Document:

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                                                                     EXHIBIT 4.2

                        MENDELL ENERGY TECHNOLOGIES, INC.

                                       AND

                        CORPORATE STOCK TRANSFER COMPANY

                                  WARRANT AGENT

                                WARRANT AGREEMENT

                                     DATED AS OF                 , 2001
                                                 ----------------

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                                TABLE OF CONTENTS

<Table>
<Caption>
Section
Number                                      Title                                       Page
<S>               <C>                                                                   <C>
    1             Definitions...........................................................  2
    2             Warrants and Issue of Warrant Certificates............................  4
    3             Form of Warrant Certificates..........................................  4
    4             Term of Warrants; Exercise of Warrants................................  5
    5             Redemption............................................................  7
    6             Reservation of Warrant Shares.........................................  8
    7             Payment of Taxes......................................................  8
    8             Warrant Shares to be Fully Paid.......................................  8
    9             Registration of Transfer..............................................  8
    10            Adjustment of Exercise Price and Number of Shares.....................  9
    11            Merger or Consolidation of the Company................................ 13
    12            Modification of Agreement............................................. 13
    13            Notices to Warrant Holders............................................ 14
    14            No Rights as Shareholder.............................................. 15
    15            Warrant Agent......................................................... 15
    16            Merger, Consolidation, or Change of Name of
                    Warrant Agent....................................................... 16
    17            Change of Warrant Agent............................................... 17
    18            Notices  ............................................................. 17
    19            Arbitration........................................................... 18
    20            Miscellaneous Provisions.............................................. 18
</Table>

Warrant Agreement

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         THIS WARRANT AGREEMENT dated as of _______________, 2001, is between
Mendell Energy Technologies, Inc. (the "Company"), a Colorado corporation, and
Corporate Stock Transfer Company, Denver, Colorado (called, as well as any
successor acting as warrant agent under this Agreement, the "Warrant Agent").

                                    RECITALS

         1. The Company proposes to issue shares of its no par value Common
Stock ("Common Stock") pursuant to Registration Statement No. 333-____ (the
"Registration Statement") that the Company has filed with the United States
Securities and Exchange Commission; and

         2. The Company also proposes to issue Warrants (evidenced by a "Warrant
Certificate") in connection with and in addition to the issuance of said shares
of Common Stock; and

         3. Each Warrant will entitle the Warrant Holder to purchase one Warrant
Share; and

         4. The Company desires to enter into this agreement to establish the
terms and conditions of the Warrants, to set forth the rights of the registered
holders of the Warrants, and to provide for the issuance, transfer and exercise
of the Warrants and other matters; and

         5. The Company desires the Warrant Agent to act on behalf of the
Company and the Warrant Agent is willing so to act under the terms of this
Agreement;

         NOW THEREFORE, in consideration of the mutual agreements stated in this
Agreement, the Company and the Warrant Agent agree as follows:

         SECTION 1 DEFINITIONS

         The following terms used in this agreement shall have the following
meanings (unless otherwise expressly provided herein):

         The "Act."  The Securities Act of 1933, as amended.

         The "Commission."  The Securities an Exchange Commission.

         The "Company." Mendell Energy Technologies, Inc., a Colorado
corporation.

         "Common Stock." The Common Stock, no par value per share, of the
Company, whether now or hereafter authorized, holders of which have the right to
participate in the distribution of earnings and assets of the Company without
limit as to the amount or percentage.

         "Current Market Price." The Current Market Price shall be determined as
follows:

Warrant Agreement

                                       2
<PAGE>   4

                  (a) if the security at issue is listed on a national
securities exchange or admitted to unlisted trading privileges on such an
exchange or quoted on either the NASDAQ National Market or on the NASDAQ Small
Cap Market, the Current Market Price shall be the last reported sale price of
that security on such exchange or system on the day for which the Current Market
Price is to be calculated; or, if no such sale is made on such day, the average
of the highest closing bid and lowest asked price for such day on such exchange
or system; or

                  (b) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges, the Current Market Price shall be the
last reported sale price of that security on the OTC Bulletin Board on the day
for which the Current Market Price is to be calculated; or if no such sale is
made on such day, the average of the last reported highest bid and lowest asked
prices quoted on the OTC Bulletin Board on such day; or

                  (c) if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges and bid and asked prices are not
reported, the Current Market Price shall be determined in such reasonable manner
as may be prescribed from time to time by the Board of Directors of the Company,
subject to the objection and arbitration procedure as described in Sections 10.9
and 19 below.

         "Effective Date."  __________ .

         "Exercise Date." The date of surrender for exercise of any Warrant
Certificate, provided the exercise form on the back of the Warrant Certificate
or a form substantially similar thereto has been completed in full by the
Warrant Holder or a duly appointed attorney and the Warrant Certificate is
accompanied by payment in full of the Exercise Price.

         "Exercise Period." The period commencing on the date the Warrants are
issued and extending to and through the Expiration Date.

         "Exercise Price." $_______ per Share, as modified in accordance with
Section 10, below.

         "Expiration Date." 5:00 p.m. Denver, Colorado, local time on
_____________, subject to the terms provided in Section 5 hereof for redemption;
provided, however, if such date shall be a holiday or a day on which banks are
authorized to close in the State of Colorado, the Expiration Date shall mean
5:00 p.m. Denver, Colorado, local time on the next following day which in the
State of Colorado is not a holiday or a day on which banks are authorized to
close. If the Company redeems the Warrants as provided in Section 5 of this
Agreement, the Expiration Date shall be the date fixed for redemption.

         "Holder" or "Warrant Holder." The person to whom a Warrant Certificate
is issued, and any valid transferee thereof pursuant to Section 9 below.

         "NASDAQ." The electronic inter-dealer quotation system operated by The
Nasdaq Stock Market, Inc.

         "OTC Bulletin Board." An electronic quotation medium operated by The
Nasdaq Stock Market, Inc.

         "Public Offering." The public offering by the Company of shares of
Common Stock and warrants pursuant to the Registration Statement.

Warrant Agreement

                                       3
<PAGE>   5

         "Warrants." The Warrants issued in accordance with the terms of this
Agreement and any Warrants issued in substitution for or replacement of such
Warrants, or any Warrants into which such Warrants may be divided or exchanged.

         "Warrant Shares." The Common Stock receivable upon exercise or
conversion of a Warrant, and the Common Stock underlying the unexercised portion
of a Warrant.

         "Termination of Business." Any sale, lease or exchange of all, or
substantially all, of the Company's assets or business or any dissolution,
liquidation or winding up of the Company.

         SECTION 2 WARRANTS AND ISSUANCE OF WARRANT CERTIFICATES

         2.1 Description of Warrants. Each Warrant shall initially entitle the
Warrant Holder to purchase one share of Common Stock on exercise thereof,
subject to modification and adjustment as hereinafter provided in Section 10.
Warrant Certificates representing up to 1,376,400 warrants and evidencing the
right to purchase an aggregate of up to 1,376,400 shares of Common Stock of the
Company shall be executed by the proper officers of the Company. The Company
shall deliver Warrant Certificates in required whole number denominations to the
person entitled thereto in connection with the original issuance of Warrant
Certificates or any transfer or exchange permitted under this Agreement.

         2.2 Warrant Shares. Except as provided in Section 3.4 hereof,
certificates representing the Warrant Shares shall be issued only on or after
the Exercise Date upon exercise of the Warrants or upon transfer or exchange of
the Warrant Shares following exercise of the Warrants.

         SECTION 3 FORM OF WARRANT CERTIFICATE

         3.1 Form of Certificates. The Warrant Certificates shall be
substantially in the form attached hereto as Exhibit A and may have such
letters, numbers or other marks of identification and such legends, summaries or
endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement.
The Warrant Certificates shall be dated as of the date of issuance, whether on
initial issuance, transfer, exchange, or in lieu of mutilated, lost, stolen or
destroyed Warrant Certificates.

         3.2 Execution of Certificates. The Warrant Certificates shall be
executed on behalf of the Company by its President and Secretary, by manual
signatures or by facsimile signatures printed thereon, and shall have imprinted
thereon a facsimile of the Company's seal. If any person whose facsimile
signature has been placed upon any Warrant Certificate as the signature of an
officer of the Company shall have ceased to be such officer before such Warrant
Certificate is countersigned, issued and delivered, such Warrant Certificate may
be countersigned, issued and delivered with the same effect as if such person
had not ceased to be such officer. Any Warrant Certificate may be signed by, or
may bear the facsimile signature of, any person who at the actual date of the
preparation of such Warrant Certificate shall be a proper officer of the Company
to sign such Warrant Certificate even though such person was not such an officer
upon the date of this Agreement.

         3.3 Countersignatures. Warrant Certificates shall be manually
countersigned by the Warrant Agent and shall not be valid for any purpose unless
so countersigned. The Warrant Agent is hereby authorized

Warrant Agreement

                                       4
<PAGE>   6

to countersign and deliver to, or in accordance with the instructions of, any
Warrant Holder any Warrant Certificate that is properly issued under the terms
of this Agreement.

         3.4 Mutilated, Lost, Stolen, or Destroyed Certificate. In case the
certificate or certificates evidencing the Warrants shall be mutilated, lost,
stolen or destroyed, the Company shall, at the request of the Warrant Holder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant Certificate
or Certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence satisfactory to the Company of such loss,
theft or destruction of such Warrant and a bond of indemnity, if requested, also
satisfactory in form and amount, at the applicant's cost. Applicants for such
substitute Warrant Certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.

         3.5 Exchange of Certificate. Any Warrant Certificate may be exchanged
for another certificate or certificates entitling the Warrant Holder to purchase
a like aggregate number of Shares as the certificate or certificates surrendered
then entitled such Warrant Holder to purchase. Any Warrant Holder desiring to
exchange a Warrant Certificate shall make such request in writing delivered to
the Company, and shall surrender, properly endorsed, with signatures guaranteed,
the certificate evidencing the Warrant to be so exchanged. Thereupon, the
Company shall execute and deliver to the person entitled thereto a new Warrant
Certificate as so requested.

         SECTION 4 TERM OF WARRANTS; EXERCISE OF WARRANTS

         4.1 Exercise of Warrant. Subject to the terms of this Agreement, the
Warrant Holder shall have the right, at any time during the Exercise Period, to
purchase from the Company up to the number of fully paid and nonassessable
Shares to which the Warrant Holder may at the time be entitled to purchase
pursuant to this Agreement, upon surrender to the Company, at its principal
office, of the certificate evidencing the Warrants to be exercised, together
with the purchase form on the reverse thereof, duly filled in and signed, and
upon payment to the Company of the Exercise Price for the number of Shares in
respect of which such Warrants are then exercised, but in no event for less than
100 Shares (unless fewer than an aggregate of 100 shares are then purchasable
under all outstanding Warrants held by a Warrant Holder).

         4.2 Payment of Exercise Price. Payment of the aggregate Exercise Price
shall be made in cash or by check, or any combination thereof.

         4.3 Delivery of Share Certificate. Subject to the provisions of Section
9, upon receipt of a Warrant Certificate with the exercise form thereon duly
executed, together with payment in full of the Exercise Price for the Warrant
Shares being purchased by such exercise, or upon exercise of the Conversion
Right described in Section 4.6, the Warrant Agent shall requisition from the
Company's transfer agent (which transfer agent may be the Warrant Agent pursuant
to its appointment therefor separately from this Agreement), certificates for
Warrant Shares and upon receipt shall make delivery of certificates evidencing
the total number of whole Warrant Shares for which Warrants are then being
exercised or converted, together with cash as provided in Section 4.8 hereof in
respect of any fractional Warrant Shares otherwise issuable upon such surrender.
The certificates shall be in such names and denominations as are required for
delivery to, or in accordance with the instructions of the Warrant Holder;
provided that if fewer than all Warrant Shares issuable on exercise of a Warrant
Certificate are purchased, the Warrant Agent (if so requested) shall issue such
balance

Warrant Agreement

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Warrant Certificate for the balance of the Warrant Shares. Such certificates for
the Warrant Shares shall be deemed to be issued, and the person to whom such
Warrant Shares are issued of record shall be deemed to have become a holder of
record of such Warrant Shares, as of the date of the surrender of such Warrant
Certificate and payment of the Exercise Price, whichever shall last occur;
provided further that if the books of the Company with respect to the Warrant
Shares shall be closed as of such date, the certificates for such Warrant Shares
shall be deemed to be issued, and the person to whom such Warrant Shares are
issued of record shall be deemed to have become a record holder of such Warrant
Shares, as of the date on which such books shall next be open (whether before,
on or after the applicable Expiration Date) but at the Exercise Price and upon
the other conditions in effect upon the date of surrender of the Warrant
Certificate and payment of the Exercise Price, whichever shall have last
occurred, to the Warrant Agent.

         4.4 Cancellation of Certificates. All Warrant Certificates surrendered
upon exercise of Warrants shall be canceled.

         4.5 Delivery of Proceeds of Exercise. Within two days after the receipt
thereof in cleared funds, the Warrant Agent shall deliver to the Company all
proceeds received from Warrant Holders on exercise of the Warrants.

         4.6 Registration Statement. If any Warrant Shares issuable upon the
exercise of Warrants require the maintenance of a current registration statement
under the Securities Act of 1933, as amended (the "Act"), with respect to such
Warrant Shares before such Warrant Shares may be validly and lawfully issued,
the Company will in good faith endeavor to maintain such current registration
statement under the Act, provided that in no event shall such Warrant Shares be
issued, and the Company shall have the authority to suspend the exercise of any
or all Warrants while such registration statement is not current. Similarly, a
Warrant Holder residing in a state where a required registration or governmental
approval of issuance of the Warrant Shares is not in effect as of or has not
been obtained within a reasonable time after the surrender date of the Warrant
Certificate for exercise shall not be entitled to exercise Warrants unless in
the opinion of counsel such registration or approval in such state shall not be
required, or the Company authorizes issuance. In such event, the Warrant Holder
shall be entitled to transfer the Warrants to others, but only prior to the
Expiration Date for the Warrants being transferred.

         4.7 Fractional Shares. On exercise of the Warrants by the Warrant
Holders, the Company shall not be required to deliver fractions of shares of
Common Stock; provided, however, that the Company shall purchase such fraction
for an amount in cash equal to the Current Market Price of such fraction,
computed on the trading day immediately preceding the day upon which such
Warrant Certificate was surrendered for exercise. By accepting a Warrant
Certificate, the holder thereof expressly waives any right to receive a Warrant
Certificate evidencing any fraction of a Warrant or to receive any fractional
share of securities upon exercise of a Warrant, except as expressly provided in
this Section 4.7.

         4.8 Status as Shareholder. Upon receipt of the Warrant Certificate by
the Company as described in this Section, the Holder shall be deemed to be the
holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the transfer books of the Company may then be closed or
that certificates representing such Warrant Shares may not have been prepared or
actually delivered to the holder.

Warrant Agreement

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         SECTION 5 REDEMPTION

         5.1 Right to Redeem. The Company may, at its option, redeem the
Warrants in whole or in part on a pro rata basis for a redemption price of $.10
per Warrant (the "Redemption Price") on 30 days prior written notice to the
Warrant Holders. The right to redeem the Warrants may be exercised by the
Company only in the event (i) the closing bid price or closing sale price, as
the case may be, for the Common Stock has exceeded the Exercise Price by at
least 200% during a period of at least 20 consecutive trading days immediately
preceding the date of mailing of the notice of redemption, (ii) the Company has
in effect a current registration statement (or a post-effective amendment to an
existing registration statement) with the Commission registering the Warrant
Shares, and (iii) the expiration of the 30 days notice period is within the
Exercise Period. In the event the Company exercises its right to redeem the
Warrants, the Expiration Date will be deemed to be, and the Warrants will be
exercisable until the close of business on, the date fixed for redemption in
such notice (the "Redemption Date"). If any Warrant called for redemption is not
exercised by such time, it will cease to be exercisable and the Warrant Holder
thereof will be entitled only to the Redemption Price.

         5.2 Termination of Rights. From and after the Redemption Date, all
rights of the holders of record of redeemed Warrants (except the right to
receive the Redemption Price) shall terminate, but only if (i) no later than one
day prior to the Redemption Date the Company shall have irrevocably deposited
with the Warrant Agent, as paying agent, a sufficient amount to pay on the
Redemption Date the Redemption Price for all Warrants called for redemption, and
(ii) the notice of redemption shall have stated the name and address of the
Warrant Agent and the intention of the company to deposit such amount with the
Warrant Agent no later than one day prior to the Redemption Date.

         5.3 Payment of Redemption Price. The Warrant Agent shall pay to the
holders of record of redeemed Warrants all amounts received by the Warrant Agent
for the redemption of warrants to which the holders of record of such redeemed
Warrants who shall have surrendered their Warrants are entitled. Any amounts
deposited by the Company with the Warrant Agent to pay the Redemption Price for
all Warrants called for redemption that are not required for redemption of
Warrants may be withdrawn by the Company. Any amounts deposited by the Company
with the Warrant Agent to pay the Redemption Price for all Warrants called for
redemption that shall be unclaimed six months after the Redemption Date may be
withdrawn by the Company, and thereafter the holders of the Warrants called for
redemption for which such funds were deposited shall look solely to the Company
for payment. The Company shall be entitled to the interest, if any, on funds
deposited with the Warrant Agent, and the Warrant Holders of redeemed Warrants
shall have no right to any such interest.

         5.4 Failure to Make Deposit. If the Company fails to make a sufficient
deposit with the Warrant Agent as provided above, the Warrant Holder of any
Warrants called for redemption may at the option of the holder (i) by notice to
the Company declare the notice of redemption a nullity as to such holder, or
(ii) maintain an action against the Company for the Redemption Price. If the
Warrant Holder brings such an action, the Company will pay the reasonable
attorney's fees of the Warrant Holder. If the Warrant Holder fails to bring an
action against the Company for the Redemption Price within 60 days after the
Redemption Date, the Warrant Holder shall be deemed to have elected to declare
the notice of redemption to be a nullity as to such holder and such notice shall
be without any force or effect as to such holder.

Warrant Agreement

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         SECTION 6. RESERVATION OF WARRANT SHARES

         There has been reserved, and the Company shall at all times keep
reserved so long as the Warrants remain outstanding, out of its authorized and
unissued Common Stock, such number of shares of Common Stock as shall be subject
to purchase under the Warrants. The Company covenants that all Warrant Shares
that may be issued and delivered to a Warrant Holder upon the exercise of a
Warrant and payment of the Exercise Price shall be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issuance thereof. Every transfer agent for the Common Stock and other
securities of the Company issuable upon the exercise of the Warrants will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares and other securities as shall be requisite for such purpose.
The Company will keep a copy of this Agreement on file with every transfer agent
for the Common Stock and other securities of the Company issuable upon the
exercise of the Warrants. The Company will supply every such transfer agent with
duly executed stock and other certificates, as appropriate, for such purpose and
will provide or otherwise make available any cash which may be payable as
provided in Sections 4.7 and 7 hereof.

         SECTION 7 PAYMENT OF TAXES

         The Company will pay all documentary stamp taxes, if any, attributable
to the initial issuance of the Warrants or the Warrant Shares and any tax
(except federal or state income tax) which may be payable in respect of any
transfer of the Warrants or the Warrant Shares.

         SECTION 8 WARRANT SHARES TO BE FULLY PAID

         The Company covenants that all Warrant Shares that may be issued and
delivered to a Holder of this Warrant upon the exercise of this Warrant and
payment of the Exercise Price, and all Converted Shares that may be issued and
delivered to a holder upon a conversion of a Warrant will be, upon such
delivery, validly and duly issued, fully paid and nonassessable.

         SECTION 9 REGISTRATION OF TRANSFER

         9.1. Exchange of Certificate. A Warrant Certificate may be exchanged
for another certificate or certificates entitling the Warrant Holder to purchase
a like aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitled such Warrant Holder to purchase. Any Warrant Holder
desiring to exchange a Warrant Certificate shall make such request in writing
delivered to the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Warrant to be so
exchanged. Thereupon, the Company shall execute and deliver to the person
entitled thereto a new Warrant Certificate as so requested.

         9.2 Transfer. The Warrants may be transferred in whole or in part.
Warrant Certificates representing the Warrants to be transferred shall be
surrendered to the Warrant Agent, properly endorsed, with signatures guaranteed.
Thereupon, the Company shall execute and deliver to the persons entitled thereto
the Warrant Certificate or Certificates to which the holder making the transfer
and the person to whom the transfer is made are entitled and the Warrant Agent
shall promptly cancel the surrendered Warrant Certificate.

         9.3 Ownership Records. The Warrant Agent shall keep books for
registration of ownership and transfer of Warrant Certificates. Such books shall
show the names and addresses of the respective holders of

Warrant Agreement

                                       8
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the Warrant Certificates and the number of Warrants evidenced by each such
Warrant Certificate. All Warrant Certificates presented for registration of
transfer shall be duly endorsed or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Warrant
Agent. On due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall caused to be executed, issued and
delivered to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants.

         9.4 Ownership Prior to Presentment. Prior to due presentment for
registration of transfer thereof, the Company may treat the Warrant Holder as
the absolute owner thereof (notwithstanding any notations of ownership or
writing thereon made by anyone other than the Company) and the parties hereto
shall not be affected by any notice to the contrary.

         SECTION 10 ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES

         The number and kind of securities purchasable upon the exercise of the
Warrants and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, as follows:

         10.1 Adjustments. The number of Warrant Shares purchasable upon the
exercise of the Warrants shall be subject to adjustments as follows:

                  (a) In case the Company shall (i) pay a dividend in Common
Stock or securities convertible into Common Stock or make a distribution to its
stockholders in Common Stock or securities convertible into Common Stock; (ii)
subdivide its outstanding Common Stock; (iii) combine its outstanding Common
Stock into a smaller number of shares of Common Stock; or (iv) issue by
reclassification of its Common Stock other securities of the Company; then the
number of Warrant Shares purchasable upon exercise of the Warrants immediately
prior thereto shall be adjusted so that the Warrant Holder shall be entitled to
receive the kind and number of Warrant Shares or other securities of the Company
which it would have owned or would have been entitled to receive immediately
after the happening of any of the events described above, had such Warrants been
exercised immediately prior to the happening of such event or any record date
with respect thereto. Any adjustment made pursuant to this subsection 10.1(a)
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.

                  (b) If, prior to the expiration of the Warrants by exercise,
by their terms, or by redemption, the Company shall be recapitalized by
reclassifying its outstanding shares of Common Stock into shares with a
different par value, or by changing its outstanding shares of Common Stock into
shares without par value or in the event of any other material change of the
capital structure of the Company or of any successor corporation by reason of
any reclassification, recapitalization or conveyance, prompt, proportionate,
equitable, lawful and adequate provision shall be made whereby any Warrant
Holder shall thereafter have the right to purchase, on the basis and the terms
and conditions specified in this Agreement, in lieu of the Warrant Shares
theretofore purchasable on the exercise of any Warrant, such securities or
assets as may be issued or payable with respect to or in exchange for the number
of Warrant Shares theretofore purchasable on exercise of the Warrants had such
reclassification, recapitalization or conveyance not taken place; and in any
such event, the rights of any Warrant Holder to any adjustment in the number of
Warrant Shares purchasable on exercise of such Warrant, as set forth above,
shall continue to be preserved in respect of any stock, securities or assets
which the Warrant Holder becomes entitled to purchase.

Warrant Agreement

                                       9
<PAGE>   11

                  (c) In case the Company shall issue rights, options, warrants,
or convertible securities to all or substantially all holders of its Common
Stock, without any charge to such holders, entitling them to subscribe for or
purchase Common Stock at a price per share which is lower at the record date
mentioned below than the then Current Market Price, the number of Shares
thereafter purchasable upon the exercise of each Option shall be determined by
multiplying the number of Shares theretofore purchasable upon exercise of the
Options by a fraction, of which the numerator shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such rights,
options, warrants or convertible securities plus the number of additional shares
of Common Stock offered for subscription or purchase, and of which the
denominator shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants, or
convertible securities plus the number of shares which the aggregate offering
price of the total number of shares offered would purchase at such Current
Market Price. Such adjustment shall be made whenever such rights, options,
warrants, or convertible securities are issued, and shall become effective
immediately and retroactively to the record date for the determination of
shareholders entitled to receive such rights, options, warrants, or convertible
securities.

                  (d) In case the Company shall distribute to all or
substantially all holders of its Common Stock evidences of its indebtedness or
assets (excluding cash dividends or distributions out of earnings) or rights,
options, warrants, or convertible securities containing the right to subscribe
for or purchase Common Stock (excluding those referred to in subsection 10.1(b)
above), then in each case the number of Warrant Shares thereafter purchasable
upon the exercise of the Warrants shall be determined by multiplying the number
of Warrant Shares theretofore purchasable upon exercise of the Warrants by a
fraction, of which the numerator shall be the then Current Market Price on the
date of such distribution, and of which the denominator shall be such Current
Market Price on such date minus the then fair value (determined as provided in
subsection 10.1(g)(y) below) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options, warrants,
or convertible securities applicable to one share. Such adjustment shall be made
whenever any such distribution is made and shall become effective on the date of
distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.

                  (e) No adjustment in the number of Warrant Shares purchasable
pursuant to the Warrants shall be required unless such adjustment would require
an increase or decrease of at least one percent in the number of Warrant Shares
then purchasable upon the exercise of the Warrants or, if the Warrants are not
then exercisable, the number of Warrant Shares purchasable upon the exercise of
the Warrants on the first date thereafter that the Warrants become exercisable;
provided, however, that any adjustments which by reason of this subsection
10.1(e) are not required to be made immediately shall be carried forward and
taken into account in any subsequent adjustment.

                  (f) Whenever the number of Warrant Shares purchasable upon the
exercise of the Warrant is adjusted, as herein provided, the Exercise Price
payable upon exercise of the Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Warrant Shares purchasable upon the exercise of
the Warrant immediately prior to such adjustment, and of which the denominator
shall be the number of Warrant Shares so purchasable immediately thereafter.

                  (g) For the purpose of this subsection 10.1, the term "Common
Stock" shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of

Warrant Agreement

                                       10
<PAGE>   12

changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to this Section 10, the Warrant Holder shall become entitled to
purchase any securities of the Company other than Common Stock, (y) if the
Warrant Holder's right to purchase is on any other basis than that available to
all holders of the Company's Common Stock, the Company shall obtain an opinion
of an independent investment banking firm valuing such other securities; and (z)
thereafter the number of such other securities so purchasable upon exercise of
the Warrants shall be subject to adjustment from time to time in a manner and on
terms as nearly equivalent as practicable to the provisions with respect to the
Warrant Shares contained in this Section 10.

                  (h) Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised, the number of
Shares purchasable upon exercise of the Warrants, to the extent the Warrants
have not then been exercised, shall, upon such expiration, be readjusted and
shall thereafter be such as they would have been had they been originally
adjusted (or had the original adjustment not been required, as the case may be)
on the basis of (i) the fact that the only shares of Common Stock so issued were
the shares of Common Stock, if any, actually issued or sold upon the exercise of
such rights, options, warrants, or conversion privileges, and (ii) the fact that
such shares of Common Stock, if any, were issued or sold for the consideration
actually received by the Company upon such exercise plus the consideration, if
any, actually received by the Company for the issuance, sale or grant of all
such rights, options, warrants, or conversion privileges whether or not
exercised; provided, however, that no such readjustment shall have the effect of
decreasing the number of Shares purchasable upon exercise of the Warrants by an
amount in excess of the amount of the adjustment initially made in respect of
the issuance, sale, or grant of such rights, options, warrants, or conversion
rights.

         10.2 No Adjustment for Dividends. Except as provided in subsection
10.1, no adjustment in respect of any dividends or distributions out of earnings
shall be made during the term of the Warrants or upon the exercise of the
Warrants.

         10.3 No Adjustment in Certain Cases. No adjustments shall be made
pursuant to Section 4 hereof in connection with the issuance of the Common Stock
sold as part of the Public Offering sale or the issuance of Warrant Shares upon
exercise of the Warrants. No adjustments shall be made pursuant to Section 10
hereof in connection with the grant or exercise of presently authorized or
outstanding options to purchase, or the issuance of shares, of Common Stock
under the Company's director or employee benefit plans disclosed in the
Registration Statement relating to the Public Offering.

         10.4 Preservation of Purchase Rights upon Reclassification,
Consolidation, etc. In case of any consolidation of the Company with or merger
of the Company into another corporation, or in case of any sale or conveyance to
another corporation of the property, assets, or business of the Company as an
entirety or substantially as an entirety, the Company or such successor or
purchasing corporation, as the case may be, shall execute an agreement that the
Warrant Holder shall have the right thereafter upon payment of the Exercise
Price in effect immediately prior to such action to purchase, upon exercise of
the Warrants, the kind and amount of shares and other securities and property
which it would have owned or have been entitled to receive after the happening
of such consolidation, merger, sale, or conveyance had the Warrants been
exercised immediately prior to such action. In the event of a merger described
in Section 368(a)(2)(E) of the Internal Revenue Code of 1986, in which the
Company is the surviving corporation, the right to purchase Warrant Shares under
the Warrants shall terminate on the date of such merger and thereupon the
Warrants shall become null and void, but only if the controlling corporation
shall agree to substitute for the Warrants, its Warrants

Warrant Agreement

                                       11
<PAGE>   13

which entitle the holder thereof to purchase upon their exercise the kind and
amount of shares and other securities and property which it would have owned or
been entitled to receive had the Warrants been exercised immediately prior to
such merger. Any such agreements referred to in this subsection 10.4 shall
provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in Section 10 hereof. The provisions
of this subsection 10.4 shall similarly apply to successive consolidations,
mergers, sales, or conveyances.

         10.5 Par Value of Shares of Common Stock. Before taking any action
which would cause an adjustment effectively reducing the portion of the Exercise
Price allocable to each Warrant Share below the par value per share of the
Common Stock issuable upon exercise of the Warrants, the Company will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Common Stock upon exercise of the Warrants.

         10.6 Independent Public Accountants. The Company may retain a firm of
independent public accountants of recognized national standing (which may be any
such firm regularly employed by the Company) to make any computation required
under this Section 10, and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 10.

         10.7 Statement on Warrant Certificates. Irrespective of any adjustments
in the number of securities issuable upon exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant Certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its sole discretion (which shall be conclusive), make any change in the form of
Warrant Certificate that it may deem appropriate and that does not affect the
substance thereof; and any Warrant Certificate thereafter issued, whether upon
registration of transfer of, or in exchange or substitution for, an outstanding
Warrant Certificate, may be in the form so changed.

         10.8 Treasury Stock. For purposes of this Section 10, shares of Common
Stock owned or held at any relevant time by, or for the account of, the Company,
in its treasury or otherwise, shall not be deemed to be outstanding for purposes
of the calculations and adjustments described.

         10.9 Officers' Certificate. Whenever the Exercise Price or that
aggregate number of Warrant Securities purchasable pursuant to this Warrant
shall be adjusted as required by the provisions of this Section 10, the Company
shall promptly file with the Warrant Agent an officers' certificate executed by
the Company's President and Secretary or Assistant Secretary, describing the
adjustment and setting forth, in reasonable detail, the facts requiring such
adjustment and the basis for and calculation of such adjustment in accordance
with the provisions of this Warrant Agreement. Each such officers' certificate
shall be made available to the Holders for inspection at all reasonable times,
and the Company, after each such adjustment, shall promptly deliver a copy of
the officers' certificate relating to that adjustment to the Holders. If the
officers' certificate is not accompanied by the Certificate described in Section
10.6, the officers' certificate described in this Section 10.9 shall be deemed
to be conclusive as to the correctness of the adjustment reflected therein if,
and only if, no Holder delivers written notice to the Company of an objection to
the adjustment within 30 days after the officers' certificate is delivered to
the Holders. The Company will make its books and records available for
inspection and copying during normal business hours by the Holder so as to
permit a determination as to the correctness of the adjustment. If a holder
delivers written notice of an objection to the Company and the parties cannot
reconcile the dispute, the Holder and the Company shall submit the dispute to
arbitration

Warrant Agreement

                                       12
<PAGE>   14

pursuant to the provisions of Section 19 below. Failure to prepare or provide
the officers' certificates shall not modify the parties' rights hereunder.

         SECTION 11 MERGER OR CONSOLIDATION OF THE COMPANY

         The Company will not merge or consolidate with or into any other
corporation or sell all or substantially all of its property to another
corporation, unless the provisions of Section 10.4 are complied with.

         SECTION 12 MODIFICATION OF AGREEMENT

         The Company may by supplemental agreement make any changes or
corrections in this Agreement it shall deem appropriate to cure any ambiguity or
to correct any defective or inconsistent provision or mistake or error herein
contained. Additionally, the Company may make any changes or corrections deemed
necessary which shall not adversely affect the interests of the Warrant Holders,
including lowering the exercise price or extending the Exercise Period of the
Warrants; provided, however, this Agreement shall not otherwise be modified,
supplemented or altered in any respect except with the consent in writing of the
Warrant Holders who hold not less than a majority of the Warrants then
outstanding and provided further that no such amendment shall accelerate the
Warrant Expiration Date or increase the Exercise Price without the approval of
all the holders of all outstanding Warrants.

Warrant Agreement

                                       13
<PAGE>   15

         SECTION 13 NOTICES TO WARRANT HOLDERS

         If, prior to the expiration of this Warrant either by its terms or by
its exercise in full, any of the following shall occur:

                  (i) the Company shall declare a dividend on its Common Stock
or authorize any other distribution on its Common Stock; or

                  (ii) the Company shall authorize the granting to the
stockholders of its Common Stock of rights to subscribe for or purchase any
securities or any other similar rights; or

                  (iii) any reclassification, reorganization or similar change
of the Common Stock, or any consolidation or merger to which the Company is a
party, or the sale, lease, or exchange of any significant portion of the assets
of the Company; or

                  (iv) the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or

                  (v) any purchase, retirement, or redemption by the Company of
its Common Stock;

then, and in any such case, the Company shall deliver to the Holder or Holders
written notice thereof at least 30 days prior to the earliest applicable date
specified below with respect to which notice is to be given, which notice shall
state the following:

                  (a) the purpose for which a record of stockholders is to be
taken;

                  (b) the number, amount, price, and nature of the shares of
Common Stock or other stock, securities, or assets which will be deliverable on
Warrant Shares following exercise of the Warrants if such exercise occurs prior
to the record date for such action;

                  (c) the date on which a record is to be taken for the purpose
of such dividend, distribution or rights, or, if a record is not to be taken,
the date as of which the stockholders of Common Stock of record to be entitled
to such dividend, distribution or rights are to be determined;

                  (d) the date on which such reclassification, reorganization,
consolidation, merger, sale, transfer, dissolution, liquidation, winding up or
purchase, retirement or redemption is expected to become effective, and the
date, if any, as of which the Company's stockholders of Common Stock of record
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reclassification, reorganization, consolidation,
merger, sale, transfer, dissolution, liquidation, winding up, purchase,
retirement or redemption; and

                  (e) if any matters referred to in the foregoing clauses (x)
and (y) are to be voted upon by stockholders of Common Stock, the date as of
which those stockholders to be entitled to vote are to be determined.

Warrant Agreement

                                       14
<PAGE>   16

         SECTION 14 NO RIGHTS AS SHAREHOLDER

         Nothing contained in this Agreement or in the Warrants shall be
construed as conferring upon the Warrant Holder or its transferees any rights as
a shareholder of the Company, including the right to vote, receive dividends,
consent or receive notices as a shareholder in respect to any meeting of
shareholders for the election of directors of the Company or any other matter.
The Company covenants, however, that for so long as this Warrant is at least
partially unexercised, it will furnish any Holder of this Warrant with copies of
all reports and communications furnished to the shareholders of the Company.

         SECTION 15 WARRANT AGENT

         15.1. Appointment. The Company hereby appoints the Warrant Agent to act
as the agent of the Company in accordance with this Agreement and Warrant Agent
hereby accepts such appointment.

         15.2 Duties. The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions by all of
which the Company and every Warrant Holder by acceptance of any Warrant
Certificates, shall be bound:

                  (i) The statements contained in this Agreement and in the
Warrant Certificates shall be taken as statements of the Company and the Warrant
Agent assumes no responsibility for the correctness of any of the same except
such as described by the Warrant Agent or action taken or to be taken by it.

                  (ii) The Warrant Agent shall not be responsible for any
failure of the Company to comply with any of the Company's covenants contained
in this Agreement or in the Warrant Certificates.

                  (iii) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Warrant
Holder in respect to any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the opinion or the advice of such counsel,
provided the Warrant Agent shall have exercised reasonable care in the selection
and continued employment of such counsel.

                  (iv) The Warrant Agent shall incur no liability or
responsibility to the Company or to any Warrant Holder for any action taken in
reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument believed by it to be genuine and to have
been signed, sent or presented by the property party or parties.

                  (v) The Company agrees to pay to the Warrant Agent the Warrant
Agent's standard published rates in effect on the date of this Agreement, as the
same may be changed from time to time upon thirty (30) days prior written notice
from the Warrant Agent to the Company, for all services rendered by the Warrant
Agent in the execution of this Agreement; to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the execution of this Agreement; and to
indemnify the Warrant Agent and save it harmless against any and all
liabilities, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of this Agreement except as a
result of the Warrant Agent's negligence or bad faith.

                  (vi) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more Warrant Holders
shall furnish the Warrant Agent with reasonable security and indemnity for any
costs and expenses

Warrant Agreement

                                       15
<PAGE>   17

which may be incurred, but this provision shall not affect the power of the
Warrant Agent to take such action as the Warrant Agent may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrant Certificates or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceedings instituted by the Warrant Agent shall be
brought in its name as Warrant Agent, and any recovery or judgment shall be for
the ratable benefit of the Warrant Holders as their respective rights or
interests may appear.

                  (vii) The Warrant Agent and any stockholder, director, officer
or employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.

                  (viii) The Warrant Agent shall act hereunder solely as agent
for the Company, and its duties shall be determined solely by the provisions
hereof and those provisions of the Act, the Securities Exchange Act of 1934, as
amended, and those Rules and Regulations of the Commission applicable to the
duties of the Warrant Agent hereunder.

         SECTION 16 MERGER, CONSOLIDATION, OR CHANGE OF NAME OF WARRANT AGENT

         16.1. Successor. Any corporation into which the Warrant Agent may be
merged or converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which the Warrant
Agent shall be a party, or any corporation succeeding to the corporate trust
business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Warrant Agent under the provisions of Section 17 of
this Agreement. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, and in case at that time any of
the Warrant Certificates shall have been countersigned but not delivered, any
such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent; and in case at the time any of the Warrant Certificates
shall not have been countersigned, any successor to the Warrant Agent may
countersign such Warrant Certificates either in the name of the predecessor
Warrant Agent or in the name of the successor Warrant Agent; and in all such
cases such Warrant Certificates shall have the full force provided in the
Warrant Certificates and in this Agreement.

         16.2. Change of Name. In case at any time the name of the Warrant Agent
shall be changed and at such time any of the Warrant Certificates shall have
been countersigned but not delivered, the Warrant Agent may adopt the
countersignature under its prior name; and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name; and in all such cases such Warrant Certificates shall have the full force
provided in the Warrant Certificates and in this Agreement.

Warrant Agreement

                                       16
<PAGE>   18

         SECTION 17 CHANGE OF WARRANT AGENT

         The Warrant Agent may resign and be discharged from its duties under
this Agreement by giving to the Company notice in writing, and by giving notice
in writing to each Warrant Holder at his address appearing in the Warrant
register, specifying a date when such resignation shall take effect, which
notice shall be sent at least 90 days prior to the date so specified. If the
Warrant Agent shall resign or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of 90 days after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by any Warrant Holder, then any Warrant Holder
may apply to any court of competent jurisdiction for the appointment of a
successor to the Warrant Agent. Pending appointment of a successor to the
Warrant Agent, either by the Company or by such court, the Company shall carry
out the duties of the Warrant Agent. Any successor Warrant Agent, whether
appointed by the Company or by such court, shall be a transfer agent, bank or
trust company, in good standing, organized under the laws of one of the states
of the United States of America or under the laws of the United States of
America. After appointment, the successor Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed and the former Warrant Agent
shall deliver and transfer to the successor Warrant Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Failure to give any notice
provided for in this Section, however, or any defect therein, shall not affect
the legality or validity of the resignation or removal of the Warrant Agent or
the appointment of the successor Warrant Agent, as the case may be.

         SECTION 18 NOTICES

         18.1 The Company. All notices, demands, claims, elections, opinions,
requests or other communications hereunder (however characterized or described)
shall be in writing and shall be deemed duly given or made if (and then two
business days after) sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to, in the case of the Company as
follows:

                  Mendell Energy Technologies, Inc.
                  402 Orofino Drive
                  Castle Rock, Colorado 80104
                  Attention:  Secretary

         18.2 The Warrant Agent. All notices, demands, claims, elections,
opinions, requests or other communications hereunder (however characterized or
described) shall be in writing and shall be deemed duly given or made if (and
then two business days after) sent by registered or certified mail, return
receipt requested, postage prepaid and addressed to, in the case of the Warrant
Agent as follows:

                  Corporate Stock Transfer
                  Compliance Department
                  370 Seventeenth Street
                  Suite 2350
                  Denver, Colorado 80202-4614

         18.3 The Warrant Holders. Any distribution, notice or demand required
or authorized by this Agreement to be given or made by the Company or the
Warrant Agent to or on the Warrant Holders shall be sufficiently given or made
if sent by mail, first class, certified or registered, postage prepaid,
addressed to the

Warrant Agreement

                                       17
<PAGE>   19

Warrant Holders at their last known addresses as they shall appear on the
registration books for the Warrant Certificates maintained by the Warrant Agent.

         18.4 Effectiveness of Notice. The Company may send any notice, demand,
claim, election, opinion, request or communication hereunder to the intended
recipient at the address set forth above using any other means (including
personal delivery, expedited courier, messenger service, telecopy, telex,
ordinary mail or electronic mail), but no such notice, demand, claim, election,
opinion, request or other communication shall be deemed to have been duly given
or made unless and until it actually is received by the intended recipient. The
Company may change the address to which notices, demands, claims, elections,
opinions, requests and other communications hereunder are to be delivered by
giving the Warrant Holders notice in the manner herein set forth.

         SECTION 19 ARBITRATION

         The Company and the Holder, and by receipt of a Warrant Certificate or
any Warrant Shares, all subsequent Holders or holders of Warrant Shares, agree
to submit all controversies, claims, disputes and matters of difference with
respect to this Agreement and the Warrant Certificates, including, without
limitation, the application of this Section 19, to arbitration in New York, New
York, according to the rules and practices of the American Arbitration
Association from time to time in force; provided, however, that if such rules
and practices conflict with the applicable procedures of New York courts of
general jurisdiction or any other provisions of New York law then in force,
those New York rules and provisions shall govern. This agreement to arbitrate
shall be specifically enforceable. Arbitration may proceed in the absence of any
party if notice of the proceeding has been given to that party. The parties
agree to abide by all awards rendered in any such proceeding. These awards shall
be final and binding on all parties to the extent and in the manner provided by
the rules of civil procedure enacted in New York. All awards may be filed, as a
basis of judgment and of the issuance of execution for its collection, with the
clerk of one or more courts, state or federal, having jurisdiction over either
the party against whom that award is rendered or its property. No party shall be
considered in default hereunder during the pendency of arbitration proceedings
relating to that default.

         SECTION 20 MISCELLANEOUS PROVISIONS

         20.1 Persons Benefiting. This Agreement shall be binding upon and inure
to the benefit of the Company, the Warrant Agent and their respective successors
and assigns and the Warrant Holders. By his acceptance of a Warrant Certificate,
the Holder accepts and agrees to comply with all of the terms and provisions
hereof. Nothing in this Agreement is intended or shall be construed to confer on
any other person any right, remedy or claim or to impose on any other person any
duty, liability or obligation.

         20.2 Severability. If any term contained herein shall be held, declared
or pronounced void, voidable, invalid, unenforceable or inoperative for any
reason by any court of competent jurisdiction, government authority or
otherwise, such holding, declaration or pronouncement shall not affect adversely
any other term, which shall otherwise remain in full force and effect, and the
effect of such holding, declaration or pronouncement shall be limited to the
territory or jurisdiction in which made.

         20.3 Termination. This Agreement shall terminate as of the close of
business on the Expiration Date, or such earlier date upon which all Warrants
shall have been exercised or redeemed; except that the

Warrant Agreement

                                       18
<PAGE>   20

exercise of a Warrant in full or the Expiration Date shall not terminate the
provisions of this Agreement as it relates to holders of Warrant Securities.

         20.4 Governing Law. These terms and each Warrant Certificate issued
hereunder shall be deemed to be a contract under the laws of the State of New
York and for all purposes shall be construed in accordance with the laws of said
state without giving effect to conflicts of laws provisions of such state.

         20.5 Agreement Available to Warrant Holders. A copy of these terms
shall be available at all reasonable times at the office of the Warrant Agent
for inspection by any Warrant Holder. As a condition of such inspection, the
Company may require any Warrant Holder to submit a Warrant Certificate held of
record for inspection.

         20.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of such counterparts shall for all purposes be deemed to be
an original and all such counterparts shall together constitute but one and the
same instrument.

         20.7 Failure to Perform. If the Company fails to perform any of its
obligations hereunder, it shall be liable to the Warrant Holder for all damages,
costs and expenses resulting from the failure, including, but not limited to,
all reasonable attorney's fees and disbursements.

         20.8 Paragraph Headings. Paragraph headings used in this Warrant are
for convenience only and shall not be taken or construed to define or limit any
of the terms or provisions of this Warrant. Unless otherwise provided, or unless
the context shall otherwise require, the use of the singular shall include the
plural and the use of any gender shall include all genders.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first written above.

                                            MENDELL ENERGY TECHNOLOGIES, INC.

                                            By:
                                                     ---------------------------

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

Attest:

----------------------------
Secretary

                                            CORPORATE STOCK TRANSFER COMPANY

Warrant Agreement

                                       19
<PAGE>   21

                                            By:
                                                     ---------------------------

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

Attest:

----------------------------
Secretary

Warrant Agreement

                                       20<PAGE>   1
                                                                    EXHIBIT 10.1

                                   APPENDIX E
================================================================================

                                     MENDELL
                               TECHNOLOGIES, INC.

                               2000 INCENTIVE PLAN

                                 JANUARY 5, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<Table>
<Caption>
                                                                                                     Page
<S>                 <C>                                                                              <C>
SECTION 1.          DEFINITIONS                                                                        1

SECTION 2.          SHARES OF STOCK SUBJECT TO THE PLAN                                                7
         2.1        Maximum Number of Shares                                                           7
         2.2        Limitation of Shares                                                               7
         2.3        Description of Shares                                                              8
         2.4        Registration and Listing of Shares                                                 9

SECTION 3.          ADMINISTRATION OF THE PLAN                                                         9
         3.1        Committee                                                                          9
         3.2        Duration, Removal, Etc.                                                            9
         3.3        Meetings and Actions of Committee                                                  9
         3.4        Committee's Powers                                                                10

SECTION 4.          ELIGIBILITY AND PARTICIPATION                                                     10
         4.1        Eligible Individuals                                                              10
         4.2        Grant of Awards                                                                   11
         4.3        Date of Grant                                                                     11
         4.4        Award Agreements                                                                  11
         4.5        Limitation for Incentive Options                                                  11
         4.6        No Right to Award                                                                 11

SECTION 5.          TERMS AND CONDITIONS OF OPTIONS                                                   12
         5.1        Number of Shares                                                                  12
         5.2        Vesting                                                                           12
         5.3        Expiration of Options                                                             12
         5.4        Exercise Price                                                                    12
         5.5        Method of Exercise                                                                12
         5.6        Incentive Option Exercises                                                        12
         5.7        Medium and Time of Payment                                                        13
         5.8        Payment with Sale Proceeds                                                        13
         5.9        Payment of Taxes                                                                  13
         5.10       Limitation on Aggregate Value of Shares That May Become
                    First Exercisable During Any Calendar Year Under an
                    Incentive Option                                                                  14
         5.11       No Fractional Shares                                                              14
         5.12       Modification, Extension, and Renewal of Options                                   14
         5.13       Other Agreement Provisions                                                        15

SECTION 6.          STOCK APPRECIATION RIGHTS                                                         15
         6.1        Form of Right                                                                     15
         6.2        Rights Related to Options                                                         15
         (a)        Exercise and Transfer                                                             15
         (b)        Value of Right                                                                    16
         6.3        Right Without Option                                                              16
</Table>

                                       i
<PAGE>   3

<Table>
<S>                 <C>                                                                              <C>
         (a)        Number of Shares                                                                  16
         (b)        Vesting                                                                           16
         (c)        Expiration of Rights                                                              16
         (d)        Value of Right                                                                    16
         6.4        Limitations on Rights                                                             16
         6.5        Payment of Rights                                                                 16
         6.6        Payment of Taxes                                                                  17
         6.7        Other Agreement Provisions                                                        17

SECTION 7.          RESTRICTED STOCK AWARDS                                                           17
         7.1        Restrictions                                                                      18
         (a)        Transferability                                                                   18
         (b)        Conditions to Removal of Restrictions                                             18
         (c)        Legend                                                                            18
         (d)        Possession                                                                        18
         (e)        Other Conditions                                                                  18
         7.2        Expiration of Restrictions                                                        18
         7.3        Rights as Shareholder                                                             18
         7.4        Payment of Taxes                                                                  18
         7.5        Other Agreement Provisions                                                        19

SECTION 8.          AWARDS TO NON-EMPLOYEE DIRECTORS                                                  19
         8.1        Awards to Committee Members                                                       19
         8.2        Eligibility for Awards                                                            19

SECTION 9.          ADJUSTMENT PROVISIONS                                                             19
         9.1        Adjustment of Awards and Authorized Stock                                         19
         9.2        Changes in Control                                                                20
         9.3        Restructuring Without Change in Control                                           21
         9.4        Notice of Restructuring                                                           23

SECTION 10.         ADDITIONAL PROVISIONS                                                             23
         10.1       Termination of Employment                                                         23
         10.2       Other Loss of Eligibility - Non-Employees                                         23
         10.3       Death                                                                             24
         10.4       Disability                                                                        24
         10.5       Leave of Absence                                                                  25
         10.6       Transferability of Awards                                                         25
         10.7       Forfeiture and Restrictions on Transfer                                           25
         10.8       Delivery of Certificates of Stock                                                 25
         10.9       Conditions to Delivery of Stock                                                   25
         10.10      Certain Directors and Officers                                                    26
         10.11      Securities Act Legend                                                             26
         10.12      Legend for Restrictions on Transfer                                               27
         10.13      Rights as a Shareholder                                                           27
         10.14      Furnish Information                                                               28
         10.15      Obligation to Exercise                                                            28
         10.16      Adjustments to Awards                                                             28
</Table>

                                       ii
<PAGE>   4

<Table>
<S>                 <C>                                                                              <C>
         10.17      Remedies                                                                          28
         10.18      Information Confidential                                                          28
         10.19      Consideration                                                                     28

SECTION 11.         DURATION AND AMENDMENT OF PLAN                                                    29
         11.1       Duration                                                                          29
         11.2       Amendment                                                                         29

SECTION 12.         GENERAL                                                                           29
         12.1       Application of Funds                                                              29
         12.2       Right of the Corporation and Subsidiaries to Terminate
                    Employment                                                                        29
         12.3       No Liability for Good Faith Determinations                                        29
         12.4       Other Benefits                                                                    30
         12.5       Exclusion From Pension and Profit-Sharing Compensation                            30
         12.6       Execution of Receipts and Releases                                                30
         12.7       Unfunded Plan                                                                     30
         12.8       No Guarantee of Interests                                                         31
         12.9       Payment of Expenses                                                               31
         12.10      Corporation Records                                                               31
         12.11      Information                                                                       31
         12.12      No Liability of Corporation                                                       31
         12.13      Corporation Action                                                                31
         12.14      Severability                                                                      31
         12.15      Notices                                                                           32
         12.16      Successors                                                                        32
         12.17      Headings                                                                          32
         12.18      Governing Law                                                                     32
         12.19      Word Usage                                                                        32
</Table>

                                      iii
<PAGE>   5

                                   APPENDIX E

                           MENDELL TECHNOLOGIES, INC.

                               2000 INCENTIVE PLAN

                            SCOPE AND PURPOSE OF PLAN

         Mendell Technologies, Inc. a Colorado corporation (the "Corporation"),
has adopted this 2000 Incentive Plan (the "Plan") to provide for the granting
of:

         (a)      Incentive Options (hereafter defined) to certain Key Employees
                  (hereafter defined);

         (b)      Nonstatutory Options (hereafter defined) to certain Key
                  Employees, Non-Employee Directors (hereafter defined) and
                  other Persons;

         (c)      Restricted Stock Awards (hereafter defined) to certain Key
                  Employees and other Persons; and

         (d)      Stock Appreciation Rights (hereafter defined) to certain Key
                  Employees and other Persons.

         The purpose of the Plan is to provide an incentive for Key Employees
and directors of the Corporation or its Subsidiaries (hereafter defined) to aid
the Corporation in attracting able Persons to enter the service of the
Corporation and its Subsidiaries, to extend to them the opportunity to acquire a
proprietary interest in the Corporation so that they will apply their best
efforts for the benefit of the Corporation, and to remain in the service of the
Corporation or its Subsidiaries. This Plan has been adopted by the Board of
Directors and shareholders of the Corporation prior to the registration of any
securities of the Corporation under the Exchange Act (hereafter defined) and
accordingly amounts paid under the Plan are exempt from the provisions of
Section 162(m) of the Code (hereafter defined).

SECTION 1. DEFINITIONS

         1.1 "Acquiring Person" means any Person other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of a Subsidiary of the Corporation or of a corporation owned directly or
indirectly by the shareholders of the Corporation in substantially the same
proportions as their ownership of Stock of the Corporation, or any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the shareholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation.

         1.2 "Affiliate" means (a) any Person who is directly or indirectly the
beneficial owner of at least 10% of the voting power of the Voting Securities or
(b) any Person controlling, controlled by, or under common control with the
Company or any Person contemplated in clause (a) of this Section 1.2.

                                       1
<PAGE>   6

         1.3 "Award" means the grant of any form of Option, Restricted Stock
Award, or Stock Appreciation Right under the Plan, whether granted individually,
in combination, or in tandem, to a Holder pursuant to the terms, conditions, and
limitations that the Committee may establish in order to fulfill the objectives
of the Plan.

         1.4 "Award Agreement" means the written agreement between the
Corporation and a Holder evidencing the terms, conditions, and limitations of
the Award granted to that Holder.

         1.5 "Board of Directors" means the board of directors of the
Corporation.

         1.6 "Business Day" means any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of Colorado are authorized or
obligated by law or executive order to close.

         1.7 "Change in Control" means the event that is deemed to have occurred
if:

                  (a) any Acquiring Person is or becomes the "beneficial owner"
         (as defined in Rule 13d-3 under the Exchange Act), directly or
         indirectly, of securities of the Corporation representing fifty percent
         or more of the combined voting power of the then outstanding Voting
         Securities of the Corporation; or

                  (b) members of the Incumbent Board cease for any reason to
         constitute at least a majority of the Board of Directors; or

                  (c) a public announcement is made of a tender or exchange
         offer by any Acquiring Person for fifty percent or more of the
         outstanding Voting Securities of the Corporation, and the Board of
         Directors approves or fails to oppose that tender or exchange offer in
         its statements in Schedule 14D-9 under the Exchange Act; or

                  (d) the shareholders of the Corporation approve a merger or
         consolidation of the Corporation with any other corporation or
         partnership (or, if no such approval is required, the consummation of
         such a merger or consolidation of the Corporation), other than a merger
         or consolidation that would result in the Voting Securities of the
         Corporation outstanding immediately before the consummation thereof
         continuing to represent (either by remaining outstanding or by being
         converted into Voting Securities of the surviving entity or of a parent
         of the surviving entity) a majority of the combined voting power of the
         Voting Securities of the surviving entity (or its parent) outstanding
         immediately after that merger or consolidation; or

                  (e) the shareholders of the Corporation approve a plan of
         complete liquidation of the Corporation or an agreement for the sale or
         disposition by the Corporation of all or substantially all the
         Corporation's assets (or, if no such approval is required, the
         consummation of such a liquidation, sale, or disposition in one
         transaction or series of related transactions) other than a
         liquidation, sale,

                                       2
<PAGE>   7

         or disposition of all or substantially all the Corporation's assets in
         one transaction or a series of related transactions to a corporation
         owned directly or indirectly by the shareholders of the Corporation in
         substantially the same proportions as their ownership of Stock of the
         Corporation.

         1.8 "Code" means the Internal Revenue Code of 1986, as amended.

         1.9 "Committee" means the Committee, which Committee shall administer
this Plan and is further described under Section 3.

         1.10 "Convertible Securities" means evidences of indebtedness, shares
of capital stock, or other securities that are convertible into or exchangeable
for shares of Stock, either immediately or upon the arrival of a specified date
or the happening of a specified event.

         1.11 "Corporation" has the meaning given to it in the first paragraph
under "Scope and Purpose of Plan."

         1.12 "Date of Grant" has the meaning given it in Section 4.3.

         1.13 "Disability" has the meaning given it in Section 10.4.

         1.14 "Effective Date" means January 5, 2000.

         1.15 "Eligible Individuals" means (a) Key Employees, (b) Non-Employee
Directors only for purposes of Nonstatutory Options pursuant to Section 8, (c)
any other Person that the Committee designates as eligible for an Award (other
than for Incentive Options) because the Person performs, or has performed,
valuable services for the Corporation or any of its Subsidiaries (other than
services in connection with the offer or sale of securities in a capital-raising
transaction) and the Committee determines that the Person has a direct and
significant effect on the financial development of the Corporation or any of its
Subsidiaries, and (d) any transferee of an Award if the Award Agreement provides
for transfer of the Award and the Award is transferred in accordance with the
terms of the Award Agreement. Notwithstanding the foregoing provisions of this
Section 1.15, to ensure that the requirements of the fourth sentence of Section
3.1 are satisfied, the Board of Directors may from time to time specify
individuals who shall not be eligible for the grant of Awards or equity
securities under any plan of the Corporation or its Affiliates. Nevertheless,
the Board of Directors may at any time determine that an individual who has been
so excluded from eligibility shall become eligible for grants of Awards and
grants of such other equity securities under any plans of the Corporation or its
Affiliates so long as that eligibility will not impair the Plan's satisfaction
of the conditions of Rule 16b-3.

         1.16 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.

                                       3
<PAGE>   8

         1.17 "Exchange Act" means the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.

         1.18 "Exercise Notice" has the meaning given it in Section 5.5.

         1.19 "Exercise Price" has the meaning given it in Section 5.4.

         1.20 "Fair Market Value" means, for a particular day:

                  (a) If shares of Stock of the same class are listed or
         admitted to unlisted trading privileges on any national or regional
         securities exchange at the date of determining the Fair Market Value,
         then the last reported sale price, regular way, on the composite tape
         of that exchange on the last Business Day before the date in question
         or, if no such sale takes place on that Business Day, the average of
         the closing bid and asked prices, regular way, in either case as
         reported in the principal consolidated transaction reporting system
         with respect to securities listed or admitted to unlisted trading
         privileges on that securities exchange; or

                  (b) If shares of Stock of the same class are not listed or
         admitted to unlisted trading privileges as provided in Section 1.20(a)
         and sales prices for shares of Stock of the same class in the
         over-the-counter market are reported by the Nasdaq Stock Market, Inc.
         ("Nasdaq") National Market System or the Nasdaq SmallCap Market (or
         such other system then in use) at the date of determining the Fair
         Market Value, then the last reported sales price so reported on the
         last Business Day before the date in question or, if no such sale takes
         place on that Business Day, the average of the high bid and low asked
         prices so reported; or

                  (c) If shares of Stock of the same class are not listed or
         admitted to unlisted trading privileges as provided in Section 1.20(a)
         and sales prices for shares of Stock of the same class are not reported
         by the Nasdaq National Market System or the Nasdaq SmallCap Market(or a
         similar system then in use) as provided in Section 1.20(b), and if bid
         and asked prices for shares of Stock of the same class in the
         over-the-counter market are reported by Nasdaq (or, if not so reported,
         by the National Quotation Bureau Incorporated) at the date of
         determining the Fair Market Value, then the average of the high bid and
         low asked prices on the last Business Day before the date in question;
         or
                  (d) If shares of Stock of the same class are not listed or
         admitted to unlisted trading privileges as provided in Section 1.20(a)
         and sales prices or bid and asked prices therefor are not reported by
         Nasdaq (or the National Quotation Bureau Incorporated) as provided in
         Section 1.20(b) or Section 1.20(c) at the date of determining the Fair
         Market Value, then the value determined in good faith by the Committee,
         which determination shall be conclusive for all purposes; or

                  (e) If shares of Stock of the same class are listed or
         admitted to unlisted trading privileges as provided in Section 1.20(a)
         or sales prices or bid and asked prices therefor are reported by Nasdaq
         (or the National Quotation Bureau

                                       4
<PAGE>   9

         Incorporated) as provided in Section 1.20(b) or Section 1.20(c) at the
         date of determining the Fair Market Value, but the volume of trading is
         so low that the Board of Directors determines in good faith that such
         prices are not indicative of the fair value of the Stock, then the
         value determined in good faith by the Committee, which determination
         shall be conclusive for all purposes notwithstanding the provisions of
         Sections 1.20(a), (b), or (c).

For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in Section
9.3(d)(v), Fair Market Value shall have the meaning and shall be determined as
set forth above; provided, however, that the Committee, with respect to any such
redemption, shall have the right to determine that the Fair Market Value for
purposes of the redemption should be an amount measured by the value of the
shares of Stock, other securities, cash, or property otherwise being received by
holders of shares of Stock in connection with the Restructuring and upon that
determination the Committee shall have the power and authority to determine Fair
Market Value for purposes of the redemption based upon the value of such shares
of stock, other securities, cash, or property. Any such determination by the
Committee, as evidenced by a resolution of the Committee, shall be conclusive
for all purposes.

         1.21 "Fiscal Year" means the fiscal year of the Corporation ending on
December of each year.

         1.22 "Holder" means an Eligible Individual to whom an outstanding Award
has been granted, or, pursuant to the terms of the Award Agreement, the
permitted transferee of a Holder.

         1.23 "Incumbent Board" means the individuals who, as of the Effective
Date, constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
shareholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board.

         1.24 "Incentive Option" means an incentive stock option as defined
under Section 422 of the Code and regulations thereunder.

         1.25 "Key Employee" means any Employee whom the Committee identifies as
having a direct and significant effect on the performance of the Corporation or
any of its Subsidiaries.

         1.26 "Non-Employee Director" means a director of the Corporation who
while a director is not an Employee.

         1.27 "Nonstatutory Option" means a stock option that does not satisfy
the requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Award Agreement to be an option other than an
Incentive Option.

                                       5
<PAGE>   10

         1.28 "Non-Surviving Event" means an event of Restructuring as described
in either Section 1.35(b) or Section 1.35(c).

         1.29 "Normal Retirement" means the separation of the Holder from
employment with the Corporation and its Subsidiaries with the right to receive
an immediate benefit under a retirement plan approved by the Corporation. If no
such plan exists, Normal Retirement shall mean separation of the Holder from
employment with the Corporation and its Subsidiaries at age 62 or later.

         1.30 "Option" means either an Incentive Option or a Nonstatutory
Option, or both.

         1.31 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of the
Corporation with that Person, shall be deemed a single "Person."

         1.32 "Plan" means the Corporation's 2000 Incentive Plan, as it may be
amended or restated from time to time.

         1.33 "Restricted Stock" means Stock that is nontransferable or subject
to substantial risk of forfeiture until specific conditions are met.

         1.34 "Restricted Stock Award" means the grant or purchase, on the terms
and conditions of Section 7 or that the Committee otherwise determines, of
Restricted Stock.

         1.35 "Restructuring" means the occurrence of any one or more of the
following:

                  (a) The merger or consolidation of the Corporation with any
         Person, whether effected as a single transaction or a series of related
         transactions, with the Corporation remaining the continuing or
         surviving entity of that merger or consolidation and the Stock
         remaining outstanding and not changed into or exchanged for stock or
         other securities of any other Person or of the Corporation, cash, or
         other property;

                  (b) The merger or consolidation of the Corporation with any
         Person, whether effected as a single transaction or a series of related
         transactions, with (i) the Corporation not being the continuing or
         surviving entity of that merger or consolidation or (ii) the
         Corporation remaining the continuing or surviving entity of that merger
         or consolidation but all or a part of the outstanding shares of Stock
         are changed into or exchanged for stock or other securities of any
         other Person or the Corporation, cash, or other property; or

                                       6
<PAGE>   11

                  (c) The transfer, directly or indirectly, of all or
         substantially all of the assets of the Corporation (whether by sale,
         merger, consolidation, liquidation, or otherwise) to any Person,
         whether effected as a single transaction or a series of related
         transactions.

         1.36 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange
Act as adopted in Exchange Act Release No. 34-37260 (May 31, 1996), or any
successor rule, as it may be amended from time to time.

         1.37 "Securities Act" means the Securities Act of 1933 and the rules
and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.

         1.38 "Stock" means the common stock of the Corporation, or any other
securities that are substituted for the Stock as provided in Section 9.

         1.39 "Stock Appreciation Right" means the right to receive an amount
equal to the excess of the Fair Market Value of a share of Stock (as determined
on the date of exercise) over, as appropriate, the Exercise Price of a related
Option or the Fair Market Value of the Stock on the Date of Grant of the Stock
Appreciation Right.

         1.40 "Subsidiary" means, with respect to any Person, any corporation,
or other entity of which a majority of the Voting Securities is owned, directly
or indirectly, by that Person.

         1.41 "Total Shares" has the meaning given it in Section 9.2.

         1.42 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners or
in the selection of any other similar governing body.

SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN

         2.1 Maximum Number of Shares. Subject to the provisions of Section 2.2
and Section 9, the aggregate number of shares of Stock that may be issued or
transferred pursuant to Awards under the Plan shall be 1,000,000.

         2.2 Limitation of Shares. For purposes of the limitations specified in
Section 2.1, the following principles shall apply:

                  (a) the following shall count against and decrease the number
         of shares of Stock that may be issued for purposes of Section 2.1: (i)
         shares of Stock subject to outstanding Options, outstanding shares of
         Restricted Stock, and shares subject to outstanding Stock Appreciation
         Rights granted independent of Options (based on a good faith estimate
         by the Corporation or the Committee of the maximum number of shares for
         which the Stock Appreciation Right may be settled (assuming payment in
         full in shares of Stock)), and (ii) in the case of Options granted in
         tandem with Stock Appreciation Rights, the greater of the

                                       7
<PAGE>   12

         number of shares of Stock that would be counted if one or the other
         alone was outstanding (determined as described in clause (i) above);

                  (b) the following shall be added back to the number of shares
         of Stock that may be issued for purposes of Section 2.1: (i) shares of
         Stock with respect to which Options, Stock Appreciation Rights granted
         independent of Options, or Restricted Stock Awards expire, are
         cancelled, or otherwise terminate without being exercised, converted,
         or vested, as applicable, and (ii) in the case of Options granted in
         tandem with Stock Appreciation Rights, shares of Stock as to which an
         Option has been surrendered in connection with the exercise of a
         related ("tandem") Stock Appreciation Right, to the extent the number
         surrendered exceeds the number issued upon exercise of the Stock
         Appreciation Right; provided that, in any case, the holder of such
         Awards did not receive any dividends or other benefits of ownership
         with respect to the underlying shares being added back, other than
         voting rights and the accumulation (but not payment) of dividends of
         Stock;

                  (c) shares of Stock subject to Stock Appreciation Rights
         granted independent of Options (calculated as provided in clause (a)
         above) that are exercised and paid in cash shall be added back to the
         number of shares of Stock that may be issued for purposes of Section
         2.1, provided that the Holder of such Stock Appreciation Right did not
         receive any dividends or other benefits of ownership, other than voting
         rights and the accumulation (but not payment) of dividends, of the
         shares of Stock subject to the Stock Appreciation Right;

                  (d) shares of Stock that are transferred by a Holder of an
         Award (or withheld by the Corporation) as full or partial payment to
         the Corporation of the purchase price of shares of Stock subject to an
         Option or the Corporation's or any Subsidiary's tax withholding
         obligations shall not be added back to the number of shares of Stock
         that may be issued for purposes of Section 2.1 and shall not again be
         subject to Awards; and

                  (e) if the number of shares of Stock counted against the
         number of shares that may be issued for purposes of Section 2.1 is
         based upon an estimate made by the Corporation or the Committee as
         provided in clause (a) above and the actual number of shares of Stock
         issued pursuant to the applicable Award is greater or less than the
         estimated number, then, upon such issuance, the number of shares of
         Stock that may be issued pursuant to Section 2.1 shall be further
         reduced by the excess issuance or increased by the shortfall, as
         applicable.

Notwithstanding the provisions of this Section 2.2, no Stock shall be treated as
issuable under the Plan to Eligible Individuals subject to Section 16 of the
Exchange Act if otherwise prohibited from issuance under Rule 16b-3.

         2.3 Description of Shares. The shares to be delivered under the Plan
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the

                                       8
<PAGE>   13

Corporation, including shares purchased on the open market, in each situation as
the Board of Directors or the Committee may determine from time to time at its
sole option.

         2.4 Registration and Listing of Shares. From time to time, the Board of
Directors and appropriate officers of the Corporation shall and are authorized
to take whatever actions are necessary to file required documents with
governmental authorities, stock exchanges, and other appropriate Persons to make
shares of Stock available for issuance pursuant to the exercise of Awards.

SECTION 3. ADMINISTRATION OF THE PLAN

         3.1 Committee. The Committee shall administer the Plan with respect to
all Eligible Individuals who are subject to Section 16(b) of the Exchange Act
(other than members of the Committee), but shall not have the power to appoint
members of the Committee or to terminate, modify, or amend the Plan. The full
Board of Directors shall administer the Plan with respect to all members of the
Committee. Except for references in Sections 3.1, 3.2 and 3.3, and unless the
context otherwise requires, references herein to the Committee shall also refer
to the Board of Directors as administrator of the Plan for members of the
Committee. The Committee shall be constituted so that, as long as Stock is
registered under Section 12 of the Exchange Act, each member of the Committee
shall be a Non-Employee Director and so that the Plan in all other applicable
respects will qualify transactions related to the Plan for the exemptions from
Section 16(b) of the Exchange Act provided by Rule 16b-3, to the extent
exemptions thereunder may be available. The number of Persons that shall
constitute the Committee shall be determined from time to time by a majority of
all the members of the Board of Directors and, unless that majority of the Board
of Directors determines otherwise or Rule 16b-3 is amended to require otherwise,
shall be no less than two Persons. The Board of Directors may designate the
Compensation Committee of the Board of Directors to serve as the Committee
hereunder. To the extent that Rule 16b-3 promulgated under the Exchange Act
requires a system of administration that is different from this Section 3.1,
this Section 3.1 shall automatically be deemed amended to the extent necessary
to cause it to be in compliance with Rule 16b-3.

         3.2 Duration, Removal, Etc. The members of the Committee shall serve at
the discretion of the Board of Directors, which shall have the power, at any
time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to resign
from membership in the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the remaining members of the
Committee, shall have the power and authority to fill all vacancies on the
Committee. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two or any other number that
Rule 16b-3 may require from time to time.

         3.3 Meetings and Actions of Committee. The Board of Directors shall
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as

                                       9
<PAGE>   14

chairman until he ceases to be a member of the Committee or until the Board of
Directors elects a new chairman. The Committee shall hold its meetings at those
times and places as the chairman of the Committee may determine. At all meetings
of the Committee, a quorum for the transaction of business shall be required and
a quorum shall be deemed present if at least a majority of the members of the
Committee are present. At any meeting of the Committee, each member shall have
one vote. All decisions and determinations of the Committee shall be made by the
majority vote or majority decision of all of its members present at a meeting at
which a quorum is present; provided, however, that any decision or determination
reduced to writing and signed by all of the members of the Committee shall be as
fully effective as if it had been made at a meeting that was duly called and
held. The Committee may make any rules and regulations for the conduct of its
business that are not inconsistent with the provisions of the Plan, the Articles
or Certificate of Incorporation of the Corporation, the bylaws of the
Corporation, and Rule 16b-3 so long as it is applicable, as the Committee may
deem advisable.

         3.4 Committee's Powers. Subject to the express provisions of the Plan
and Rule 16b-3, the Committee shall have the authority, in its sole and absolute
discretion, to (a) adopt, amend, and rescind administrative and interpretive
rules and regulations relating to the Plan; (b) determine the Eligible
Individuals to whom, and the time or times at which, Awards shall be granted;
(c) determine the amount of cash and the number of shares of Stock, Stock
Appreciation Rights, or Restricted Stock Awards, or any combination thereof,
that shall be the subject of each Award; (d) determine the terms and provisions
of each Award Agreement (which need not be identical), including provisions
defining or otherwise relating to (i) the term and the period or periods and
extent of exercisability of the Options, (ii) the extent to which the
transferability of shares of Stock issued or transferred pursuant to any Award
is restricted, (iii) the effect of termination of employment of the Holder on
the Award, and (iv) the effect of approved leaves of absence (consistent with
any applicable regulations of the Internal Revenue Service); (e) accelerate,
pursuant to Section 9, the time of exercisability of any Option that has been
granted; (f) construe the respective Award Agreements and the Plan; (g) make
determinations of the Fair Market Value of the Stock pursuant to the Plan; (h)
delegate its duties under the Plan to such agents as it may appoint from time to
time, provided that the Committee may not delegate its duties with respect to
making Awards to, or otherwise with respect to Awards granted to, Eligible
Individuals who are subject to Section 16(b) of the Exchange Act; and (i) make
all other determinations, perform all other acts, and exercise all other powers
and authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as the Committee deems
appropriate. Subject to Rule 16b-3, the Committee may correct any defect, supply
any omission, or reconcile any inconsistency in the Plan, in any Award, or in
any Award Agreement in the manner and to the extent it deems necessary or
desirable to carry the Plan into effect, and the Committee shall be the sole and
final judge of that necessity or desirability. The determinations of the
Committee on the matters referred to in this Section 3.4 shall be final and
conclusive.

SECTION 4. ELIGIBILITY AND PARTICIPATION

         4.1 Eligible Individuals. Awards may be granted pursuant to the Plan
only to Persons who are Eligible Individuals at the time of the grant thereof.

                                       10
<PAGE>   15

         4.2 Grant of Awards. Subject to the express provisions of the Plan, the
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into consideration
the contribution the potential Holder has made or may make to the success of the
Corporation or its Subsidiaries and such other considerations as the Board of
Directors may from time to time specify. The Committee shall also determine the
number of shares subject to each of the Awards and shall authorize and cause the
Corporation to grant Awards in accordance with those determinations.

         4.3 Date of Grant. The date on which the Committee completes all action
resolving to offer an Award to an individual, including the specification of the
number of shares of Stock to be subject to the Award, shall be the date on which
the Award covered by an Award Agreement is granted (the "Date of Grant"), even
though certain terms of the Award Agreement may not be determined at that time
and even though the Award Agreement may not be executed until a later time. In
no event shall a Holder gain any rights in addition to those specified by the
Committee in its grant, regardless of the time that may pass between the grant
of the Award and the actual execution of the Award Agreement by the Corporation
and the Holder.

         4.4 Award Agreements. Each Award granted under the Plan shall be
evidenced by an Award Agreement that is executed by the Corporation and the
Eligible Individual to whom the Award is granted and incorporating those terms
that the Committee shall deem necessary or desirable. More than one Award may be
granted under the Plan to the same Eligible Individual and be outstanding
concurrently. In the event an Eligible Individual is granted both one or more
Incentive Options and one or more Nonstatutory Options, those grants shall be
evidenced by separate Award Agreements, one for each of the Incentive Option
grants and one for each of the Nonstatutory Option grants.

         4.5 Limitation for Incentive Options. Notwithstanding any provision
contained herein to the contrary, (a) a Person shall not be eligible to receive
an Incentive Option unless he is an Employee of the Corporation or a corporate
Subsidiary (but not a partnership Subsidiary) and (b) a Person shall not be
eligible to receive an Incentive Option if, immediately before the time the
Option is granted, that Person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total combined
voting power or value of all classes of outstanding stock of the Corporation or
a Subsidiary. Nevertheless, Section 4.5(b) shall not apply if, at the time the
Incentive Option is granted, the Exercise Price of the Incentive Option is at
least one hundred ten percent of Fair Market Value and the Incentive Option is
not, by its terms, exercisable after the expiration of five years from the Date
of Grant.

         4.6 No Right to Award. The adoption of the Plan shall not be deemed to
give any Person a right to be granted an Award.

                                       11
<PAGE>   16

SECTION 5. TERMS AND CONDITIONS OF OPTIONS

         All Options granted under the Plan shall comply with, and the related
Award Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 5 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Sections 9 and 10; provided, however, that the Committee may authorize an Award
Agreement that expressly contains terms and provisions that differ from the
terms and provisions set forth in Sections 9.2, 9.3, and 9.4 and any of the
terms and provisions of Section 10 (other than Sections 10.9 and 10.10).

         5.1 Number of Shares. Each Award Agreement shall state the total number
of shares of Stock to which it relates.

         5.2 Vesting. Each Award Agreement shall state the time or periods in
which, or the conditions upon satisfaction of which, the right to exercise the
Option or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Option shall vest at each such time, period, or
fulfillment of condition.

         5.3 Expiration of Options. No Option shall be exercised after the
expiration of a period of ten years commencing on the Date of Grant of the
Option; provided, however, that any portion of a Nonstatutory Option that
pursuant to the terms of the Award Agreement under which such Nonstatutory
Option is granted shall not become exercisable until the date which is the tenth
anniversary of the Date of Grant of such Nonstatutory Option may be exercisable
for a period of 30 days following the date on which such portion becomes
exercisable.

         5.4 Exercise Price. Each Award Agreement shall state the exercise price
per share of Stock (the "Exercise Price"); provided, however, that the exercise
price per share of Stock subject to an Incentive Option shall not be less than
the greater of (a) the par value per share of the Stock or (b) 100% of the Fair
Market Value per share of the Stock on the Date of Grant of the Option.

         5.5 Method of Exercise. The Option shall be exercisable only by written
notice of exercise (the "Exercise Notice") delivered to the Corporation during
the term of the Option, which notice shall (a) state the number of shares of
Stock with respect to which the Option is being exercised, (b) be signed by the
Holder of the Option or, if the Holder is dead or becomes affected by a
Disability, by the Person authorized to exercise the Option pursuant to Sections
10.3 and 10.4, (c) be accompanied by the Exercise Price for all shares of Stock
for which the Option is being exercised, and (d) include such other information,
instruments, and documents as may be required to satisfy any other condition to
exercise contained in the Award Agreement. The Option shall not be deemed to
have been exercised unless all of the requirements of the preceding provisions
of this Section 5.5 have been satisfied.

         5.6 Incentive Option Exercises. Except as otherwise provided in Section
10.4 or in the Award Agreement, during the Holder's lifetime, only the Holder
may exercise an Incentive Option.

                                       12
<PAGE>   17

         5.7 Medium and Time of Payment. The Exercise Price of an Option shall
be payable in full upon the exercise of the Option (a) in cash or by an
equivalent means acceptable to the Committee, (b) on the Committee's prior
consent, with shares of Stock owned by the Holder (including shares received
upon exercise of the Option or restricted shares already held by the Holder) and
having a Fair Market Value at least equal to the aggregate Exercise Price
payable in connection with such exercise, or (c) by any combination of clauses
(a) and (b). If the Committee elects to accept shares of Stock in payment of all
or any portion of the Exercise Price, then (for purposes of payment of the
Exercise Price) those shares of Stock shall be deemed to have a cash value equal
to their aggregate Fair Market Value determined as of the date the certificate
for such shares is delivered to the Corporation. If the Committee elects to
accept shares of restricted Stock in payment of all or any portion of the
Exercise Price, then an equal number of shares issued pursuant to the exercise
shall be restricted on the same terms and for the restriction period remaining
on the shares used for payment.

         5.8 Payment with Sale Proceeds. In addition, at the request of the
Holder and to the extent permitted by applicable law, the Committee may (but
shall not be required to) approve arrangements with a brokerage firm under which
that brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised and the Corporation shall promptly
deliver the exercised shares of Stock to the brokerage firm. To accomplish this
transaction, the Holder must deliver to the Corporation an Exercise Notice
containing irrevocable instructions from the Holder to the Corporation to
deliver the Stock certificates representing the shares of Stock directly to the
broker. Upon receiving a copy of the Exercise Notice acknowledged by the
Corporation, the broker shall sell that number of shares of Stock or loan the
Holder an amount sufficient to pay the Exercise Price and any withholding
obligations due. The broker then shall deliver to the Corporation that portion
of the sale or loan proceeds necessary to cover the Exercise Price and any
withholding obligations due. The Committee shall not approve any transaction of
this nature if the Committee believes that the transaction would give rise to
the Holder's liability for short-swing profits under Section 16(b) of the
Exchange Act.

         5.9 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Option or thereafter, the amount that the Committee deems necessary to
satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state, or local income or other taxes that the Holder incurs
by exercising an Option. In connection with the exercise of an Option requiring
tax withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to be
based on the shares' Fair Market Value as of the date of exercise; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of exercise or the date as of which the
shares of Stock issued in connection with such exercise become includible in the
income of the Holder; or (c) deliver sufficient cash to

                                       13
<PAGE>   18

the Corporation to satisfy its tax withholding obligations. Holders who elect to
use such a Stock withholding feature must make the election at the time and in
the manner that the Committee prescribes. The Committee may, at its sole option,
deny any Holder's request to satisfy withholding obligations through Stock
instead of cash. In the event the Committee subsequently determines that the
aggregate Fair Market Value (as determined above) of any shares of Stock
withheld or delivered as payment of any tax withholding obligation is
insufficient to discharge that tax withholding obligation, then the Holder shall
pay to the Corporation, immediately upon the Committee's request, the amount of
that deficiency in the form of payment requested by the Committee.

         5.10 Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option. Except as is
otherwise provided in Section 9.3, with respect to any Incentive Option granted
under this Plan, the aggregate Fair Market Value of shares of Stock subject to
an Incentive Option and the aggregate Fair Market Value of shares of Stock or
stock of any Subsidiary (or a predecessor of the Corporation or a Subsidiary)
subject to any other incentive stock option (within the meaning of Section 422
of the Code) of the Corporation or its Subsidiaries (or a predecessor
corporation of any such corporation) that first become purchasable by a Holder
in any calendar year may not (with respect to that Holder) exceed $100,000, or
such other amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As used in the previous
sentence, Fair Market Value shall be determined as of the Date of Grant of the
Incentive Option. For purposes of this Section 5.10, "predecessor corporation"
means (a) a corporation that was a party to a transaction described in Section
424(a) of the Code (or which would be so described if a substitution or
assumption under that Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock option (within the
meaning of Section 422 of the Code) is granted, is a Subsidiary of the
Corporation or a predecessor corporation of any such corporations, or (c) a
predecessor corporation of any such corporations. Failure to comply with this
provision shall not impair the enforceability or exercisability of any Option,
but shall cause the excess amount of shares to be reclassified in accordance
with the Code.

         5.11 No Fractional Shares. The Corporation shall not in any case be
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.

         5.12 Modification, Extension, and Renewal of Options. Subject to the
terms and conditions of and within the limitations of the Plan, Rule 16b-3, and
any consent required by the last sentence of this Section 5.12, the Committee
may (a) modify, extend, or renew outstanding Options granted under the Plan, (b)
accept the surrender of Options outstanding hereunder (to the extent not
previously exercised) and authorize the granting of new Options in substitution
for outstanding Options (to the extent not previously exercised), and (c) amend
the terms of an Incentive Option at any time to include provisions that have the
effect of changing the Incentive Option to a Nonstatutory Option. Nevertheless,
without the consent of the Holder, the Committee may not modify any outstanding
Options so as to specify a higher or lower Exercise Price or accept the

                                       14
<PAGE>   19

surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any rights or obligations under any
Option theretofore granted to such Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Section 5.12.

         5.13 Other Agreement Provisions. The Award Agreements relating to
Options shall contain such provisions in addition to those required by the Plan
(including without limitation restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable. Each Award Agreement shall
identify the Option evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be, and no Award Agreement shall cover both an Incentive
Option and a Nonstatutory Option. Each Award Agreement relating to an Incentive
Option granted hereunder shall contain such limitations and restrictions upon
the exercise of the Incentive Option to which it relates as shall be necessary
for the Incentive Option to which such Award Agreement relates to constitute an
incentive stock option, as defined in Section 422 of the Code.

SECTION 6. STOCK APPRECIATION RIGHTS

         All Stock Appreciation Rights granted under the Plan shall comply with,
and the related Award Agreements shall be deemed to include and be subject to,
the terms and conditions set forth in this Section 6 (to the extent each term
and condition applies to the form of Stock Appreciation Right) and also the
terms and conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement related to a Stock Appreciation Right
that expressly contains terms and provisions that differ from the terms and
provisions set forth in Sections 9.2, 9.3, and 9.4 and any of the terms and
provisions of Section 10 (other than Sections 10.9 and 10.10).

         6.1 Form of Right. A Stock Appreciation Right may be granted to an
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) independent of an
Option.

         6.2 Rights Related to Options. A Stock Appreciation Right granted
pursuant to an Option shall entitle the Holder, upon exercise, to surrender that
Option or any portion thereof, to the extent unexercised, and to receive payment
of an amount computed pursuant to Section 6.2(b). That Option shall then cease
to be exercisable to the extent surrendered. Stock Appreciation Rights granted
in connection with an Option shall be subject to the terms of the Award
Agreement governing the Option, which shall comply with the following provisions
in addition to those applicable to Options:

                  (a) Exercise and Transfer. Subject to Section 10.9, a Stock
         Appreciation Right granted in connection with an Option shall be
         exercisable only at such time or times and only to the extent that the
         related Option is exercisable and shall not be transferable except to
         the extent that the related Option is transferable.

                                       15
<PAGE>   20

                  (b) Value of Right. Upon the exercise of a Stock Appreciation
         Right related to an Option, the Holder shall be entitled to receive
         payment from the Corporation of an amount determined by multiplying:

                           i) The difference obtained by subtracting the
                  Exercise Price of a share of Stock specified in the related
                  Option from the Fair Market Value of a share of Stock on the
                  date of exercise of the Stock Appreciation Right, by

                           ii) The number of shares as to which that Stock
                  Appreciation Right has been exercised.

         6.3 Right Without Option. A Stock Appreciation Right granted
independent of an Option shall be exercisable as determined by the Committee and
set forth in the Award Agreement governing the Stock Appreciation Right, which
Award Agreement shall comply with the following provisions:

                  (a) Number of Shares. Each Award Agreement shall state the
         total number of shares of Stock to which the Stock Appreciation Right
         relates.

                  (b) Vesting. Each Award Agreement shall state the time or
         periods in which the right to exercise the Stock Appreciation Right or
         a portion thereof shall vest and the number of shares of Stock for
         which the right to exercise the Stock Appreciation Right shall vest at
         each such time or period.

                  (c) Expiration of Rights. Each Award Agreement shall state the
         date at which the Stock Appreciation Rights shall expire if not
         previously exercised.

                  (d) Value of Right. Each Stock Appreciation Right shall
         entitle the Holder, upon exercise thereof, to receive payment of an
         amount determined by multiplying:

                           i) The difference obtained by subtracting the Fair
                  Market Value of a share of Stock on the Date of Grant of the
                  Stock Appreciation Right from the Fair Market Value of a share
                  of Stock on the date of exercise of that Stock Appreciation
                  Right, by

                           ii) The number of shares as to which the Stock
                  Appreciation Right has been exercised.

         6.4 Limitations on Rights. Notwithstanding Sections 6.2(b) and 6.3(d),
the Committee may limit the amount payable upon exercise of a Stock Appreciation
Right. Any such limitation must be determined as of the Date of Grant and be
noted on the Award Agreement evidencing the Holder's Stock Appreciation Right.

         6.5 Payment of Rights. Payment of the amount determined under Section
6.2(b) or 6.3(d) and Section 6.4 may be made, in the sole discretion of the
Committee

                                       16
<PAGE>   21

unless specifically provided otherwise in the Award Agreement, solely in whole
shares of Stock valued at Fair Market Value on the date of exercise of the Stock
Appreciation Right, solely in cash, or in a combination of cash and whole shares
of Stock. If the Committee decides to make full payment in shares of Stock and
the amount payable results in a fractional share, payment for the fractional
share shall be made in cash.

         6.6 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of a Stock Appreciation Right or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising a Stock Appreciation Right. In connection with the
exercise of a Stock Appreciation Right requiring tax withholding, a Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value as of the date of
such delivery) to satisfy the Corporation's tax withholding obligations, which
tax withholding obligation is based on the shares' Fair Market Value as of the
later of the date of exercise or the date as of which the shares of Stock issued
in connection with such exercise become includible in the income of the Holder;
or (c) deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency in the form of payment
requested by the Commission.

         6.7 Other Agreement Provisions. The Award Agreements relating to Stock
Appreciation Rights shall contain such provisions in addition to those required
by the Plan (including without limitation restrictions or the removal of
restrictions upon the exercise of the Stock Appreciation Right and the retention
or transfer of shares thereby acquired) as the Committee may deem advisable.

SECTION 7. RESTRICTED STOCK AWARDS

         All Restricted Stock Awards granted under the Plan shall comply with
and be subject to, and the related Award Agreements shall be deemed to include,
the terms and conditions set forth in this Section 7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the Committee
may authorize an Award Agreement related to a Restricted Stock Award that
expressly contains terms and provisions that differ from the terms and
provisions set forth in Sections 9.2, 9.3, and 9.4 and the terms and provisions
set forth in Section 10 (other than Sections 10.9 and 10.10).

                                       17
<PAGE>   22

         7.1 Restrictions. All shares of Restricted Stock Awards granted or sold
pursuant to the Plan shall be subject to the following conditions:

                  (a) Transferability. The shares may not be sold, transferred,
         or otherwise alienated or hypothecated until the restrictions are
         removed or expire.

                  (b) Conditions to Removal of Restrictions. Conditions to
         removal or expiration of the restrictions may include, but are not
         required to be limited to, continuing employment or service as a
         director, officer, or Key Employee or achievement of performance
         objectives described in the Award Agreement.

                  (c) Legend. Each certificate representing Restricted Stock
         Awards granted pursuant to the Plan shall bear a legend making
         appropriate reference to the restrictions imposed.

                  (d) Possession. The Committee may require the Corporation to
         retain physical custody of the certificates representing Restricted
         Stock Awards during the restriction period and may require the Holder
         of the Award to execute stock powers in blank for those certificates
         and deliver those stock powers to the Corporation, or the Committee may
         require the Holder to enter into an escrow agreement providing that the
         certificates representing Restricted Stock Awards granted or sold
         pursuant to the Plan shall remain in the physical custody of an escrow
         holder until all restrictions are removed or expire.

                  (e) Other Conditions. The Committee may impose other
         conditions on any shares granted or sold as Restricted Stock Awards
         pursuant to the Plan as it may deem advisable, including without
         limitation (i) restrictions under the Securities Act or Exchange Act,
         (ii) the requirements of any securities exchange upon which the shares
         or shares of the same class are then listed, and (iii) any state
         securities law applicable to the shares.

         7.2 Expiration of Restrictions. The restrictions imposed in Section 7.1
on Restricted Stock Awards shall lapse as determined by the Committee and set
forth in the applicable Award Agreement, and the Corporation shall promptly
deliver to the Holder of the Restricted Stock Award a certificate representing
the number of shares for which restrictions have lapsed, free of any restrictive
legend relating to the lapsed restrictions. Each Restricted Stock Award may have
a different restriction period as determined by the Committee in its sole
discretion. The Committee may, in its discretion, prospectively reduce the
restriction period applicable to a particular Restricted Stock Award.

         7.3 Rights as Shareholder. Subject to the provisions of Sections 7.1
and 10.10, the Committee may, in its discretion, determine what rights, if any,
the Holder shall have with respect to the Restricted Stock Awards granted or
sold, including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.

         7.4 Payment of Taxes. The Committee may, in its discretion, require a
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of

                                       18
<PAGE>   23

a Subsidiary of the Corporation) the amount that the Committee deems necessary
to satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state, or local income or other taxes that the Holder incurs
by reason of the Restricted Stock Award. The Holder may (a) direct the
Corporation to withhold from the shares of Stock to be issued to the Holder the
number of shares necessary to satisfy the Corporation's obligation to withhold
taxes, that determination to be based on the shares' Fair Market Value as of the
date on which tax withholding is to be made; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value as of the date of
such delivery) to satisfy the Corporation's tax withholding obligations, which
tax withholding obligation is based on the shares' Fair Market Value as of the
later of the date of issuance or the date as of which the shares of Stock issued
become includible in the income of the Holder; or (c) deliver sufficient cash to
the Corporation to satisfy its tax withholding obligations. Holders who elect to
have Stock withheld pursuant to (a) or (b) above must make the election at the
time and in the manner that the Committee prescribes. The Committee may, in its
sole discretion, deny any Holder's request to satisfy withholding obligations
through Stock instead of cash. In the event the Committee subsequently
determines that the aggregate Fair Market Value (as determined above) of any
shares of Stock withheld or delivered as payment of any tax withholding
obligation is insufficient to discharge that tax withholding obligation, then
the Holder shall pay to the Corporation, immediately upon the Committee's
request, the amount of that deficiency.

         7.5 Other Agreement Provisions. The Award Agreements relating to
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.

SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS

         8.1 Awards to Committee Members. The full Board of Directors shall
determine the number of Awards to be granted to members of the Committee, the
Exercise Price and the vesting schedule thereof.

         8.2 Eligibility for Awards. Non-Employee Directors shall be eligible to
receive any Awards under the Plan other than an Award of an Incentive Option.

SECTION 9. ADJUSTMENT PROVISIONS

         9.1 Adjustment of Awards and Authorized Stock. The terms of an Award
and the number of shares of Stock authorized pursuant to Section 2.1 and Section
8 for issuance under the Plan shall be subject to adjustment from time to time,
in accordance with the following provisions:

                  (a) If at any time, or from time to time, the Corporation
         shall subdivide as a whole (by reclassification, by a Stock split, by
         the issuance of a distribution on Stock payable in Stock, or otherwise)
         the number of shares of Stock then outstanding into a greater number of
         shares of Stock, then (i) the maximum number of shares of Stock
         available for the Plan as provided in Section 2.1 shall be increased
         proportionately, and the kind of shares or other securities

                                       19
<PAGE>   24

         available for the Plan shall be appropriately adjusted, (ii) the number
         of shares of Stock (or other kind of shares or securities) that may be
         acquired under any Award shall be increased proportionately, and (iii)
         the price (including Exercise Price) for each share of Stock (or other
         kind of shares or securities) subject to then outstanding Awards shall
         be reduced proportionately, without changing the aggregate purchase
         price or value as to which outstanding Awards remain exercisable or
         subject to restrictions.

                  (b) If at any time, or from time to time, the Corporation
         shall consolidate as a whole (by reclassification, reverse Stock split,
         or otherwise) the number of shares of Stock then outstanding into a
         lesser number of shares of Stock, then (i) the maximum number of shares
         of Stock available for the Plan as provided in Section 2.1 shall be
         decreased proportionately, and the kind of shares or other securities
         available for the Plan shall be appropriately adjusted, (ii) the number
         of shares of Stock (or other kind of shares or securities) that may be
         acquired under any Award shall be decreased proportionately, and (iii)
         the price (including Exercise Price) for each share of Stock (or other
         kind of shares or securities) subject to then outstanding Awards shall
         be increased proportionately, without changing the aggregate purchase
         price or value as to which outstanding Awards remain exercisable or
         subject to restrictions.

                  (c) Whenever the number of shares of Stock subject to
         outstanding Awards and the price for each share of Stock subject to
         outstanding Awards are required to be adjusted as provided in this
         Section 9.1, the Committee shall promptly prepare a notice setting
         forth, in reasonable detail, the event requiring adjustment, the amount
         of the adjustment, the method by which such adjustment was calculated,
         and the change in price and the number of shares of Stock, other
         securities, cash, or property purchasable subject to each Award after
         giving effect to the adjustments. The Committee shall promptly give
         each Holder such a notice.

                  (d) Adjustments under Sections 9(a) and (b) shall be made by
         the Committee, and its determination as to what adjustments shall be
         made and the extent thereof shall be final, binding, and conclusive. No
         fractional interest shall be issued under the Plan on account of any
         such adjustments.

         9.2 Changes in Control. Any Award Agreement may provide that, upon the
occurrence of a Change in Control, one or more of the following apply: (a) each
Holder of an Option shall immediately be granted corresponding Stock
Appreciation Rights; (b) all outstanding Stock Appreciation Rights and Options
shall immediately become fully vested and exercisable in full, including that
portion of any Stock Appreciation Right or Option that pursuant to the terms and
provisions of the applicable Award Agreement had not yet become exercisable (the
total number of shares of Stock as to which a Stock Appreciation Right or Option
is exercisable upon the occurrence of a Change in Control is referred to herein
as the "Total Shares"); and (c) the restriction period of any Restricted Stock
Award shall immediately be accelerated and the restrictions shall expire. An
Award Agreement does not have to provide for any of the foregoing. If a Change
in Control involves a Restructuring or occurs in connection with a series of
related

                                       20
<PAGE>   25

transactions involving a Restructuring and if such Restructuring is in the form
of a Non-Surviving Event and as a part of such Restructuring shares of stock,
other securities, cash, or property shall be issuable or deliverable in exchange
for Stock, then the Holder of an Award shall be entitled to purchase or receive
(in lieu of the Total Shares that the Holder would otherwise be entitled to
purchase or receive), as appropriate for the form of Award, the number of shares
of Stock, other securities, cash, or property to which that number of Total
Shares would have been entitled in connection with such Restructuring (and, for
Options, at an aggregate exercise price equal to the Exercise Price that would
have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the
Restructuring). Nothing in this Section 9.2 shall impose on a Holder the
obligation to exercise any Award immediately before or upon the Change in
Control, or cause a Holder to forfeit the right to exercise the Award during the
remainder of the original term of the Award because of a Change in Control;
provided, however, in connection with any Non-Surviving Event, the relevant
merger agreement, purchase agreement or similar agreement pursuant to which such
transaction occurs may contain provisions by which all outstanding Awards may,
without the consent of the Holders thereof, be converted into the right to
receive, in cash, an amount that would fairly reflect the value of such Award
giving due consideration to (i) the Exercise Price of any Award in the form of
an Option or the value to be given by the Holder with respect to any other Award
and (ii) the consideration payable pursuant to the transaction with respect to a
share of outstanding Stock.

         9.3 Restructuring Without Change in Control. In the event a
Restructuring shall occur at any time while there is any outstanding Award
hereunder and the Restructuring does not occur in connection with a Change in
Control or a series of related transactions involving a Change in Control, then:

                  (a) no outstanding Option or Stock Appreciation Right shall
         immediately become fully vested and exercisable in full merely because
         of the occurrence of the Restructuring;

                  (b) no Holder of an Option shall automatically be granted
         corresponding Stock Appreciation Rights;

                  (c) the restriction period of any Restricted Stock Award shall
         not immediately be accelerated and the restrictions expire merely
         because of the occurrence of the Restructuring; and

                  (d) at the option of the Committee, the Committee may (but
         shall not be required to) cause the Corporation to take any one or more
         of the following actions:

                           i) accelerate in whole or in part the time of the
                  vesting and exercisability of any one or more of the
                  outstanding Stock Appreciation Rights and Options so as to
                  provide that those Stock Appreciation Rights and Options shall
                  be exercisable before, upon, or after the consummation of the
                  Restructuring;

                                       21
<PAGE>   26

                           ii) grant each Holder of an Option corresponding
                  Stock Appreciation Rights;

                           iii) accelerate in whole or in part the expiration of
                  some or all of the restrictions on any Restricted Stock Award;

                           iv) if the Restructuring is in the form of a
                  Non-Surviving Event, cause the surviving entity to assume in
                  whole or in part any one or more of the outstanding Awards
                  upon such terms and provisions as the Committee deems
                  desirable; or

                           v) redeem in whole or in part any one or more of the
                  outstanding Awards (whether or not then exercisable) in
                  consideration of a cash payment, as such payment may be
                  reduced for tax withholding obligations as contemplated in
                  Sections 5.9, 6.6, or 7.4, as applicable, in an amount equal
                  to:

                                    (A) for Options and Stock Appreciation
                           Rights granted in connection with Options, the excess
                           of (1) the Fair Market Value, determined as of the
                           date immediately preceding the consummation of the
                           Restructuring, of the aggregate number of shares of
                           Stock subject to the Award and as to which the Award
                           is being redeemed over (2) the Exercise Price for
                           that number of shares of Stock;

                                    (B) for Stock Appreciation Rights not
                           granted in connection with an Option, the excess of
                           (1) the Fair Market Value, determined as of the date
                           immediately preceding the consummation of the
                           Restructuring, of the aggregate number of shares of
                           Stock subject to the Award and as to which the Award
                           is being redeemed over (2) the Fair Market Value of
                           that number of shares of Stock on the Date of Grant;
                           and

                                    (C) for Restricted Stock Awards, the Fair
                           Market Value, determined as of the date immediately
                           preceding the consummation of the Restructuring, of
                           the aggregate number of shares of Stock subject to
                           the Award and as to which the Award is being
                           redeemed.

The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Section 9.3. In the event of any election or
action taken by the Corporation pursuant to this Section 9.3 that requires the
amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner affect the validity or

                                       22
<PAGE>   27

enforceability of any action taken by the Corporation and the Committee under
this Section 9.3, including without limitation any redemption of an Award as of
the consummation of a Restructuring. Any cash payment to be made by the
Corporation pursuant to this Section 9.3 in connection with the redemption of
any outstanding Awards shall be paid to the Holder thereof currently with the
delivery to the Corporation of the Award Agreement evidencing that Award;
provided, however, that any such redemption shall be effective upon the
consummation of the Restructuring notwithstanding that the payment of the
redemption price may occur subsequent to the consummation. If all or any portion
of an outstanding Award is to be exercised or accelerated upon or after the
consummation of a Restructuring that does not occur in connection with a Change
in Control and is in the form of a Non-Surviving Event, and as a part of that
Restructuring shares of stock, other securities, cash, or property shall be
issuable or deliverable in exchange for Stock, then the Holder of the Award
shall thereafter be entitled to purchase or receive (in lieu of the number of
shares of Stock that the Holder would otherwise be entitled to purchase or
receive) the number of shares of Stock, other securities, cash, or property to
which such number of shares of Stock would have been entitled in connection with
the Restructuring (and, for Options, upon payment of the aggregate exercise
price equal to the Exercise Price that would have been payable if that number of
Total Shares had been purchased on the exercise of the Option immediately before
the consummation of the Restructuring) and such Award shall be subject to
adjustments that shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 9.

         9.4 Notice of Restructuring. The Corporation shall attempt to keep all
Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's shareholders are
informed by the Corporation of any such event or potential event.

SECTION 10. ADDITIONAL PROVISIONS

         10.1 Termination of Employment. If a Holder is an Eligible Individual
because the Holder is an Employee and if that employment relationship is
terminated for any reason other than (a) that Holder's death or (b) that
Holder's Disability (hereafter defined), then any and all Awards held by such
Holder in such Holder's capacity as an Employee as of the date of the
termination that are not yet exercisable (or for which restrictions have not
lapsed) shall become null and void as of the date of such termination; provided,
however, that the portion, if any, of such Awards that are exercisable as of the
date of termination shall be exercisable for a period of the lesser of (a) the
remainder of the term of the Award or (b) the date which is 30 days following
the date of termination. Any portion of an Award not exercised upon the
expiration of the lesser of the periods specified above shall be null and void
unless the Holder dies during such period, in which case the provisions of
Section 10.3 shall govern.

         10.2 Other Loss of Eligibility - Non-Employees. If a Holder is an
Eligible Individual because the Holder is serving in a capacity other than as an
Employee and if that capacity is terminated for any reason other than the
Holder's death or Disability, then that portion, if any, of any and all Awards
held by the Holder that were granted because of that capacity which are not yet
exercisable (or for which restrictions have not lapsed) as of the date of the
termination shall become null and void as of the date of the termination;
provided, however, that the portion, if any, of any and all Awards held by the
Holder that are then exercisable as of the date of the

                                       23
<PAGE>   28

termination shall be exercisable for a period of the lesser of (a) the remainder
of the term of the Award or (b) 30 days following the date such capacity is
terminated. If a Holder is an Eligible Individual because the Holder is serving
in a capacity other than as an Employee and if that capacity is terminated by
reason of the Holder's death or Disability, then the portion, if any, of any and
all Awards held by the Holder that are not yet exercisable (or for which
restrictions have not lapsed) as of the date of termination for death or
Disability shall become exercisable (and the restrictions thereon, if any, shall
lapse) and all such Awards held by that Holder as of the date of termination
that are exercisable (either as a result of this sentence or otherwise) shall be
exercisable for a period of the lesser of (a) the remainder of the term of the
Award or (b) the date which is 30 days following the date of termination. Any
portion of an Award not exercised upon the expiration of the periods specified
in (a) or (b) of the preceding two sentences shall be null and void upon the
expiration of such period, as applicable.

         10.3 Death. Upon the death of a Holder, any and all Awards held by the
Holder that are not then exercisable (or for which restrictions have not lapsed)
shall become immediately exercisable (and any restrictions shall immediately
lapse) and such Awards shall be exercisable by that Holder's legal
representatives, heirs, legatees, or distributees for a period of 90 days
following the date of the Holder's death unless the Award Agreement specifies a
longer period of time. Any portion of an Award not exercised upon the expiration
of such period shall be null and void. Except as expressly provided in this
Section 10.3, no Award held by a Holder shall be exercisable after the death of
that Holder.

         10.4 Disability. If a Holder is an Eligible Individual because the
Holder is an Employee and if that employment relationship is terminated by
reason of the Holder's Disability, then the portion, if any, of any and all
Awards held by the Holder that are not then exercisable (or for which
restrictions have not lapsed) shall become immediately exercisable (and any
restrictions shall immediately lapse) and such Awards shall be exercisable by
the Holder, his guardian or his legal representative for a period of 90 days
following the date of such termination except as otherwise provided below. Any
portion of an Award not exercised upon the expiration of such period shall be
null and void unless the Holder dies during such period, in which event the
provisions of Section 10.3 shall govern. "Disability" shall have the meaning
given it in the employment agreement of the Holder; provided, however, that if
the Holder has no employment agreement defining such term, "Disability" shall
mean, as determined by the Board of Directors in the sole discretion exercised
in good faith of the Board of Directors, a physical or mental impairment of
sufficient severity that either the Holder is unable to continue performing the
duties he performed before such impairment or the Holder's condition entitles
him to disability benefits under any insurance or employee benefit plan of the
Corporation or its Subsidiaries and that impairment or condition is cited by the
Corporation as the reason for termination of the Holder's employment.
Notwithstanding the foregoing, in the event the Holder is permanently and
totally disabled so that he is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment
which can be expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than 12 months, and the Holder

                                       24
<PAGE>   29

furnishes proof of the existence thereof in such form and manner, and at such
time, as the Internal Revenue Service may require, then the Holder shall have
one year from the date of termination within which to exercise such Awards.

         10.5 Leave of Absence. With respect to an Award, the Committee may, in
its sole discretion, determine that any Holder who is on leave of absence for
any reason will be considered to still be in the employ of the Corporation or
any of its Subsidiaries, as applicable, for any or all purposes of the Plan and
the Award Agreement of such Holder.

         10.6 Transferability of Awards. In addition to such other terms and
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferable other than (i) by will or the laws of descent
and distribution, or (ii) in accordance with the terms of the Award Agreement.

         10.7 Forfeiture and Restrictions on Transfer. Each Award Agreement may
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute discretion may
deem proper or advisable. The conditions giving rise to forfeiture may include,
but need not be limited to, the requirement that the Holder render substantial
services to the Corporation or its Subsidiaries for a specified period of time.
The restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of the Corporation and shareholders
of the Corporation other than the Holder of such shares of Stock who is a party
to the particular Award Agreement or a subsequent Holder of the shares of Stock
who is bound by that Award Agreement.

         10.8 Delivery of Certificates of Stock. Subject to Section 10.9, the
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested, (b) a Stock
Appreciation Right has been exercised (to the extent the Committee determines to
pay such Stock Appreciation Right in shares of Stock pursuant to Section 6.5)
and upon receipt by the Corporation of any tax withholding as may be requested,
and (c) restrictions have lapsed with respect to a Restricted Stock Award and
upon receipt by the Corporation of any tax withholding as may be requested. The
value of the shares of Stock or cash transferable because of an Award under the
Plan shall not bear any interest owing to the passage of time, except as may be
otherwise provided in an Award Agreement. If a Holder is entitled to receive
certificates representing Stock received for more than one form of Award under
the Plan, separate Stock certificates shall be issued with respect to Incentive
Options and Nonstatutory Options.

         10.9 Conditions to Delivery of Stock. Nothing herein or in any Award
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding

                                       25
<PAGE>   30

statute or statutes, any other applicable statute or regulation, or the rules of
any applicable securities exchange or securities association, as then in effect.
At the time of any exercise of an Option or Stock Appreciation Right, or at the
time of any grant of a Restricted Stock Award, the Corporation may, as a
condition precedent to the exercise of such Option or Stock Appreciation Right
or vesting of any Restricted Stock Award, require from the Holder of the Award
(or in the event of his death, his legal representatives, heirs, legatees, or
distributees) such written representations, if any, concerning the Holder's
intentions with regard to the retention or disposition of the shares of Stock
being acquired pursuant to the Award and such written covenants and agreements,
if any, as to the manner of disposal of such shares as, in the opinion of
counsel to the Corporation, may be necessary to ensure that any disposition by
that Holder (or in the event of the Holder's death, his legal representatives,
heirs, legatees, or distributees) will not involve a violation of the Securities
Act or any similar or superseding statute or statutes, any other applicable
state or federal statute or regulation, or any rule of any applicable securities
exchange or securities association, as then in effect.

         10.10 Certain Directors and Officers. With respect to Holders who are
directors or officers of the Corporation or any of its Subsidiaries and who are
subject to Section 16(b) of the Exchange Act, Awards and all rights under the
Plan shall be exercisable during the Holder's lifetime only by the Holder or the
Holder's guardian or legal representative, but not for at least six months after
grant, unless (a) the Board of Directors expressly authorizes that an Award
shall be exercisable before the expiration of the six-month period or (b) the
death or Disability of the Holder occurs before the expiration of the six-month
period. In addition, no such officer or director shall exercise any Stock
Appreciation Right or have shares of Stock withheld to pay tax withholding
obligations within the first six months of the term of an Award. Any election by
any such officer or director to have tax withholding obligations satisfied by
the withholding of shares of Stock shall be irrevocable and shall be
communicated to the Committee during the period beginning on the third day
following the date of release of quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date (the
"Window Period") or by an irrevocable election communicated to the Committee at
least six months before the date of exercise of the Award for which such
withholding is desired. Any election by an officer or director to receive cash
in full or partial settlement of a Stock Appreciation Right, as well as any
exercise by such individual of a Stock Appreciation Right for cash, in either
case to the extent permitted under the applicable Award Agreement or otherwise
permitted by the Committee, shall be made during the Window Period or within any
other periods that the Committee shall specify from time to time.

         10.11 Securities Act Legend. Certificates for shares of Stock, when
issued, may have the following legend, or statements of other applicable
restrictions (including, without limitation, restrictions required under any
federal, state or foreign law), endorsed thereon and may not be immediately
transferable:

                                       26
<PAGE>   31

         THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
         REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
         SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
         TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
         EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
         ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER)
         THAT SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT
         VIOLATE APPLICABLE FEDERAL OR STATE LAWS.

This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.

         10.12 Legend for Restrictions on Transfer. Each certificate
representing shares issued to a Holder pursuant to an Award granted under the
Plan shall, if such shares are subject to any transfer restriction, including a
right of first refusal, provided for under this Plan or an Award Agreement, bear
a legend that complies with applicable law with respect to the restrictions on
transferability contained in this Section 10.12, such as:

         THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
         RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT
         ENTITLED "MENDELL TECHNOLOGIES, INC. 2000 INCENTIVE PLAN" AS ADOPTED BY
         THE CORPORATION, AND AN AGREEMENT THEREUNDER BETWEEN THE CORPORATION
         AND THE INITIAL HOLDER THEREOF DATED ________________, 199__, AND MAY
         NOT BE TRANSFERRED, SOLD, OR OTHERWISE DISPOSED OF EXCEPT AS THEREIN
         PROVIDED. THE CORPORATION WILL FURNISH A COPY OF SUCH INSTRUMENT AND
         AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE WITHOUT CHARGE ON
         REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF BUSINESS OR
         REGISTERED OFFICE.

         10.13 Rights as a Shareholder. A Holder shall have no right as a
shareholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof. Nevertheless,
dividends, dividend equivalent rights and voting rights may be extended to and
made part of any Award denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the Committee may establish. The Committee
may also establish rules and procedures for the crediting of interest on
deferred cash payments and dividend equivalents for deferred payment denominated
in Stock or units of Stock.

                                       27
<PAGE>   32

         10.14 Furnish Information. Each Holder shall furnish to the Corporation
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.

         10.15 Obligation to Exercise. The granting of an Award hereunder shall
impose no obligation upon the Holder to exercise the same or any part thereof.

         10.16 Adjustments to Awards. Subject to the general limitations set
forth in Sections 5, 6, and 9, the Committee may make any adjustment in the
Exercise Price of, the number of shares subject to, or the terms of a
Nonstatutory Option or Stock Appreciation Right by canceling an outstanding
Nonstatutory Option or Stock Appreciation Right and regranting a Nonstatutory
Option or Stock Appreciation Right. Such adjustment shall be made by amending,
substituting, or regranting an outstanding Nonstatutory Option or Stock
Appreciation Right. Such amendment, substitution, or regrant may result in terms
and conditions that differ from the terms and conditions of the original
Nonstatutory Option or Stock Appreciation Right. The Committee may not, however,
impair the rights of any Holder of previously granted Nonstatutory Options or
Stock Appreciation Rights without that Holder's consent. If such action is
effected by amendment, such amendment shall be deemed effective as of the Date
of Grant of the amended Award.

         10.17 Remedies. The Corporation shall be entitled to recover from a
Holder reasonable attorneys' fees incurred in connection with the enforcement of
the terms and provisions of the Plan and any Award Agreement whether by an
action to enforce specific performance or for damages for its breach or
otherwise.

         10.18 Information Confidential. As partial consideration for the
granting of each Award hereunder, the Holder shall agree with the Corporation
that he will keep confidential all information and knowledge that he has
relating to the manner and amount of his participation in the Plan; provided,
however, that such information may be disclosed as required by law and may be
given in confidence to the Holder's spouse, tax or financial advisors, or to a
financial institution to the extent that such information is necessary to secure
a loan. In the event any breach of this promise comes to the attention of the
Committee, it shall take into consideration that breach in determining whether
to recommend the grant of any future Award to that Holder, as a factor
mitigating against the advisability of granting any such future Award to that
Person.

         10.19 Consideration. No Option or Stock Appreciation Right shall be
exercisable and no restriction on any Restricted Stock Award shall lapse with
respect to a Holder unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.

                                       28
<PAGE>   33

SECTION 11. DURATION AND AMENDMENT OF PLAN

         11.11 Duration. No Awards may be granted hereunder after the date that
is ten years from the earlier of (a) the date the Plan is adopted by the Board
of Directors or (b) the date the Plan is approved by the shareholders of the
Corporation.

         11.12 Amendment. The Board of Directors may, insofar as permitted by
law, with respect to any shares which, at the time, are not subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect whatsoever
and may amend any provision of the Plan or any Award Agreement to make the Plan
or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act
and the exemptions from that Section in the regulations thereunder. The Board of
Directors may also amend, modify, suspend, or terminate the Plan for the purpose
of meeting or addressing any changes in other legal requirements applicable to
the Corporation or the Plan or for any other purpose permitted by law. The Plan
may not be amended without the consent of the holders of a majority of the
shares of Stock then outstanding to (a) increase materially the aggregate number
of shares of Stock that may be issued under the Plan (except for adjustments
pursuant to Section 9 hereof), (b) increase materially the benefits accruing to
Eligible Individuals under the Plan, or (c) modify materially the requirements
about eligibility for participation in the Plan; provided, however, that such
amendments may be made without the consent of shareholders of the Corporation if
changes occur in law or other legal requirements (including Rule 16b-3) that
would permit such changes. In connection with any amendment of the Plan, the
Board of Directors shall be authorized to incorporate such provisions as shall
be necessary for amounts paid under the Plan to be exempt from Section 162(m) of
the Code.

SECTION 12. GENERAL

         12.1 Application of Funds. The proceeds received by the Corporation
from the sale of shares pursuant to Awards may be used for any general corporate
purpose.

         12.2 Right of the Corporation and Subsidiaries to Terminate Employment.
Nothing contained in the Plan or in any Award Agreement shall confer upon any
Holder the right to continue in the employ of the Corporation or any Subsidiary
or interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the Holder's employment at any time.

         12.3 No Liability for Good Faith Determinations. Neither the members of
the Board of Directors nor any member of the Committee shall be liable for any
act, omission or determination taken or made in good faith with respect to the
Plan or any Award granted under it; and members of the Board of Directors and
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors' and officers' liability or similar insurance coverage that may from
time to time be in effect. This right to indemnification shall be in addition
to, and not a limitation on, any other indemnification rights any member of the
Board of Directors or the Committee may have.

                                       29
<PAGE>   34

         12.4 Other Benefits. Participation in the Plan shall not preclude the
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the shareholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of Stock and cash otherwise than under the Plan and such arrangements
may be either generally applicable or applicable only in specific cases.

         12.5 Exclusion From Pension and Profit-Sharing Compensation. By
acceptance of an Award (regardless of form), as applicable, each Holder shall be
deemed to have agreed that the Award is special incentive compensation that will
not be taken into account in any manner as salary, compensation, or bonus in
determining the amount of any payment under any pension, retirement, or other
employee benefit plan of the Corporation or any Subsidiary, unless any pension,
retirement, or other employee benefit plan of the Corporation or Subsidiary
expressly provides that such Award shall be so considered for purposes of
determining the amount of any payment under any such plan. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that the Award
will not affect the amount of any life insurance coverage, if any, provided by
the Corporation or a Subsidiary on the life of the Holder that is payable to the
beneficiary under any life insurance plan covering Employees of the Corporation
or any Subsidiary.

         12.6 Execution of Receipts and Releases. Any payment of cash or any
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such Persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.

         12.7 Unfunded Plan. Insofar as it provides for Awards of cash and
Stock, the Plan shall be unfunded. Although bookkeeping accounts may be
established with respect to Holders who are entitled to cash, Stock, or rights
thereto under the Plan, any such accounts shall be used merely as a bookkeeping
convenience. The Corporation shall not be required to segregate any assets that
may at any time be represented by cash, Stock, or rights thereto, nor shall the
Plan be construed as providing for such segregation, nor shall the Corporation
nor the Board of Directors nor the Committee be deemed to be a trustee of any
cash, Stock, or rights thereto to be granted under the Plan. Any liability of
the Corporation to any Holder with respect to a grant of cash, Stock, or rights
thereto under the Plan shall be based solely upon any contractual obligations
that may be created by the Plan and any Award Agreement; no such obligation of
the Corporation shall be deemed to be secured by any pledge or other encumbrance
on any property of the Corporation. Neither the Corporation nor the Board of
Directors nor the Committee shall be required to give any security or bond for
the performance of any obligation that may be created by the Plan.

                                       30
<PAGE>   35

         12.8 No Guarantee of Interests. Neither the Committee nor the
Corporation guarantees the Stock of the Corporation from loss or depreciation.

         12.9 Payment of Expenses. All expenses incident to the administration,
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages, fees,
expenses, and costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.

         12.10 Corporation Records. Records of the Corporation or its
Subsidiaries regarding the Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and other
matters shall be conclusive for all purposes hereunder, unless determined by the
Committee to be incorrect.

         12.11 Information. The Corporation and its Subsidiaries shall, upon
request or as may be specifically required hereunder, furnish or cause to be
furnished all of the information or documentation which is necessary or required
by the Committee to perform its duties and functions under the Plan.

         12.12 No Liability of Corporation. The Corporation assumes no
obligation or responsibility to the Holder or his legal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.

         12.13 Corporation Action. Any action required of the Corporation shall
be by resolution of its Board of Directors or by a Person authorized to act by
resolution of the Board of Directors.

         12.14 Severability. In the event that any provision of this Plan, or
the application hereof to any Person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal, or unenforceable provision shall be fully
severable; and this Plan shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been contained in this
Plan; and the remaining provisions of this Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Plan. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Plan a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid, and
enforceable. If any of the terms or provisions of this Plan conflict with the
requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible
Individuals who are subject to Section 16(b) of the Exchange Act), then those
conflicting terms or provisions shall be deemed inoperative to the extent they
so conflict with the requirements of Rule 16b-3 and, in lieu of such conflicting
provision, there shall be added automatically as part of this Plan a provision
as similar in terms to such conflicting provision as may be possible and not
conflict with the requirements of Rule 16b-3. If any of the terms or provisions
of this Plan conflict with the requirements of Section 422 of the Code (with

                                       31
<PAGE>   36

respect to Incentive Options), then those conflicting terms or provisions shall
be deemed inoperative to the extent they so conflict with the requirements of
Section 422 of the Code and, in lieu of such conflicting provision, there shall
be added automatically as part of this Plan a provision as similar in terms to
such conflicting provision as may be possible and not conflict with the
requirements of Section 422 of the Code. With respect to Incentive Options, if
this Plan does not contain any provision required to be included herein under
Section 422 of the Code, that provision shall be deemed to be incorporated
herein with the same force and effect as if that provision had been set out at
length herein; provided, however, that, to the extent any Option that is
intended to qualify as an Incentive Option cannot so qualify, that Option (to
that extent) shall be deemed a Nonstatutory Option for all purposes of the Plan.

         12.15 Notices. Whenever any notice is required or permitted hereunder,
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is actually received by the Corporation
addressed to the attention of the Corporate Secretary at the Corporation's
office as specified in the applicable Award Agreement. The Corporation or a
Holder may change, at any time and from time to time, by written notice to the
other, the address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation and each Holder
shall specify as its and his address for receiving notices the address set forth
in the Award Agreement pertaining to the shares to which such notice relates.
Any Person entitled to notice hereunder may waive such notice.

         12.16 Successors. The Plan shall be binding upon the Holder, his legal
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors and assigns and upon the Committee and its successors.

         12.17 Headings. The titles and headings of Sections are included for
convenience of reference only and are not to be considered in construction of
the provisions hereof.

         12.18 Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of the
State of Colorado, without giving effect to any conflict of law provisions
thereof, except to the extent Colorado law is preempted by federal law.
Questions arising with respect to the provisions of an Award Agreement that are
matters of contract law shall be governed by the laws of the state specified in
the Award Agreement, except to the extent that Colorado corporate law
subconflicts with the contract law of such state, in which event Colorado
corporate law shall govern irrespective of any conflict of law laws. The
obligation of the Corporation to sell and deliver Stock hereunder is subject to
applicable federal, state and foreign laws and to the approval of any
governmental authority required in connection with the authorization, issuance,
sale, or delivery of such Stock.

         12.19 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan dictates, the
plural shall be read as the singular and the singular as the plural.

                                       32
<PAGE>   37

         IN WITNESS WHEREOF, the Corporation, acting by and through its officers
hereunto duly authorized, has executed this 2000 Incentive Plan, to be effective
as of January 5, 2000.

                                      MENDELL TECNOLOGIES, INC.
                                      A Colorado corporation

                                      By:
                                         ---------------------------------------
                                               Paul E. Mendell, President

                                       33

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