Document:

<PAGE>

                                                                  Exhibit 10.2.3

                                   GUARANTY
                                   --------

GUARANTY dated as of December 5, 2000 (this "Guaranty") from CAPITAL ONE
FINANCIAL CORPORATION, a Delaware corporation (the "Guarantor"), in favor of
FIRST UNION DEVELOPMENT CORPORATION, a North Carolina corporation (the
"Lessor"); the various financial institutions and other institutional investors
 ------
which are parties to the Participation Agreement (as defined below) from time to
time as purchasers of Tranche A Notes (subject to the definition of Tranche A
Note Purchasers in Appendix A to the Participation Agreement, individually, a
                   ----------
"Tranche A Note Purchaser" and collectively, the "Tranche A Note Purchasers");
 ------------------------                         -------------------------
the various banks and other lending institutions which are parties to the
Participation Agreement from time to time as Tranche B Lenders (subject to the
definition of Tranche B Lenders in Appendix A to the Participation Agreement,
                                   ----------
individually, a "Tranche B Lender" and collectively, the "Tranche B Lenders")
                 ----------------                         -----------------
(each Tranche A Note Purchaser and each Tranche B Lender may be referred to
individually as a "Primary Financing Party" and collectively as the "Primary
                   -----------------------                           -------
Financing Parties"); FIRST UNION NATIONAL BANK, a national banking association,
-----------------
as the agent for the Primary Financing Parties and, respecting the Security
Documents, as the agent for the Secured Parties (in such capacity, the "Agent");
                                                                        -----
and FIRST UNION NATIONAL BANK, as the escrow agent (the "Escrow Agent"). The
                                                         ------------
Lessor, the Primary Financing Parties, the Agent and the Escrow Agent may be
referred to herein as the "Financing Parties."
                           -----------------

     Reference is made to that certain Participation Agreement dated as of
December 5, 2000 (the "Participation Agreement"), among Capital One, F.S.B. and
                       -----------------------
Capital One Bank, jointly and severally as the construction agent and the lessee
(the "Lessee"), the Guarantor, the Lessor, the Primary Financing Parties, the
      ------
Agent and the Escrow Agent.  Capitalized terms used in this Guaranty but not
otherwise defined shall have the meanings given to such terms in Appendix A to
                                                                 ----------
the Participation Agreement.  The rules of usage as set forth in Appendix A to
                                                                 ----------
the Participation Agreement shall apply to this Guaranty.

                             PRELIMINARY STATEMENT

     WHEREAS, Lessee wishes to enter into the transactions contemplated by the
Participation Agreement, the Lease and the other Operative Agreements relating
to the Property;

     WHEREAS, the Guarantor owns all of the outstanding capital stock of Capital
One, F.S.B. and Capital One Bank, other than directors' qualifying shares;

     WHEREAS, it is a condition precedent to the obligations of the Financing
Parties to consummate the transactions contemplated by the Participation
Agreement, the Lease and the other Operative Agreements that the Guarantor
execute and deliver this Guaranty; and

     NOW THEREFORE, in order to induce the Financing Parties to enter into the
Operative Agreements, the Guarantor hereby agrees with the Financing Parties as
follows:
<PAGE>

1.   THE GUARANTY.

1.1  Guaranty of Payment and Performance.
     -----------------------------------

Subject to Section 1.7, the Guarantor hereby absolutely, unconditionally and
irrevocably guarantees to each Financing Party the prompt payment and
performance of the Company Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration or otherwise, including
without limitation, rent or interest accruing following the filing of any
bankruptcy or receivership action) or when such is otherwise to be performed;
provided, notwithstanding the foregoing, that the obligations of the Guarantor
--------
under this Section 1 shall not constitute a direct guaranty of the indebtedness
of the Lessor evidenced by the Notes but rather a guaranty of the Company
Obligations arising under the Operative Agreements.  This Section 1 is a
guaranty of payment and performance and not of collection and is a continuing
guaranty and shall apply to all Company Obligations whenever arising.  All
rights granted to the Financing Parties under this Section 1 shall be subject to
the provisions of Section 8.6 of the Participation Agreement.

1.2  Obligations Unconditional.
     -------------------------

     The Guarantor agrees that the obligations of the Guarantor hereunder are
absolute, unconditional and irrevocable, irrespective of the value, genuineness,
validity, regularity or enforceability of any of the Operative Agreements, or
any other agreement or instrument referred to therein, or any substitution,
release or exchange of any other guarantee of or security for any of the Company
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety, guarantor or
co-obligor, it being the intent of this Section 1.2 that the obligations of the
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances.  The Guarantor agrees that this Section 1 may be enforced by the
Financing Parties without the necessity at any time of resorting to or
exhausting any other security or collateral and without the necessity at any
time of having recourse to the Notes or any other of the Operative Agreements or
any collateral, if any, hereafter securing the Company Obligations or otherwise
and the Guarantor hereby waives the right to require the Financing Parties to
proceed against the Construction Agent, the Lessee or any other Person
(including without limitation a co-guarantor) or to require the Financing
Parties to pursue any other remedy or enforce any other right.  The Guarantor
further agrees that it hereby waives any and all right of subrogation,
indemnity, reimbursement or contribution against the Lessee and the Construction
Agent or any other co-guarantor of the Company Obligations for amounts paid
under this Section 1 until such time as the Financing, accrued but unpaid
interest, and all other amounts owing under the Operative Agreements have been
paid in full and the Tranche B Commitments are terminated.  Without limiting the
generality of the waiver provisions of this Section 1, the Guarantor hereby
waives any rights to require the Financing Parties to proceed against the
Construction Agent, the Lessee, any co-guarantor or any Collateral or to require
Lessor, the Agent or any other Financing Party to pursue any other remedy or
enforce any other right, including without limitation, any and all rights under
N.C. Gen. Stat. (S) 26-7 through 26-9.  The Guarantor further agrees that
nothing contained herein shall prevent the Financing Parties from suing on any
Operative Agreement or foreclosing any security interest in or Lien on any

                                       2
<PAGE>

collateral, if any, securing the Company Obligations or from exercising any
other rights available to it under any Operative Agreement, or any other
instrument of security, if any, and the exercise of any of the aforesaid rights
and the completion of any foreclosure proceedings shall not constitute a
discharge of the Guarantor's obligations hereunder; it being the purpose and
intent of the Guarantor that its obligations hereunder shall be absolute,
independent and unconditional under any and all circumstances; provided that any
                                                               --------
amounts due under this Section 1 which are paid to or for the benefit of any
Financing Party shall reduce the Company Obligations by a corresponding amount
(unless required to be rescinded at a later date).  Neither the Guarantor's
obligations under this Section 1 nor any remedy for the enforcement thereof
shall be impaired, modified, changed or released in any manner whatsoever by an
impairment, modification, change, release or limitation of the liability of the
Construction Agent, the Lessee or any other Person (including without limitation
a co-guarantor) or by reason of the bankruptcy or insolvency of the Construction
Agent or the Lessee or any other Person (including without limitation a co-
guarantor) or by reason of the disallowance, under Section 502 of the Bankruptcy
Code or under any analogous provision of any other applicable Law, of all or any
portion of the Company Obligations.  The Guarantor hereby waives the application
of Section 502(b)(6) of the Bankruptcy Code or any other analogous provision of
any other applicable Law.  The Guarantor waives any and all notice of the
creation, renewal, extension or accrual of any of the Company Obligations and
notice of or proof of reliance by any Financing Party upon this Section 1 or
acceptance of this Section 1.  The Company Obligations shall conclusively be
deemed to have been created, contracted or incurred, or renewed, extended,
amended or waived, in reliance upon this Section 1.  All dealings between the
Construction Agent, the Lessee, any co-guarantor and the Guarantor, on the one
hand, and the Financing Parties, on the other hand, likewise shall be
conclusively presumed to have been had or consummated in reliance upon this
Section 1.

1.3  Modifications.
     -------------

     The Guarantor agrees that (a) all or any part of the security now or
hereafter held for the Company Obligations, if any, may be exchanged,
compromised or surrendered from time to time; (b) no Financing Party shall have
any obligation to protect, perfect, secure or insure any such security
interests, liens or encumbrances now or hereafter held, if any, for the Company
Obligations or the properties subject thereto; (c) the time or place of payment
of the Company Obligations may be changed or extended, in whole or in part, to a
time certain or otherwise, and may be renewed or accelerated, in whole or in
part; (d) the Construction Agent, the Lessee and any other party (including any
co-guarantor) liable for payment under the Operative Agreements may be granted
indulgences generally; (e) any of the provisions of the Notes or any of the
other Operative Agreements may be modified, amended or waived; (f) any party
(including any co-guarantor) liable for the payment thereof may be granted
indulgences or be released; and (g) any deposit balance for the credit of the
Construction Agent, the Lessee or any other party (including any co-guarantor)
liable for the payment of the Company Obligations or liable upon any security
therefor may be released, in whole or in part, at, before or after the stated,
extended or accelerated maturity of the Company Obligations, all without notice
to or further assent by the Guarantor, which shall remain bound thereon,
notwithstanding any such exchange, compromise, surrender, extension, renewal,
acceleration, modification, indulgence or release.

                                       3
<PAGE>

1.4  Waiver of Rights.
     ----------------

     The Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Section 1 by any Financing
Party and of all extensions of credit or other Advances to the Construction
Agent and the Lessee by the Primary Financing Parties pursuant to the terms of
the Operative Agreements; (b) presentment and demand for payment or performance
of any of the Company Obligations; (c) protest and notice of dishonor or of
default with respect to the Company Obligations or with respect to any security
therefor; (d) notice of any Financing Party obtaining, amending, substituting
for, releasing, waiving or modifying any security interest, lien or encumbrance,
if any, hereafter securing the Company Obligations, or any Financing Party's
subordinating, compromising, discharging or releasing such security interests,
liens or encumbrances, if any; and (e) all other notices to which the Guarantor
might otherwise be entitled. Notwithstanding anything to the contrary herein,
the Guarantor's payments hereunder shall be due three (3) Business Days after
written demand by the Lessor or Agent for such payment (unless the Company
Obligations are automatically accelerated pursuant to the applicable provisions
of the Operative Agreements in which case the Guarantor's payments shall be
automatically due).

1.5  Reinstatement.
     -------------

     The obligations of the Guarantor under this Section 1 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Company Obligations is rescinded or
must be otherwise restored by any Financing Party or any holder of any of the
Company Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and the Guarantor agrees that it will indemnify
each Financing Party on demand for all reasonable costs and expenses (including,
without limitation, reasonable fees of counsel) incurred by any Financing Party
in connection with such rescission or restoration, including without limitation
any such costs and expenses incurred in defending against any claim alleging
that such payment constituted a preference, fraudulent transfer or similar
payment under any bankruptcy, insolvency or similar law.

1.6  Remedies.
     --------

     The Guarantor agrees that, as between the Guarantor on the one hand and
each Financing Party on the other hand, the Company Obligations may be declared
to be forthwith due and payable as provided in the applicable provisions of the
Operative Agreements (and shall be deemed to have become automatically due and
payable in the circumstances provided therein) notwithstanding any stay,
injunction or other prohibition preventing such declaration (or preventing such
Company Obligations from becoming automatically due and payable) as against any
other Person and that, in the event of such declaration (or such Company
Obligations being deemed to have become automatically due and payable), such
Company Obligations (whether or not due and payable by any other Person) shall
forthwith become due and payable by the Guarantor in accordance with the
applicable provisions of the Operative Agreements.

                                       4
<PAGE>

1.7  Limitation of Guaranty.
     ----------------------

     Notwithstanding any provision to the contrary contained herein or in any of
the other Operative Agreements, to the extent the obligations of the Guarantor
shall be adjudicated to be invalid or unenforceable for any reason (including
without limitation because of any applicable state or federal law relating to
fraudulent conveyances or transfers) then the obligations of the Guarantor
hereunder shall be limited to the maximum amount that is permissible under
applicable law (whether federal or state and including without limitation the
Bankruptcy Code).

     Subject to Section 1.5, upon the satisfaction of the Company Obligations in
full, regardless of the source of payment, the Guarantor's obligations hereunder
shall be deemed satisfied, discharged and terminated other than indemnifications
set forth herein that expressly survive.

1.8  Payment of Amounts to the Agent.
     -------------------------------

     Each Financing Party hereby instructs the Guarantor, and the Guarantor
hereby acknowledges and agrees, that until such time as the Financing is paid in
full, the Tranche B Commitments are terminated and the Liens evidenced by the
Security Agreement and the Mortgage Instruments have been released, any and all
Company Obligations, Rent (excluding Excepted Payments which shall be payable to
the Lessor or any other Person as appropriate) and any and all other amounts of
any kind or type under any of the Operative Agreements due and owing or payable
to any Person by any Credit Party shall be paid directly to the Agent (excluding
Excepted Payments which shall be payable to Lessor or any other Person as
appropriate) or as the Agent may direct from time to time for allocation and
distribution in accordance with the procedures set forth in Section 8.7 of the
Participation Agreement.

2.   REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.

     The Guarantor represents and warrants to the Financing Parties that:

2.1. Organization; Power and Authority.
     ---------------------------------

     Guarantor and each of its Subsidiaries:  (a) is a corporation, partnership
or other entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization; (b) has all requisite corporate or
other power, and has all material governmental licenses, authorizations,
consents and approvals necessary to own its assets and carry on its business as
now being conducted; and (c) is qualified to do business and is in good standing
in all jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.

                                       5
<PAGE>

2.2. Authorization, etc.
     -------------------

     Guarantor has all necessary corporate power, authority and legal right to
execute, deliver and perform its obligations under each of the Operative
Agreements to which it is a party and to consummate the transactions
contemplated thereby; the execution, delivery and performance by Guarantor of
each of the Operative Agreements to which it is a party and the consummation of
the transactions contemplated thereby have been duly authorized by all necessary
corporate action on its part (including, without limitation, any required
shareholder approvals); and this Guaranty and each of the other Operative
Agreements to which it is a party have been duly and validly executed and
delivered by Guarantor and constitute its legal, valid and binding obligations,
enforceable against Guarantor in accordance with its terms, except as may be
limited by (a) bankruptcy, insolvency, receivership, conservatorship,
reorganization, moratorium or similar laws of general applicability affecting
the enforcement of creditors' rights and (b) the application of general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

2.3. Compliance with Laws, Other Instruments, etc.
     --------------------------------------------

     None of the execution and delivery of this Guaranty and the other Operative
Agreements to which Guarantor is a party, the consummation of the transactions
herein or therein contemplated or compliance with the terms and provisions
hereof or thereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws of Guarantor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which
Guarantor or any of its Subsidiaries is a party or by which any of them or any
of their property is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, except for any such conflict,
breach or default that, or consent that if not obtained, could not (either
individually or in the aggregate) have a Material Adverse Effect and could not
subject any Financing Party to liability.

2.4. Governmental Authorizations, etc.
     --------------------------------

     No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency, or any
securities exchange, are necessary for the execution, delivery or performance by
Guarantor of this Guaranty or any of the other Operative Agreements to which
Guarantor is a party or for the consummation of any the transactions
contemplated hereby or thereby or for the legality, validity or enforceability
hereof or thereof.

2.5  Taxes.
     -----

     Guarantor and its Subsidiaries are members of an affiliated group of
corporations filing consolidated returns for Federal income tax purposes, of
which Guarantor is the "common parent" (within the meaning of Section 1504 of
the Code) of such group.  Guarantor and its Subsidiaries have filed all Federal
income tax returns and all other material tax returns that are required to be
filed by them and have paid all taxes due pursuant to such returns or pursuant
to any assessment received by Guarantor or any of its Subsidiaries.  The
charges, accruals and

                                       6
<PAGE>

reserves on the books of Guarantor and its Subsidiaries in respect of taxes and
other governmental charges are, in the opinion of Guarantor, adequate and are in
accordance and in conformity with GAAP. Neither Guarantor nor any member of the
affiliated group has given or been requested to give a waiver of the statute of
limitations relating to the payment of any Federal, state, local and foreign
taxes or other impositions.

2.6  Litigation.
     ----------

     Except as set forth on EXHIBIT K to the Participation Agreement, there are
                            ---------
no actions, suits or proceedings pending or, to the Guarantor's knowledge,
threatened against the Guarantor in any court or before any Governmental
Authority (nor shall any order, judgment or decree have been issued or, to the
knowledge of the Guarantor, proposed to be issued by any Governmental Authority
against the Guarantor to set aside, restrain, enjoin or prevent the full
performance of any Operative Agreement or any transaction contemplated thereby)
that (i) concern the Property or the Guarantor's interest therein, (ii) question
the validity or enforceability of any Operative Agreement to which the Guarantor
is a party or the overall transaction described in the Operative Agreements to
which the Guarantor is a party or (iii) have or could reasonably be expected to
have a Material Adverse Effect (but only as of the Closing Date with respect to
a Material Adverse Effect of the type referred to in clause (a) of the
definition thereof).

3.   DEFINITIONS, ETC.

3.1. Accounting Terms.
     ----------------

     All accounting terms not specifically defined herein shall have the
meanings given to them in accordance with GAAP.

3.2. Headings and References.
     -----------------------

     Section and other headings are for reference only, and shall not affect the
interpretation or meaning of any provision of this Guaranty.  Unless otherwise
provided, references to Sections, Schedules, and Exhibits shall be deemed
references to Sections, Schedules and Exhibits of this Guaranty.

4.   MISCELLANEOUS.

4.1. Expenses, Etc.
     -------------

     The Guarantor shall pay, or cause to be paid, upon demand, any Financing
Party's reasonable attorneys' and collection fees and all other costs and
expenses which may be incurred by any Financing Party in any suit or other
effort to enforce the Company Obligations, this Guaranty or both, by legal
proceedings or through any bankruptcy court, or otherwise.  If the Guarantor
fails to pay any amount hereunder when due, the Guarantor shall pay interest, on
demand, on such amount at the Overdue Rate accrued from the date of such demand
to the date on which all such amounts due have been paid in full.

                                       7
<PAGE>

4.2. Severability.
     ------------

     The Financing Parties are relying and are entitled to rely upon each and
all of the provisions of this Guaranty; and accordingly, if any provision or
provisions of this Guaranty should be held to be invalid, inapplicable, illegal,
unenforceable or ineffective, then all other provisions shall continue in full
force and effect and this Guaranty shall be construed as if such invalid,
inapplicable, illegal, unenforceable or ineffective provision has never been
contained herein.

4.3. Notices.
     -------

     All notifications, notices, demands, requests and other communications
herein provided for or made pursuant hereto shall be in writing and delivered in
accordance with Section 12.2 of the Participation Agreement.

4.4. Successors and Assigns.
     ----------------------

     Wherever the term "Lessor" or the term "Lessee" is used herein, those terms
shall mean, in addition to the parties described above, any assignees or
successors of either permitted by the Lease if, and to the extent, such assignee
or successor has properly been assigned, or succeeded to the rights and
obligations of the party in question.  This Guaranty shall be binding upon the
Guarantor and its permitted successors and assigns and shall inure to the
benefit of the Financing Parties and their respective successors and assigns.

4.5. Amendments; No Waiver.
     ---------------------

     No provision of this Guaranty can be changed, waived, discharged or
terminated except by an instrument in writing signed by the Guarantor, and
consented to in writing by the Majority Tranche A Note Purchasers, expressly
referring to the provision of this Guaranty to which such instrument relates.
No such waiver effected in accordance with this Section 4.5 shall extend to,
affect or impair any right with respect to the Company Obligations which is not
expressly dealt with therein.  No course of dealing or delay or omission on the
part of any Financing Party exercising any right shall operate as a waiver
thereof or otherwise be prejudicial thereto.

4.6. Governing Law.
     -------------

     THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED, INTERPRETED AND ENFORCED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO THE PRINCIPLES THEREOF RELATING TO CONFLICTS OF LAW), EXCEPT TO THE
EXTENT THE LAWS OF THE STATE WHERE THE PROPERTY IS LOCATED ARE REQUIRED TO
APPLY.

                                       8
<PAGE>

4.7. Submission to Jurisdiction; Venue.
     ---------------------------------

     THE PROVISIONS OF SECTION 12.7 OF THE PARTICIPATION AGREEMENT RELATING TO
SUBMISSION TO JURISDICTION AND VENUE ARE HEREBY INCORPORATED BY REFERENCE
HEREIN, MUTATIS MUTANDIS.
        ----------------

4.8. Effectiveness.
     -------------

     All representations, warranties and covenants in this Guaranty shall become
effective at the time of the delivery hereof on the Closing Date.

        [The remainder of this page has been left blank intentionally.]

                                       9
<PAGE>

     IN WITNESS WHEREOF, this Guaranty has been duly executed as of the date
first above written.

                                             CAPITAL ONE FINANCIAL CORPORATION

                                             By_________________________________
                                               Title:<PAGE>

                                                                    Exhibit 10.7

                        CAPITAL ONE FINANCIAL CORPORATION

                            1994 STOCK INCENTIVE PLAN

                          (As Amended January 18, 2001)

        1. Purpose. The purpose of the Capital One Financial Corporation 1994
Stock Incentive Plan (the "Plan") is to further the long term stability and
financial success of Capital One Financial Corporation (the "Company") by
attracting and retaining key employees of the Company through the use of stock
incentives. It is believed that ownership of Company Stock will stimulate the
efforts of those employees of the Company upon whose judgment and interest the
Company is and will be largely dependent for the successful conduct of its
business. It is also believed that Awards granted to such employees under this
Plan will strengthen their desire to remain with the Company and will further
the identification of those employees' interests with those of the Company's
shareholders. The Plan was adopted by the Board of Directors and approved by the
Company's sole shareholder on October 28, 1994.

        The Plan is intended to satisfy the requirements of Securities and
Exchange Commission Rule 16b-3 ("Rule 16b-3").

        2. Definitions. As used in the Plan, the following terms have the
meanings indicated:

           (a) "Award" means, collectively, the award of an Option, Stock
        Appreciation Right, Restricted Stock or Incentive Stock under the Plan.

           (b) "Board" means the board of directors of the Company.
<PAGE>

     (c)  "Change of Control" means:

          (i) The acquisition by an individual, entity or group (within the
     meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
     1934, as amended (the "Exchange Act")) of beneficial ownership (within the
     meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% (or, if
     such shares are purchased from the Company, 40%) or more of either (A) the
     then outstanding shares of common stock of the Company (the "Outstanding
     Company Common Stock") or (B) the combined voting power of the then
     outstanding voting securities of the Company entitled to vote generally in
     the election of directors (the "Company Voting Securities"), provided,
                                                                  --------
     however, that any acquisition by (x) the Company or any of its
     -------
     subsidiaries, or any employee benefit plan (or related trust) sponsored or
     maintained by the Company or any of its subsidiaries or (y) any corporation
     with respect to which, immediately following such acquisition, more than
     60% of, respectively, the then outstanding shares of common stock of such
     corporation and the combined voting power of the then outstanding voting
     securities of such corporation entitled to vote generally in the election
     of directors is then beneficially owned, directly or indirectly, by all or
     substantially all of the individuals and entities who were the beneficial
     owners, respectively, of the Outstanding Company Common Stock and Company
     Voting Securities immediately prior to such acquisition in substantially
     the same proportion as their ownership, immediately prior to such
     acquisition, of the

                                       2
<PAGE>

     Company Common Stock and Company Voting Securities, as the case may be,
     shall not constitute a Change of Control; or

          (ii)   Individuals who constitute the Board as of September 1, 1995
     (the "Incumbent Board") cease for any reason to constitute at least a
     majority of the Board, provided that any individual becoming a director
     subsequent to September 1, 1995 whose appointment to fill a vacancy or to
     fill a new Board position or whose 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 shall be considered as though such
     individual were a member of the Incumbent Board, but excluding, for this
     purpose, any such individual whose initial assumption of office is in
     connection with an actual or threatened election contest relating to the
     election of the Directors of the Company (as such terms are used in Rule
     14a-11 of Regulation 14A promulgated under the Exchange Act); or

          (iii)  Approval by the shareholders of the Company of a
     reorganization, merger or consolidation (a "Business Combination"), in each
     case, with respect to which all or substantially all of the individuals and
     entities who were the respective beneficial owners of the Outstanding
     Company Common Stock and Company Voting Securities immediately prior to
     such Business Combination do not in the aggregate, immediately following
     such Business Combination, beneficially own, directly or indirectly, more
     than 60% of, respectively, the then outstanding shares of common stock and
     the combined voting power of the then outstanding voting securities
     entitled to vote generally in the election of directors,

                                       3
<PAGE>

     as the case may be, of the corporation resulting from such Business
     Combination in substantially the same proportion as their ownership
     immediately prior to such Business Combination of the Outstanding Company
     Common Stock and Company Voting Securities, as the case may be; or

          (iv)   (A) a complete liquidation or dissolution of the Company or (B)
     sale or other disposition of all or substantially all of the assets of the
     Company other than to a corporation with respect to which, immediately
     following such sale or disposition, more than 60% of, respectively, the
     then outstanding shares of common stock and the combined voting power of
     the then outstanding voting securities entitled to vote generally in the
     election of directors is then beneficially owned, directly or indirectly,
     in the aggregate by all or substantially all of the individuals and
     entities who were the beneficial owners, respectively, of the Outstanding
     Company Common Stock and Company Voting Securities immediately prior to
     such sale or disposition in substantially the same proportion as their
     ownership of the Outstanding Company Common Stock and Company Voting
     Securities, as the case may be, immediately prior to such sale or
     disposition.

          (v)    Neither the sale of Company common stock in an initial public
     offering, nor the distribution of Company common stock by Capital One
     Financial Corporation's parent corporation to its shareholders in a
     transaction to which Section 355 of the Internal Revenue Code applies, nor
     any restructuring of the

                                       4
<PAGE>

     Company or its Board of Directors in contemplation of or as the result of
     either of such events, shall constitute a Change of Control.

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

     (e)  "Company" means Capital One Financial Corporation, a Delaware
corporation.

     (f)  "Company Stock" means Common Stock of the Company. If the par value of
the Company Stock is changed, or in the event of a change in the capital
structure of the Company (as provided in Section 15), the shares resulting from
such a change shall be deemed to be Company Stock within the meaning of the
Plan.

     (g)  "Date of Grant" means the date on which an Award is granted by the
Committee or such later date specified by the Committee as the date as of which
the Award is to be effective.

     (h)  "Disability" or "Disabled" means, as to an Incentive Stock Option, a
Disability within the meaning of Code section 22(e)(3). As to all other Awards,
the Committee shall determine whether a Disability exists and such determination
shall be conclusive.

     (i)  "Distribution" means the distribution of the Company's common stock to
shareholders of the Company's parent corporation in a transaction to which Code
Section 355 applies.

     (j)  "Distribution Date" means the date on which the Distribution occurs.

     (k)  "Fair Market Value" means, on the date shares of the Company Stock are
offered in an initial public offering, the offering price, and on any given date
thereafter,

                                       5
<PAGE>

the average of the high and low price on such date as reported on The New York
Stock Exchange-Composite Transactions Tape. In the absence of any such sale,
fair market value means the average of the highest bid and lowest asked prices
of a share of Company Stock on such date as reported by such source. In the
absence of such average or if shares of Company Stock are no longer traded on
The New York Stock Exchange, the fair market value shall be determined by the
Committee using any reasonable method in good faith.

     (l)  "Incentive Stock" means Company Stock awarded when performance goals
are achieved pursuant to an incentive plan as provided in Section 9.

     (m)  "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable Federal income tax treatment under,
Code section 422.

     (n)  "Insider" means a person subject to Section 16(b) of the Securities
Exchange Act of 1934.

     (o)  "Nonstatutory Stock Option" means an Option, which does not meet the
requirements of Code section 422, or even if meeting the requirements of Code
section 422, is not intended to be an Incentive Stock Option and is so
designated.

     (p)  "Option" means a right to purchase Company Stock granted under the
Plan, at a price determined in accordance with the Plan.

     (q)  "Parent" means, with respect to any corporation, a "parent
corporation" of that corporation within the meaning of Code section 424(e).

     (r)  "Participant" means any employee who receives an Award under the Plan.

                                       6
<PAGE>

     (s)  "Reload Feature" means a feature of an Option described in an
employee's stock option agreement that provides for the automatic grant of a
Reload Option in accordance with the provisions described in Section 10(d).

     (t)  "Reload Option" means an Option granted to an employee equal to the
number of shares of already owned Company Stock delivered by the employee to
exercise an Option described in Section 10(d).

     (u)  "Restricted Stock" means Company Stock awarded upon the terms and
subject to the restrictions set forth in Section 8.

     (v)  "Restricted Stock Award" means an award of Restricted Stock granted
under the Plan.

     (w)  "Rule 16b-3" means Rule 16b-3 of the Securities Exchange Act of 1934.
A reference in the Plan to Rule 16b-3 shall include a reference to any
corresponding rule (or number redesignation) of any amendments to Rule 16b-3
enacted after the effective date of the Plan's adoption.

     (x)  "Stock Appreciation Right" means a right granted under the Plan to
receive from the Company amounts in cash or shares of Company Stock upon the
surrender of an Option.

     (y)  "Stock Option Committee" or "Committee" means the committee appointed
by the Board as described under Section 16.

     (z)  "Subsidiary" means, with respect to any corporation, a "subsidiary
corporation" of that corporation within the meaning of Code section 424(f).

                                       7
<PAGE>

               (aa)   "10% Shareholder" means a person who owns, directly or
        indirectly, stock possessing more than 10% of the total combined voting
        power of all classes of stock of the Company or any Parent or Subsidiary
        of the Company. Indirect ownership of stock shall be determined in
        accordance with Code section 424(d).

        3.     General.  The following types of Awards may be granted under the
Plan: Options, Stock Appreciation Rights, Restricted Stock or Incentive Stock.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options.

        4.     Stock. Subject to Section 15 of the Plan, there shall be reserved
for issuance under the Plan an aggregate of 52,112,640 shares of Company Stock,
of which 41,612,640 shares (the "Existing Reserve") may be used for the grant of
any Award and 10,500,000 shares (the "New Reserve") may be used for the grant of
any Award except Incentive Stock Options, which shall be authorized, but
unissued shares. Shares granted under the Plan that expire or otherwise
terminate unexercised and shares forfeited pursuant to restrictions on
Restricted Stock or Incentive Stock may again be subjected to an Award under the
Plan. The Committee is expressly authorized to make an Award to a Participant
conditioned upon the surrender for cancellation of an existing Award. For
purposes of determining the number of shares that are available for Awards under
the Plan, such number shall include the number of shares surrendered by an
optionee or retained by the Company in payment of federal and state income tax
withholding liabilities upon exercise of a Nonstatutory Stock Option or a Stock
Appreciation Right.

        5.     Eligibility.

               (a) Any employee of the Company (or Parent or Subsidiary of the
Company) who, in the judgment of the Committee has contributed or can be
expected to contribute to the

                                       8
<PAGE>

profits or growth of the Company (or Parent or Subsidiary) shall be eligible to
receive Awards under the Plan. Directors of the Company who are employees and
are not members of the Committee are eligible to participate in the Plan. The
Committee shall have the power and complete discretion, as provided in Section
16, to select eligible employees to receive Awards and to determine for each
employee the terms and conditions, the nature of the award and the number of
shares to be allocated to each employee as part of each Award.

               (b)  The grant of an Award shall not obligate the Company or any
Parent or Subsidiary of the Company to pay an employee any particular amount of
remuneration, to continue the employment of the employee after the grant or to
make further grants to the employee at any time thereafter.

        6.     Stock Options.

               (a)  Whenever the Committee deems it appropriate to grant
Options, notice shall be given to the eligible employee stating the number of
shares for which Options are granted, the Option price per share, whether the
Options are Incentive Stock Options or Nonstatutory Stock Options, the extent to
which Stock Appreciation Rights are granted (as provided in Section 7), and the
conditions to which the grant and exercise of the Options are subject. This
notice shall constitute the stock option agreement between the Company and the
eligible employee.

               (b)  The exercise price of shares of Company Stock covered by an
Option shall be not less than 100% of the Fair Market Value of such shares on
the Date of Grant. If the employee is a 10% Shareholder and the Option is an
Incentive Stock Option, the exercise price shall be not less than 110% of the
Fair Market Value of such shares on the Date of Grant.

                                       9
<PAGE>

               (c)  Options may be exercised in whole or in part at such times
as may be specified by the Committee in the employee's stock option agreement;
provided that the exercise provisions for Incentive Stock Options shall in all
events not be more liberal than the following provisions:

                    (i)  No Incentive Stock Option may be exercised after the
               first to occur of (x) ten years (or, in the case of an Incentive
               Stock Option granted to a 10% Shareholder, five years) from the
               Date of Grant, (y) three months from the employee's retirement or
               termination of employment with the Company and its Parent and
               Subsidiary corporations for reasons other than Disability or
               death, or (z) one year from the employee's termination of
               employment on account of Disability or death.

                    (ii) Except as otherwise provided in this paragraph, no
               Incentive Stock Option may be exercised unless the employee is
               employed by the Company or a Parent or Subsidiary of the Company
               at the time of the exercise (or was so employed not more than
               three months before the time of the exercise) and has been
               employed by the Company or a Parent or Subsidiary of the Company
               at all times since the Date of Grant. If an employee's employment
               is terminated other than by reason of his Disability or death at
               a time when the employee holds an Incentive Stock Option that is
               exercisable (in whole or in part), the employee may exercise any
               or all of the exercisable portion of the Incentive Stock Option
               (to the extent exercisable on the date of termination) within
               three months after the employee's termination of employment. If
               an employee's employment is

                                       10
<PAGE>

               terminated by reason of his Disability at a time when the
               employee holds an Incentive Stock Option that is exercisable (in
               whole or in part), the employee may exercise any or all of the
               exercisable portion of the Incentive Stock Option (to the extent
               exercisable on the date of Disability) within one year after the
               employee's termination of employment. If an employee's employment
               is terminated by reason of his death at a time when the employee
               holds an Incentive Stock Option that is exercisable (in whole or
               in part), the Incentive Stock Option may be exercised (to the
               extent exercisable on the date of death) within one year after
               the employee's death by the person to whom the employee's rights
               under the Incentive Stock Option shall have passed by will or by
               the laws of descent and distribution.

                      (iii)  An Incentive Stock Option by its terms, shall be
               exercisable in any calendar year only to the extent that the
               aggregate Fair Market Value (determined at the Date of Grant) of
               the Company Stock with respect to which incentive stock options
               are exercisable for the first time during the calendar year does
               not exceed $100,000 (the "Limitation Amount"). Incentive Stock
               Options granted under the Plan and similar incentive options
               granted after 1986 under all other plans of the Company and any
               Parent or Subsidiary of the Company shall be aggregated for
               purposes of determining whether the Limitation Amount has been
               exceeded. The Board may impose such conditions as it deems
               appropriate on an Incentive Stock Option to ensure that the
               foregoing requirement is met. If Incentive Stock Options that
               first become exercisable in a calendar year exceed the Limitation

                                       11
<PAGE>

               Amount, the excess Options will be treated as Nonstatutory Stock
               Options to the extent permitted by law.

               (d) The Committee may, in its discretion, grant Options which by
their terms become fully exercisable upon a Change of Control, notwithstanding
other conditions on exercisability in the stock option agreement.

               (e) The maximum number of shares with respect to which
Nonstatutory Options or Stock Appreciation Rights may be granted in any calendar
year to an employee eligible to participate in the Plan is as follows: the Chief
Executive Officer, 1,500,000; each of the next four most highly compensated
employees, 1,000,000; each other eligible employee, 500,000.

               (f) The Committee may, in its discretion, grant Options
containing or amend Options previously granted to provide for a Reload Feature
subject to the limitations of Section 10(d).

               (g) Notwithstanding paragraph (c) above, the Committee may, in
its discretion, amend a previously granted Incentive Stock Option to provide for
more liberal exercise provisions; provided however if the Incentive Stock Option
as amended no longer meets the requirements of Code section 422, and as a result
such Option no longer qualifies for favorable Federal income tax treatment under
Code section 422, the amendments shall not become effective without the written
consent of the Participant and provided further that no Incentive Stock Option
may be exercised after ten (10) years (or, in the case of an Incentive Stock
Option granted to a 10% Shareholder, five (5) years) from the Date of Grant.

                                       12
<PAGE>

        7.     Stock Appreciation Rights.

               (a) Whenever the Committee deems it appropriate, Stock
Appreciation Rights may be granted in connection with all or any part of an
Incentive Stock Option. At the discretion of the Committee, Stock Appreciation
Rights may also be granted in connection with all or any part of a Nonstatutory
Stock Option, either concurrently with the grant of the Nonstatutory Stock
Option or at any time thereafter during the term of the Nonstatutory Stock
Option. The following provisions apply to all Stock Appreciation Rights that are
granted in connection with Options:

                      (i)  Stock Appreciation Rights shall entitle the employee,
               upon exercise of all or any part of the Stock Appreciation
               Rights, to surrender to the Company unexercised that portion of
               the underlying Option relating to the same number of shares of
               Company Stock as is covered by the Stock Appreciation Rights (or
               the portion of the Stock Appreciation Rights so exercised) and to
               receive in exchange from the Company an amount in cash or shares
               of Company Stock (as provided in the Stock Appreciation Right)
               equal to the excess of (x) the Fair Market Value on the date of
               exercise of the Company Stock covered by the surrendered portion
               of the underlying Option over (y) the exercise price of the
               Company Stock covered by the surrendered portion of the
               underlying Option. The Committee may limit the amount that the
               employee will be entitled to receive upon exercise of the Stock
               Appreciation Right.

                                       13
<PAGE>

                      (ii)  Upon the exercise of a Stock Appreciation Right and
               surrender of the related portion of the underlying Option, the
               Option, to the extent surrendered, shall not thereafter be
               exercisable.

                      (iii) Subject to any further conditions upon exercise
               imposed by the Committee, a Stock Appreciation Right issued in
               tandem with an Option shall be exercisable only to the extent
               that the related Option is exercisable and shall expire no later
               than the date on which the related Option expires.

                      (iv)  A Stock Appreciation Right may only be exercised at
               a time when the Fair Market Value of the Company Stock covered by
               the Stock Appreciation Right exceeds the exercise price of the
               Company Stock covered by the underlying Option.

               (b) The manner in which the Company's obligation arising upon the
exercise of a Stock Appreciation Right shall be paid shall be determined by the
Committee and shall be set forth in the employee's Option or the related Stock
Appreciation Rights agreement. The Committee may provide for payment in Company
Stock or cash, or a fixed combination of Company Stock or cash, or the Committee
may reserve the right to determine the manner of payment at the time the Stock
Appreciation Right is exercised. Shares of Company Stock issued upon the
exercise of a Stock Appreciation Right shall be valued at their Fair Market
Value on the date of exercise.

        8.     Restricted Stock Awards.

               (a) Whenever the Committee deems it appropriate to grant a
Restricted Stock Award, notice shall be given to the Participant stating the
number of shares of Restricted Stock

                                       14
<PAGE>

for which the Restricted Stock Award is granted and the terms and conditions to
which the Restricted Stock Award is subject. This notice, when accepted in
writing by the Participant shall become an award agreement between the Company
and the Participant and certificates representing the shares shall be issued and
delivered to the Participant. A Restricted Stock Award may be made by the
Committee in its discretion without cash consideration.

               (b)    Restricted Stock issued pursuant to the Plan shall be
subject to the following restrictions:

                      (i)   Unless otherwise provided by the Committee,
               Restricted Stock may not be sold, assigned, transferred or
               disposed of within a six-month period beginning on the Date of
               Grant.

                      (ii)  None of such shares may be sold, assigned,
               transferred, pledged, hypothecated, or otherwise encumbered or
               disposed of until the restrictions on such shares shall have
               lapsed or shall have been removed pursuant to paragraph (d) or
               (e) below.

                      (iii) If a Participant ceases to be employed by the
               Company or a Parent or Subsidiary of the Company, the Participant
               shall forfeit to the Company any shares of Restricted Stock, the
               restrictions on which shall not have lapsed or shall not have
               been removed pursuant to paragraph (d) or (e) below, on the date
               such Participant ceases to be so employed.

               (c)  Upon the acceptance by a Participant of a Restricted Stock
Award, such Participant shall, subject to the restrictions set forth in
paragraph (b) above, have all the rights of a shareholder with respect to the
shares of Restricted Stock subject to such Restricted Stock

                                       15
<PAGE>

Award, including, but not limited to, the right to vote such shares of
Restricted Stock and the right to receive all dividends and other distributions
paid thereon. Certificates representing Restricted Stock shall bear a legend
referring to the restrictions set forth in the Plan and the Participant's award
agreement.

               (d) The Committee shall establish as to each Restricted Stock
Award the terms and conditions upon which the restrictions set forth in
paragraph (b) above shall lapse. Such terms and conditions may include, without
limitation, the passage of time, the meeting of performance goals, the lapsing
of such restrictions as a result of the Disability, death or retirement of the
Participant, or the occurrence of a Change of Control.

               (e) Notwithstanding the forfeiture provisions of paragraph
(b)(iii) above, the Committee may at any time, in its sole discretion,
accelerate the time at which any or all restrictions will lapse or remove any
and all such restrictions.

               (f) Each Participant shall agree at the time his Restricted Stock
Award is granted, and as a condition thereof, to pay to the Company, or make
arrangements satisfactory to the Company regarding the payment to the Company
of, the aggregate amount of any Federal, state or local taxes of any kind
required by law to be withheld with respect to the shares of Restricted Stock
subject to the Restricted Stock Award. Until such amount has been paid or
arrangements satisfactory to the Company have been made, no stock certificate
free of a legend reflecting the restrictions set forth in paragraph (b) above
shall be issued to such Participant.

               (g) The Company may place on any certificate representing Company
Stock issued in connection with an Incentive Award any legend deemed desirable
by the Company's

                                       16
<PAGE>

counsel to comply with Federal or state securities laws, and the Company may
require a customary written indication of the Participant's investment intent.

        9.     Incentive Stock Awards.

               (a) Incentive Stock may be issued pursuant to the Plan in
connection with incentive programs established from time to time by the
Committee when performance criteria established by the Committee as part of the
incentive program have been achieved. If the objectives established by the
Committee as a prerequisite to the receipt of Incentive Stock have not been
achieved, no stock will be issued, except as provided in (c). A Participant
eligible for the receipt or issuance of incentive shares will have no rights as
a stockholder before actual receipt of the Incentive Stock.

               (b) Whenever the Committee deems it appropriate, the Committee
may establish an incentive program and notify Participants of their
participation in and the terms of the incentive program. More than one incentive
program may be established by the Committee and they may operate concurrently or
for varied periods of time and a Participant may be permitted to participate in
more than one incentive program at the same time. Incentive Stock will be issued
only subject to the incentive program and the Plan and consistent with meeting
the performance goals set by the Committee. Incentive Stock may be issued
without cash consideration.

               (c) The Committee may provide in the incentive program, or
subsequently, that Incentive Stock will be issued if a Change of Control occurs
even though the performance goals set by the Committee have not been met.

                                       17
<PAGE>

               (d) A Participant's interest in an incentive program may not be
sold, assigned, transferred, pledged, hypothecated, or otherwise encumbered.

               (e) Each Participant shall agree as a condition of his
participation in an incentive program and the receipt of Incentive Stock, to pay
to the Company, or make arrangements satisfactory to the Company regarding the
payment to the Company of, the aggregate amount of any Federal, state or local
taxes of any kind required by law to be withheld with respect to the shares of
Incentive Stock received. Until such amount has been paid or arrangements
satisfactory to the Company have been made, no stock certificate free of a
legend reflecting the restrictions set forth in paragraph (b) above shall be
issued to such Participant.

               (f) The Company may place on any certificate representing Company
Stock issued in connection with an Incentive Award any legend deemed desirable
by the Company's counsel to comply with Federal or state securities laws, and
the Company may require a customary written indication of the Participant's
investment intent.

        10.    Method of Exercise of Options and Stock Appreciation Rights.

               (a) Options and Stock Appreciation Rights may be exercised by the
employee giving written notice of the exercise to the Company, stating the
number of shares the employee has elected to purchase under the Option or the
number of Stock Appreciation Rights he has elected to exercise. In the case of
the purchase of shares under an Option, such notice shall be effective only if
accompanied by the exercise price in full in cash; provided that if the terms of
an Option so permit, the employee may (i) deliver Company Stock that the
Participant has owned for at least six (6) months (valued at Fair Market Value
on the date of exercise) in satisfaction of all or any part of the exercise
price, (ii) deliver a properly executed exercise notice together with

                                       18
<PAGE>

irrevocable instructions to a broker to promptly deliver to the Company the
amount of the sale or loan proceeds to pay the exercise price, or (iii) deliver
an interest bearing promissory note, payable to the Company, in payment of all
or part of the exercise price together with such collateral as may be required
by the Committee at the time of exercise. The interest rate under any such
promissory note shall be equal to the minimum interest rate required at the time
to avoid imputed interest to the Participant under the Code.

               (b) Options and Stock Appreciation Rights may also be exercised
by the employee in accordance with any other method or methods of exercise as
may be approved from time to time by the Committee;

               (c) The Company may place on any certificate representing Company
Stock issued upon the exercise of an Option or Stock Appreciation Right any
legend deemed desirable by the Company's counsel to comply with Federal or state
securities laws, and the Company may require of the employee a customary written
indication of his investment intent. Until the employee has made any required
payment, including any applicable Federal, state and local withholding taxes,
and has had issued to him a certificate for the shares of Company Stock
acquired, he shall possess no shareholder rights with respect to the shares.

               (d) If an employee exercises an Option that has a Reload Feature
by delivering already owned shares of Company Stock, the employee shall
automatically be granted a Reload Option. The Reload Option shall be subject to
the following provisions:

                   (i) The Reload Option shall cover the number of shares of
               Company Stock delivered by the employee to the Company to
               exercise the Option with the Reload Feature;

                                       19
<PAGE>

                      (ii)  The Reload Option will not have a Reload Feature;

                      (iii) The exercise price of shares of Company Stock
               covered by a Reload Option shall be 100% of the Fair Market Value
               of such shares on the date the employee delivers shares of
               Company Stock to the Company to exercise the Option that has a
               Reload Feature;

                      (iv)  The Reload Option shall be subject to the same
               restrictions on exercisability as those imposed on the underlying
               Option (possessing the Reload Feature);

                      (v)   The Reload Option shall not be exercisable until the
               expiration of any retention holding period imposed on the
               disposition of any shares of Company Stock covered by the
               underlying Option (possessing the Reload Feature).

The Committee may, in its discretion, cause the Company to place on any
certificate representing Company Stock issued to a Participant upon the exercise
of an underlying Option (possessing a Reload Feature as evidenced by the stock
option agreement for such Option) delivered pursuant to this subsection (d), a
legend restricting the sale or other disposition of such Company Stock.

               (e) Notwithstanding anything herein to the contrary, Awards shall
always be granted and exercised in such a manner as to conform to the provisions
of Rule 16b-3, or any replacement rule adopted, as the same now exists or may,
from time to time, be amended.

        11.    Applicable Withholding Taxes. As an alternative to making a cash
payment to the Company to satisfy tax withholding obligations, the Committee may
establish procedures permitting the Participant to elect to (a) deliver shares
of already owned Company Stock or (b)

                                       20
<PAGE>

have the Company retain that number of shares of Company Stock that would
satisfy all or a specified portion of the Federal, state and local tax
liabilities of the Participant arising in the year the Award becomes subject to
tax. Any such election shall be made only in accordance with procedures
established by the Committee.

        12.    Transferability of Awards and Options. To the extent required by
the Code, Awards, by their terms, shall not be transferable by the Participant
except by will or by the laws of descent and distribution and shall be
exercisable, during the Participant's lifetime, only by the Participant or by
his guardian or legal representative. The Committee is expressly authorized, in
its discretion, to provide that all or a portion of a Nonstatutory Stock Option
or Stock Appreciation Right may be granted to a Participant upon terms that
permit transfer of the Nonstatutory Stock Option or Stock Appreciation Right in
a form and manner determined by the Committee.

        13.    Effective Date of the Plan. This Plan having been adopted by the
Company's Board and approved by the Company's sole shareholder shall be
effective on October 28, 1994. Until the requirements of any applicable federal
and state securities laws have been met, no Option or Stock Appreciation Right
shall be exercisable and no award of Restricted Stock or Incentive Stock shall
be made.

        14.    Termination, Modification, Change. If not sooner terminated by
the Board, this Plan shall terminate at the close of business on October 27,
2004. No Awards shall be made under the Plan after its termination. The Board
may terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided, that, if and to the extent required by the Code, no change
shall be made that materially increases the total number of shares of Company
Stock

                                       21
<PAGE>

reserved for issuance pursuant to Awards granted under the Plan (except pursuant
to Section 15), materially expands the class of persons eligible to receive
Awards, or materially increases the benefits accruing to Participants under the
Plan, unless such change is authorized by the shareholders of the Company.
Notwithstanding the foregoing, the Board may amend the Plan and unilaterally
amend Awards as it deems appropriate to ensure compliance with Rule 16b-3 and to
cause Incentive Stock Options to meet the requirements of the Code and
regulations thereunder. Except as provided in the preceding sentence, a
termination or amendment of the Plan shall not, without the consent of the
Participant, detrimentally affect a Participant's rights under an Award
previously granted to him.

        15.    Change in Capital Structure.

               (a) In the event of a stock dividend, stock split or combination
of shares, spin-off, recapitalization or merger in which the Company is the
surviving corporation or other change in the Company's capital stock (including,
but not limited to, the creation or issuance to shareholders generally of
rights, options or warrants for the purchase of common stock or preferred stock
of the Company), the number and kind of shares of stock or securities of the
Company to be subject to the Plan and to Awards then outstanding or to be
granted under the Plan, the maximum number of shares or securities which may be
delivered under the Plan, the exercise price and other relevant provisions shall
be appropriately adjusted by the Committee, whose determination shall be binding
on all persons. If the adjustment would produce fractional shares with respect
to any unexercised Option, the Committee may adjust appropriately the number of
shares covered by the Option so as to eliminate the fractional shares.

                                       22
<PAGE>

               (b) If the Company is a party to a consolidation or a merger in
which the Company is not the surviving corporation, a transaction that results
in the acquisition of substantially all of the Company's outstanding stock by a
single person or entity, or a sale or transfer of substantially all of the
Company's assets, the Committee may take such actions with respect to
outstanding Incentive Awards as the Committee deems appropriate.

               (c) Notwithstanding anything in the Plan to the contrary, the
Committee may take the foregoing actions without the consent of any Participant,
and the Committee's determination shall be conclusive and binding on all persons
for all purposes.

        16.    Administration of the Plan. The Plan shall be administered by the
Committee consisting solely of two or more nonemployee directors of the Company
(within the meaning of Rule 16b-3), who shall be appointed by the Board. The
Committee shall have general authority to impose any limitation or condition
upon an Award the Committee deems appropriate to achieve the objectives of the
Award and the Plan and, in addition, and without limitation and in addition to
powers set forth elsewhere in the Plan, shall have the following specific
authority:

               (a) The Committee shall have the power and complete discretion to
        determine (i) which eligible employees shall receive an Award and the
        nature of the Award, (ii) the number of shares of Company Stock to be
        covered by each Award, (iii) whether Options shall be Incentive Stock
        Options or Nonstatutory Stock Options, (iv) when, whether and to what
        extent Stock Appreciation Rights shall be granted in connection with
        Options, (v) whether to include a Reload Feature in an Option and to
        impose limitations on the use of shares acquired through the exercise of
        a Reload Option to exercise Options, (vi) the fair market value of
        Company Stock, (vii) the time or times when an Award shall be granted,

                                       23
<PAGE>

        (viii) whether an Award shall become vested over a period of time and
        when it shall be fully vested, (ix) conditions relating to the length of
        time before disposition of Company Stock received in connection with an
        Award is permitted, (x) the terms and conditions on which restrictions
        upon Restricted Stock shall lapse, (xi) whether to accelerate the time
        of receipt of Incentive Stock or the time when any or all restrictions
        with respect to Restricted Stock will lapse or be removed, (xii) the
        terms of incentive programs, performance criteria and other factors
        relevant to the issuance of Incentive Stock or the lapse of restrictions
        on Restricted Stock, (xiii) when Options and Stock Appreciation Rights
        may be exercised, (xiv) whether a Disability exists, (xv) the manner in
        which payment will be made upon the exercise of Options or Stock
        Appreciation Rights, (xvi) whether to approve a Participant's election
        (x) to deliver shares of already owned Company Stock to satisfy tax
        liabilities arising upon the exercise of a Nonstatutory Stock Option or
        Stock Appreciation Right or (y) to have the Company withhold from the
        shares to be issued upon the exercise or receipt of an Award that number
        of shares necessary to satisfy tax liabilities arising from such
        exercise or receipt, (xvii) notice provisions relating to the sale of
        Company Stock acquired under the Plan, and (xviii) any additional
        requirements relating to Awards that the Committee deems appropriate.
        Notwithstanding the foregoing, no "tandem stock options" (where two
        stock options are issued together and the exercise of one option affects
        the right to exercise the other option) may be issued in connection with
        Incentive Stock Options. The Committee shall also have the power to
        amend the terms of previously granted Awards so long as the terms as
        amended are consistent with the terms of the Plan and provided that the
        consent of the Participant is

                                       24
<PAGE>

        obtained with respect to any amendment that would be detrimental to him,
        except that such consent will not be required if such amendment is for
        the purpose of complying with Rule 16b-3 or any requirement of the Code
        applicable to the Award.

               (b) The Committee may adopt rules and regulations for carrying
        out the Plan. The interpretation and construction of any provision of
        the Plan by the Committee shall be final and conclusive. The Committee
        may consult with counsel, who may be counsel to the Company, and shall
        not incur any liability for any action taken in good faith in reliance
        upon the advice of counsel.

               (c) A majority of the members of the Committee shall constitute a
        quorum, and all actions of the Committee shall be taken by a majority of
        the members present. Any action may be taken by a written instrument
        signed by all of the members, and any action so taken shall be fully
        effective as if it had been taken at a meeting.

               (d) The Board of Directors from time to time may appoint members
        previously appointed and may fill vacancies, however caused, in the
        Committee.

        17.    Notice. All notices and other communications required or
permitted to be given under this Plan shall be in writing and shall be deemed to
have been duly given if delivered as follows: (a) if to the Company - delivery
shall be made personally or by first class mail, postage prepaid at its
principal business address to the attention of the Company's Director of Human
Resources; and (b) if to any Participant - personally, including by delivery
through the Company's internal electronic system with a return receipt requested
or interoffice mail system, or by first class mail, postage prepaid, at the last
known address of the Participant known to the sender at the time the notice or
other communication is sent.

                                       25
<PAGE>

        18.    Interpretation. The terms of this Plan are subject to all present
and future regulations and rulings of the Secretary of the Treasury or his
delegate relating to the qualification of Incentive Stock Options under the
Code. If any provision of the Plan conflicts with any such regulation or ruling,
then that provision of the Plan shall be void and of no effect.

        19.    Foreign Equity Incentive Plans. The Committee may authorize any
foreign Subsidiary or any foreign unincorporated division of the Company or of a
Subsidiary to adopt a plan for granting Awards (a "Foreign Equity Incentive
Plan"). All Awards granted under a Foreign Equity Incentive Plan shall be
treated as grants under this Plan. A Foreign Equity Incentive Plan shall have
such terms as the Committee permits; provided that such terms are not
inconsistent with the provisions of this Plan; and provided further that such
terms may be more restrictive than those in this Plan. Awards granted under a
Foreign Equity Incentive Plan shall be governed by the terms of this Plan except
to the extent that the terms of the Foreign Equity Incentive Plan are more
restrictive than the terms of this Plan, in which case such terms of the Foreign
Equity Incentive Plan shall control.

        20.    Substitute Award. The Committee may make a grant of an Award to
an employee of another corporation who becomes an employee of the Company (or
Parent or Subsidiary of the Company) by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization, liquidation or
similar transaction involving the Company (or Parent or Subsidiary of the
Company) in substitution for any award made by such corporation. The terms and
conditions of the substitute Award may vary from the terms and conditions
required by the Plan and from those of the substituted award. The Committee
shall prescribe the provisions of the substitute Award.

                                       26
<PAGE>

        21.    Provisions Applicable to French Employees. Notwithstanding any
other provision of the Plan to the contrary, the following provisions shall
apply to Options granted to any employee who is employed by a French company or
who works primarily in France (hereinafter collectively referred to as a "French
Employee").

               (a) Notwithstanding anything to the contrary herein, whether a
Disability exists for a French Employee shall be determined in accordance with
French law.

               (b) Notwithstanding the provisions of Section 3 herein, only
Options may be granted to French Employees to the exclusion of any other type of
Awards. Moreover, Options granted under the Plan to French Employees may be
Nonstatutory Stock Options only.

               (c) Notwithstanding anything to the contrary herein, no Option
shall be granted to any French Employee who holds more than ten percent of the
Company's capital as of the Date of Grant.

               (d) Notwithstanding the provisions of Section 4 herein, (i) at no
time shall the number of shares underlying Options granted to French Employees
but not exercised exceed one-third of the total number of shares of Company
Stock issued and outstanding, and (ii) the Committee shall not make an Award to
any French Employee conditioned upon the surrender for cancellation of an
existing Award.

               (e) Notwithstanding the provisions of Section 6(b) herein, all
Options granted to French Employees shall be granted at an exercise price per
share equal to the greater of (i) the Fair Market Value per share of Company
Stock as of the Date of Grant and (ii) 80% of the average Fair Market Value per
share of Company Stock for the 20 trading days preceding the Date of Grant.

                                       27
<PAGE>

               (f) Notwithstanding anything to the contrary herein, in respect
of a Participant who is a French Employee, upon such French Employee's death,
the vested portion of such Participant's Option shall remain exercisable for a
six-month period after the date of his death and shall be exercisable by his
heirs, provided his heirs agree to comply with and be bound by the Plan and the
employee's stock option agreement, if applicable.

               (g) Notwithstanding anything to the contrary herein, in respect
of a Participant who is a French Employee, the method of exercise shall comply
with applicable French law.

               (h) Notwithstanding the provisions of Section 12 herein, no
Option granted to a French Employee shall be transferable except as provided in
paragraph (f) above.

               (i) Notwithstanding the provisions of Section 14 herein, no
Options shall be granted to any French Employee under the Plan five years after
the later of (i) the date the Company's shareholders initially approved the Plan
or (ii) the date on which the Plan has been subsequently re-authorized, in its
original form or as amended from time to time by the Board, by the Company's
shareholders.

               (j) Notwithstanding anything to the contrary herein, no portion
of any Option granted to a French Employee shall become exercisable before the
second anniversary of the Date of Grant. Moreover, notwithstanding anything to
the contrary herein, no share of the Company Stock received pursuant to the
exercise of an Option by a French Employee may be sold for a three-year period
after the date the Option is exercised, unless (i) such sale occurs on or after
the fifth anniversary of the Option's Date of Grant; (ii) the Optionee is
dismissed or retired from the Company (to the extent that the Optionee has
exercised Options at least three months prior to notice of such dismissal or
retirement); (iii) the Optionee's dies or terminates due to

                                       28
<PAGE>

disability. The stock option agreements with respect to French Employees shall
reflect these restrictions and may provide that if the Optionee sells shares in
breach of the foregoing restrictions, he or she shall be responsible for his or
her share of any taxes or social charges arising from such sale.

               (k) Notwithstanding anything to the contrary herein, the Company
shall not amend or terminate all or a portion of an Option granted to any French
Employee without the consent of such French Employee.

               (l) Notwithstanding the provisions of Section 15 herein, any
adjustment made to any Option granted to a French Employee shall comply with
applicable French law.

                                       29

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