Document:

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                 UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

                       2001 EQUITY-BASED COMPENSATION PLAN

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                                TABLE OF CONTENTS

<S>      <C>                                                                                         <C>
1.       PURPOSE.....................................................................................1

2.       DEFINITIONS.................................................................................1

3.       ADMINISTRATION..............................................................................6

         (a)      Authority of the Committee.........................................................6
         (b)      Manner of Exercise of Committee Authority..........................................7
         (c)      Limitation of Liability............................................................7

4.       STOCK SUBJECT TO PLAN.......................................................................8

         (a)      Overall Number of Shares Available for Delivery....................................8
         (b)      Application of Limitation to Grants of Awards......................................8
         (c)      Availability of Shares Not Delivered under Awards..................................8
         (d)      Stock Offered......................................................................8

5.       ELIGIBILITY; PER PERSON AWARD LIMITATIONS...................................................8

6.       SPECIFIC TERMS OF AWARDS....................................................................8

         (a)      General............................................................................8
         (b)      Options............................................................................9
         (c)      Stock Appreciation Rights..........................................................10
         (d)      Restricted Stock...................................................................11
         (e)      Phantom Stock......................................................................12
         (f)      Bonus Stock and Awards in Lieu of Obligations......................................13
         (g)      Dividend Equivalents...............................................................13
         (h)      Other Stock-Based Awards...........................................................13

7.       CERTAIN PROVISIONS APPLICABLE TO AWARDS.....................................................14

         (a)      Stand-Alone, Additional, Tandem, and Substitute Awards.............................14
         (b)      Term of Awards.....................................................................14
         (c)      Form and Timing of Payment under Awards; Deferrals.................................14
         (d)      Exemptions from Section 16(b) Liability............................................15
         (e)      Non-Competition Agreement..........................................................15

8.       PERFORMANCE AND ANNUAL INCENTIVE AWARDS.....................................................15

         (a)      Performance Conditions.............................................................15
         (b)      Performance Awards Granted to Designated Covered Employees.........................15
         (c)      Annual Incentive Awards Granted to Designated Covered Employees....................17
         (d)      Written Determinations.............................................................18
         (e)      Status of Section 8(b) and Section 8(c) Awards under Section 162(m)
                  of the Code........................................................................18

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9.       RECAPITALIZATION OR REORGANIZATION..........................................................18

         (a)      Existence of Plans and Awards......................................................18
         (b)      Subdivision or Consolidation of Shares.............................................19
         (c)      Corporate Restructuring............................................................19
         (d)      Change in Control Price............................................................20
         (e)      Non-Option Awards..................................................................20
         (f)      Additional Issuances...............................................................21
         (g)      Restricted Stock Awards............................................................21

10.      GENERAL PROVISIONS..........................................................................21

         (a)      Transferability....................................................................21
         (b)      Taxes..............................................................................22
         (c)      Changes to this Plan and Awards....................................................23
         (d)      Limitation on Rights Conferred under Plan..........................................23
         (e)      Unfunded Status of Awards..........................................................23
         (f)      Nonexclusivity of this Plan........................................................23
         (g)      Payments in the Event of Forfeitures; Fractional Shares............................24
         (h)      Severability.......................................................................24
         (i)      Governing Law......................................................................24
         (j)      Conditions to Delivery of Stock....................................................24
         (k)      Plan Effective Date and Stockholder Approval.......................................25

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                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

                       2001 EQUITY-BASED COMPENSATION PLAN

     1.   PURPOSE.  The  purpose  of the United Surgical Partners International,
Inc.  2001  Equity-Based  Compensation  Plan (the  "Plan") is to provide a means
through  which  United  Surgical  Partners   International,   Inc.,  a  Delaware
corporation  (the  "Company"),  and its subsidiaries may attract and retain able
persons as employees,  directors and consultants of the Company and to provide a
means  whereby those persons upon whom the  responsibilities  of the  successful
administration  and  management  of the  Company  rest,  and whose  present  and
potential  contributions  to the welfare of the Company are of  importance,  can
acquire and maintain  stock  ownership,  or awards the value of which is tied to
the performance of the Company's stock, thereby  strengthening their concern for
the welfare of the Company and their  desire to remain in its employ.  A further
purpose of this Plan is to provide such employees and directors with  additional
incentive and reward opportunities  designed to enhance the profitable growth of
the Company.  Accordingly,  this Plan primarily  provides for granting Incentive
Stock  Options,  options  which  do  not  constitute  Incentive  Stock  Options,
Restricted Stock Awards, Stock Appreciation Rights,  Phantom Stock Awards or any
combination  of the  foregoing,  as is best suited to the  circumstances  of the
particular individual as provided herein.

     2.   DEFINITIONS.  For purposes of this Plan, the following  terms shall be
defined as set forth  below,  in  addition  to such  terms  defined in Section 1
hereof:

          (a)   "Annual  Incentive  Award" means a conditional  right granted to
a  Participant  under  Section 8(c) hereof to receive a cash  payment,  Stock or
other Award,  unless otherwise  determined by the Committee,  after the end of a
specified fiscal year.

          (b)   "Award" means any Option, SAR(including Limited SAR), Restricted
Stock Award, Phantom Stock Award, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive  Award,  together  with any  other  right  or  interest  granted  to a
Participant under this Plan.

          (c)   "Beneficiary" means one or more persons,trusts or other entities
which have been  designated by a Participant  in his or her most recent  written
beneficiary  designation  filed  with the  Committee  to  receive  the  benefits
specified  under this Plan upon such  Participant's  death or to which Awards or
other rights are transferred if and to the extent  permitted under Section 10(a)
hereof. If, upon a Participant's  death,  there is no designated  Beneficiary or
surviving designated  Beneficiary,  then the term Beneficiary means the persons,
trusts  or  other  entities  entitled  by  will  or  the  laws  of  descent  and
distribution to receive such benefits.

          (d)   "Beneficial Owner" shall  have the meaning ascribed to such term
in Rule 13d-3 under the Exchange Act and any successor to such Rule.

          (e)   "Board" means the Company's Board of Directors.

          (f)   "Business Day" means any day other than a Saturday, a Sunday, or
a day on which  banking  institutions  in the state of Texas are  authorized  or
obligated by law or executive order to close.

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          (g)   "Change in Control" means the occurrence of any of the following
events:

                (i)   The agreement to acquire or a tender offer for  beneficial
ownership  (within the meaning of Rule 13d-3  promulgated under the Exchange Act
by any  individual,  entity or group (within the meaning of section  13(d)(3) or
14(d)(2) of the  Exchange  Act) (a  "Person"),  of 50% or more of either (x) the
then outstanding  shares of Stock (the "Outstanding  Stock") or (y) the combined
voting power of the then outstanding  voting  securities of the Company entitled
to vote generally in the election of directors (the "Outstanding  Company Voting
Securities");  provided,  however, that for purposes of this subsection (i), the
following  acquisitions  shall  not  constitute  a Change  in  Control:  (A) any
acquisition  directly from the Company,  (B) any acquisition by the Company, (C)
any  acquisition by any employee  benefit plan (or related  trust)  sponsored or
maintained  by the Company or any  corporation  controlled by the Company or (D)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of paragraph (iii) below; or

                (ii)  Individuals who, as of the date of this Plan, constitute
the  Board  cease  for any  reason  to  constitute  at least a  majority  of the
Incumbent  Board,  which  shall be defined  as the  individuals  who,  as of the
Effective  Date,  constitute  the Board and any other  individual  who becomes a
director of the Company after that date and whose election or appointment by the
Board or nomination for election by the Company's stockholders was approved by a
vote of at least a majority  of the  directors  then  comprising  the  Incumbent
Board,  but  excluding,  for this  purpose,  any such  individual  whose initial
assumption  of office  occurs as a result  of an actual or  threatened  election
contest  with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Incumbent Board; or

                (iii) Consummation of a reorganization,  merger or consolidation
or sale or other  disposition of all or  substantially  all of the assets of the
Company  or an  acquisition  of  assets  of  another  corporation  (a  "Business
Combination"),  in each case, unless,  following such Business Combination,  (A)
the Outstanding  Stock and  Outstanding  Company Voting  Securities  immediately
prior to such Business Combination  represent or are converted into or exchanged
for  securities  which  represent  or are  convertible  into  more  than 50% of,
respectively,  the then  outstanding  shares  of common  stock and the  combined
voting  power  of the  then  outstanding  voting  securities  entitled  to  vote
generally in the election of directors,  as the case may be, of the  corporation
resulting  from such Business  Combination  (including,  without  limitation,  a
corporation  which as a result of such transaction  owns the Company,  or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries),  (B) no Person  (excluding any employee  benefit plan (or related
trust)  of  the  Company  or  the  corporation   resulting  from  such  Business
Combination)  beneficially  owns,  directly  or  indirectly,  20%  or  more  of,
respectively,  the then  outstanding  shares of common stock of the  corporation
resulting  from such Business  Combination  or the combined  voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership of the Company existed prior to the Business  Combination and (C)
at least a majority of the members of the board of directors of the  corporation
resulting from such Business  Combination were members of the Incumbent Board at
the time of the  execution  of the  initial  agreement,  or of the action of the
Board, providing for such Business Combination; or

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                (iv)  Approval by the stockholders  of the Company of a complete
liquidation or dissolution of the Company.

          (h)   "Change  in  Control  Price"  means  the  amount  calculated  in
accordance with Section 9 of this Plan.

          (i)   "Code" means the Internal Revenue Code of 1986,  as amended from
time to time,  including  regulations  thereunder  and successor  provisions and
regulations thereto.

          (j)   "Committee"   means   a  committee  of  two  or  more  directors
designated by the Board to administer this Plan; provided, however, that, unless
otherwise  determined by the Board, the Committee shall consist solely of two or
more directors,  each of whom shall be (i) a "nonemployee  director"  within the
meaning of Rule 16b-3 under the Exchange Act, and (ii) an "outside  director" as
defined under section 162(m) of the Code, unless  administration of this Plan by
"outside   directors"  is  not  then  required  in  order  to  qualify  for  tax
deductibility under section 162(m) of the Code.

          (k)   "Covered  Employee"  means an  Eligible Person  who is a Covered
Employee as specified in Section 8(e) of this Plan.

          (l)   "Disability"  means,  as  determined  by the  Board  in the sole
discretion exercised in good faith of the Board, a physical or mental impairment
of  sufficient  severity  that  either  the  Participant  is unable to  continue
performing the duties he performed  before such impairment or the  Participant's
condition  entitles him to disability  benefits  under any insurance or employee
benefit plan of the Company or its Subsidiaries and that impairment or condition
is cited by the  Company  as the  reason for  termination  of the  participant's
employment or participation as a member of the Board.

          (m)   "Dividend  Equivalent"  means a right, granted to a  Participant
under Section 6(g), to receive cash, Stock, other Awards or other property equal
in value to  dividends  paid with  respect  to a  specified  number of shares of
Stock, or other periodic payments.

          (n)   "Effective  Date"  means the date of the  consummation of a firm
commitment underwritten public offering of the Stock for cash.

          (o)   "Eligible  Person"  means  all  officers  and  employees  of the
Company or of any  Subsidiary,  and other  persons who  provide  services to the
Company or any of its  Subsidiaries,  including  directors  of the  Company.  An
employee  on leave of absence  may be  considered  as still in the employ of the
Company or a Subsidiary for purposes of eligibility  for  participation  in this
Plan.

          (p)   "Exchange  Act" means the  Securities  Exchange  Act of 1934, as
amended from time to time,  including rules thereunder and successor  provisions
and rules thereto.

          (q)   "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.

          (r)   "Fair Market Value" means, for a particular day:

                                      -3-

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                (i)   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 that
business day 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, if no such  closing  prices are  available  for that day, 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

                (ii)  if shares of Stock of the same  class  are not  listed  or
admitted to unlisted  trading  privileges as provided in subparagraph (i) and if
sales  prices  for  shares  of Stock of the same  class in the  over-the-counter
market are reported by the National  Association  of  Securities  Dealers,  Inc.
Automated  Quotations,  Inc. ("NASDAQ") National Market System as of the date of
determining  the  Fair  Market  Value,  then the last  reported  sales  price so
reported on that  business day or, if no such sale takes place on that  business
day, the average of the high bid and low asked prices so reported or, if no such
prices are  available  for that day, the last reported sale price so reported on
the last business day before the date in question; or

                (iii) if shares  of Stock of the same  class  are not  listed or
admitted to unlisted  trading  privileges  as provided in  subparagraph  (i) and
sales  prices  for  shares of Stock of the same  class are not  reported  by the
NASDAQ  National  Market System (or a similar system then in use) as provided in
subparagraph  (ii),  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)  as of the date of
determining  the Fair  Market  Value,  then the  average of the high bid and low
asked prices on that  business day or, if no such prices are  available for that
day, the average of the high bid and low asked  prices on the last  business day
before the date in question; or

                (iv)  if shares of Stock of  the same  class  are not  listed or
admitted to unlisted  trading  privileges  as provided in  subparagraph  (i) and
sales prices or bid and asked prices therefor are not reported by NASDAQ (or the
National  Quotation  Bureau  Incorporated)  as provided in subparagraph  (ii) or
subparagraph (iii) as of 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

                (v)   if  shares of  Stock  of  the  same  class  are  listed or
admitted to unlisted trading privileges as provided in subparagraph (i) or sales
prices or bid and asked prices  therefor are reported by NASDAQ (or the National
Quotation Bureau  Incorporated) as provided in subparagraph (ii) or subparagraph
(iii) as of 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 subparagraphs (i),
(ii) or (iii).

For purposes of valuing Incentive Stock 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.

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          (s)   "Incentive  Stock Option" or "ISO" means any Option intended  to
be and designated as an incentive stock option within the meaning of section 422
of the Code or any successor provision thereto.

          (t)   "Incumbent  Board"  shall  mean  individuals  who,  as  of   the
Effective  Date,  constitute  the Board and any other  individual  who becomes a
director of the Company after that date and whose election or appointment by the
Board or nomination for election by the Company's stockholders was approved by a
vote of at least a majority  of the  directors  then  comprising  the  Incumbent
Board.

          (u)   "Limited SAR"  means  a  right  granted  to  a Participant under
Section 6(c) hereof.

          (v)   "Option" means a right, granted to a  Participant  under Section
6(b)  hereof,  to purchase  Stock or other  Awards at a specified  price  during
specified time periods.

          (w)   "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.

          (x)   "Participant" means a person who has been granted an Award under
this Plan  which  remains  outstanding,  including  a person who is no longer an
Eligible Person.

          (y) "Performance Award" means a right,  granted to a Participant under
Section 8 hereof, to receive Awards based upon performance criteria specified by
the Committee.

          (z)   "Person" means any  person or entity of any  nature  whatsoever,
specifically  including an  individual,  a firm,  a company,  a  corporation,  a
partnership,  a limited  liability  company,  a trust or other entity; a Person,
together  with that  Person's  Affiliates  and  Associates  (as those  terms are
defined in Rule 12b-2  under the  Exchange  Act),  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 Company  with such Person,  shall be
deemed a single "Person."

          (aa)  "Phantom  Stock" means a right,  granted to a Participant  under
Section 6(e) hereof, to receive Stock, cash or a combination  thereof at the end
of a specified deferral period.

          (bb)  "Qualified  Member"  means a member  of the  Committee  who is a
"Non-Employee  Director"  within the meaning of Rule 16b-3(b)(3) and an "outside
director" within the meaning of regulation  1.162-27 under section 162(m) of the
Code.

          (cc)  "Restricted  Stock" means Stock granted to a  Participant  under
Section 6(d) hereof,  that is subject to certain  restrictions  and to a risk of
forfeiture.

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          (dd)  "Rule 16b-3" means Rule 16b-3, promulgated by the Securities and
Exchange  Commission  under section 16 of the Exchange Act, as from time to time
in effect and applicable to this Plan and Participants.

          (ee)  "Rule 701" means Rule 701,  promulgated  by the  Securities  and
Exchange Commission under the Securities Act, as from time to time in effect and
applicable to the Plan and Participants.

          (ff)  "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.

          (gg)  "Stock"  means the  Company's  Common Stock,  par value $.01 per
share,  and such other securities as may be substituted (or  resubstituted)  for
Stock pursuant to Section 9.

          (hh)  "Stock Appreciation  Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.

          (ii)  "Subsidiary" means with respect to any Person,  any  corporation
or other  entity of which a majority  of the voting  power of the voting  equity
securities or equity interest is owned, directly or indirectly, by that Person.

3.        ADMINISTRATION.

          (a)   AUTHORITY OF THE COMMITTEE.  This  Plan shall be administered by
the  Committee  except to the extent the Board  elects,  in order to comply with
Rule 16b-3 or for any other  reason,  to  administer  this  Plan,  in which case
references  herein to the "Committee"  shall be deemed to include  references to
the "Board."  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 (i)
adopt, amend, and rescind  administrative and interpretive rules and regulations
relating to the Plan; (ii) determine the Eligible  Persons to whom, and the time
or times at which,  Awards shall be granted;  (iii) determine the amount of cash
and the number of shares of Stock,  Stock  Appreciation  Rights,  Phantom  Stock
Rights,  or Restricted Stock Awards, or any combination  thereof,  that shall be
the subject of each Award; (iv) determine the terms and provisions of each Award
agreement  (which  need not be  identical),  including  provisions  defining  or
otherwise  relating  to (A) the term and the  period or  periods  and  extent of
exercisability of the Options,  (B) the extent to which the  transferability  of
shares of Stock issued or transferred  pursuant to any Award is restricted,  (C)
the effect of termination  of employment of a Participant on the Award,  and (D)
the  effect  of  approved  leaves of  absence  (consistent  with any  applicable
regulations  of the  Internal  Revenue  Service);  (v)  accelerate  the  time of
exercisability of any Option that has been granted; (vi) construe the respective
Award  agreements  and the Plan;  (vii) make  determinations  of the Fair Market
Value of the Stock  pursuant to the Plan;  (viii)  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 Persons who are subject to
section 16(b) of the Exchange Act or section 162(m) of the Code; (ix) subject to
ratification by the Board,  terminate,  modify,  or amend the Plan; and (x) make
all other determinations, perform all other acts, and exercise all

                                      -6-

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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 and section  162(m) of the
Code,  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(a) shall be final and conclusive.

          (b)   MANNER OF EXERCISE  OF COMMITTEE  AUTHORITY.  At any time that a
member of the Committee is not a Qualified  Member,  any action of the Committee
relating  to an Award  granted  or to be granted  to a  Participant  who is then
subject to section 16 of the Exchange Act in respect of the Company, or relating
to  an  Award  intended  by  the  Committee  to  qualify  as  "performance-based
compensation"  within the meaning of section 162(m) of the Code and  regulations
thereunder,  may be  taken  either  (i)  by a  subcommittee,  designated  by the
Committee,  composed  solely of two or more  Qualified  Members,  or (ii) by the
Committee but with each such member who is not a Qualified Member  abstaining or
recusing himself or herself from such action; provided, however, that, upon such
abstention or recusal,  the  Committee  remains  composed  solely of two or more
Qualified  Members.  Such action,  authorized by such a  subcommittee  or by the
Committee upon the abstention or recusal of such non-Qualified Member(s),  shall
be the action of the  Committee  for  purposes  of this Plan.  Any action of the
Committee shall be final,  conclusive and binding on all persons,  including the
Company,  its  subsidiaries,  stockholders,  Participants,   Beneficiaries,  and
transferees  under Section 10(a) hereof or other persons claiming rights from or
through a Participant. The express grant of any specific power to the Committee,
and the  taking  of any  action by the  Committee,  shall  not be  construed  as
limiting any power or authority of the Committee.  The Committee may delegate to
officers or managers of the Company or any  Subsidiary,  or committees  thereof,
the  authority,  subject  to such terms as the  Committee  shall  determine,  to
perform such functions, including administrative functions, as the Committee may
determine,  to the extent that such delegation will not result in the loss of an
exemption under Rule  16b-3(d)(1) for Awards granted to Participants  subject to
section 16 of the  Exchange  Act in respect  of the  Company  and will not cause
Awards  intended to qualify as  "performance-based  compensation"  under section
162(m) of the Code to fail to so qualify.  The Committee  may appoint  agents to
assist it in administering this Plan.

          (c)   LIMITATION OF LIABILITY.  The Committee and each member  thereof
shall be  entitled  to,  in good  faith,  rely or act upon any  report  or other
information furnished to him or her by any officer or employee of the Company or
a Subsidiary, the Company's legal counsel, independent auditors,  consultants or
any other agents assisting in the  administration  of this Plan.  Members of the
Committee  and any officer or employee of the Company or a Subsidiary  acting at
the direction or on behalf of the Committee  shall not be personally  liable for
any action or  determination  taken or made in good  faith with  respect to this
Plan, and shall, to the fullest extent permitted by law, be indemnified and held
harmless by the Company with respect to any such action or determination.

                                      -7-

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4.        STOCK SUBJECT TO PLAN.

          (a)   OVERALL  NUMBER OF SHARES AVAILABLE  FOR  DELIVERY.  Subject  to
adjustment in a manner  consistent  with any adjustment made pursuant to Section
9, the total number of shares of Stock  reserved and  available  for delivery in
connection  with  Awards  under  this  Plan  shall  not  exceed  the  lesser  of
300,000,000  shares or 12.5  percent of the total number of shares of Stock then
outstanding,  assuming the exercise of all outstanding  Options and warrants and
assuming the conversion of all securities convertible into Stock.

          (b)   APPLICATION  OF LIMITATION TO GRANTS OF AWARDS.  No Award may be
granted if (i)(A) the number of shares of Stock to be  delivered  in  connection
with such Award or, (B) in the case of an Award  relating to shares of Stock but
settleable only in cash (such as cash-only  SARs), the number of shares to which
such  Award  relates  exceeds  (ii) the  number  of  shares  of Stock  remaining
available  under  this Plan  minus the  number  of shares of Stock  issuable  in
settlement of or relating to  then-outstanding  Awards.  The Committee may adopt
reasonable  counting  procedures to ensure  appropriate  counting,  avoid double
counting (as, for example,  in the case of tandem or substitute awards) and make
adjustments if the number of shares of Stock actually delivered differs from the
number of shares previously counted in connection with an Award.

          (c)   AVAILABILITY OF SHARES NOT  DELIVERED UNDER  AWARDS.  Shares  of
Stock  subject  to an  Award  under  this  Plan  that  expire  or are  canceled,
forfeited,  settled in cash or otherwise terminated without a delivery of shares
to the  Participant,  including (i) the number of shares  withheld in payment of
any exercise or purchase price of an Award or taxes relating to Awards, and (ii)
the number of shares surrendered in payment of any exercise or purchase price of
an Award or taxes  relating  to any Award,  will again be  available  for Awards
under this Plan, except that if any such shares could not again be available for
Awards to a particular Participant under any applicable law or regulation,  such
shares shall be available  exclusively  for Awards to  Participants  who are not
subject to such limitation.

          (d)   STOCK OFFERED.  The  shares to be delivered under the Plan shall
be made available from (i) authorized but unissued  shares of Stock,  (ii) Stock
held in the treasury of the Company,  or (iii) previously issued shares of Stock
reacquired by the Company,  including  shares  purchased on the open market,  in
each  situation as the Board or the Committee may determine from time to time at
its sole option.

     5.   ELIGIBILITY; PER PERSON AWARD LIMITATIONS. Awards may be granted under
this Plan only to Eligible  Persons.  In each fiscal year or 12-month period, as
applicable,  during any part of which this Plan is in effect, a Covered Employee
may not be granted  Awards  relating to more than  300,000,000  shares of Stock,
subject to adjustment in a manner  consistent  with any adjustment made pursuant
to Section 9.

     6.   SPECIFIC TERMS OF AWARDS.

          (a)   GENERAL. Awards may be granted on the terms and  conditions  set
forth in this Section 6. In addition,  the  Committee may impose on any Award or
the exercise  thereof,  at the date of grant or  thereafter  (subject to Section
10(c)),  such  additional  terms  and  conditions,

                                      -8-

<PAGE>

not  inconsistent  with the  provisions  of this Plan,  as the  Committee  shall
determine,  including  terms  requiring  forfeiture  of  Awards  in the event of
termination of employment by the Participant and terms  permitting a Participant
to make elections  relating to his or her Award. The Committee shall retain full
power and  discretion to accelerate,  waive or modify,  at any time, any term or
condition of an Award that is not mandatory under this Plan; provided,  however,
that the Committee shall not have any discretion to accelerate,  waive or modify
any  term  or   condition   of  an  Award  that  is   intended   to  qualify  as
"performance-based  compensation"  for purposes of section 162(m) of the Code if
such  discretion  would  cause the Award to not so  qualify.  Except in cases in
which the Committee is authorized to require other forms of consideration  under
this Plan, or to the extent other forms of consideration must be paid to satisfy
the requirements of the Delaware General Corporation Law, no consideration other
than services may be required for the grant (but not the exercise) of any Award.

          (b)   OPTIONS.   The  Committee is  authorized  to  grant  Options  to
Participants on the following terms and conditions:

                (i)   EXERCISE PRICE.   Each  Option  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  Stock 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 or in the case of an  individual  who owns stock  possessing  more
than 10 percent of the total  combined  voting  power of all classes of stock of
the  Corporation or its parent or any  Subsidiary  110% of the Fair Market Value
per share of the Stock on the date of grant, and the exercise price per share of
Stock  subject to an Option  other than an  Incentive  Stock Option shall not be
less than the par  value  per share of the Stock  (but may be less than the Fair
Market Value of a share of the Stock on the date of grant).

                (ii)  TIME AND METHOD OF EXERCISE. The Committee shall determine
the time or times at which or the  circumstances  under  which an Option  may be
exercised in whole or in part  (including  based on  achievement  of performance
goals and/or future  service  requirements),  the methods by which such exercise
price  may be paid or  deemed to be paid,  the form of such  payment,  including
without limitation cash, Stock, other Awards or awards granted under other plans
of the Company or any Subsidiary,  or other property  (including  notes or other
contractual  obligations of Participants  to make payment on a deferred  basis),
and the  methods by or forms in which  Stock will be  delivered  or deemed to be
delivered  to  Participants,  including,  but not  limited  to, the  delivery of
Restricted Stock subject to Section 6(d). In the case of an exercise whereby the
Exercise Price is paid with Stock,  such Stock shall be valued as of the date of
exercise.

                (iii) ISOS.  The terms of any ISO granted  under this Plan shall
comply in all respects with the provisions of section 422 of the Code.  Anything
in this Plan to the contrary  notwithstanding,  no term of this Plan relating to
ISOs (including any SAR in tandem  therewith)  shall be interpreted,  amended or
altered,  nor shall any  discretion  or  authority  granted  under  this Plan be
exercised,  so as to disqualify either this Plan or any ISO under section 422 of
the Code, unless the Participant has first requested the change that will result
in such  disqualification.  ISOs shall not be granted  more than ten years after
the  earlier of the  adoption  of this Plan or the  approval of this Plan by the
Company's stockholders.  Notwithstanding the

                                      -9-

<PAGE>

foregoing,  the Fair Market  Value of shares of Stock  subject to an ISO and the
aggregate  Fair  Market  Value of  shares of stock of any  parent or  Subsidiary
corporation  (within the meaning of sections 424(e) and (f) of the Code) subject
to any other  incentive  stock option  (within the meaning of section 422 of the
Code)) of the Company or a parent or Subsidiary  corporation (within the meaning
of  sections  424(e) and (f) of the Code) that first  becomes  purchasable  by a
Participant  in any  calendar  year may not (with  respect to that  Participant)
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 the
incentive stock options is granted.  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.

          (c)   STOCK APPRECIATION RIGHTS.  The Committee is authorized to grant
SARs to Participants on the following terms and conditions:

                (i)   RIGHT TO PAYMENT.  An SAR shall confer on the  Participant
to whom it is granted a right to receive,  upon exercise thereof,  the excess of
(A) the Fair Market Value of one share of Stock on the date of exercise  (or, in
the case of a "Limited  SAR," the Fair Market Value  determined  by reference to
the Change in Control Price,  as defined under Section 2(h) hereof) over (B) the
grant price of the SAR as determined by the Committee.

                (ii)  RIGHTS  RELATED  TO  OPTIONS.   A Stock Appreciation Right
granted  pursuant to an Option shall entitle a Participant,  upon  exercise,  to
surrender that Option or any portion thereof, to the extent unexercised,  and to
receive payment of an amount computed pursuant to Subsection  6(c)(ii)(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)     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.

                      (B)     Upon  the  exercise  of a Stock Appreciation Right
          related to an  Option,  a  Participant  shall be  entitled  to receive
          payment from the Company of an amount determined by multiplying:

                              (1)    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

                              (2)    the number of shares as to which that Stock
                Appreciation Right has been exercised.

                (iii) RIGHT WITHOUT OPTION.  A  Stock Appreciation Right granted
independent of an Option shall be exercisable as determined by the Committee and
set forth in

                                      -10-

<PAGE>

the  Award  agreement  governing  the  Stock  Appreciation  Right,  which  Award
agreement shall comply with the following provisions:

                      (A)     Each Award agreement shall state the total  number
     of shares of Stock to which the Stock Appreciation Right relates.

                      (B)     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)     Each Award agreement shall state the date at which
     the Stock Appreciation Rights shall expire if not previously exercised.

                      (D)     Each  Stock  Appreciation Right  shall  entitle  a
     participant,  upon  exercise  thereof,  to  receive  payment  of an  amount
     determined by multiplying:

                              (1)    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

                              (2)    the number of shares as to which the  Stock
          Appreciation Right has been exercised.

                (iv)  TERMS.  The Committee shall determine at the date of grant
or thereafter,  the time or times at which and the circumstances  under which an
SAR may be  exercised in whole or in part  (including  based on  achievement  of
performance goals and/or future service  requirements),  the method of exercise,
method of settlement, form of consideration payable in settlement,  method by or
forms  in  which  Stock  will  be   delivered  or  deemed  to  be  delivered  to
Participants,  whether or not an SAR shall be in tandem or in  combination  with
any other Award,  and any other terms and  conditions  of any SAR.  Limited SARs
that may only be exercised in connection with a Change in Control or other event
as specified by the  Committee  may be granted on such terms,  not  inconsistent
with this Section 6(c), as the  Committee may  determine.  SARs and Limited SARs
may be either freestanding or in tandem with other Awards.

          (d)   RESTRICTED  STOCK.    The  Committee  is  authorized  to   grant
Restricted Stock to Participants on the following terms and conditions:

                (i)   GRANT AND RESTRICTIONS. Restricted Stock shall  be subject
to  such  restrictions  on   transferability,   risk  of  forfeiture  and  other
restrictions,  if any, as the Committee may impose, which restrictions may lapse
separately or in combination at such times, under such circumstances  (including
based on achievement of performance  goals and/or future service  requirements),
in such installments or otherwise, as the Committee may determine at the date of
grant or  thereafter.  Except to the extent  restricted  under the terms of this
Plan and any Award  agreement  relating to the  Restricted  Stock, a Participant
granted  Restricted  Stock  shall  have  all of  the  rights  of a  stockholder,
including  the  right to vote the  Restricted  Stock  and the  right to  receive
dividends  thereon (subject to any mandatory  reinvestment or other  requirement
imposed

                                      -11-

<PAGE>

by the  Committee).  During the restricted  period  applicable to the Restricted
Stock, the Restricted Stock may not be sold, transferred, pledged, hypothecated,
margined or otherwise encumbered by the Participant.

                (ii)  FORFEITURE.   Except   as  otherwise  determined  by   the
Committee,  upon  termination of employment  during the  applicable  restriction
period,  Restricted Stock that is at that time subject to restrictions  shall be
forfeited  and  reacquired  by the  Company;  provided  that the  Committee  may
provide,  by rule or regulation or in any Award  agreement,  or may determine in
any individual  case,  that  restrictions or forfeiture  conditions  relating to
Restricted  Stock  shall  be  waived  in  whole  or in  part  in  the  event  of
terminations  resulting  from specified  causes,  and the Committee may in other
cases waive in whole or in part the forfeiture of Restricted Stock.

                (iii) CERTIFICATES FOR STOCK.  Restricted  Stock  granted  under
this Plan may be evidenced in such manner as the Committee shall  determine.  If
certificates  representing  Restricted  Stock are  registered in the name of the
Participant,   the  Committee  may  require  that  such   certificates  bear  an
appropriate   legend  referring  to  the  terms,   conditions  and  restrictions
applicable to such Restricted Stock, that the Company retain physical possession
of the  certificates,  and that the  Participant  deliver  a stock  power to the
Company, endorsed in blank, relating to the Restricted Stock.

                (iv)  DIVIDENDS AND SPLITS.  As  a condition to the grant of  an
Award of Restricted  Stock, the Committee may require or permit a Participant to
elect  that  any  cash  dividends  paid  on  a  share  of  Restricted  Stock  be
automatically  reinvested in additional shares of Restricted Stock or applied to
the purchase of additional Awards under this Plan.  Unless otherwise  determined
by the Committee,  Stock  distributed in connection  with a Stock split or Stock
dividend,  and other  property  distributed  as a dividend,  shall be subject to
restrictions and a risk of forfeiture to the same extent as the Restricted Stock
with respect to which such Stock or other property has been distributed.

          (e)   PHANTOM STOCK.   The  Committee  is  authorized to grant Phantom
Stock to Participants, which are rights to receive Stock, cash, or a combination
thereof at the end of a  specified  deferral  period,  subject to the  following
terms and conditions:

                (i)   AWARD  AND  RESTRICTIONS.  Satisfaction  of  an  Award  of
Phantom Stock shall occur upon expiration of the deferral  period  specified for
such Phantom  Stock by the  Committee  (or, if permitted  by the  Committee,  as
elected by the Participant). In addition, Phantom Stock shall be subject to such
restrictions  (which may  include a risk of  forfeiture)  as the  Committee  may
impose,  if any, which  restrictions may lapse at the expiration of the deferral
period  or at  earlier  specified  times  (including  based  on  achievement  of
performance  goals  and/or  future  service  requirements),   separately  or  in
combination,  in  installments  or otherwise,  as the  Committee may  determine.
Phantom  Stock may be  satisfied  by delivery  of Stock,  cash equal to the Fair
Market Value of the  specified  number of shares of Stock covered by the Phantom
Stock, or a combination  thereof,  as determined by the Committee at the date of
grant or thereafter.

                (ii)  FORFEITURE.   Except  as   otherwise   determined  by  the
Committee,  upon termination of employment during the applicable deferral period
or portion  thereof to

                                      -12-

<PAGE>

which forfeiture conditions apply (as provided in the Award agreement evidencing
the Phantom  Stock),  all Phantom Stock that is at that time subject to deferral
(other than a deferral at the election of the  Participant)  shall be forfeited;
provided that the  Committee may provide,  by rule or regulation or in any Award
agreement,  or may  determine  in any  individual  case,  that  restrictions  or
forfeiture  conditions  relating to Phantom Stock shall be waived in whole or in
part in the event of  terminations  resulting  from  specified  causes,  and the
Committee may in other cases waive in whole or in part the forfeiture of Phantom
Stock.

                (iii) DIVIDEND EQUIVALENTS.  Unless  otherwise determined by the
Committee at date of grant,  Dividend  Equivalents  on the  specified  number of
shares of Stock  covered by an Award of Phantom  Stock  shall be either (A) paid
with  respect to such Phantom  Stock on the dividend  payment date in cash or in
shares of  unrestricted  Stock having a Fair Market Value equal to the amount of
such  dividends,  or (B) deferred  with  respect to such  Phantom  Stock and the
amount or value thereof  automatically  deemed reinvested in additional  Phantom
Stock,  other  Awards  or other  investment  vehicles,  as the  Committee  shall
determine or permit the Participant to elect.

          (f) BONUS STOCK AND AWARDS IN LIEU OF  OBLIGATIONS.  The  Committee is
authorized to grant Stock as a bonus,  or to grant Stock or other Awards in lieu
of  obligations  to pay cash or deliver other  property under this Plan or under
other  plans  or  compensatory  arrangements,  provided  that,  in the  case  of
Participants  subject  to  section 16 of the  Exchange  Act,  the amount of such
grants remains within the discretion of the Committee to the extent necessary to
ensure that  acquisitions  of Stock or other  Awards are exempt  from  liability
under section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall
be subject to such other terms as shall be determined by the  Committee.  In the
case of any grant of Stock to an officer of the Company or a Subsidiary  in lieu
of salary or other cash  compensation,  the number of shares granted in place of
such compensation shall be reasonable, as determined by the Committee.

          (g)   DIVIDEND  EQUIVALENTS.  The  Committee  is  authorized  to grant
Dividend  Equivalents  to a  Participant,  entitling the  Participant to receive
cash,  Stock,  other Awards,  or other property equal in value to dividends paid
with  respect  to a  specified  number of shares  of  Stock,  or other  periodic
payments.  Dividend  Equivalents may be awarded on a  free-standing  basis or in
connection  with  another  Award.   The  Committee  may  provide  that  Dividend
Equivalents shall be paid or distributed when accrued or shall be deemed to have
been reinvested in additional Stock, Awards, or other investment  vehicles,  and
subject to such restrictions on transferability and risks of forfeiture,  as the
Committee may specify.

          (h)   OTHER STOCK-BASED AWARDS.  The  Committee is authorized, subject
to limitations  under applicable law, to grant to Participants such other Awards
that may be  denominated  or payable in, valued in whole or in part by reference
to, or otherwise  based on, or related to, Stock,  as deemed by the Committee to
be  consistent  with the  purposes of this Plan,  including  without  limitation
convertible  or  exchangeable  debt  securities,  other  rights  convertible  or
exchangeable  into  Stock,  purchase  rights  for Stock,  Awards  with value and
payment  contingent  upon  performance  of  the  Company  or any  other  factors
designated by the Committee, and Awards valued by reference to the book value of
Stock  or  the  value  of  securities  of  or  the   performance   of  specified
subsidiaries.  The Committee  shall  determine the terms and  conditions

                                      -13-

<PAGE>

of such Awards. Stock delivered pursuant to an Award in the nature of a purchase
right granted under this Section 6(h) shall be purchased for such consideration,
paid for at such times, by such methods, and in such forms,  including,  without
limitation, cash, Stock, other Awards, or other property, as the Committee shall
determine.  Cash awards, as an element of or supplement to any other Award under
this Plan, may also be granted pursuant to this Section 6(h).

     7.   CERTAIN PROVISIONS APPLICABLE TO AWARDS.

          (a)   STAND-ALONE, ADDITIONAL, TANDEM, AND  SUBSTITUTE AWARDS.  Awards
granted  under this Plan may, in the  discretion  of the  Committee,  be granted
either alone or in addition to, in tandem with, or in  substitution  or exchange
for, any other Award or any award granted under another plan of the Company, any
Subsidiary,  or  any  business  entity  to  be  acquired  by  the  Company  or a
Subsidiary,  or any other right of a  Participant  to receive  payment  from the
Company or any Subsidiary.  Such  additional,  tandem and substitute or exchange
Awards  may be granted at any time.  If an Award is granted in  substitution  or
exchange for another  Award,  the Committee  shall require the surrender of such
other Award in consideration for the grant of the new Award. In addition, Awards
may be granted in lieu of cash  compensation,  including in lieu of cash amounts
payable under other plans of the Company or any  Subsidiary,  in which the value
of Stock subject to the Award is  equivalent  in value to the cash  compensation
(for  example,  Phantom  Stock or  Restricted  Stock),  or in which the exercise
price,  grant price or purchase price of the Award in the nature of a right that
may be exercised is equal to the Fair Market Value of the underlying Stock minus
the value of the cash  compensation  surrendered  (for example,  Options granted
with an  exercise  price  "discounted"  by the  amount of the cash  compensation
surrendered).

          (b)   TERM OF AWARDS.  The term of each Award shall be for such period
as may be determined by the Committee;  provided that in no event shall the term
of any Option or SAR exceed a period of ten years (or such  shorter  term as may
be required in respect of an ISO under section 422 of the Code).

          (c)   FORM AND TIMING OF PAYMENT UNDER AWARDS; DEFERRALS.   Subject to
the terms of this Plan and any applicable Award  agreement,  payments to be made
by the Company or a Subsidiary  upon the exercise of an Option or other Award or
settlement  of an  Award  may be made  in  such  forms  as the  Committee  shall
determine,  including  without  limitation  cash,  Stock,  other Awards or other
property,  and may be made in a single payment or transfer, in installments,  or
on a deferred basis.  The settlement of any Award may be  accelerated,  and cash
paid in lieu of Stock in connection with such  settlement,  in the discretion of
the Committee or upon occurrence of one or more specified events (in addition to
a Change in Control).  Installment  or deferred  payments may be required by the
Committee  (subject  to  Section  10(c)  of this  Plan,  including  the  consent
provisions  thereof  in the case of any  deferral  of an  outstanding  Award not
provided for in the original  Award  agreement)  or permitted at the election of
the Participant on terms and conditions  established by the Committee.  Payments
may  include,  without  limitation,  provisions  for the payment or crediting of
reasonable  interest  on  installment  or  deferred  payments  or the  grant  or
crediting of Dividend  Equivalents or other amounts in respect of installment or
deferred payments denominated in Stock. Any deferral shall only be allowed as is
provided in a separate deferred  compensation plan adopted by the Company.  This

                                      -14-

<PAGE>

Plan shall not  constitute  an "employee  benefit  plan" for purposes of section
3(3) of the Employee Retirement Income Security Act of 1974, as amended.

          (d)   EXEMPTIONS FROM SECTION 16(B) LIABILITY. It is the intent of the
Company that the grant of any Awards to or other  transaction  by a  Participant
who is subject to section 16 of the Exchange Act shall be exempt from section 16
pursuant to an applicable  exemption  (except for  transactions  acknowledged in
writing to be non-exempt by such Participant).  Accordingly, if any provision of
this Plan or any Award  agreement does not comply with the  requirements of Rule
16b-3  as then  applicable  to any such  transaction,  such  provision  shall be
construed or deemed amended to the extent necessary to conform to the applicable
requirements of Rule 16b-3 so that such Participant  shall avoid liability under
section 16(b).

          (e)   NON-COMPETITION AGREEMENT.  Each Participant to whom an Award is
granted  under this Plan may be required  to agree in writing as a condition  to
the  granting  of such Award not to engage in conduct  in  competition  with the
Company or any of its  subsidiaries  for a period after the  termination of such
Participant's  employment with the Company and its subsidiaries as determined by
the Committee.

     8.   PERFORMANCE AND ANNUAL INCENTIVE AWARDS.

          (a)   PERFORMANCE CONDITIONS.  The right of a Participant to  exercise
or receive a grant or settlement of any Award,  and the timing  thereof,  may be
subject to such performance conditions as may be specified by the Committee. The
Committee may use such business criteria and other measures of performance as it
may  deem  appropriate  in  establishing  any  performance  conditions,  and may
exercise  its  discretion  to reduce or increase the amounts  payable  under any
Award subject to performance  conditions,  except as limited under Sections 8(b)
and 8(c) hereof in the case of a  Performance  Award or Annual  Incentive  Award
intended to qualify under section 162(m) of the Code.

          (b)   PERFORMANCE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES.   If
the Committee  determines that a Performance  Award to be granted to an Eligible
Person who is  designated  by the  Committee as likely to be a Covered  Employee
should  qualify as  "performance-based  compensation"  for  purposes  of section
162(m) of the Code, the grant,  exercise and/or  settlement of such  Performance
Award may be contingent upon achievement of preestablished performance goals and
other terms set forth in this Section 8(b).

                (i)   PERFORMANCE  GOALS  GENERALLY.  The performance  goals for
such  Performance  Awards  shall  consist of one or more  business  criteria  or
individual  performance  criteria and a targeted  level or levels of performance
with respect to each of such criteria,  as specified by the Committee consistent
with this Section 8(b). Performance goals shall be objective and shall otherwise
meet the  requirements of section 162(m) of the Code and regulations  thereunder
(including Treasury Regulation  ss.1.162-27 and successor  regulations thereto),
including the  requirement  that the level or levels of performance  targeted by
the  Committee   result  in  the   achievement   of   performance   goals  being
"substantially  uncertain."  The Committee may determine  that such  Performance

                                      -15-

<PAGE>

Awards shall be granted,  exercised,  and/or settled upon achievement of any one
performance  goal or that two or more of the performance  goals must be achieved
as a condition to grant,  exercise and/or settlement of such Performance Awards.
Performance  goals  may  differ  for  Performance  Awards  granted  to  any  one
Participant or to different Participants.

                (ii)  BUSINESS AND INDIVIDUAL PERFORMANCE CRITERIA

                      (A)     BUSINESS  CRITERIA.  One or more of the  following
     business  criteria for the Company,  on a  consolidated  basis,  and/or for
     specified  subsidiaries  or business or  geographical  units of the Company
     (except with respect to the total stockholder return and earnings per share
     criteria), shall be used by the Committee in establishing performance goals
     for such  Performance  Awards:  (1)  earnings  per share;  (2)  increase in
     revenues;  (3) increase in cash flow; (4) increase in cash flow return; (5)
     return on net assets,  return on assets,  return on  investment,  return on
     capital,  or return on equity;  (6)  economic  value added;  (7)  operating
     margin or contribution  margin;  (8) net income;  pretax  earnings;  pretax
     earnings before interest,  depreciation and amortization;  pretax operating
     earnings after interest  expense and before  incentives,  service fees, and
     extraordinary or special items; or operating income;  (9) total stockholder
     return; (10) debt reduction;  and (11) any of the above goals determined on
     an  absolute  or relative  basis or as  compared  to the  performance  of a
     published or special index deemed  applicable  by the Committee  including,
     but not  limited  to, the  Standard & Poor's 500 Stock  Index or a group of
     comparable companies.  One or more of the foregoing business criteria shall
     also be  exclusively  used in  establishing  performance  goals for  Annual
     Incentive Awards granted to a Covered Employee under Section 8(c) hereof.

                      (B)     INDIVIDUAL  PERFORMANCE   CRITERIA.   The   grant,
     exercise  and/or  settlement of  Performance  Awards may also be contingent
     upon individual performance goals established by the Committee. If required
     for  compliance  with section  162(m) of the Code,  such criteria  shall be
     approved by the stockholders of the Company.

                (iii) PERFORMANCE PERIOD;  TIMING  FOR  ESTABLISHING PERFORMANCE
GOALS.  Achievement of performance  goals in respect of such Performance  Awards
shall be measured over a performance  period of up to ten years, as specified by
the Committee.  Performance  goals shall be  established  not later than 90 days
after the beginning of any  performance  period  applicable to such  Performance
Awards,   or  at  such  other  date  as  may  be  required  or   permitted   for
"performance-based compensation" under section 162(m) of the Code.

                (iv)  PERFORMANCE  AWARD  POOL.  The  Committee  may establish a
Performance  Award  pool,  which  shall be an  unfunded  pool,  for  purposes of
measuring  performance of the Company in connection with Performance Awards. The
amount of such  Performance  Award pool shall be based upon the achievement of a
performance  goal or goals  based on one or more of the  criteria  set  forth in
Section 8(b)(ii) hereof during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii) hereof. The Committee may specify
the  amount  of the  Performance  Award  pool  as a  percentage  of any of  such
criteria,  a percentage  thereof in excess of a threshold  amount, or as another
amount  which  need  not  bear a  strictly  mathematical  relationship  to  such
criteria.

                (v)   SETTLEMENT  OF  PERFORMANCE  AWARDS;  OTHER  TERMS.  After
the end of each performance period, the Committee shall determine the amount, if
any, of (A) the

                                      -16-

<PAGE>

Performance  Award pool, and the maximum amount of potential  Performance  Award
payable to each Participant in the Performance  Award pool, or (B) the amount of
potential Performance Award otherwise payable to each Participant. Settlement of
such Performance Awards shall be in cash, Stock, other Awards or other property,
in the discretion of the Committee. The Committee may, in its discretion, reduce
the  amount  of a  settlement  otherwise  to be made  in  connection  with  such
Performance  Awards, but may not exercise discretion to increase any such amount
payable to a Covered Employee in respect of a Performance  Award subject to this
Section  8(b).  The  Committee  shall  specify the  circumstances  in which such
Performance  Awards shall be paid or forfeited  in the event of  termination  of
employment  by the  Participant  prior  to the end of a  performance  period  or
settlement of Performance Awards.

          (c)   ANNUAL INCENTIVE AWARDS GRANTED TO DESIGNATED COVERED EMPLOYEES.
If the Committee  determines that an Annual  Incentive Award to be granted to an
Eligible  Person who is  designated  by the  Committee as likely to be a Covered
Employee  should  qualify as  "performance-based  compensation"  for purposes of
section 162(m) of the Code, the grant, exercise and/or settlement of such Annual
Incentive  Award  shall  be  contingent  upon   achievement  of   preestablished
performance goals and other terms set forth in this Section 8(c).

                (i)   ANNUAL INCENTIVE AWARD POOL.  The  Committee may establish
an Annual Incentive Award pool, which shall be an unfunded pool, for purposes of
measuring performance of the Company in connection with Annual Incentive Awards.
The  amount  of such  Annual  Incentive  Award  pool  shall  be  based  upon the
achievement of a performance  goal or goals based on one or more of the business
criteria  set forth in Section  8(b)(ii)  hereof  during  the given  performance
period,  as specified  by the  Committee in  accordance  with Section  8(b)(iii)
hereof.  The Committee may specify the amount of the Annual Incentive Award pool
as a percentage of any of such business criteria, a percentage thereof in excess
of a  threshold  amount,  or as  another  amount  which need not bear a strictly
mathematical relationship to such business criteria.

                (ii)  POTENTIAL ANNUAL INCENTIVE  AWARDS. Not later than the end
of the 90th day of each fiscal year, or at such other date as may be required or
permitted in the case of Awards intended to be "performance-based  compensation"
under section  162(m) of the Code,  the Committee  shall  determine the Eligible
Persons who will potentially  receive Annual Incentive  Awards,  and the amounts
potentially  payable  thereunder,  for that fiscal year, either out of an Annual
Incentive Award pool established by such date under Section 8(c)(i) hereof or as
individual  Annual Incentive  Awards. In the case of individual Annual Incentive
Awards  intended  to  qualify  under  section  162(m)  of the Code,  the  amount
potentially payable shall be based upon the achievement of a performance goal or
goals  based  on one or more of the  business  criteria  set  forth  in  Section
8(b)(ii) hereof in the given performance year, as specified by the Committee; in
other cases, such amount shall be based on such criteria as shall be established
by the  Committee.  In all cases,  the  maximum  Annual  Incentive  Award of any
Participant shall be subject to the limitation set forth in Section 5 hereof.

                (iii) PAYOUT OF ANNUAL INCENTIVE AWARDS.  After  the end of each
fiscal year, the Committee shall determine the amount, if any, of (A) the Annual
Incentive Award pool, and the maximum amount of potential Annual Incentive Award
payable to each  Participant  in the Annual  Incentive  Award  pool,  or (B) the
amount  of  potential   Annual   Incentive  Award  otherwise

                                      -17-

<PAGE>

payable to each  Participant.  The Committee may, in its  discretion,  determine
that the amount  payable to any  Participant as a final Annual  Incentive  Award
shall be  increased or reduced  from the amount of his or her  potential  Annual
Incentive Award,  including a determination  to make no final Award  whatsoever,
but may not  exercise  discretion  to increase any such amount in the case of an
Annual Incentive Award intended to qualify under section 162(m) of the Code. The
Committee  shall specify the  circumstances  in which an Annual  Incentive Award
shall be paid or  forfeited in the event of  termination  of  employment  by the
Participant  prior  to the end of a fiscal  year or  settlement  of such  Annual
Incentive Award.

          (d)   WRITTEN  DETERMINATIONS.  All  determinations  by the  Committee
as to the  establishment  of performance  goals,  the amount of any  Performance
Award pool or potential individual  Performance Awards and as to the achievement
of performance goals relating to Performance  Awards under Section 8(b), and the
amount  of any  Annual  Incentive  Award  pool or  potential  individual  Annual
Incentive  Awards and the amount of final Annual  Incentive Awards under Section
8(c),  shall be made in  writing  in the case of any Award  intended  to qualify
under  section   162(m)  of  the  Code.  The  Committee  may  not  delegate  any
responsibility relating to such Performance Awards or Annual Incentive Awards.

          (e)   STATUS OF SECTION 8(B)  AND  SECTION  8(C) AWARDS UNDER  SECTION
162(M) OF THE CODE. It is the intent of the Company that Performance  Awards and
Annual  Incentive  Awards under Sections 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within the
meaning  of section  162(m) of the Code and  regulations  thereunder  (including
Treasury Regulation  ss.1.162-27 and successor regulations thereto) shall, if so
designated by the Committee, constitute "performance-based  compensation" within
the  meaning  of  section  162(m)  of  the  Code  and  regulations   thereunder.
Accordingly,  the  terms of  Sections  8(b),  (c),  (d) and (e),  including  the
definitions  of  Covered  Employee  and  other  terms  used  therein,  shall  be
interpreted  in a  manner  consistent  with  section  162(m)  of  the  Code  and
regulations  thereunder.  The foregoing  notwithstanding,  because the Committee
cannot  determine with certainty  whether a given  Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered  Employee  as used  herein  shall mean only a person  designated  by the
Committee,  at the time of grant of  Performance  Awards or an Annual  Incentive
Award,  who is likely to be a Covered Employee with respect to that fiscal year.
If any  provision  of this  Plan as in  effect  on the date of  adoption  or any
agreements  relating to Performance  Awards or Annual  Incentive Awards that are
designated as intended to comply with section 162(m) of the Code does not comply
or is  inconsistent  with the  requirements  of  section  162(m)  of the Code or
regulations  thereunder,  such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements.

     9.   RECAPITALIZATION OR REORGANIZATION.

          (a)   EXISTENCE OF PLANS AND AWARDS.  The  existence of  this Plan and
the Awards granted  hereunder  shall not affect in any way the right or power of
the  Board  or  the  stockholders  of the  Company  to  make  or  authorize  any
adjustment,  recapitalization,  reorganization  or other change in the Company's
capital  structure or its business,  any merger or consolidation of the Company,
any issue of debt or equity securities ahead of or affecting Stock or the rights
thereof,  the  dissolution  or  liquidation  of the Company or any sale,  lease,
exchange

                                      -18-

<PAGE>

or other  disposition  of all or any part of its assets or business or any other
corporate act or proceeding.

          (b)   SUBDIVISION OR CONSOLIDATION OF SHARES.  The  terms of an  Award
and the number of shares of Stock authorized  pursuant to Section 4 for issuance
under the Plan shall be subject to  adjustment  from time to time, in accordance
with the following provisions:

                (i)   If at any time,  or  from  time to time, the Company 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 (A) the
maximum number of shares of Stock  available for the Plan as provided in Section
4 shall be increased proportionately, and the kind of shares or other securities
available for the Plan shall be appropriately adjusted, (B) 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 (C) the price  (including  the
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.

                (ii)  If at any time, or from time to time,  the  Company  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,  (A) the  maximum  number of shares  of Stock  available  for the Plan as
provided in Section 4 shall be decreased proportionately, and the kind of shares
or other securities available for the Plan shall be appropriately  adjusted, (B)
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 (C) the
price  (including the 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.

                (iii) 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(b),  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 Participant such a notice.

                (iv)  Adjustments  under  Subsections  9(b)(i)  and  (ii)  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.

          (c)   CORPORATE   RESTRUCTURING.   If   the   Company   recapitalizes,
reclassifies  its capital stock, or otherwise  changes its capital  structure (a
"recapitalization"),  the  number  and class of shares  of Stock  covered  by an
Option  theretofore  granted  shall  be  adjusted  so  that  such

                                      -19-

Option  shall  thereafter  cover  the  number  and  class of shares of stock and
securities to which the holder would have been entitled pursuant to the terms of
the recapitalization if, immediately prior to the  recapitalization,  the holder
had been the holder of record of the  number of shares of Stock then  covered by
such  Option and the share  limitations  provided  in  Sections 4 and 5 shall be
adjusted  in a manner  consistent  with the  recapitalization.  Upon a Change in
Control  the  Committee,  acting in its sole  discretion  without the consent or
approval of any holder, shall effect one or more of the following  alternatives,
which may vary among individual holders and which may vary among Options held by
any individual holder: (1) accelerate the time at which Options then outstanding
may be  exercised  so that such  Options may be  exercised in full for a limited
period of time on or before a  specified  date  (before or after such  Change in
Control) fixed by the  Committee,  after which  specified  date all  unexercised
Options and all rights of holders  thereunder shall  terminate,  (2) require the
mandatory  surrender  to the Company by  selected  holders of some or all of the
outstanding  Options held by such holders  (irrespective of whether such Options
are then exercisable  under the provisions of this Plan) as of a date, before or
after such Change in Control,  specified  by the  Committee,  in which event the
Committee shall  thereupon  cancel such Options and pay to each holder an amount
of cash per share  equal to the  excess,  if any,  of the amount  calculated  in
Section  9(d) (the  "Change  in Control  Price")  of the shares  subject to such
Option over the exercise  price(s)  under such  Options for such shares,  or (3)
make such  adjustments  to  Options  then  outstanding  as the  Committee  deems
appropriate  to reflect  such  Change in Control  (provided,  however,  that the
Committee may determine in its sole  discretion  that no adjustment is necessary
to Options then outstanding).

          (d)   CHANGE IN CONTROL  PRICE.  The "Change in Control  Price"  shall
equal the amount determined in clause (i), (ii),  (iii), (iv) or (v),  whichever
is  applicable,  as follows:  (i) the per share price  offered to holders of the
same class of Stock of the Company in any such merger or consolidation, (ii) the
per share value of the Stock  immediately  before the Change in Control  without
regard to assets  sold in the Change in Control  and  assuming  the  Company has
received  the  consideration  paid for the  assets  in the case of a sale of the
assets,  (iii)  the  amount  distributed  per  share of  Stock in a  dissolution
transaction,  (iv) the price per share  offered  to holders of the same class of
Stock of the Company in any tender offer or exchange  offer  whereby a Change in
Control takes place, or (v) if such Change in Control occurs other than pursuant
to a tender or exchange  offer,  the fair  market  value per share of the shares
into which such Options being surrendered are exercisable,  as determined by the
Committee  as of  the  date  determined  by the  Committee  to be  the  date  of
cancellation and surrender of such Options.  In the event that the consideration
offered to  stockholders  of the Company in any  transaction  described  in this
Section 9(d) or Section  9(c) above  consists of anything  other than cash,  the
Committee  shall  determine  the fair  cash  equivalent  of the  portion  of the
consideration offered which is other than cash.

          (e)   NON-OPTION  AWARDS.  In the event of changes in the  outstanding
Stock by reason of recapitalization,  reorganizations,  mergers, consolidations,
combinations,  exchanges or other relevant changes in  capitalization  occurring
after the date of the grant of any Award and not otherwise  provided for by this
Section 9, any  outstanding  Awards and any  agreements  evidencing  such Awards
shall be subject to  adjustment  by the  Committee at its  discretion  as to the
number  and  price of  shares of Stock or other  consideration  subject  to such
Awards. In the event of any such change in the outstanding  Stock, the aggregate
number of shares available under this Plan may be appropriately  adjusted by the
Committee, whose determination shall be conclusive.

                                      -20-

<PAGE>

          (f)   ADDITIONAL   ISSUANCES.    Except   as  hereinbefore   expressly
provided,  the  issuance  by the  Company  of  shares  of stock of any  class or
securities  convertible into shares of stock of any class,  for cash,  property,
labor or services,  upon direct sale, upon the exercise of rights or warrants to
subscribe  therefor,  or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, and in any case whether or not
for fair value,  shall not affect,  and no adjustment by reason thereof shall be
made  with  respect  to,  the  number  of  shares  of Stock  subject  to  Awards
theretofore granted or the purchase price per share, if applicable.

          (g)   RESTRICTED  STOCK  AWARDS.   Plan  provisions  to  the  contrary
notwithstanding,  with respect to any Restricted Stock Awards outstanding at the
time a Change in Control as described in Section 2(g) occurs, the Committee may,
in its discretion and as of a date  determined by the Committee,  fully vest any
or all Stock awarded to the holder pursuant to such  Restricted  Stock Award and
then  outstanding and, upon such vesting,  all  restrictions  applicable to such
Restricted  Stock  Award  shall  terminate  as of such  date.  Any action by the
Committee  pursuant to this Section 9(g) may vary among  individual  holders and
may vary among the Restricted Stock Awards held by any individual holder.

     10.  GENERAL PROVISIONS.

          (a)   TRANSFERABILITY.

                (i)   PERMITTED  TRANSFEREES.    The  Committee  may,   in   its
discretion,  permit a  Participant  to transfer all or any portion of an Option,
Stock Appreciation Right, Phantom Stock Award or Restricted Stock Award (if such
Restricted  Stock Award does not require the  transfer of  consideration  by the
Participant  or the holder  other than usual and  customary  service)  after the
Company's initial  registration of the Stock under section 12(b) or 12(g) of the
Exchange  Act, or authorize  all or a portion of such Awards to be granted to an
Eligible  Person  to be on terms  which  permit  transfer  by such  Participant;
provided that, in either case the  transferee or transferees  must be any child,
stepchild,  grandchild, parent, stepparent,  grandparent, spouse, former spouse,
sibling,    niece,    nephew,    mother-in-law,    father-in-law,    son-in-law,
daughter-in-law,    brother-in-law,   or   sister-in-law,   including   adoptive
relationships,  in each case with respect to the Participant, any person sharing
the Participant's  household (other than a tenant or employee of the Company), a
trust in which  these  persons  have more than fifty  percent of the  beneficial
interest,  a foundation in which these persons (or the Participant)  control the
management  of  assets,  and any other  entity in which  these  persons  (or the
Participant) own more than fifty percent of the voting interests  (collectively,
"Permitted   Transferees");   provided   further  that,  (X)  there  may  be  no
consideration  for any such  transfer  and (Y)  subsequent  transfers  of Awards
transferred as provided above shall be prohibited  except  subsequent  transfers
back to the  original  holder  of the  Award and  transfers  to other  Permitted
Transferees of the original holder. Agreements evidencing Awards with respect to
which such  transferability  is authorized at the time of grant must be approved
by the Committee,  and must expressly  provide for  transferability  in a manner
consistent with this Subsection 10(a)(i).

                (ii)  QUALIFIED  DOMESTIC  RELATIONS  ORDERS.  An Option,  Stock
Appreciation  Right,  Phantom  Stock  Award or  Restricted  Stock Award (if such
Restricted  Stock Award does not require the  transfer of  consideration  by the
Participant  or the holder  other than

                                      -21-

<PAGE>

usual and customary  service) after the Company's  initial  registration  of the
Stock under section 12(b) or 12(g) of the Exchange Act, may be transferred, to a
Permitted Transferee, pursuant to a domestic relations order entered or approved
by a court of  competent  jurisdiction  upon  delivery to the Company of written
notice of such transfer and a certified copy of such order.

                (iii) OTHER  TRANSFERS.    Except   as  expressly  permitted  by
Subsections 10(a)(i) and 10(a)(ii),  Awards shall not be transferable other than
by will or the laws of descent and  distribution  except that in the Committee's
discretion  a Stock  Appreciation  Right,  Phantom  Stock  Award (if such  Stock
Appreciation  Right or Phantom Stock Award is not  exercisable for Stock and not
subject to the  Participant's or holder's  discretion as to the timing or method
of payment) or Restricted  Stock Award (if such Restricted  Stock Award does not
require the transfer of  consideration  by the  Participant  or the holder other
than  usual  and  customary  service)  may be  transferable,  however,  not  for
consideration.  Notwithstanding  anything to the contrary in this Section 10, an
Incentive Stock Option shall not be transferable  other than by will or the laws
of descent and distribution.

                (iv)  EFFECT OF TRANSFER. Following the transfer of any Award as
contemplated by Subsections 10(a)(i),  10(a)(ii) and 10(a)(iii),  (A) such Award
shall continue to be subject to the same terms and conditions as were applicable
immediately  prior to transfer,  provided that the term  "Participant"  shall be
deemed to refer to the Permitted  Transferee,  the  recipient  under a qualified
domestic  relations  order,  the estate or heirs of a deceased  Participant,  or
other  transferee,  as  applicable,  to the  extent  appropriate  to enable  the
Participant to exercise the  transferred  Award in accordance  with the terms of
this Plan and  applicable  law and (B) the  provisions of the Award  relating to
exercisability  hereof shall continue to be applied with respect to the original
Participant and,  following the occurrence of any such events described  therein
the Awards shall be exercisable by the Permitted Transferee, the recipient under
a  qualified  domestic  relations  order,  the  estate  or heirs  of a  deceased
Participant,  or other transferee, as applicable, only to the extent and for the
periods that would have been applicable in the absence of the transfer.

                (v)   PROCEDURES AND  RESTRICTIONS.  Any Participant desiring to
transfer  an  Award  as  permitted  under  Subsections  10(a)(i),  10(a)(ii)  or
10(a)(iii) shall make  application  therefor in the manner and time specified by
the Committee and shall comply with such other requirements as the Committee may
require to assure compliance with all applicable  securities laws. The Committee
shall  not give  permission  for such a  transfer  if (A) it would  give rise to
short-swing  liability under section 16(b) of the Exchange Act or (B) it may not
be made in compliance with all applicable federal,  state and foreign securities
laws.

                (vi)  REGISTRATION.  To the extent the issuance to any Permitted
Transferee of any shares of Stock  issuable  pursuant to Awards  transferred  as
permitted  in this Section  10(a) is not  registered  pursuant to the  effective
registration statement of the Company generally covering the shares to be issued
pursuant to this Plan to initial  holders of Awards,  the Company shall not have
any  obligation to register the issuance of any such shares of Stock to any such
transferee.

          (b)   TAXES.  The Company and any Subsidiary is authorized to withhold
from any Award  granted,  or any  payment  relating to an Award under this Plan,
including from a

                                      -22-

<PAGE>

distribution of Stock, amounts of withholding and other taxes due or potentially
payable in connection with any transaction  involving an Award, and to take such
other  action as the  Committee  may deem  advisable  to enable the  Company and
Participants  to satisfy  obligations  for the payment of withholding  taxes and
other tax  obligations  relating  to any Award.  This  authority  shall  include
authority  to  withhold  or  receive  Stock or other  property  and to make cash
payments in respect thereof in satisfaction of a Participant's  tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.

          (c)   CHANGES TO THIS PLAN AND  AWARDS.  The Board may  amend,  alter,
suspend,  discontinue  or terminate  this Plan or the  Committee's  authority to
grant  Awards  under  this  Plan   without  the  consent  of   stockholders   or
Participants,  except that any amendment or  alteration to this Plan,  including
any  increase in any share  limitation,  shall be subject to the approval of the
Company's  stockholders  not later than the annual  meeting next  following such
Board  action if such  stockholder  approval is required by any federal or state
law or  regulation  or the rules of any stock  exchange or  automated  quotation
system  on which the  Stock  may then be  listed  or  quoted,  and the Board may
otherwise,  in its  discretion,  determine  to submit other such changes to this
Plan to  stockholders  for approval;  provided  that,  without the consent of an
affected  Participant,  no such Board action may materially and adversely affect
the rights of such  Participant  under any  previously  granted and  outstanding
Award. The Committee may waive any conditions or rights under, or amend,  alter,
suspend,  discontinue or terminate any Award  theretofore  granted and any Award
agreement relating thereto,  except as otherwise provided in this Plan; provided
that, without the consent of an affected  Participant,  no such Committee action
may materially and adversely  affect the rights of such  Participant  under such
Award.

          (d)   LIMITATION ON RIGHTS CONFERRED UNDER PLAN. Neither this Plan nor
any action taken  hereunder shall be construed as (i) giving any Eligible Person
or Participant  the right to continue as an Eligible Person or Participant or in
the employ or service of the Company or a Subsidiary,  (ii)  interfering  in any
way with the right of the Company or a  Subsidiary  to  terminate  any  Eligible
Person's or  Participant's  employment  or service at any time,  (iii) giving an
Eligible Person or Participant any claim to be granted any Award under this Plan
or to be  treated  uniformly  with other  Participants  and  employees,  or (iv)
conferring  on a Participant  any of the rights of a stockholder  of the Company
unless and until the  Participant is duly issued or transferred  shares of Stock
in accordance with the terms of an Award.

          (e)   UNFUNDED STATUS OF AWARDS.   This Plan is intended to constitute
an "unfunded" plan for certain incentive awards.

          (f)   NONEXCLUSIVITY OF THIS PLAN.   Neither the adoption of this Plan
by the Board nor its submission to the  stockholders of the Company for approval
shall be construed as creating  any  limitations  on the power of the Board or a
committee  thereof  to adopt such other  incentive  arrangements  as it may deem
desirable,  including  incentive  arrangements  and awards  which do not qualify
under  section  162(m)  of the Code.  Nothing  contained  in this Plan  shall be
construed  to prevent the Company or any  Subsidiary  from taking any  corporate
action which is deemed by the Company or such Subsidiary to be appropriate or in
its best  interest,  whether or not such action would have an adverse  effect on
this Plan or any Award made under this Plan. No employee,  beneficiary  or other
person shall have any claim against the Company or any Subsidiary as a result of
any such action.

                                      -23-

<PAGE>

          (g)   PAYMENTS IN THE EVENT OF FORFEITURES; FRACTIONAL SHARES.  Unless
otherwise determined by the Committee,  in the event of a forfeiture of an Award
with  respect to which a  Participant  paid cash or other  consideration  to the
Company in exchange for such Award,  the Participant  shall be repaid the amount
of such cash or other  consideration.  No  fractional  shares of Stock  shall be
issued or  delivered  pursuant to this Plan or any Award.  The  Committee  shall
determine  whether cash,  other Awards or other property shall be issued or paid
in lieu of such  fractional  shares or  whether  such  fractional  shares or any
rights thereto shall be forfeited or otherwise eliminated.

          (h)   SEVERABILITY.  If  any  provision  of this  Plan  is  held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining provisions hereof, but such provision shall be fully severable and
the Plan shall be construed and enforced as if the illegal or invalid  provision
had never been included  herein.  If any of the terms or provisions of this Plan
or any Award  agreement  conflict with the  requirements of Rule 16b-3 (as those
terms or provisions  are applied to Eligible  Persons who are subject to section
16(b) of the Exchange Act) or section 422 of the Code (with respect to Incentive
Stock  Options),  then those  conflicting  terms or  provisions  shall be deemed
inoperative to the extent they so conflict with the  requirements  of Rule 16b-3
(unless the Board or the Committee,  as  appropriate,  has expressly  determined
that the Plan or such Award should not comply with Rule 16b-3) or section 422 of
the Code. With respect to Incentive Stock 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,
further,  that,  to the  extent  any Option  that is  intended  to qualify as an
Incentive Stock Option cannot so qualify,  that Option (to that extent) shall be
deemed an Option not subject to section 422 of the Code for all  purposes of the
Plan.

          (i)   GOVERNING  LAW.   All  questions  arising  with  respect  to the
provisions of the Plan and Awards shall be determined by application of the laws
of the State of Texas,  without  giving effect to any conflict of law provisions
thereof,  except to the  extent  Texas law is  preempted  by  federal  law.  The
obligation  of the Company to sell and  deliver  Stock  hereunder  is subject to
applicable  federal  and  state  laws and to the  approval  of any  governmental
authority  required in connection  with the  authorization,  issuance,  sale, or
delivery of such Stock.

          (j)   CONDITIONS TO DELIVERY OF STOCK.  Nothing herein or in any Award
granted  hereunder or any Award agreement shall require the Company to issue any
shares  with  respect to any Award if that  issuance  would,  in the  opinion of
counsel for the Company,  constitute a violation  of the  Securities  Act or any
similar or  superseding  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 Company 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 Participant (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  Company,  may be  necessary to ensure that
any disposition by that holder (or in the event of the holder's death, his legal
representatives,

                                      -24-

<PAGE>

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.  No  Option or Stock
Appreciation  Right shall be  exercisable  and no  restriction on any Restricted
Stock  Award  shall  lapse with  respect to a  Participant  unless and until the
holder  thereof shall have paid cash or property to, or performed  services for,
the Company 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.

          (k)   PLAN  EFFECTIVE  DATE AND  STOCKHOLDER  APPROVAL.  This Plan has
been adopted by the Board and by the stockholders of the Company effective as of
the date of the consummation of a firm commitment  underwritten  public offering
of Stock for cash.

                                      -25-<PAGE>

                  UNITED SURGICAL PARTNERS INTERNATIONAL, INC.

                          EMPLOYEE STOCK PURCHASE PLAN

         1.       PURPOSE.     The  purpose  of  the  United  Surgical  Partners
International,  Inc.  Employee  Stock  Purchase  Plan (the "Plan") is to provide
eligible employees with an incentive to advance the interests of United Surgical
Partners  International,  Inc. (the  "Company") by affording an  opportunity  to
purchase stock of the Company at a favorable price.

         2.       ADMINISTRATION OF THE PLAN. The Plan shall be administered  by
a committee  (the  "Committee")  as  appointed  by the Board of Directors of the
Company (the  "Board").  Subject to the  provisions  of the Plan,  the Committee
shall  interpret  and construe the Plan and all options  granted under the Plan,
shall make such rules as it deems necessary for the proper administration of the
Plan,  shall  make all  other  determinations  necessary  or  advisable  for the
administration  of the Plan,  including  the  determination  of  eligibility  to
participate  in the Plan and  limitations  on the number of shares  subject to a
participant's  option under the Plan, and shall correct any defect or supply any
omission or reconcile  any  inconsistency  in the Plan or in any option  granted
under  the  Plan in the  manner  and to the  extent  that  the  Committee  deems
desirable to carry the Plan or any option into effect.  The Committee  shall, in
its  sole   discretion   exercised  in  good  faith,   make  such  decisions  or
determinations  and take  such  actions  as it deems  appropriate,  and all such
decisions, determinations and actions taken or made by the Committee pursuant to
this and the other  paragraphs  of the Plan shall be  conclusive on all parties.
The  Committee  shall not be liable for any  decision,  determination  or action
taken in good  faith in  connection  with the  administration  of the Plan.  The
Committee may approve the use of a voice response  system through which Eligible
Employees and the Committee may act under the Plan, as an alternative to written
forms, notices and elections.

         3.       PARTICIPATING  COMPANIES.   Each  present  and  future  parent
or subsidiary  corporation of the Company (within the meaning of sections 424(e)
and (f) of the Internal  Revenue Code of 1986,  as amended (the "Code")) that is
eligible by law to  participate in the Plan shall be a  "Participating  Company"
during  the  period  that  such  corporation  is  such a  parent  or  subsidiary
corporation; provided, however, that the Committee may at any time and from time
to time, in its sole discretion,  prevent or terminate a Participating Company's
Plan participation.  Any Participating Company may, by appropriate action of its
Board of Directors, prevent or terminate its participation in the Plan. Transfer
of employment among the Company and Participating Companies (and among any other
parent or  subsidiary  corporation  of the  Company)  shall not be  considered a
termination of employment hereunder.

         4.       ELIGIBILITY.    All   employees  of   the   Company  and   the
Participating   Companies   who  have  been  employed  by  the  Company  or  any
Participating  Company (including any predecessor entity) at any time during the
6 months  (including any authorized leave of absence meeting the requirements of
Treasury Regulation ss. 1.421-7(h)(2)) prior to the applicable Date of Grant (as
defined in subparagraph 6(a)) and who are customarily employed at least 20 hours
per week and at least 5 months per year shall be eligible to  participate in the
Plan; provided,  however, that no option

                                       1

<PAGE>

shall be granted to an employee if such employee,  immediately  after the option
is granted,  owns stock  possessing  five percent or more of the total  combined
voting power or value of all classes of stock of the Company or of its parent or
subsidiary  corporation  (within the meaning of sections 423(b)(3) and 424(d) of
the Code) ("Eligible Employee").

         5.       STOCK  SUBJECT  TO THE  PLAN.  Subject  to the  provisions  of
paragraph 12  (relating to  adjustment  upon  changes in stock),  the  aggregate
number of shares which may be sold  pursuant to options  granted  under the Plan
shall not exceed  1,500,000 shares of the authorized $.01 par value common stock
of the Company  ("Stock"),  which  shares may be unissued  shares or  reacquired
shares or shares  bought on the  market  for  purposes  of the Plan.  Should any
option granted under the Plan expire or terminate prior to its exercise in full,
the shares theretofore  subject to such option may again be subject to an option
granted under the Plan. Any shares which are not subject to outstanding  options
upon the termination of the Plan shall cease to be subject to the Plan.

         6.       GRANT  OF  OPTIONS.  (a) GENERAL  STATEMENT;  "DATE OF GRANT";
"OPTION  PERIOD";  "DATE OF EXERCISE".  Upon the effective  date of the Plan, as
provided in Section 14, and  continuing  while the Plan  remains in effect,  the
Company shall offer options under the Plan to all Eligible Employees to purchase
shares of Stock.  Except as otherwise  determined by the Committee and except as
provided  below,  these options  shall be granted on the  effective  date of the
Plan, the next subsequent  January 1 or July 1, whichever  occurs  earlier,  and
each six month  anniversary of such date (each of which dates is herein referred
to as a "Date of Grant").  The term of each  option,  except as provided  below,
shall  begin on a Date of Grant  and  shall be for a period  ending  on the next
subsequent June 30 or December 31 (each such 6 month period or shorter period in
the case of the first  period shall be referred to as an "Option  Period").  The
first day of the first  Option  Period shall be a Date of Grant and the last day
of such  Option  Period  shall  be a "Date  of  Exercise."  Notwithstanding  the
foregoing,  the first Date of Grant shall be the effective date of the Plan. The
number of shares  subject to each option and Option Period shall be the quotient
of the sum of the payroll  deductions  withheld on behalf of each participant in
accordance with  subparagraph  6(b) for the Option Period and any amount carried
forward from the preceding Option Period pursuant to subparagraph  7(a), divided
by the "Option Price" (as defined in subparagraph 7(b)) of the Stock,  excluding
all fractions;  provided, however, that the maximum number of shares that may be
subject to any option may not exceed  5,000  shares  (subject to  adjustment  as
provided in paragraph 12).

         (b)      ELECTION  TO  PARTICIPATE;  DEDUCTION  AUTHORIZATION.   Except
as provided in  subparagraph  6(f), an Eligible  Employee may participate in the
Plan only by means of payroll  deduction.  Except as  provided  in  subparagraph
6(g), each Eligible Employee who elects to participate in the Plan shall deliver
to the Company,  within the time period  prescribed by the Committee,  a written
payroll  deduction  authorization on a form prepared by the Committee whereby he
gives notice of his election to participate in the Plan as of the next following
Date of Grant,  and whereby he  designates  an integral  percentage  or specific
amount (as  determined  by the  Committee) of his  "Eligible  Compensation"  (as
defined in subparagraph  6(d)) to be deducted from his compensation for each pay
period  and  credited  to a book  entry  account  established  in his name.  The
designated  percentage or specific  amount may not result in a deduction  during
any payroll period of an amount less than $20.00.  The designated  percentage or
specific amount may not exceed either of the following: (i) 20% of the amount of
Eligible  Compensation from which the deduction is made;

                                       2

<PAGE>

or (ii) an amount which will result in noncompliance with the limitations stated
in subparagraphs 6(a) or 6(e).

         (c)      CHANGES  IN  PAYROLL  AUTHORIZATION.  Except  as  provided  in
subparagraph   8(a),  the  payroll  deduction   authorization   referred  to  in
subparagraph 6(b) may not be changed until the following Date of Grant.

         (d)      "ELIGIBLE   COMPENSATION"   DEFINED.    The   term   "Eligible
Compensation"  means the gross (before  taxes are withheld)  total of all wages,
salaries,  commissions,  overtime and bonuses received during the Option Period,
except that such term shall include elective contributions made on an employee's
behalf by the Company or a  Participating  Company  that are not  includable  in
income under section 125 or section 402(e)(3) of the Code.  Notwithstanding  the
foregoing,  "Eligible Compensation" shall not include (i) employer contributions
to or payments from any deferred compensation  program,  whether such program is
qualified  under  section  401(a) of the Code (other than amounts  considered as
employer  contributions  under section  402(e)(3) of the Code) or  nonqualified,
(ii) amounts realized from the receipt or exercise of a stock option that is not
an incentive  stock option within the meaning of section 422 of the Code,  (iii)
amounts  realized at the time  property  described  in section 83 of the Code is
freely  transferable  or no longer subject to a substantial  risk of forfeiture,
(iv) amounts  realized as a result of an election  described in section 83(b) of
the Code, and (v) any amount realized as a result of a disqualifying disposition
within the meaning of section 421(b) of the Code.

         (e)      $25,000 LIMITATION.  No  Eligible Employee shall be granted an
option  under the Plan to the  extent  such  grant  would  permit  his rights to
purchase  Stock under the Plan and under all other employee stock purchase plans
of the Company  and its parent and  subsidiary  corporations  (as such terms are
defined  in  sections  424(e)  and (f) of the Code) to  accrue  at a rate  which
exceeds  $25,000 of the Fair Market  Value of Stock (as defined in  subparagraph
7(b)),  determined at the time the option is granted,  for each calendar year in
which any such  option  granted  to such  employee  is  outstanding  at any time
(within the meaning of section 423(b)(8) of the Code).

         (f)      LEAVES OF ABSENCE.  During a paid leave of absence approved by
the  Company  and  meeting  the   requirements   of  Treasury   Regulation   ss.
1.421-7(h)(2),  a participant's  elected payroll deductions shall continue. If a
participant takes an unpaid leave of absence, then such participant may not make
additional  contributions  under the Plan while on unpaid leave of absence,  and
the  participant's  payroll  deductions for the  applicable  Option Period shall
remain  subject to the Plan and used to exercise  options on the next  following
Date of Exercise.

         (g)      CONTINUING   ELECTION.  A  participant  (i)  who  has  elected
to participate in the Plan pursuant to  subparagraph  6(b) as of a Date of Grant
and (ii) who takes no action to change or revoke  such  election  as of the next
following  Date of  Grant,  shall be  deemed  to have  made  the same  election,
including the same  attendant  payroll  deduction  authorization,  for such next
following  and/or  subsequent  Date(s) of Grant as was in effect for the Date of
Grant for which he made such election to participate.  A participant who desires
to  discontinue  participation  in  the  Plan  for a  subsequent  Option  Period
commencing as of the next Date of Grant shall deliver to the Company a notice of
withdrawal,  on a form prepared by the Committee,  at least 30 days prior to the
beginning of such Option Period.

                                       3

<PAGE>

         7.       EXERCISE OF OPTIONS.  (a)  GENERAL  STATEMENT.  Each  Eligible
Employee who is a participant in the Plan,  automatically and without any act on
his part,  shall be deemed to have exercised his option on each Date of Exercise
to the  extent  that the cash  balance  then in his  account  under  the Plan is
sufficient to purchase at the "Option Price" (as defined in  subparagraph  7(b))
whole shares of Stock. Any balance remaining in his account after payment of the
purchase price of those whole shares,  to the extent the balance is insufficient
to  purchase  a whole  share,  shall be carried  forward  and used  towards  the
purchase of whole shares in the next following Option Period.  To the extent the
balance remaining in his account after the payment of the purchase price exceeds
the value of a share,  at such  time,  the  entire  remaining  balance  shall be
returned to the participant.

         (b)      "OPTION PRICE" DEFINED. The Option Price per share of Stock to
be paid by each optionee on each exercise of his option shall be an amount equal
to the  lesser  of 85% of the  Fair  Market  Value  of the  Stock on the Date of
Exercise or on the Date of Grant.  For all  purposes  under the Plan,  the "Fair
Market Value" of a share of Stock means, for a particular day:

                  (i)      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 that  business day 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,
         if no such closing prices are available for that day, 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

                  (ii)     If  shares of Stock of the same class are not  listed
         or admitted to unlisted trading  privileges as provided in subparagraph
         (i) and if sales  prices  for  shares of Stock of the same class in the
         over-the-counter  market are  reported by the National  Association  of
         Securities Dealers, Inc. Automated Quotations, Inc. ("NASDAQ") National
         Market System as of the date of determining the Fair Market Value, then
         the last  reported  sales price so reported on that business day or, if
         no such sale takes place on that  business day, the average of the high
         bid and low  asked  prices  so  reported  or,  if no  such  prices  are
         available for that day, the last reported sale price so reported on the
         last business day before the date in question; or

                  (iii)    If shares of Stock of the same  class are not  listed
         or admitted to unlisted trading  privileges as provided in subparagraph
         (i) and sales  prices  for  shares  of Stock of the same  class are not
         reported by the NASDAQ National Market System (or a similar system then
         in use) as provided in  subparagraph  (ii), 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) as of the date of determining the Fair
         Market Value,  then the average of the high bid and low asked prices on
         that business day or, if no such prices are available for that day, the
         average of the high bid and low asked  prices on the last  business day
         before the date in question; or

                                       4

<PAGE>

                  (iv)     If  shares of Stock of the same  class are not listed
         or admitted to unlisted trading  privileges as provided in subparagraph
         (i) and sales prices or bid and asked prices  therefor are not reported
         by NASDAQ (or the National  Quotation Bureau  Incorporated) as provided
         in  subparagraph  (ii)  or  subparagraph   (iii)  as  of  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

                  (v)      If  shares  of Stock  of the  same  class  are listed
         or admitted to unlisted trading  privileges as provided in subparagraph
         (i) or sales  prices or bid and asked  prices  therefor are reported by
         NASDAQ (or the National  Quotation Bureau  Incorporated) as provided in
         subparagraph  (ii) or subparagraph  (iii) as of 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 subparagraphs (i),
         (ii) or (iii).

         (c)      DELIVERY OF SHARE  CERTIFICATES.  As soon as practicable after
each  Date of  Exercise,  the  Company  shall  issue  one or  more  certificates
representing  the total  number of whole  shares of Stock  respecting  exercised
options in the aggregate of all of the Eligible  Employees  hereunder.  Any such
certificate  shall  be held by the  Company  (or its  agent)  and may be held in
street name. If the Company issues a certificate representing the shares of more
than one  Eligible  Employee,  the Company  shall keep  accurate  records of the
beneficial interests of each Eligible Employee in each such certificate by means
of a Company stock account.  Each Eligible  Employee shall be provided with such
periodic statements as may be directed by the Committee  reflecting all activity
in any such  Company  stock  account.  In the event the  Company is  required to
obtain from any  commission or agency  authority to issue any such  certificate,
the Company  shall seek to obtain such  authority.  Inability  of the Company to
obtain  from any such  commission  or agency  authority  which  counsel  for the
Company deems  necessary for the lawful issuance of any such  certificate  shall
relieve the Company  from  liability  to any  participant  in the Plan except to
return to him the amount of the balance in his account.  A  participant  may, on
the form  prescribed  by the  Committee,  request the Company to deliver to such
participant a certificate  issued in his name  representing all or a part of the
aggregate whole number of shares of Stock then held by the Company on his behalf
under the Plan. Further, upon the termination of a participant's employment with
the Company and its parent or subsidiary corporations for any reason whatsoever,
the Company  shall  deliver to such  employee a  certificate  issued in his name
representing  the  aggregate  whole  number of shares of Stock  then held by the
Company  on his  behalf  under the Plan.  While  shares of Stock are held by the
Company  (or its  agent),  such  shares  may  not be  sold,  assigned,  pledged,
exchanged,  hypothecated or otherwise transferred,  encumbered or disposed of by
the  employee  who has  purchased  such  shares;  provided,  however,  that such
restriction  shall not apply to the transfer of such shares of Stock pursuant to
(i) a plan of reorganization of the Company, but the stock,  securities or other
property  received in exchange therefor shall be held by the Company pursuant to
the  provisions  hereof or (ii) a  divorce.  The  Committee  may cause the Stock
certificates issued in connection with the exercise of options under the Plan to
bear such legend or legends,  and the Committee may take such other actions,  as
it deems  appropriate  in order to reflect the  provisions of this  subparagraph
7(c) and to assure  compliance  with  applicable  securities  laws.  Neither the
Company nor the Committee  shall have any

                                       5

<PAGE>

liability  with  respect  to a delay  in the  delivery  of a  Stock  certificate
pursuant to this  subparagraph  7(c).

         8.       WITHDRAWAL  FROM  THE  PLAN.    (a)  GENERAL  STATEMENT.   Any
participant  may  withdraw  in whole  from the Plan at any time prior to 30 days
before the Date of Exercise  relating to a  particular  Option  Period.  Partial
withdrawals  shall not be permitted.  A participant  who wishes to withdraw from
the Plan must  timely  deliver to the Company a notice of  withdrawal  on a form
prepared by the  Committee.  The Company,  promptly  following the time when the
notice of withdrawal is delivered, shall refund to the participant the amount of
the cash balance in his account under the Plan; and thereupon, automatically and
without any further act on his part, his payroll deduction authorization and his
interest in unexercised options under the Plan shall terminate.

         (b)      ELIGIBILITY FOLLOWING WITHDRAWAL.  A participant who withdraws
from the Plan  shall  not be  eligible  to  participate  in the Plan  until  the
following Date of Grant  (provided that he is otherwise  eligible to participate
in the  Plan at such  time and  complies  with the  enrollment  procedures).

         9.       TERMINATION OF EMPLOYMENT. If the employment of a  participant
terminates for any reason whatsoever (including death), his participation in the
Plan  automatically  and without any act on his part shall  terminate  as of the
date of the termination of his  employment.  The Company shall refund to him the
amount of the cash  balance in his account  under the Plan,  and  thereupon  his
interest in unexercised options under the Plan shall terminate.

         10.      RESTRICTION  UPON  ASSIGNMENT OF  OPTION.  An  option  granted
under the Plan shall not be  transferable  otherwise than by will or the laws of
descent and distribution. Each option shall be exercisable, during his lifetime,
only by the employee to whom granted.  The Company shall not recognize and shall
be under no duty to  recognize  any  assignment  or purported  assignment  by an
employee of his option or of any rights  under his option,  and any such attempt
may be treated by the Company as an election to withdraw from the Plan.

         11.      NO  RIGHTS  OF  STOCKHOLDER  UNTIL CERTIFICATE  ISSUES.   With
respect  to shares of Stock  subject to an option,  a  participant  shall not be
deemed  to be a  stockholder,  and he  shall  not  have  any of  the  rights  or
privileges of a stockholder.  A participant shall have the rights and privileges
of a stockholder  upon, but not until, a certificate  for shares has been issued
following exercise of his option.  With respect to a participant's Stock held by
the Company (or its agent) pursuant to subparagraph  7(c), the Company shall, as
soon as practicable, pay the participant any cash dividends attributable thereto
and facilitate the participant's voting rights attributable thereto.

         12.      CHANGES IN STOCK; ADJUSTMENTS.  Whenever any change is made in
the Stock,  by reason of a stock  dividend  or by reason of  subdivision,  stock
split,  reverse  stock split,  recapitalization,  reorganization,  combinations,
reclassification of shares, or other similar change,  appropriate action will be
taken by the Committee to adjust accordingly the number of shares subject to the
Plan,  the maximum  number of shares that may be subject to any option,  and the
number and Option Price of shares subject to options outstanding under the Plan.

                                       6

<PAGE>

         Upon  the  occurrence  of a  Change  in  Control,  unless  a  surviving
corporation  assumes or substitutes  new options  (within the meaning of section
424(a) of the Code) for all options then  outstanding or the Committee elects to
continue the options then outstanding  without change,  the Date of Exercise for
all  options  then  outstanding  shall  be  accelerated  to a date  fixed by the
Committee prior to the effective date of such Change in Control.

         "Change  in  Control"  means  the  occurrence  of any of the  following
events:

                  (i)      The   agreement  to  acquire or  a  tender offer  for
beneficial  ownership  (within the meaning of Rule 13d-3  promulgated  under the
Securities  Exchange Act of 1934 ("Exchange Act")) by any individual,  entity or
group  (within the meaning of section  13(d)(3) or 14(d)(2) of the Exchange Act)
(a "Person"), of 50% or more of either (x) the then outstanding shares of Common
Stock  of the  Company  (the  "Outstanding  Company  Common  Stock")  or (y) the
combined voting power of the then outstanding  voting  securities of the Company
entitled to vote  generally  in the  election  of  directors  (the  "Outstanding
Company  Voting  Securities");  provided,  however,  that for  purposes  of this
subsection  (i), the  following  acquisitions  shall not  constitute a Change in
Control:  (A) any acquisition  directly from the Company, (B) any acquisition by
the Company, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or  maintained  by the Company or any  corporation  controlled  by the
Company or (D) any  acquisition  by any  corporation  pursuant to a  transaction
which complies with clauses (A), (B) and (C) of paragraph (iii) below; or

                  (ii)     Individuals  who,  as  of  the  date  of  this  Plan,
constitute  the Board cease for any reason to  constitute at least a majority of
the Incumbent  Board,  which shall be defined as the individuals  who, as of the
Effective  Date,  constitute  the Board and any other  individual  who becomes a
director of the Company after that date and whose election or appointment by the
Board or nomination for election by the Company's stockholders was approved by a
vote of at least a majority  of the  directors  then  comprising  the  Incumbent
Board,  but  excluding,  for this  purpose,  any such  individual  whose initial
assumption  of office  occurs as a result  of an actual or  threatened  election
contest  with respect to the election or removal of directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Incumbent Board; or

                  (iii)    Consummation   of   a   reorganization,    merger  or
consolidation or sale or other  disposition of all or  substantially  all of the
assets of the  Company or an  acquisition  of assets of another  corporation  (a
"Business   Combination"),   in  each  case,  unless,  following  such  Business
Combination,  (A) the Outstanding  Company Common Stock and Outstanding  Company
Voting Securities  immediately prior to such Business  Combination  represent or
are  converted  into  or  exchanged  for  securities   which  represent  or  are
convertible into more than 50% of, respectively,  the then outstanding shares of
common  stock  and the  combined  voting  power of the then  outstanding  voting
securities entitled to vote generally in the election of directors,  as the case
may be, of the corporation resulting from such Business Combination  (including,
without limitation, a corporation which as a result of such transaction owns the
Company,  or all or substantially all of the Company's assets either directly or
through one or more subsidiaries), (B) no Person (excluding any employee benefit
plan (or related  trust) of the Company or the  corporation  resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively,  the then  outstanding  shares of common stock of the  corporation
resulting  from such Business  Combination  or the combined  voting power of the
then outstanding voting securities of such corporation except

                                       7

<PAGE>

to the extent that such  ownership of the Company  existed prior to the Business
Combination and (C) at least a majority of the members of the board of directors
of the corporation  resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of the
action of the Board, providing for such Business Combination; or

                  (iv)     Approval by  the  stockholders of the  Company  of  a
complete liquidation or dissolution of the Company.

         13.      USE OF FUNDS;  NO INTEREST PAID.  All  funds  received or held
by the Company  under the Plan shall be  included  in the  general  funds of the
Company  free of any  trust  or  other  restriction,  and  may be  used  for any
corporate  purpose.  No interest shall be paid to any participant or credited to
his account under the Plan.

         14.      TERM OF THE PLAN. The Plan shall be  effective as of the  date
of the  consummation  of a firm commitment  underwritten  public offering of the
Stock for cash;  provided that the Plan is approved by the  stockholders  of the
Company  within 12 months of the date of adoption by the Board.  Notwithstanding
any provision in the Plan, no option granted under the Plan shall be exercisable
prior to such stockholder  approval,  and, if the stockholders of the Company do
not approve the Plan within 12 months after its adoption by the Board,  then the
Plan shall automatically terminate.

         15.      AMENDMENT OR TERMINATION THE PLAN. The Board in its discretion
may  terminate the Plan at any time with respect to any shares for which options
have not theretofore been granted.  The Board and Committee shall have the right
to alter or amend the Plan or any part  thereof  from time to time  without  the
approval of the  stockholders  of the Company;  provided,  that no change in any
option  theretofore  granted  may be made which  would  impair the rights of the
participant without the consent of such participant; and provided, further, that
the Board and  Committee may not make any  alteration  or amendment  which would
increase  the  aggregate  number of shares  which may be issued  pursuant to the
provisions of the Plan (other than as a result of the  anti-dilution  provisions
of the Plan), change the class of individuals  eligible to receive options under
the  Plan,  or  cause  options  issued  under  the  Plan to  fail  to  meet  the
requirements  for employee stock purchase plans as defined in section 423 of the
Code without the approval of the stockholders of the Company.

         16.      SECURITIES  LAWS.  The Company shall not be obligated to issue
any Stock  pursuant  to any option  granted  under the Plan at any time when the
shares covered by such option have not been registered  under the Securities Act
of 1933, as amended, and such other state and federal laws, rules or regulations
as the Company or the Committee  deems  applicable  and, in the opinion of legal
counsel  for  the  Company,   there  is  no  exemption  from  the   registration
requirements of such laws,  rules or regulations  available for the issuance and
sale of such shares.  Further,  all Stock acquired pursuant to the Plan shall be
subject to the Company's policy or policies,  if any, concerning compliance with
securities laws and regulations, as the same may be amended from time to time.

         17.      NO RESTRICTION ON CORPORATE  ACTION.  Nothing contained in the
Plan shall be construed to prevent the Company or any subsidiary from taking any
corporate  action  which is  deemed  by the  Company  or such  subsidiary  to be
appropriate  or in its best  interest,  whether or not such action would have an
adverse  effect on the Plan or any award  made  under  the  Plan.  No

                                       8

<PAGE>

employee,  beneficiary  or other person shall have any claim against the Company
or any subsidiary as a result of any such action.

                     [THIS PAGE IS INTENTIONALLY LEFT BLANK]

                                       9

<PAGE>

         EXECUTED this ______ day of _____________, 2001.

                                             UNITED SURGICAL PARTNERS
                                             INTERNATIONAL, INC.

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

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