not be construed as giving a Participant the right to
be retained in the employ of the Company or any of its subsidiaries. Further,
the Company and its subsidiaries expressly reserve the right at any time to
terminate the employment of any Participant free from any liability under the
Plan; except that a Participant, who meets or exceeds the Performance Goals for
the Performance Period and was actively employed for the full term of the
Performance Period, will be eligible for an Award even though the Participant is
not an active employee of the Company at the time the Committee grants Awards
under the Plan.

                              X. CHANGE IN CONTROL

         Immediately upon a Change in Control, all outstanding Awards shall be
deemed earned at the Commendable Performance Goal level and the Company shall
make a pro rata payment in cash to each Participant within ten (10) days after
the effective date of the Change in Control in the amount of such Commendable
Performance Goal level Award times a fraction, the numerator of which is the
number of months elapsed in the year of the Change in Control (a partial month
shall be counted as a whole month) and the denominator of which is 12. The
granting of Awards under the Plan shall in no way affect the right of the
Company to adjust, reclassify, reorganize, or otherwise change its capital or
business structure, or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any portion of its businesses or assets.

             XI. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION

         The Board may amend, modify, suspend or terminate this Plan for any
purpose except that amendment or alteration shall be effective prior to approval
by the Company's shareholders to the extent such approval is then required
pursuant to Section 162(m) or otherwise required as a matter of law. Further, no
amendment to the Plan shall be effective that would (i) increase the maximum
amount that can be paid to a Participant under the Plan; (ii) change the
performance criterion or criteria set forth in Section V hereof for payment of
Awards; or (iii) modify the eligibility requirements for Participants in the
Plan unless first approved by the Company's shareholders.

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                               XII. GOVERNING LAW

         The validity, construction and effect of the Plan and any actions taken
or relating to the Plan shall be determined in accordance with the laws of the
State of Ohio and applicable Federal law.

                  XIII. OTHER BENEFIT AND COMPENSATION PROGRAMS

         Unless otherwise specifically provided to the contrary in the relevant
plan, program or practice, Awards received by Participants under the Plan shall
not be deemed a part of a Participant's regular, recurring compensation for
purposes of calculating payments or benefits under any other Company benefit
plan, program or practice or any severance policy of the Company. Further, the
Company may adopt other compensation programs, plans or arrangements for
employees below the level of Senior Executive Officer as it deems necessary and
appropriate.

                           XIV. SUCCESSORS AND ASSIGNS

         The Plan shall be binding on all successors and assigns of a
Participant, including, without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.

                               XV. EFFECTIVE DATE

         This Plan shall be effective as of the date it is approved by the Board
of Directors of the Company. Notwithstanding the foregoing, the adoption of this
Plan is expressly conditioned upon the approval by the Company's shareholders at
the annual meeting of the Company's shareholders held in 1996. If the
shareholders of the Company shall fail to approve this Plan prior to such date,
this Plan shall terminate and cease to be of any further force or effect.
Subject to earlier termination pursuant to Section XI, the Plan shall have a
term of five years from its effective date. After termination of the Plan, no
future Awards may be granted.

                               XVI. INTERPRETATION

         The Plan is designed to comply with Section 162(m) of the Code, and all
provisions hereof shall be construed in a manner consistent with that intent.

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                                                                    EXHIBIT 4.1

                            COOPER INDUSTRIES, INC.
                              AMENDED AND RESTATED
                              STOCK INCENTIVE PLAN
                                 AUGUST 4, 1998

                             I. PURPOSE OF THE PLAN

         The Cooper Industries Stock Incentive Plan is intended to provide
Cooper Industries, Inc. (the "Company") a means by which it can engender and
sustain a sense of proprietorship and personal commitment on the part of its
executives, managers and other key employees in the continued growth,
development and financial success of the Company and encourage them to remain
with and devote their best efforts to the business of the Company, thereby
advancing the interests of the Company and its shareholders. Accordingly, the
Company may award to certain employees shares of the Common Stock of the
Company, on the terms and conditions established herein.

                                II. DEFINITIONS

         2.1      "Award" means any form of Stock Option, Restricted Stock or
Performance Share granted under the Plan, whether singly or in combination, to
a Participant by the Committee pursuant to such terms, conditions, restrictions
and limitations, if any, as the Committee may establish by the Award Agreement
or otherwise.

         2.2      "Award Agreement" means a written agreement with respect to
an Award between the Company and a Participant establishing the terms,
conditions, restrictions and limitations applicable to an Award. To the extent
an Award Agreement is inconsistent with the terms of the Plan, the Plan shall
govern the rights of the Participant thereunder.

         2.3      "Board" shall mean the Board of Directors of the Company.

         2.4      A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:

                  (1)      any Person is or becomes the Beneficial Owner,
         directly or indirectly, of securities of the Company (not including in
         the securities beneficially owned by such Person any securities
         acquired directly from the Company or its affiliates) representing 25%
         or more of the combined voting power of the Company's then outstanding
         securities, excluding any Person who becomes such a Beneficial Owner
         in connection with a transaction described in clause (i) of paragraph
         (3) below; or

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                  (2)      the following individuals cease for any reason to
          constitute a majority of the number of directors then serving:
         individuals who on the date hereof constitute the Board and any new
         director (other than a director whose initial assumption of office is
         in connection with an actual or threatened election contest, including
         but not limited to a consent solicitation, relating to the election of
         directors of the Company) whose appointment or election by the Board
         or nomination for election by the Company's stockholders was approved
         or recommended by a vote of at least two-thirds (2/3) of the directors
         then still in office who either were directors on the date hereof or
         whose appointment, election or nomination for election was previously
         so approved or recommended; or

                  (3)      there is consummated a merger or consolidation of
          the Company or any direct or indirect subsidiary of the Company with
         any other corporation, other than (i) a merger or consolidation which
         would result in the voting securities of the Company outstanding
         immediately prior to such merger or consolidation continuing to
         represent (either by remaining outstanding or by being converted into
         voting securities of the surviving entity or any parent thereto), at
         least 60% of the combined voting power of the securities of the
         Company or such surviving entity or any parent thereof outstanding
         immediately after such merger or consolidation, or (ii) a merger or
         consolidation effected to implement a recapitalization of the Company
         (or similar transaction) in which no Person is or becomes the
         Beneficial Owner, directly or indirectly, of securities of the Company
         (not including in the securities Beneficially Owned by such Person any
         securities acquired directly from the Company or its Affiliates)
         representing 25% or more of the combined voting power of the Company's
         then outstanding securities; or

                  (4)      the stockholders of the Company approve a plan of
          complete liquidation or dissolution of the Company or there is
         consummated an agreement for the sale or disposition by the Company of
         all or substantially all of the Company's assets, other than a sale or
         disposition by the Company of all or substantially all of the
         Company's assets to an entity, at least 60% of the combined voting
         power of the voting securities of which are owned by stockholders of
         the Company in substantially the same proportions as their ownership
         of the Company immediately prior to such sale.

         Notwithstanding the foregoing, a "Change in Control" shall not be
         deemed to have occurred by virtue of the consummation of any
         transaction or series of integrated transactions immediately following
         which the record holders of the common stock of the Company
         immediately prior to such transaction or series of transactions
         continue to have substantially the same proportionate ownership in an
         entity which owns all or substantially all of the assets of the
         Company immediately following such transaction or series of
         transactions.

         For purposes of this section, "Affiliate" shall have the meaning set
         forth in Rule 12b-2 under Section 12 of the Exchange Act; "Beneficial
         Owner" shall have the meaning set forth in Rule 13d-3 under the
         Exchange Act, except that a Person shall not be deemed to

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         be the Beneficial Owner of any securities which are properly filed on
         a Form 13-G; and "Person" shall have the meaning given in Section
         3(a)(9) of the Exchange Act, as modified and used in Sections 13(d)
         and 14(d) thereof, except that such term shall not include (i) the
         Company or any of its Affiliates, (ii) a trustee or other fiduciary
         holding securities under an employee benefit plan of the Company or
         any of its subsidiaries, (iii) an underwriter temporarily holding
         securities pursuant to an offering of such securities or (iv) a
         corporation owned, directly or indirectly, by the stockholders of the
         Company in substantially the same proportions as their ownership of
         stock of the Company.

         2.5      "Change in Control Price" means the higher of (i) the Fair
Market Value on the date of determination of the Change in Control, or (ii) the
highest price per share actually paid for the Common Stock in connection with
the Change in Control of the Company.

         2.6      "Code" means the Internal Revenue Code of 1986, as amended
from time to time.

         2.7      "Commission" shall mean the Securities and Exchange
Commission.

         2.8      "Committee" means the Management Development and Compensation
Committee of the Board, or such other committee designated by the Board to
administer the Plan, provided that the Committee shall consist of three or more
persons, each of whom is an "outside director" within the meaning of Section
162(m) of the Code and a "disinterested person" within the meaning of Rule
16b-3 under the Exchange Act.

         2.9      "Common Stock" or "Shares" shall mean the shares of Common
 Stock, par value $5.00 a share, of the Company and other such securities of the
Company as the Committee may from time to time determine.

         2.10     "Dividend Equivalent" shall mean any right granted pursuant
 to Section X hereof.

         2.11     "Exchange Act" means the Securities Exchange Act of 1934, as
 amended.

         2.12     "Executive Officer" means an executive officer as defined in
 Rule 3b-7 promulgated under the Exchange Act.

         2.13     "Fair Market Value" of a share of Common Stock, as of any
 date, means the average of the high and low sales prices of a share of Common
Stock as reported on the Stock Exchange composite tape on the applicable date,
provided that if no sales of Common Stock were made on the Stock Exchange on
that date, the average of the high and low prices as reported on the composite
tape for the preceding day on which sales of Common Stock were made.

         2.14     "Incentive Stock Option" shall mean an option granted under
 Section VII hereof that is intended to meet the requirements of Section 422 of
the Code or any successor provision thereto.

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         2.15     "Nonstatutory Stock Option" shall mean an option granted
under Section VII hereof that is not intended to be an Incentive Stock Option.

         2.16     "Option" shall mean any right granted to a Participant under
the Plan allowing such Participant to purchase Shares at such prices and during
such Period or Periods as the Committee shall determine.

         2.17     "Participant" means an officer or key employee of the Company
or its subsidiaries who is selected by the Committee to participate in the
Plan.

         2.18     "Performance Goals" or "Targets" in respect to Awards of
Performance Shares are defined as the performance criterion or criteria
established by the Committee, pursuant to Section 9.3 hereof.

         2.19     "Performance Period" shall mean that period established by
the Committee at the time any Performance Shares are granted, provided that a
Performance Period shall be a minimum of one year.

         2.20     "Performance Share" shall mean any grant pursuant to Section
IX hereof of a unit valued by reference to a designated number of Shares, which
value may be paid to the Participant by delivery of such property as the
Committee shall determine, including cash. Shares or any combination thereof,
upon achievement of such Performance Goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.

         2.21     "Plan" shall mean the Cooper Industries, Inc. Stock Incentive
Plan dated November 7, 1995.

         2.22     "Restricted Stock" shall mean any Shares issued pursuant to
Section VIII and which are subject to such terms, conditions and restrictions
as the Committee deems appropriate, including but not limited to restrictions
on transferability, which restrictions may lapse separately or in combination
at such time or times, in installments or otherwise, as the Committee may deem
appropriate.

         2.23     "Section 162(m)" means Section 162(m) of the Code and the
regulations promulgated thereunder.

         2.24     "Stock Exchange" means the New York Stock Exchange, Inc.
("NYSE") or, if the Common Stock is no longer included on the NYSE, then such
other market price reporting system on which the Common Stock is traded or
quoted.

         2.25     "Voting Stock" means securities entitled to vote in an
election of Directors of the Company.

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                              III. ADMINISTRATION

         3.1      The Plan shall be administered by the Committee.

         3.2      Subject to the provisions of the Plan, the Committee shall
have the authority in its sole discretion to administer the Plan and to
exercise all the powers and authorities either specifically granted to it under
the Plan or necessary or advisable in the administration of the Plan,
including, without limitation, the authority to select the Participants; to
determine the type of Awards to be made to Participants; to determine the
Shares subject to any Award and the terms, conditions and restrictions relating
to any Award; to determine whether, to what extent and under what circumstances
any Award may be settled, cancelled, forfeited, exchanged, or surrendered; to
waive or modify any condition applicable to an Award (other than a Performance
Share Award to Executive Officers if inconsistent with Section 162(m)); to make
adjustments in the performance goals of an Award (i) in recognition of unusual
or nonrecurring events affecting the Company or the financial statements of the
Company (with respect to Awards made to Executive Officers, to the extent in
accordance with Section 162(m), if applicable) or (ii) in response to changes
in applicable laws, regulations, or accounting principles; to interpret the
Plan; to establish, amend or rescind any administrative policies; to determine
the terms and provisions of any agreements entered into hereunder; and to make
all other determinations necessary or advisable for the administration of the
Plan. The Committee may correct any defect, supply any omission or reconcile
any inconsistency in the Plan or in any Award in the manner and to the extent
it shall deem desirable to carry it into effect. The determinations of the
Committee in the administration of the Plan, as described herein, shall be
final and conclusive: provided, however, that no action shall be taken which
will prevent Awards granted under the Plan from meeting the requirements for
exemption from Section 16(b) of the Exchange Act, or subsequent comparable
statute, as set forth in Rule 16b-3 under the Exchange Act or any subsequent
comparable rule; and, provided further, that no action shall be taken which
will prevent Awards hereunder that are intended to provide "performance-based
compensation," within the meaning of Section 162(m), from doing so.

         3.3      In order to enable Participants who are foreign nationals or
employed outside the United States, or both, to receive Awards under the Plan,
the Committee may adopt such amendments, subplans and the like as are necessary
or advisable, in the opinion of the Committee, to effectuate the purposes of
the Plan.

                                IV. ELIGIBILITY

         Any key employee of the Company or any of its subsidiaries or
affiliates is eligible to receive one or more Awards under the Plan.

                         V. SHARES SUBJECT TO THE PLAN

         5.1      There shall be available for Awards granted wholly or partly
in Common Stock (including rights or options which may be exercised for or
settled in Common Stock) during the

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term of this Plan an aggregate of 7,000,000 shares of Common Stock, of which no
more than 2,300,000 shall be available for Restricted Stock or Performance
Shares as provided herein, subject to the adjustments provided for in Section
XIV hereof. Shares of Common Stock available for issuance under the Plan may be
authorized and unissued Shares or treasury shares, as the Company may from time
to time determine. The Board of Directors and the appropriate officers of the
Company shall from time to time take whatever actions are necessary to file
required documents with governmental authorities and the Stock Exchange to make
shares of Common Stock available for issuance pursuant to Awards. Common Stock
related to Awards that are forfeited or otherwise terminated, or expire
unexercised, or are settled in a manner such that all or some of the Shares
covered by an Award are not issued to a Participant (other than an exchange for
cash or other property of comparable value) shall immediately become available
for Awards hereunder. If an Award is exchanged for cash or other property of
comparable value, the Common Stock related to the Award will be deducted from
the Shares available for Awards hereunder. Any Shares issued by the Company in
respect of the assumption or substitution of outstanding awards from a
corporation or other business entity acquired by the Company shall not reduce
the number of Shares available for Awards under this Plan. The Committee may
from time to time adopt and observe such procedures concerning the counting of
shares against the Plan maximum as it may deem appropriate under Rule 16b-3
issued pursuant to the Exchange Act.

         5.2      The number of shares of Common Stock subject to Awards
granted under the Plan to any individual who is an Executive Officer shall not
exceed the limits set forth below:

         o        Stock Options - the greater of 100,000 Shares per calendar
                  year or a total of 500,000 Shares in a continuous five (5)
                  year period.

         o        Restricted Stock and Performance Shares - the greater of
                  125,000 Shares per calendar year or a total of 500,000 Shares
                  in a continuous four (4) year period.

Determinations under the preceding sentence shall be made in a manner that is
consistent with Section 162(m).

                                   VI. AWARDS

         Awards under the Plan may consist of: Stock Options (other Incentive
Stock Options within the meaning of Section 422 of the Code or Nonstatutory
Stock Options), Restricted Stock, or Performance Shares. Awards of Performance
Shares and Restricted Stock may provide the Participant with dividends or
Dividend Equivalents and voting rights prior to vesting (whether based on a
period of time or based on attainment of specified performance conditions). The
terms, conditions and restrictions of each Award shall be set forth in an Award
Agreement.

                                       6
<PAGE>   7

                               VII. STOCK OPTIONS

         7.1      GRANTS. Awards may be granted in the form of Stock Options.
Stock Options may be incentive Stock Options within the meaning of Section 422
of the Code or Nonqualified Stock Options or a combination of both, or any
particular type of tax-advantaged option authorized by the Code from time to
time, and approved by the Committee.

         7.2      TERMS AND CONDITIONS OF OPTIONS. A Stock Option shall be
exercisable in whole or in such installments and at such times and upon such
terms as may be determined by the Committee: provided, however, that no Stock
Option shall be exercisable more than 10 years after the date of grant thereof.
The option exercise price shall be established by the Committee, but such price
shall not be less than the Fair Market Value on the date of the Stock Option's
grant, subject to adjustment as provided in Section XIV hereof.

         7.3      RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS. Stock
Options issued in the form of Incentive Stock Options shall, in addition to
being subject to all applicable terms, conditions, restrictions and limitations
established by the Committee, comply with Section 422 of the Code. Incentive
Stock Options shall be granted only to key employees of the Company and its
subsidiaries within the meaning of Section 424 of the Code.

         7.4      PAYMENT. Upon exercise, a Participant may pay the option
exercise price of a Stock Option in cash or Shares, or a combination of cash
and Shares, or such other consideration as the Committee may deem appropriate.
The Committee shall establish appropriate methods for accepting Common Stock
and may impose such conditions as it deems appropriate on the use of Common
Stock to exercise a Stock Option.

         7.5      ADDITIONAL TERMS AND CONDITIONS. The Committee may, by way of
the Award Agreement or otherwise, establish such other terms, conditions or
restrictions, if any, on any Stock Option Award, provided they are not
inconsistent with the Plan. The Committee may condition the vesting of Stock
Options on the achievement of financial performance criteria established by the
Committee at the time of grant.

                         VIII. RESTRICTED STOCK AWARDS

         8.1      GRANTS. Awards may be granted in the form of Restricted Stock
("Restricted Stock Awards"). Restricted Stock Awards shall be awarded in such
numbers and at such times as the Committee shall determine.

         8.2      AWARD RESTRICTIONS. Restricted Stock Awards shall be subject
to such terms, conditions or restrictions as the Committee deems appropriate,
including, but not limited to, restrictions on transferability, requirements of
continued employment, individual performance or the financial performance of
the Company. The period of vesting and the forfeiture restrictions shall be
established by the Committee at the time of grant, provided that the period of
vesting shall be at least one year from the date of grant, except as provided
in Section XVIII.

                                       7
<PAGE>   8

         8.3      RIGHTS AS SHAREHOLDERS. The Committee may, in its discretion,
grant to the Participant to whom such Restricted Stock has been awarded, all or
any of the rights of a shareholder with respect to such shares of Restricted
Stock, including the right to receive dividends.

         8.4      EVIDENCE OF AWARD. Any Restricted Stock Award granted under
the Plan may be evidenced in such manner as the Committee deems appropriate,
including, without limitation, book entry registration or issuance of a stock
certificate or certificates.

                          IX. PERFORMANCE SHARE AWARDS

         9.1      GRANTS. Awards may be granted in the form of Performance
Shares.

         9.2      PERFORMANCE SHARES. The Committee may grant an Award of
Performance Shares to Participants as of the first day of each Performance
Period. Performance Goals will be established by the Committee not later than
90 days after the commencement of the Performance Period relating to the
specific Award. At the end of the Performance Period, the Performance Shares
shall be converted into Common Stock (or cash or a combination of Common Stock
and cash, as determined by the Award Agreement) and distributed to Participants
based upon such entitlement. Award payment in respect of Performance Shares
made in cash rather than the issuance of Common Stock shall not, by reason of
such payment in cash, result in additional Shares being available for
reissuance pursuant to Section V hereof.

         9.3      PERFORMANCE CRITERIA. Notwithstanding anything to the
contrary contained in this Section IX, Performance Share Awards shall be made
to Executive Officers only in compliance with Section 162(m). Performance
criteria used to establish Performance Goals for Performance Share Awards
granted to Executive Officers must include one or any combination of the
following: (i) the Company's return on equity, assets, capital or investment;
(ii) pre-tax or after-tax profit levels expressed in earnings per share of the
Company or any subsidiary or business segment of the Company; (iii) cash flow
or similar measure; (iv) total shareholder return; (v) change in the market
price of the Common Stock; or (vi) market share. The Performance Goals
established by the Committee for each Performance Share Award will specify
achievement targets with respect to each applicable performance criterion
(including a threshold level of performance below which no amount will become
payable with respect to such Award). To the extent applicable, any such
Performance Goals shall be determined in accordance with generally accepted
accounting principles. Each Award will specify the amount payable, or the
formula for determining the amount payable, upon achievement of the various
applicable Performance Targets. The Performance Goals established by the
Committee may be (but need not be) different for each Performance Period and
different Performance Goals may be applicable for Awards to different Executive
Officers in the same Performance Period. Payment shall be made with respect to
a Performance Share Award to an Executive Officer only after the attainment of
the applicable Performance Goals has been certified in writing by the
Committee.

                                       8
<PAGE>   9

         9.4      ADJUSTMENTS. The Committee shall be authorized to make
adjustments in the method of calculating attainment of Performance Goals in
recognition of: (i) extraordinary or non-recurring items; (ii) changes in tax
laws; (iii) changes in generally accepted accounting principles or changes in
accounting policies; (iv) charges related to restructured or discontinued
operations; (v) restatement of prior period financial results; and (vi) any
other unusual, non-recurring gain or loss that is separately identified and
quantified in the Company's financial statements. Notwithstanding the
foregoing, the Committee may, at its sole discretion, reduce the performance
results upon which Awards are based under the Plan, to offset any unintended
result(s) arising from events not anticipated when the Performance Goals were
established, provided, that such adjustment is permitted by Section 162(m).

         9.5      ADDITIONAL TERMS AND CONDITIONS. The Committee may, by way of
the Award Agreement or otherwise, determine the manner of payment of Awards of
Performance Shares and other terms, conditions or restrictions, if any, on any
Award of Performance Shares, provided they are consistent with the Plan.

                                  X. DIVIDENDS

         Upon issuance of Performance Shares earned under the Plan, the Company
also shall pay to the Participant an amount equal to the aggregate amount of
dividends that the Participant would have received had the Participant been the
owner of record of such earned Performance Shares during the Performance
Period.

                         XI. DEFERRALS AND SETTLEMENTS

         The Committee may require or permit Participants to elect to defer the
issuance of Shares or the settlement of Awards in cash as set out in any Award
Agreement or under such administrative policies as it may establish under the
Plan. It also may provide that deferred settlements include the payment or
crediting of interest on the deferral amounts, or the payment or crediting of
Dividend Equivalents where the deferral amounts are denominated in Shares.

                         XII. TERMINATION OF EMPLOYMENT

         Upon the termination of employment by a Participant, any unexercised,
deferred or unpaid Awards shall be treated as provided in the specific Award
Agreement evidencing the Award, except that the Committee may, in its
discretion, accelerate the vesting or exercisability of an Award, eliminate or
make less restrictive any restrictions contained in an Award, waive any
restriction or other provision of this Plan or an Award or otherwise amend or
modify the Award in any manner that is either: (i) not adverse to such
Participant; or (ii) consented to by such Participant.

                                       9
<PAGE>   10

                    XIII. TRANSFERABILITY AND EXERCISABILITY

         Awards granted under the Plan shall not be transferable or assignable
other than: (i) by will or the laws of descent and distribution; (ii) by gift
or other transfer of an Award (other than an Incentive Stock Option unless
permitted by the Code) to any trust or estate in which the original Award
recipient or such recipient's spouse or other immediate relative has a
substantial beneficial interest, or to a spouse or other immediate relative,
provided that any such transfer is permitted subject to Rule 16b-3 issued
pursuant to the Exchange Act as in effect when such transfer occurs and the
Board does not rescind this provision prior to such transfer; or (iii) pursuant
to a qualified domestic relations order (as defined by the Code). However, any
Award so transferred shall continue to be subject to all the terms and
conditions contained in the Award Agreement.

                                XIV. ADJUSTMENTS

         14.1     The existence of outstanding Awards shall not affect in any
manner the right or power of the Company or its shareholders to make or
authorize: (i) any adjustments, recapitalizations, reorganizations or other
changes in the capital stock of the Company or its business; (ii) any merger or
consolidation of the Company; (iii) any issuance of bonds, debentures,
preferred or prior preference stock (whether or not such issue is prior to, on
a parity with or junior to the Common Stock); (iv) the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business; or (v) any other corporate act or proceeding of any kind,
whether or not of a character similar to that of the acts or proceedings
enumerated above.

         14.2     In the event of any subdivision or consolidation of
outstanding shares of Common Stock or declaration of a dividend payable in
shares of Common Stock or other stock split, then (i) the number of shares of
Common Stock issuable pursuant to each Award; (ii) the total number of Shares
reserved under the Plan; and (iii) the per share exercise price of the Awards
shall each be proportionately adjusted to reflect such transaction. In the
event of any other recapitalization or capital reorganization of the Company,
any consolidation or merger of the Company with another corporation or entity,
the adoption by the Company of a plan of exchange affecting the Common Stock or
any distribution to holders of Common Stock of securities or property (other
than normal cash dividends or dividends payable in Common Stock), the Board of
Directors shall make appropriate adjustments to: (i) the number of shares of
Common Stock issuable pursuant to each Award, and (ii) the per share exercise
price of the Awards to reflect such transaction; provided that such adjustments
shall only be such as are necessary to maintain the proportionate interest of
the Participants and preserve, without exceeding, the value of the Awards. In
the event of a corporate merger, consolidation, acquisition of property or
stock, separation, reorganization or liquidation, the Board of Directors shall
be authorized to issue or assume Stock Options by means of substitution of new
options for previously issued options or an assumption of previously issued
options as a part of such adjustment.

                                      10
<PAGE>   11

                             XV. WITHHOLDING TAXES

         The Company shall have the right to deduct from any payment to be made
pursuant to the Plan the amount of any taxes required by law to be withheld
therefrom, or to require a Participant to pay to the Company such amount
required to be withheld prior to the issuance or delivery of any shares of
Common Stock or the payment of cash under the Plan. The Committee may, in its
discretion, permit a Participant to elect to satisfy such withholding
obligation by (i) having the Company retain the number of shares of Common
Stock, or (ii) tendering the number of shares of Common Stock, in either case,
whose Fair Market Value equals the amount required to be withheld. Any fraction
of a share of Common Stock required to satisfy such obligation shall be
disregarded and the amount due shall instead be paid in cash, to or by the
Participant, as the case may be.

                     XVI. REGULATORY APPROVALS AND LISTINGS

         Notwithstanding anything contained in this Plan to the contrary, the
Company shall have no obligation to issue or deliver certificates evidencing
Shares under this Plan prior to: (i) the obtaining of any approval from any
governmental agency which the Company shall, in its sole discretion, determine
to be necessary or advisable; (ii) the listing of such Shares on the Stock
Exchange; and (iii) the completion of any registration or other qualification
of the Shares under any state or federal law or ruling of any governmental body
which the Company shall, in its sole discretion, determine to be necessary or
advisable.

                XVII. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS

         No person shall have any claim or right to be granted an Award, and
the grant of an Award shall not be construed as giving a Participant the right
to be retained in the employ of the Company or its subsidiaries. Further, the
Company and its subsidiaries expressly reserve the right at any time to
terminate the employment of any Participant free from any liability, or any
claim under the Plan, except as provided herein or in any Award Agreement
entered into hereunder.

                            XVIII. CHANGE IN CONTROL

         18.1     Immediately upon a Change in Control, all outstanding Awards
shall vest automatically, all forfeiture restrictions shall lapse, and all
Performance Share Awards shall be deemed earned at the commendable Performance
Goal level. All amounts deferred pursuant to Section XI of the Plan and any
accrued interest thereon shall be paid in cash in one lump sum to the
Participant within 10 days after the occurrence of a Change in Control.

         18.2     With respect to outstanding Stock Options, the Company shall
cancel such Stock Options and make a payment in cash to each Participant with
an outstanding Stock Option in an amount equal to the excess of the Change in
Control Price over the option exercise price times the number of Shares subject
to the outstanding Stock Options, within 10 days after the effective

                                      11
<PAGE>   12

date of the Change in Control. Notwithstanding the preceding sentence, at the
Company's option, the Company may issue shares in lieu of making a cash payment
with respect to outstanding Stock Options in the event that the payment of cash
would have the adverse effect of preventing a pooling of interest transaction
that was approved by the Board of Directors. With respect to Restricted Stock
Awards and Performance Share Awards, the Company shall issue certificates
evidencing the Shares subject to such Awards (or remove restricted legends if
certificates were issued previously) within 10 days after the effective date of
the Change in Control.

         18.3     It is recognized that under certain circumstances: (a)
payments or benefits provided to a Participant might give rise to an "excess
parachute payment" within the meaning of Section 280G of the Code; and (b) it
might be beneficial to a Participant to disclaim some portion of the payment or
benefit in order to avoid such "excess parachute payment" and thereby avoid the
imposition of an excise tax resulting therefrom; and (c) under such
circumstances it would not be to the disadvantage of the Company to permit the
Participant to disclaim any such payment or benefit in order to avoid the
"excess parachute payment" and the excise tax resulting therefrom.

         Accordingly, the Participant may, at the Participant's option,
exercisable at any time or from time to time, disclaim any entitlement to any
portion of the payment or benefits arising under this Plan which would
constitute "excess parachute payments," and it shall be the Participant's
choice as to which payments or benefits shall be so surrendered, if and to the
extent that the Participant exercises such option, so as to avoid "excess
parachute payments."

         18.4     The granting of Awards under the Plan shall in no way affect
the right of the Company to adjust, reclassify, reorganize or otherwise change
its capital or business structures or to merge, consolidate, dissolve,
liquidate, sell or transfer all or any portion of its business or assets.

            XIX. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION

         The Board may amend, modify, suspend or terminate this Plan for any
purpose except that: (i) no amendment or alteration that would impair the
rights of any Participant under any Award previously granted to such
Participant shall be made without such Participant's consent, and (ii) no
amendment or alteration shall be effective prior to approval by the Company's
shareholders to the extent such approval is then required: (a) pursuant to Rule
16b-3 in order to preserve the applicability of any exemption provided by such
rule to any Award then outstanding (unless the holder of such Award consents);
(b) pursuant to Section 162(m); or (c) otherwise required by applicable legal
requirements.

                                      12
<PAGE>   13

                               XX. GOVERNING LAW

         The validity, construction and effect of the Plan and any actions
taken or relating to the Plan shall be determined in accordance with the laws
of the State of Ohio and applicable Federal law.

                           XXI. RIGHTS AS SHAREHOLDER

         Except as otherwise provided in the Award Agreement, a Participant
shall have no rights as a shareholder until he or she becomes the holder of
record.

                 XXII. OTHER BENEFIT AND COMPENSATION PROGRAMS

         Unless otherwise specifically provided to the contrary in the relevant
plan, program or practice, settlements of Awards received by Participants under
the Plan shall not be deemed a part of a Participant's regular, recurring
compensation for purposes of calculating payments or benefits from any Company
benefit plan, program or practice or any severance pay law of any country.
Further, the Company may adopt other compensation programs, plans or
arrangements as it deems appropriate or necessary.

                              XXIII. UNFUNDED PLAN

         Unless otherwise determined by the Committee, the Plan shall be
unfunded and shall not create (or be construed to create) a trust or a separate
fund or funds. The Plan shall not establish any fiduciary relationship between
the Company and any Participant or other person. To the extent any person holds
any rights by virtue of an Award granted under the Plan, such rights (unless
otherwise determined by the Committee) shall be no greater than the rights of
an unsecured general creditor of the Company.

                             XXIV. USE OF PROCEEDS

         The cash proceeds received by the Company from the issuance of Shares
pursuant to Awards under the Plan shall constitute general funds of the
Company.

                          XXV. SUCCESSORS AND ASSIGNS

         The Plan shall be binding on all successors and assigns of a
Participant, including, without limitation, the estate of such Participant and
the executor, administrator or trustee of such estate, or any receiver or
trustee in bankruptcy or representative of the Participant's creditors.

                                      13
<PAGE>   14

                              XXVI. EFFECTIVE DATE

         This Plan shall be effective as of the date it is approved by the
Board of Directors of the Company. Notwithstanding the foregoing, the adoption
of this Plan is expressly conditioned upon approval by the Company's
shareholders at the annual meeting held in 1996. If the shareholders of the
Company shall fail to approve this Plan prior to such date, this Plan shall
terminate and cease to be of any further force or effect and all grants of
Awards hereunder shall be null and void. Subject to earlier termination
pursuant to Section XIX, the Plan shall have a term of 10 years from its
effective date. After termination of the Plan, no future Awards may be granted
but previously granted Awards shall remain outstanding in accordance with their
applicable terms and conditions and the terms and conditions of the Plan.

                             XXVII. INTERPRETATION

         The Plan as applicable to certain employees is designed and intended
to comply with Rule 16b-3 promulgated under the Exchange Act and with Section
162(m) of the Code, and all provisions hereof shall be construed in a manner to
so comply with respect to such employees.

                                      14

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