Document:

exv10w1

 

Exhibit 10.01

      

     EMPLOYMENT AGREEMENT dated as of
September 11, 2004 (this “Agreement”), by and
between RESOLUTION PERFORMANCE PRODUCTS LLC, a
Delaware limited liability company (the
“Company”) and LAYLE K. SMITH (“Executive”).

     In order to induce Executive to accept employment with the Company, the
Company desires to provide Executive with compensation and other benefits on
the terms and conditions set forth in this Agreement. Executive is willing to
enter into such employment and perform services for the Company on the terms
and conditions set forth in this Agreement. Therefore, the Company and
Executive agree as follows:

	1.	 	Employment.

     (a) Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive during the term hereof as President and Chief
Operating Officer of the Company. Executive hereby accepts employment as such
and agrees to devote his full working time and efforts, to the best of his
ability, experience and talent, to the performance of services, duties and
responsibilities in connection therewith. As President and Chief Operating
Officer, Executive will perform those duties that are (a) customarily performed
by presidents and chief operating officers of companies similar to the Company
and/or (b) reasonably requested by the Chief Executive Officer or the Board of
Directors (the “Board”) of the Company. Consistent with Section 9 herein,
Executive shall be entitled to join boards of directors of other companies
subject to a conflict of interest evaluation by the Company’s General Counsel
and approval of the Company’s Chief Executive Officer, which shall not be
unreasonably withheld. Furthermore, Executive shall have the opportunity to
respond to inquiries from a previous employer or others in the industry
provided that it shall not substantially interfere with the performance of his
duties hereunder

     (b) Subject to approval of the Board and based on the performance of
Executive as evaluated by the Company in its sole discretion, it is the
Company’s current intention to appoint Executive as Chief Executive Officer of
the Company within twelve months of the Commencement Date (as defined below).
If appointed Chief Executive Officer, Executive will perform those duties that
are (a) customarily performed by chief executive officers of companies similar
to the Company and/or (b) requested by the Board.

	2.	 	Term of Employment.

     This Agreement and the term of employment shall commence and be effective
from and after September 20, 2004 (the “Commencement Date”) and, subject to the
terms hereof, shall terminate on the third anniversary of the Commencement Date
(the “Termination Date”); provided, however, that on such anniversary date and
on each subsequent one year anniversary of such anniversary date, the
Termination Date shall automatically be extended for a period of one year,
unless either party shall have given written notice to the other party not less
than one hundred and twenty days prior to the Termination Date that the
Termination Date shall not be so extended.

	3.	 	Compensation and Benefits.

     (a) Base Salary. The Company shall pay Executive a base salary (the “Base
Salary”) at the annual rate of $300,000. The Base Salary shall be payable in
accordance with the ordinary payroll practices of the Company and shall be
subject to increase as determined by the Board or its compensation committee
(the “Compensation Committee”).

     (b) Annual Bonus. In addition to the Base Salary, Executive shall receive
a cash bonus (the “Bonus”) with respect to each fiscal year; provided that
Executive is employed by the Company on the last day of such fiscal year
without giving effect to any pro rata allocation in fiscal year 2004. The
Bonus shall be based on the

 

 

Company’s achievement of certain operating and/or financial goals to be
established by the Compensation Committee, with an annual target bonus amount
equal to 50% of Executive’s then current Base Salary.

     (c) Signing Bonus. Effective upon the execution of this Agreement by the
parties hereto, Executive shall receive a cash payment of $100,000, which shall
be due and payable by the Company within thirty (30) days after the
Commencement Date.

     (d) Extension Bonus Plan. Executive shall participate in the Company’s
Executive Supplemental Bonus Plan (the “Extension Plan”). In connection
therewith, Executive shall receive the following payments (the “Extension
Payments”) within fifteen (15) days of each of the dates (the “Extension
Dates”) set forth below, provided that Executive remains employed by the
Company as of each such Extension Date.

	 	 	 	 	 
	Extension Date
	 	Payment Amount

	December 31, 2004
	 	$	6,000	 
	March 31, 2005
	 	$	6,000	 
	June 30, 2005
	 	$	6,000	 
	September 30, 2005
	 	$	6,000	 
	December 31, 2005
	 	$	6,000	 
	March 31, 2006
	 	$	6,000	 
	June 30, 2006
	 	$	6,000	 
	September 30, 2006
	 	$	78,000	 

     All remaining unpaid Extension Payments under the Extension Plan shall
become immediately due and payable effective immediately prior to a Realization
Event (as such term is defined in Resolution Performance Products Inc.’s 2000
Stock Option Plan).

     (e) Benefits. During the term of employment hereunder, the Company shall
provide to Executive coverage under any standard employee benefit programs,
plans and practices, in accordance with the terms that the Company makes
generally available to its executive officers. In addition, the Company shall
provide Executive with four (4) weeks vacation per year.

	4.	 	Termination of Employment.

     (a) Termination Rights. The Company may terminate Executive’s employment
at any time, and Executive may terminate his employment at any time.

     (b) Definitions.

          (i) “Affiliate” of the Company shall mean a Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by,
or is under common control with, the Company. As used in this definition, the
term “control,” including the correlative terms “controlling,” “controlled by”
and “under common control with,” means possession, directly or indirectly, of
the power to direct or cause the direction of management or policies (whether
through ownership of securities or any partnership or other ownership interest,
by contract or otherwise) of a Person. The term “Affiliate” shall not include
at any time any portfolio companies of Apollo Management IV, L.P. or its
Affiliates.

          (ii) “Cause” shall mean termination by the Company of Executive’s
employment (a) because Executive has engaged in conduct constituting willful
misconduct or gross negligence, or breach of a fiduciary duty; (b) because
Executive has breached or violated any of the provisions of the Company’s
employee handbook or other policies in effect from time to time that by their
terms may result in termination of employment and which meet the standard in
(ii)(a) above; (c) because Executive has committed a felony, has engaged in any
act involving the misuse or misappropriation of money or other property of the
Company, has defrauded the Company, any Affiliate of the Company or any
customer of the Company, or because of habitual intoxication while performing
his job duties, or

 

 

drug addiction; or (d) because Executive has failed to take action
consistent with or has taken actions inconsistent with a reasonable directive
of the Chief Executive Officer of the Company or the Board.

          (iii) “Disability” shall mean that Executive has been unable, for 180
consecutive days, or for periods aggregating 180 business days in any period of
twelve months, to perform Executive’s duties under this Agreement, as a result
of physical or mental impairment, illness or injury, as determined by a medical
doctor jointly selected by the Company and Executive. A termination of
Executive’s employment by either party for Disability shall be communicated to
the other party by written notice, and shall be effective on the 30th day after
receipt of such notice by the other party (the “Disability Effective Date”),
unless Executive returns to full-time performance of Executive’s duties before
the Disability Effective Date .

          (iv) “Good Reason” shall mean the occurrence of any of the following
events without Executive’s express prior written consent and which event shall
not have been cured within a reasonable period after notice from the Executive:
(A) the assignment to Executive by the Company of duties materially
inconsistent with Executive’s duties as set forth in Section 1 hereof, or any
material reduction by the Company of Executive’s duties, except in connection
with the termination of Executive’s employment for any other reason; (B) a
reduction by the Company in Executive’s Base Salary or Bonus (other than due to
the failure to meet applicable performance objectives); or (C) any material
breach by the Company of any material provision of this Agreement after a
written notice of such breach shall have been delivered to the Company and, if
such breach can be cured, such breach shall not have been cured prior to the
tenth day after delivery of such notice.

          (v) “Person” shall be construed broadly and shall include, without
limitation, an individual, a partnership, a corporation, an association, a
joint stock company, a limited liability company, a trust, a joint venture, an
unincorporated organization and a governmental entity or any department, agency
or political subdivision thereof.

          (vi) “Termination Payments” shall mean earned but unpaid amounts of
compensation and benefits as of the date of any termination under applicable
benefit plans or programs.

     (c) Termination other than for Cause or Termination for Good Reason; for
Death and Disability. If Executive’s employment is terminated by the Company
other than for Cause or Executive terminates his employment for Good Reason, or
if Employee dies or his employment is terminated by either party for
Executive’s Disability, in each case, prior to the Termination Date, Executive
(or his estate) shall be entitled to receive (i) no later than 30 days after
the date of termination, the Termination Payments; (ii) in lieu of any other
cash compensation provided for herein but not in substitution for compensation
already paid or earned, payable in accordance with the Company’s customary
payroll practices, for a period equal to 12 months following the date of
termination (such period, the “Termination Period”) an amount equal to
Executive’s Base Salary at its then current annual rate; and (iii) the
remaining unpaid Extension Payments under the Extension Plan. During the
Termination Period, the Company shall continue to provide Executive with access
to the Company’s health benefit programs and plans.

     (d) Voluntary Termination by Executive; Discharge for other reasons. If
Executive’s employment is terminated by the Company for any reason other than a
termination without Cause or by Executive other than for Good Reason, in each
case prior to the Termination Date, Executive shall be entitled to receive,
within a reasonable time after the date of termination, the Termination
Payments and the remaining unpaid Extension Payments under the Extension Plan.

     (e) DEFRA.

          (i) Notwithstanding anything in this Agreement or any other agreement
between Executive and the Company to the contrary, in the event that the
provisions of the Deficit Reduction Act of 1984 (“DEFRA”), and Section 280G of
the Internal Revenue Code of 1986, as amended (the “Code”) relating to “excess
parachute payments” (as defined in the Code) shall be applicable to any payment
or benefit received or to be received by Executive, then the total amount of
payments or benefits payable to Executive shall be reduced to the largest
amount

 

 

such that the provisions of DEFRA and Section 280G of the Code relating to
“excess parachute payments” shall no longer be applicable. Should such a
reduction be required, Executive shall determine, in the exercise of his sole
discretion, which payment or benefit to reduce or eliminate. Pending such
determination, the Company shall continue to make all other required payments
to Executive at the time and in the manner provided herein and shall pay the
largest portion of any parachute payments such that the provisions of DEFRA
relating to “excess parachute payments” shall no longer be applicable.

          (ii) Due to the complexity in the application of Section 280(G) of the
Code, it is possible that payments made or benefits received hereunder should
not have been made under clause (e)(i) above (an “Overpayment”). If it is
determined by the Company’s outside auditors in their reasonable good faith
judgment or by any court of competent jurisdiction that an Overpayment has been
made resulting in an “Excess Parachute Payment” as defined in Section
280G(b)(1) of the Code), then any such Overpayment shall be treated for all
purposes as an unsecured, long-term loan from the Company to Executive, or
Executive’s personal representative, successors or assigns, as the case may be,
that is payable, together with accrued interest from the date of the making of
the Overpayment at the rate of 8% per annum on the later to occur of the third
anniversary of the payment of such Overpayment, or 6 months following the date
upon which it is determined an Overpayment was made. Should it be determined
that such an Overpayment has been made, Executive shall determine, in the
exercise of his sole discretion, which payments or benefits shall be deemed to
constitute the Overpayment.

	5.	 	Notices.

     All notices or communications hereunder shall be in writing, addressed, in
the case of Executive, at the address set forth on the signature pages hereto,
and to the Company, as follows:

Resolution Performance Products LLC

1600 Smith Street

Houston, Texas 77002

Attention: Vice President — Human Resources

Telecopy:          (832) 366-2582

Telephone:          (832) 366-2429

with a copy to:

RPP Holdings LLC

c/o Apollo Management, L.P.

9 West 57th Street

New York, New York 10019

Attn: Scott Kleinman

Telecopy:          (212) 515-3288

Telephone:          (212) 515-3228

with a copy to:

O’Melveny & Myers LLP

Times Square Towers

7 Times Square

New York, New York 10036

Attention: Adam K. Weinstein, Esq.

Telecopy:          (212) 326-2061

Telephone:          (212) 408-2491

Any such notice or communication shall be sent certified or registered mail,
return receipt requested, postage prepaid, addressed as above (or to such other
address as such party may designate in a notice duly delivered as described
above), and the actual date of mailing shall constitute the time at which
notice was given.

 

 

	6.	 	Separability; Arbitration.

     If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof, which shall remain in full-force
and effect. Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement (other than Section 9 hereof) that
cannot be resolved by Executive on the one hand and the Company on the other,
including any dispute as to the calculation of Executive’s benefits or any
payments hereunder, shall be submitted to arbitration in New York, New York in
accordance with New York law and the procedures of the American Arbitration
Association. The determination of the arbitrators shall be conclusive and
binding on the Company and Executive, and judgment may be entered on the
arbitrators’ award in any court having jurisdiction.

	7.	 	Assignment.

     This contract shall be binding upon and inure to the benefit of the heirs
and representatives of Executive and the assigns and successors of the Company,
but neither this nor any rights hereunder shall be assignable or otherwise
subject to hypothecation by Executive except by will or by operation of the
laws of intestate succession.

	8.	 	Amendment.

     This Agreement may only be amended by written agreement of the parties
hereto.

	9.	 	Nondisclosure of Confidential Information; Non-Competition.

     (a) Executive shall not, without the prior written consent of the Company,
divulge, disclose or make accessible to any other person, firm, partnership,
corporation or other entity any Confidential Information pertaining to the
business of the Company, except (i) while employed by the Company, in the
business of and for the benefit of the Company, or (ii) when required to do so
by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Company, or by any
administrative body or legislative body (including a committee thereof) with
purported or apparent jurisdiction to order Executive to divulge, disclose or
make accessible such information.

     (b) For purposes of this Section, “Confidential Information” shall mean
non-public information concerning the Company’s and its Affiliates’ financial
data, strategic business plans, product development (or other proprietary
product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the Company and its Affiliates that
is not otherwise available to the public.

     (c) For the period commencing on the date hereof and ending on the last
day on which Executive receives any payment from the Company or any of its
Affiliates, Executive shall not, directly or indirectly, (i) either as
principal, manager, agent, consultant, officer, director, stockholder, partner,
member, investor, lender or employee or in any other capacity, carry on, be
engaged in or have any financial interest in any business that is in material
direct competition with the business of the Company and/or its Affiliates, or
(ii) solicit or hire any employees of the Company and/or its Affiliates. For
purposes hereof, a business shall be deemed to be in material direct
competition with the Company if it is significantly involved in the rendering
of any service purchased, sold, dealt in or rendered by the Company and/or its
Affiliates. As used in the preceding sentence, the term “significantly” shall
be deemed to refer to activities generating gross annual sales of at least $25
million. Nothing in this Section shall be construed so as to preclude
Executive from investing in any publicly held company provided Executive’s
beneficial ownership of any class of such company’s securities does not exceed
5% of the outstanding securities of such class.

     (d) Executive and the Company agree that the foregoing covenant not to
compete is a reasonable covenant under the circumstances, and further agree
that if in the opinion of any court of competent jurisdiction such restraint is
not reasonable in any respect, such court shall have the right, power and
authority to excise or modify such provision or provisions of such covenant as
to the court shall appear not reasonable and to enforce the remainder of the
covenant as so amended. Executive agrees that any breach of the covenants
contained in this

 

 

Section would irreparably injure the Company. Accordingly, the Company
may, in addition to pursuing any other remedies they may have in law or in
equity, obtain an injunction against Executive from any court having
jurisdiction over the matter, restraining any further violation of this Section
by Executive.

	10.	 	Governing Law.

     This Agreement shall be construed, interpreted and governed in accordance
with the laws of the State of New York, without reference to rules relating to
conflict of laws.

	11.	 	Withholding.

     The Company shall be entitled to withhold from any payment hereunder or
under any other agreement between the Company and Executive any amount required
by law to be withheld.

	12.	 	Counterparts.

     This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original.

	13.	 	Entire Agreement.

     This Agreement reflects the entire agreement and understanding of the
parties hereto with respect to the subject matter hereof and replaces and
supercedes any prior employment agreements.

* * * * *

 

 

     IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.

	 	 	 	 	 
	 	RESOLUTION PERFORMANCE PRODUCTS LLC

 	 
	 	By:  	/s/ Marvin O. Schlanger
 	 
	 	 	Name:  	Marvin O. Schlanger 	 
	 	 	Title:  	Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	                                /s/ Layle K. Smith
 	 
	 	 	Name:  	Layle K. Smith 	 
	 	 	

Address:

1894 Seacrest Dr.

Lummi Island, WA  98262-8624<PAGE>

                                                                   EXHIBIT 10(c)

                               G&K SERVICES, INC.
                         1996 DIRECTOR STOCK OPTION PLAN
                         (AS AMENDED ON MARCH 10, 2004)

      1.    PURPOSE. The purpose of the G&K Services, Inc. 1996 Director Stock
Option Plan (the "Plan") is to advance the interests of G&K Services, Inc. (the
"Company") and its shareholders by encouraging increased share ownership by
members of the Board of Directors of the Company (the "Board") who are not
employees of the Company or any of its subsidiaries, in order to promote
long-term shareholder value through continuing ownership of the Company's common
stock.

      2.    ADMINISTRATION. The Plan shall be administered by the Board. The
Board shall have all the powers vested in it by the terms of the Plan, such
powers to include authority (within the limitations described herein) to
prescribe the form of the agreement embodying awards of nonqualified stock
options made under the Plan ("Options"). The Board shall, subject to the
provisions of the Plan, grant Options under the Plan and shall have the power to
construe the Plan, to determine all questions arising thereunder and to adopt
and amend such rules and regulations for the administration of the Plan as it
may deem desirable. Any decisions of the Board in the administration of the
Plan, as described herein, shall be final and conclusive. The Board may act only
by a majority of its members in office, except that the members thereof may
authorize any one or more of their number or any other officer of the Company to
execute and deliver documents on behalf of the Board. No member of the Board
shall be liable for anything done or omitted to be done by him or by any other
member of the Board in connection with the Plan, except for his own willful
misconduct or as expressly provided by statute.

      3.    PARTICIPATION. Each member of the Board who is not an employee of
the Company or any of its subsidiaries (a "Non-Employee Director") shall be
eligible to receive an Option in accordance with Paragraph 5 below.

      4.    AWARDS UNDER THE PLAN.

            (a)   Awards under the Plan shall include only Options, which are
      rights to purchase Class A common stock of the Company having a par value
      of $0.50 per share (the "Common Stock"). Such Options are subject to the
      terms, conditions and restrictions specified in Paragraph 5 below.

            (b)   There may be issued under the Plan pursuant to the exercise of
      Options an aggregate of not more than 100,000 shares of Common Stock,
      subject to adjustment as provided in Paragraph 6 below. If any Option is
      cancelled, terminates or expires unexercised, in whole or in part, any
      shares of Common Stock that would otherwise have been issuable pursuant
      thereto will be available for issuance under new Options.

            (c)   A Non-Employee Director to whom an Option is granted (and any
      person succeeding to such a Non-Employee Director's rights pursuant to the
      Plan) shall have no rights as a shareholder with respect to any Common
      Stock issuable pursuant to any such

<PAGE>

      Option until the date of the issuance of a stock certificate to him for
      such shares. Except as provided in Paragraph 6 below, no adjustment shall
      be made for dividends, distributions or other rights (whether ordinary or
      extraordinary, and whether in cash, securities or other property) for
      which the record date is prior to the date such stock certificate is
      issued.

      5.    NONQUALIFIED STOCK OPTIONS. Each Option granted under the Plan shall
be evidenced by an agreement in such form as the Board shall prescribe from time
to time in accordance with the Plan and shall comply with the following terms
and conditions:

            (a)   The Option exercise price shall be the Average Market Value
      (as herein defined) of the Common Stock subject to such Option on the date
      the Option is granted. For purposes hereof, "Average Market Value" shall
      be defined as the average of the closing prices of the Company's Common
      Stock, as reported on the Nasdaq National Market, during the ten business
      days preceding the date on which the Option is granted.

            (b)   Each Non-Employee Director shall receive, as of the date of
      initial adoption of the Plan by the shareholders, or upon such
      Non-Employee Director=s initial election or appointment to the Board, a
      one-time only Option for 3,000 shares of Common Stock (the "One-Time
      Option"). In addition, for each year beginning in 1996, on the date of the
      annual meeting of shareholders of the Company, each Non-Employee Director
      shall automatically receive an Option for 1,000 shares of Common Stock
      (the "Annual Option"), subject to adjustment as set forth in Section 6
      below.

            (c)   The Option shall not be transferable by the optionee otherwise
      than by will or the laws of descent and distribution, and shall be
      exercisable during his lifetime only by him.

            (d)   Options shall not be exercisable:

                  (i)   before the expiration of one year from the date it is
            granted and after the expiration of ten years from the date it is
            granted, and (A) the One-Time Option may be exercised during such
            period as follows: one-third (33-1/3 %) of the total number of
            shares covered by the One-Time Option shall become exercisable each
            year beginning with the first anniversary of the date it is granted,
            and (B) the Annual Option shall become exercisable in full upon the
            first anniversary of the date it is granted; provided that a
            Non-Employee Director who does not stand for re-election to the
            Board may exercise any otherwise unexercisable Annual Options
            beginning on the date such director's successor is elected and
            qualified, subject to all of the other terms and conditions of such
            Annual Options. Notwithstanding anything to the contrary herein, an
            Option shall automatically become immediately exercisable in full
            upon the death of a Non-Employee Director;

                  (ii)  unless payment in full is made for the shares of Common
            Stock being acquired thereunder at the time of exercise; such
            payment shall be made in United States dollars by cash or check, or
            in lieu thereof, by tendering to the Company

                                      -2-
<PAGE>

            Common Stock owned by the person exercising the Option and having a
            fair market value (as evidenced by the closing sales price of a
            share of Common Stock on the Nasdaq National Market or, if the
            Nasdaq National Market is closed on that date, on the last preceding
            date on which the Nasdaq National Market was open for trading) equal
            to the cash exercise price applicable to such Option, or by a
            combination of United States dollars and Common Stock as aforesaid;
            and

                  (iii) unless the person exercising the Option has been at all
            times during the period beginning with the date of grant of the
            Option and ending on the date of such exercise, a Non-Employee
            Director of the Company, except that if such person shall cease to
            be such a Non-Employee Director for any reason, including death,
            while holding an Option that has not expired and has not been fully
            exercised, such person may, at any time within one year of the date
            he ceased to be a Non-Employee Director (but in no event after the
            Option has expired under the provisions of subparagraph 5(d)(i)
            above), exercise the Option with respect to any Common Stock as to
            which he could have exercised on the date he ceased to be such a
            Non-Employee Director.

                  (e)   If, on any date on which Options are automatically
            granted, the number of shares of Common Stock remaining available
            under the Plan is insufficient for the grant to each Non-Employee
            Director of Options to purchase 1,000 shares of Common Stock, then
            Options to purchase a proportionate amount of such available number
            of shares of Common Stock (rounded to the nearest whole share) shall
            be granted to each Non-Employee Director.

      6.    DILUTION AND OTHER ADJUSTMENTS. In the event of any change in the
outstanding Common Stock of the Company by reason of any stock split, stock
dividend, split-up, split-off, spin-off, recapitalization, merger,
consolidation, rights offering, reorganization, combination or exchange of
shares, a sale by the Company of all or part of its assets, any distribution to
shareholders other than a normal cash dividend, or other extraordinary or
unusual event, the number or kind of shares that may be issued under the Plan
pursuant to subparagraph 4(b) above (specifically including the number of shares
thereafter subject to the One-Time and Annual Options), the number or kind of
shares subject to, and the Option price per share under, all outstanding Options
shall be automatically adjusted so that the proportionate interest of the
participant shall be maintained as before the occurrence of such event; such
adjustment in outstanding Options shall be made without change in the total
Option exercise price applicable to the unexercised portion of such Options and
with a corresponding adjustment in the Option exercise price per share, and such
adjustment shall be conclusive and binding for all purposes of the Plan.

      7.    MISCELLANEOUS PROVISIONS.

            (a)   Except as expressly provided for in the Plan, no Non-Employee
      Director or other person shall have any claim or right to be granted an
      Option under the Plan. Neither the Plan nor any action taken hereunder
      shall be construed as giving any Non-Employee Director any right to be
      retained in the service of the Company.

                                      -3-
<PAGE>

            (b)   A participant's rights and interest under the Plan may not be
      assigned or transferred, hypothecated or encumbered in whole or in part
      either directly or by operation of law or otherwise (except in the event
      of a participant's death, by will or the laws of descent and
      distribution), including, but not by way of limitation, execution, levy,
      garnishment, attachment, pledge, bankruptcy or in any other manner, and no
      such right or interest of any participant in the Plan shall be subject to
      any obligation or liability of such participant.

            (c)   Common Stock shall not be issued hereunder unless counsel for
      the Company shall be satisfied that such issuance will be in compliance
      with applicable federal, state, local and foreign securities, securities
      exchange and other applicable laws and requirements.

            (d)   It shall be a condition to the obligation of the Company to
      issue Common Stock upon exercise of an Option, that the participant (or
      any beneficiary or person entitled to act under subparagraph 5(d)(iii)(B)
      above) pay to the Company, upon its demand, such amount as may be
      requested by the Company for the purpose of satisfying any liability to
      withhold federal, state, local or foreign income or other taxes. If the
      amount requested is not paid, the Company may refuse to issue such Common
      Stock.

            (e)   The expenses of the Plan shall be borne by the Company.

            (f)   By accepting any Option or other benefit under the Plan, each
      participant and each person claiming under or through him shall be
      conclusively deemed to have indicated his acceptance and ratification of,
      and consent to, any action taken under the Plan by the Company or the
      Board.

            (g)   The appropriate officers of the Company shall cause to be
      filed any reports, returns or other information regarding Options
      hereunder or any Common Stock issued pursuant hereto as may be required by
      Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, or
      any other applicable statute, rule or regulation.

      8.    AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any time and
from time to time by the Board as the Board shall deem advisable; provided,
however, that no amendment shall become effective without shareholder approval
if such shareholder approval is required by law, rule or regulation. No
amendment of the Plan shall materially and adversely affect any right of any
participant with respect to any Option theretofore granted without such
participant's written consent.

      9.    TERMINATION. This Plan shall terminate upon the earlier of the
following dates or events to occur:

            (a)   upon the adoption of a resolution of the Board terminating the
      Plan; or

                                      -4-
<PAGE>

            (b)   ten years from the date the Plan is initially approved and
      adopted by the shareholders of the Company.

      No termination of the Plan shall materially and adversely affect any of
the rights or obligations of any person, without his consent, under any Option
theretofore granted under the Plan.

      10.   IMMEDIATE ACCELERATION OF OPTIONS. Notwithstanding any provision in
this Plan to the contrary, all outstanding options will become exercisable
immediately if any of the following events occur unless otherwise determined by
the Board of Directors and a majority of the Continuing Directors (as defined
below):

            (a)   any person or group of persons becomes the beneficial owner of
      30% or more of any equity security of the Company entitled to vote for the
      election of directors;

            (b)   a majority of the members of the Board of Directors of is
      replaced within the period of less than two years by directors not
      nominated and approved by the Board of Directors; or

            (c)   the stockholders of the Company approve an agreement to merge
      or consolidate with or into another corporation or an agreement to sell or
      otherwise dispose of all or substantially all of the Company's assets
      (including a plan of liquidation).

      For purposes of this Section 10, beneficial ownership by a person or group
of persons shall be determined in accordance with Regulation 13D (or any similar
successor regulation) promulgated by the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended. Beneficial
ownership of more than 30% of an equity security may be established by any
reasonable method, but shall be presumed conclusively as to any person who files
a Schedule 13D report with the Securities and Exchange Commission reporting such
ownership.

      For purposes of this Section 10 "Continuing Directors" are directors (i)
who were in office prior to the time any of provisions (a), (b) or (c) occurred
or any person publicly announced an intention to acquire 20% or more of any
equity security of the Company, (ii) directors in office for a period of more
than two years, and (iii) directors nominated and approved by the Continuing
Directors.

      11.   EFFECTIVE DATE OF PLAN. The Plan will become effective on the date
that it is approved by the affirmative vote of the holders of a majority of the
shares of Common Stock entitled to notice of and to vote at the Company's 1996
Annual Meeting of Stockholders.

                                      -5-

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