Document:

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                                                                   Exhibit 10.4

                                                                [EXECUTION COPY]

                               AMENDMENT NO. 3 TO
                      AMENDED AND RESTATED CREDIT AGREEMENT

         AMENDMENT dated as of November 10, 1999 to the Amended and Restated
Credit Agreement dated as of December 11, 1998 (as heretofore amended the
"CREDIT AGREEMENT") among POLAROID CORPORATION (the "COMPANY"), the LENDERS
party thereto (the "LENDERS"), MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as
Administrative Agent and Collateral Agent (the "AGENT"), and BANKBOSTON, N.A., a
Co-Agent.

                              W I T N E S S E T H :

         WHEREAS, the parties hereto desire to amend the Credit Agreement to
include additional permissible Investments;

         NOW, THEREFORE, the parties hereto agree as follows:

         SECTION 1. DEFINED TERMS; REFERENCES. Unless otherwise specifically
defined herein, each term used herein which is (i) defined in the Credit
Agreement shall have the meaning assigned to such term in the Credit Agreement
and (ii) defined in both the Credit Agreement and the Supplemental Indenture has
the meaning assigned to such term in the Credit Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Credit Agreement shall, after this Amendment becomes effective,
refer to the Credit Agreement as amended hereby.

         SECTION 2. AMENDMENT TO INVESTMENTS. Section 5.13 of the Credit
Agreement is amended by deleting the word "and" from subsection (b), relabeling
the current text of subsection (c) as subsection "(d)" (and changing the
reference in the last sentence thereof to "clause (d)") and inserting the
following new subsection (c) after subsection (b):

                  "(c)     any Investment constituting all or any portion of the
                           consideration received by the Company or any
                           Subsidiary for the sale, transfer or other
                           disposition of the stock of a Designated Subsidiary
                           or any property or assets used in a Designated
                           Business (or

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                           any other Investment received in exchange for any
                           such Investment); and"

         SECTION 3. CONSENT BY GUARANTORS. By its signature below, each
Guarantor hereby consents to this Amendment, and acknowledges that this
Amendment shall not alter, release, discharge or otherwise affect any of its
obligations under the Credit Agreement or any Financing Document (as defined in
the Credit Agreement), and hereby ratifies and confirms all of the Financing
Documents (as so defined) to which it is a party.

         SECTION 4.  GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York.

         SECTION 5. COUNTERPARTS. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         SECTION 6. EFFECTIVENESS. This Amendment shall become effective as of
the date hereof on the date when the Agent shall have received from each of the
Borrower, each Guarantor and the Required Lenders a counterpart hereof signed by
such party or facsimile or other written confirmation (in form satisfactory to
the Agent) that such party has signed a counterpart hereof.

                                       2

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         IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the date first above written.

                                   POLAROID CORPORATION

                                   By:   /s/ JUDITH G. BOYNTON
                                         ---------------------------------------
                                         Name:    Judith G. Boynton
                                         Title:   Executive Vice President,
                                                  Chief Financial Officer

                                   INNER CITY, INC.

                                   By:   /s/ JOHN R. JENKINS
                                         ---------------------------------------
                                         Name:    John R. Jenkins
                                         Title:   President

                                   POLAROID ASIA PACIFIC LIMITED

                                   By:   /s/ CARL L. LUEDERS
                                         ---------------------------------------
                                         Name:    Carl L. Lueders
                                         Title:   Director

                                   POLAROID CARRIBEAN
                                         CORPORATION

                                   By:   /s/ CARL L. LUEDERS
                                         ---------------------------------------
                                         Name:    Carl L. Lueders
                                         Title:   Director

                                   POLAROID DIGITAL SOLUTIONS, INC.

                                   By:   /s/ CARL L. LUEDERS
                                         ---------------------------------------
                                         Name:    Carl L. Lueders
                                         Title:   Director

                                   POLAROID EYEWEAR, INC.

<PAGE>

                                   By:   /s/ CARL L. LUEDERS
                                         ---------------------------------------
                                         Name:    Carl L. Lueders
                                         Title:   Director

                                   POLAROID ID SYSTEMS, INC.

                                   By:   /s/ CARL L. LUEDERS
                                         ---------------------------------------
                                         Name:    Carl L. Lueders
                                         Title:   Director

                                   POLAROID MALAYSIA LIMITED

                                   By:   /s/ CARL L. LUEDERS
                                         ---------------------------------------
                                         Name:    Carl L. Lueders
                                         Title:   Director

                                   PRD CAPITAL INC.

                                   By:   /s/ CARL L. LUEDERS
                                         ---------------------------------------
                                         Name:    Carl L. Lueders
                                         Title:   Director

<PAGE>

                                   MORGAN GUARANTY TRUST
                                         COMPANY OF NEW YORK

                                   By:   /s/ DENNIS WILCZEK
                                         ---------------------------------------
                                         Name:    Dennis Wilczek
                                         Title:   Associate

                                   ABN AMRO BANK N.V.

                                   By:   /s/ DAVID CARROLL
                                         ---------------------------------------
                                         Name:    David Carroll
                                         Title:   AVP

                                   By:   /s/ JAMES ADELSHEIM
                                         ---------------------------------------
                                         Name:    James Adelsheim
                                         Title:   Group Vice President

                                   BANKBOSTON, N.A.

                                   By:   /s/ GRACE A. BARNETT
                                         ---------------------------------------
                                         Name:    Grace A. Barnett
                                         Title:   Vice President

                                   TRANSAMERICA BUSINESS CREDIT
                                         CORPORATION

                                   By:   /s/ PERRY VAVOULES
                                         ---------------------------------------
                                         Name:    Perry Vavoules
                                         Title:   Senior Vice President

<PAGE>

                                   FOOTHILL CAPITAL (L.A.)

                                   By:   _______________________________________
                                         Name:
                                         Title:

                                   DEUTSCHE BANK AG, NEW YORK
                                         AND/OR CAYMAN ISLANDS
                                         BRANCHES

                                   By:   /s/  ALEXANDER KAROW
                                         ---------------------------------------
                                         Name:    Alexander Karow
                                         Title:   Assistant Vice President

                                   By:   /s/ SUSAN L. PEARSON
                                         ---------------------------------------
                                         Name:    Susan L. Pearson
                                         Title:   Director

                                   BANK ONE, NA

                                   By:   /s/ PHILLIP D. MARTIN
                                         ---------------------------------------
                                         Name:    Phillip D. Martin
                                         Title:   First Vice President

                                   SENIOR DEBT PORTFOLIO

                                   By:   Boston Management and Research,
                                         as investment advisor

                                   By:   /s/ SCOTT H. PAGE
                                         ---------------------------------------
                                         Name:    Scott H. Page
                                         Title:   Vice President

<PAGE>

                                   THE SUMITOMO BANK, LIMITED,
                                       NEW YORK BRANCH

                                   By:   /s/ LEO E. PAGARIGAN
                                         ---------------------------------------
                                         Name:    Leo E. Pagarigan
                                         Title:   Vice President

                                   WACHOVIA BANK, N.A.

                                   By:   /s/ JOHN P. RAFFERTY
                                         ---------------------------------------
                                         Name:    John P. Rafferty
                                         Title:   Senior Vice President

                                   FLEET NATIONAL BANK

                                   By:
                                         ---------------------------------------
                                         Name:
                                         Title:

                                   MELLON BANK, N.A.

                                   By:   /s/ R. JANE WESTRICH
                                         ---------------------------------------
                                         Name:    R. Jane Westrich
                                         Title:   Vice President

                                   TEXTRON FINANCIAL CORPORATION

                                   By:   /s/ JANE M. LAVOIE
                                         ---------------------------------------
                                         Name:    Jane M. Lavoie
                                         Title:   AVP

<PAGE>

                                   PNC BANK, NATIONAL ASSOCIATION

                                   By:   /s/ DONALD V. DAVIS
                                         ---------------------------------------
                                         Name:    Donald V. Davis
                                         Title:   Vice President

                                   KZH STERLING LLC

                                   By:   /s/ PETER CHIN
                                         ---------------------------------------
                                         Name:    Peter Chin
                                         Title:   Authorized Agent

<PAGE>

                                   MORGAN GUARANTY TRUST
                                         COMPANY OF NEW YORK, as
                                         Administrative Agent

                                   By:   /s/ DENNIS WILCZEK
                                         ---------------------------------------
                                         Name:    Dennis Wilczek
                                         Title:   Associate

                                   BANKBOSTON, N.A., as Co-Agent

                                   By:   /s/ JANET G. O'DONNELL
                                         ---------------------------------------
                                         Name:    Janet G. O'Donnell
                                         Title:   Managing Director

                                   MORGAN GUARANTY TRUST
                                         COMPANY OF NEW YORK, as
                                         Collateral Agent

                                   By:   /s/ DENNIS WILCZEK
                                         ---------------------------------------
                                         Name:   Dennis Wilczek
                                         Title:  Associate<PAGE>

                                                 DOCUMENT CONTROL NO.:  SIP #3

                       1993 POLAROID STOCK INCENTIVE PLAN

                              AMENDED AND EFFECTIVE

                                 JANUARY 1, 1999

<PAGE>

                     THE 1993 POLAROID STOCK INCENTIVE PLAN

The purpose of the Plan is to advance the interests of the Company and its
shareholders by affording officers, executives and other key employees of the
Company and its Subsidiaries an opportunity to increase their proprietary
interest in the Company by the grant of Awards under the terms set forth herein.
The Company seeks to motivate present employees as well as attract highly
competent individuals whose judgment, initiative, leadership, and continued
effort contribute to the success of the Company and its Subsidiaries. The
Company believes that this Plan can give an incentive to managers to increase
revenues and profits.

                                    ARTICLE I

                                   DEFINITIONS

1.01     AWARD. Award shall mean an incentive award granted under the Plan,
         whether in the form of Options, Stock Appreciation Rights, Restricted
         Stock, Performance Awards, or any other form of consideration (which
         may provide for settlement in shares of Stock, cash and/or a
         combination thereof) determined by the Committee to be consistent with
         the purposes of the Plan, including but not limited to restricted
         units, phantom stock, stock appreciation shares, limited stock
         appreciation rights, stock acquisition rights, valuation protection
         rights, reload options or any other type of award or combination or
         derivative of various types of awards.

1.02     BOARD OR BOARD OF DIRECTORS.  Board or Board of Directors shall mean
         the Board of Directors of the Company.

1.03     CODE.  Code shall mean the Internal Revenue Code of 1986, as amended,
         unless otherwise specifically provided herein.

1.04     COMMITTEE. Committee shall mean a Committee of the Board of whom each
         member:

          (A) is not a current employee of the Company; and,

          (B) is not otherwise disqualified from being:

                                  Page 1 of 23

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               (i) a "non-employee director" with respect to the Company for
               purposes of Rule 16b-3(b)(3) under the Exchange Act (or any
               successor rule); or

               (ii) an "outside director" with respect to the Company for
               purposes of Section 162(m) of the Code (or any successor statute)
               and the rules and regulations of the Treasury Department
               promulgated thereunder; PROVIDED, HOWEVER, that the failure of
               any member of the Committee appointed by the Board in good faith
               to meet the requirements of clause (B) above shall not invalidate
               the Plan or any Award granted hereunder.

1.05     COMPANY. Company shall mean Polaroid Corporation, a Delaware
         corporation, and any successor thereof.

1.06     EXCHANGE ACT. Exchange Act shall mean the Securities Exchange Act of
         1934, as amended.

1.07     FAIR MARKET VALUE. Fair Market Value of the Stock shall mean the last
         sale price at which Stock is traded on any given date or, if no Stock
         is traded on such date, the most recent prior date on which Stock was
         traded, as reflected in the New York Stock Exchange Composite
         Transactions Index.

1.08     INCENTIVE STOCK OPTION.  Incentive Stock Option shall have the meaning
         given to it by Section 422 of the Code and as further defined in
         Article V hereof.

1.09     NONSTATUTORY STOCK OPTION.  Nonstatutory Stock Option shall mean any
         Option granted by the Company pursuant to this Plan which is not an
         Incentive Stock Option.

1.10     OPTION.  Option shall mean an option granted by the Company to purchase
         Stock pursuant to the provisions of this Plan and the Agreement
         executed pursuant thereto.

1.11     OPTION  PRICE.  Option Price shall mean the price per share of Stock
         purchasable  under an Option.  The Option Price shall be  determined
         by the Committee at the time of grant but, in the case of an Incentive
         Stock Option, shall not be less than the Fair Market Value on the date
         of grant.

                                  Page 2 of 23

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1.12     PARTICIPANT.  Participant shall mean an employee or former employee of
         the Company or one of its Subsidiaries who has received an Award
         granted by the Committee hereunder.

1.13     PERFORMANCE AWARD.  Performance Award means an award made pursuant to
         Article VIII that is subject to attainment of one or more Performance
         Goals.

1.14     PERFORMANCE GOAL.  Performance Goal means a standard established by the
         Committee to determine in whole or in part whether a Performance Award
         shall be earned.

1.15     PLAN.  Plan shall mean the 1993 Polaroid Stock Incentive Plan, as
         amended.

1.16     RESTRICTED STOCK AWARDS. A Restricted Stock Award shall mean a grant
         made by the Committee entitling the Participant to acquire, at no cost
         or for a purchase price determined by the Committee at the time of
         grant, shares of Stock subject to such restrictions and conditions as
         the Committee may determine at the time of grant ("Restricted Stock").

1.17     SECURITIES ACT.  Securities Act shall mean the Securities Act of 1933,
         as amended from time to time.

1.18     STOCK.  Stock shall mean common stock, par value $1 per share, issued
         by the Company.

1.19     STOCK APPRECIATION RIGHT OR SAR. A Stock Appreciation Right shall mean
         a grant entitling the Participant to receive an amount in cash or
         shares of Stock or a combination thereof having a value equal to (or if
         the Committee shall so determine at the time of a grant, less than) the
         excess of the Fair Market Value of a share of Stock on the date of
         exercise over the Fair Market Value of a share of Stock on the date of
         grant (or over the Option Price, if the Stock Appreciation Right was
         granted in tandem with an Option) multiplied by the number of shares
         with respect to which the Stock Appreciation Right shall have been
         exercised, with the Committee having sole discretion to determine the
         form of payment. A Stock Appreciation Right is further defined in
         Article VI hereof.

                                  Page 3 of 23

<PAGE>

1.20     STOCK INCENTIVE  AGREEMENT OR AGREEMENT.  Stock  Incentive  Agreement
         or Agreement shall mean the agreement as described in Section 3.04 of
         the Plan between the Company and the Participant under which such
         Participant receives an Award pursuant to this Plan.

1.21     SUBSIDIARY.  Subsidiary  shall mean any  corporation  of which more
         than fifty percent of the  outstanding  shares of voting stock are
         beneficially  owned directly or indirectly by the Company.

                                   ARTICLE II

                                  PARTICIPATION

2.01     PARTICIPATION.  A grant under this Plan may be made by the Committee to
         any officer, executive or other key employee of the Company or a
         Subsidiary.

                                   ARTICLE III

                       SHARES OF STOCK SUBJECT TO THE PLAN

3.01     LIMITATIONS.

         (A)       Subject to adjustments pursuant to the provisions of Section
                   3.03 hereof, the number of shares of Stock or Stock
                   equivalents which may be granted hereunder to Participants
                   under all forms of Awards shall not exceed 3,500,000 shares
                   plus the remaining shares available for grant under this
                   Plan, as of the date of approval of this Plan by the
                   Company's stockholders (the "Approval Date"), plus the number
                   of shares that become available under the 1990 Plan after the
                   Approval Date due to the lapse, termination or forfeiture of
                   grants under the 1990 Plan, including shares issued in lieu
                   of or upon reinvestment of dividends arising from grants. No
                   grants will be made under the 1990 Plan after the Approval
                   Date.

          (B)      For purposes of this Section 3.01, the shares of Stock that
                   shall be counted toward such limitation shall include all
                   Stock:

                                  Page 4 of 23

<PAGE>

                  (1)    Issued or issuable pursuant to Options that have been
                         or may be exercised;

                  (2)    Subject to Stock Appreciation Rights that have been
                         or may be exercised (other than Stock Appreciation
                         Rights granted in tandem with outstanding Options or
                         any limited stock appreciation rights deemed to be
                         granted pursuant to Article XII); and,

                  (3)    Issued as, or subject to issuance as Restricted Stock.

         (C)      Shares of Stock subject to grants under this Plan shall be
                  authorized and unissued shares of Stock or treasury stock.

3.02     AVAILABILITY OF SHARES ONCE ISSUED UNDER THE PLAN. Once grants of
         Awards have lapsed, terminated or have been forfeited, the Committee
         shall have the sole discretion to issue a new grant to any Participant,
         covering the number of shares to which such lapsed, terminated or
         forfeited grant related, provided that the Participant has received no
         monetary benefits of ownership therefrom, such as dividends.

3.03     ADJUSTMENTS TO GRANTS ONCE ISSUED. In the event that the outstanding
         shares of Stock are changed into or exchanged for a different number or
         kind of shares or other securities of the Company or of another
         corporation by reason of merger, consolidation, other reorganization,
         recapitalization, reclassification, combination of shares; stock
         split-up, or stock dividend, the Committee shall make such
         corresponding adjustments, if any, as deemed appropriate in its sole
         discretion. The Committee may adjust the number and kind of shares
         which may be granted under the Plan, the maximum number and kind of
         shares which may be granted to any one eligible Participant, and the
         number, the Option Price, and the kind of shares or property subject to
         each outstanding grant.

3.04     GRANTS AND AGREEMENT. Each grant of an Award under this Plan shall be
         evidenced by a written Stock Incentive Agreement dated as of the date
         of the grant and executed by the Company and the Participant. This
         Agreement shall set forth the terms and conditions of such Award, as
         may be determined by the Committee consistent with this Plan, and if
         such Agreement relates to the grant of an Option, shall indicate
         whether the Option that it

                                  Page 5 of 23

<PAGE>

         evidences, if applicable, is intended to be an Incentive Stock Option
         or a Nonstatutory Stock Option.

                                   ARTICLE IV

                                     OPTIONS

4.01     OPTION EXERCISE. Subject to Federal and State statutes then applicable,
         the terms and procedures by which an Option may be exercised shall be
         set forth in the Participant's Agreement or in procedures established
         by the Committee. The Committee may permit payment of the Option Price
         to be made through the tender of cash or securities, the withholding of
         Stock or cash to be received through Awards, or any other arrangement
         satisfactory to the Committee.

4.02     NONSTATUTORY  STOCK OPTIONS.  The Committee may grant  Nonstatutory
         Stock Options under this Plan. Such  Nonstatutory  Stock Options must
         comply with all  requirements of this Plan except for those contained
         in Article V, Article VI, Article VII, and Article VIII hereof.

4.03     VESTING OF OPTIONS. The Stock Incentive Agreement shall specify the
         date or dates on which the Participant may begin to exercise all or a
         portion of his Option. Subsequent to such date or dates, the option
         shall be deemed "vested." Notwithstanding the terms of any Stock
         Incentive Agreement, the Committee at any time may accelerate such date
         or dates and otherwise waive or amend any conditions of the grant.

         A Participant's subsequent transfer or disposition of any Stock secured
         through the grant shall be subject to any Federal and State laws then
         applicable, specifically securities laws.

                                    ARTICLE V

                             INCENTIVE STOCK OPTIONS

                                  Page 6 of 23

<PAGE>

5.01    GENERAL. All Incentive Stock Options shall comply with all of the
        restrictions and limitations set forth in Section 422 of the Code and
        this Article. To the extent that any Option does not qualify as an
        Incentive Stock Option, it shall constitute a Nonstatutory Stock Option.

                                   ARTICLE VI

                            STOCK APPRECIATION RIGHTS

6.01     GRANT AND EXERCISE OF STOCK APPRECIATION RIGHTS. Stock Appreciation
         Rights may be granted to Participants by the Committee in tandem with,
         or independently of, any Option granted pursuant to Article IV or
         Article V of this Plan. In the case of a Stock Appreciation Right
         granted in tandem with a Nonstatutory Stock Option, such Stock
         Appreciation Right may be granted either at or after the time of the
         grant of such Nonstatutory Stock Option. In the case of a Stock
         Appreciation Right granted in tandem with an Incentive Stock Option,
         such Stock Appreciation Right may be granted only at the time of the
         grant of such Incentive Stock Option.

                  A Stock Appreciation Right, or applicable portion thereof
         granted in tandem with an Option, shall terminate and no longer be
         exercisable upon the termination or exercise of the related Option.
         However, if a Stock Appreciation Right is granted with respect to less
         than the full number of shares covered by a related Option, such Stock
         Appreciation Right shall terminate only if and to the extent that the
         number of shares covered by the exercise or termination of the related
         Option exceeds the number of shares not covered by such Stock
         Appreciation Right.

6.02     TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. Stock Appreciation
         Rights shall be subject to such terms and conditions as shall be
         determined from time to time by the Committee and embodied in the
         Agreements and in procedures established by the Committee. The
         Committee at any time may accelerate the exercisability of any Stock
         Appreciation Right and otherwise waive or amend any conditions of the
         grant of a Stock Appreciation Right.

                                  Page 7 of 23

<PAGE>

                                   ARTICLE VII

                             RESTRICTED STOCK AWARDS

7.01     AGREEMENT. The Committee may grant a Participant a Restricted Stock
         Award entitling the Participant to acquire, at no cost or for a
         purchase price determined by the Committee at the time of grant, shares
         of Stock subject to such restrictions and conditions as the Committee
         may determine at the time of grant. At the sole discretion of the
         Committee, stock subject to a Restricted Stock Award may be issued
         effective the date of the grant, or effective only after all
         restrictions on the Award have lapsed.

                  If the purchase of Restricted Stock is required by the
         Agreement, a Participant who is granted a Restricted Stock Award shall
         not have any rights with respect to such grant unless the Participant
         shall have accepted the grant within 60 days (or such shorter time as
         the Committee may specify) following the date of the grant by making
         payment to the Company by certified or bank check or other instrument
         acceptable to the Committee in an amount equal to the specified
         purchase price, if any, of the shares covered by the grant and by
         executing and delivering to the Company an Agreement in such form as
         the Committee shall determine.

7.02     RIGHTS AS A SHAREHOLDER.  After the Restricted Stock has been recorded
         in the stock ledger of the Company and:

         (A)      Upon complying with Section 7.01 above, if the purchase of
                  Restricted Stock is required by the Agreement; or,

         (B)      Immediately, if no purchase of Restricted Stock is required by
                  the Agreement, a Participant shall have all the rights of a
                  shareholder with respect to such Restricted Stock including
                  voting and dividend rights, subject to non-transferability
                  restrictions and Company repurchase or forfeiture rights
                  described in this Section and Section 7.03, and subject to
                  such other conditions (including, but not limited to,
                  condition on voting and dividend rights) as are contained in
                  the Agreement. Unless the Committee shall otherwise determine,
                  certificates evidencing shares of

                                  Page 8 of 23

<PAGE>

                  Restricted Stock shall remain in the possession of the Company
                  until such shares are vested as provided in Section 7.04 below
                  and the Agreement.

7.03     RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
         transferred, pledged, or otherwise encumbered or disposed of except as
         specifically provided herein. Restrictions on shares of Restricted
         Stock shall be set forth in a Stock Incentive Agreement and may include
         such vesting restrictions as the Committee shall determine, including,
         but not limited to, restrictions related to timing, profitability of
         the Company, and growth of the share price. In the event of a
         Participant's termination of employment with the Company and its
         Subsidiaries for any reason (including death) prior to the date shares
         of Restricted Stock awarded to such Participant become vested, the
         Company shall have the right, at the discretion of the Committee, to
         repurchase such shares at their purchase price, or to require
         forfeiture of such shares to the Company if acquired at no cost, from
         such Participant or Participant's legal representative.

7.04     VESTING OF RESTRICTED STOCK. The Committee at the time of grant shall
         specify the date or dates (which may depend upon or be related to the
         attainment of performance goals and other conditions) on which the
         restrictions imposed upon the Restricted Stock and the Company's right
         of repurchase or forfeiture shall lapse. Subsequent to such date or
         dates, the shares on which all restrictions have lapsed shall no longer
         be Restricted Stock and shall be deemed "vested." The Committee at any
         time may accelerate such date or dates and otherwise waive or amend any
         conditions of the grant. A Participant may transfer or dispose of any
         Restricted Stock that has vested, subject to any Federal and State laws
         then applicable, specifically securities laws.

7.05     LIMITATION  ON GRANTS.  Except to the extent that any  acceleration  of
         vesting  pursuant to Section  13.01(A)  hereof may be deemed to
         constitute  the grant of a new Award no Person may be granted
         Restricted Stock covering more than 100,000 shares of Stock in any one
         calendar year.

                                  Page 9 of 23

<PAGE>

                                  ARTICLE VIII

                               PERFORMANCE AWARDS

8.01     TERMS OF PERFORMANCE AWARDS. Subject to the limitations of the Plan,
         the Committee shall designate those eligible persons to be granted
         Performance Awards, shall determine the form and amount of each such
         award, the time when each such award shall be granted, and the
         Performance Goals applicable thereto, and may prescribe other
         restrictions, terms and conditions applicable to such Award in addition
         to those provided in the Plan. A Performance Award may be payable in
         the form of cash, property or securities of the Company, including,
         without limitation, Options, Stock Appreciation Rights and/or shares of
         Restricted Stock (however a grant of Restricted Stock pursuant to
         Article VII hereof shall not constitute a Performance Award hereunder,
         even if subject in whole or in part to the achievement of performance
         goal, unless the Committee shall otherwise determine at the time of
         grant). A Performance Award shall be paid, vested or otherwise
         deliverable solely on account of the attainment of one or more
         pre-established, objective Performance Goals established by the
         Committee prior to the earlier occurrence of:

         (A) 90 days after the commencement of the period of service to which
         the Performance Goal relates, and

         (B) the passage of 25% of the period of service (as scheduled in good
         faith at the time goal is established), and in any event while the
         outcome is substantially uncertain.

         A Performance Goal is objective if a third party having knowledge of
         the relevant facts can determine whether the goal has been met.

8.02     PERFORMANCE GOAL CRITERIA. A Performance Goal may be based on one or
         more business criteria that apply to the individual, one or more
         business units of the Company, or the Company as a whole, and may
         include one or more of the following: revenue, net income, cash flow
         (as defined for such purpose by the Committee), stock price, market
         share, earnings per share, return on equity, return on assets or
         decrease in cost, economic value added, operating profit, earnings
         before interest and taxes and gross margin percent.

                                 Page 10 of 23

<PAGE>

         Unless otherwise stated, such Performance Goals need not be based upon
         an increase or positive result under a particular business criterion
         and could include, for example, maintaining the status quo or limiting
         economic losses (measured, in each case, by reference to specific
         business criteria). In interpreting Plan provisions applicable to
         Performance Goals and Performance Awards, it is the intent of the Plan
         to conform with the standards of Section 162(m) of the Code and
         Treasury Regulation Section 1.162-27(e)(2)(i), and the Committee in
         establishing such goals and interpreting the Plan shall be guided by
         such provisions.

8.03     COMMITTEE CERTIFICATION. Prior to the payment of any compensation based
         on the achievement of Performance Goals, the Committee must certify in
         writing that applicable Performance Goals and any of the material terms
         thereof were, in fact, satisfied. Subject to the foregoing provisions,
         the terms, conditions and limitations applicable to any Performance
         Awards made pursuant to this Plan shall be determined by the Committee.

8.04     CERTAIN LIMITATIONS. Notwithstanding anything to the contrary contained
         in this Plan, any Performance Awards made hereunder shall be limited so
         that no person may be granted Performance Awards consisting of cash or
         in any other form permitted under this Plan (other than Awards
         consisting of Options or Stock Appreciation Rights, or Restricted Stock
         subject to Article VII) in any one year having a value determined on
         the date of grant in excess of $2,000,000.

                                 Page 11 of 23

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                                   ARTICLE IX

                               STOCK CERTIFICATES

9.01     STOCK  CERTIFICATES.  The Company shall not be required to issue or
         deliver any  certificate  for shares of Stock under this Plan or of any
         portion thereof prior to fulfillment of all of the following
         conditions:

         (A) The admission of such shares to listing on all stock exchanges on
             which the Stock is then listed, if any;

         (B) The completion of any registration or other qualification of such
             shares under any Federal or State law, under the rulings or
             regulations of the Securities and Exchange Commission, or under any
             other governmental regulatory agency which the Committee shall in
             its sole discretion determine to be necessary or advisable;

         (C) The obtaining of any approval or other clearance from any Federal
             or State governmental agency which the Committee shall in its sole
             discretion determine to be necessary or advisable; and,

         (D) The lapse of such reasonable period of time following the exercise
             of the grant as the Committee from time to time may establish for
             reasons of administrative convenience.

         If these conditions are not satisfied, the employee may lose his
         rights to such Stock as determined by the Committee.

                                    ARTICLE X

                                    DIVIDENDS

10.01    DIVIDENDS. At the time of each grant of an Award the Committee may, in
         its sole discretion, determine whether the grant shall provide a
         dividend or a dividend equivalent and the terms and conditions under
         which any such dividend or dividend equivalent is to

                                 Page 12 of 23

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         be provided, including, but not limited to, permitting or requiring
         immediate payment, deferral or investment of dividends or dividend
         equivalents.

                                   ARTICLE XI

                               PLAN ADMINISTRATION

11.01    PLAN  ADMINISTRATION.  The Plan and all Agreements  shall be
         administered, and all grants under this Plan shall be awarded,  by the
         Committee.  The Committee  shall have full authority and absolute sole
         discretion:

         (A)      To determine, consistent with the provisions of this Plan,
                  which of the employees shall be granted Awards; the form and
                  terms of such Awards; the timing of such grants; the number of
                  shares subject to each Award and the Option Price of Stock
                  covered by each Option (if applicable); and the period over
                  which the Awards shall become and remain exercisable (if
                  applicable);

         (B)      To construe and interpret the Plan and the Agreements;

         (C)      To determine the terms and provisions of each respective Stock
                  Incentive Agreement, which need not be identical;

         (D)      To make all other determinations and take all other actions
                  deemed necessary or advisable for the proper administration of
                  the Plan;

         (E)      To adopt, alter, and repeal such rules, guidelines, and
                  practices for administration of the Plan and for its own acts
                  and proceedings as it shall deem advisable;

         (F)      To interpret the terms and provisions of the Plan and any
                  grant(including related Agreements);

         (G)      To make all determinations it deems advisable for the
                  administration of the Plan;

         (H)      To decide all disputes arising in connection with the Plan;
                  and,

                                 Page 13 of 23

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         (I)      To otherwise supervise the administration of the Plan.

                                   ARTICLE XII

                            MISCELLANEOUS PROVISIONS

12.01    APPLICABLE  LAW.  To the extent  that state law shall not have been
         preempted  by any laws of the  United  States,  the Plan shall be
         construed,  regulated,  interpreted  and administered according to the
         laws of the State of Delaware.

12.02    EXPENSES.  The cost of benefit payments from this Plan and the
         expenses of administering the Plan shall be borne by the Company.

12.03    GENDER AND NUMBER.  Unless the context  clearly  requires  otherwise,
         the masculine  pronoun  whenever used shall include the feminine and
         neuter  pronoun, the singular shall include the plural, and vice
         versa.

12.04    HEADINGS NOT PART OF THE PLAN.  Headings of Articles and Sections are
         inserted for convenience and reference; they constitute no part of
         this Plan.

12.05    INDEMNIFICATION. No member of the Board of Directors or the Committee
         shall be liable for any action or determination taken or made in good
         faith with respect to this Plan nor shall any member of the Board of
         Directors or the Committee be liable for any Agreement issued pursuant
         to this Plan or any grants under this Plan. Each member of the Board of
         Directors and the Committee shall be indemnified by the Company against
         any losses incurred in such administration of the Plan, unless his
         action constitutes serious and willful misconduct.

12.06    LIMITATION OF RIGHTS.  Neither the adoption and maintenance of the
         Plan or Agreement nor anything contained herein, with respect to any
         Participant, shall be deemed to:

         (A)      Limit the right of the Company or any Subsidiary to discharge
                  or discipline any such person, or otherwise terminate or
                  modify the terms of his employment; or,

Page 14 of 23

<PAGE>

         (B)      Create any contract or other right or interest under the
                  Plan, or in any funds hereunder, other than as specifically
                  provided in the Plan and the Agreement.

12.07    NO DISTRIBUTION UNTIL COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee
         may require each Participant acquiring shares pursuant to a grant to
         represent to and agree with the Company in writing that such
         Participant is acquiring the shares without a view to distribution
         thereof. No shares of Stock shall be issued pursuant to a grant until
         all applicable securities laws and other legal and stock exchange
         requirements have been satisfied. The Committee may require the placing
         of such stop-orders and restrictive legends on certificates for Stock
         and grants as it deems appropriate.

12.08    TIMING OF GRANTS.  All Awards granted under this Plan shall be granted
         on or prior to May 31, 2001.

12.09    NON-ASSIGNABILITY. A Participant's interest under this Plan shall not
         be subject at any time, or in any manner, to alienation, sale,
         transfer, assignment, pledge, attachment, garnishment or encumbrance of
         any kind and any attempt to deliver, sell, transfer, assign, pledge,
         attach, garnish or otherwise encumber such interest shall be void and
         any interest so encumbered will terminate.

12.10    NON-TRANSFERABILITY. An Award shall not be transferable by the
         Participant other than by will or the laws of descent and distribution.
         During the lifetime of the Participant, such Award shall be exercisable
         or perfected only by the Participant in accordance with the terms of
         this Plan and the Agreement.

12.11    OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect any
         other existing or future incentive or compensation plans for directors,
         officers or employees of the Company or its Subsidiaries. Moreover, the
         adoption of this Plan shall not preclude the Company or its
         Subsidiaries from:

          (A) Establishing any other forms of incentive or other compensation
          for directors, officers or employees of the Company or its
          Subsidiaries; or,

Page 15 of 23

<PAGE>

          (B) Assuming any forms of incentives or other compensation of any
          person or entity in connection with the acquisition of the business or
          assets, in whole or in part, of any person or entity.

12.12    PLAN BINDING ON SUCCESSORS.  This Plan shall be binding upon the
         successors and assigns of the Company.

12.13    TAX WITHHOLDING. Each Participant shall, no later than the date as of
         which the value of a grant or of any Stock or other amount received
         thereunder first becomes includable in the gross income of the
         Participant for Federal income tax purposes, pay to the Company, or
         make arrangements satisfactory to the Committee regarding payment of
         any Federal, State, or local taxes of any kind required by law to be
         withheld with respect to such income. The Committee may permit payment
         of such taxes to be made through the tender of cash or securities, the
         withholding of Stock or cash to be received through Awards or any other
         arrangement satisfactory to the Committee. The Company and its
         Subsidiaries shall, to the extent permitted by law, have the right to
         deduct any such taxes from any payment of any kind otherwise due to the
         Participant.

12.14    NON-CONTRAVENTION OF SECURITIES LAWS. Notwithstanding anything to the
         contrary expressed in this Plan, any provisions hereof that vary from
         or conflict with any applicable Federal or State securities laws
         (including any regulations promulgated thereunder) shall be deemed to
         be modified to conform to and comply with such laws.

12.15    UNENFORCEABILITY OF A PARTICULAR  PROVISION.  The  unenforceability of
         any particular provision of this document shall not affect the other
         provisions and the document shall be construed in all respects as if
         such unenforceable provision were omitted.

                                 Page 16 of 23

<PAGE>

                                  ARTICLE XIII

                                CHANGE OF CONTROL

13.01 ACCELERATION. Unless the Committee shall otherwise expressly provide in
the Agreement relating to an Award:

         (A) Upon the occurrence of a Trigger Date (as hereinafter defined):

               (1) In the case of Options and Stock Appreciation Rights, each
               such Option and Stock Appreciation Right shall automatically
               become fully exercisable;

               (2) Restrictions and conditions applicable to Restricted Stock
               shall automatically be deemed waived, and the recipients of such
               grants shall become entitled to receipt of the Stock subject to
               such grants; and,

               (3) In the case of any other Award, the occurrence of such
               Trigger Date shall have such effect on such Award as may be
               provided in the Agreement related thereto or in the Committee's
               procedures; and,

         (B) The Committee may at any time accelerate the exercisability of any
             Awards (if applicable) and may waive restrictions and conditions
             on Awards (if applicable) to the extent it shall in its sole
             discretion determine.

13.02    SPECIAL RIGHTS. Anything in this Plan and the 1990 Plan to the contrary
         notwithstanding, but subject to Section 13.04, during the 90-day period
         from and after a Trigger Date (the "Change of Control Exercise Period")
         a Participant (other than a Participant who initiated the event that
         resulted in the occurrence of such Trigger Date in a capacity other
         than as an officer or director of the Company) shall have the following
         rights, unless the Committee shall otherwise expressly provide in the
         Agreement relating to an Award:

         (A) With respect to any Option or 1990 Plan Option (or portion
             thereof) granted to such Participant and unaccompanied by a Stock
             Appreciation Right, such Participant shall have the right
             (by giving written notice to the Company) to elect

                                 Page 17 of 23

<PAGE>

             (within the Change of Control Exercise Period) to surrender all
             or a portion of such Option or 1990 Plan Option (as the case may
             be) to the Company and to receive in cash, for each share of Stock
             in respect of which such Option or 1990 Plan Option (as the case
             may be) is surrendered, an amount equal to the amount by which the
             Event Price exceeds the Option Price (as such term is defined in
             the 1990 Plan in the case of a 1990 Plan Option) for such share;

         (B) With respect to any Stock Appreciation Right granted to such
             Participant, such Participant shall have the right (by giving
             written notice to the Company) to elect (within the Change of
             Control Exercise Period) to surrender such Stock Appreciation
             Right to the Company and to receive in cash an amount equal to
             the amount such Participant would have received if such Stock
             Appreciation Right had been exercised and the Fair Market Value
             of a share of Stock on the date of exercise had been the Event
             Price;

         (C) With respect to any Restricted Stock granted to such Participant
             in respect of which such Participant has paid the required purchase
             price (if any), such Participant shall have the right (by giving
             written notice to the Company) to elect (within the Change of
             Control Exercise Period) to surrender all or a portion of such
             Restricted Stock to the Company and receive in lieu thereof a cash
             payment equal to the Event Price for each share of Restricted
             Stock so surrendered; and,

         (D) With respect to any other type of Award granted to such
             Participant, such Participant shall have the right to take such
             action or make such election as may be permitted upon a Trigger
             Date in the Agreement relating to such Award or in the Committee's
             procedures.

13.03    SPECIAL MERGER PROVISIONS. Anything in this Plan and the 1990 Plan to
         the contrary notwithstanding (other than Section 13.02 of this Plan
         which shall control in the event of any conflict with this Section
         13.03), upon consummation of a consolidation or merger or sale of all
         or substantially all of the assets of the Company in which outstanding
         shares of Stock are exchanged for securities, cash or other property of
         an unrelated corporation or

                                 Page 18 of 23

<PAGE>

          business entity or in the event of liquidation of the Company (in each
          case, a "Transaction"), all outstanding Options (including under the
          1990 Plan), SARs, Restricted Stock, Performance Awards and any other
          Award shall become fully vested and exercisable and the Board or the
          board of directors of any corporation assuming the obligation of the
          Company, may, in its discretion, take any one or more of the following
          actions, as to outstanding Awards:

          a)   provide that such Awards shall be assumed or equivalent options
               shall be substituted, by the acquiring or succeeding corporation
               (or an affiliate thereof),

          b)   upon written notice to the holder of an Option or SAR, provide
               that all unexercised Options or SARs will terminate immediately
               prior to the consummation of the Transaction unless exercised by
               the holder within a specified period following the date of such
               notice, and/or

          c)   in the event of a business combination under the terms of which
               holders of the Stock of the Company will receive upon
               consummation thereof a cash payment for each share surrendered in
               the business combination, make or provide for a cash payment to
               the holder of an Option or SAR equal to the difference between:

               (i)  the value (as determined by the Committee) of the
                    consideration payable per share of Stock pursuant to the
                    business combination (the "Merger Price") times the number
                    of shares of Stock subject to such outstanding Options or
                    SARs (to the extent then exercisable at prices not in excess
                    of the Merger Price) and

               (ii) the aggregate exercise price of all such outstanding Options
                    or SARs in exchange for the termination of such Options or
                    SARs.

               In the event Options and SARs will terminate upon the
               consummation of the Transaction, each holder of such Award shall
               be permitted, within a specified period determined by the
               Committee, to exercise all outstanding Options or SARs held by
               each holder of such Award that are then exercisable; and, subject
               to the

                                 Page 19 of 23

<PAGE>

               consummation of the Transaction, all Options or SARs that would
               become fully vested and exercisable solely as a result of the
               Transaction.

          (d)  in the event of a business combination under the terms of which
               holders of the Stock of the Company will receive upon
               consummation thereof a cash payment for each share surrendered in
               the business combination, make or provide for a cash payment to
               the holder of Restricted Stock or other stock-based Award equal
               to the Merger Price.

13.04    LIMITATION ON SPECIAL RIGHTS. If a Participant is subject to the
         restrictions of Section 16(b) of the Exchange Act and has been granted
         (or is deemed to have been granted) an Award under this Plan during the
         six months prior to a Trigger Date, then the Change of Control Exercise
         Period referred to in Section 13.02 shall, in respect of such Award,
         begin on the Trigger Date and end 90 days after the date six months
         after the later of the Approval Date or the date such Award was
         granted. If a Trigger Date occurs prior to six months after the
         Approval Date, then the Change of Control Exercise Period referred to
         in Section 13.02 shall, in respect of 1990 Plan Options, begin on the
         Trigger Date and end 90 days after the date six months after the
         Approval Date. The Committee may at any time prior to the occurrence of
         a Trigger Date provide that any or all of the exercises, surrenders,
         elections and other actions that may be taken by Participants pursuant
         to Section 13.02 shall occur automatically with respect to Participants
         (or particular categories of Participants) subject to Section 16(b) of
         the Exchange Act.

13.05    TERMINATION OF PARTICIPANT; MODIFICATION OF THE PLAN. The rights of a
         Participant under Section 13.02 with respect to Awards or 1990 Plan
         Options, may be exercised during the Change of Control Exercise Period
         referred to therein (or, if applicable, in Section 13.03)
         notwithstanding the termination of the Participant's employment by the
         Company, unless provided otherwise in the Agreement relating to such
         Award. Anything in this Plan to the contrary notwithstanding, no
         termination amendment or modification of this Plan after the occurrence
         of a Trigger Date shall in any manner adversely affect any
         Participant's rights

                                 Page 20 of 23

<PAGE>

          under this Article XIII in respect of such Trigger Date without the
          written consent of the affected Participant.

13.06    EVENT PRICE.  In  connection  with a Trigger Date and an exercise,
         surrender,  election or other action  contemplated  by Section 13.02
         with respect to an Award or a 1990 Plan Option, Event Price shall mean
         a price per share of Stock equal to the higher of:

     (A)  The highest Fair Market Value of the Stock during the period beginning
          90 days prior to such Trigger Date and ending on and including the
          last trading day prior to such exercise, surrender, election or other
          action; or,

     (B)  Whichever of the following is applicable (or the highest if more than
          one is applicable):

          (1)  The highest per share price paid or to be paid in any tender or
               exchange offer which is in effect at any time during such period
               referred to in clause (A);

          (2)  The fixed or formula price for the acquisition of shares of Stock
               in a merger or similar agreement approved by the Company's
               stockholders or the Board, if such price is determinable on the
               date of such exercise, surrender, election or other action;
               and/or,

          (3)  The highest price per share paid or to be paid to any stockholder
               of the Company in a transaction or group of transactions
               (including any tender or exchange offer) giving rise to the
               occurrence of such Trigger Date;

         PROVIDED, HOWEVER, that a Participant may at the time of an election
         pursuant to Section 13.02 request that certain of the foregoing
         parameters be disregarded (which may include shortening applicable time
         periods) in determining the Event Price applicable to one or more of
         the Awards held by such Participant, so long as disregarding such
         parameters does not increase the Event Price.

Page 21 of 23

<PAGE>

                  Any securities or property which are part or all of the
         consideration paid or to be paid for shares of Stock in connection with
         any event contemplated by clauses (B) (1), (2), and (3) above shall be
         valued in determining the Event Price at the higher of (x) the
         valuation placed on such securities or property by the person or entity
         which paid or is to pay such price or (y) the valuation placed on such
         securities or property by the Committee.

13.07    TRIGGER DATE.  Trigger date shall have the meaning assigned to such
         term in the Polaroid  Extended  Severance Plan as originally  adopted
         by the Company effective June 28, 1987 and amended from time to time
         and as it may be further amended from time to time.

13.08    1990 PLAN OPTIONS.  1990 Plan Options shall mean "Options", as such
         item is defined in the 1990 Plan.

                                   ARTICLE XIV

                   PERMANENCY OF THE PLAN AND PLAN TERMINATION

14.01    EFFECTIVE DATE.  This Plan originally effective as of May 11, 1993,
         has been amended from time to time, with the most recent amendment
         effective as of January 1, 1999.

14.02    TERMINATION, AMENDMENT, AND MODIFICATION OF THE PLAN. The Board of
         Directors may at any time terminate or suspend, and may at any time
         and from time to time and in any respect amend or modify, the Plan;
         provided, however, that no such action of the Board of Directors
         without approval of the shareholders of the Company may increase the
         total number of shares of Stock subject to the Plan except as
         contemplated in Section 3.03 hereof.

                                 Page 22 of 23

<PAGE>

IN WITNESS WHEREOF, this Plan is hereby adopted effective January 1, 1999.

ATTEST:                                       POLAROID CORPORATION

  /s/ CHERYL A GOMES                          /s/ HARVEY M. GREENBERG
--------------------------                  ----------------------------------
                                               Harvey M. Greenberg
                                               Vice President, Human Resources

                                  Page 23 of 23

<PAGE>

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