Document:

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                    PEOPLES BANCORP OF NORTH CAROLINA, INC.

                          OMNIBUS STOCK OWNERSHIP AND
                           LONG TERM INCENTIVE PLAN

     THIS IS THE OMNIBUS STOCK OWNERSHIP AND LONG TERM INCENTIVE PLAN ("Plan")
of Peoples Bancorp of North Carolina, Inc. (the "Company"), a North Carolina
corporation with its principal office in Newton, Catawba County, North Carolina,
under which Incentive Stock Options and Non-Qualified Options to acquire shares
of the Stock, Restricted Stock, Stock Appreciation Rights, Units, and/or Book
Value Shares may be granted from time to time to Eligible Directors and Eligible
Employees of the Company and of any of its Subsidiaries (the "Subsidiaries"),
subject to the following provisions:

                                   ARTICLE I
                                  DEFINITIONS

     The following terms shall have the meanings set forth below. Additional
terms defined in this Plan shall have the meanings ascribed to them when first
used herein.

     Bank.  Peoples Bank, Newton, North Carolina.
     ----

     Board.  The Board of Directors of Peoples Bancorp of North Carolina, Inc.
     -----

     Book Value Share.  The Right of a BVS Recipient (as defined in Section 7.1)
     ----------------
to receive cash compensation when, as and in the amounts described in Article
VII.

     Book Value Share Agreement.  The agreement between the Company and the BVS
     --------------------------
Recipient with respect to Book Value Shares granted to such BVS Recipient,
including such terms and provisions as are necessary or appropriate under
Article VII.

     Change In Control Transaction. A transaction in which (i) any "person" (as
     -----------------------------
such term is defined in Section 3(a)(9) and 13(d)(3) of the 1934 Act), directly
or indirectly, acquires beneficial ownership of voting stock, or acquires
irrevocable proxies or any combination of voting stock and irrevocable proxies,
representing twenty-five percent (25%) or more of any class of voting securities
of either the Company or the Bank, or acquires in any manner control of the
election of a majority of the directors of either the Company or the Bank, (ii)
either the Company or the Bank consolidates or merges with or into another
corporation, association or entity, or is otherwise reorganized, where neither
the Company nor the Bank is the surviving corporation in such transaction, or
(iii) all or substantially all of the assets of either the Company or the Bank
are sold or otherwise transferred to, or are acquired by, any other entity or
group.

     Code.  The Internal Revenue Code of 1986, as amended.
     ----

     Committee.  The Compensation Committee of the Board.
     ---------

     Common Stock.  The Common Stock, no par value, of the Company.
     ------------

     Death.  The date and time of death of an Eligible Director or Eligible
     -----
Employee who has received Rights, as established by the relevant death
certificate.
<PAGE>

     Disability. The date on which (A) an Eligible Employee who has received
     ----------
Rights becomes totally and permanently disabled as determined (i) by the
Company's disability insurance carrier (if the Eligible Employee is covered by a
Company-owned disability policy) or by his or her disability insurance carrier
(if the Eligible Employee is not covered by a Company-owned disability policy),
(ii) under federal Social Security laws and regulations, or (iii) by a physician
acceptable to the Company; and (B) an Eligible Director who has received Rights
becomes totally and permanently disabled as determined (i) under federal Social
Security laws or (ii) by a physician acceptable to the Company.

     Effective Date.  Pursuant to the action of the Board adopting the Plan, the
     --------------
date as of which this Plan is effective shall be the date it is approved by the
Company's shareholders.

     Eligible Directors.  Those individuals who are duly elected directors of
     ------------------
the Company or any of its subsidiaries who are serving in such capacity, who are
not members of the Committee and who have been selected by the Committee as a
person to whom a Right or Rights shall be granted under the Plan.

     Eligible Employees.  Those individuals who meet the following eligibility
     ------------------
requirements:

          (i)   Such individual must be a full time employee of the Company or a
     Subsidiary. For this purpose, an individual shall be considered to be an
     "employee" only if there exists between the Company or a Subsidiary and the
     individual the legal and bona fide relationship of employer and employee.
     In determining whether such relationship exists, the regulations of the
     United States Treasury Department relating to the determination of such
     relationship for the purpose of collection of income tax at the source on
     wages shall be applied.

          (ii)  If the Registration shall not have occurred, such individual
     must have such knowledge and experience in financial and business matters
     that he or she is capable of evaluating the merits and risks of the
     investment involved in the receipt and/or exercise of a Right.

          (iii) Such individual, being otherwise an Eligible Employee under the
     foregoing items, shall have been selected by the Committee as a person to
     whom a Right or Rights shall be granted under the Plan.

     Fair Market Value.  With respect to the Company's Common Stock, the market
     -----------------
price per share of such Common Stock determined by the Committee, consistent
with  the requirements of Section 422 of the Code and to the extent consistent
therewith, as follows, as of the date specified in the context within which such
term is used: (i) if the Common Stock was traded on a stock exchange on the date
in question, then the Fair Market Value will be equal to the closing price
reported by the applicable composite-transactions report for such date; (ii) if
transactions in the Common Stock were quoted on the Nasdaq National Market on
the date in question, then the Fair Market Value will be equal to the last-
transaction price quoted by the Nasdaq National Market; (iii) if transactions in
the Common Stock  were quoted on a system of The Nasdaq Stock Market, Inc., but
not the Nasdaq National Market, then the Fair Market Value will be equal to the
average of the last reported representative bid and asked prices quoted by The
National Stock Market, Inc. for such date; and (iv) if none of the foregoing
provisions is applicable, then the Fair Market Value will be determined by the
Committee in good faith on such basis as it deems appropriate.  The Committee
shall maintain a written record of its method of determining Fair Market Value.

     ISO.  An "incentive stock option" as defined in Section 422 of the Code.
     ---

     Non-Qualified Option.  Any Option granted under Article III whether
     --------------------
designated by the Committee as a Non-Qualified Option or otherwise, other than
an Option designated by the Committee as an ISO, or any Option
<PAGE>

so designated but which, for any reason, fails to qualify as an ISO pursuant to
Section 422 of the Code and the rules and regulations thereunder.

     Option Agreement.  The agreement between the Company and an Optionee with
     ----------------
respect to Options granted to such Optionee, including such terms and provisions
as are necessary or appropriate under Article III.

     Options.  ISOs and Non-Qualified Options are collectively referred to
     -------
herein as "Options;" provided, however, whenever reference is specifically made
only to ISOs or Non-Qualified Options, such reference shall be deemed to be made
to the exclusion of the other.

     Plan Pool.  A total of 292,600 shares of authorized, but unissued, Common
     ---------
Stock, as adjusted pursuant to Section 2.3(b), which shall be available as Stock
under this Plan.

     Registration.  The registration by the Company under the 1933 Act and
     ------------
applicable state "Blue Sky" and securities laws of this Plan, the offering of
Rights under this Plan, the offering of Stock under this Plan, and/or the Stock
acquirable under this Plan.

     Restricted Stock.  The Stock which a Holder (as defined in Section 4.1(a))
     ----------------
shall be entitled to receive when, as and in the amounts described in Article
IV.

     Restricted Stock Agreement.  The agreement between the Company and a Holder
     --------------------------
with respect to Rights to receive Restricted Stock, including such terms and
provisions as are necessary or appropriate under Article IV.

     Rights.  The rights to exercise, purchase or receive the Options,
     ------
Restricted Stock, Units,  SARs and Book Value Shares described herein.

     Rights Agreement.  An Option Agreement, a Restricted Stock Agreement, a
     ----------------
Unit Agreement, a SAR Agreement or a Book Value Share Agreement.

     SAR.  The Right of a SAR Recipient (as defined in Section 6.1(a)) to
     ---
receive cash when, as and in the amounts described in Article VI.

     SAR Agreement.  The agreement between the Company and a SAR Recipient with
     -------------
respect to the SAR awarded to the SAR Recipient, including such terms and
conditions as are necessary or appropriate under Article VI.

     SEC.  The Securities and Exchange Commission.
     ---

     Stock.  The shares of Common Stock in the Plan Pool available for issuance
     -----
pursuant to the valid exercise of a Right or on which the cash value of a Right
is to be based.

     Tax Withholding Liability.  All federal and state income taxes, social
     -------------------------
security tax, and any other taxes applicable to the compensation income arising
from the transaction required by applicable law to be withheld by the Company.

     Transfer.  The sale, assignment, transfer, conveyance, pledge,
     --------
hypothecation, encumbrance, loan, gift, attachment, levy upon, assignment for
the benefit of creditors, by operation of law (by will or descent and
<PAGE>

distribution), transfer by a qualified domestic relations order, a property
settlement or maintenance agreement, transfer by result of the bankruptcy laws
or otherwise of a share of Stock or of a Right.

     Units.  The Right of a Unit Recipient (as defined in Section 5.1(a)) to
     -----
receive a combination of cash and Stock when, as and in the amounts described in
Article V.

     Unit Agreement.  The agreement between the Company and Unit Recipient with
     --------------
respect to the award of Units to the Unit Recipient, including such terms and
conditions as are necessary or appropriate under Article V.

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

     1934 Act.  The Securities Exchange Act of 1934, as amended.
     --------

                                  ARTICLE II
                                    GENERAL

       Section 2.1.  Purpose.  The purposes of this Plan are to encourage and
       -----------   -------
motivate directors and key employees to contribute to the successful performance
of the Company and its Subsidiaries and the growth of the market value of the
Common Stock; to achieve a unity of purpose among such directors, key employees
and the Company's shareholders by providing ownership opportunities, and a unity
of interest among such parties in the achievement of the Company's primary long
term performance objectives; and to retain key employees by rewarding them with
potentially tax-advantageous future compensation.  These objectives will be
promoted through the granting of Rights to designated Eligible Directors and
Eligible Employees pursuant to the terms of this Plan.

       Section 2.2.  Administration.
       -----------   --------------

          (a)  The Plan shall be administered by the Committee which meets, and
     shall continue to meet, the standards of Rule 16b-3(d)(1) promulgated by
     the SEC under the 1934 Act.  Subject to the provisions of SEC Rule 16b-
     3(d)(1), the Committee may designate any officers or employees of the
     Company or any Subsidiary to assist in the administration of the Plan,  to
     execute documents on behalf of the Committee and to perform such other
     ministerial duties as may be delegated to them by the Committee.

          (b)  Subject to the provisions of the Plan, the determinations and the
     interpretation and construction of any provision of the Plan by the
     Committee shall be final and conclusive upon all persons affected thereby.
     By way of illustration and not of limitation, the Committee shall have the
     discretion (a) to construe and interpret the Plan and all Rights granted
     hereunder and to determine the terms and provisions (and amendments
     thereof) of the Rights granted under the Plan (which need not be
     identical); (b) to define the terms used in the Plan and in the Rights
     granted hereunder; (c) to prescribe, amend and rescind the rules and
     regulations relating to the Plan; (d) to determine the Eligible Employees
     to whom and the time or times at which such Rights shall be granted, the
     number of shares of Stock, as and when applicable, to be subject to each
     Right, the exercise, other relevant purchase price or value pertaining to a
     Right, and the determination of leaves of absence which may be granted to
     Eligible Employees without constituting a termination of their employment
     for the purposes of the Plan; and (e) to make all other determinations
     necessary or advisable for the administration of the Plan.  Only the full
     Board of Directors has the discretion to determine the Eligible Directors
     to whom and the time or times at which such Rights shall be granted , the
     number of shares of Stock, as and when applicable, to be subject to each
     Right, the exercise, and other relevant purchase price or
<PAGE>

     value pertaining to a Right. References to the Committee contained in this
     Agreement will also mean the Board wherever Rights of Eligible Directors
     are addressed.

          (c)  It shall be in the discretion of the Committee to grant Options
     to purchase shares of Stock which qualify as ISOs under the Code or which
     will be given tax treatment as Non-Qualified Options.  Any Options granted
     which fail to satisfy the requirements for ISOs shall become Non-Qualified
     Options.

          (d)  The intent of the Company is to register the (i) offering of
     shares of Stock pertaining to or underlying the Rights and the offering of
     Rights pursuant to this Plan, (ii) this Plan and (iii) the Rights, to the
     extent required, under the 1933 Act and applicable state securities and
     "Blue Sky" laws (the "Registration"). In such event, the Company shall make
     available to Eligible Directors and Eligible Employees receiving Rights,
     and/or shares of Stock in connection therewith, all disclosure documents
     required under such federal and state laws.  If such Registration shall not
     occur, the Committee shall be responsible for supplying the recipient of a
     Right, and/or shares of Stock in connection therewith, with such
     information about the Company as is contemplated by the federal and state
     securities laws in connection with exemptions from the registration
     requirements of such laws, as well as providing the recipient of a Right
     with the opportunity to ask questions and receive answers concerning the
     Company and the terms and conditions of the Rights granted under this Plan.
     In addition, if such Registration shall not occur, the Committee shall be
     responsible for determining the maximum number of Eligible Directors and
     Eligible Employees and the suitability of particular persons to be Eligible
     Directors and Eligible Employees in order to comply with applicable federal
     and state securities statutes and regulations governing such exemptions.

          (e)  In determining the Eligible Directors and Eligible Employees to
     whom Rights shall be granted and the number of shares of stock to be
     covered by each Right, the Committee shall take into account the nature of
     the services rendered by such Eligible Directors and Eligible Employees,
     their present and potential contributions to the success of the Company
     and/or the Subsidiaries and such other factors as the Committee shall deem
     relevant.  An Eligible Director or Eligible Employee who has been granted a
     Right under the Plan may be granted additional Rights under the Plan if the
     Committee shall so determine.

          If, pursuant to the terms of the Plan, or otherwise in connection with
     the Plan, it is necessary that the percentage of stock ownership of an
     Eligible Director or Eligible Employee be determined, the ownership
     attribution provisions set forth in Section 424(d) of the Code shall be
     controlling.

          (f)  The granting of Rights pursuant to this Plan is in the exclusive
     discretion of the Committee, and until the Committee acts, no individual
     shall have any rights under this Plan.  The terms of this Plan shall be
     interpreted in accordance with this intent.

     Section 2.3.  Stock Available For Rights.
     -----------   --------------------------

          (a)  Shares of the Stock shall be subject to, or underlying, grants of
     Options, Restricted Stock, SARs, Units and Book Value Shares under this
     Plan.  The total number of shares of Stock for which, or with respect to
     which, Rights may be granted (including the number of shares of Stock in
     respect of which SARs, Units and Book Value Shares may be granted) under
     this Plan shall be those designated in the Plan Pool.  In the event that a
     Right granted under the Plan to any Eligible Director or Eligible Employee
     expires or is terminated unexercised as to any shares of Stock covered
     thereby, such shares thereafter shall be deemed available in the Plan Pool
     for the granting of Rights under this Plan; provided, however, if the
     expiration or termination date of a Right is beyond the term of the Plan as
     described in Section 8.3, then any shares of Stock
<PAGE>

     covered by unexercised or terminated Rights shall not reactivate the
     existence of this Plan and therefore shall not be available for additional
     grants of Rights under this Plan.

          (b)  In the event the outstanding shares of Common Stock are
     increased, decreased, changed into or exchanged for a different number or
     kind of securities as a result of a stock split, reverse stock split, stock
     dividend, recapitalization, merger, share exchange acquisition, combination
     or reclassification appropriate proportionate adjustments will be made in:
     (i) the aggregate number and/or kind of shares of Stock in the Plan Pool
     that may be issued pursuant to the exercise of, or that are underlying,
     Rights granted hereunder; (ii) the exercise or other purchase price and the
     number and/or kind of shares of Stock called for with respect to, or
     underlying, each outstanding Right granted hereunder; and (iii) other
     rights and matters determined on a per share basis under this Plan or any
     Rights Agreement.  Any such adjustments will be made only by the Committee,
     subject to ratification by the Board, and when so made will be effective,
     conclusive and binding for all purposes with respect to this Plan and all
     Rights then outstanding.  Except as provided in Section 6.2(g), no such
     adjustments will be required by reason of (i) the issuance or sale by the
     Company for cash of additional shares of its Common Stock or securities
     convertible into or exchangeable for shares of its Common Stock, or (ii)
     the issuance of shares of Common Stock in exchange for shares of the
     capital stock of any corporation, financial institution or other
     organization acquired by the Company or any subsidiary in connection
     therewith.

          (c)  The grant of a Right pursuant to this Plan shall not affect in
     any way the right or power of the Company to make adjustments,
     reclassification, reorganizations or changes of its capital or business
     structure or to merge or to consolidate or to dissolve, liquidate or sell,
     or transfer all or any part of its business or assets.

          (d)  No fractional shares of Stock shall be issued under this Plan for
     any adjustment under Section 2.3(b).

                                  ARTICLE III
                                    OPTIONS

     Section 3.1.  Grant of Options.
     -----------   ----------------

          (a)  The Company may grant Options to Eligible Directors and Eligible
     Employees as provided in this Article III.  Options will be deemed granted
     pursuant to this Article III only upon (i) authorization by the Committee,
     and (ii) the execution and delivery of an Option Agreement by the Eligible
     Director or Eligible Employee optionee (the "Optionee") and a duly
     authorized officer of the Company.  Options will not be deemed granted
     hereunder merely upon authorization of such grant by the Committee.  The
     aggregate number of shares of Stock potentially acquirable under all
     Options granted shall not exceed the total number of shares of Stock in the
     Plan Pool, less all shares of Stock potentially acquired under, or
     underlying, all other Rights outstanding under this Plan.

          (b)  The Committee shall designate Options at the time a grant is
     authorized as either ISOs or Non-Qualified Options.  The aggregate Fair
     Market Value (determined as of the time an ISO is granted) of the shares of
     Stock as to which an ISO may first become exercisable by an Optionee in a
     particular calendar year (pursuant to Article III and all other plans of
     the Company and/or its Subsidiaries) may not exceed $100,000 (the "$100,000
     Limitation").  If an Optionee is granted Options in excess of the $100,000
     Limitation, or if such Options otherwise become exercisable with respect to
     the number of shares of Stock which would exceed the $100,000 Limitation,
     such excess Options shall be Non-Qualified Options.
<PAGE>

     Section 3.2.  Exercise Price.   The exercise price of each Option granted
     -----------   --------------
under the Plan (the "Exercise Price") shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock on the date of grant of the
Option.  In the case of ISOs granted to a shareholder who owns capital stock of
the Company possessing more than ten percent (10%) of the total combined voting
power of all classes of the capital stock of the Company (a "10% Shareholder"),
the Exercise Price of each Option granted under the Plan to such 10% Shareholder
shall not be less than one hundred and ten percent (110%) of the Fair Market
Value of the Common Stock on the date of grant of the Option.

     Section 3.3.  Terms and Conditions of Options.
     -----------   -------------------------------

          (a)  All Options must be granted within ten (10) years of the
     Effective Date.

          (b)  The Committee may grant ISOs and Non-Qualified Options, either
     separately or jointly, to an Eligible Employee.

          (c)  The grant of Options shall be evidenced by an Option Agreement in
     form and substance satisfactory to the Committee in its discretion,
     consistent with the provisions of this Article III.

          (d)  At the discretion of the Committee, an Optionee, as a condition
     to the granting of the Option, must execute and deliver to the Company a
     confidential information agreement approved by the Committee.

          (e)  Nothing contained in Article III, any Option Agreement or in any
     other agreement executed in connection with the granting of an Option under
     this Article III will confer upon any Optionee any right with respect to
     the continuation of his or her status as an employee or director of the
     Company or any of its Subsidiaries.

          (f)  Except as otherwise provided herein, each Option Agreement may
     specify the period or periods of time within which each Option or portion
     thereof will first become exercisable (the "Vesting Period") with respect
     to the total number of shares of Stock acquirable thereunder. Such Vesting
     Periods will be fixed by the Committee in its discretion, and may be
     accelerated or shortened by the Committee in its discretion; provided that
     the Committee may, at the time of grant of an Option, designate that,
     notwithstanding any otherwise applicable Vesting Period, such Option shall
     vest immediately prior and subject to the consummation of a Change In
     Control Transaction(which may cause an Option granted as an ISO to be
     deemed a Non-Qualified Option).

          (g)  Not less than one hundred (100) shares of Stock may be purchased
     at any one time through the exercise of an Option unless the number
     purchased is the total number at that time purchasable under all Options
     granted to the Optionee.

          (h)  An Optionee shall have no rights as a shareholder of the Company
     with respect to any shares of Stock underlying such Option until payment in
     full of the Exercise Price by such Optionee for the stock being purchased.
     No adjustment shall be made for dividends (ordinary or extraordinary,
     whether in cash, securities or other property) or distributions or other
     rights for which the record date is prior to the date such Stock is fully
     paid for, except as provided in Section 2.3(b).

          (i)  All shares of Stock obtained pursuant to an Option which
     qualifies as an ISO shall be held in escrow for a period which ends on the
     later of (i) two (2) years from the date of the granting of the ISO or
<PAGE>

     (ii) one (1) year after the issuance of such shares pursuant to the
     exercise of the ISO. Such shares of Stock shall be held by the Company or
     its designee. The Optionee who has exercised the ISO shall have all rights
     of a shareholder, including, but not limited, to the rights to vote,
     receive dividends and sell such shares. The sole purpose of the escrow is
     to inform the Company of a disqualifying disposition of the shares of Stock
     acquired within the meaning of Section 422 of the Code, and it shall be
     administered solely for this purpose.

     Section 3.4.  Exercise of Options.
     -----------   -------------------

          (a)  An Optionee must at all times be an Eligible Employee from the
     date of grant until the exercise of the Options granted, except as provided
     in Section 3.5(b).

          (b)  An Option may be exercised to the extent exercisable (i) by
     giving written notice of exercise to the Company, specifying the number of
     shares of Stock to be purchased and, if applicable, accompanied by full
     payment of the Exercise Price thereof and the amount of withholding taxes
     pursuant to Section 3.4(c) below; and (ii) by giving assurances
     satisfactory to the Company that the shares of Stock to be purchased upon
     such exercise are being purchased for investment and not with a view to
     resale in connection with any distribution of such shares in violation of
     the 1933 Act; provided, however, that in the event of the prior occurrence
     of the Registration or in the event resale of such Stock without such
     Registration would otherwise be permissible, the second condition will be
     inoperative if, in the opinion of counsel for the Company, such condition
     is not required under the 1933 Act or any other applicable law, regulation
     or rule of any governmental agency.

          (c)  As a condition to the issuance of the Stock upon full or partial
     exercise of a Non-Qualified Option, the Optionee will pay to the Company in
     cash, or in such other form as the Committee may determine in its
     discretion, the amount of the Company's Tax Withholding Liability required
     in connection with such exercise.

          (d)  The Exercise Price of an Option shall be payable to the Company
     either (i) in United States dollars, in cash or by check, bank draft or
     money order payable to the order of the Company, or (ii) at the discretion
     of the Committee, through the delivery of outstanding shares of the Common
     Stock owned by the Optionee with a Fair Market Value at the date of
     delivery equal to the Exercise Price, or (iii) at the discretion of the
     Committee by a combination of (i) and (ii) above.  No shares of Stock shall
     be delivered until full payment has been made.  Except as provided in
     Section 2.3(b), the Committee may not approve a reduction of such Exercise
     Price in any such Option, or the cancellation of any such Options and the
     regranting thereof to the same Optionee at a lower Exercise Price, at a
     time when the Fair Market Value of the Common Stock is lower than it was
     when such Option was granted.

     Section 3.5.  Term and Termination of Option.
     -----------   ------------------------------

          (a)  The Committee shall determine, and each Option Agreement shall
     state, the expiration date or dates of each Option, but such expiration
     date shall be not later than ten (10) years after the date such Option is
     granted (the "Option Period").  In the event an ISO is granted to a 10%
     Shareholder, the expiration date or dates of each Option Period shall be
     not later than five (5) years after the date such Option is granted.  The
     Committee, in its discretion, may extend the expiration date or dates of an
     Option Period after such date was originally set; provided, however, such
     expiration date may not exceed the maximum expiration date described in
     this Section 3.5(a).
<PAGE>

          (b) To the extent not previously exercised, each Option will terminate
     upon the expiration of the Option Period specified in the Option Agreement;
     provided, however, that each such Option will terminate upon the earlier
     of: (i) twelve (12) months after the date that the Optionee ceases to be an
     Eligible Employee by reason of Death or Disability; or (ii) immediately as
     of the date that the Optionee ceases to be an Eligible Director or Eligible
     Employee for any reason other than Death or Disability.  Any portions of
     Options not exercised within the foregoing periods shall terminate.

     Section 3.6. Change in Control Transaction. All or any part of the Options
     -----------   ----------------------------
theretofore granted under this Article III shall become immediately exercisable
in full and may thereafter be exercised on the date of consummation of the
Change in Control Transaction (except as otherwise provided in Article II
hereof, and except to the extent that such acceleration of exercisability would
result in an "excess parachute payment" within the meaning of Section 280G of
the Code). Any Option that has not been fully exercised on or before the date of
consummation of the Change in Control Transaction shall terminate on such date,
unless a provision has been made in writing in connection with such transaction
for the assumption of all Options theretofore granted, or the substitution for
such Options of options to acquire the voting stock of a successor employer
corporation, or a parent or a subsidiary thereof, with appropriate adjustments
in the number and kind of shares and prices, in which event the Options
theretofore granted shall continue in the manner and under the terms so
provided.

     Section 3.7.  Restrictions On Transfer.  An Option granted under Article
     -----------   ------------------------
III may not be Transferred except by will or the laws of descent and
distribution and, during the lifetime of the Optionee to whom it was granted,
may be exercised only by such Optionee.

     Section 3.8.  Stock Certificates.  Certificates representing the Stock
     -----------   ------------------
issued pursuant to the exercise of Options will bear all legends required by law
and necessary to effectuate the provisions hereof.  The Company may place a
"stop transfer" order against such shares of Stock until all restrictions and
conditions set forth in this Article III, the applicable Option Agreement, and
in the legends referred to in this Section 3.8 have been complied with.

     Section 3.9.  Amendment and Discontinuance. The Board may at any time
     -----------   ----------------------------
alter, suspend, terminate or discontinue the Plan, subject to any applicable
regulatory requirements and any required shareholder approval or any shareholder
approval which the Board may deem advisable for any reason, such as for the
purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying applicable stock exchange or
quotation system listing requirements.  The Board may not, without the consent
of the holder of an Option previously granted, make any alteration which would
deprive the optionee of his rights with respect thereto.

     Section 3.10.  Compliance with Rule 16b-3.  With respect to persons subject
     ------------   --------------------------
to Section 16 of the 1934 Act, transactions under this Article III are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of this Article III or action by the
Board or the Committee fails so to comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.

                                  ARTICLE IV
                            RESTRICTED STOCK GRANTS

     Section 4.1.  Grants of Restricted Stock.
     -----------   --------------------------

          (a)  The Company may grant Restricted Stock to Eligible Directors and
     Eligible Employees as provided in this Article IV.  Shares of Restricted
     Stock will be deemed granted only upon (i) authorization by the Committee
     and (ii) the execution and delivery of a Restricted Stock Agreement by the
     Eligible
<PAGE>

     Director or Eligible Employee to whom such Restricted Stock is to be issued
     (the "Holder") and a duly authorized officer of the Company. Restricted
     Stock will not be deemed to have been granted merely upon authorization by
     the Committee. The aggregate number of shares of Restricted Stock
     potentially acquirable under all Rights to acquire Restricted Stock shall
     not exceed the total number of shares of Stock in the Plan Pool, less all
     shares of Stock potentially acquirable under, or underlying, all other
     Rights outstanding under this Plan.

          (b)  Each grant of Restricted Stock pursuant to this Article IV will
     be evidenced by a Restricted Stock Agreement between the Company and the
     Holder in form and substance satisfactory to the Committee in its sole
     discretion, consistent with this Article IV.  Each Restricted Stock
     Agreement will specify the purchase price per share (the "Purchase Price"),
     if any, with respect to the Restricted Stock to be issued to the Holder
     thereunder.  The purchase price will be fixed by the Committee in its
     discretion.  The Purchase Price will be payable to the Company in United
     States dollars in cash or by check or, such other legal consideration as
     may be approved by the Committee, in its discretion.

          (c)  Without limiting the foregoing, each Restricted Stock Agreement
     shall include the following terms and conditions:

          (i)  Nothing contained in this Article IV, any Restricted Stock
          Agreement or in any other agreement executed in connection with the
          issuance of Restricted Stock under this Article IV will confer upon
          any Holder any right with respect to the continuation of his or her
          status as an employee or director of the Company or any of its
          Subsidiaries.

          (ii) Except as otherwise provided herein, each Restricted Stock
          Agreement may specify the period or periods of time within which each
          Restricted Stock or portion thereof will first become exercisable (the
          "Vesting Period") with respect to the total number of shares of
          Restricted Stock acquirable thereunder.  Such Vesting Periods will be
          fixed by the Committee in its discretion, and may be accelerated or
          shortened by the Committee in its discretion; provided that the
          Committee may, at the time of grant of a Restricted Stock, designate
          that, notwithstanding any otherwise applicable Vesting Period, such
          Restricted Stock shall vest immediately prior and subject to the
          consummation of a Change In Control Transaction.

     Section 4.2.  Restrictions on Transfer of Restricted Stock.
     -----------   --------------------------------------------

          (a)  Rights to acquire Restricted Stock may not be Transferred, and
     shares of Restricted Stock acquired by a Holder may be Transferred only in
     accordance with the specific limitations on the Transfer of Restricted
     Stock imposed by applicable state or federal securities laws and set forth
     below, and subject to certain undertakings of the transferee set forth in
     Section 4.2(c).  All Transfers of Restricted Stock not meeting the
     conditions set forth in this Section 4.2(a) are expressly prohibited.

          (b)  Any Transfer of Rights to acquire Restricted Stock and any
     prohibited Transfer of Restricted Stock is void and of no effect.  Should
     such a Transfer purport to occur, the Company may refuse to carry out the
     Transfer on its books, attempt to set aside the Transfer, enforce any
     undertaking or right under this Section 4.2(b), or exercise any other legal
     or equitable remedy.

          (c)  Any Transfer of Restricted Stock that would otherwise be
     permitted under the terms of this Plan is prohibited unless the transferee
     executes such documents as the Company may reasonably require to ensure the
     Company's rights under a Restricted Stock Agreement and this Article IV are
     adequately protected
<PAGE>

     with respect to the Restricted Stock so Transferred. Such documents may
     include, without limitation, an agreement by the transferee to be bound by
     all of the terms of this Plan applicable to Restricted Stock, and of the
     applicable Restricted Stock Agreement, as if the transferee were the
     original Holder of such Restricted Stock.

          (d)  To facilitate the enforcement of the restrictions on Transfer set
     forth in this Article IV, the Committee may, at its discretion, require the
     Holder of shares of Restricted Stock to deliver the certificate(s) for such
     shares with a stock power executed in blank by Holder and Holder's spouse,
     to the Secretary of the Company or his or her designee, to hold said
     certificate(s) and stock power(s) in escrow and to take all such actions
     and to effectuate all such Transfers and/or releases as are in accordance
     with the terms of this Plan. The certificates may be held in escrow so long
     as the shares of Restricted Stock whose ownership they evidence are subject
     to any restriction on Transfer under this Article IV or under a Restricted
     Stock Agreement.  Each Holder acknowledges that the Secretary of the
     Company (or his or her designee) is so appointed as the escrow holder with
     the foregoing authorities as a material inducement to the issuance of
     shares of Restricted Stock under this Article IV, that the appointment is
     coupled with an interest, and that it accordingly will be irrevocable.  The
     escrow holder will not be liable to any party to a Restricted Stock
     Agreement (or to any other party) for any actions or omissions unless the
     escrow holder is grossly negligent relative thereto.  The escrow holder may
     rely upon any letter, notice or other document executed by any signature
     purported to be genuine.

     Section 4.3.  Termination.
     -----------   -----------

          (a)  The Committee shall determine, and each Restricted Stock
     Agreement shall state, the expiration date or dates of each grant of
     Restricted Stock, but such expiration date shall not be later than ten (10)
     years after the date such grant of Restricted Stock is granted (the
     "Restricted Stock Period").  The Committee, in its discretion, may extend
     the expiration date or dates of a Restricted Stock Period after such date
     was originally set; provided, however, such expiration date may not exceed
     the maximum expiration date described in this Section 4.3(a).

          (b)  To the extent not previously exercised, each grant of Restricted
     Stock will terminate upon the expiration of the Restricted Stock Period
     specified in the Restricted Stock Agreement; provided, however, that each
     such grant of Restricted Stock will terminate upon the earlier of: (i)
     twelve (12) months after the date that the Holder ceases to be an Eligible
     Director or Eligible Employee by reason of Death or Disability; or (ii)
     immediately as of the date that the Holder ceases to be an Eligible
     Employee for any reason other than death or disability.  Any portions of
     the grant of Restricted Stock to a Holder not exercised within the
     foregoing periods shall terminate.

     Section 4.4.  Change in Control Transaction.  All or any part of the grants
     -----------   -----------------------------
of Restricted Stock theretofore made under the Plan shall become immediately
exercisable in full and may thereafter be exercised on the date of consummation
of the Change in Control Transaction (except as otherwise provided in Article II
hereof, and except to the extent that such acceleration of exercisability would
result in an "excess parachute payment" within the meaning of Section 280G of
the Code).  Any grant of Restricted Stock that has not been fully exercised on
or before the date of consummation of the Change in Control Transaction shall
terminate on such date, unless a provision has been made in writing in
connection with such transaction for the assumption of all grants of restricted
stock theretofore made, or the substitution for such grants of Restricted Stock
of grants of restricted stock to acquire the voting stock of a successor
employer corporation, or a parent or a subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices, in which event the
grants of Restricted Stock theretofore made shall continue in the manner and
under the terms so provided.
<PAGE>

       Section 4.5. Compliance with Law.  Notwithstanding any other provision of
       -----------  -------------------
this Article IV, Restricted Stock may be issued pursuant to this Article IV only
after there has been compliance with all applicable federal and state securities
laws, and such issuance will be subject to this overriding condition. The
Company may include shares of Restricted Stock in a Registration, but will not
be required to register or qualify Restricted Stock with the SEC or any state
agency, except that the Company will register with, or as required by local law,
file for and secure an exemption from such registration requirements from, the
applicable securities administrator and other officials of each jurisdiction in
which an Eligible Director or Eligible Employee would be issued Restricted Stock
hereunder prior to such issuance.

       Section 4.6. Stock Certificates. Certificates representing the Restricted
       -----------  ------------------
Stock issued pursuant to this Article IV will bear all legends required by law
and necessary to effectuate the provisions hereof. The Company may place a "stop
transfer" order against shares of Restricted Stock until all restrictions and
conditions set forth in this Article IV, the applicable Restricted Stock
Agreement and in the legends referred to in this Section 4.6, have been complied
with.

       Section 4.7. Market Standoff.  To the extent requested by the Company and
       -----------  ---------------
any underwriter of securities of the Company in connection with a firm
commitment underwriting, no Holder of any shares of Restricted Stock will sell
or otherwise Transfer any such shares not included in such underwriting, or not
previously registered in a Registration, during the one hundred twenty (120) day
period following the effective date of the registration statement filed with the
SEC in connection with such offering.

       Section 4.8. Amendment and Discontinuance. The Board may at any time
       -----------  ----------------------------
alter, suspend, terminate or discontinue the Plan, subject to any applicable
regulatory requirements and any required shareholder approval or any shareholder
approval which the Board may deem advisable for any reason, such as for the
purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying applicable stock exchange or
quotation system listing requirements. The Board may not, without the consent of
the Holder of a Restricted Share previously granted, make any alteration which
would deprive the Holder of his rights with respect thereto.

       Section 4.9. Compliance with Rule 16b-3.  With respect to persons subject
       -----------  --------------------------
to Section 16 of the 1934 Act, transactions under this Article IV are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of this Article IV or action by the
Board or the Committee fails so to comply, it shall be deemed null and void, to
the extent permitted by law and deemed advisable by the Committee.

                                   ARTICLE V
                    LONG-TERM INCENTIVE COMPENSATION UNITS

       Section 5.1. Awards of Units.
       -----------  ---------------

          (a)  The Committee may grant awards of Units to Eligible Directors and
     Eligible Employees as provided in this Article V.  Units will be deemed
     granted only upon (i) authorization by the Committee and (ii) the execution
     and delivery of a Unit Agreement by the Eligible Director or Eligible
     Employee to whom Units are to be granted (a "Unit Recipient") and an
     authorized officer of the Company. Units will not be deemed granted merely
     upon authorization by the Committee. Units may be granted in such amounts
     and to such Unit Recipients as the Committee may determine in its sole
     discretion subject to the limitation in Section 5.2 below.
<PAGE>

          (b)  Each grant of Units pursuant to this Article V will be evidenced
     by a Unit Award Agreement between the Company and the Unit Recipient in
     form and substance satisfactory to the Committee in its sole discretion,
     consistent with this Article V.

          (c)  Except as otherwise provided herein, Units will be distributed
     only after the end of a performance period of two or more years
     ("Performance "Period") beginning with the year in which such Units were
     awarded. The Performance Period shall be set by the Committee for each
     year's awards.

          (d)  The percentage of the Units awarded under this Section 5.1 or
     credited pursuant to Section 5.5 that will be distributed to Unit
     Recipients shall depend on the levels of financial performance and other
     performance objectives achieved during each year of the Performance Period;
     provided, however, that the Committee may adopt one or more performance
     categories or eliminate all performance categories other than financial
     performance. Financial performance shall be based on the consolidated
     results of the Company and its Subsidiaries prepared on the same basis as
     the financial statements published for financial reporting purposes and
     determined in accordance with Section 5.1(e) below. Other performance
     categories adopted by the Committee shall be based on measurements of
     performance as the Committee shall deem appropriate.

          (e)  Distributions of Units awarded will be based on the Company's
     financial performance with results from other performance categories
     applied as a factor, not exceeding one, against financial results. The
     annual financial and other performance results will be averaged over the
     Performance Period and translated into percentage factors according to
     graduated criteria established by the Committee for the entire Performance
     Period. The resulting percentage factors shall determine the percentage of
     Units to be distributed.

          No distributions of Units, based on financial performance and other
     performance, shall be made if a minimum average percentage of the
     applicable measurement of performance, to be established by the Committee,
     is not achieved for the Performance Period.  The performance levels
     achieved for each Performance Period and percentage of Units to be
     distributed shall be conclusively determined by the Committee.

          (f)  The percentage of Units awarded and which Unit Recipients become
     entitled to receive based on the levels of performance (including those
     Units credited under Section 5.5) will be determined as soon as practicable
     after each Performance Period and are called "Retained Units."

          (g)  As soon as practical after determination of the number of
     Retained Units, such Retained Units shall be distributed in the form of a
     combination of shares and cash. The Committee, in its sole discretion, will
     determine how much of the Retained Unit will be distributed in cash and how
     much will be distributed in shares of stock. The Units awarded, but which
     Unit Recipients do not become entitled to receive, shall be cancelled.

          (h)  Notwithstanding any other provision in this Article V, the
     Committee, if it determines in its sole discretion that it is necessary or
     advisable under the circumstances, may adopt rules pursuant to which
     Eligible Employees by virtue of hire, or promotion or upgrade to a higher
     employee grade classification, or special individual circumstances, may be
     granted the total award of Units or any portion thereof, with respect to
     one or more Performance Periods that began in prior years and at the time
     of the awards have not yet been completed.
<PAGE>

     Section 5.2. Limitations.  The aggregate number of shares of Stock
     -----------  -----------
potentially distributable under all Units granted, including those Units
credited pursuant to Section 5.5, shall not exceed the total number of shares of
Stock in the Plan Pool, less all shares of Stock potentially acquirable under,
or underlying, all other Rights outstanding under this Plan.

     Section 5.3. Terms and Conditions.
     -----------  --------------------

          (a)  All awards of Units must be made within ten (10) years of the
     Effective Date.

          (b)  The award of Units shall be evidenced by a Unit Award Agreement
     in form and substance satisfactory to the Committee in its discretion,
     consistent with the provisions of this Article V.

          (c)  Nothing contained in this Article V, any Unit Award Agreement or
     in any other agreement executed in connection with the award of Units under
     this Article V will confer upon any Unit Recipient any right with respect
     to the continuation of his or her status as an employee or director of the
     Company or any of its Subsidiaries.

          (d)  A Unit Recipient shall have no rights as a shareholder of the
     Company with respect to any Units until the distribution of shares of Stock
     in connection therewith. No adjustment shall be made in the number of Units
     for dividends (ordinary or extraordinary, whether in cash, securities or
     other property) or distributions or other rights for which the record date
     is prior to the date such Stock is fully paid for, except as provided in
     Sections 2.3(b) and 5.6(a).

     Section 5.4. Special Distribution Rules.
     -----------  --------------------------

          (a)  Except as otherwise provided in this Section 5.4, a Unit
     Recipient must be an Eligible Director or Eligible Employee from the date a
     Unit is awarded to him or her continuously through and including the date
     of distribution of such Unit.

          (b)  In case of the Death or Disability of a Unit Recipient prior to
     the end of any Performance Period, whether before or after any event set
     forth in Section 5.4(b) below, the number of Units awarded to the Unit
     Recipient for such Performance Period shall be reduced pro rata based on
     the number of months remaining in the Performance Period after the month of
     Death or Disability. The remaining Units, reduced in the discretion of the
     Committee to the percentage indicated by the levels of performance achieved
     prior to the date of Death or Disability, if any, shall be distributed
     within a reasonable time after Death or Disability. All other Units awarded
     to the Unit Recipient for such Performance Period shall be cancelled.

          (c)  In case of the termination of the Unit Recipient's status as an
     Eligible Director or Eligible Employee prior to the end of any Performance
     Period for any reason other than Death or Disability, all Units awarded to
     the Unit Recipient with respect to any such Performance Period shall be
     immediately forfeited and cancelled.

          (d)  Upon a Unit Recipient's promotion to a higher employee grade
     classification, the Committee may award to the Unit Recipient the total
     Units, or any portion thereof, which are associated with the higher
     employee grade classification for the current Performance Period.

          Notwithstanding any other provision of the Plan, the Committee may
     reduce or eliminate awards to a Unit Recipient who has been demoted to a
     lower employee grade classification, and where circumstances
<PAGE>

     warrant, may permit continued participation, proration or early
     distribution, or a combination thereof, of awards which would otherwise be
     cancelled.

     Section 5.5. Dividend Equivalent Units.  On each record date for dividends
     -----------  -------------------------
on the Common Stock, an amount equal to the dividend payable on one share of
Common Stock will be determined and credited (the "Dividend Equivalent Credit")
on the payment date to each Unit Recipient's account for each Unit which has
been awarded to the Unit Recipient and not distributed or cancelled. Such amount
will be converted within the account to an additional number of Units equal to
the number of shares of Common Stock that could be purchased at Fair Market
Value on such dividend payment date. These Units will be treated for purposes of
this Article V in the same manner as those Units granted pursuant to Section
5.1.

     Section 5.6. Adjustments.
     -----------  -----------

          (a)  In addition to the provisions of Section 2.3(b), if an
     extraordinary change occurs during a Performance Period which significantly
     alters the basis upon which the performance levels were established under
     Section 5.1 for that Performance Period, to avoid distortion in the
     operation of this Article V, but subject to Section 5.2, the Committee may
     make adjustments in such performance levels to preserve the incentive
     features of this Article V, whether before or after the end of the
     Performance Period, to the extent it deems appropriate in its sole
     discretion, which adjustments shall be conclusive and binding upon all
     parties concerned. Such changes may include, without limitation, adoption
     of, or changes in, accounting practices, tax laws and regulatory or other
     laws or regulations; economic changes not in the ordinary course of
     business cycles; or compliance with judicial decrees or other legal
     authorities.

          (b)  All or any part of the Units theretofore awarded under this
     Article V shall become immediately distributable (reduced pro rata based on
     the number of months remaining in the Performance Period after the
     consummation of the Change in Control Transaction) and may thereafter be
     distributed on the date of consummation of the Change in Control
     Transaction (except as otherwise provided in Article II hereof, and except
     to the extent that such acceleration of distribution would result in an
     "excess parachute payment" within the meaning of Section 280G of the Code).
     Any Units that have not been distributed on or before the date of
     consummation of the Change in Control Transaction shall terminate on such
     date, unless a provision has been made in writing in connection with such
     transaction for the assumption of all awards of Units theretofore made, or
     the substitution for such Units of awards of compensation units having
     comparable characteristics under a long term incentive award plan of a
     successor employer corporation, or a parent or a subsidiary thereof, with
     appropriate adjustments, in which event the awards of Units theretofore
     made shall continue in the manner and under the terms so provided.

     Section 5.7. Other Conditions.
     -----------  ----------------

          (a)  No person shall have any claim to be granted an award of Units
     under this Article V and there is no obligation for uniformity of treatment
     of Eligible Employees or Unit Recipients under this Article IV. Units under
     this Article V may not be Transferred.

          (b)  The Company shall have the right to deduct from any distribution
     or payment in cash under this Article V, and the Unit Recipient or other
     person receiving shares of Stock under this Article V shall be required to
     pay to the Company, any Tax Withholding Liability. The number of shares of
     Stock to be distributed to any individual Unit Recipient may be reduced by
     the number of shares of Stock, the Fair Market Value on the Distribution
     Date (as defined in Section 5.7(d) below) of which is equivalent to the
     cash necessary to pay any Tax Withholding Liability, where the cash to be
     distributed is not sufficient to pay such
<PAGE>

     Tax Withholding Liability or the Unit Recipient may deliver to the Company
     cash sufficient to pay such Tax Withholding Liability.

          (c)  Any distribution of shares of Stock under this Article V may be
     delayed until the requirements of any applicable laws or regulations, and
     any stock exchange or Nasdaq National Market requirements, are satisfied.
     The shares of Stock distributed under this Article V shall be subject to
     such restrictions and conditions on disposition as counsel for the Company
     shall determine to be desirable or necessary under applicable law.

          (d)  For the purpose of distribution of Units in cash, the value of a
     Unit shall be the Fair Market Value on the Distribution Date. The
     "Distribution Date" shall be the first business day of April in the year of
     distribution, except that in the case of special distributions the
     Distribution Date shall be the first business day of the month in which the
     Committee determines the distribution.

          (e)  Notwithstanding any other provision of this Article V, no
     Dividend Equivalent Credits shall be made and no distributions of Units
     shall be made if at the time a Dividend Equivalent Credit or distribution
     would otherwise have been made:

               (i)   The regular quarterly dividend on the Common Stock has been
          omitted and not subsequently paid or there exists any default in
          payment of dividends on any such outstanding shares of capital stock
          of the Company;

               (ii)  The rate of dividends on the Common Stock is lower than at
          the time the Units to which the Dividend Equivalent Credit relates
          were awarded, adjusted for any change of the type referred to in
          Section 2.3(b).

               (iii) Estimated consolidated net income of the Company for the
          twelve-month period preceding the month the Dividend Equivalent Credit
          or distribution would otherwise have been made is less than the sum of
          the amount of the Dividend Equivalent Credits and Units eligible for
          distribution under this Article V in that month plus all dividends
          applicable to such period on an accrual basis, either paid, declared
          or accrued at the most recently paid rate, on all outstanding shares
          of Common Stock; or

               (iv)  The Dividend Equivalent Credit or distribution would result
          in a default in any agreement by which the Company is bound.

          (f)  In the event net income available under Section 5.7(e) above for
     Dividend Equivalent Credits and awards eligible for distribution under this
     Article V is sufficient to cover part but not all of such amounts, the
     following order shall be applied in making payments: (i) Dividend
     Equivalent Credits, (ii) Units eligible for distribution under this Article
     V.

     Section 5.8. Designation of Beneficiaries. A Unit Recipient may designate a
     -----------  ----------------------------
beneficiary or beneficiaries to receive all or part of the Stock and/or cash to
be distributed to the Unit Recipient under this Article V in case of Death. A
designation of beneficiary may be replaced by a new designation or may be
revoked by the Unit Recipient at any time. A designation or revocation shall be
on a form to be provided for that purpose and shall be signed by the Unit
Recipient and delivered to the Company prior to the Unit Recipient's Death. In
case of the Unit Recipient's Death, the amounts to be distributed to the Unit
Recipient under this Article V with respect to which a designation of
beneficiary has been made (to the extent it is valid and enforceable under
applicable law) shall be
<PAGE>

distributed in accordance with this Article V to the designated beneficiary or
beneficiaries. The amount distributable to a Unit Recipient upon Death and not
subject to such a designation shall be distributed to the Unit Recipient's
estate. If there shall be any question as to the legal right of any beneficiary
to receive a distribution under this Article V, the amount in question may be
paid to the estate of the Unit Recipient, in which event the Company shall have
no further liability to anyone with respect to such amount.

     Section 5.9.  Restrictions On Transfer.  Units granted under Article V may
     -----------   ------------------------
not be Transferred except as provided in Section 5.8, during the lifetime of the
Unit Recipient to whom it was awarded, cash and stock receivable with respect to
Units may be received only by such Unit Recipient.

     Section 5.10. Amendment and Discontinuance. The Board may at any time
     ------------  ----------------------------
alter, suspend, terminate or discontinue the Plan, subject to any applicable
regulatory requirements and any required shareholder approval or any shareholder
approval which the Board may deem advisable for any reason, such as for the
purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying applicable stock exchange or
quotation system listing requirements. The Board may not, without the consent of
the Unit Recipient, make any alteration which would deprive the Unit Recipient
of his rights with respect thereto.

     Section 5.11. Compliance with Rule 16b-3.  With respect to persons subject
     ------------  --------------------------
to Section 16 of the 1934 Act, transactions under this Article V are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of this Article V or action by the Board
or the Committee fails so to comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.

                                  ARTICLE VI
                           STOCK APPRECIATION RIGHTS

     Section 6.1.  Grants of SARs.
     -----------   --------------

          (a)  The Company may grant SARs to Eligible Directors and Eligible
     Employees under this Article VI. SARs will be deemed granted only upon (i)
     authorization by the Committee and (ii) the execution and delivery of a SAR
     Agreement by the Eligible Director or Eligible Employee to whom the SARs
     are to be granted (the "SAR Recipient") and a duly authorized officer of
     the Company. SARs will not be deemed granted merely upon authorization by
     the Committee. The aggregate number of shares of Stock which shall underlie
     SARs granted hereunder shall not exceed the total number of shares of Stock
     in the Plan Pool, less all shares of Stock potentially acquirable under, or
     underlying, all other Rights outstanding under this Plan.

          (b)  Each grant of SARs pursuant to this Article VI shall be evidenced
     by a SAR Agreement between the Company and the SAR Recipient, in form and
     substance satisfactory to the Committee in its sole discretion, consistent
     with this Article VI.

     Section 6.2.  Terms and Conditions of SARs.
     -----------   ----------------------------

          (a)  All SARs must be granted within ten (10) years of the Effective
     Date.

          (b)  Each SAR issued pursuant to this Article VI shall have an initial
     base value (the "Base Value") equal to the Fair Market Value of a share of
     Common Stock on the date of issuance of the SAR (the "SAR Issuance Date").
<PAGE>

          (c)  In its discretion and subject to the provisions of Section 6.2(b)
     (as to the establishment of the Base Value of a SAR), the Committee may
     establish that the Base Value of a SAR shall be adjusted, upward or
     downward, on a quarterly basis, based upon the market value performance of
     the Common Stock in comparison with the aggregate market value performance
     of a selected index or at a stated annual percentage rate.

          (d)  Nothing contained in this Article VI, any SAR Agreement or in any
     other agreement executed in connection with the granting of a SAR under
     this Article VI will confer upon any SAR Recipient any right with respect
     to the continuation of his or her status as an employee or director of the
     Company or any of its Subsidiaries.

          (e)  Except as otherwise provided herein, each SAR Agreement may
     specify the period or periods of time within which each SAR or portion
     thereof will first become exercisable (the "SAR Vesting Period") with
     respect to the total Cash Payment (as defined in Section 6.4(b)) receivable
     thereunder. Such SAR Vesting Periods will be fixed by the Committee in its
     discretion, and may be accelerated or shortened by the Committee in its
     discretion.

          (f)  SARs relating to no less than one hundred (100) shares of Stock
     may be exercised at any one time unless the number exercised is the total
     number at that time exercisable under all SARs granted to the SAR
     Recipient.

          (g)  A SAR Recipient shall have no rights as a shareholder of the
     Company with respect to any shares of Stock covered by such SAR. However,
     adjustment shall be made to each SAR granted for dividends (ordinary or
     extraordinary, whether in cash, securities or other property), and upon the
     sale by the Company for cash of additional shares of its Common Stock.

     Section 6.3. Restrictions on Transfer of SARs.  Each SAR granted under this
     -----------  --------------------------------
Article VI may not be Transferred except by will or the laws of descent and
distribution and, during the lifetime of the SAR Recipient to whom it was
granted, may be exercised only by such SAR Recipient.

     Section 6.4. Exercise of SARs.
     -----------  ----------------

          (a)  A SAR Recipient, or his or her executors or administrators, or
     heirs or legatees, shall exercise a SAR of the SAR Recipient by giving
     written notice of such exercise to the Company. SARs may be exercised only
     upon the completion of the SAR Vesting Period applicable to such SAR.

          (b)  Within ten (10) days of the SAR Exercise Date applicable to a SAR
     exercised in accordance with Section 6.4(a), the SAR Recipient shall be
     paid in cash the difference between the Base Value of such SAR (as
     adjusted, if applicable, under Section 6.2(f) as of the most recently
     preceding quarterly period) and the Fair Market Value of the Common Stock
     as of the SAR Exercise Date, reduced by the Tax Withholding Liability
     arising from such exercise.

     Section 6.5. Termination of SARs.
     -----------  -------------------

          (a)  The Committee shall determine in its sole discretion, and each
     SAR Agreement shall state, the expiration date or dates of each SAR, but
     such expiration date shall not be later than ten (10) years after the date
     such SAR is granted (the "SAR Period"). The Committee, in its discretion,
     may extend the expiration
<PAGE>

     date or dates of a SAR Period after such date was originally set; provided,
     however, such expiration date may not exceed the maximum expiration date
     described in this Section 6.5(a).

          (b)  To the extent not previously exercised, each SAR will terminate
     upon the expiration of the SAR Period specified in the SAR Agreement;
     provided, however, that each such SAR will terminate upon the earlier of:
     (i) twelve (12) months after the date that the SAR Recipient ceases to be
     an Eligible Director or Eligible Employee by reason of Death or Disability;
     or (ii) immediately as of the date that the SAR Recipient ceases to be an
     Eligible Director or Eligible Employee for any reason other than by Death
     or Disability. Any SARs not exercised within the foregoing periods shall
     terminate.

     Section 6.6.  Change in Control Transaction.  All or any part of the SARs
     -----------   -----------------------------
theretofore granted under this Article VI shall become immediately exercisable
in full and may thereafter be exercised on the date of consummation of the
Change in Control Transaction (except as otherwise provided in Article II
hereof, and except to the extent that such acceleration of exercisability would
result in an "excess parachute payment" within the meaning of Section 280G of
the Code). Any SAR that has not been fully exercised on or before the date of
consummation of the Change in Control Transaction shall terminate on such date,
unless a provision has been made in writing in connection with such transaction
for the assumption of all SARs theretofore granted, or the substitution for such
SARs of grants of stock appreciation rights having comparable characteristics
under a stock appreciation rights plan of a successor employer corporation, or a
parent or a subsidiary thereof, with appropriate adjustments, in which event the
SARs theretofore granted shall continue in the manner and under the terms so
provided.

     Section 6.7.  Designation of Beneficiaries.  A SAR Recipient may designate
     -----------   ----------------------------
a beneficiary or beneficiaries to receive all or part of the cash to be paid to
the SAR Recipient under this Article VI in case of Death. A designation of
beneficiary may be replaced by a new designation or may be revoked by the SAR
Recipient at any time. A designation or revocation shall be on a form to be
provided for that purpose and shall be signed by the SAR Recipient and delivered
to the Company prior to the SAR Recipient's Death. In case of the SAR
Recipient's Death, the amounts to be distributed to the SAR Recipient under this
Article VI with respect to which a designation of beneficiary has been made (to
the extent it is valid and enforceable under applicable law) shall be
distributed in accordance with this Article VI to the designated beneficiary or
beneficiaries. The amount distributable to a SAR Recipient upon Death and not
subject to such a designation shall be distributed to the SAR Recipient's
estate. If there shall be any question as to the legal right of any beneficiary
to receive a distribution under this Article VI, the amount in question may be
paid to the estate of the SAR Recipient, in which event the Company shall have
no further liability to anyone with respect to such amount.

     Section 6.8.  Amendment and Discontinuance. The Board may at any time
     -----------   ----------------------------
alter, suspend, terminate or discontinue the Plan, subject to any applicable
regulatory requirements and any required shareholder approval or any shareholder
approval which the Board may deem advisable for any reason, such as for the
purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying applicable stock exchange or
quotation system listing requirements. The Board may not, without the consent of
the SAR Recipient, make any alteration which would deprive the SAR Recipient of
his rights with respect thereto.

     Section 6.9.  Compliance With Rule 16b-3.  With respect to persons subject
     -----------   --------------------------
to Section 16 of the 1934 Act, transactions under this Article VI are intended
to comply with all applicable conditions of Rule 16b-3 or its successors under
the 1934 Act. To the extent any provision of this Article VI
or action by the Board or the Committee fails so to comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by the
Committee.

                                  ARTICLE VII
<PAGE>

                               BOOK VALUE SHARES

     Section 7.1. Grant of Book Value Shares.   The Company may grant Book Value
     ----------------------------------------
Shares to Eligible Directors and Eligible Employees (the "BVS Recipient") as
provided in this Article VII. Book Value Shares will be deemed granted pursuant
to this Article VII only upon vote by the Committee, effective on even date
thereon, and shall require the immediate execution and delivery of a Book Value
Share Agreement by the BVS Recipient and a duly authorized officer of the
Company. Book Value Shares will not be deemed granted hereunder merely upon
authorization of such grant by the Committee. The aggregate number of Book Value
Shares potentially granted shall not exceed the total number of shares in the
Plan Pool, less all other rights to shares outstanding under this Plan.

     Section 7.2  Initial Value.  The initial value of each Book Value Share
     ---------------------------
granted under this Plan (the "Initial Value") shall be the book value of the
Common Stock on the day of issuance.

     Section 7.3.  Terms and Conditions of Book Value Shares.
     -------------------------------------------------------

          (a)  All Book Value Shares must be granted within ten (10) years of
     the Effective Date.

          (b)  The Committee may make more than one grant of Book Value Shares
     to a BVS Recipient.

          (c)  Each grant of Book Value Shares shall be evidenced by a Book
     Value Share Agreement in form and substance satisfactory to the Committee
     in its discretion, consistent with the provisions of this Article VII.

          (d)  Nothing contained in Article VII, any Book Value Share Agreement
     or in any other agreement executed in connection with the granting of Book
     Value Shares under this Article VII will confer upon any BVS Recipient any
     right with respect to the continuation of his or her status as an employee
     or director of the Company or any of its Subsidiaries.

          (e)  Except as otherwise provided herein, each Book Value Share
     Agreement may specify the period or periods of time within which each Book
     Value Share or portion thereof will first become redeemable (the "Vesting
     Period") with respect to the total number of Book Value Shares acquirable
     thereunder. Such Vesting Periods will be fixed by the Committee in its
     discretion, and may be accelerated or shortened by the Committee in its
     discretion.

          (f)  A BVS Recipient shall have no rights as a shareholder of the
     Company with respect to any shares of Common Stock represented by the Book
     Value Shares. An adjustment shall be made for dividends (ordinary or
     extraordinary, whether in cash, securities or other property) or
     distributions or other rights for which the record date is prior to the
     date such Book Value Shares is redeemed, except as provided in Sections
     2.3(b).

     Section 7.4.  Redemption of Book Value Shares.
     ----------------------------------------------

          (a)  A BVS Recipient must be an Eligible Employee or Eligible Director
     at all times from the date of grant until the redemption of the Book Value
     Shares granted, except as provided in Section 7.5(b).

          (b)  A Book Value Share may be redeemed to the extent redeemable (i)
     by giving written notice of redemption to the Company, specifying the
     number of full Book Value Shares to be redeemed and, if
<PAGE>

     applicable, accompanied by full payment of the amount of the Tax
     Withholding Liability pursuant to Section 7.4(c) below.

          (c)  As a condition to the redemption, in full or in part, of the Book
     Value Shares, the BVS Recipient will pay to the Company in cash, or in such
     other form as the Committee may determine in its discretion, the amount of
     the Tax Withholding Liability required in connection with such exercise.

          (d)  Book Value Shares shall be redeemed for the then current book
     value of the Common Stock, adjusted for the effects of dividends, and the
     premium or discount resulting from the issuance of additional Common Stock
     as noted otherwise herein, less the Initial Value per share.

          (e)  The monies due shall be payable to the BVS Recipient either in
     United States dollars, in cash or by check, draft or money order payable to
     the order of the BVS Recipient.

     Section 7.5. Term and Termination of Book Value Shares.
     -------------------------------------------------------

          (a)  The Committee shall determine, and each Book Value Share
     Agreement shall state, the expiration date or dates of such Book Value
     Shares, but such expiration date shall be not later than ten (10) years
     after the date such Book Value Share was granted (the "Book Value Share
     Period").

          (b)  To the extent not previously redeemed, each Book Value Share held
     by a BVS Recipient will terminate upon the expiration of the Book Value
     Share Period specified in the Book Value Share Agreement; provided,
     however, that, subject to the provisions of Section 7.5(a), each such Book
     Value Share will terminate upon the earlier of: (i) immediately as of the
     date that the BVS Recipient ceases to be an Eligible Employee or Eligible
     Director for any reason, other than by reason of Death or Disability, or
     (ii) twelve (12) months after the date that the BVS Recipient ceases to be
     an Eligible Employee or Eligible Director by reason of Death or Disability.
     Any portions of Book Value Shares not redeemed within the foregoing periods
     shall terminate. The Committee may, in its discretion, specify in the
     agreement other events that will result in the termination of the Book
     Value Shares.

     Section 7.6  Change in Control Transaction.  All or any part of the Book
     ------------------------------------------
Value Shares theretofore granted under this Article VII shall become immediately
redeemable in full and may thereafter be redeemed on the date of consummation of
the Change in Control Transaction (except as otherwise provided in Article II
hereof, and except to the extent that such acceleration of redeemability would
result in an "excess parachute payment" within the meaning of Section 280G of
the Code). Any Book Value Shares that have not been fully redeemed on or before
the date of consummation of the Change in Control Transaction shall terminate on
such date, unless a provision has been made in writing in connection with such
transaction for the assumption of all Book Value Shares theretofore granted, or
the substitution for such Book Value Shares of book value shares of the
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices, in which
event the Book Value Shares theretofore granted shall continue in the manner and
under the terms so provided.

     Section 7.7  Restrictions on Transfer.  A Book Value Share granted under
     -------------------------------------
Article VII may not be Transferred and during the lifetime of the BVS Recipient
and may be exercised only by such BVS Recipient.

     Section 7.8  Evidence of Participation.  In lieu of certificates
     --------------------------------------
representing the Book Value Shares issued pursuant to this Agreement, the Book
Value Share Agreement shall serve as evidence of ownership.
<PAGE>

     Section 7.9.  Amendment and Discontinuance.  The Board may at any time
     -------------------------------------------
alter, suspend, terminate or discontinue the Plan, subject to any applicable
regulatory requirements and any required shareholder approval or any shareholder
approval which the Board may deem advisable for any reason, such as for the
purpose of obtaining or retaining any statutory or regulatory benefits under
tax, securities or other laws or satisfying applicable stock exchange or
quotation system listing requirements. The Board may not, without the consent of
the BVS Recipient, make any alteration which would deprive the BVS Recipient of
his rights with respect thereto.

                                 ARTICLE VIII
                                 MISCELLANEOUS

     Section 8.1.  Application of Funds.  The proceeds received by the Company
     -----------   --------------------
from the sale of Stock pursuant to the exercise of Rights will be used for
general corporate purposes.

     Section 8.2.  No Obligation to Exercise Right.  The granting of a Right
     -----------   -------------------------------
shall impose no obligation upon the recipient to exercise such Right.

     Section 8.3.  Term of Plan.  Except as otherwise specifically provided
     -----------   ------------
herein, Rights may be granted pursuant to this Plan from time to time within ten
(10) years from the Effective Date.

     Section 8.4.  Captions and Headings; Gender and Number.  Captions and
     -----------   ----------------------------------------
paragraph headings used herein are for convenience only, do not modify or affect
the meaning of any provision herein, are not a part, and shall not serve as a
basis for interpretation or construction of this Plan. As used herein, the
masculine gender shall include the feminine and neuter, and the singular number
shall include the plural, and vice versa, whenever such meanings are
appropriate.

     Section 8.5.  Expenses of Administration of Plan.  All costs and expenses
     -----------   ----------------------------------
incurred in the operation and administration of this Plan shall be borne by the
Company or by one or more Subsidiaries. The Company shall indemnify, defend and
hold each member of the Committee harmless against all claims, expenses and
liabilities arising out of or related to the exercise of the Committee's powers
and the discharge of the Committee's duties hereunder.

     Section 8.6.  Governing Law.  Without regard to the principles of conflicts
     -----------   -------------
of laws, the laws of the State of North Carolina shall govern and control the
validity, interpretation, performance, and enforcement of this Plan.

     Section 8.7.  Inspection of Plan.  A copy of this Plan, and any amendments
     -----------   ------------------
thereto, shall be maintained by the Secretary of the Company and shall be shown
to any proper person making inquiry about it.

     Section 8.8.  Severable Provisions. The Company intends that the provisions
     -----------   --------------------
of Articles III, IV, V, VI and VII, in each case together with Articles I, II
and VIII, shall each be deemed to be effective on an independent basis, and that
if one or more of such Articles, or the operative provisions thereof, shall be
deemed invalid, void or voidable, the remainder of such Articles shall continue
in full force and effect.<PAGE>

                                                                    EXHIBIT 10.5

                                FOURTH AMENDMENT
                                     TO THE
                             ESSEX SAVINGS BANK, FSB
                     SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

          THIS FOURTH AMENDMENT TO THE ESSEX SAVINGS BANK, FSB SUPPLEMENTAL
EXECUTIVE RETIREMENT PLAN (the "Plan") is made as of the 1st day of January,
1999.

                                 WITNESSETH:

          WHEREAS, Essex Savings Bank, FSB (the "Bank") maintains the Essex
Savings Bank, FSB Supplemental Executive Retirement Plan (the "Plan") for the
benefit of certain of its executive employees and certain executive employees of
its subsidiaries; and

          WHEREAS, it is necessary and desirable to amend the Plan in certain
respects; and

          WHEREAS, the Bank has reserved the right to amend the Plan from time
to time.

          NOW, THEREFORE, the Plan is hereby amended effective January 1, 1999
as follows:

          1.  Article V of the Plan is hereby amended to add the following
sentence at the end thereof:

                    Any provision herein to the contrary notwithstanding, the
          Retirement Accounts of Gene D. Ross and Earl McPherson shall be fully
          (100%) vested at all times.

           2.  Except as provided above, the Plan shall continue in accordance
with its terms as in effect immediately prior to the date of this Amendment.

          IN TESTIMONY WHEREOF, the Bank has caused this Fourth Amendment to be
executed by its duly authorized officer this 27th day of October, 1999.

                                 ESSEX SAVINGS BANK, FSB

                                 By: /s/ Gene D. Ross
                                     ------------------
                                         Its: President
                                         --------------

                                       1

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